AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 21, 1997

REGISTRATION NO. 333-13499
================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 3

TO
FORM S-3

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

SIMULA, INC. ARIZONA 86-0320129
SIMULA HOLDINGS, INC. ARIZONA 86-0846951
SIMULA GOVERNMENT PRODUCTS, INC. ARIZONA 86-0742551
SIMULA TECHNOLOGIES, INC. ARIZONA 86-0842935
SAFETY EQUIPMENT, INC. ARIZONA 86-0505970
SEDONA SCIENTIFIC, INC. ARIZONA 86-0778600
INTERNATIONAL CENTER FOR SAFETY EDUCATION, ARIZONA 86-0787589
INC.
SIMULA TRANSPORTATION EQUIPMENT CORPORATION ARIZONA 86-0742552
AIRLINE INTERIORS, INC. ARIZONA 86-0768865
COACH AND CAR EQUIPMENT CORPORATION ARIZONA 86-0763929
ARTCRAFT INDUSTRIES CORP. ARIZONA 86-0772587
INTAERO, LTD. ARIZONA PENDING
SIMULA AUTOMOTIVE SAFETY DEVICES, INC. ARIZONA 86-0789385
VIATECH, INC. DELAWARE 86-0763930
SIMULA AUTOMOTIVE SAFETY DEVICES, LIMITED UNITED KINGDOM N/A
(Exact name of Registrant (State of Incorporation) (I.R.S. Employer
as specified in charter) Identification No.)

------------------------

2700 NORTH CENTRAL AVENUE, SUITE 1000 BRADLEY P. FORST, ESQ.
PHOENIX, ARIZONA 85004 VICE PRESIDENT AND GENERAL COUNSEL
(602) 631-4005 2700 NORTH CENTRAL AVENUE, SUITE 1000
(Address, including zip code, and telephone number, PHOENIX, ARIZONA 85004
including area code, of Registrant's principal executive (602) 631-4005
offices) (Name, address including zip code, and telephone number,
including area code, of agent for service)

with copies to:

CHRISTIAN J. HOFFMANN, III, ESQ. ROBERT S. KANT, ESQ.
STREICH LANG, P.A. MICHELLE S. MONSEREZ, ESQ.
RENAISSANCE ONE O'CONNOR, CAVANAGH, ANDERSON,
TWO NORTH CENTRAL AVENUE KILLINGSWORTH & BESHEARS, P.A.
PHOENIX, ARIZONA 85004-2391 ONE EAST CAMELBACK ROAD, SUITE 1100
(602) 229-5200 PHOENIX, ARIZONA 85012-1656
(602) 263-2400

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
PROPOSED
TITLE OF EACH CLASS AMOUNT TO BE MAXIMUM AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED(1) OFFERING PRICE REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------------------------
% Senior Subordinated Convertible Notes............... $34,500,000 $34,500,000 $11,896
- ----------------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $.01 per share(2)................. 2,300,000 shares -- (4)
- ----------------------------------------------------------------------------------------------------------------------------------
Subsidiary Guarantees(5).................................. (6) (5)
==================================================================================================================================

(1) Includes $ aggregate principal amount that may be purchased pursuant
to the Underwriters' over-allotment option.

(2) This number is estimated on the date of this Registration Statement. The
actual number of shares of Common Stock issuable upon conversion will be
determined by the Conversion Price on the date this Registration Statement
becomes effective.

(3) Estimated solely for purposes of calculating the registration fee.

(4) The shares of Common Stock being registered hereby are issuable upon
conversion of % Senior Subordinated Convertible Notes. Accordingly, no
additional filing fee is required pursuant to Rule 457(i) under the
Securities Act of 1933.

(5) Simula Holdings, Inc., Simula Government Products, Inc., Simula
Technologies, Inc., Safety Equipment, Inc., Sedona Scientific, Inc.,
International Center for Safety Education, Inc., Simula Transportation
Equipment Corporation, Airline Interiors, Inc., Coach and Car Equipment
Corporation, Artcraft Industries Corp., Intaero, Ltd., Simula Automotive
Safety Devices, Inc., ViaTech, Inc., and Simula Automotive Safety Devices
Limited are all wholly-owned subsidiaries of Simula, Inc. and each is
registering guarantees of payment of principal, premium, if any, and
interest on the % Senior Subordinated Convertible Notes registered hereby.
Pursuant to Rule 457(n) under the Securities Act of 1933, no registration
fee is required with respect to the Subsidiary Guarantees.

(6) No separate consideration will be received from the purchasers of the %
Senior Subordinated Notes with respect to the Subsidiary Guarantees.

------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
2

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED APRIL 21, 1997

PROSPECTUS

$30,000,000

SIMULA, INC.

% SENIOR SUBORDINATED CONVERTIBLE NOTES DUE , 2004

SIMULA LOGO W/O NAME

Simula, Inc. (the "Company") is offering hereby its % Senior Subordinated
Convertible Notes due ,2004 (the "Notes"). Interest on the Notes is
payable on January 30 and July 30 of each year commencing July 30, 1997. The
Notes are convertible at the option of the holder at any time, unless previously
redeemed, into shares of the Company's Common Stock, par value $.01 per share
("Common Stock") at a price of $ per share of Common Stock (the
"Conversion Price"), subject to adjustment in certain events.

The 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 , 1999,
at certain specified redemption prices plus accrued interest payable to the
redemption date. However, on or after , 1999 and prior to ,
2000, the Notes will not be redeemable unless the closing price of the Company's
Common Stock as quoted on the New York Stock Exchange ("NYSE") has equaled or
exceeded $ for 20 trading days within a period of 30 consecutive trading
days. In the event of a Change of Control of the Company, the Company will offer
to purchase all outstanding Notes. See "Description of Notes."

The Notes will be general unsecured obligations of the Company and will be
subordinated to all present and future Senior Indebtedness (as defined herein).
The Notes will rank pari passu in right of payment with all Senior Subordinated
Indebtedness (as defined herein) and senior in right of payment to any future
Subordinated Indebtedness (as defined herein) of the Company. At February 28,
1997, the Company had approximately $19.4 million of Senior Indebtedness
outstanding, of which $4.2 million was at the subsidiary level. In addition, the
Company had $20.0 million of Senior Subordinated Indebtedness outstanding at
February 28, 1997.

The Common Stock of the Company is traded on the NYSE under the symbol
"SMU." On April 18, 1997, the closing price of the Common Stock on the NYSE was
$14.38 per share. See "Price Range of Common Stock." The Notes have been
approved for listing on the NYSE, subject to official notice of issuance under
the symbol .

INVESTORS SHOULD CAREFULLY CONSIDER THE FACTORS SET FORTH UNDER "RISK
FACTORS," BEGINNING ON PAGE 8.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(1)(3)
- ----------------------------------------------------------------------------------------------------
Per Note...................................... % % %
- ----------------------------------------------------------------------------------------------------
Total(4)...................................... $30,000,000 $ $
====================================================================================================

(1) Plus accrued interest, if any, from the date of original issuance.

(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities arising under the Securities Act of 1933,
as amended. See "Underwriting."

(3) Before deducting expenses payable by the Company estimated at $ .

(4) The Company has granted to the Underwriters an option for 45 days to
purchase up to an additional $ aggregate principal amount of the
Notes at the Price to Public less the Underwriting Discount, solely to cover
over-allotments, if any. If such option is exercised in full, the total
Price to Public, Underwriting Discount, and Proceeds to Company will be
$ , $ , and $ , respectively. See "Underwriting."

The Notes are being offered by the Underwriters, when, as and if delivered
to and accepted by them and subject to the right of the Underwriters to
withdraw, cancel, modify, or reject any orders, in whole or in part, and subject
to certain other conditions. It is expected that delivery of the Notes will be
made against payment therefor in New York, New York, on or about ,
1997.

HD BROUS & CO., INC.
BREAN MURRAY & CO., INC.
L.H. FRIEND, WEINRESS, FRANKSON
& PRESSON, INC.

The date of this Prospectus is April , 1997
3

COMMERCIAL TRANSPORTATION SEATING

[Photo of mass transit [Photo of rail seating] [Photo of 16g seat] 16g Seat designed
seating] to absorb 16 times
Rail Seating the force of
Mass Transit Seating gravity upon
impact.

AUTOMOBILE SAFETY PRODUCTS

The Company's patented inflatable
[Photo of ITS] tubular structure ("ITS") technology [Graphic of Inflatable Tubular
incorporates a tube that becomes Cushion ("ITC")]
ITS for side-impact head and neck shorter in length and wider in
protection. diameter as it inflates. It forms a Inflatable Tubular Cushion ("ITC")
rigid structure and does not vent
like a conventional airbag.
[Graphic of Inflatable Tubular
Bolster ("ITB")]
Inflatable Tubular Bolster ("ITB")

------------------------

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

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4

PROSPECTUS SUMMARY

The following summary should be read in conjunction with, and is qualified
in its entirety by, the more detailed information and financial statements and
notes thereto appearing elsewhere in this Prospectus. Unless otherwise noted,
all information in this Prospectus assumes that the over-allotment option
granted to the Underwriters will not be exercised. All information in this
Prospectus gives retroactive effect to the Company's 3-for-2 stock split of its
Common Stock on September 28, 1995.

THE COMPANY

The Company is a market-focused developer of technologies and advanced
products and solutions addressing safety-related problems. A recognized world
leader in energy absorption and related technologies, the Company designs and
manufactures occupant seating, safety systems, and other devices engineered to
safeguard human life in a wide range of air, ground, and sea transportation
vehicles. Through strategic acquisitions and successful application of its
various proprietary technologies in a variety of industries, the Company in
recent years has expanded its market focus and is introducing new products for
commercial and military applications. The Company currently conducts operations
in three principal market segments including commercial transportation seating,
government and defense contracting, and automobile safety systems. Products
include commercial airliner seating systems, rail and mass-transit seating,
helicopter and other military aircraft crashworthy seats, advanced composite
materials including armor, and a side-impact head protection inflatable
restraint system for automobiles. In late 1997 the Company will commence volume
production for roll out of additional products including a bulkhead airbag
system for commercial airliners and two cockpit inflatable restraint systems for
military aircraft.

Energy-Absorbing and Other Seating Systems. For over 20 years, the Company
has been a leading provider of energy-absorbing, or "crashworthy," seating
systems. As an outgrowth of this core business, in late 1995 the Company
commenced the manufacture and sale of commercial airliner seating systems
utilizing its technology to comply with stringent new FAA safety standards
mandating seats designed to absorb 16 times the force of gravity upon impact
("16g"). Seating systems incorporating this crashworthy technology absorb shock
upon impact that would otherwise be absorbed by an occupant of the vehicle. This
is accomplished through engineering and utilization of the Company's proprietary
data bases regarding the properties of materials, failure characteristics, and
human body dynamics. Based on internal market surveys and data, management
believes that the Company is the world's largest supplier of energy-absorbing
military helicopter and other military aircraft seats and also is the leading
North American provider of seating systems for rail and other mass transit
vehicles.

Inflatable Restraint Systems. The Company has developed proprietary and
patented structures and systems that are used as inflatable restraints. The
first product for automobiles, the inflatable tubular structure ("ITS"), is
being introduced in certain BMW models to be delivered in 1997 to provide head
and neck protection in side-impact collisions. The Company has a variety of
other inflatable restraint applications and configurations for automobiles. The
Company has also developed and certified the first airbag systems for commercial
and military aircraft, which will be introduced in late 1997. In addition to
providing inflatable restraint products directly to automobile and aircraft
manufacturers, the Company licenses its proprietary inflatable restraint
technology and products to first tier component suppliers.

Armor and Other Composite Materials. The Company develops and manufactures
a variety of composite materials which are integrated into its products and the
products of third parties. The Company's principal composite products include
high-strength, ultra-lightweight armor systems for use in targeted applications,
such as surrounding crew seats in aircraft (V-22 Osprey, Apache, Blackhawk, and
CH-53 Sea Stallion), protecting vital components of aircraft (C-17 cockpits and
tank power units), and providing additional floor protection (multi-wheeled and
transport vehicles). Other new products utilizing the Company's composite
technology include portable transparent armor products for use in commercial
vehicles, such as police cars and executive vehicles.

3
5

Introductory Stage Technologies. The Company has several technologies and
products in various phases of development that it believes will provide it with
new products over the next several years. These products include additional
applications of the Company's inflatable restraint technology, light-weight
transparent armor, advanced sensors with multi-axial sensing ability, a
vacuum-packed sealed parachute, and new polymers that may be used for
high-performance windows, lenses, visors, and a number of other applications.

The Company has experienced substantial growth since fiscal 1992 resulting
from the broader application of its technology, its strategic acquisitions, and
its development of new products. The Company's revenue increased from $18.8
million in 1992 to $65.8 million in 1996. During this time period, the
percentage of the Company's revenue derived from government and defense
contracts declined from 100% in 1990 to approximately 49% in 1996, with the
balance from commercial customers. The Company's principal customers include
America West Airlines, Autoliv GmbH, BMW, Boeing, Continental Airlines,
Matsushita, McDonnell Douglas, Morton International, Sikorsky Aircraft,
Southwest Airlines, metropolitan transit authorities in major North American
cities, and various branches of the United States armed forces and agencies.

The Company's strategy is to maintain its leading position in creating and
applying proprietary technologies and advanced solutions to safety related
problems and to develop its products for commercial sale to a wide range of
customers in each of its three market segments. The key elements in executing
this strategy are to (i) develop and utilize technology to enhance current
products and create new products, (ii) focus on new product markets and
regulatory requirements, (iii) expand manufacturing capabilities and maximize
internal synergies, and (iv) pursue acquisitions and strategic alliances that
complement existing businesses or provide manufacturing or distribution
opportunities.

The Company maintains its principal executive offices at 2700 North Central
Avenue, Suite 1000, Phoenix, Arizona 85004, and its telephone number is (602)
631-4005. Unless the context indicates otherwise, all references to the
"Company" or "Simula" refer to Simula, Inc. and its subsidiaries.

THE OFFERING

See "Description of Notes."

Securities Offered......... $30,000,000 aggregate principal amount of %
Senior Subordinated Convertible Notes due,
2004.

Seniority.................. The Notes will be general unsecured obligations of
the Company and will be subordinated to all present
and future Senior Indebtedness (as defined herein).
The Notes will rank pari passu in right of payment
with all Senior Subordinated Indebtedness (as
defined herein) and senior in right of payment to
any future Subordinated Indebtedness (as defined
herein) of the Company.

Interest Payments.......... The Notes will bear interest at % per annum,
payable semiannually on January 30 and July 30,
commencing July 30, 1997.

Maturity................... If not earlier converted or redeemed, the Notes
will be due and payable in full with all accrued
interest on , 2004.

Conversion Rights.......... The Notes and the accrued interest payable thereon
are convertible into shares of the Company's Common
Stock at a conversion price of $ per share
(the "Conversion Price"), subject to adjustment in
certain events to protect against dilution of the
Conversion Price.

Change of Control
Redemption................. Within 30 days following the occurrence of any
Change of Control (as defined herein), the Company
will offer to purchase all outstanding Notes at a
purchase price equal to 100% of the aggregate
principal amount of the Notes plus accrued and
unpaid interest to the date of purchase. No
assurance can be given that upon such event the
Company would have adequate resources to pay such
redemption price.

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6

Optional Redemption........ If not earlier converted or redeemed, the 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 , 1999, at certain
specified redemption prices (expressed in
percentages of principal amount) together with
accrued interest payable thereon to the redemption
date. However, on or after , 1999 and
prior to , 2000, the Notes will not be
redeemable unless the closing price of the
Company's Common Stock as quoted on the NYSE has
equaled or exceeded $ for 20 trading days
within a period of 30 consecutive trading days.

Guarantees................. The Notes are fully and unconditionally guaranteed,
jointly and severally, by all of the Company's
subsidiaries. See "Description of Notes."

Listing.................... The Notes have been approved for listing on the
NYSE, upon official notice of issuance, under the
symbol "SMU- ." The Company's Common Stock is
listed on the NYSE under the symbol "SMU."

Use of Proceeds............ Expansion of manufacturing facilities, working
capital and other general purposes, and potentially
for acquisitions. See "Use of Proceeds."

Risk Factors............... Prospective purchasers of the Notes offered hereby
should carefully consider certain risk factors as
detailed in this Prospectus and contained in all
documents incorporated by reference into this
Prospectus. Included among such factors are the
Company's recent and anticipated losses,
subordination, leverage and liquidity, entry into
new markets, production risks and manufacturing
experience, investment in and dependence on
proprietary technology, need for additional
capital, quarterly operating results, cyclicality,
possible volatility of stock price, and management
of growth. See "Risk Factors."

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7

SUMMARY CONSOLIDATED FINANCIAL DATA

YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
(Dollars in thousands, except per share data)

INCOME STATEMENT DATA:
Revenue............................ $ 65,762 $ 59,089 $ 41,158 $ 24,781 $ 18,833
Operating (loss) income(1)......... (9,226) 4,443 5,184 2,665 2,387
(Loss) earnings before cumulative
effect of change in accounting
principle....................... (6,810) 2,657 2,114 1,121 1,270
Cumulative effect of change in
accounting principle(2)......... (3,240)
---------- ---------- ---------- ---------- ----------
Net (loss) earnings................ $ (10,050) $ 2,657 $ 2,114 $ 1,121 $ 1,270
========== ========== ========== ========== ==========
PER SHARE AMOUNTS:
(Loss) earnings before cumulative
effect of a change in accounting
principle....................... $ (0.76) $ .31 $ .37 $ .22
Cumulative effect of change in
accounting principle............ (0.36)
---------- ---------- ---------- ----------
Net (loss) earnings per share...... $ (1.12) $ .31 $ .37 $ .22
========== ========== ========== ==========
PRO FORMA AMOUNTS(2)(3):
Net earnings....................... $ 194 $ 1,675 $ 947 $ 1,313
========== ========== ========== ==========
Net earnings per share............. $ .02 $ .29 $ .19 $ .29
========== ========== ========== ==========
WEIGHTED AVERAGE SHARES
OUTSTANDING(4)..................... 8,947,060 8,576,817 5,704,926 5,024,679 4,608,825
---------- ---------- ---------- ---------- ----------
OTHER DATA:
Ratio of earnings to fixed charges
and preferred dividends(5)......... -- 2.19x 2.67x 3.00x 5.86x
Research and development:
Funded by the Company.............. $ 1,916 $ 1,419 $ 688 $ 376 $ 240
Costs incurred on funded
contracts....................... 8,588 4,722 3,165 1,813 4,529

DECEMBER 31,
-------------------------------------------------------------
AS ADJUSTED ACTUAL
1996(6) 1996 1995 1994 1993 1992
----------- ------- ------- ------- ------- -------

BALANCE SHEET DATA:
Working capital...................... $50,706 $23,206 $21,069 $ 5,236 $ 8,209 $ 4,049
Total assets......................... 109,788 86,688 73,136 47,691 26,787 18,007
Long-term debt....................... 54,697 24,697 11,261 15,339 12,794 4,839
Shareholders' equity(7).............. 37,187 37,187 46,087 16,649 8,078 7,232

- ---------------
(1) The operating loss for 1996 is primarily due to expenses attributable to
pre-contract development costs, the start-up costs of the ITS manufacturing
facilities in Phoenix, Arizona and the United Kingdom and 16g Seat
manufacturing facilities in San Diego, California and Chicago, Illinois,
losses arising from research and development contracts for which the Company
anticipates profitable follow-on contracts, increased research and
development and the expenses of the administrative and sales infrastructure
that will be necessary in 1997 to support manufacturing and the generation
of sales of the ITS and 16g Seat. See "Risk Factors -- Recent and
Anticipated Losses."

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8

customers. Effective January 1, 1996, these costs have been expensed. Pro forma
amounts for 1995, 1994 and 1993 assume the new accounting method is applied
retroactively. The change in accounting would not have affected 1992.

(3) Prior to the Company's April 1992 initial public offering, the Company was
an S corporation for tax purposes. Pro forma net earnings and net earnings
per share amounts for 1992 reflect pro forma tax provisions as if all income
taxes for 1992 had been payable by the Company.

(4) The Company effected a 3-for-2 split of its Common Stock on September 28,
1995. As a result, all shares and related references have been restated for
all prior periods and transactions.

(5) Ratio of earnings to fixed charges and preferred dividends is computed by
dividing (i) earnings (loss) before income taxes plus fixed charges and
preferred stock dividend requirements by (ii) fixed charges and preferred
stock dividend requirements. Fixed charges consist of interest on
indebtedness, amortization of debt issuance cost and the estimated interest
component (one-third) of rental and lease expense. There were no preferred
stock dividend requirements during the periods presented. Earnings were
insufficient to cover fixed charges by approximately $11.6 million for the
year ended December 31, 1996.

(6) Adjusted to reflect the issuance of the Notes offered hereby and the
application of the estimated net proceeds of $27.5 million. The actual 1996
balances are adjusted to reflect: (i) an increase in working capital of
$27.5 million, reflecting the reduction of the revolving line of credit of
$6.9 million and an increase in cash of $20.6 million, of which
approximately $10.0 million is anticipated to be used for future expansion
of manufacturing facilities; (ii) an increase in total assets of $23.1
million; and (iii) an increase in long-term debt of $30 million.

(7) The Company has not paid any cash dividends since its April 1992 initial
public offering.

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9

RISK FACTORS

Prospective purchasers of the Notes offered hereby should carefully
consider the following factors in addition to the other information in this
Prospectus. This Prospectus contains certain forward-looking statements and
information. The cautionary statements made in this Prospectus should be read as
being applicable to all related forward-looking statements wherever they appear
in this Prospectus. Forward-looking statements, by their very nature, include
risks and uncertainties. Accordingly, the Company's actual results could differ
materially from those discussed herein. Factors that could cause or contribute
to such differences include those discussed below as well as those discussed
elsewhere herein. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

RECENT AND ANTICIPATED LOSSES

In order to prepare for the production of the crashworthy seating systems
for commercial airliners (the "16g Seat") in commercial quantities and the
commercial introduction of the ITS and bulkhead airbag, the Company incurred
significant pre-contract costs, which were charged to expense in 1996. In prior
years, such costs were capitalized. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and Note 2 to the Consolidated
Financial Statements. In order to support the introduction and production of
these products, the Company incurred plant start-up costs and significantly
increased expenses applicable to its corporate and sales infrastructure, which
expenses were necessary to develop markets and support the production of these
products that are anticipated to produce revenue in 1997. In addition, the
Company accelerated research and development expenses applicable to potential
new products related to these technologies. The incurrence of these costs
resulted in a loss before the cumulative effect of the change in accounting
principle of $6.8 million for the year ended December 31, 1996, and will result
in a net loss in the first quarter of 1997. The Company cannot estimate the
amount of this loss at this time. The Company's contracts for the 16g Seat and
ITS provide for deliveries of significant commercial quantities in 1997. In the
first quarter of 1997, the Company received approximately $28 million in new 16g
Seat orders and follow-on options primarily from two major U.S. carriers, and
expects revenues therefrom to be recorded over a period of 18 months from the
date of this Prospectus. As of April 1, 1997, the Company has in excess of $65
million in outstanding bid proposals to seat customers, and expects revenues
from successful bids to be recorded over the next 24 months. The Company cannot
predict what portion of these orders may ultimately be awarded to the Company,
if any. The Company commenced production and started deliveries of the ITS in
March 1997. The Company has an initial purchase order of approximately $3
million and anticipates additional orders and revenues in 1997. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

SUBORDINATION

The Notes will be subordinated to the prior payment when due of the
principal of, and premium, if any, and accrued and unpaid interest on, all
existing and future Senior Indebtedness (as defined herein). The Indenture
contains a covenant that limits the Company's ability to incur additional
indebtedness including Senior Indebtedness. See "Description of Notes -- Certain
Covenants." At February 28, 1997, the Company had approximately $19.4 million of
Senior Indebtedness outstanding, of which $4.2 million was at the subsidiary
level. By reason of such subordination of the Notes, in the event of insolvency,
liquidation, reorganization, dissolution or winding up of the business of the
Company or upon a default in payment with respect to any indebtedness of the
Company or an event of default with respect to such indebtedness resulting in
the acceleration thereof, the assets of the Company will be available to pay the
amounts due on the Notes only after all Senior Indebtedness has been paid in
full. The Notes will rank pari passu in all respects with all other Senior
Subordinated Indebtedness of the Company. At February 28, 1997 the Company had
approximately $20.0 million in Senior Subordinated Indebtedness outstanding. The
Notes will be senior and unsecured subordinated obligations of the Company.

The Company conducts a significant portion of its operations through its
subsidiaries. Accordingly, the Company's ability to meet its cash obligations is
dependent in part upon the ability of its subsidiaries to make cash
distributions to the Company. Each Subsidiary Guarantor's Guarantee will be
subordinate to Senior Indebtedness of such Subsidiary Guarantor, including such
Subsidiary Guarantor's guarantees of Senior

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10

Indebtedness of the Company, generally on the same basis as the Company's
obligations under the Indenture and the Notes will be subordinate to Senior
Indebtedness of the Company. The Guarantees will, however, rank at least on a
parity with claims of all other unsecured creditors of the respective Subsidiary
Guarantors. The obligations of each Subsidiary Guarantor are limited to the
maximum amount as will, after giving effect to all other contingent and fixed
liabilities of such Subsidiary Guarantor and after giving effect to any
collections from or payments made by or on behalf of any other Subsidiary
Guarantor in respect of the obligations of such other Subsidiary Guarantor under
its Guarantee or pursuant to its contribution obligations under the Indenture,
result in the obligations of such Subsidiary Guarantor under its Guarantee not
constituting a fraudulent conveyance or fraudulent transfer under federal,
state, or foreign law.

LEVERAGE AND LIQUIDITY

Upon completion of the offering, the Company's long-term indebtedness will
be approximately $54.7 million (calculated using the Company's long-term
indebtedness as of December 31, 1996 and assuming the issuance of $30,000,000 in
principal amount of the Notes), representing approximately 57% of total
capitalization. There can be no assurance that the Company will have adequate
cash available to make required principal and interest payments. The Company's
ability to pay interest and principal on the Notes and to satisfy its other debt
obligations will depend upon its future operating performance, which will be
affected by prevailing economic conditions and financial, business and other
factors, certain of which are beyond its control. The Company anticipates that
its operating cash flow, together with borrowings under the Senior Indebtedness,
will be sufficient to meet its operating expenses and to service its debt
requirements as they become due. However, if the Company is unable to service
its indebtedness, whether upon acceleration of such indebtedness or in the
ordinary course of business, the Company would be required to pursue one or more
alternative strategies such as restructuring or refinancing its indebtedness, or
seeking additional equity capital. There can be no assurance that any of these
strategies could be effected on satisfactory terms, if at all. See "Management's
Discussion and Analysis of Results of Operations and Financial
Condition -- Liquidity and Capital Resources."

ENTRY INTO NEW MARKETS

In the first quarter of 1997 the Company commenced full scale production
for its 16g Seats and ITS and plans to enter full scale production for new
product roll-outs for a bulkhead airbag system for commercial aircraft and two
cockpit inflatable restraint systems for military aircraft in late 1997. There
can be no assurance that the Company will be successful in the introduction of
its new products. Such success will depend on a variety of factors, including
successful product testing and acceptance by its potential customers,
particularly airlines and automobile manufacturers; the success of the Company's
sales and marketing efforts in markets not previously addressed by the Company;
successful and rapid expansion of the Company's manufacturing capacity,
including the expansion or establishment of additional manufacturing facilities,
particularly for inflatable restraints and aircraft seating systems; the ability
of the Company's products to provide their intended benefits; and increasing
government safety regulations and consumer safety concerns, particularly for
energy-absorbing seating systems and for inflatable restraints. If the Company
is unable to manufacture and market its new products successfully, its business,
results of operations, and financial condition will be materially and adversely
affected. See "Business."

PRODUCTION RISKS AND MANUFACTURING EXPERIENCE

The Company does not have experience in high-volume manufacturing and must
build capacity to meet anticipated demand for certain of its new products. The
Company is currently adding to its production capabilities through new plant and
equipment. The Company plans to use approximately $10 million of the net
proceeds of this offering to expand existing manufacturing facilities, primarily
for the manufacture of aircraft inflatable restraint systems and components
related to the ITS. See "Use of Proceeds." The Company has received purchase
orders for the ITS and has invested substantial resources for its manufacture
prior to receipt of additional orders. From January 1, 1995 to December 31,
1996, the Company invested approximately $14.4 million in the purchase of plant
and equipment. The Company funded this investment with its bank credit
facilities. The Company believes that it currently has sufficient capacity to
meet 1997 delivery requirements. The Company could incur significant start-up

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costs, expenses, and delays in connection with its attempts to manufacture
commercial quantities of its new products. There can be no assurance that the
anticipated level of demand will occur or that the Company will not experience
either overcapacity or undercapacity in its new production facilities. Further,
there can be no assurance that the Company will be successful in overcoming the
technological, engineering, and management challenges associated with the
production of commercial quantities of its new products, at any given volume, at
acceptable costs, or on a timely or profitable basis. Operating results could be
adversely affected if the expansion of the Company's manufacturing capacity is
delayed or inefficiently implemented. No assurance can be given that the Company
will not experience manufacturing inefficiencies or delivery problems in the
future in the event of fluctuations in demand. When and if the Company receives
volume orders for its products, it may determine to license or outsource the
manufacturing of certain of the components. There can be no assurance that the
Company will be able to identify manufacturers that will meet its requirements
as to quality, reliability, timeliness, and cost-effectiveness. Any such failure
will limit the Company's ability to satisfy customer orders and would have a
material adverse effect on the Company's business, results of operations, and
financial condition. See "Business -- Production, Manufacturing, and Licensing."

The Company believes that its products and components have passed, and will
continue to pass, certain product performance and reliability testing by its
customers; however, there can be no assurance that its products will continue to
pass such testing in the future, particularly as the Company moves toward higher
production volumes. If such problems occur, the Company could experience
increased costs, delays, reductions or cancellations of orders and shipments,
and warranty issues, any of which could adversely affect the Company's business,
results of operations, and financial condition.

INVESTMENT IN AND DEPENDENCE ON PROPRIETARY TECHNOLOGY

The Company's future success and competitive position depend to a
significant extent upon its proprietary technology. The Company must make
significant investments to continue to develop and refine its technologies.
Technological advances, the introduction of new products, and new design and
manufacturing techniques could adversely affect the Company's operations unless
the Company is able to adapt to the resulting change in conditions. As a result,
the Company will be required to expend substantial funds for and commit
significant resources to the conduct of continuing research and development
activities, the engagement of additional engineering and other technical
personnel, the purchase of advanced design, production, and test equipment, and
the enhancement of design and manufacturing processes and techniques. The
Company's future operating results will depend to a significant extent on its
ability to continue to provide design and manufacturing services for new
products that compare favorably on the basis of time to introduction, cost, and
performance with the design and manufacturing capabilities of aircraft,
automobile, and other transportation vehicle suppliers. The success of new
design and manufacturing services depends on various factors, including
utilization of advances in technology, innovative development of new solutions
for customer products, efficient and cost-effective services, timely completion
and delivery of new product solutions, and market acceptance of customers' end
products. Because of the complexity of the Company's products, the Company may
experience delays from time to time in completing the design and manufacture of
new product solutions. In addition, there can be no assurance that any new
product solutions will receive or maintain customer or market acceptance. If the
Company were unable to design and manufacture solutions for new products of its
customers on a timely and cost-effective basis, its future operating results
would be adversely affected.

The Company relies in part on patent, trade secret, and copyright law to
protect its intellectual property. There can be no assurance that any patent
owned by the Company will not be invalidated or challenged, that the rights
granted thereunder will provide competitive advantages to the Company, or that
any of the Company's pending or future patent applications will be issued with
the scope of the claims sought by the Company, if at all. Furthermore, there can
be no assurance that others will not develop technologies that are similar or
superior to the Company's technology, duplicate the Company's technology, or
design around the patents owned by the Company. In addition, effective patent
and other intellectual property protection may be unavailable or limited in
certain foreign countries. There can be no assurance that the steps taken by the
Company will prevent misappropriation of its technology. Litigation may be
necessary in the future to enforce the Company's patents and other intellectual
property rights, to protect the Company's trade secrets, and to

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determine the validity and scope of the proprietary rights of others. Similarly,
there can be no assurance that the Company's technologies will not be subject to
claims that they infringe the rights of others, which would require the Company
to defend such claims. Patent and trade secret litigation could result in
substantial costs and diversion of resources, which could have a material
adverse effect on the Company's operating results and financial condition. See
"Business -- Proprietary Technology."

DEPENDENCE ON INDUSTRY RELATIONSHIPS

A number of the Company's products are components in its customers' final
products. In particular, the Company's automobile and aircraft inflatable
restraint systems are intended for use as components in automobiles or aircraft.
Accordingly, to gain market acceptance, the Company must demonstrate that its
products will provide advantages to the manufacturers of final products,
including increasing the safety of their products, providing such manufacturers
with competitive advantages, or assisting such manufacturers in complying with
existing or new government regulations affecting their products. There can be no
assurance that the Company's products will be able to achieve any of these
advantages for the products of its customers. Furthermore, even if the Company
is able to demonstrate such advantages, there can be no assurance that such
manufacturers will elect to incorporate the Company's products into their final
products, or if they do, that the Company's products will be able to meet such
customers' manufacturing requirements. Additionally, there can be no assurance
that the Company's relationships with its manufacturer customers will ultimately
lead to volume orders for the Company's products. The failure of manufacturers
to incorporate the Company's products into their final products would have a
material adverse effect on the Company's business, results of operations, and
financial condition. The Company also depends on its relationships with first
tier component suppliers to which it licenses its proprietary technology to
facilitate the marketing and distribution of its products, particularly its
inflatable restraint products. See "Business -- Operating and Growth Strategy --
Expanding Manufacturing Capabilities and Maximizing Internal Synergies."

SUBSTANTIAL RELIANCE UPON MAJOR CUSTOMERS

The Company's business has 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 current contracts. During fiscal 1995 and fiscal
1996, no commercial customer accounted for more than 10% of the Company's
revenue. Although the Company has long-established relationships with a number
of its customers, the Company does not have long-term supply contracts with any
customers. The Company's customers also generally do not commit to long-term
production schedules and, as a result, customer orders generally can be canceled
and volume levels changed or delayed. The timely replacement of canceled,
delayed, or reduced orders cannot be assured. The loss or reduction in sales to
a major customer may have a more material adverse effect on the Company's
operations and financial condition than would be the case if the Company's
revenue were less concentrated by customer. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and
"Business -- Customers."

The Company believes that the United States Army and other branches of the
United States armed forces as well as prime defense contractors, to which the
Company has supplied products for approximately 20 years, will continue to be
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. See "Business -- Customers" and "Business -- Backlog."
For the year ended December 31, 1996, approximately 23%, 4%, and 9% of the
Company's revenue was attributable to the Company's contracts with the United
States Army, other branches of the United States armed forces, and prime defense
contractors, respectively. Reliance upon defense contracts involves certain
inherent risks, including dependence on Congressional appropriations, changes in
governmental policies that reflect military and political developments, and
other factors characteristic of the defense industry. The Company believes that
the impact of reductions in military expenditures have been and may continue to
be less significant on the Company than on many other military suppliers because
completed and currently announced reductions in military expenditures have
tended to relate more to strategic programs than to the types of tactical
programs that the Company's products address. There can be no assurance,
however, that reductions in military expenditures or the type of reductions

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instituted will not adversely affect the Company's business, operating results,
and financial condition. See "Business -- Overview of Market Segments and
Industries -- Government and Defense."

EFFECT OF GOVERNMENT CONTRACT PROVISIONS

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. Sales of 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
underestimating 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
audit by the Defense Contract Audit Agency ("DCAA"), an 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 any such contract. If a DCAA audit
establishes overcharges or discrepancies in costs or accounting, it can seek the
repayment of such overcharges or seek other reconciliations. DCCA audits are
routine in the defense contracting industry, and the Company has been subject to
such audits from time to time. Since the inception of the Company's operations,
no DCAA audit has resulted in an adverse determination against the Company. In
September 1993, however, the Company agreed to pay $445,000 over a 12-month
period to resolve an overcharge dispute, without any admission of liability. The
investigation and settlement resulted in the review of virtually all of the
Company's government contracts entered into between April 1987 and June 1990.
The settlement agreement concluded any other potential defective pricing claims
on all of the Company's contracts with the United States Department of Defense
negotiated during that period.

NEED FOR ADDITIONAL CAPITAL

In order to meet the anticipated demand for its products in 1998 and
beyond, the Company must continue to make significant investments in research
and development, equipment, and facilities, including capital expenditures to
construct and equip the facilities. The Company's operating results may be
adversely affected if its revenue does not increase sufficiently to offset the
increase in fixed costs and operating expenses relating to these capital
expenditures. The continued expansion of the Company's business may require it,
from time to time, to seek debt or equity financing in addition to the funds to
be provided by this offering. Such capital expenditures may be required to
maintain or expand the Company's engineering, design, and production facilities
and equipment as well as to otherwise finance the growth of its business. The
Company cannot predict the timing or amount of any such capital requirements.
The Company anticipates that such financing may include bank financing or the
issuance of debt or equity securities. The Company's ability to incur
indebtedness is limited by covenants and restrictions under the Indenture and
the Company's loan agreement with Wells Fargo Bank N.A. See "Management's
Discussions and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources." The ability of the Company to
obtain bank financing or raise additional debt or equity capital also will
depend on its financial condition and results of operations. In addition, there
can be no assurance that additional financing will be available to the Company
if and when required and under terms acceptable to the Company.

ACQUISITIONS

The Company's acquisition strategy depends in large part on its continued
ability to successfully acquire, integrate, and operate additional companies
that have complementary businesses that can utilize or enhance the Company's
technologies or that can provide benefits in terms of manufacturing,
distribution, or availability of component parts. The Company has completed
three major acquisitions since August 1993. There can be no assurance that the
Company will be able to identify additional suitable acquisition candidates,
that it will be

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able to consummate or finance any such acquisitions, or that it will be able to
integrate any such acquisitions successfully into its operations. See
"Business -- Operating and Growth Strategy -- Exploring Acquisition and
Strategic Alliance Opportunities" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

QUARTERLY OPERATING RESULTS; CYCLICALITY

Since the beginning of 1993, the Company has experienced significant growth
in its revenue and net income as a result of internal growth and its
acquisitions. As a growth company, the Company's quarterly results may be
especially variable and historic results are not a reliable basis on which to
predict future operating results. Further, during the second quarter of 1996,
the Company adopted a new method of accounting for pre-contract costs under
which various costs are expensed as incurred rather than being deferred. The
effect of changing this accounting principle resulted in a restatement and
reduction of earnings per share previously reported for the first quarter of
1996. The Company's change in accounting method in 1996 will make year to year
and quarter to quarter comparisons of earnings difficult. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

The continued success of the Company will be impacted by the cyclical
nature of the airline, rail, and automobile industries as well as other markets
served by the Company's products; the level and makeup of military expenditures;
technological changes; competition and competitive pressures on pricing; new
government regulations; and economic conditions in the United States and
worldwide markets served by the Company and its customers. The Company's
products are incorporated into a variety of transportation vehicles. A slowdown
in demand for such new transportation vehicles or modification services to
existing transportation vehicles as a result of economic or other conditions in
the United States or in the worldwide markets served by the Company and its
customers or other broad-based factors could adversely affect the Company's
operating results and financial condition. Conversely, an increase in demand for
new transportation vehicles or modification services could strain the Company's
capacity, its manufacturing efficiency, and delivery schedules. See "Business."

POSSIBLE VOLATILITY OF STOCK PRICE

The trading price of the Company's Common Stock has been and in the future
may be subject to wide fluctuations in response to quarterly variations in
operating results of the Company or its competitors, actual or anticipated
announcements of technical innovations or new products by the Company or its
competitors, contracts with key customers, new agreement negotiations, changes
in analysts' estimates of the Company's financial performance, general industry
conditions, military expenditures, worldwide economic and financial conditions,
and other events or factors. In addition, the stock market has experienced
extreme price and volume fluctuations, which have particularly affected the
market price of many technology companies and which often have been unrelated to
the operating performance of such companies. These broad market fluctuations and
other factors may adversely affect the market price of the Company's Common
Stock. See "Price Range of Common Stock" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

COMPETITION

The markets served by the Company's aircraft and rail seating and
inflatable restraint systems are intensely competitive. The Company's principal
competitors in the military seating market are Martin Baker (U.K.) and Israel
Aircraft Industries Ltd. (Israel). The Company does not have financial or market
share data concerning these two competitors. However, based on internal market
surveys and data, the Company believes that it is the supplier for a majority of
the world's energy-absorbing seating programs under domestic and foreign
military contracts. The Company has 10 principal competitors in the commercial
airline seating market, dominated by BE Aerospace, Inc. The Company has four
principal competitors in the North American rail and mass transit seating
market. Most of the Company's competitors have greater marketing capabilities
and financial resources than the Company.

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Although most of the Company's technology is proprietary, many businesses
are actively engaged in the research and development of new products and in the
manufacture and sale of products that may compete with the Company's seating and
inflatable restraint systems. 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. Competition for commercial contracts
relates primarily to technical know-how, cost, and marketing efforts.
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. Numerous suppliers compete for
government defense contracts as prime contractors or subcontractors. The demand
for aircraft seating, which is one of the Company's target markets, currently
exceeds supply; however, the Company's competitors may seek to cover such
undercapacity. As a result, there is no assurance that such undercapacity in
those markets will continue to exist in the future. A substantial increase in
the capacity of all manufacturers in those markets may have an adverse impact on
the Company's results of operations and financial condition. See
"Business -- Competition."

MANAGEMENT OF GROWTH

The Company currently is experiencing a period of significant growth. The
Company's ability to manage its growth effectively will require it to enhance
its operational, financial, and management information systems. In addition, the
Company must also effectively oversee operations of geographically dispersed
subsidiaries in diverse lines of business. The Company is increasing staffing
and other expenses as well as its expenditures on manufacturing plants, capital
equipment, and leasehold improvements in order to meet the anticipated demand of
its customers for its new products. However, the Company's customers generally
do not commit to firm production schedules for other than a relatively short
time in advance. The Company's profitability would be adversely affected if the
Company increased its expenditures in anticipation of future orders that do not
materialize. Its customers may also require, from time to time, rapid increases
in design and production services, which place an excessive short-term burden on
the Company's resources. The failure of the Company to manage its growth
effectively could have a material adverse effect on the Company's business,
operating results, and financial condition.

PRODUCT LIABILITY

The Company will face increasing exposure to product liability claims as it
increases its presence in commercial markets. Product liability claims may be
particularly significant in connection with the Company's commercial aircraft
and automobile products. The Company maintains product liability insurance,
including general product liability, special aircraft product liability, and
intends in the summer of 1997 to obtain product recall insurance. In connection
with its government business, product liability defense is available to some
extent under the so-called "government contractor defense." In addition, the
Company's product liability insurance also provides protection with respect to
exposure, if any, under government contracts and products. The Company believes
its insurance is adequate.

GOVERNMENT SAFETY REGULATIONS

The Company regularly monitors regulations adopted or being considered by
the Federal Aviation Administration ("FAA") relating to airlines, particularly
those relating to seating and restraints, and by the National Highway Traffic
Safety Administration ("NHTSA"), particularly those relating to airbags and
other safety features in automobiles, rail, and other mass transit vehicles.
Administratively promulgated regulations are typically subject to industry
resistance, comment periods, and significant delays in implementation. To the
extent that proposed regulations are withdrawn or that new or existing
regulations are subsequently amended, rescinded, or deadlines for compliance
extended, the demand for improved safety systems, such as those provided by the
Company, could be adversely impacted. See "Business -- Overview,"
"Business -- Operating and Growth Strategy -- Market and Regulatory Focus,"
"Business -- Overview of Market Segments and Industries -- Commercial
Transportation Seating," and "Business -- Overview of Market Segments and
Industries -- Automobile Safety Systems."

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HOLDING COMPANY STRUCTURE

The Company is a holding company with no business operations of its own.
The Company's only material assets are the outstanding capital stock of its
subsidiaries, through which it conducts its operations. See
"Business -- Operating and Growth Strategy." As a holding company, the Company
depends on distributions from its subsidiaries to pay interest on the Notes. See
"-- Subordination" and "Description of Notes -- Subsidiary Guarantees."

ENVIRONMENTAL REGULATIONS

The Company is subject to a variety of federal, state, and local government
regulations related to the storage, use, discharge, and disposal of toxic,
volatile, or otherwise hazardous chemicals used in its manufacturing processes.
There can be no assurance that changes in environmental regulations will not
impose the need for additional capital equipment or other requirements. Any
failure by the Company to obtain required permits for, control the use of, or
adequately restrict the discharge of, hazardous substances under present or
future regulations could subject the Company to substantial liability or could
cause manufacturing operations to be suspended. Such liability or suspension of
manufacturing operations could have a material adverse effect on the Company's
operating results and financial condition. See "Business -- Environmental
Regulations."

INTERNATIONAL TRADE AND CURRENCY EXCHANGE

Approximately 24% of the Company's revenue in fiscal 1996 was derived from
international customers, all of which is billed and recorded in U.S. dollars.
The Company has acquired manufacturing facilities outside the United States in
anticipation of an increased volume of business overseas, particularly with
respect to its inflatable restraint systems for automobiles. Therefore, the
Company purchases an increasing portion of its raw materials and equipment from
foreign suppliers and incurs labor costs in foreign locations. The foreign sale
of products and the purchase of raw materials and equipment from foreign
suppliers may be adversely affected by political and economic conditions abroad.
Protectionist trade legislation in either the United States or foreign
countries, such as a change in current tariff structures, export compliance
laws, or other trade policies, could adversely affect the Company's ability to
sell its products in foreign markets and purchase materials or equipment from
foreign suppliers.

DEPENDENCE ON MANAGEMENT AND OTHER KEY PERSONNEL

The Company's success depends upon the retention of key personnel,
particularly Stanley P. Desjardins, its founder and Chairman, and Donald W.
Townsend, its President. The Company has entered into five-year employment
contracts with Messrs. Desjardins and Townsend through the year 2001. The loss
of Messrs. Desjardins or Townsend or other existing key personnel or the failure
to recruit and retain necessary additional personnel would adversely affect the
Company's business prospects. Additionally, the covenants of one of the
Company's credit facilities requires that the Company continue to employ Messrs.
Desjardins and Townsend. There can be no assurance that the Company will be able
to retain its current personnel or attract and retain necessary additional
personnel. See "Business -- Employees" and "Management."

CONTROL BY MANAGEMENT

Following the completion of this offering and assuming the conversion of
the Notes into Common Stock, the directors and executive officers of the Company
will own an aggregate of 4,244,974 shares of Common Stock, or approximately 47%
of the outstanding Common Stock of the Company, of which Stanley P. Desjardins
owns 3,543,052 shares, or approximately 39% of the outstanding Common Stock of
the Company. Through the ownership of such Common Stock, the ability to elect or
otherwise designate members of the Board of Directors, as a practical matter,
will continue to reside with the current management of the Company. The
directors and executive officers have the right to acquire additional shares
upon exercise of options granted under the Company's stock option plans, and the
executive officers may acquire additional

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shares under the Company's Employee Stock Purchase Plan. See "Principal
Shareholders," "Management -- Stock Options," and "Management -- Employee Stock
Purchase Plan."

SHARES ELIGIBLE FOR FUTURE SALE

As of April 17, 1997, the Company had 9,022,348 shares of Common Stock
outstanding, of which 3,682,049 shares are "restricted securities" (the
"Restricted Shares") as that term is defined in Rule 144 under the Securities
Act of 1933, as amended (the "Act"). Such Restricted Shares may be subject to
volume and other resale limitations described below. The directors and executive
officers have agreed with the Company at the request of the Underwriters not to
sell or otherwise dispose of any shares of Common Stock in the public market for
a period of 90 days after the date of this Prospectus without the prior written
consent of the Underwriters. In general, under Rule 144 as amended effective
April 29, 1997, any person (or persons whose shares are aggregated for purposes
of Rule 144) who beneficially owns restricted securities with respect to which
at least one year has elapsed since the later of the date the shares were
acquired from the Company or from an affiliate of the Company, is entitled to
sell, within any three-month period, a number of shares that does not exceed the
greater of (i) 1% of the then outstanding shares of Common Stock of the Company,
or (ii) the average weekly trading volume in Common Stock during the four
calendar weeks preceding such sale. Sales under Rule 144 also are subject to
certain manner-of-sale provisions and notice requirements and to the
availability of current public information about the Company. A person who is
not an affiliate, has not been an affiliate within three months prior the sale,
and who beneficially owns restricted securities with respect to which at least
two years have elapsed since the later of the date the shares were acquired from
the Company or from an affiliate of the Company, is entitled to sell such shares
under Rule 144(k) without regard to any of the volume limitations or other
requirements described above. See "Principal Shareholders -- Shares Eligible For
Future Sale" and "Underwriting."

RECENT REGISTRATION

In September 1996, the Company issued $14.3 million principal amount of the
10% Notes in a private placement. Based upon the conversion prices fixed prior
to December 31, 1996 and the average market price of the Company's Common Stock
for the ten (10) days ended December 31, 1996 for the 10% Notes not yet fixed,
the 10% Notes would be convertible into approximately 975,000 shares of the
Company's Common Stock. See "Description of Other Capital Stock and Debt
Securities" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations." The Company's registration statement covering resales by
the holders of the Common Stock issuable upon conversion of the 10% Notes became
effective April 3, 1997. Sales of substantial amounts of Common Stock in the
public market subsequent to the completion of this offering, and the possibility
that such sales may be made, could adversely affect the prevailing market price
of the Company's Common Stock into which the Notes may be converted.

NO PRIOR PUBLIC MARKET

There has been no public market for the Notes prior to this offering, and
there can be no assurance that such market will develop or be sustained upon
completion of this offering. Because of the conversion feature, the trading
values of the Notes, if issued, will most likely be based on the market price of
the Company's Common Stock and the value attributed to the interest rates and
other priorities of the Notes.

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USE OF PROCEEDS

The net proceeds to the Company from the sale of the Notes offered hereby
are estimated to be approximately $27.5 million, after deducting estimated
underwriting discounts and offering expenses. The Company plans to use
approximately $10.0 million of the net proceeds to expand existing manufacturing
facilities, primarily for the manufacture of aircraft and rail seating systems
and components related to the Company's automobile side-impact inflatable
restraint system. The Company also intends to use approximately $6.9 million of
the net proceeds for repayment of the outstanding balance of its revolving line
of credit which bears interest at LIBOR plus 2% (7.5% at December 31, 1996) and
matures June 1, 1998. The remaining net proceeds will be used for working
capital and other general corporate purposes, including potential future
acquisitions. The Company does not have any acquisitions pending at this time.

Pending the uses described above, the Company will invest the net proceeds
of this offering in high quality government and short-term investment grade,
interest bearing securities.

The foregoing represents the Company's best estimate of its allocation of
the proceeds of this offering based upon its present plans and business
conditions. However, there can be no assurance that unforeseen events or changed
business conditions will not result in the application of the proceeds of this
offering in a manner other than as described in this Prospectus. Any such
reallocation of the net proceeds of this offering would be substantially limited
to the categories set forth above.

PRICE RANGE OF COMMON STOCK

The Company's Common Stock has been listed on the NYSE under the symbol
"SMU" since January 31, 1996. The Company's Common Stock traded on the American
Stock Exchange from October 14, 1993 until January 30, 1996, and on the Nasdaq
National Market System from April 14, 1992 until October 13, 1993.

On September 28, 1995, the Company completed a 3-for-2 stock split for all
holders of record of the Company's Common Stock as of September 15, 1995,
thereby increasing the number of shares of the Company's Common Stock then
issued and outstanding from 5,904,647 to 8,856,952.

Giving effect to the stock split, the following table sets forth the
quarterly high and low closing prices of the Company's Common Stock for each
calendar quarter of the years indicated.

HIGH LOW
------ ------

1995:
First Quarter...................................... $14.92 $12.83
Second Quarter..................................... 16.42 13.50
Third Quarter...................................... 25.13 14.83
Fourth Quarter..................................... 24.13 16.50

1996:
First Quarter...................................... $19.25 $12.75
Second Quarter..................................... 20.63 15.88
Third Quarter...................................... 18.38 15.75
Fourth Quarter..................................... 15.88 13.00

1997:
First Quarter...................................... $18.38 $13.63
Second Quarter (through April 18, 1997)............ 15.50 14.00

The number of holders of the Common Stock of the Company, including
beneficial holders of shares held in street name, is estimated to be in excess
of 2,500. On April 18, 1997, the closing price of the Common Stock was $14.38
per share.

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CAPITALIZATION

The following table sets forth (i) the actual capitalization of the Company
at December 31, 1996 and (ii) the capitalization as adjusted to give the effect
to the estimated net proceeds of this offering of $27.5 million and the
application of the net proceeds therefrom as described under "Use of Proceeds."
See "Use of Proceeds" and Consolidated Financial Statements contained elsewhere
in this Prospectus.

DECEMBER 31, 1996(1)
-----------------------
ACTUAL AS ADJUSTED
------- -----------
(Dollars in thousands)

Current portion of long-term debt...................................... $ 4,536 $ 4,536
------- -------
4,536 4,536
------- -------
LONG-TERM DEBT:
% Senior Subordinated Convertible Notes due 2004................... 30,000
12% Senior Subordinated Notes Due November 1998...................... 5,700 5,700
10% Senior Subordinated Convertible Notes due September 1999......... 14,300 14,300
Mortgage notes and other(2).......................................... 4,697 4,697
------- -------
24,697 54,697
------- -------
SHAREHOLDERS' EQUITY:
Common Stock, par value $.01 per share; 50,000,000 shares authorized;
8,992,598 shares issued........................................... 90 90
Additional paid-in capital........................................... 39,031 39,031
Retained deficit..................................................... (1,966) (1,966)
Currency translation adjustment...................................... 32 32
------- -------
37,187 37,187
------- -------
Total capitalization................................................... $66,420 $96,420
======= =======

- ---------------
(1) Excludes shares of Common Stock reserved for issuance under stock option
plans, the Employee Stock Purchase Plan and an estimate of 975,000 shares of
Common Stock reserved for issuance upon conversion of the 10% Notes. See
"Management -- Stock Option Plans, "Management -- Employee Stock Purchase
Plan" and "Description of Other Capital Stock and Debt Securities."

(2) Consists of various loans payable, secured by property and equipment;
unsecured installment notes; and obligations under capital leases. See Note
9 to Consolidated Financial Statements.

DIVIDEND POLICY

The Company has not paid any cash dividends since its April 1992 initial
public offering and does not plan to pay cash dividends on its Common Stock in
the foreseeable future. Instead, the Company intends to apply any earnings to
the expansion and development of its business. Any payment of cash dividends on
its Common Stock in the future will depend upon the Company's earnings,
financial condition and capital requirements and other factors which the Board
of Directors deems relevant. The Company may not pay dividends on Common Stock
at any time that the Company's Credit Agreement with Wells Fargo Bank N.A. is in
effect.

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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, 1996. The financial
statements included elsewhere herein, at December 31, 1996 and 1995 and for the
three years in the period ended December 31, 1996 have been audited by Deloitte
& Touche LLP, independent auditors. 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.

INCOME STATEMENT DATA:
Revenue............................ $ 65,762 $ 59,089 $ 41,158 $ 24,781 $ 18,833
Cost of revenue.................... 55,239 39,037 27,709 15,728 12,135
---------- ---------- ---------- ---------- ----------
Gross margin....................... 10,523 20,052 13,449 9,053 6,698
Administrative expenses............ 19,749 15,609 8,265 5,469 4,311
Unusual item....................... 919
---------- ---------- ---------- ---------- ----------
Operating (loss) income(1)......... (9,226) 4,443 5,184 2,665 2,387
Interest expense................... (2,377) (2,030) (1,832) (800) (209)
Interest income.................... 52 440 22 57
---------- ---------- ---------- ---------- ----------
(Loss) income before taxes......... (11,551) 2,853 3,374 1,865 2,235
Income tax benefit (expense)....... 4,741 (196) (1,260) (744) (965)
---------- ---------- ---------- ---------- ----------
(Loss) earnings before cumulative
effect of change in accounting
principle....................... (6,810) 2,657 2,114 1,121 1,270
Cumulative effect of change in
accounting principle(2)......... (3,240)
---------- ---------- ---------- ---------- ----------
Net (loss) earnings................ $ (10,050) $ 2,657 $ 2,114 $ 1,121 $ 1,270
========== ========== ========== ========== ==========
PER SHARE AMOUNTS:
(Loss) earnings before cumulative
effect of a change in accounting
principle....................... $ (0.76) $ .31 $ .37 $ .22
Cumulative effect of change in
accounting principle............ (0.36)
---------- ---------- ---------- ----------
Net (loss) earnings per share...... $ (1.12) $ .31 $ .37 $ .22
========== ========== ========== ==========
PRO FORMA AMOUNTS(2)(3):
Net earnings....................... $ 194 $ 1,675 $ 947 $ 1,313
========== ========== ========== ==========
Net earnings per share............. $ .02 $ .29 $ .19 $ .29
========== ========== ========== ==========
WEIGHTED AVERAGE SHARES
OUTSTANDING(4)..................... 8,947,060 8,576,817 5,704,926 5,024,679 4,608,825
OTHER DATA:
Ratio of earnings to fixed charges
and preferred dividends(5)......... -- 2.19x 2.67x 3.00x 5.86x
Research and development:
Funded by the Company.............. $ 1,916 $ 1,419 $ 688 $ 376 $ 240
Costs incurred on funded
contracts....................... $ 8,588 $ 4,722 $ 3,165 $ 1,813 $ 4,529

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BALANCE SHEET DATA:
Assets:
Current assets..................... $ 48,010 $ 36,857 $ 20,594 $ 13,779 $ 9,616
Property and equipment............. 23,356 15,779 13,199 7,803 7,540
Deferred costs..................... 929 6,385 1,460 1,460 595
Intangibles........................ 10,964 11,455 12,164 3,517 169
Other.............................. 3,429 2,660 274 228 87
---------- ---------- ---------- ---------- ----------
Total assets......................... $ 86,688 $ 73,136 $ 47,691 $ 26,787 $ 18,007
========== ========== ========== ========== ==========
Liabilities:
Current liabilities................ $ 24,804 $ 15,788 $ 15,358 $ 5,570 $ 5,567
Long-term debt..................... 24,697 11,261 15,339 12,794 4,839
Other.............................. 345 345 369
---------- ---------- ---------- ---------- ----------
Total liabilities.................... 49,501 27,049 31,042 18,709 10,775
Shareholders' equity(6).............. 37,187 46,087 16,649 8,078 7,232
---------- ---------- ---------- ---------- ----------
Total liabilities and shareholders'
equity............................. $ 86,688 $ 73,136 $ 47,691 $ 26,787 $ 18,007
========== ========== ========== ========== ==========

(2) During the second quarter of 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,
1994 and 1993 assume the new accounting method is applied retroactively. The
change in accounting would not have affected 1992.

(4) The Company effected a 3-for-2 split of its Common Stock on September 28,
1995. As a result, all shares and related references have been restated for
all prior periods and transactions.

(6) The Company has not paid any cash dividends since its April 1992 initial
public offering.

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22

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, 1996 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 Prospectus. This
Prospectus contains certain forward-looking statements and information. The
cautionary statements should be read as being applicable to all related
forward-looking statements wherever they appear. The Company's actual future
results could 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
crashes.

The Company's core historic business has been as a government contractor.
Additionally, through recent acquisitions, the Company has become the largest
North American-based supplier of seating systems for rail and other mass transit
vehicles and a successful new entrant in the manufacture of new commercial
airliner seating. Utilizing its proprietary safety technology, customer
relationships, and manufacturing capacity expertise, recently enhanced through
acquisitions, the Company has introduced crashworthy seating systems for a
variety of aircraft, various inflatable restraint systems for automobiles, a
bulkhead airbag system for commercial airliners, and two cockpit inflatable
restraint systems for military aircraft.

In 1993, management made a strategic decision to enter the commercial
aircraft seating market to bring its proprietary energy-absorbing technologies
to a new industry and take advantage of positive industry trends. To implement
its decision the Company completed three acquisitions that allowed it to develop
the necessary infrastructure to support future growth. In August 1993, the
Company acquired Airline Interiors, Inc. (the "Airline Acquisition"), which was
primarily involved with the refurbishment, reupholstery, reconditioning, and
reconfiguring of existing passenger seats. The Airline Acquisition provided
certain FAA certifications, enhanced the Company's management team and customer
base, and provided substantial assembly capacity. During 1994, the Company
acquired Coach and Car Equipment Corporation ("Coach and Car") and Artcraft
Industries Corp. ("Artcraft"). The acquisitions of Coach and Car and Artcraft
are collectively referred to as the 1994 Acquisitions. The 1994 Acquisitions'
existing operations included providing a majority of all manufacturing and
refurbishment of rail and mass transit seating systems in North America. The
1994 Acquisitions also provided the Company with substantial large-scale
manufacturing capacity and synergies, which will be utilized in the production
of its 16g Seat for airliners. The Company has taken advantage of the synergies
between these three entities in the manufacture of rail and mass transit seating
systems. The full strategic value of these businesses will not be realized until
the Company begins large scale manufacturing of its 16g Seat. As a result of the
size and timing of its acquisitions, the financial statements for the years
1996, 1995, and 1994 may not be directly comparable.

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 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

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23

each significant segment of the Company. Note 17 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, including
Simula Government Products, Inc., the principal entity conducting the Company's
"Government and Defense" business, and Simula Transportation Equipment
Corporation ("SimTec" -- formerly known as Intaero), an entity conducting the
Company's commercial seating businesses. Other includes general corporate
operations and subsidiaries engaged in technology development including Simula
Automotive Safety Devices, Inc. ("Simula ASD") which was established in 1995 and
conducts substantially all of the Company's operations encompassing inflatable
restraints for automobiles. Through 1996, Simula ASD has not had significant
revenue.

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
------- ------- -------
(Dollars in thousands)

REVENUE:
Government and Defense...................................... $32,312 $25,533 $22,034
SimTec...................................................... 32,603 29,609 18,093
Other....................................................... 847 3,947 1,031
------- ------- -------
Total............................................... $65,762 $59,089 $41,158
======= ======= =======
GROSS MARGIN:
Government and Defense...................................... $ 9,253 $ 9,632 $ 8,652
SimTec...................................................... 3,740 7,537 4,944
Other....................................................... (2,470) 2,883 (147)
------- ------- -------
Total............................................... $10,523 $20,052 $13,449
======= ======= =======
ADMINISTRATIVE EXPENSES:
Government and Defense...................................... $ 7,897 $ 6,337 $ 5,114
SimTec...................................................... 10,068 6,885 2,775
Other....................................................... 1,784 2,387 376
------- ------- -------
Total............................................... $19,749 $15,609 $ 8,265
======= ======= =======
OPERATING (LOSS) INCOME:
Government and Defense...................................... $ 1,356 $ 3,295 $ 3,038
SimTec...................................................... (6,328) 652 2,168
Other....................................................... (4,254) 496 (22)
------- ------- -------
Total............................................... $(9,226) $ 4,443 $ 5,184
======= ======= =======

The following table sets forth, for the periods indicated, the components
of the consolidated statements of income expressed as a percentage of revenues.

YEAR ENDED DECEMBER 31,
----------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----

INCOME STATEMENT DATA
Revenue................................................. 100% 100% 100% 100% 100%
Cost of revenue......................................... 84 66 67 63 64
Gross margin............................................ 16 34 33 37 36
Administrative expenses................................. 30 26 20 22 23
Unusual item............................................ 4
--- --- --- --- ---
Operating (loss) income................................. (14)% 8 % 13% 11% 13%
=== === === === ===

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24

During the second quarter of 1996, the Company adopted a new method of
accounting for pre-contract costs as more fully described in Note 2 of the Notes
to Consolidated Financial Statements. Beginning in 1996, the Company now
expenses these pre-contract costs as incurred rather than deferring these costs
to be amortized over the revenue streams from the Company's customers. This
change resulted in a cumulative catch-up adjustment for the effect of costs
capitalized as of December 31, 1995. The effect of the change on the year ended
December 31, 1996 was to increase cost of revenue by $5.3 million, resulting in
an increase in the loss before cumulative effect of a change in accounting
principle of $3.2 million ($.36 per share) net of the related income tax
benefit. In addition, net income for year ended December 31, 1996 was reduced by
$3.2 million ($.36 per share) for the cumulative effect on prior years (to
December 31, 1995) of changing accounting for pre-contract costs. Assuming the
change in accounting had been applied retroactively to the year ended December
31, 1995, cost of revenue would have increased $4.1 million to $43.2 million and
gross margins would have decreased from 34% to 27%. See "Risk Factors -- Recent
and Anticipated Losses."

1996 Compared to 1995

Revenue for the year ended December 31, 1996 increased 11% to $65.8 million
from $59.1 million in 1995. Government and Defense revenue increased 27%, or
$6.8 million as a result of increased contract activity principally resulting
from an armor contract completed during the second quarter of 1996 and funded
research and development. SimTec revenue increased 10%, or $3.0 million,
primarily as a result of increased deliveries of the 16g Seats. Other revenue
decreased principally as a result of a reduction of technology sales and
royalties which approximated $2.0 million in 1995.

Gross margin for the year ended December 31, 1996 decreased 48% to $10.5
million from $20.1 million for 1995. As a percent of sales, gross margin
decreased to 16% from 34%. The effect of expensing pre-contract costs increased
cost of revenue by $5.3 million for the year ended December 31, 1996. Excluding
the effect of expensing pre-contract costs, the gross margin percentage for 1996
would have been 24%. Gross margin percentages of Government and Defense in 1996
decreased to 29% from 38%. The decrease in gross margin percentage at Government
and Defense was primarily due to: 1) the expensing of pre-contract costs
principally related to the bulkhead airbag ("BABS") which is anticipated to
begin deliveries in 1997; 2) funding deficiencies incurred on funded research
and development contracts which typically result in follow-on production
contracts in future years; and 3) a decrease in royalties. The gross margin
percentage at SimTec decreased to 11% from 25% in 1995. The decrease in gross
margin percentage at SimTec was primarily due to: 1) the expensing of
precontract costs principally related to the 16g Seat, including the related new
"composite" seat back; 2) high material costs related to the low volume
production of the 16g Seat; 3) reduced throughput at Coach and Car as it was
repositioned to begin high volume manufacturing of 16g Seat components; and 4)
lower individual gross margin percentages from the mix of contracts in process
or completed during the year at Coach and Car and Artcraft. The negative gross
margins of the Other category was primarily due to the expensing of pre-contract
costs for the Inflatable Tubular Structure ("ITS") and certain start-up costs
related to the production facilities in Arizona and the United Kingdom for the
manufacture of the ITS which began shipments in March 1997.

Administrative expenses for the year ended December 31, 1996 increased 27%
to $19.7 million from $15.6 million for 1995. As a percent of sales,
administrative expenses increased to 30% from 26%. Research and development
expenses increased 35% to $1.9 million from $1.4 million as a result of the
Company's increased investment in several products and developmental
subsidiaries that are expected to begin generating revenue subsequent to 1996.
Government and Defense administrative expenses increased 25% or $1.6 million
primarily as a result of increased activity and increased research and
development. SimTec's administrative expenses increased 46% or $3.2 million,
primarily as a result of the corporate and sales infrastructure necessary to
support the anticipated increase in activity related to the 16g Seat. Other
administrative expenses decreased 25% or approximately $600,000, primarily as a
result of the elimination or reduction of the supporting operations for certain
technologies.

For the year ended December 31, 1996, the Company incurred an operating
loss of $9.2 million compared to operating income of $4.4 million in 1995. The
reduction in operating income resulted primarily from the reduction in gross
margins and increased administrative expenses noted above. Excluding the effect
of expensing pre-contract costs during 1996, the operating loss would have been
$3.9 million. This loss is

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25

primarily due to the start-up costs of the ITS manufacturing facilities in
Phoenix, Arizona and the United Kingdom and 16g Seat manufacturing facilities in
San Diego, California and Chicago, Illinois, losses arising from research and
development contracts for which the Company anticipates profitable follow-on
contracts, increased research and development and the expenses of the
administrative and sales infrastructure that will be necessary in 1997 to
support manufacturing and the generation of sales of the ITS and 16g Seat.

Interest expense for the year ended December 31, 1996 increased 17% to $2.4
million from $2.0 million for the year ended December 31, 1995. This increase is
due to increased borrowings on the Company's bank credit facilities and the
issuance of $14.3 million of Series C 10% Senior Subordinated Convertible Notes
(the "10% Notes") in a private placement to accredited investors in September
1996. These borrowings were made to fund the growth in working capital and fixed
assets necessary to support the anticipated growth in revenues in 1997.

The effective income tax rate approximated the statutory rate of 40% in
1996. For 1995, the effective income tax rate was disproportionate at 7%
primarily due to the realization of tax attributes of an acquired subsidiary.
The effects of the tax attributes of this acquired subsidiary were substantially
recognized in 1995.

1995 Compared to 1994

Revenue for the year ended December 31, 1995 increased 44% to $59.1 million
from $41.2 million in 1994. Government and Defense increased 16%, or $3.5
million, as a result of increased contract activity including increases in
funded research and development. SimTec revenue increased 64%, or $11.5 million,
primarily as a result of the full year inclusion of the 1994 Acquisitions and
the initial delivery of the 16g Seats. Other revenue increased principally as a
result of technology sales and royalties of approximately $2.0 million in 1995.

Gross margin for the year ended December 31, 1995 increased 50% to $20.1
million from $13.4 million in 1994. The increase is attributable to increased
revenue noted above. As a percent of sales, gross margin increased to 34% from
33%. Gross margin percentages of Government and Defense in 1995 decreased to 38%
from 39%. The gross margin percentage at SimTec decreased to 25% from 27% in
1994. The decrease for SimTec resulted from $2.4 million in losses recorded on
contracts which were acquired in the acquisition of Artcraft. These losses were
substantially offset by the full integration of the 1994 Acquisitions, which
allowed the Company to increase its vertical integration, thereby eliminating
several third party vendors. These benefits were offset to a certain extent by
the acceleration of two low-margin contracts that were committed to by Coach and
Car prior to its acquisition by the Company. The gross margin percentage of the
Other category increased to 73% from a negative margin of (14%) in 1994 as a
result of the technology sales and royalties.

Administrative expenses for the year ended December 31, 1995 increased 89%
to $15.6 million from $8.3 million in 1994. As a percent of sales,
administrative expenses increased to 26% from 20%. Research and development
expenses increased 106% to $1.4 million from approximately $700,000 as a result
of the Company's increased investment in several products and developmental
subsidiaries that are expected to begin generating revenue subsequent to 1996.
Depreciation and amortization expenses increased 86% to $3.1 million from $1.7
million, primarily as a result of amortization relating to the 1994
Acquisitions. Government and Defense administrative expenses increased 24%, or
$1.2 million, primarily as a result of increased activity and increased research
and development. SimTec's administrative expenses increased 148% or $4.1
million, primarily as a result of the inclusion of the acquired companies for
the entire 1995 period and the expansion of the corporate and sales
infrastructure necessary to support the anticipated increase in activity related
to the 16g Seat. Other administrative expenses increased 536%, or $2.0 million,
primarily as a result of an increased investment in personnel and operations of
the Company's developmental subsidiaries.

Operating income for the year ended December 31, 1995 decreased 14% to $4.4
million from $5.2 million for the comparable period in 1994. Operating income
decreased primarily due to the recording of losses on the contracts at Artcraft
and increased administrative costs. These costs were substantially offset by the
increased gross margins resulting from increased revenue.

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26

Interest expense for the year ended December 31, 1995 increased by
approximately $200,000 over the comparable period in 1994 as a result of a
higher average debt balance in 1995. Additional debt was incurred to finance
working capital requirements and assumed in connection with the 1994
Acquisitions. Approximately $8.2 million of debt was retired in the second
quarter of 1995 with a portion of the proceeds of the Company's 1995 public
offering.

The effective income tax rate was approximately 7% for 1995 and 37% for
1994. The decrease in the effective tax rate in 1995 is attributable to the
realization of tax attributes of an acquired subsidiary. The effects of the tax
attributes of this acquired subsidiary were substantially recognized in 1995.
Accordingly, management does not expect that the remaining tax attributes will
have a significant impact on the Company's effective income tax rate in future
periods.

LIQUIDITY AND CAPITAL RESOURCES

The Company has historically financed its operations through operating cash
flow, lines of credit and debt and equity offerings. In August 1993, the Company
began to acquire companies, primarily with borrowed funds. The Company issued
$5.7 million of 12% Senior Subordinated Notes (the "12% Notes") in connection
with the acquisition of Airline Interiors in August 1993; the Company issued
approximately $6.5 million of 9% Senior Subordinated Convertible Notes (the "9%
Notes") in connection with the acquisition of Coach and Car in June 1994; and
the Company issued Common Stock and assumed a bank line of credit of $1.7
million, of which $650,000 was repaid simultaneously with the closing, in
connection with the acquisition of Artcraft in September 1994. But for the
acquisitions, the Company would have been able to satisfy its financial needs
through operating cash flow. These acquisitions resulted in substantially
increased working capital needs to fund the large vendor payable balances,
contract advances of Coach and Car existing at the date of acquisition, and the
increase in receivables and inventories of all the acquired companies after the
respective dates of acquisition. In addition, restrictive covenants under the
Company's then existing bank line of credit required the Company to seek
alternative financing. In September 1994, prior to the closing of the Artcraft
acquisition, the Company obtained an aggregate of $6.2 million of financing from
three non-bank lenders, including $2.0 million from the Company's Chairman.

The 9% Notes were converted into Common Stock during 1994. The Company
completed a public offering of Common Stock, which closed and funded in April
1995. As a result of this offering, 2,328,750 shares were sold by the Company at
$12 per share. Approximately $8.2 million of indebtedness was repaid at that
time, including the $6.2 million described above.

In September 1996, the Company issued $14.3 million of the 10% Notes in a
private placement to accredited investors. The 10% Notes bear interest at 10%
payable semi-annually and are due in September 1999. At the date of issuance,
the 10% Notes were convertible into Common Stock of the Company at 103% of the
average closing price of the Company's Common Stock as quoted on the New York
Stock Exchange for the 10 consecutive trading days immediately preceding notice
by the individual holder fixing the conversion price. Based upon the conversion
prices fixed prior to December 31, 1996 and the average market price of the
Company's Common Stock for the 10 days ended December 31, 1996 for the 10% Notes
not yet fixed, the 10% Notes would be convertible into approximately 930,000
shares of the Company's Common Stock. At the date of issuance, the Company had
the right to call the 10% Notes at par plus accrued interest through the date of
redemption any time after June 15, 1997 and earlier under certain circumstances.
The indenture relating to the 10% Notes and the 12% Notes contains certain
covenants including limitations on the incurrence of additional indebtedness,
limitation on sale of assets, transactions with affiliates, and restricted
dividend payments. In accordance with the indenture, the Company may incur
indebtedness based upon the specified ratio of cash flow, as defined, to
interest expense. All of the Company's 1996 borrowings, including the
availability under the Company's line of credit, are allowable borrowings under
the terms of the indenture. As of December 31, 1996 the Company was in
compliance with all covenants of the indenture.

Subsequent to December 31, 1996, the Company undertook to obtain the
consent of the holders of the 10% Notes and the 12% Notes to amend the indenture
to eliminate the covenants limiting the incurrence of additional indebtedness
and making certain dividend payments, to allow the Company greater flexibility
with

25
27

future financings consistent with the Company's growth. Consistent with the
procedures under the indenture, effective March 14, 1997, the Company obtained
the consent of in excess of the majority of the principal amount of such Notes
and by act of the Company and the trustee under the indenture, the amendments
eliminating these covenants were adopted. The Company was in compliance with all
of the covenants on the effective date of the amendment. In consideration for
the consent of the holders of the 10% Notes, the 10% Notes were amended to
change the conversion ratio from 103% to 98% or reduce the conversion price for
the 10% Notes previously fixed by $.75 per share. In addition, the Company's
optional redemption date was extended from June 15, 1997 to December 15, 1997
and certain fees to be paid to the holders of the 10% Notes were eliminated.
Based on the revised terms of the 10% Notes and the average market price of the
Company's Common Stock for the 10 days ended December 31, 1996, the 10% Notes
would be convertible into approximately 975,000 shares of the Company's Common
Stock.

In 1996 and 1997, the Company entered into modifications of its existing
loan agreement with Wells Fargo Bank, N.A. These modifications provided for an
increase in the existing revolving line of credit to $20 million and $1.5
million of availability for equipment purchases. The modified agreement contains
a covenant that limits the Company's ability to incur additional indebtedness.
Specifically, the modified agreement allows the Company to incur up to $65.0
million of subordinated debt, a foreign loan facility of $5.0 million, computer
equipment financing and certain refinancing indebtedness. In addition, the
modified agreement contains certain covenants that require the maintenance of
various financial ratios, including minimum tangible net worth, as defined, of
$45.0 million, a maximum leverage ratio, a minimum current ratio of 1.5 to 1 and
a minimum debt coverage ratio. As of December 31, 1996 the Company was in
compliance with all covenants.

The Company's liquidity is greatly impacted by the nature of the billing
provisions under its government contracts. Generally, in the early period of
contracts, cash expenditures and accrued profits are greater than allowed
billings while contract completion results in billing previously unbilled costs
and profits. Contract receivables increased $4.1 million for the year ended
December 31, 1996 principally due to the timing of billings, increased volume at
Coach and Car and the reduction of advances on contracts at Coach and Car and
Artcraft.

Operating activities required the use of $15.6 million of cash during the
year ended December 31, 1996 compared to the use of $14.5 million of cash during
1995. This resulted primarily from significant investment in research and
development expenses, pre-contract costs and plant start-up costs, including the
associated general and administrative costs, all of which have been expensed,
for products the Company will not begin to ship in substantial quantities until
1997, the working capital required for the reduction in advances on contracts
noted above and the funding of the $7.0 million investment in inventories
primarily at SimTec and Government and Defense. The increase in inventories at
SimTec primarily represents the buildup necessary to support anticipated future
deliveries of the 16g Seat. The increase in inventories at Government and
Defense represents inventory necessary to support certain programs which require
the buildup of components necessary to support rapid deliveries of various
configurations of seats. In addition, both SimTec and Government and Defense
have purchased inventory in larger quantities to reduce per unit costs.

Investing activities required the use of $9.3 million of cash during the
year ended December 31, 1996 primarily for the purchase of equipment for the
Company's new ITS manufacturing facilities in Phoenix, Arizona and the United
Kingdom, manufacturing equipment for the 16g Seat and computer and test
equipment at Government and Defense. For 1995, cash used by investing activities
was $3.4 million and was expended primarily for the acquisition of property and
equipment.

Financing activities provided $23.0 million of cash during the year ended
December 31, 1996, of which $6.9 million resulted from borrowings on the
revolving credit facility primarily for working capital needs and $3.2 million
resulted from borrowings on the equipment credit facility for the financing of
fixed assets. In addition, the Company issued the 10% Notes in September 1996.
Cash provided by financing activities for 1995 was $20.1 million and primarily
resulted from the sale of the Company's Common Stock for $26.4 million offset by
the net reduction of borrowings of $6.3 million.

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Included in current portion of long-term debt is a mortgage of $2.6 million
on one of the Company's facilities that is due in March 1998. The Company is
currently pursuing various alternatives for this property and believes it will
be able to repay or refinance the mortgage on a long term basis prior to its
maturity.

The Company believes it has sufficient manufacturing capacity, at December
31, 1996, to meet its estimated 1997 delivery requirements. The Company
anticipates cash provided by operating activities and the availability under its
bank credit facilities will be sufficient to meet its current working capital
requirements. The Company believes that the net proceeds of this offering will
be sufficient to fund purchases of property and equipment and future working
capital requirements necessary to address the anticipated growth of demand and
markets for its new technologies and products for the next 18 months. The
Company may, however, seek to obtain additional capital. The modification to the
indenture noted above will allow the Company more flexibility in pursuing
financing alternatives. The raising of additional capital in public markets will
be primarily dependent upon prevailing market conditions and the demand for the
Company's technologies and products. The net proceeds of this offering will be
used to expand existing manufacturing facilities, primarily for the manufacture
of aircraft and rail seating systems and components related to the Company's
automobile inflatable restraint systems, working capital requirements attendant
to growth in markets and revenues and other general corporate purposes,
including potential future acquisitions.

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 rail seating
technologies. As noted in Note 17 to the Consolidated Financial Statements, the
Company's costs for research and development to advance its technologies were
$10.5 million in 1996.

SEASONALITY

The Company's operations and financial results are affected by the seasonal
variations in deliveries by suppliers. Historically, the Company has experienced
its highest level of deliveries of materials in the fourth quarter and its
lowest level of deliveries in the first quarter. Accordingly, for those
contracts accounted for under the percentage of completion method, the Company
has historically recorded its highest revenue in the fourth quarter and lower
revenue in the first quarter.

FORWARD LOOKING INFORMATION AND RISKS OF THE BUSINESS

During fiscal 1997 the Company will enter large scale production of the ITS
and 16g Seats and expects to complete roll-out of other new products, including
CABS, BABS, and IBAHRS. The Company expects that in late 1997 and in 1998, it
will begin to realize significant revenues from the introduction of these
products. The other core businesses of the Company are expected to remain at
current revenue and profit levels.

Projected operating results and capital needs will be affected by a wide
variety of factors which could adversely impact revenues, profitability and cash
flows, many of which are beyond the control of the Company. The factors include
the Company's ability to design and introduce new products on a timely basis;
market acceptance and demand of both the Company's and its customers' products;
success in building strategic alliances with large prime contractors and first
tier suppliers; the level of orders which are received and can be

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shipped and invoiced in a quarter; customer order patterns and seasonality;
levels of accounts receivable; changes in product mix; product performance and
reliability; product obsolescence; availability and utilization of manufacturing
capacity; fluctuations in manufacturing yield; the availability and cost of raw
materials, equipment, and other supplies; the cyclical nature of the airline,
rail and automobile industries and other markets addressed by the Company's
products; the level and makeup of military expenditures; technological changes;
competition and competitive pressures on pricing; and economic conditions in the
United States and worldwide markets served by the Company. The Company's
products are incorporated into a variety of transportation vehicles. A slowdown
in demand for new transportation vehicles or modifications services to
transportation vehicles as a result of economic or other conditions in the
United States or worldwide markets served by the Company and its customers or
other broad-based factors could adversely affect the Company's operating results
or financial condition.

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BUSINESS

OVERVIEW

The Company was formed in 1975 when its founder accepted a government
research contract to focus on engineering solutions that could be used to
protect the lives of American helicopter crews in crash situations. Because of
the rotary blade utilized by helicopters, helicopter pilots cannot eject in the
same manner as pilots in fixed-wing aircraft. The contract led to the Company's
development of a crashworthy seat, first introduced in the Army Blackhawk
helicopter.

The core technology developed under the Company's first contract was
energy-absorbing seating which, upon impact, absorbs shock that otherwise would
be directed onto the occupant. In the course of supplying the United States
armed forces and agencies with crashworthy seating, the Company performed years
of research and tests and developed proprietary databases with respect to how
materials stretch, bend, and break. Similarly, in an effort to provide
additional protection for pilots, the Company conducted extensive research and
development in the late 1970s on armor systems composed of a variety of
lightweight, high-strength composites and ceramics. Such lightweight armor
systems were eventually incorporated into most helicopter seating systems. This
armor technology has also led to the development of a variety of other armor and
occupant protection systems. In the 1980s, the Army asked the Company to develop
a solution to injuries suffered by pilots caused by contact with instrumentation
on hard landings or during crashes. From its extensive research, the Company
developed its inflatable restraint systems, which include harnesses, belts, and
other types of sophisticated airbags. The Company has leveraged this evolving
research and development into applications in a variety of technologies and
products.

The Company, through its 11 operating subsidiaries, conducts operations in
three principal market segments: commercial transportation seating systems,
government and defense, and automobile safety systems. Operations can be
described in three phases: (i) providing contracted research and development
activities to third parties to solve specific safety related issues and
undertaking Company funded research to expand existing technologies to new
applications, (ii) leveraging such research into advanced, high-performance,
cost-efficient product solutions to influence market preferences in a wide range
of applications and industries, and (iii) manufacturing, selling, and marketing
such products.

OPERATING AND GROWTH STRATEGY

The Company's strategy is to maintain its leading position in creating and
applying proprietary technologies and advanced solutions to safety related
problems and to develop its products for commercial sale to a wide range of
customers. The key elements in executing this strategy are to (i) develop and
utilize technology to enhance current products and create new products, (ii)
focus on new product markets and regulatory requirements, (iii) expand
manufacturing capabilities and maximize internal synergies, and (iv) pursue
acquisitions and strategic alliances that complement existing businesses or
provide manufacturing or distribution opportunities.

TECHNOLOGY AND PRODUCT DEVELOPMENT

The Company focuses on the development of technologically advanced,
high-performance, cost-efficient solutions to influence existing markets to move
in new directions or create entirely new markets. The Company's growth strategy
is "engineering-driven," taking technologies learned, developed, and refined in
one arena, and applying them to another sector. Management's objective is to
selectively identify and manage engineering solutions to create market
opportunities rather than allow the Company's current product base to define the
Company's markets. The Company believes that its competitive advantage is
technology and innovation. The Company employs approximately 150 engineers and
scientists and maintains an active research and development program to enhance
its existing products and to develop new products and product applications. The
Company has a substantial data base, available to its biomechanical engineers,
based on which analysis is made regarding human body dynamics in crash
environments. Additionally, the Company's proprietary technologies are embodied
in numerous trade secrets, 13 patents, and 35 patents pending. The

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Company enhances and supports products by the development of a compatible family
of products, such as its various inflatable restraint technologies designed into
four automobile applications and three aircraft applications. The Company seeks
to pursue a diverse technology and product base that minimizes dependence on one
or a few products and technologies. See "Risk Factors -- Investment in and
Dependence on Proprietary Technology."

MARKET AND REGULATORY FOCUS

The Company endeavors to demonstrate the technological feasibility of new
standards, provide the basis for new regulations, and utilize its technological
expertise to develop and introduce products that meet these new standards and
regulations ahead of its competitors. The Company seeks to remain at the
forefront of industry developments by being proactive in developing industry
trends and regulatory guidelines. The Company's long-standing involvement with
governmental departments and agencies facilitates its ability to anticipate
regulatory safety requirements and consumer safety issues and to develop
products that address these concerns. In this regard, the Company authors the
"Aircraft Crash Survival Design Guide," a five-volume text published by the
United States Army regarding crash survival technology, which is commonly used
worldwide as a guide in the design of crashworthy aircraft. The Company also
co-authored "The Transport Seat Performance and Cost Benefit Study," a study
commissioned by the FAA to analyze the performance of seats in commercial
airliner accidents. This study, which was first published in October 1986, was
cited as a principal consideration in the FAA's changes in commercial airliner
seat design specifications. The Company also owns and operates the International
Center for Safety Education ("ICSE"), a Phoenix-based training school
established in 1958 that sponsors courses which have been attended by more than
5,000 safety investigators from United States and foreign government agencies,
armed services, the aircraft industry, and the field of aviation medicine. The
function of ICSE is to teach the analysis of aircraft behavior in a crash, the
causes of injury or death to passengers and crew, and the design and structural
changes that can be made to improve survivability. See "Risk
Factors -- Government Safety Regulations."

EXPANDING MANUFACTURING CAPABILITIES AND MAXIMIZING INTERNAL SYNERGIES

The Company seeks to maintain integrated testing and manufacturing capacity
for its products; however, the Company may also subcontract certain
non-proprietary components of its products and provide its proprietary products
for integration and sale in the final products of customers. Over the last three
years, the Company has significantly expanded its manufacturing capabilities and
infrastructure, through both acquisitions and internal development, to support
the commercial production of several new product lines. In addition, the Company
has vertically integrated the manufacturing of several components used in its
seating systems, which has positively impacted overall profitability. The
Company expects to continue to expand its manufacturing capabilities, to develop
its infrastructure to support its new product development programs, and to enter
into licensing relationships to facilitate the distribution of its products. See
"Risk Factors -- Production Risks and Manufacturing Experience" and "Risk
Factors -- Dependence on Industry Relationships."

EXPLORING ACQUISITION AND STRATEGIC ALLIANCE OPPORTUNITIES

The Company explores acquisition opportunities as they arise and enters
into strategic alliances when it believes such acquisitions or alliances will
enable the Company to introduce new products or enhance existing products, to
exploit its technologies or acquire complementary technologies, to improve its
manufacturing capabilities, to broaden its distribution channels, or to obtain
components or supplies necessary for its products. In its last three fiscal
years, the Company has experienced substantial growth resulting from strategic
acquisitions to maximize the market potential of new technologies, wider
application of technologies, and new product introductions. The Company has no
present commitments or agreements with respect to any additional acquisitions or
alliances. See "Risk Factors -- Acquisitions."

OVERVIEW OF MARKET SEGMENTS AND INDUSTRIES

The Company believes that the entire transportation market is poised for
transformation as society's awareness of safety issues increases. The Company
seeks to position itself to benefit from consumer demand

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and government regulations requiring progressive safety equipment on all forms
of transportation, from automobiles and aircraft, to school buses and high speed
trains.

COMMERCIAL TRANSPORTATION SEATING

Airliner Seating Systems. At the end of 1995, there were approximately
11,000 passenger aircraft in operation worldwide, representing over 2.0 million
passenger seats. A study conducted by the Boeing Commercial Airplane Group
projects that 3,142 new passenger aircraft will be put into service during the
next five years, replacing 1,532 older aircraft and adding 1,610 additional
aircraft to airline fleets. The study further projects that 14,054 aircraft will
be manufactured and put into service over the next 20 years, representing over
3.2 million passenger seats.

Historically, annual production of new aircraft seats has been between
120,000 and 130,000 worldwide, exclusive of repaired and refurbished seats. The
Company believes that the recent growth of the airline industry, with the
resulting increase in passenger miles flown and the recent trend toward
installation of communication and entertainment systems in aircraft seats, will
increase demand for new seats. Additionally, there has been a recent significant
consolidation in the new seat industry, which the Company believes will benefit
it because of the desire of airlines to have a broader supplier base. Although
the Boeing study did not include refurbished seats, the Company also believes
that the demand for refurbished aircraft seats will grow as the airline industry
expands and new airlines purchase used aircraft.

Additionally, demand for both new and refurbished aircraft passenger seats
may further increase as new regulations are adopted or enforced that raise the
standards for crashworthiness in light of recent heightened attention to airline
safety and FAA initiatives. For example, the continued phase-in of FAA standards
requiring airliner passenger seats to withstand the force of 16g's (16 times the
force of gravity) in a crash is expected to create increased demand for new
aircraft seating systems meeting such requirements. Similarly, in 1988, the FAA
adopted regulations requiring that all passengers on an aircraft have a certain
specified level of head injury protection, as measured by Head Injury Criteria
("HIC"). Presently, most commercial aircraft certificated since the adoption of
the FAA regulations are flying under waivers granted by the FAA because such
aircraft do not meet the HIC criteria for passengers sitting immediately behind
bulkheads and other cabin partitions. The Company believes that the FAA waiver
policy will be reviewed and updated, thus creating an increased demand for
installation of inflatable bulkhead restraints on commercial aircraft to improve
the safety of passengers. See "Risk Factors -- Government Safety Regulations."

The FAA initiatives, and the resulting products of the Company focusing on
16g seats and bulkhead HIC standards, are intended to address injuries in
"survivable" crashes. According to NTSB statistics, there were 2,211 aviation
accidents in the United States in 1995. Scheduled commercial, commuter, and
charter airlines were involved in 145 of such accidents, 20% of which had some
fatalities and 80% of which resulted only in injuries. Of these injuries,
approximately 80% were to passengers and 20% to the crew. Common causes of
aircraft accidents include overruns, hard landings, and ground collisions with
objects. These survivable accidents, which have historically resulted in
injuries, are the type for which the Company's products increase safety and
reduce the risk or severity of injuries on commercial airliners.

Rail and Mass Transit Seating. The rail and mass transit industries are
undergoing significant changes, including growth in ridership and upgrading of
fleets. Demand for rail and mass transit seating results from the traveling
public's desire for safety and comfort as well as new laws and regulations, such
as the new safety regulations recently proposed by the Federal Railroad
Administration, the Clean Air Act Amendments of 1990 and the Americans with
Disabilities Act, which require that transit authorities and rail operators
purchase new, upgrade, or retrofit existing equipment.

The Company believes that the United States bus industry will purchase over
13,000 new buses between 1995 and 1998 and that railcar-purchasing agencies will
purchase up to 3,500 rail and mass transit cars during the same period. Rail and
mass transit seat manufacturers may also potentially benefit from the
development of lighter weight and high-speed rail systems in North America.

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GOVERNMENT AND DEFENSE

The Company believes that the United States government will continue to
fund a significant defense budget and will increasingly support high technology
and safety improvements. In part as a result of a shifting focus on tactical
weaponry designed to meet the needs of a military primarily adopting a
containment defense posture, certain strategic programs, such as the Stealth B-2
Bomber and the MX missile, have been cut or eliminated, while government
contract revenue for containment, mobile, and tactical programs has increased.
Certain technical military aircraft programs in which the Company is involved,
such as the Black Hawk helicopter, C-17 utility air transport, and Apache attack
helicopter, continue to be funded. The Company expects that pilot and passenger
safety will continue to be a critical part of these and other programs, although
no assurances can be offered in this regard. As part of the shifting focus of
the military, defense forces are more mobile than ever before, with the United
States and many foreign governments placing greater emphasis on transportation
safety. The United States is widely regarded as the world leader in military
safety and technology development, and expenditures in these areas are expected
to continue in the future as military forces become increasingly mobile. The
Company believes that there will be continued government spending on and demand
for military safety technology products, such as advanced energy-absorbing
seating, lightweight armor systems, and inflatable restraints. See "Risk
Factors -- Substantial Reliance Upon Major Customers."

The Company regards its reputation and relationship with various military
branches and regulatory agencies throughout the world, including the FAA,
National Highway Traffic and Safety Administration ("NHTSA"), National
Aeronautics and Space Administration ("NASA"), and the National Transportation
Safety Board ("NTSB") to be a significant asset and intends to continue to
pursue government-funded research and development when it can retain proprietary
rights. The Company intends to continue to expand its government business;
however, this segment's revenue has declined as a percentage of overall Company
revenue as demand for the Company's commercial products has steadily increased.

AUTOMOBILE SAFETY SYSTEMS

Demand for automobile safety products results primarily from government
regulations and consumer demands. One regulation, adopted in 1984 by NHTSA,
provided the impetus for the development of the airbag market in the United
States by requiring installation of passive restraints in all new cars sold
after 1989. Passive restraints typically consist of either frontal airbags or
passive seat belt systems. Applicable 1991 regulations require the use of
airbags for both sides of the front passenger compartment of all new cars sold
in the United States by the 1998 model year. Frontal impact is the leading cause
of automobile injuries and third leading cause of automobile fatalities,
accounting for approximately 51% of all injuries and 31% of all fatalities in
automobile collisions. See "Risk Factors -- Government Safety Regulations."

Consumer demand has outpaced regulation as the primary impetus for the
growth of the airbag market. According to publicly available automotive industry
data, in the 1989 model year, only 7% of the automobiles produced in the United
States included an airbag. This percentage increased to 28% in 1990, 42% in
1991, 59% in 1992, and 71% in 1993. Industry sources estimate that standard
driver's side airbags were installed in approximately 90% of 1995 model year
automobiles sold in the United States and, to a lesser extent, overseas. This
high degree of penetration has been achieved in advance of the regulatory
deadline as a result of consumer demand.

Side-impact collisions comprise the second leading cause of injury and the
leading cause of fatalities, accounting for approximately 25% of all injuries
and 34% of all fatalities, which occur in automobile collisions, with a
significant majority of such injuries caused by impact to the head and neck.
Present United States side-impact safety standards address the use of foam
padding and/or structural beams. However, NHTSA is currently examining head
crash standards, measured in quantifiable HICs for side-impact collisions.
Rollover injuries are the third leading cause of injury and second leading cause
of fatalities, accounting for approximately 15% of all automobile injuries and
33% of fatalities. The Company's ITS is the only available product designed
specifically to protect the head and neck of vehicle occupants in side-impact
collisions and

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potentially provide containment of occupants in rollover and secondary impact
collisions. See "Inflatable Restraint Systems -- Automobile Inflatable Restraint
Systems."

EMERGING TECHNOLOGIES

The Company believes that regulatory mandates and consumer demands will
continue to drive the demand for advanced safety products and technologies,
creating opportunities for the development of new technologies and products and
providing additional markets for existing technologies. The Company believes
that included among the products and technologies with significant present or
future market potential in which the Company is developing capabilities are (i)
sensor equipment for the deployment of airbags, (ii) remote sensing devices
programmed to analyze the failure characteristics of vehicles and structures,
(iii) advanced lightweight composite materials, and (iv) other advanced
materials, such as urethanes and polymers, with a wide variety of potential
product applications, including high-performance windows for aircraft and
automobiles, and protective lenses and visors.

THE COMPANY'S PRODUCTS AND EMERGING MARKETS

The Company's growth to date has resulted principally from its core
products and technologies involving energy-absorbing seating systems, armor, and
seat repair and refurbishment. More recently the Company has introduced new
products. The following table shows each of the Company's products currently in
production and each of the products the Company expects to commence delivery of
on the rollout schedule indicated.

PRODUCT AND TECHNOLOGY STATUS

PRODUCT/TECHNOLOGY STATUS PRODUCT ROLLOUT
- ----------------------------------------- ------------------------------- ----------------------

Energy Absorbing Seating
Systems -- Military.................... In Production 1975 -- On-going
Composite Armor.......................... In Production 1985 -- On-going
Airliner Seat Repair and Refurbishment... In Production Acquired 1993 --
On-going
Rail and Transit Seating................. In Production Acquired 1994 --
On-going
New 16g Airliner Seats................... In Production 1996 -- On-going
Inflatable Tubular Structure............. In Production 1997
Bulkhead Airbag System................... Certified/Ready for Production 1997
Cockpit Airbag System.................... Ready for Production 1997
Inflatable Body and Head Restraint
System................................. Ready for Production 1997

SEATING SYSTEMS AND COMPONENTS

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 for more than 20 years. The seating systems focus on
reducing injury and increasing survivability in crashes involving aircraft.
These crashworthy seating systems contain proprietary energy-absorbing
components and devices that activate upon crash impact to absorb shock that
otherwise would be absorbed by the seat occupant.

Based on publicly available information and industry sources, the Company
believes that it is the leading provider of crashworthy helicopter seats
purchased by the United States armed forces, being the sole supplier for 11
helicopter programs. Military aircraft for which the 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-roar aircraft; Indian Hindustan Aeronautics, Ltd. ALH utility
helicopter; and C-17 fixed wing utility aircraft.

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Aircraft manufacturers in the Company's customer base include the Boeing
Company, McDonnell Douglas Corporation, and Sikorsky Aircraft.

Commercial Airliner Seating Systems. The Company, through its wholly owned
subsidiary Airline Interiors, manufactures and sells commercial airline seating
systems that comply with FAA-mandated 16g standards for airline seats ("16g
seats") and repairs, refurbishes and retrofits existing commercial aircraft
seats. With the acquisition of Airline Interiors in 1993, the Company obtained
FAA certifications and an established customer base of commercial airlines as
well as the operations to repair, refurbish, and retrofit commercial aircraft
seats. The Company's entrance into the airline seating market is an outgrowth of
both the Company's technologies and Airline Interiors' traditional core
business -- the repair, refurbishment, and retrofitting of commercial aircraft
seats.

The 16g Seats are designed to absorb 16 times the force of gravity upon
impact. The prices and features of the Company's new 16g Seats are competitive
with more established 16g seat suppliers, but exceed existing and currently
anticipated industry and regulatory standards for crashworthiness. The Company's
16g Seats have been tested, approved, and certified for use in numerous classes
of commercial aircraft. The Company's customer base for its 16g Seats includes
Air Transit, The Boeing Company, GATX Leasing, International Leasing Finance
Corp., Onur Air, Flying Colors Airlines, and two major U.S. carriers. In the
first quarter of 1997 the Company has received more than $25 million in orders
and follow-on options and currently has in excess of $65 million in bid
proposals outstanding for proposed seating contracts with international,
national, and regional airlines. There can be no assurance, however, that the
Company will be awarded these or other outstanding bids. See "Risk
Factors -- Entry into New Markets," "Risk Factors -- Competition," and
"Business -- Overview of Markets and Industry -- Commercial Airliner Safety
Systems."

The Company also repairs, refurbishes, and retrofits existing commercial
aircraft seats. Its services include (i) the supply of seat components,
including upholstery, cushioning, and fiber blocking; (ii) the overhaul and
modification of seat assemblies, including arm rests and tray tables; and (iii)
the design and integration of communication and entertainment systems into
aircraft seats. Customers of Airline Interiors for such services include America
West Airlines, Continental Airlines, Southwest Airlines, and United Airlines.

The Company believes that various developments in the airline industry may
increase the demand for new energy-absorbing seats and for the repair,
refurbishment, and retrofitting of existing airliner seats. These factors
include the potential for increased federal regulation requiring improvements in
passenger seat crashworthiness, increased safety concerns by passengers, the
growth of airline travel, restructurings and reorganizations of air carriers,
the need to reconfigure and upgrade existing aircraft interiors, the delivery of
new aircraft, and the growth of demand for communications and entertainment
features in aircraft seats.

Rail and Other Mass Transit Seats. The Company's acquisition of Coach and
Car and Artcraft in 1994 brought to the Company an established seat
manufacturing identification, contract backlog, and additional manufacturing
capacity for airline seats. In addition to these synergies with Airline
Interiors and its seat technology, the Company became, and continues to be, the
leading North American provider of seating systems for rail and other mass
transit vehicles. Through an integrated design, development, and production
capability, the Company supplies seating in a variety of styles, materials,
colors, configurations, and optional features. The Company produces stainless
steel, plastic, and fiberglass seating systems for subways, cushioned and
upholstered seating for other mass transit vehicles, and deluxe recliners for
railroad cars. The seating systems feature lightweight construction; ease of
installation and maintenance; vandal resistant, durable, and long-lasting
components; reinforced structures for superior strength and support; fire and
smoke resistance; sound and energy absorption; and passenger safety and comfort.
Customers include Amtrak, ABB Traction, Inc., Bombardier, Inc., Amerail
(formerly Morrison Knudsen Corporation), Siemens Duewag Corporation, Kawasaki
Rail Car, Inc., and the metropolitan transit authorities in major North American
cities.

The Company believes that additional opportunities exist in its seating
business as a result of the need to expand and modernize mass transit systems
across the United States, the Company's pursuit of international business, and
potentially the application of various aspects of the Company's
energy-absorption and other safety technologies to rail and other mass transit
vehicles, including high-speed trains.

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INFLATABLE RESTRAINT SYSTEMS

The Company developed its core inflatable restraint technology in the 1980s
under a contract with the United States government and, commencing in late 1997,
will use this technology to manufacture an inflatable body and head restraining
system ("IBAHRS") for military helicopter crew members. As customary with
government contracts, the Company retained the proprietary commercial rights to
the IBAHRS technology and has expanded and developed such technology into
numerous other applications in various products and industries. As an outgrowth
of IBAHRS, the Company currently produces or is developing four types of
inflatable restraint systems for automobiles and three systems for commercial
and military aircraft.

Automobile Inflatable Restraint Systems. The Company developed, patented,
and is manufacturing an automobile inflatable restraint system known as the
inflatable tubular structure ("ITS"). The ITS occupies a stored position above a
side window and inflates upon impact to extend diagonally across the side
window, which provides protection against head and neck injuries from
side-impact collisions. An automobile may be equipped with an ITS at each side
window. The Company's ITS technology comprised two of the 36 finalists out of
4,000 technology entrants submitted for Discovery Magazine's 1996 "Technology of
the Year Award."

The ITS provides protection in certain side-impact collisions beyond that
provided by conventional airbags currently utilized in automobiles. Unlike a
conventional airbag, which must be trapped by a structure such as a steering
wheel, dashboard, or door, the ITS 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. As a result, the ITS provides protection despite the window being open
or breaking upon impact, while a conventional airbag would not have adequate
support in these situations. Therefore, the ITS is able to substantially reduce
head rotation to the side, preventing contact with vehicle components.
Additionally, the diagonal arrangement of the activated ITS offers protection
for occupants of different sizes, weights, and seating positions, and in
different types of side-impact collisions, as well as in rollover, secondary
impact, and ejection situations.

Recent tests have shown that a side-impact collision at approximately 30
miles per hour with a combination of the most extensive safety protection
systems available in 1996 model automobiles (consisting of a seat belt and
shoulder harness along with conventional frontal and side impact airbags)
results in a HIC of about 1500, which is an impact sufficient to cause a fatal
injury to the vehicle occupant. Conversely, tests performed under the same
conditions with the addition of an ITS resulted in a HIC of only approximately
560, which, barring injury to other parts of the anatomy not addressed by the
ITS, would allow the occupant to survive the crash.

The Company has developed various additional applications for the ITS.
Through different configurations, the ITS provides protection to other parts of
the body and in other types of collisions. Such applications include the
inflatable tubular cushion ("ITC"), a seat mounted torso protection system, the
inflatable tubular bolster ("ITB"), a system to protect knees and legs, and the
inflatable tubular torso restraint ("ITTR") which utilizes the ITS in an
inflatable restraint harness and seat belt application.

The Company, through Autoliv GmbH, is providing the ITS to BMW, a major
European automobile manufacturer, for inclusion in certain models of its
automobiles to be delivered in 1997. The Company also has agreements with a
first tier auto supplier to provide ITS to a second automobile manufacturer and
to provide a different application of the ITS technology to an automobile
manufacturer. The Company has a low-volume production facility in Phoenix and a
high-volume European manufacturing plant, located in Northumberland County in
the northeast of England.

Alone and with Autoliv GmbH, Morton International, and other first tier
component suppliers, the Company is actively pursuing ITS and other product
applications with other automobile manufacturers. The Company has entered into
strategic alliances with these first tier component suppliers because the
Company is able to leverage off of the size and industry strength of such large
manufacturers and benefit from their market contacts. Further, such
relationships facilitate the marketing and distribution of the ITS and related
products through the combined marketing and manufacturing efforts of the Company
and the strategic partners.

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37

Although the first tier component suppliers produce airbag products, the ITS and
related technologies are unique proprietary products and not mere auto part
commodities as are most forms of traditional airbags. The distinction between
the ITS and traditional airbags recently has been highlighted by the increased
governmental and public scrutiny of the effectiveness and possible risks
associated with traditional airbags. There can be no assurance, however, that
the Company will be successful in its efforts to expand the markets for ITS and
other product applications. See "Risk Factors -- Entry into New Markets" and
"Risk Factors-- Dependence on Industry Relationships."

Aircraft Inflatable Restraint Systems. The Company has completed
development of and is marketing various inflatable restraint systems for
military and commercial aircraft. These systems include the IBAHRS for the
protection of military helicopter crew members, a cockpit airbag system ("CABS")
for the protection of the flight crew in military aircraft, and a bulkhead
airbag system ("BABS") for the protection of passengers sitting immediately
behind the bulkhead and other cabin partitions in commercial aircraft.

Under a contract with the United States Army, the Company served as the
prime contractor for the development of the IBAHRS. Following the completion of
the initial development, the Company was awarded a contract to serve as the
prime contractor to complete the development, perform production design, produce
hardware, and perform testing procedures for the IBAHRS. During a crash, the
airbags inflate between the aviator and the seat harness, causing the aviator to
be pushed back into the seat and providing support under the aviator's chin to
reduce the forward rotation of the head. The Company anticipates that it will
commence production of the IBAHRS in late 1997.

The Company is engaged in research and development efforts for 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 retracts following
deployment and thereby protects against mishaps caused by accidental deployment
during the normal operations of the aircraft. The Company anticipates that it
will complete the research and development project and commence production of
CABS in late 1997.

The Company developed BABS at its own expense to provide a product that
satisfies FAA regulations requiring protection against head injuries to
passengers sitting immediately behind the bulkhead and other cabin partitions in
commercial aircraft certificated after 1988, which includes only complete new
aircraft designs, representing a small percentage of aircraft currently in
service. Prior to BABS, no other company had introduced a product that satisfied
the FAA regulations, and newly certified aircraft have operated under FAA
waivers from the regulations. In addition, the regulations have not been
extended to aircraft certificated prior to 1988. Although the Company believes
that BABS satisfies the FAA regulations, the Company cannot assess whether the
FAA will withdraw its waivers as a result of the forthcoming availability of
BABS and extend its regulations to apply to presently exempt commercial
aircraft. The Company has an agreement with Jetstream Aircraft Ltd.
("Jetstream") to manufacture and sell BABS for implementation of the system in
the Jetstream J-41. With its introduction of BABS in Jetstream aircraft in 1997,
the Company believes that the FAA waiver policy will be reviewed by the agency.
The Company is also discussing the introduction of BABS with other aircraft
manufacturers. See "Inflatable Restraint Systems -- Aircraft Inflatable
Restraint."

The Company is also developing the related systems for sensors,
electronics, and other applications for its inflatable restraint technology.

COMPOSITE MATERIALS

As an outgrowth of its military aircraft seating systems, the Company
developed an expertise in armor, which comprises a significant portion of both
materials in and costs of such seating systems. In addition, the Company has
developed a variety of other composite materials for integration in its existing
and proposed products and for sale as raw material to customers. Composites are
structures, typically made of layered materials, glues, resins, metal alloys,
and ceramics, which provide advantages in terms of weight, flexibility, and
strength over traditional metal components. Composite materials are often much
lighter than conventional materials such as basic metals, and by their complex
nature are generally more expensive than such materials. Composite materials
have a wide variety of product applications, ranging from shaped or molded
plastic

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38

structures to advanced, lightweight, protective ballistic armor systems.
Advanced composite materials with which the Company has expertise include
silicon carbide, aluminum, and ceramics matched with fiber reinforcements of
Kevlar, carbon, Spectra, S-glass, E-glass, and hybrid weaves. The Company also
has the capability to process thermoset resins including epoxies, polyesters,
and vinyl esters.

The Company's principal composite products are high-strength, lightweight
armor systems that have been incorporated into a variety of United States armed
forces vehicles, including aircraft, naval landing craft, and personnel
carriers. 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 vital 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"). Other products include oil and cable armor and ballistic radomes. The
Company has an on-site ballistics firing range, enabling it to conduct tests on
armor products.

The Company has recently developed a number of commercial applications for
its composites technology, including high-strength transparent armors and
portable armor kits for use in police cars and other vehicles, high-performance
equipment such as archery bows, bicycle components, and 16g Seat backs. The
Company believes that composite materials will increasingly be incorporated in a
wide range of goods requiring strong, advanced, or lightweight components.

DEVELOPMENTAL STAGE TECHNOLOGIES

Smart Structures. The Company has recently combined its composite
technologies with its neural network computer capabilities as part of the
development of products known as "smart structures." Smart structures contain
sensors and fiber optics that communicate through computers to monitor the
integrity or status of a system or structure. As an example, military vehicles
equipped with sensors incorporating smart structure technology can be remotely
monitored for battlefield status. Similarly, structures such as bridges and
overpasses can be remotely monitored to detect early signs of deterioration in
structural integrity. The Company is exploring the development of smart system
sensors that have potential in a variety of product applications, including
crash sensors for airbag and other safety systems in both automobiles and
aircraft.

Parachutes. Under contract with the United States Navy, the Company
recently applied its technologies and overall knowledge of materials and
structures to develop a parachute that solves numerous functional problems
attendant to traditional military parachutes. Specifically, many parachutes
traditionally used by the military have (i) been large and heavy, (ii) been
unable to be worn during flight or by females, and (iii) had limited shelf life,
requiring the labor intensive process of unpacking and repacking parachutes
every six months. The parachute developed by the Company is small, lightweight,
unisex, capable of being worn during flight, and vacuum-packed so that it
maintains more than a five-year shelf life without repacking. The Company will
commence initial production of its parachute in 1997 for Navy aircraft.

Other Advanced Materials. As an outgrowth of its development of a
proprietary "bladder" for the ITS, the Company has recently developed and tested
a number of advanced proprietary materials, including polymers and urethanes,
possessing a wide variety of potential product applications. Such materials are
generally high strength and lightweight and can be developed to withstand
extreme temperatures. Potential uses for such materials include laser protective
aircraft canopies, high-performance windows for aircraft and automobiles, and
protective lenses and visors.

PROPRIETARY TECHNOLOGY

The Company maintains a design, development, research, testing, and
engineering staff whose duties include the modification and improvement of
existing products and the development of new products and applications. The
Company regards its research, development, and engineering capabilities as a
particular strength and intends to continue to emphasize this aspect of its
business.

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39

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 1996, 1995, and 1994 were approximately $10.5 million, $6.1
million, and $3.9 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, but there can be no assurance that others will not develop such
information and know-how independently or otherwise obtain access to the
Company's technology. See "Risk Factors -- Dependence on Proprietary
Technology."

The Company holds 13 patents, including those recently issued for its ITS
and 16g Seat technologies. In addition, the Company has 35 patent applications
pending for such items as its ITB and ITC technologies and various of its
advanced materials. The Company is also currently developing five additional
patent applications for filing. Patents protect inventions for up to a period of
20 years after the application is first filed. All of the Company's patents
issued or applied for regarding its principal products, including ITS, ITC, ITB,
and 16g Seats, have been issued or pending for three years or less. The Company
does not presently own or maintain any trademarks which are material to its
business.

PRODUCTION, MANUFACTURING, AND LICENSING

The Company intends to consolidate certain operations, expand and upgrade
its existing manufacturing capabilities, and establish new manufacturing
facilities in connection with the expansion of its 16g Seat and inflatable
restraint businesses. The Company began implementing its expansion plans in 1996
and has established a low-volume production facility in Phoenix and a
high-volume manufacturing plant in England for the production of inflatable
restraints. The Company currently is expanding its airline seat manufacturing
capacity in its Chicago and San Diego facilities. In addition, in 1996 the
Company consolidated its sewing and upholstery operations, and placed airline
and train seat parts manufacturing in a central location. Such steps were taken
for efficiency purposes and did not have a material effect on the Company's
financial condition or results of operation. If demand for the Company's
products grows faster than it is able to expand its manufacturing capacities,
the Company may consider entering into licensing arrangements with third-party
manufacturers of related products, pursuant to which it would receive a royalty
on all items manufactured. See "Risk Factors -- Entry Into New Markets," "Risk
Factors -- Management of Growth," and "Risk Factors -- Production Risks and
Manufacturing Experience."

The Company's production and manufacturing consist principally of the
bending and welding, molding, ceramic and composites composition and processing,
sewing, upholstery, component fabrication, and final assembly, along with airbag
and restraint 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. Products manufactured for government programs
must meet rigorous standards and specifications for workmanship, process, raw
materials, procedures, and testing. 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.

MARKETING AND SALES

Depending upon the product, the Company typically employs one of four
methods for marketing: (i) direct sales, which it utilizes in the marketing of
its 16g Seats, (ii) technical teams, typically comprised of a combination of
administrative personnel and development engineers, which it utilizes in the
marketing of inflatable restraints and advanced materials, (iii) strategic
alliances with first tier component suppliers, which

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40

it utilizes in the marketing of inflatable restraints, and (iv) responses to
formal requests for proposals in bidding for governmental contracts.

In marketing its commercial seating and restraint products, the Company
endeavors to maintain close relationships with existing customers and to
establish new customer relationships. Ongoing relationships and repeat customers
are an important source of business for the Company's current and new products.
For example, the Company believes that its aircraft seat refurbishment customers
are excellent prospects for its proposed new aircraft seats. Similarly, the
Company will rely in part on forming strategic alliances to gain the established
marketing capabilities of first tier component suppliers in connection with the
distribution of the Company's automobile restraint systems. See "Risk
Factors -- Dependence on Industry Relationships."

The Company's marketing and sales activities in the government sector focus
primarily upon identifying research and development and other contract
opportunities with various agencies of the United States government or with
others acting as prime contractors on government projects. Key members of the
Company's engineering, contracts, and project management staffs maintain close
working relationships with representatives of the United States armed forces and
their prime contractors. Through these relationships, the Company monitors
needs, trends, and opportunities within current or potential military product
lines.

Approximately 24% of the Company's total revenue in 1996 resulted from
products sold internationally, either directly by the Company or indirectly
through sales made to the United States government or domestic prime contractors
for export. These sales were predominantly to England, Germany, and Japan.
Historically, as United States government contracts are awarded and filled,
prime contractors have thereafter typically marketed their products to foreign
military allies, resulting in sales of the Company's products abroad. The
Company has also recently entered into development contracts directly with
foreign military organizations. Accordingly, the Company anticipates that its
international defense sales will continue to grow. The initial customer of the
ITS is BMW, a European automobile manufacturer. The Company believes that there
are opportunities for additional sales of the ITS, and for sales of commercial
aircraft and rail seating systems, in foreign markets and is conducting
marketing efforts internationally. Countries in which the Company is actively
marketing include Germany, France, England, and other EU countries, as well as
Japan, India, Korea, Italy, Singapore, Australia, Canada, and China. See "Risk
Factors -- International Trade and Currency Exchange."

CUSTOMERS

Sales of the Company's products to all branches of the United States armed
forces represented approximately 27% of the Company's revenue in 1996. No other
customer accounted for more than 10% of the Company's revenue during 1996.

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, to which the Company has
supplied products for approximately 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. Other historical customers of the Company include the Boeing
Company, McDonnell Douglas Corporation, and Sikorsky Aircraft. 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 customer. See "Risk Factors -- Reliance Upon Major
Customers."

As the Company has applied its technologies to additional products and
markets and grown through strategic acquisitions, the list of customers for the
Company's commercial products has expanded rapidly in recent years. Current
customers of the Company include, in addition to its historical customers,
America West Airlines, Amtrak, Autoliv GmbH, BMW, Continental Airlines, Morton
International, Southwest Airlines, TRW, United Airlines, and the metropolitan
transit authorities in major North American cities. Auotliv GmbH, Morton
International, and TRW are first tier component suppliers. See "Risk
Factors -- Dependence on Industry Relationships."

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COMPETITION

The Company believes that it is the world's largest supplier of seating
systems for military helicopters. The Company's principal competitors in the
military seating market are Martin Baker (U.K.) and Israel Aircraft Industries,
Ltd. (Israel). The Company does not have financial or market share data
concerning these two competitors; however, based on internal market surveys and
data, the Company believes that is it the supplier for a majority of the world's
energy-absorbing seating programs under domestic and foreign military contracts.
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.

Based on internal data, management believes that the Company also is the
leading North American provider of seating systems for rail and other mass
transit vehicles, with an approximate 70% to 80% market share. The Company has
four principal competitors in the North American rail and mass transit seating
market, comprising in the aggregate 20% to 30% of the market.

Management believes that the Company achieved a 2.5% share of the worldwide
commercial airline seating market in its full first year of production in 1996.
The Company has 10 principal competitors in the commercial airline seating
market, with BE Aerospace, Inc. having an approximate 50% market share.

The worldwide automobile airbag market is currently dominated by TRW,
Morton International, Inc., Allied Signal, Inc., Takata, Inc., and Autoliv GmbH,
all of which are producing airbag systems in commercial quantities. The market
served by the Company's inflatable restraint systems is intensely competitive.
As a result of the proprietary nature of the Company's ITS and related
technologies, the Company has entered into strategic alliances with a number of
the largest suppliers of conventional automotive airbags, including Morton,
Autoliv, and others, to market and produce the Company's products. Under these
arrangements, the Company acts as licensor and supplier and, thus, does not
compete with first tier automotive suppliers. The Company does not intend to
compete as a first tier supplier of a broad range of safety devices. Autoliv and
Morton recently announced a proposed business combination relating to their
respective airbag operations. The Company does not believe that any such
combination will adversely affect its business relationship with these
companies.

Most of the Company's competitors have greater marketing capabilities and
financial resources than the Company. 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. See "Risk
Factors -- Competition."

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 urethanes, ceramics, Kevlar, aluminum, steel, upholstery and fabric
products, and fire blocking foam. Components include restraints, harnesses, and
gas generators for inflatable restraint products. The Company does not depend
upon any single supplier. Because of multiple sources of supply, the Company has
not experienced difficulties in obtaining components and raw materials for its
manufacturing and assembly processes. The Company is not party to any formal
contracts regarding the delivery of its supplies and components, but instead
generally purchases such items 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.

BACKLOG

The Company's backlog at December 31, 1996 and 1995 was approximately $63
million and $58 million, respectively. The backlog at December 31, 1996
consisted of approximately $17 million under defense contracts and approximately
$46 million with commercial customers.

The backlog includes contracts for major current products as well as for
supplies and replacement components. Backlog includes only $3 million under the
Company's agreement to supply the ITS for certain

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of BMW's models to be delivered in 1997. 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 period from the date of this
Prospectus to December 31, 1997.

EMPLOYEES

The Company has over 700 full-time employees at its locations in Arizona,
California, Illinois, New York, North Carolina, Wisconsin, and the United
Kingdom. This number includes engineers and research and development personnel,
manufacturing personnel, and administrative and other personnel. The Company
believes that its continued success depends on its ability to attract and retain
highly qualified personnel.

PERSONNEL PROFILE

APPROXIMATE NUMBER
CLASSIFICATION OF EMPLOYEES
----------------------------------------------------------- ------------------

Research and Development; Scientists; Engineers; Technical
Support.................................................. 150
Manufacturing.............................................. 310
Administration............................................. 190
Other...................................................... 65

In connection with its 1994 acquisition of Coach and Car, the Company
executed a collective bargaining agreement with the United Electrical Workers.
The predecessor corporation's work force was similarly represented by the
collective bargaining unit. The Company's other employees are not represented by
a labor union, and the Company has no knowledge of any organizing activities.
The Company has never suffered a work stoppage and considers its relations with
employees to be excellent.

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 a qualified waste disposal
company 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. See "Risk Factors -- Environmental Regulations."

LITIGATION

The Company is not a party to any material threatened or pending
litigation. See Note 3 to the Consolidated Financial Statements regarding Coach
and Car.

PROPERTIES

The Company is currently expanding its manufacturing and administrative
facilities in order to meet the expected demand for its products. Upon the
completion of such expansion, the Company believes that its manufacturing and
administrative facilities will be adequate for the foreseeable future. The
following table summarizes the properties which the Company leased or owned as
of December 31, 1996. See "Use of Proceeds."

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FACILITIES PROFILE

SQUARE
COMPANY LOCATION FUNCTION FOOTAGE
- ------------------------- --------------------- ---------------------------------- -------

Simula, Inc. ............ Phoenix, AZ (1) Corporate Headquarters 11,000

Simula Government
Products, Inc. ........ Tempe, AZ (2) Manufacturing and Administration 60,000
Tempe, AZ (2) Manufacturing and Administration 24,000
Tempe, AZ (1) Manufacturing and Administration 19,000
Tempe, AZ (1) Manufacturing and Administration 14,000
Tempe, AZ (1) Manufacturing and Administration 14,000

Simula Technologies,
Inc. .................. Phoenix, AZ (2) Research and Development 25,000

Simula ASD, Inc. ........ Phoenix, AZ (1) ITS Low Rate Production; Testing; 7,000
Administration
Phoenix, AZ (1) ITS Low Rate Production; Testing 20,000

Simula ASD, Ltd. ........ Northumberland, U.K. ITS Volume Production 30,000
(1)

Airline Interiors,
Inc. .................. San Diego, CA (1) Airliner Seat Refurbishment and 44,000
New Seat Assembly; Administration
San Diego, CA (1) Upholstery and Sewing 17,000
San Diego, CA (1) Warehouse 6,000

Coach and Car Equipment
Corporation............ Chicago, IL (1) Airline, Rail and Transit Seat 71,000
Manufacturing; Administration
Albany, NY (1) Rail Seat Assembly 20,000

Artcraft Industries
Corp. ................. Milwaukee, WI (1) Rail and Airline Seat 45,000
Refurbishment and Upholstery
Milwaukee, WI (1) Warehouse 20,000
Milwaukee, WI (1) Warehouse 5,000

ViaTech, Inc. ........... Tempe, AZ (1) Composites Research; Fabrication; 16,000
Administration

Safety Equipment,
Inc. .................. Asheville, NC (1) Research and Development; Survival 5,000
Equipment Manufacturing; Parachute
Manufacturing

Sedona Scientific,
Inc. .................. Sedona, AZ (1) Research and Development; Sensors, 5,000
Smart Systems, Fiber Optics
Sedona, AZ (1) Warehouse 2,000

- ---------------
(1) Denotes leased facility
(2) Denotes Company-owned facility

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MANAGEMENT

The following sets forth certain information with respect to directors and
executive officers of the Company.

NAME AGE POSITION
----------------------- --- ---------------------------------------------------------

Stanley P.
Desjardins........... 66 Chief Executive Officer and Chairman of the Board of
Directors
Donald W. Townsend..... 57 President and Director
Bradley P. Forst....... 44 Vice President, General Counsel, Secretary, and Director
Sean K. Nolen.......... 34 Vice President of Finance, Treasurer, and Director
James C. Withers....... 63 Director
Robert D. Olliver...... 70 Director
Scott E. Miller........ 37 Director

Stanley P. Desjardins founded the Company in 1975 and has served as its
Chief Executive Officer and Chairman since that time. He was President from 1975
until October 1994. Mr. Desjardins pioneered crashworthy seating technology for
the United States armed forces and continues to work on technology development
as a recognized world expert in the field. He has over 38 years of experience in
research and development of aerospace systems and components, including over 29
years in research and development of technology for improving survival in
vehicle crashes. Prior to forming the Company, Mr. Desjardins was Manager of
Aircraft Safety for a division of Ultrasystems, Inc., where he managed research
programs involving the crashworthiness of aircraft seating and restraint
systems. From 1958 to 1968, he held various positions in missile programs with
Thiokol Chemical Corporation. His work has resulted in several United States
patents related to energy-absorption and rocket nozzle design. He is the author
or co-author of 26 technical articles related to his research. Mr. Desjardins is
a member of the American Helicopter Society, the Survival and Flight Equipment
Association, the Arizona Innovation Network, the Center for Aerospace Safety
Education, and the Governor's Science and Technology Council (Arizona).

Donald W. Townsend has served as President since October 1994 and a
Director since 1989. He was Executive Vice President from 1989 to 1994 and
Treasurer and Secretary from 1986 until 1994. Prior to joining the Company in
1985, Mr. Townsend was employed by Walled Lake Door Company, a manufacturer of
wooden doors, in positions as Vice President of Finance, Chief Financial
Officer, Director, and Controller. Mr. Townsend also acted as President of
Pulsar Corporation, a research and development company affiliated with Walled
Lake Door Company, at the same time as he served as Vice President of Finance
for Walled Lake Door Company. Mr. Townsend is a Certified Public Accountant. Mr.
Townsend also currently serves on the Board of Directors of Meadow Valley
Corporation, a publicly held construction company specializing in highways,
bridges and overpasses.

Bradley P. Forst joined the Company as Vice President and General Counsel
in early 1995 and became Secretary and a Director in August 1995. From 1985
until joining the Company in 1995, Mr. Forst was engaged in the private practice
of law in Phoenix, Arizona. Included among his clients was the Company, for
which he provided corporate, finance, and securities legal services for a number
of years. Prior to entering private practice in Phoenix, Mr. Forst was an
attorney in the head office legal department of Shell Oil Company based in
Houston, Texas.

Sean K. Nolen joined the Company as Vice President of Finance, Chief
Financial Officer, Treasurer, and as a Director in April 1996. From 1984 until
joining the Company in 1996, Mr. Nolen was employed by Deloitte & Touche LLP,
most recently as an Audit Senior Manager, in which capacity Mr. Nolen provided
auditing, planning, and other assistance and consultation to numerous privately
and publicly held companies, including the Company. Mr. Nolen is a Certified
Public Accountant.

James C. Withers has served as a Director of the Company since 1992. Mr.
Withers is the Chief Executive Officer of Materials and Electrochemical Research
Corporation based in Tucson, Arizona. He has

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served in that capacity since 1985. From 1986 to 1988, Mr. Withers was President
and Chief Executive Officer of Keramont Research Corporation, also based in
Tucson, Arizona.

Robert D. Olliver has served as a Director of the Company since 1992. Mr.
Olliver is the Director of Risk Management Services for Acordia of Arizona based
in Phoenix, Arizona. Mr. Olliver has over 47 years experience in the insurance
business. Mr. Olliver, through his affiliates, has been the general agent for
the Company's insurance program since 1987.

Scott E. Miller has served as a Director of the Company since January 1995.
Mr. Miller is a Director of Investment Banking of HD Brous & Co., Inc. From 1991
to 1994, Mr. Miller was Director of Investment Banking of W.B. McKee Securities,
Inc., Phoenix, Arizona, which was the managing underwriter of the Company's
initial public offering. From 1987 to 1991, Mr. Miller was the Director of
Investments of Bellmar Partners, an investment fund. Mr. Miller also currently
serves on the Board of Directors of Meadow Valley Corporation, a publicly held
construction company specializing in highways, bridges, and overpasses. See
"Certain Transactions."

All members of the Board of Directors hold office until the next annual
meeting of the shareholders of the Company or until their successors are duly
elected and qualified. All officers are elected annually and serve at the
discretion of the Board of Directors. The Board of Directors of the Company have
several standing committees. The Audit Committee presently consists of Messrs.
Withers, Miller and Olliver. The Audit Committee meets with appropriate Company
financial and legal personnel and independent public accountants and reviews the
internal controls of the Company and the objectivity of its financial reporting.
This Committee recommends to the Board the appointment of independent public
accountants to serve as auditors in examining the corporate accounts of the
Company. The independent public accountants periodically meet privately with the
Audit Committee and have access to the Committee at any time.

The Compensation Committee reviews and advises management, makes
recommendations to the Board, and reviews and approves proposals regarding the
establishment or change of benefit plans, salaries, and compensation afforded
the executive officers and other employees of the Company. Messrs. Miller,
Olliver, and Withers currently serve as members of the Committee.

The Company has identified James A. Saunders, Donald R. Rutter, Randall L.
Taylor, and Joseph W. Coltman as key employees.

James A. Saunders is a Vice President of the Company and President of its
subsidiary, Simula Automotive Safety Devices, Inc. From 1989 to 1995, Mr.
Saunders was Chief Executive Officer of SouthTech, Inc., a supplier of
high-purity silicon carbide ceramics to the electronics industry. SouthTech was
a subsidiary of the Company from 1994 to 1995.

Donald R. Rutter is President of the Company's subsidiary Simula
Transportation Equipment Corporation, a holding company for the Company's
commercial passenger seat operating subsidiaries, Airline Interiors, Inc., Coach
and Car Equipment Corporation, and Aircraft Industries Corp. From 1983 until
joining the Company in 1993, Mr. Rutter was Vice President and General Manager
for Burns Aerospace Corporation. From 1979 until 1982, Mr. Rutter was Vice
President and General Manager for PTC Aerospace, a B.E. Aerospace, Inc.
subsidiary. Mr. Rutter was also previously employed by United Airlines.

Randall L. Taylor joined the Company in 1977 and serves as a Vice
President. He coordinates certain aspects of corporate development and
international programs. Prior to this position, Mr. Taylor held numerous
positions with the Company's subsidiary, Simula Government Products, Inc. Mr.
Taylor's past employment includes experience with Sperry Flight Systems, a
division of Sperry Rand, and The Boeing Company Defense & Space Group.

Joseph W. Coltman is President of the Company's subsidiary Simula
Technologies, Inc., which operates as the Company's research and technology
development organization. Mr. Coltman joined the Company in 1979 and prior to
his present position, held numerous management and technical positions within
the Company.

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EXECUTIVE COMPENSATION

The following table sets forth the total compensation received by the
Company's Chief Executive Officer and other most highly compensated executive
officers whose total remuneration exceeded $100,000 for services rendered in all
capacities to the Company during the last three fiscal years.

SUMMARY COMPENSATION TABLE

LONG TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ---------------
----------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS(2) COMPENSATION(3) OPTIONS/SARS(#)(6)
- ------------------------------ ---- --------- -------- -------------- ---------------

Stanley P. Desjardins......... 1996 $ 200,000
Chief Executive Officer and 1995 200,000
Chairman of the Board 1994 158,000

Donald W. Townsend............ 1996 200,000 Tax Assistance(3) 70,000
President 1995 180,000 $40,000 Tax Assistance(3) 60,000
1994 108,000 75,000

Bradley P. Forst.............. 1996 140,000 50,000
Vice President, General 1995 140,000 56,250
Counsel, and Secretary(4)

Sean K. Nolen................. 1996 120,000 25,000
Vice President of Finance,
Chief Financial Officer, and
Treasurer(5)

- ---------------
(1) Included as salary are nominal amounts which the Company contributes to the
401(k) accounts of Messrs. Desjardins and Townsend. See
"Management -- 401(k) Profit Sharing Plan."

(2) The Compensation Committee declared a bonus for Mr. Townsend for services in
1994 and 1995, which was paid in late 1995.

(3) In 1995, the Compensation Committee adopted policies to encourage executive
management of the Company to exercise stock options and thereby become
equity owners of the Company. In order to exercise such options, members of
management were required to sell such underlying shares in the market to
provide the funds to pay for the option exercises. Because of the immediate
exercise and sale, incentive tax aspects of the options, under relevant IRS
rules, were eliminated. Accordingly, taxes on such sales were immediately
due and payable. As part of the policy, the Committee determined to pay such
taxes for the accounts of the executives. Such payments by the Company were
fully deductible as a compensation expense and such amounts did not accrue
to the individuals, but were paid to state and federal taxing authorities.
The amounts of such tax assistance on behalf of Mr. Townsend were $231,367
and $211,500 for the fiscal years 1995 and 1996, respectively.

(4) Mr. Forst was not employed by the Company for the entire fiscal year 1995.
The salary figure contained in the column for 1995 reflects the salary Mr.
Forst would have received had he been employed by the Company for the entire
year. Mr. Forst's actual salary compensation for 1995 was $60,000.

(5) Mr. Nolen was not employed by the Company for the entire fiscal year 1996.
The salary figure contained in the column for 1996 reflects the salary Mr.
Nolen would have received had he been employed by the Company for the entire
year. Mr. Nolen's actual salary compensation for 1996 was $80,000.

(6) Messrs. Townsend, Forst, and Nolen were granted 238,200, 93,750, and 150,000
additional options to purchase Common Stock, respectively, on January 1,
1997.

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EMPLOYMENT AGREEMENTS

The Company has a five-year employment agreement with Mr. Desjardins. The
agreement requires Mr. Desjardins to devote his full time to the Company and
provides for compensation of $200,000 annually, subject to annual increases upon
the agreement of Mr. Desjardins and the majority of the disinterested members of
the Board of Directors. The agreement is renewable annually for prospective
one-year terms. The agreement may not be terminated unilaterally by the Company
except for cause, which includes absence, disability, or failure of performance
as determined by the Board.

Mr. Desjardins' employment agreement provides that during the term thereof,
including renewals, in the event of his resignation or a termination of his
employment for any reason following a "change in control" of the Company, the
compensation required to be paid by the Company to him under the employment
agreement shall continue to be paid as though the agreement had not been
terminated. This provision does not apply however to an early termination of the
agreement upon Mr. Desjardins' death, termination following a conviction for the
willful and intentional commission of a crime, or retirement. A "change of
control" under the agreement is deemed to occur when any person acquires,
directly or indirectly, beneficial ownership of equity securities of the Company
representing in excess of 20% of the outstanding shares of any class, or when
any person who has acquired, directly or indirectly, beneficial ownership of
equity securities of the Company in excess of 10% of the outstanding shares of
any class seeks to nominate and cause to be elected to the Board of Directors
any person who has not been nominated for election of the board by the majority
of the then incumbent directors. If Mr. Desjardins dies during the term of his
employment, the Company under the agreement will pay to his estate compensation
including any bonus which would otherwise be payable to the time of death and
thereafter, for a period of three years.

The Company also has an agreement with Mr. Townsend, under which the
Company retains Mr. Townsend under the same terms as those contained in Mr.
Desjardins' employment agreement.

In addition to the foregoing, the Company has also entered into change in
control employment agreements with six members of executive management,
providing for severance pay, the immediate vesting of stock options, and tax
assistance payments, in the event of a change in control of the Company. See
"Executive Compensation -- Stock Options."

DIRECTOR COMPENSATION

Directors who are not executive officers receive $5,000 annual cash
compensation for their services in that capacity to cover expenses. Directors
who are executive officers do not receive such additional compensation for their
services as Directors. Directors are also awarded options to purchase 15,000
shares upon commencement of service on the Board and 1,500 additional shares on
an annual basis thereafter.

STOCK OPTIONS

STOCK OPTION PLANS

In 1992, the Company and its then sole shareholder adopted the 1992 Stock
Option Plan. The 1992 Plan provided for the issuance of up to 360,000 shares of
the Company's Common Stock pursuant to grants made under the 1992 Plan. As of
January 1, 1997, all 360,000 options had been granted pursuant to the 1992 Plan.
In August 1994, the Board of Directors adopted the 1994 Stock Option Plan, which
was subsequently approved by the shareholders of the Company at the annual
meeting in June 1995, and amended by the shareholders of the Company at the
annual meeting in June 1996. The 1994 Plan reserves up to 1,545,000 shares of
Common Stock for issuance under the Plan. Through December 31, 1996, 876,250
options had been granted pursuant to the 1994 Plan.

The 1992 Plan and the 1994 Plan (together hereafter referred to as the
"Plans") authorize the Company to grant to key employees of the Company (i)
incentive stock options to purchase shares of Common Stock, and (ii)
non-qualified stock options to purchase shares of Common Stock. The objectives
of the Plans are to provide incentives to key employees to achieve financial
results aimed at increasing shareholder value and attracting talented
individuals to the Company. Although the Plans do not specify what portion of
the shares

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may be awarded in the form of incentive stock options or non-statutory options,
a substantially greater number of incentive stock options have been awarded
under the Plans. The incentive stock options are qualified stock options under
the Internal Revenue Code. Persons eligible to participate in the Plans are
those employees and others of the Company whose performance can have significant
effect on the success of the Company.

The Plans are administered by the Compensation Committee of the Board of
Directors, which has the authority to interpret the Plans' provisions, to
establish and amend rules for their administration, to determine the types and
amounts of awards made pursuant to the Plans, subject to the Plans' limitations,
and to approve recommendations made by management of the Company as to who
should receive awards. The Compensation Committee of the Board of Directors must
consist of disinterested Directors.

Incentive stock options may be granted under the Plans for terms of up to
10 years and at an exercise price at least equal to 100% of the fair market
value of the Common Stock as of the date of grant, and 85% of the fair market
value in the case of non-statutory options, except that incentive options
granted to any person who owns stock possessing more than 10% of the combined
voting power of all classes of the Company's stock or of any parent or
subsidiary corporation must have an exercise price at least equal to 110% of the
fair market value of the Company's Common Stock on the date of grant. The
aggregate fair market value, determined as of the time an incentive stock option
is granted, of the Common Stock with respect to which incentive stock options
are exercisable by an employee for the first time during any calendar year may
not exceed $100,000. There is no aggregate dollar limitation on the amount of
non-statutory stock options which may be exercisable for the first time by an
employee during any calendar year. Payment of the exercise price is to be in
cash, although the Compensation Committee may, in its discretion, allow payment
in the form of shares of the Company's Common Stock under certain circumstances.
Any option granted under the Plans will expire at the time fixed by the
Committee, which will not be more than 10 years after the date it is granted.
Any employee receiving a grant must remain continuously employed by the Company
for a period of 12 months after the date of the grant, as a condition to the
exercise of the option. The Compensation Committee may also specify when all or
part of an option becomes exercisable, but in the absence of such specification,
the option will ordinarily be exercisable in whole or part at any time during
its term. In addition, optionees who are directors or executive officers of the
Company may not exercise any portion of an option within six months of the date
of grant. Subject to the foregoing, the Compensation Committee may accelerate
the exercisability of any option in its discretion.

The Plans presently provide that options granted under the Plans are not
assignable. Options may be exercised only while the optionee is employed by the
Company or within 12 months after termination by reason of death, within 12
months after the date of disability, or within 10 days after termination for any
other reason.

The Company may assist optionees in paying the exercise price of options
granted under the Plans by either the extension of a loan by the Company for
payment by the optionee of the exercise price in installments, or a guarantee by
the Company of a loan obtained by the optionee from a third party. The terms of
any loan, installment payments or guarantees, including the interest rate and
terms of repayment and collateral requirements, if any, will be determined by
the Compensation Committee in its sole discretion.

In addition to the foregoing, the 1994 Plan provides that in the event of a
change in control of the Company, that all issued but unvested options become
immediately vested and exercisable. The 1994 Plan also provides that in
connection with such immediate exercises made by executive officers of the
Company, the Company provide tax assistance to supply the funds necessary for
those individuals to pay taxes resulting from the loss of tax incentives due to
such accelerated exercises and sales. Any such payments by the Company would be
fully deductible as a compensation expense and such amounts would not accrue to
the individuals exercising the options, but would be paid to state and federal
taxing authorities. See "Management -- Employment Agreements."

1992 RESTRICTED STOCK PLAN

In February 1992, the Company adopted the 1992 Restricted Stock Plan
("Restricted Stock Plan") authorizing the Company to grant to key employees of
the Company and other individuals who provide

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services to the Company the right to purchase up to an aggregate of 19,500
shares of Common Stock at $.01 per share. The Restricted Stock Plan is intended
to allow the Company to provide awards of Common Stock to directors or long-term
employees who have provided valuable past services to the Company. The
Restricted Stock Plan authorizes disinterested members of the Board of Directors
to determine the persons to whom awards under the Restricted Stock Plan will be
granted and the terms and conditions and restrictions of such awards. To date,
4,500 shares have been awarded under the Restricted Stock Plan.

OPTIONS GRANTED UNDER PLANS

In March 1996, October 1996, and January 1997, the Board of Directors
approved recommendations of the Compensation Committee and granted certain
incentive stock options under the Plans to key employees. The options granted
are exercisable, or when vested will be exercisable, for a total of 1,875 shares
under the 1992 Plan and 1,030,075 shares under the 1994 Plan.

The following table sets forth information regarding options granted in
fiscal 1996 to executive officers named in the Summary Compensation Table:

OPTION/SAR GRANTS IN LAST FISCAL YEAR
(Individual Grants)

POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
NUMBER OF TOTAL ANNUAL RATES
SECURITIES OPTIONS/ OF STOCK PRICE
UNDERLYING SARS EXERCISE APPRECIATION FOR
OPTIONS/ GRANTED TO OR BASE OPTION TERM(2)
SARS EMPLOYEES IN PRICE EXPIRATION -----------------------
NAME GRANTED(1) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- -------------------------------- ---------- ------------ -------- ---------- ---------- ----------

Donald W. Townsend(3)........... 70,000 20% $12.75 2006 $1,453,883 $2,315,145
Bradley P. Forst(4)............. 50,000 14% 12.75 2006 1,038,488 1,653,675
Sean K. Nolen(5)................ 25,000 7% 16.13 2006 656,691 1,045,706

- ---------------
(1) All options contained in the table which were granted to named executive
officers in 1996 become exercisable for the first time in March 1997. In
addition to the options shown in the table, 215,250 options were granted to
employees of the Company in 1996.

(2) Calculated from a base price equal to the exercise price of each option,
which was the fair market value of the Common Stock on the date of grant.
The amounts represent only certain assumed rates of appreciation. Actual
gains, if any, on stock option exercises and Common Stock holdings cannot be
predicted, and there can be no assurance that the gains set forth on the
table will be achieved. Further, the number shown is the gross dollar value
of the Common Stock, but does not give effect to the payment of the purchase
price to exercise the option, and thus does not represent the net value or
net gain. The amount also does not reflect the taxes payable on such gain.

(3) In addition to the 1996 option grant listed in the table, Mr. Townsend owns
334,800 options with various vesting periods.

(4) In addition to the 1996 option grant listed in the table, Mr. Forst owns
150,000 options with various vesting periods.

(5) In addition to the 1996 option grant listed in the table, Mr. Nolen owns
150,000 options with various vesting periods.

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FISCAL YEAR END OPTION/SAR VALUES

NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT FISCAL YEAR END OPTIONS/SARS AT FISCAL YEAR END
NAME (#) EXERCISABLE/UNEXERCISABLE ($)(1) EXERCISABLE/UNEXERCISABLE
- ------------------------------------ ------------------------------- ----------------------------------

Donald W. Townsend.................. 96,600/70,000 $ 240,938/52,500
Bradley P. Forst.................... 56,250/50,000 -0-/37,500
Sean K. Nolen....................... -0-/25,000 -0-/-0-

- ---------------

(1) Calculated by multiplying the number of shares underlying outstanding
in-the-money options by the difference between the last sales price of the
Company's Common Stock on December 31, 1996 ($13.50 per share) and the
exercise prices for both exercisable and unexercisable shares. See also
footnote (2) immediately above.

DEFINED BENEFIT PENSION PLAN

The Company adopted a non-contributory defined benefit pension plan as of
November 1, 1980. To be eligible, participants must have completed six months of
continuous service and have attained the age of 21. Benefits are based on the
length of service and the participants' final pay (averaged over the five
highest consecutive years of his last 10 years of participation). The Company
makes contributions to the plan based on actuarially determined amounts. Both
Mr. Desjardins and Mr. Townsend are participants in the plan consistent with the
normal terms and conditions of the plan.

The following table sets forth the estimated annual benefits payable on
retirement for specified earnings and years of service categories for
participants.

PENSION PLAN TABLE

YEARS OF SERVICE(1)
-------------------------------------------------------
REMUNERATION 15 20 25 30 35
- ------------ ------- ------- ------- ------- -------

$ 50,000 $17,500 $17,500 $17,500 $17,500 $17,500
75,000 26,250 26,250 26,250 26,250 26,250
100,000 35,000 35,000 35,000 35,000 35,000
150,000 52,500 52,500 52,500 52,500 52,500
200,000 70,000 70,000 70,000 70,000 70,000

- ---------------
(1) As of December 31, 1996, Mr. Desjardins' and Mr. Townsend's credited years
of service were 16 and 11, respectively.

(2) Benefits are calculated on a straight-life annuity basis. The compensation
covered by the retirement plan includes all wages and salaries but excludes
bonuses. Benefits under the retirement plan are not subject to deduction for
Social Security or other offset amounts.

401(k) PROFIT SHARING PLAN

The Company's 401(k) Profit Sharing Plan (the "PSP") is qualified under
Sections 401(a) and 401(k) of the Internal Revenue Code. The PSP was adopted
effective November 1, 1989. The PSP is administered under a trust, and the
Company's directors are currently serving as its trustees. All employees of the
Company who are 21 years or older, including its executive officers, are
eligible to participate in the PSP after six months of employment with the
Company.

Under the PSP, participating employees have the right to elect their
contributions to the PSP be made by reductions from compensation owed to them by
the Company. In addition, the Company at its discretion can make contributions
to the PSP of a percentage of a participant's annual compensation. Participating
employees are entitled to full distribution of their share of the Company's
contributions under the PSP upon death, disability or when they reach retirement
age. If their employment is terminated earlier, their share of

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the Company's contributions will depend on the number of years of employment
with the Company. All participating employees have the right to receive 100% of
their own contributions to the PSP upon any termination of employment. Apart
from the Company's and the employee's contributions, they may receive investment
earnings related to the funds in their account under this plan.

EMPLOYEE STOCK PURCHASE PLAN

At the 1996 Annual Meeting, the Company's Board of Directors and
shareholders adopted the Employee Stock Purchase Plan ("ESPP" or "Plan"). The
ESPP provides eligible employees with the opportunity to acquire a stock
ownership interest in the Company through periodic payroll deductions. The
purpose of the Plan is to provide incentive to employees of the Company to
perform in a manner which enhances the value of the Company's Common Stock by
providing a direct ownership stake in the Company's performance.

The ESPP reserves 400,000 shares of the Company's Common Stock to be issued
to employees eligible to participate in the Plan. Employees of the Company and
its subsidiaries are eligible to participate in the Plan following 30 days of
continuous service with the Company, provided that such employees work in excess
of 20 hours per week and greater than five months per calendar year. The
Company, at its discretion, need not include all of its operating subsidiaries
in the ESPP.

Eligible employees invest in the Plan through regular payroll deductions of
up to 10% of their gross earnings, deducted net of taxes, for each semi-annual
period of participation, provided that no employee may purchase greater than
$25,000 worth of the Company's Common Stock in any given calendar year. At each
semi-annual purchase date, payroll deductions are credited to an account
established in each participating employee's name and shares of the Company's
Common Stock are automatically purchased on behalf of participating employees on
the last business day of each semi-annual period of participation at the lesser
of (i) 85% of the market price per share of Common Stock on an individual's
entry date into the Plan (subject to certain limitations), or (ii) 85% of the
market price per share on the semi-annual purchase date.

The Company commenced operation of the ESPP on October 1, 1996. The Plan
provides for semi-annual purchase dates to occur on March 31 and September 30 of
each year.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Company's Compensation Committee consists of Messrs. Miller, Olliver,
and Withers, all of whom are non-employee directors for purposes of
administering the stock option plans under SEC Rule 16b-3. These individuals do
not serve on the compensation committees of other corporations.

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CERTAIN TRANSACTIONS

In August 1996, Mr. Desjardins loaned $1.65 million to the Company pursuant
to two promissory notes. The notes contained arm's length terms and conditions
and were approved by the disinterested members of the Board of Directors. One
note bore interest at a rate of 8 3/4% per annum and the other bore interest at
the rate of 10% per annum. All principal and interest have been repaid in full
on the notes. Mr. Desjardins loaned the Company $2 million in 1994 on similar
terms which was repaid by the Company in 1995.

In 1995 it was determined by management that the regulatory burdens that
were imposed on its subsidiary Comfab, Inc. ("Comfab") in connection with its
role as a government subcontractor, were not reasonable under a cost-benefit
analysis. In connection with this assessment, it was also determined that the
business of Comfab no longer was completely aligned with the Company's overall
strategic plan. Consequently, on November 1, 1995, Desjardins Engineering, a
proprietorship owned and operated by Mr. Desjardins, purchased the assets of
Comfab. The transaction was approved by the independent members of the Board of
Directors. In June 1996, Desjardins Engineering sold the assets of Comfab to an
unrelated third party for the price of approximately $1,050,000. No gain inured
to the benefit of Mr. Desjardins in connection with the sale of Comfab.

Mr. Miller, a director of the Company since 1995, is a Director of
Investment Banking of HD Brous & Co, Inc., headquartered in Great Neck, New
York. Mr. Miller is the principal in the office located in Phoenix, Arizona. HD
Brous & Co.,Inc. is an Underwriter of this offering. See "Underwriting." HD
Brous & Co., Inc. acted as an underwriter in the Company's offering of Common
Stock in April 1995 and as a placement agent in the private placement issuance
of $14.3 million principal amount of the Company's 10% Notes issued in September
1996. Prior to joining HD Brous & Co., Inc. in 1994, Mr. Miller was Director of
Investment Banking of W.B. McKee Securities, Inc., Phoenix, Arizona, which
served as the managing underwriter of the Company's initial public offering of
Common Stock in 1992. Since that date, Mr. Miller has consulted with the Company
as its investment banker in connection with equity and debt financing and
mergers and acquisitions. See "Management."

The Board of Directors has a policy that provides that all transactions
between the Company and its executive officers, directors, employees, and
affiliates are subject to the approval of a majority of disinterested directors
of the Board of Directors and will be on terms that are no less favorable to the
Company than those that could be negotiated with unaffiliated parties.

LIMITATION ON LIABILITY OF DIRECTORS

The General Corporation Law of Arizona, under which the Company is
incorporated, was amended in full effective January 1, 1996. Subsequent to such
modification of the Arizona Corporate Code, the Company's Board of Directors
recommended, and its shareholders approved, amended and restated Articles of
Incorporation of the Company providing for the limitation or elimination of
potential monetary liability of directors of the Company to the fullest extent
permitted by Arizona law.

The Arizona Corporate Code limits or eliminates the liability of a director
of a corporation for money damages for any action taken or not taken as a
director in all instances except (i) instances where a director receives
financial benefits to which he is not entitled; (ii) any intentional infliction
of harm on the corporation or its shareholders; (iii) the making of unlawful
distributions; and (iv) intentional violations of criminal law.

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PRINCIPAL SHAREHOLDERS

The following table sets forth information with respect to the number of
shares of Common Stock of the Company, as of April 17, 1997, beneficially owned
by individual directors of the Company, the named executive officers, all
directors and named executive officers of the Company as a group, as well as
information regarding the ownership of such shares after this offering assuming
the conversion of the Notes.

SHARES BENEFICIALLY
SHARES BENEFICIALLY OWNED OWNED
PRIOR TO OFFERING AFTER OFFERING(10)
--------------------------- ---------------------
NAME OF BENEFICIAL OWNER NUMBER(1) PERCENTAGE(2) NUMBER PERCENT
--------------------------------- --------- ------------- --------- -------

Stanley P. Desjardins(3)......... 3,543,052 39% 3,543,052
Donald W. Townsend(4)............ 450,000 5% 450,000
Bradley P. Forst(5).............. 151,050 2% 151,050
Sean K. Nolen(6)................. 25,000 * 25,000
James C. Withers(7).............. 24,900 * 24,900
Robert D. Olliver(8)............. 24,922 * 24,922
Scott E. Miller(9)............... 26,050 * 26,050
All directors and executive
officers as a group (nine
persons)....................... 4,244,974 47% 4,244,974

- ---------------
* Less than 1% of the outstanding Common Stock

(1) The number of shares shown in the table, including the notes thereto, have
been rounded to the nearest whole share. Includes, when applicable, shares
owned of record by such person's spouse and by other related individuals
and entities over whose shares of Common Stock such person has custody,
voting control, or power of disposition. Also includes shares of Common
Stock that the identified person had the right to acquire within 60 days of
April 17, 1997 by the exercise of stock options.

(2) The percentages shown include the shares of Common Stock that the person
will have the right to acquire within 60 days of April 17, 1997. In
calculating the percentage of ownership, all shares of Common Stock that
the identified person will have the right to acquire within 60 days of
April 17, 1997 upon the exercise of stock options are deemed to be
outstanding for the purpose of computing the percentage of shares of Common
Stock owned by such person, but are not deemed to be outstanding for the
purpose of computing the percentage of the shares of Common Stock owned by
any other person.

(3) The address of Mr. Desjardins and all other directors and executive
officers named in the table above is 2700 North Central Avenue, Suite 1000,
Phoenix, Arizona 85004.

(4) Includes options to purchase 404,800 shares of Common Stock, which are
presently exercisable, or which will be exercisable within 60 days of April
17, 1997.

(5) Includes options to purchase 150,000 shares of Common Stock, which are
presently exercisable, or which will be exercisable within 60 days of April
17, 1997, but does not include options to purchase 50,000 shares of Common
Stock, which are not exercisable before January 1998.

(6) Includes options to purchase 25,000 shares of Common Stock which are
exercisable within 60 days of April 17, 1997, but does not include options
to purchase 150,000 shares of Common Stock which have various vesting
periods starting January 1998.

(7) Includes options to purchase 24,000 shares of Common Stock, which are
presently exercisable, or which will be exercisable within 60 days of April
17, 1997. Does not include options for 1,500 shares not exercisable before
January 1998.

(8) Includes options to purchase 21,687 shares of Common Stock, which are
presently exercisable, or which will be exercisable within 60 days of April
17, 1997. Does not include options for 1,500 shares not exercisable before
January 1998.

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(9) Includes options to purchase 24,000 shares of Common Stock, which are
presently exercisable, or which will be exercisable within 60 days of April
17, 1997. Does not include options for 1,500 shares not exercisable before
January 1998.

(10) Does not include up to 180,000 shares of Common Stock into which Notes may
be converted if the over-allotment option is exercised in full. See
"Underwriting."

SHARES ELIGIBLE FOR FUTURE SALE

As of April 17, 1997, the Company had 9,022,348 outstanding shares of
Common Stock, of which 3,669,349 shares are "restricted securities," as that
term is defined in Rule 144 under the Act (the "Restricted Shares"). Such
Restricted Shares may be subject to volume and other resale limitations
described below.

The directors and executive officers have agreed with the Company at the
request of the Underwriters not to sell or otherwise dispose of any shares of
Common Stock in the public market for a period of 90 days after the date of this
Prospectus without the prior written consent of the Underwriters.

In general, under Rule 144 as amended effective April 29, 1997, any person
(or persons whose shares are aggregated for purposes of Rule 144) who
beneficially owns restricted securities with respect to which at least one year
has elapsed since the later of the date the shares were acquired from the
Company or from an affiliate of the Company, is entitled to sell, within any
three-month period, a number of shares that does not exceed the greater of (i)
1% of the then outstanding shares of Common Stock of the Company or (ii) the
average weekly trading volume in Common Stock during the four calendar weeks
preceding such sale. Sales under Rule 144 also are subject to certain
manner-of-sale provisions and notice requirements and to the availability of
current public information about the Company. A person who is not an affiliate,
has not been an affiliate within three months prior the sale, and who
beneficially owns restricted securities with respect to which at least two years
have elapsed since the later of the date the shares were acquired from the
Company or from an affiliate of the Company, is entitled to sell such shares
under Rule 144(k) without regard to any of the volume limitations or other
requirements described above.

In September 1996, the Company issued $14.3 million principal amount of 10%
Notes in a private placement. Based upon the conversion prices for the 10% Notes
fixed prior to December 31, 1996 and the average market price of the Company's
Common Stock for the 10 days ended December 31, 1996 for the 10% Notes not yet
fixed, the 10% Notes would be convertible into approximately 975,000 shares of
the Company's Common Stock. The Company's registration statement covering
resales by the holders of the Common Stock issuable upon conversion of the 10%
Notes became effective on April 3, 1997. See "Risk Factors -- Recent
Registration" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."

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DESCRIPTION OF NOTES

The following statements with respect to the % Senior Subordinated
Convertible Notes are not complete and are qualified in all respects by the
provisions of the Company's Amended and Restated Articles of Incorporation,
Bylaws and the Indenture, which are included in, or are incorporated by
reference into, the Registration Statement of which this Prospectus forms a
part.

GENERAL

The Notes will be issued under an Indenture (the "Indenture") to be dated
as of April 1, 1997, between the Company and Bank One Trust Company, NA (the
"Trustee"). A copy of the proposed form of the Indenture has been filed as an
exhibit to the Registration Statement of which this Prospectus is a part. The
summaries of certain provisions of the Indenture hereunder do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all of the provisions of the Indenture including the definitions therein of
certain terms and those terms made part of the Indenture by reference to the
Trust Indenture Act of 1939 as in effect on the date hereof. The definitions of
certain capitalized terms are set forth under "-- Certain Definitions" and
throughout this description. Capitalized terms that are used but not otherwise
defined herein have the meanings assigned to them in the Indenture and such
definitions are incorporated herein by reference.

The Indenture authorizes an aggregate principal amount of $150,000,000 of
notes. The initial issuance of notes thereunder will consist of the Notes which
will bear interest from the date of original issuance at the rate of % per
annum payable semiannually on the 30th day of January and July commencing on
July 30, 1997 and continuing semiannually thereafter until paid in full (each
such date an "interest payment date") to holders of record at the close of
business on the first day of the month of such interest payment date.

The Notes will be due on , 2004, will be issued in registered
form, without coupons, only in denominations of $1,000 and integral multiples
thereof and will be unsecured obligations of the Company which will be
subordinated to the Senior Indebtedness of the Company. The Notes may be
presented for transfer and exchange at the office of the Trustee maintained for
that purpose, provided that payment of interest may, at the option of the
Company, be made by check mailed to the registered address of the person
entitled thereto. No service charge will be made for any transfer or exchange of
Notes, but the Company may require payment of a sum sufficient to cover any tax
or other governmental charge payable in connection therewith.

DEFINITIONS

Set forth below is a summary of certain of the defined terms used in the
covenants contained in the Indenture. Reference is made to the Indenture for the
full definition of all such terms.

"Asset Sale" means any sale, lease, transfer, exchange or other disposition
(or series of related sales, leases, transfers, exchanges or dispositions) of
shares of capital stock of a Subsidiary (other than directors' qualifying
shares), or of property or assets or any interests therein by the Company or any
of its Subsidiaries, including any disposition by means of a merger,
consolidation or similar transaction (other than (A) by the Company to a wholly
owned subsidiary or by a Subsidiary to the Company or a wholly owned subsidiary,
(B) a sale of products, services, inventories and assets in the ordinary course
of business of the Company's operations, and (C) the disposition of all or
substantially all of the assets of the Company in compliance with the covenant
captioned "Limitations on Mergers and Consolidations").

"Change of Control" means any event or series of events by which (i) any
person as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended is or becomes the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act) of 50% of more of the
total voting power of the voting stock of the Company; (ii) the Company
consolidates with or merges or amalgamates with or into another person or
conveys, transfers, or leases all or substantially all of its assets to any
person, or any person consolidates with, or merges or amalgamates with or into
the Company, in any such event pursuant to the transaction in which the
outstanding voting stock of the Company is changed into or exchanged for cash,
securities or other property, other than any such transaction where (A) the
outstanding voting stock of the

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Company is changed or exchanged for voting stock of the surviving corporation
and (B) the holders of the Voting Stock of the Company immediately prior to such
transaction own, directly or indirectly, not less than a majority of the Voting
Stock of the surviving corporation immediately after such transaction; or (iii)
the shareholders of the Company approve any plan of liquidation or dissolution
of the Company.

"Indebtedness" means, without duplication, with respect to any person, (a)
all obligations of such person (i) in respect of borrowed money (whether or not
the recourse of the lender is to the whole of the assets of such person or only
to a portion thereof), (ii) evidenced by bonds, notes, debentures or similar
instruments, (iii) representing the balance deferred and unpaid of the purchase
price of any property or services (other than accounts payable or other
obligations arising in the ordinary course of business), (iv) evidenced by
bankers' acceptances or similar instruments issued or accepted by banks, (v) for
the payment of money relating to a capitalized lease obligation, or (vi)
evidenced by a letter of credit or a reimbursement obligation of such person
with respect to any letter of credit; (b) all net obligations of such person
under interest rate swap obligations and foreign currency hedges; (c) all
liabilities of others of the kind described in the preceding clauses (a) or (b)
that such person has guaranteed or that are otherwise its legal liability; (d)
with respect to such person, the liquidation preference or any mandatory
redemption payment obligations in respect to disqualified stock; and (e) any and
all deferrals, renewals, extensions, refinancings and refundings (whether direct
or indirect) of, or amendments, modifications or supplements to, any liability
of the kind described in any of the preceding clauses (a), (b), (c) and (d).

"Net Available Proceeds" means, with respect to any Asset Sale of any
person, cash proceeds received (including any cash proceeds received by way of
deferred payment of principal pursuant to a note or installment receivable or
otherwise, but only as and when received, and excluding any other consideration
until such time as such consideration is converted into cash) therefrom, in each
case net of all legal, title and recording tax expenses, commissions and other
fees and expenses incurred, and all federal, state or local taxes required to be
accrued as a liability as a consequence of such Asset Sale, and in each case net
of all Indebtedness which was secured by such assets, in accordance with the
terms of any lien upon or with respect to such assets, or which must, by its
terms or in order to obtain a necessary consent to such Asset Sale or by
applicable law, be repaid out of the proceeds from such Asset Sale and which is
actually so repaid.

"Senior Indebtedness" means any Indebtedness of the Company (whether
outstanding on the date of issuance of the Notes or thereafter incurred), unless
such Indebtedness is pari passu with or contractually subordinate or junior in
right of payment to the Notes, except Indebtedness to any affiliate of the
Company which shall be junior and subordinate to the Notes, and except
Indebtedness evidenced by any series of notes authorized to be issued under the
Indenture in addition to and on parity with the Notes.

"Subordinated Indebtedness" means any Indebtedness of the Company (whether
outstanding on the date of issuance of the Notes or thereafter incurred) which
is contractually subordinate or junior in right of payment to the Notes.

SUBORDINATED INDEBTEDNESS

The Indebtedness evidenced by the Notes will be subordinated to the prior
payment when due of the principal of, and premium, if any, and accrued and
unpaid interest on, all existing and future Senior Indebtedness of the Company.
The Notes will be senior to, in right of payment of principal of, premium, if
any, and accrued and unpaid interest on, any other and future Subordinated
Indebtedness of the Company.

The Notes and the Indenture provide that, upon any distribution of assets
of the Company in any dissolution, winding up, liquidation, or reorganization of
the Company, all holders of Senior Indebtedness of the Company must be paid in
full before any payment or distribution is made with respect to the Notes.
Because of these subordination provisions, unless sufficient sums are available
to pay the holders of the Notes and the holders of Senior Indebtedness of the
Company in full, holders of Senior Indebtedness of the Company, including
certain creditors of the Company who are not holders of Senior Indebtedness of
the Company, may recover more, ratably, than the holders of the Notes.

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The Indenture provides that, upon the maturity of any Senior Indebtedness
of the Company by lapse of time, acceleration or otherwise, unless and until all
principal thereof, premium, if any, and interest thereon and other amounts due
thereon shall first be paid in full, no payment shall be made by or on behalf of
the Company with respect to the principal of, premium, if any, or interest on
the Notes. Upon the happening of any default in the payment of any principal of
or interest on or other amounts due on any Senior Indebtedness of the Company,
unless and until such default shall have been cured or waived or have ceased to
exist, no payment shall be made by or on behalf of the Company with respect to
the principal of or interest on the Notes.

SUBSIDIARY GUARANTEES

Each of the Company's subsidiaries (the "Subsidiaries") will
unconditionally and fully guarantee (the "Guarantees"), on a joint and several
basis, the Company's obligations to pay principal of, premium, if any, and
interest on the Notes. The Indenture also provides that each person that becomes
a Subsidiary after the date of original issuance of the Notes shall guarantee
the payment of the Notes. Under the terms of the Indenture, a Subsidiary
Guarantor may be released from its Guarantee if such Subsidiary Guarantor is
sold or disposed of by the Company, or sells or disposes of substantially all of
its assets, to another person in accordance with the Indenture, as described
below.

Each Subsidiary Guarantor's Guarantee will be subordinate to Senior
Indebtedness of such Subsidiary Guarantor, including such Subsidiary Guarantor's
guarantees of Senior Indebtedness of the Company, generally on the same basis as
the Company's obligations under the Indenture and the Notes will be subordinate
to Senior Indebtedness of the Company. The Guarantees will, however, rank at
least on a parity with claims of all other unsecured creditors of the respective
Subsidiary Guarantors. However, because of the subordination provisions, unless
sufficient sums are available to pay the full amounts required under the
Guarantees and to pay the unsecured creditors of the respective Subsidiary
Guarantors, such other unsecured creditors of the Subsidiary Guarantors may
recover more, ratably, than the holders of the Notes would recover with respect
to the Guarantees. Each Subsidiary Guarantor will be prohibited from making
payments under its Guarantee if defaults and certain other events with respect
to Senior Indebtedness of a Subsidiary Guarantor have occurred that prohibit the
Subsidiary Guarantor from making payments on the Notes pursuant to the
Guarantee.

The obligations of each Subsidiary Guarantor are limited to the maximum
amount as will, after giving effect to all other contingent and fixed
liabilities of such Subsidiary Guarantor and after giving effect to any
collections from or payments made by or on behalf of any other Subsidiary
Guarantor in respect of the obligations of such other Subsidiary Guarantor under
its Guarantee or pursuant to its contribution obligations under the Indenture,
result in the obligations of such Subsidiary Guarantor under its Guarantee not
constituting a fraudulent conveyance or fraudulent transfer under federal,
state, or foreign law.

Each Subsidiary Guarantor may consolidate with or merge into or sell its
assets to the Company or another Subsidiary Guarantor without limitation. Each
Subsidiary Guarantor may consolidate with or merge into or sell its assets to a
corporation other than the Company or another Subsidiary Guarantor (whether or
not affiliated with the Subsidiary Guarantor), provided, that (a) if the
surviving corporation is not the Subsidiary Guarantor, the surviving corporation
agrees to assume such Subsidiary Guarantor's Guarantee and all its obligations
pursuant to the Indenture and (b) such transaction does not (i) violate any
covenants under the Indenture or (ii) result in a Default or Event of Default
immediately thereafter that is continuing. A Subsidiary Guarantor may be
released from its Guarantee only if such Subsidiary Guarantor consolidates with,
merges into or sells substantially all of its assets to, another person in
accordance with the requirements of the Indenture. Except as provided in the
preceding sentence, a Subsidiary Guarantor may not otherwise be released from
its Guarantee.

CHANGE OF CONTROL

Within 30 days following the occurrence of any Change of Control, the
Company will offer (a "Change of Control Offer") to purchase all outstanding
Notes at a purchase price equal to 100% of the aggregate principal

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amount of the Notes, plus accrued and unpaid interest to the date of purchase.
The Change of Control Offer shall be deemed to have commenced upon mailing of
the notice described in the next succeeding paragraph and shall terminate 20
business days after its commencement, unless a longer offering period is
required by law. Promptly after the termination of the Change of Control Offer
(the "Change of Control Payment Date"), the Company shall purchase and mail or
deliver payment for all Notes tendered in response to the Change of Control
Offer.

It is expected that any bank credit facility or other Senior Indebtedness
that the Company is a party to would prohibit the repurchase of Indebtedness
subordinated to Indebtedness thereunder, which would include the Notes. Failure
of the Company to repurchase the Notes in the event of a Change of Control would
create an Event of Default with respect to the Notes. In addition, the
subordination provisions of the Indenture prohibit, subject to certain
conditions, the repurchase or repayment of the Notes if there is a default under
Senior Indebtedness. As a result, the Company may be prohibited from making
payment upon a Change of Control.

The Company, to the extent applicable and if required by law, will comply
with Section 14 of the Exchange Act and the provisions of Regulation 14E and any
other tender offer rules under the Exchange Act and any other federal and state
securities laws, rules and regulations which may then be applicable to any offer
by the Company to purchase the Notes at the option of the holders of the Notes
upon a Change of Control.

CONVERSION

The Notes and the accrued interest payable thereon are convertible into
shares of the Company's Common Stock, par value $.01 per share, at a conversion
price of $ per share (the "Conversion Price"), subject to adjustment on
the Conversion Date as set forth below to protect against dilution of the
Conversion Price. No accrued and unpaid interest will be convertible into Common
Stock unless the conversion occurs after the record date for such accrued and
unpaid interest. No other payment or adjustment will be made on conversion of
any Note for interest accrued thereon or for dividends declared on the Common
Stock. No fractional shares will be issued. In lieu of fractional shares, the
Company will pay to the holder of the Notes at the time of conversion an amount
in cash equal to the same fraction of the current market value of a share of
Common Stock of the Company. This current market value will be deemed the
closing price of the Common Stock on the NYSE on the last trading day preceding
the Conversion Date. In the case of Notes called for redemption, conversion
rights will expire at the close of business on the redemption date.

A holder of Notes may convert his Notes by surrendering to the conversion
agent each Note covering Notes to be converted together with a statement of the
name or names in which the shares of Common Stock shall be registered upon
issuance (the date of such surrender, the "Conversion Date"). Every such notice
of election to convert will constitute a contract between the holder giving such
notice and the Company whereby such holder will be deemed to subscribe for the
shares of Common Stock he will be entitled to receive upon such conversion and,
in payment and satisfaction of such subscription, to surrender the Notes to be
converted and to release the Company from all further obligation thereon and
whereby the Company will be deemed to accept the surrender of such Notes in full
payment of the shares of Common Stock so subscribed for and to be issued upon
such conversion. As promptly as practicable after the Conversion Date, the
Company shall issue and deliver to the converting holder of the Notes a
certificate representing the number of shares of Common Stock into which the
Notes was converted together with cash in lieu of fractional shares, if any. If
a holder of Notes elects to convert only a portion of his Notes, upon such
conversion the Company shall also deliver to the holder of the Notes a new Note
representing his unconverted Notes.

To protect against dilution of the Conversion Price, the Conversion Price
is subject to adjustment upon the occurrence of certain events, including the
issuance of shares of Common Stock or other securities of the Company as a
dividend or distribution on shares of Common Stock of the Company to the holders
of all of its outstanding shares of Common Stock; subdivisions, combinations, or
certain reclassifications of shares of Common Stock of the Company; the issuance
of shares of Common Stock of the Company or of rights, options, or warrants to
subscribe for or purchase shares of Common Stock of the Company at less than the
effective Conversion Price of the Notes; or the distribution to the holders of
shares of Common Stock of the Company generally of evidences of indebtedness or
assets (excluding cash dividends and distributions made

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out of current or retained earnings) or rights, options, or warrants to
subscribe for securities of the Company other than those mentioned above. No
adjustment in the Conversion Price will be required to be made with respect to
the Notes until cumulative adjustments amount to 1% or more; however, any such
adjustment not required to be made will be carried forward and taken into
account in any subsequent adjustment.

In the event of any consolidation with or merger of the Company into
another corporation, or sale of all or substantially all of the properties and
assets of the Company to any other corporation, or in case of any reorganization
of the Company, the Notes would thereupon become convertible only into the
number of shares of stock or other securities, assets, or cash to which a holder
of the number of shares or Common Stock of the Company issuable (at the time of
such consolidation, merger, sale, or reorganization) upon conversion of such
Notes would have been entitled upon such consolidation, merger, sale or
reorganization.

REDEMPTION

If not earlier converted or redeemed, the Notes may be redeemed upon at
least 30 days' notice, at the Company's option, in whole or in part on a pro
rata basis, on and after , 1999, at the following redemption prices
(expressed in percentages of the principal amount) if redeemed during the
twelve-month period beginning of the year indicated below, in each
case together with accrued interest payable thereon to the redemption date:

YEAR REDEMPTION PRICE
- ----- ----------------------------------------------

1999
2000
2001
2002
2003

However, on or after , 1999 and prior to , 2000, the
Notes will not be redeemable unless the closing price of the Company's Common
Stock as quoted on the NYSE has equaled or exceeded $ for 20 trading
days within a period of 30 consecutive trading days.

Concurrently with the notice of redemption provided by the Company, the
Company will provide instructions as to the procedure to be followed to execute
such redemption. If less than all of the Notes are to be redeemed, the Trustee
shall select the Notes or the portion thereof to be redeemed on a pro rata
basis.

CERTAIN COVENANTS

Limitation on Incurrence of Indebtedness. The Indenture provides that the
Company will not, and will not permit any of its subsidiaries, directly or
indirectly, to issue, incur, guarantee, become liable, contingently or
otherwise, or otherwise become responsible for the payment of any Indebtedness;
provided, however, that if no Default or Event of Default with respect to the
Notes shall have occurred and be continuing at the time of such incurrence, the
Company or its Subsidiaries may incur Indebtedness if, on a pro forma basis,
after giving effect to such incurrence and the application of the proceeds
therefrom, the Consolidated Coverage Ratio would have been equal to or greater
than 1.0 to 1.0 with respect to Indebtedness incurred thereafter. However, such
Consolidated Coverage Ratio covenant shall not apply until on and after January
1, 1998. Notwithstanding the foregoing, (i) the Company may incur Indebtedness
consisting of the Notes, and (ii) the Subsidiary Guarantors may incur
Indebtedness consisting of the Guarantees of the Notes.

The foregoing limitations will not apply to Indebtedness incurred or
assumed in connection with any acquisition as long as the historic coverage
ratio for the acquired company or the pro forma Consolidated Coverage Ratio for
the Company and the acquired company is equal to or greater than 1.0 to 1.0. The
foregoing limitations also will not apply to, nor include the effect of, $50
million aggregate principal amount of Indebtedness pursuant to senior credit
facilities.

For purposes of this covenant, "Consolidated Coverage Ratio" shall mean,
for the preceding four quarter period, the ratio on a pro forma basis of (i)
consolidated earnings before interest, taxes, depreciation and

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amortization, (as those terms are defined by GAAP) for such period, to (ii)
consolidated interest expense (as that term is defined by GAAP) for such period.

Limitation on Sale of Assets. The Indenture provides that the Company will
not, and will not permit any Subsidiary to, make any Asset Sales which, in the
aggregate, have a fair market value of $5 million or more in any 12-month period
unless:

(i) the Company (or its Subsidiaries, as the case may be) receives
consideration at the time of such sale or other disposition at least equal
to the fair market value thereof (as determined in good faith by the
Company's Board of Directors and evidenced by a resolution of such Board in
the case of any Asset Sales or series of related Asset Sales having a fair
market value of $20 million or more); and

(ii) not less than 35% of the proceeds received by the Company (or its
Subsidiaries, as the case may be) from such Asset Sale consists of cash,
cash equivalents, publicly traded stock of a person primarily engaged in
the Company's principal business; or any combination of the foregoing; and

(iii) the Net Available Proceeds received by the Company (or its
Subsidiaries, as the case may be) from such Asset Sale are applied as
described below.

Notwithstanding the limitation on any Asset Sale, the Company and its
Subsidiaries may dispose of property and assets of the Company or its
Subsidiaries in exchange for capital property and capital assets (i) which are
directly related to the Company's principal business; (ii) which are of the same
type of property or assets, or which have the same function, as the properties
or assets being disposed of; and (iii) which have an aggregate fair market value
equal to or greater than the aggregate fair market value of the property and
assets being disposed of; provided, however, that (A) in no event may the
Company and its Subsidiaries, in any 12-month period, dispose of property or
assets pursuant to this paragraph having an aggregate fair market value of $30
million or more and (B) with respect to any property or assets being disposed of
having a fair market value of $20 million or more, the Board of Directors of the
Company shall have determined in good faith that the aggregate fair market value
of the property and assets being received by the Company and its Subsidiaries is
equal to or greater than the aggregate fair market value of the property and
assets being disposed of.

The Company shall, within 270 days following the receipt of Net Available
Proceeds from any Asset Sale, apply such Net Available Proceeds to: (i) the
repayment of Indebtedness of the Company under the Company's bank credit
facility or other Senior Indebtedness of the Company, or Senior Indebtedness of
any Subsidiary Guarantor, provided that any such repayment shall result in a
permanent reduction in the principal amount of such Senior Indebtedness in an
amount equal to the principal amount so repaid; or (ii) make an investment in
capital assets used in the principal business of the Company. If, upon
completion of the 270-day period, any portion of the Net Available Proceeds of
any Asset Sale shall not have been applied by the Company as described in the
preceding sentence and such remaining Net Available Proceeds, together with any
remaining net cash proceeds from any prior Asset Sale (such aggregate
constituting "Excess Proceeds") exceeds $30 million, then the Company will be
obligated to make an offer (the "Net Proceeds Offer") to purchase Notes having
an aggregate principal amount equal to the Excess Proceeds (such purchase to be
made pro rata or by lot if the amount available for such repurchase is less than
the principal amount of the Notes tendered in such Net Proceeds Offer) at a
purchase price of 100% of the principal amount thereof plus accrued interest, if
any, to the date of repurchase (the "Net Proceeds Payment Date"). The paying
agent will promptly mail or deliver to holders whose Notes have been accepted
for repurchase payment in an amount equal to the purchase price, and the Company
will execute and the Trustee will promptly authenticate and mail or make
available for delivery to such holders a new Note equal in principal amount to
any unpurchased portion of the Notes surrendered. Any Notes not so accepted will
be promptly mailed or delivered to the holder thereof. Upon the completion of a
Net Proceeds Offer, the amount of Excess Proceeds will be reset to zero.

Notice of a Net Proceeds Offer to purchase the Notes will be made on behalf
of the Company not less than 25 business days nor more than 60 business days
before the Net Proceeds Payment Date. Notes tendered to the Company pursuant to
a Net Proceeds Offer will cease to accrue interest after the Net Proceeds

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Payment Date. For purposes of this covenant, the term "Net Proceeds Offer
Amount" means the principal of outstanding Notes in an aggregate principal
amount equal to any remaining Net Available Proceeds (rounded to the next lowest
$1,000). If the Net Proceeds Payment Date is on or after an interest payment
record date and on or before the related interest payment date, any accrued
interest will be paid to the person in whose name an Exchange Note is registered
at the close of business on such record date, and no additional interest will be
payable to holders who tender Notes pursuant to the Net Proceeds Offer.

Limitation on Liens Securing Indebtedness. The Indenture provides that the
Company will not, and will not permit any of its Subsidiaries to, create, incur,
assume or suffer to exist any liens (other than as permitted) upon any of their
respective properties securing (i) any Indebtedness of the Company (other than
Senior Indebtedness of the Company), unless the Notes are equally and ratably
secured or (ii) any Indebtedness of any Subsidiary Guarantor (other than Senior
Indebtedness of such Subsidiary Guarantor) unless the Guarantors are equally and
ratably secured; provided, that if such Indebtedness is expressly subordinated
to the Notes or Guarantees, the lien securing such Indebtedness will be
subordinated and junior to any lien securing the Notes or Guarantees, with the
same relative priority as such Subordinated Indebtedness of the Company or
Subordinated Indebtedness of a Subsidiary Guarantor will have with respect to
the Notes or Guarantees. The terms and conditions of any lien securing the Notes
must be acceptable to the Trustee and the Trustee is not required to foreclose
on or realize on any such lien, if in the judgment of the Trustee, to do so
would expose the Trustee to liability for which the Trustee would not be
adequately indemnified.

Limitation on Payment Restrictions Affecting Subsidiaries. The Indenture
provides that the Company will not, and will not permit any of its Subsidiaries
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any consensual encumbrance or consensual restriction on the
ability of any Subsidiary of the Company to (i) pay dividends or make any other
distributions on its capital stock or on any other interest or participation in
the Company or a Subsidiary; (ii) pay any Indebtedness owed to the Company or a
Subsidiary of the Company; (iii) make loans or advances to the Company or a
Subsidiary of the Company; or (iv) transfer any of its properties or assets to
the Company or a Subsidiary of the Company, except for (a) encumbrances or
restrictions with respect to Senior Indebtedness; (b) consensual encumbrances or
consensual restrictions binding upon any person at the time such person becomes
a Subsidiary of the Company (unless the agreement creating such consensual
encumbrance or consensual restriction was entered into in connection with, or in
contemplation of, such entity becoming a Subsidiary); (c) customary provisions
restricting subletting or assignment of any lease governing a leasehold interest
of any Subsidiary; (d) customary restrictions in security agreements or
mortgages securing Indebtedness of a Subsidiary to the extent such restrictions
restrict the transfer of the property subject to such security agreements and
mortgages; (e) customary restrictions in purchase money obligations for property
acquired in the ordinary course of business restricting the transfer of the
property acquired thereby; (f) consensual encumbrances or restrictions under any
agreement that refinances or replaces any agreement described in clauses (a),
(b) (c), (d) or (e) above, provided that the terms and conditions of any such
restrictions are no less favorable to the holders of the Notes than those under
the agreement so refinanced or replaced; and (g) customary non-assignment
provision in leases, purchase money financings and any encumbrance or
restriction due to applicable law.

Limitation on Transactions with Affiliates. The Indenture provides that
neither the Company nor any of its Subsidiaries shall (i) sell, lease, transfer
or otherwise dispose of any of its properties, assets or securities to, (ii)
purchase or lease any property, assets or securities from, (iii) make any
investment in, or (iv) enter into or amend any contract or agreement with or for
the benefit of, either an (A) affiliate of any of them, (B) any person or person
who is a member of a group (as such term is used for purposes of Sections 13(d)
and 14(d) of the Exchange Act, whether or not applicable) that, directly or
indirectly, is the beneficial holder of 5% or more of any class of equity
securities of the Company, (C) any person who is an affiliate of any such
holder, or (D) any officers, directors, or employees of any of the above (each
case under (A), (B), (C) and (D), an "Affiliate Transaction"), in one or a
series of related transactions (to either party) per Affiliate Transaction in
excess of $2,000,000, except for transactions evidenced by an officers'
certificate addressed and delivered to the Trustee stating that such Affiliate
Transaction is made in good faith, the terms of which are fair and reasonable to
the Company and such Subsidiary, as the case may be, or, with respect to
Affiliate Transactions between the Company and its Subsidiaries, to the Company;
provided, that (x) transactions between or

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among the Company and its Subsidiaries shall not be deemed to constitute
Affiliate Transactions and (y) with respect to any Affiliate Transaction with an
aggregate value (to either party) in excess of $4,000,000, the Company must,
prior to the consummation thereof, obtain a written favorable opinion as to the
fairness of such transaction to itself from a financial point of view from an
investment banking firm.

Limitation on Future Senior Subordinated Indebtedness. The Indenture
provides that the Company and its Subsidiaries will not incur any Indebtedness
(other than the Notes) that is subordinated in right of payment to any other
Indebtedness of the Company unless such Indebtedness, by its terms, is pari
passu with or subordinated to the Notes. No Subsidiary Guarantor shall incur any
Indebtedness other than the Guarantee that is subordinated in right of payment
to any other Indebtedness of such Subsidiary Guarantor unless such Indebtedness,
by its terms, is pari passu with or subordinated to the Guarantee of such
Subsidiary Guarantor.

Line of Business. For so long as the Notes are outstanding, the Company
shall not, and shall not permit any of its Subsidiaries to, engage in any
business or activity other than the principal business of the Company. Principal
business of the Company means the business of crash resistant technology
including seating systems and restraint systems for transportation vehicles,
civilian and military aircraft components and services and any activity or
business that is a reasonable extension, development or expansion thereof.

Limitations on Mergers and Consolidations. The Company shall not
consolidate with or merge into any other corporation or convey or transfer or
lease its properties and assets substantially as an entirety to any person,
unless: (1) the corporation formed by such consolidation or into which the
Company is merged or the person which acquires by conveyance, transfer or lease
the properties or assets of the Company substantially as an entirety shall be a
corporation organized and existing under the laws of the United States of
America or any State or the District of Columbia, and shall expressly assume the
due and punctual payment of the principal of (and premium, if any) and interest
on all Notes and the performance of every covenant of the Indenture on the part
of the Company to be performed or observed; and (2) immediately before and after
giving effect to such transaction, no Event of Default, and no event which,
after notice or lapse of time, or both, would become an Event of Default, shall
have happened and be continuing.

Upon any consolidation or merger, or any conveyance, transfer or lease of
the properties and assets of the Company substantially as an entirety in
accordance with the above, the successor corporation formed by such
consolidation or into which the Company is merged or into which such conveyance,
transfer or lease is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under the Indenture with the same
effect as if such successor corporation had been named as the Company herein and
thereafter (except in the case of a lease) the predecessor corporation will be
relieved of all further obligations and covenants under the Indenture and the
Notes.

EVENTS OF DEFAULT

An Event of Default is defined in the Indenture as being: (i) default by
the Company or any Subsidiary Guarantor in the payment of principal of, or
premium, if any, on the Notes when due and payable at maturity, upon repurchase
pursuant to a Change of Control Offer or a Net Proceeds Offer; (ii) default by
the Company or any Subsidiary Guarantor for 30 days in payment of any interest
on the Notes; (iii) the acceleration of the maturity of any other Indebtedness
of the Company or any Subsidiary Guarantor having an outstanding principal
amount of $10,000,000 or more individually or in the aggregate; (iv) default by
the Company or any Subsidiary Guarantor in performance or breach of any other
covenant or agreement in the Notes or the Indenture or Guarantees which shall
not have been remedied within 60 days after written notice by the Trustee or by
the holders of at least 25% in principal amount of the Notes then outstanding;
(v) judgments or orders for the payment of money in an aggregate amount in
excess of $10,000,000 (net of applicable insurance coverage which is
acknowledged in writing by the insurer) having been rendered against the Company
or any Subsidiary Guarantor and such judgments or orders shall continue
unsatisfied and unstayed for a period of 60 days from the entry thereof; (vi) a
guarantee of a Subsidiary Guarantor shall cease to be in full force or effect or
any Subsidiary Guarantor shall deny or disaffirm its obligations with respect
thereto; or (vii) certain events involving bankruptcy, insolvency or
reorganization of the Company or any Subsidiary Guarantor. The Indenture
provides that the Trustee may withhold notice to the holders of the Notes of any
default (except in

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payment of principal of, or premium, if any, or interest on the Notes) if the
Trustee considers it in the interest of the holders of the Notes to do so.

The Indenture provides that if an Event of Default occurs and is continuing
with respect to the Indenture, the Trustee or the holders of not less than 25%
in principal amount of the Notes outstanding may declare the unpaid principal of
and premium, if any, and accrued but unpaid interest on all Notes to be due and
payable immediately by notice in writing to the Company (and to the Trustee if
given by the holders). Upon such a declaration, such principal, premium, if any,
and interest will be due and payable immediately. If an Event of Default
relating to certain events of bankruptcy, insolvency or reorganization of the
Company or any Subsidiary occurs and is continuing, the principal of and
premium, if any, and interest on all the Notes will become and be immediately
due and payable without any declaration or other act on the part of the Trustee
or any holders of the Notes. Under certain circumstances, the holders of a
majority in principal amount of the outstanding Notes may rescind any such
acceleration with respect to the Notes and its consequences.

The Indenture provides that no holder of a Note may pursue any remedy under
the Indenture unless (i) the Trustee shall have received written notice of a
continuing Event of Default from the holder, (ii) the Trustee shall have
received a request from holders of at least 25% in principal amount of the Notes
to pursue such remedy, (iii) the Trustee shall have been offered indemnity
reasonably satisfactory to it and (iv) the Trustee shall have failed to act for
a period of 60 days after receipt of such notice and offer of indemnity;
however, such provision does not affect the right of a holder of a Note to sue
for enforcement of any overdue payment thereon.

The Notes and the Indenture provide that if an Event of Default occurs as
defined above, a default rate of interest in the amount of 15% per annum shall
accrue on the indebtedness evidenced by the Notes from such date for such period
of time until the default is cured.

The holders of a majority in principal amount of the Notes then outstanding
have the right to direct the time, method and place of conducting any proceeding
for exercising any remedy available to the Trustee under the Indenture, subject
to certain limitations specified in the Indenture. The Indenture requires the
annual filing by the Company with the Trustee of a written statement as to
compliance with the covenants contained in the Indenture.

MODIFICATION AND WAIVER

The Indenture provides that modifications and amendments to the Indenture
may be made by the Company and the Trustee with the consents of the holders of a
majority in principal amount of the Notes then outstanding; provided that no
such modification or amendment may, without the consent of the holder of each
Note then outstanding affected thereby, (i) reduce the percentage of principal
amount of Notes whose holders may consent to an amendment, supplement or waiver;
(ii) reduce the rate or change the time for payment of interest, including
default interest, on any Note; (iii) reduce the principal amount of any Exchange
Note or change the maturity date of the Notes; or (iv) reduce the redemption
price, including premium, if any, payable upon redemption of any Note or change
the time at which any Note may or shall be redeemed; (v) reduce the repurchase
price, including premium, if any, payable upon the repurchase of any Note or
change the time at which any Note may or shall be repurchased; (vi) increase the
Conversion Price; (vii) make any Note payable in money other than that stated in
the Note; (vii) impair the right to institute suit for the enforcement of any
payment of principal of, or premium, if any, or interest on, any Note; (viii)
make any change in the percentage of principal amount of Notes necessary to
waive compliance with certain provisions of the Indenture; or (ix) waive a
continuing Default or Event of Default in the payment of principal of, premium,
if any, or interest on the Notes. The Indenture provides that modifications and
amendments of the Indenture may be made by the Company and the Trustee without
the consent of any holders of Notes in certain limited circumstances, including
(a) to cure any ambiguity, omission, defect or inconsistency, (b) to provide for
the assumption of the obligations of the Company under the Indenture upon the
merger, consolidation or sale or other disposition of all or substantially all
of the assets of the Company, (c) to comply with, and maintain the qualification
of the Indenture under the Trust Indenture Act of 1939 or (d) to make any change
that does not adversely affect the rights of any holder of Notes.

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The Indenture provides that the holders of a majority in aggregate
principal amount of the Notes then outstanding may waive any past default under
the Indenture, except a default in the payment of principal, premium, if any, or
interest.

DISCHARGE AND TERMINATION

The Company may at any time terminate its obligations under the Notes and
the Indenture, with certain exceptions specified in the Indenture, by
irrevocably depositing in trust cash or obligations of the United States
government and its agencies for payment of principal of, premium, if any, and
interest on, the Notes to redemption or maturity, subject to the satisfaction of
certain conditions.

Subject to the conditions described below, at the Company's option, either
(a) the Company will be deemed to have been discharged from its obligation with
respect to the Notes on the 31st day after the applicable conditions set forth
below have been satisfied or (b) the Company will cease to be under any
obligation to comply with certain restrictive covenants, including those
described under "Certain Covenants," at any time after the applicable conditions
set forth below have been satisfied: (1) the Company has deposited or cause to
be deposited irrevocably with the Trustee as trust funds in trust, specifically
pledged as security for, and dedicated solely to, the benefit of the holders of
(i) U.S. legal tender or (ii) United States government obligations, which
through the payment of interest and principal in respect thereof in accordance
with their terms will provide (without any reinvestment of such interest or
principal), not later than one day before the due date of any payment, U.S.
legal tender or (iii) a combination of (i) and (ii), in an amount sufficient, in
the opinion (with respect to (ii) and (iii)) of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee at or prior to the time of such deposit, to pay and
discharge each installment of principal of, premium, if any, and interest on,
the outstanding Notes on the date such installments are due; (2) the Company has
delivered to the Trustee an officers' certificate certifying whether the Notes
are then listed on a national securities exchange; (3) if the Notes are then
listed on a national securities exchange, the Company has delivered to the
Trustee an officers' certificate to the effect that the Company's exercise of
its option described above would not cause the Notes to be delisted; (4) no
Default or Event of Default has occurred and is continuing on the date of such
deposit or will occur as a result of such deposit and such deposit will not
result in a breach or violation of, or constitute a default under, any other
instrument to which the Company or Subsidiary or Subsidiary Guarantor is a party
or by which any of them is bound, as evidenced to the Trustee in an officers'
certificate delivered to the Trustee concurrently with such deposit; (5) the
Company has delivered to the Trustee an opinion of counsel to the effect that
holders will not recognize income, gain or loss for federal income tax purposes
as a result of the Company's exercise of its option described above and will be
subject to federal income tax on the same amount and in the same manner and at
the same time as would have been the case if such option had not been exercised,
and, in the case of the Notes being discharged, accompanied by a ruling to that
effect received from or published by the Internal Revenue Service; (6) the
Company has delivered to the Trustee an opinion of counsel to the effect that
the Company's exercise of its option described above will not result in any of
the Company, the Trustee or the trust created by the Company's deposit of funds
hereunder becoming or being deemed to be an "investment company" under the
Investment Company Act of 1940, as amended; (7) the Company has paid or duly
provided for payment of all amounts then due to the Trustee pursuant to the
terms of the Indenture; and (8) the Company has delivered to the Trustee an
officers' certificate and an opinion of counsel, each stating that all
conditions precedent provided for in the Indenture relating to the satisfaction
and discharge of the Indenture have been complied with.

THE TRUSTEE

Bank One Trust Company, NA is the Trustee under the Indenture. Its address
is Corporate Trust Client Service Group, 100 East Broad Street, Columbus, Ohio
43271-0181. The Company has also appointed the Trustee as the initial registrar
and paying agent under the Indenture.

The Indenture contains certain limitations on the right of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions;

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however, if it acquires any conflicting interest (as defined in the Trust
Indenture Act of 1939), it must eliminate such conflict or resign.

The Indenture provides that in case an Event of Default shall occur (and be
continuing), the Trustee is required to use the degree of care and skill of a
prudent man in the conduct of his own affairs. The Trustee is under no
obligation to exercise any of its powers under the Indenture at the request of
any of the holders of the Notes, unless such holders shall have offered the
Trustee indemnity reasonably satisfactory to it.

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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS

The following discussion is a summary of certain federal income tax
considerations relevant to the purchase, ownership, and disposition of the Notes
by holders acquiring such Notes on original issue, but does not purport to be a
complete analysis of all potential tax effects. The following discussion is
based on the provisions of the Internal Revenue Code of 1986, as amended
("Code"), Treasury regulations, Internal Revenue Service ("Service") rulings and
pronouncements, and judicial decisions now in effect, all of which are subject
to change. Any such changes may be retroactively applied in a manner that could
adversely affect a holder of the Notes.

The succeeding discussion, except as otherwise stated therein, represents
the opinion of Streich Lang, a professional association formed under the laws of
the State of Arizona ("Counsel"). In the opinion of such Counsel, the succeeding
discussion accurately describes the material federal income tax consequences
that can be determined at the time of the acquisition of a Note on original
issue by a person who will hold the Note as a "capital asset," within the
meaning of Section 1221 of the Code. While the opinions described herein are
based on Counsel's best judgment, they are not binding on the Service or the
courts and do not guarantee a particular tax treatment. The Company has not
sought and will not seek any rulings from the Service with respect to the tax
reporting positions of the Company described below. The tax treatment of certain
aspects of the Notes is uncertain, and there can be no assurance that the
Service will not take positions that are different from those described herein.
No assurances can be given that the positions adopted by the Company will be
sustained, if challenged by the Service.

The tax treatment of a holder of Notes may vary depending on the taxpayer's
particular situation. Certain holders (including S corporations, insurance
companies, tax-exempt organizations, financial institutions, broker-dealers, and
others who do not hold the Notes as "capital assets," taxpayers subject to
alternative minimum tax, foreign corporations and persons who are not citizens
or residents of the United States) may be subject to special rules not discussed
below. In addition, the description does not consider the effect of any
applicable foreign, state, local, or other tax laws or any estate or gift tax
considerations.

CHARACTERIZATION OF NOTES

The federal income tax treatment of the holder of a Note, will depend upon
the characterization of the Note for tax purposes. Under Section 385 of the
Code, the characterization of a financial instrument by its issuer at the time
of issuance is binding upon both the issuer and all holders of such instrument,
but is not binding upon the Service.

The Company will take the position that the Notes will be treated as debt
for federal income tax purposes. The determination of the tax classification of
an instrument depends upon factors, including the issuer's financial condition,
the ratio of the issuer's debt to equity, the issuer's earning power, whether
the debt is subordinated to other creditors or convertible into stock, and other
factors affecting the likelihood that the principal and interest on the
instrument will be paid when due. The Notes will possess certain equity-like
features, including the feature permitting the conversion of the Notes into
Common Stock of the Company, subordination of the claims of holders of Notes to
other creditors and the unsecured nature of the Notes. However, the Notes have a
fixed term of approximately seven (7) years, payment of the Notes is guaranteed
by the Company's subsidiaries, the Company expects to pay interest on the Notes
currently and the principal on maturity. It is Counsel's opinion that it is more
likely than not that the Notes will be recognized as debt for federal income tax
purposes. If it were determined that any or all of the Notes constitute stock,
some of the consequences would be that (a) the Company would not be entitled to
deduct amounts characterized herein as interest; (b) payments of interest would
be treated as dividends to the extent of the Company's current and/or
accumulated earnings and profits; (c) the principal payment to be made on the
maturity of the Notes would be tested for "sale or exchange" treatment under
Section 302 of the Code; and (d) corporate holders would be entitled to the
dividends received deduction with respect to payments of interest to the extent
of the Company's current and/or accumulated earnings and profits and provided
the eligibility requirements for such deduction are otherwise met. The inability
of the Company to deduct amounts paid or accrued with respect to the Notes that
are designated as interest may impair the Company's ability to make payments on
the Notes or

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to service its debt generally. The remainder of the discussion assumes that the
Notes will be treated as debt for federal income tax purposes.

INTEREST ON NOTES

Interest payments on the Notes will be treated as ordinary income to a
holder and will be reported under the holder's method of accounting. The Company
does not intend to issue the Notes with any discount. Consequently, the Notes
will be issued without original issue discount.

GAIN OR LOSS ON SALE OR MATURITY OF NOTES

Any gain or loss realized on the sale of Notes or upon retirement of the
Notes at maturity will be capital gain or loss if the Notes are held as a
capital asset, except ordinary income may be recognized to the extent the market
discount rules discussed below require recognition of ordinary income. Any
capital gain or loss will be long-term capital gain or loss if the holding
period for the Notes exceeds one year. Gain or loss will be measured by the
difference between the amount realized and the holder's adjusted basis in the
Notes.

Currently, net capital gains and ordinary income of corporations are
taxable at the same maximum rate (35%), whereas net long-term capital gains of
individuals are taxable at a maximum rate (28%) that is lower than the maximum
rate applicable to ordinary income (39.6%). In the case of both individuals and
corporations, capital losses generally may be used to offset only capital gains,
subject to a de minimis $3,000 per annum exception in the case of individuals.

AMORTIZABLE BOND PREMIUM

In the case of a holder of Notes who acquires such Notes at a cost that
exceeds the stated redemption price at maturity of such Notes, such excess
amount may be treated as "amortizable bond premium," within the meaning of
Section 171 of the Code. In that event and except as otherwise may be provided
in final Treasury regulations, such amortizable bond premium will be allocated
among the interest payments on the Notes on a constant interest rate basis over
the remaining term of the Notes (based upon circumstances existing on the date
the Notes are acquired and not on the issue date), and the amount allocated to
each such interest payment will be applied against and reduce the amount of such
interest payment that is required to be included in the income of the holder.
The interest offset will be available only if an election under Section 171 of
the Code is made or is in effect. This election, once made, would apply to all
debt instruments held by the electing holder on, or acquired after, the first
day of the first taxable year to which the election applies, and may not be
revoked without the consent of the Service.

CONVERSION OF NOTES INTO COMMON STOCK

The Notes are convertible into Common Stock on the basis described in
"Description of Notes -- Conversion" above. Generally, no gain or loss will be
recognized for federal income tax purposes on the conversion of or a Note solely
into Common Stock of the Company. Taxable gain will be realized upon the receipt
of cash paid in lieu of a fractional share of Common Stock. Taxable gain also
may be realized in the amount of any unpaid interest at the time of the
conversion. In general, the tax basis for Common Stock received on conversion
will be equal to the tax basis of the Notes converted and, provided that such
Notes were held as a capital asset, the holding period of the shares of Common
Stock received will include the holding period of such Notes.

BACKUP WITHHOLDING

Under Section 3406 of the Code and applicable Treasury regulations, a
holder of Notes may be subject to backup withholding at the rate of 31% with
respect to interest paid and with respect to the proceeds of certain sales,
exchanges or redemptions, unless such holder (a) is a corporation or is
otherwise exempt from backup withholding or (b) provides a taxpayer
identification number, certifies that such number is correct and otherwise
complies with applicable requirements of the backup withholding rules.

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MARKET DISCOUNT

Investors should note that in the event they acquire Notes other than upon
original issue, that the market discount provisions of Sections 1276 through
1278 of the Code may apply. Under the market discount rules, if a holder of a
Note receives or purchases it at a market discount (i.e., at a price below its
stated redemption price at maturity) in excess of a statutorily-defined de
minimis amount and thereafter recognizes gain upon a disposition or retirement
of the Note, then the lesser of the gain recognized or the portion of the market
discount that accrued on a ratable basis (or, if elected, on a constant interest
rate basis) generally will be treated as ordinary income at the time of the
disposition, including its redemption. Moreover, any market discount on a Note
may be taxable to an investor to the extent of appreciation at the time of
certain otherwise non-taxable transactions (e.g. gifts). Any accrued market
discount not previously taken into income prior to a conversion of a Note,
however, should carry over to the Common Stock received on conversion and be
treated as ordinary income upon a subsequent disposition of such Common Stock to
the extent of any gain recognized on such disposition. In addition, absent an
election to include market discount in income as it accrues, a holder of a
market discount debt instrument may be required to defer a portion of any
interest expense that otherwise may be deductible on any indebtedness incurred
or maintained to purchase or carry such debt instrument until the holder
disposes of the debt instrument in a taxable transaction.

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DESCRIPTION OF OTHER CAPITAL STOCK AND DEBT SECURITIES

COMMON STOCK

The Company is authorized to issue 50,000,000 shares of Common Stock, par
value $.01 per share, of which 9,022,348 shares were issued and outstanding as
of April 17, 1997.

Holders of the Common Stock are entitled to one vote for each share owned
for all matters to be voted on by the Common Stock shareholders. As required
under Arizona law, there is cumulative voting in the election of directors.
Accordingly, each shareholder is entitled to vote the number of shares owned by
him for as many persons as there are directors to be elected, or to cumulate his
votes by giving one candidate as many votes as the number of such directors
multiplied by the number of his shares, or by distributing votes on the same
principle among any number of candidates. Holders of Common Stock are entitled
to receive such dividends as may be declared from time to time by the Board of
Directors out of funds legally available therefor and, in the event of
liquidation, dissolution, or winding up of the Company, to share ratably in all
assets remaining after payment of liabilities. The holders of Common Stock have
no preemptive or conversion rights. The holders of Common Stock are not subject
to further calls or assessments. There are no redemption or sinking fund
provisions applicable to the Common Stock. The rights of the holders of the
Common Stock are subject to any rights that may be fixed for holders of
preferred stock. The Common Stock currently outstanding is, and the Common Stock
underlying the Notes offered by the Company hereby will, when issued, be validly
issued, fully paid, and nonassessable.

PREFERRED STOCK

The Company is authorized to issue 50,000,000 shares of preferred stock,
par value $.05 per share. No preferred stock is issued or outstanding. The
preferred stock may, without action by the shareholders of the Company, be
issued by the Board of Directors from time to time in one or more series for
such consideration and with such relative rights, privileges, and preferences as
the Board may determine. Accordingly, the Board has the power to fix the
dividend rate and to establish the provisions, if any, relating to voting
rights, redemption rate, sinking fund, liquidation, preferences, and conversion
rights for any series of preferred stock issued in the future.

SENIOR SUBORDINATED NOTES

In December 1993, the Company issued $5.7 million principal amount of 12%
Notes. The 12% Notes were issued pursuant to an Indenture dated December 17,
1993. The 12% Notes are not convertible and are non-callable. The 12% Notes are
listed on the NYSE. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations." In September 1996, the Company issued, in
a private placement, $14.3 million principal amount of 10% Notes. The 10% Notes
were issued pursuant to the Company's Indenture dated December 17, 1993 and a
supplemental indenture dated September 12, 1996. The 10% Notes were sold
pursuant to exemptions from registration under the Securities Act, Section 4(2),
and Regulation D in reliance on Rule 506 thereunder, and comparable provisions
of states' securities laws. The 10% Notes were sold solely to accredited
investors as defined in Regulation D. The proceeds were used to repay
indebtedness under the Company's bank line of credit, and for working capital.
The 10% Notes are convertible into Common Stock of the Company at a conversion
price which may be fixed by each Noteholder at the equivalent of 98% of the
average closing price of the Company's Common Stock on the NYSE for the 10 day
period immediately preceding notice to the Company of such an election to fix
the conversion price. If not earlier converted, the 10% Notes are redeemable by
the Company in whole or in part on a pro rata basis, at par value plus all
accrued interest payable through the date of redemption, at any time upon 30
days written notice to the Noteholders in accordance with the following: (i)
from September 12, 1996 until December 15, 1997, the 10% Notes may be redeemed
by the Company after the closing price of the Company's Common Stock as quoted
on the NYSE has equaled or exceeded $25.00 for any 10 consecutive trading days
and (ii) after December 15, 1997, the Company may redeem the 10% Notes at any
time at par value plus all accrued interest payable through the date of
redemption. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources." As of the date of
this Prospectus, no 10% Notes have been converted into Common Stock.

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ARIZONA ANTI-TAKEOVER STATUTE

The Arizona Corporate Takeover Act (the "Takeover Act") was adopted in
1987. The policy of the Takeover Act is to prevent unfriendly corporate takeover
attempts by third parties. Article I of the Takeover Act deals with, among other
things, the prohibition of "green mail." Article II deals with limitation on
voting rights of certain individuals acquiring shares in the market, and Article
III regulates certain business combinations respecting corporate transactions
proposed by insiders and as part of a takeover plan. Arizona corporations may
elect to not be governed by Articles II or III of the Takeover Act and by doing
so may elect to not be subject to the considerable restrictions on a possible
tender offer or other takeovers. Pursuant to a 1995 amendment to the Company's
Articles of Incorporation, the Company affirmatively approved its coverage under
Articles II and III of the Takeover Act.

TRANSFER AGENT AND REGISTRAR

The Company's Transfer Agent and Registrar for the Common Stock is American
Stock Transfer & Trust Company, New York, New York.

LISTING

The Common Stock is currently listed and traded on the NYSE under the
symbol "SMU". The Notes have been approved for listing on the NYSE, subject to
official notice of issuance, under the symbol "SMU- ".

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UNDERWRITING

The Underwriters named below (the "Underwriters"), have severally agreed,
subject to the terms and conditions set forth in the underwriting agreement (the
form of which is filed as an exhibit to the Company's Registration Statement of
which this Prospectus is a part) among the Company and the Underwriters (the
"Underwriting Agreement"), to purchase from the Company and the Company has
agreed to sell to the Underwriters, the principal amount of Notes set forth
opposite their names below:

PRINCIPAL AMOUNT
NAME OF NOTES
- ------------------------------------------------------------------- ----------------

HD Brous & Co., Inc................................................ $
Brean Murray & Co., Inc............................................
L.H. Friend, Weinress, Frankson & Presson, Inc.....................

The Underwriting Agreement provides that the obligations of the
Underwriters to purchase the Notes are subject to certain conditions. The
Underwriters are committed to purchase all of the Notes offered hereby (other
than the principal amount of Notes covered by the over-allotment option
described below) if any are purchased.

The Company has been advised that the Underwriters propose to offer the
Notes to the public at the public offering price set forth on the cover page of
this Prospectus, and to certain securities dealers at such price less a
concession not in excess of % of the principal amount of the Notes.
The Underwriters may allow and such dealers may re-allow to other dealers,
including any Underwriter, a discount not in excess of % of the
principal amount of the Notes. After the public offering, the public offering
price and concessions and discounts may be changed by the Underwriters.

The Company has agreed to indemnify the Underwriters and their controlling
persons against certain liabilities in connection with the offer and sale of the
Notes, including liabilities under the Securities Act and to contribute to
payments the Underwriters may be required to make in respect thereof.

The Underwriters have obtained an option from the Company, exercisable
during the 45-day period after the date of this Prospectus, under which they may
purchase up to $ in principal amount of additional Notes at the same
public offering price, less the underwriting discount set forth on the cover
page of this Prospectus. The Underwriters may exercise the option only to cover
over-allotments. To the extent that the Underwriters exercise such option, each
of the Underwriters will be committed, subject to certain conditions, to
purchase approximately the same percentage thereof as the principal amount of
Notes to be purchased by it shown in the above table bears to the total
offering.

The Underwriters have informed the Company that the Underwriters do not
intend to confirm sales of Notes offered hereby to accounts over which they
exercise discretionary authority.

The Company, its directors, and executive officers have agreed not to
offer, issue, sell, grant any option for the sale of or otherwise dispose of (or
announce any offer, issuance, sale, grant of option to purchase or other
disposition) of any shares of Common Stock, or any securities convertible into
an exercisable or exchangeable for shares of Common Stock shares for the 90 day
period from the date of this Prospectus unless released earlier by the
Underwriters.

Mr. Miller, a director of the Company since 1995, is a Director of
Investment Banking of HD Brous & Co, Inc. headquartered in Great Neck, New York.
Mr. Miller is the principal in the office located in Phoenix, Arizona. HD Brous
& Co., Inc. is an Underwriter of this offering. See "Certain Transactions."

70
72

LEGAL OPINIONS

The validity of the shares being offered hereby has been passed upon for
the Company by Streich Lang, a professional association, Phoenix, Arizona and
for the Underwriters by O'Connor, Cavanagh, Anderson, Killingsworth & Beshears,
a professional association, Phoenix, Arizona.

EXPERTS

The consolidated financial statements as of December 31, 1996 and 1995 and
for each of the three years in the period ended December 31, 1996 included and
incorporated by reference in this Prospectus have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their reports, which are included
and incorporated by reference herein and have been so included and incorporated
by reference in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents filed by the Company with the Commission are
incorporated herein by reference: (1) the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996; and (2) the Company's Registration
Statement on Form 8-A under the Securities Exchange Act of 1934 with respect to
the Common Stock, including any amendment or reports filed for the purpose of
updating such description.

All documents filed by the Company with the Commission (the "Commission")
pursuant to Section 13(a), 13(c), 14 or 15(d) (the "Exchange Act") of the
Exchange Act subsequent to the date hereof and prior to the termination of the
offering of the Notes registered hereby shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the date of filing
such documents. Any statements contained in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statements. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.

The Company will provide without charge to each person to whom this
Prospectus is delivered, upon a written request of such person, a copy of any or
all of the foregoing documents incorporated by reference into this Prospectus
(other than exhibits to such documents, unless such exhibits are specifically
incorporated by reference into such documents). Requests for such copies should
be delivered to the Simula, Inc. Investor Relations Department, 2700 North
Central Avenue, Suite 1000, Phoenix, Arizona 85004, phone number (602) 631-4005.

ADDITIONAL INFORMATION

The Company is subject to the informational requirements of the Securities
and Exchange Act of 1934, as amended, and in accordance therewith files reports,
proxy statements and other information with the Securities and Exchange
Commission. Such reports, proxy and information statements and other information
may be inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
following Regional Offices of the Commission: New York Regional Office, Seven
World Trade Center, New York, New York 10048, and Chicago Regional Office, 500
West Madison Street, Chicago, Illinois 60661. Copies of such material can be
obtained from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549 upon payment of the prescribed fees. The Commission
also maintains a Web site that contains reports, proxy and information
statements and other materials that are filed through the Commission's
Electronic Data Gathering Analysis, and Retrieval system. This Web site can be
accessed at http://www.sec.gov. The Common Stock is listed on the NYSE. The
foregoing information concerning the Company may be inspected at the NYSE at 20
Broad Street, New York, New York 10005.

71
73

The Company will distribute to holders of the securities being offered
hereby, annual reports containing audited financial statements and quarterly
reports containing unaudited summary financial information for each of the first
three fiscal quarters of each fiscal year.

This Prospectus constitutes a part of a Registration Statement on Form S-3
(herein, together with all amendments and exhibits, referred to as the
"Registration Statement") filed by the Company with the Commission under the
Securities Act of 1933. This Prospectus does not contain all of the information
set forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the securities offered hereby,
reference is hereby made to the Registration Statement. Statements contained
herein concerning the provisions of any document are not necessarily complete,
and each such statement is qualified in its entirety by reference to the copy of
such document filed with the Commission.

72
74

SIMULA, INC.

INDEX TO FINANCIAL STATEMENTS

Independent Auditors' Report...................................................... F-2
Consolidated Balance Sheets as of December 31, 1996 and 1995...................... F-3
Consolidated Statements of Operations for the three years ended December 31,
1996............................................................................ F-4
Consolidated Statements of Shareholders' Equity for the three years ended December
31, 1996........................................................................ F-5
Consolidated Statements of Cash Flows for the three years ended December 31,
1996............................................................................ F-6-F-7
Notes to Consolidated Financial Statements........................................ F-8-F-24

F-1
75

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, 1996 and 1995, and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the three years in the period ended December 31, 1996. 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, 1996 and 1995, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1996 in
conformity with generally accepted accounting principles.

Deloitte & Touche LLP

March 20, 1997
Phoenix, Arizona

F-2
76

SIMULA, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31,
-------------------------
1996 1995
----------- -----------

ASSETS
CURRENT ASSETS:
Cash and cash equivalents......................................... $ 1,298,741 $ 3,175,172
Contract and trade receivables -- Net (Notes 4 and 16)............ 25,164,350 24,814,754
Inventories (Note 5).............................................. 15,644,157 8,104,194
Income taxes receivable (Note 10)................................. 1,089,564
Deferred income taxes (Note 10)................................... 3,763,000
Prepaid expenses and other........................................ 1,050,215 762,836
----------- -----------
Total current assets...................................... 48,010,027 36,856,956
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS -- Net (Notes 6 and
9)................................................................ 23,356,025 15,778,819
DEFERRED INCOME TAXES (Note 10)..................................... 1,782,000 812,000
DEFERRED COSTS (Notes 2 and 7)...................................... 928,728 6,385,328
INTANGIBLES -- Net (Notes 3 and 7).................................. 10,964,139 11,455,005
OTHER ASSETS........................................................ 1,647,537 1,848,028
----------- -----------
TOTAL..................................................... $86,688,456 $73,136,136
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolving line of credit (Note 8)................................. $ 6,900,000
Trade accounts payable............................................ 9,200,214 $ 7,884,141
Other accrued liabilities......................................... 4,019,534 2,607,849
Advances on contracts............................................. 148,194 3,920,533
Deferred income taxes (Note 10)................................... 8,000
Current portion of long-term debt (Note 9)........................ 4,536,508 1,367,187
----------- -----------
Total current liabilities................................. 24,804,450 15,787,710
LONG-TERM DEBT -- Less current portion (Notes 9 and 14)............. 24,696,509 11,261,365
----------- -----------
Total liabilities......................................... 49,500,959 27,049,075
COMMITMENTS AND CONTINGENCIES (Note 14)
SHAREHOLDERS' EQUITY (Notes 11 and 15)
Preferred stock, $.05 par value -- authorized, 50,000,000 shares;
no shares issued or outstanding................................
Common stock, $.01 par value -- authorized, 50,000,000 shares;
issued, 8,992,598 and 8,970,627 shares......................... 89,926 89,706
Additional paid-in capital........................................ 39,031,453 37,981,759
Retained (deficit) earnings....................................... (1,966,296) 8,295,434
Currency translation adjustment................................... 32,414
Treasury stock -- at cost, 82,500 shares.......................... (279,838)
----------- -----------
Total shareholders' equity................................ 37,187,497 46,087,061
----------- -----------
TOTAL..................................................... $86,688,456 $73,136,136
=========== ===========

See notes to consolidated financial statements.

F-3
77

SIMULA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

YEARS ENDED DECEMBER 31,
----------------------------------------
1996 1995 1994
------------ ----------- -----------

Revenue (Notes 3, 16 and 18)........................... $ 65,761,957 $59,088,613 $41,157,794
Cost of revenue........................................ 55,239,176 39,036,471 27,708,610
------------ ------------ ------------
Gross margin........................................... 10,522,781 20,052,142 13,449,184
Administrative expenses (Note 17)...................... 19,748,851 15,609,005 8,264,864
------------ ------------ ------------
Operating (loss) income................................ (9,226,070) 4,443,137 5,184,320
Interest expense (Notes 8 and 9)....................... (2,376,607) (2,029,854) (1,831,505)
Interest income........................................ 51,711 440,076 21,608
------------ ------------ ------------
(Loss) income before taxes............................. (11,550,966) 2,853,359 3,374,423
Income tax benefit (expense) (Note 10)................. 4,741,000 (196,000) (1,260,000)
------------ ------------ ------------
(Loss) earnings before cumulative effect of a change in
accounting principle................................. (6,809,966) 2,657,359 2,114,423
Cumulative effect on prior years (to December 31, 1995)
of changing accounting for pre-contract costs -- Net
of the related income tax benefit of $2,160,000 (Note
2)................................................... (3,239,948)
------------ ------------ ------------
Net (loss) earnings.................................... $(10,049,914) $ 2,657,359 $ 2,114,423
============ ============ ============
Per share amounts:
(Loss) earnings before cumulative effect of a change
in accounting principle........................... $ (0.76) $ 0.31 $ 0.37
Cumulative effect on prior years (to December 31,
1995) of changing accounting for pre-contract
costs (Note 2).................................... (0.36)
------------ ------------ ------------
Net (loss) earnings.................................. $ (1.12) $ 0.31 $ 0.37
============ ============ ============
Weighted average shares outstanding.................... 8,947,060 8,576,817 5,704,926
============ ============ ============
Pro forma amounts (Note 2):
Net earnings......................................... $ 193,735 $ 1,675,722
============ ============
Net earnings per share............................... $ .02 $ .29
============ ============

See notes to consolidated financial statements.

F-4
78

SIMULA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
THREE YEARS ENDED DECEMBER 31, 1996

CLASS A
COMMON STOCK ADDITIONAL RETAINED CURRENCY TOTAL
------------------ PAID-IN (DEFICIT) TRANSLATION TREASURY SHAREHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT STOCK EQUITY
--------- ------- ----------- ------------ ---------- --------- ------------

BALANCE, January 1, 1994............. 5,073,440 $50,735 $ 4,100,086 $ 4,207,178 $(279,838) $ 8,078,161
Net earnings....................... 2,114,423 2,114,423
Conversion of Series B 9% Senior
Subordinated Convertible Notes... 967,236 9,672 5,721,578 5,731,250
Issuance of common shares for
warrants and options............. 158,525 1,585 610,361 611,946
Issuance of common shares in
connection with:
Acquisition of SOUTHtech......... 178,582 1,786 44,388 (683,526) (637,352)
Acquisition of Artcraft.......... 67,228 672 464,328 465,000
Acquisition of Sedona Scientific,
Inc............................ 23,834 238 285,762 286,000
--------- ------- ----------- ----------- ------- -------- ------------
BALANCE, December 31, 1994........... 6,468,845 64,688 11,226,503 5,638,075 (279,838) 16,649,428
Net earnings....................... 2,657,359 2,657,359
Secondary offering of common
shares........................... 2,328,750 23,288 25,544,534 25,567,822
Issuance of common shares for
warrants and options............. 173,032 1,730 847,256 848,986
Tax benefit from exercise of stock
options.......................... 363,466 363,466
--------- ------- ----------- ----------- ------- -------- ------------
BALANCE, December 31, 1995........... 8,970,627 89,706 37,981,759 8,295,434 (279,838) 46,087,061
Net loss........................... (10,049,914) (10,049,914)
Issuance of common shares for
options.......................... 104,471 1,045 953,891 954,936
Tax benefit from exercise of stock
options.......................... 163,000 163,000
Currency translation adjustment.... 32,414 32,414
Retirement of treasury stock....... (82,500) (825) (67,197) (211,816) 279,838
--------- ------- ----------- ----------- ------- -------- ------------
BALANCE, December 31, 1996........... 8,992,598 $89,926 $39,031,453 $ (1,966,296) $ 32,414 $ $ 37,187,497
========= ======= =========== =========== ======= ======== ============

See notes to consolidated financial statements.

F-5
79

SIMULA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31,
---------------------------------------------
1996 1995 1994
------------ ------------ -----------

OPERATING ACTIVITIES:
Net (loss) earnings............................. $(10,049,914) $ 2,657,359 $ 2,114,423
Adjustments to reconcile net (loss) earnings to
net cash used by operating activities:
Depreciation and amortization................ 3,278,433 3,064,833 1,651,118
Deferred income taxes........................ (4,578,000) (1,126,000) 256,000
Currency translation adjustment.............. 32,414
Cumulative effect of change in accounting.... 5,399,948
Changes in net assets and liabilities -- net of
effects from acquisitions:
Contract and trade receivables, net of
advances................................... (4,121,935) (12,859,956) (1,358,328)
Inventories.................................. (7,042,562) (1,372,151) (2,681,370)
Income taxes receivable...................... (1,089,564)
Prepaid expenses and other................... (287,379) (363,817) 94,635
Deferred costs............................... (5,572,295) (1,083,476)
Other assets................................. 168,598 (1,089,933) 40,035
Trade accounts payable....................... 1,316,073 1,769,254 (146,991)
Other accrued liabilities.................... 1,411,685 378,526 (1,538,783)
------------ ------------ -----------
Net cash used by operating activities... (15,562,203) (14,514,180) (2,652,737)
------------ ------------ -----------
INVESTING ACTIVITIES:
Purchase of property and equipment.............. (8,770,586) (3,843,133) (1,256,852)
Proceeds from sale of property and equipment.... 743,671
Costs incurred to obtain intangibles............ (522,909) (342,528) (271,212)
Cash paid to acquire Coach and Car.............. (5,352,982)
Cash paid to acquire SOUTHtech.................. (4,606)
Cash paid to acquire Artcraft -- net of cash
acquired..................................... (628,948)
Cash paid to acquire Sedona Scientific, Inc..... 0 0 (93,000)
------------ ------------ -----------
Net cash used in investing activities... (9,293,495) (3,441,990) (7,607,600)
------------ ------------ -----------
FINANCING ACTIVITIES:
Net borrowings (repayments) under short-term
debt and line of credit agreement............ 6,900,000 (3,050,000) 2,000,000
Borrowings under other debt arrangements........ 3,153,296 4,407,628 10,799,940
Principal payments under other debt
arrangements................................. (1,685,465) (7,694,271) (3,611,047)
Issuance of Series C Notes -- net of expenses... 13,656,500
Issuance of common shares -- net of expenses.... 954,936 26,416,808 611,946
------------ ------------ -----------
Net cash provided by financing activities.... 22,979,267 20,080,165 9,800,839
------------ ------------ -----------
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS..................................... (1,876,431) 2,123,995 (459,498)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR...... 3,175,172 1,051,177 1,510,675
------------ ------------ -----------
CASH AND CASH EQUIVALENTS, END OF YEAR............ $ 1,298,741 $ 3,175,172 $ 1,051,177
============ ============ ===========

F-6
80

SIMULA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)

YEARS ENDED DECEMBER 31,
1996 1995 1994
------------ ------------ -----------

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid................................... $ 1,657,995 $ 1,691,712 $ 1,515,844
============ ============ ===========
Taxes paid...................................... $ 352,575 $ 1,365,826 $ 441,700
============ ============ ===========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Property and equipment acquired under capital
leases....................................... $ 836,634 $ 924,324
============ ============
Tax benefits from exercise of stock options..... $ 163,000 $ 363,466
============ ============
Purchase accounting adjustments related to the
acquisitions of Coach and Car:
Additional liabilities offset against seller
note payable............................... $ 1,438,000
============
Conversion of notes:
Conversion of $6,475,000 Series B 9% Senior
Subordinated Convertible Notes and accrued
interest of $136,600 less deferred note
issuance costs of $880,350 for 967,236
shares..................................... $ 5,731,250
===========
Coach and Car acquisition:
Fair value of assets acquired................ $11,422,148
Liabilities assumed.......................... (7,069,166)
Seller note payable.......................... (1,500,000)
Covenants not to compete..................... 2,500,000
-----------
Cash paid to acquire Coach and Car.............. $ 5,352,982
===========
SOUTHtech acquisition:
Fair value of assets acquired................ $ 378,014
Liabilities assumed.......................... (1,010,760)
Common stock issued.......................... 637,352
-----------
Cash paid to acquire SOUTHtech.................. $ 4,606
===========
Aircraft acquisition:
Fair value of assets acquired................ $ 4,103,924
Liabilities assumed.......................... (2,988,924)
Common stock issued.......................... (465,000)
Cash acquired................................ (21,052)
-----------
Cash paid to acquire Artcraft -- net of cash
acquired..................................... $ 628,948
===========
Sedona Scientific, Inc. acquisition:
Fair value of assets acquired................ $ 471,277
Liabilities assumed.......................... (92,277)
Common stock issued.......................... (286,000)
-----------
Cash paid to acquire Sedona Scientific, Inc..... $ 93,000
===========

See notes to consolidated financial statements.

F-7
81

SIMULA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED DECEMBER 31, 1996

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.

The Company announced a 3 for 2 split of its common stock to shareholders
of record as of September 15, 1995; which shares were issued on September 28,
1995. As a result, all shares and related references have been restated for all
prior periods and transactions.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- These consolidated financial
statements are prepared in accordance with generally accepted accounting
principles. Described below are those 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 and most commercial 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. However, adjustments to this measurement are made 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. Changes in estimated total contract costs will result
in revisions to contract revenue. These revisions are recognized when
determined.

Revenue derived from sales of some commercial products is recognized at
contractual amounts when the product is shipped.

c. Inventories include 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 estimated average cost per unit.

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 and buildings is
calculated on a straight-line basis over the estimated useful lives of
three to thirty years.

F-8
82

SIMULA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED DECEMBER 31, 1996 -- (CONTINUED)

e. Intangibles are recorded at cost. The Company acquires intangible assets
in the normal course of business and in business combinations. 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 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 the following
periods:

Goodwill........................................................ 10-25 years
Covenants not to compete........................................ 10 years
Other........................................................... 7-17 years

f. Net (loss) earnings per common and equivalent share has been computed
using the weighted average number of common shares and common share
equivalents outstanding during each period. Stock options and warrants
have been included in the computations as common equivalent shares
utilizing the treasury stock method only when their effect is dilutive.
Weighted average shares used to compute per share amounts for the year
ended December 31, 1996 do not include common stock equivalents because
their effect would be anti-dilutive. In addition, fully diluted earnings
per share reflecting the effect of the convertible notes discussed in
Note 9 is not presented because the effect would also be anti-dilutive.

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 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.

2. ACCOUNTING CHANGE

During the second quarter of 1996, the Company adopted a new method of
accounting for pre-contract costs. Pre-contract costs represent amounts
applicable to products and technologies which represent adaptations of existing
capabilities to the particular requirements of the Company's customers. These
costs were previously deferred and recovered over the revenue streams from these
customers. The Company will now expense these costs as they are incurred. Due to
current industry trends and anticipated accounting changes, the new policy is
considered preferable to the previous policy. Both policies are currently in
accordance with generally accepted accounting principles.

The $3.2 million cumulative effect of the change on prior years (after
reduction for income taxes of $2.2 million) is included in operations of the
year ended December 31, 1996. The effect of the change on the year ended
December 31, 1996 was to decrease earnings before cumulative effect of a change
in accounting principle $3.2 million ($.36 per share) and net earnings by $6.4
million ($.72 per share).

F-9
83

SIMULA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED DECEMBER 31, 1996 -- (CONTINUED)

The effect of the change on the first quarter of 1996 was as follows:

THREE MONTHS
ENDED
MARCH 31, 1996
--------------

Net income as originally reported...................................... $ 685,179
Effect of change in accounting for pre-contract costs.................. (563,247)
-----------
Income before cumulative effect of a change in accounting principle.... 121,932
Cumulative effect on prior years (to December 31, 1995) (3,239,948)
of changing accounting for pre-contract costs........................
-----------
Net loss as restated................................................... $ (3,118,016)
===========
Per share amounts:
Net income as originally reported.................................... $ 0.08
Effect of change in accounting for pre-contract costs................ (0.07)
-----------
Income before cumulative effect of a change in accounting 0.01
principle.........................................................
Cumulative effect on prior years (to December 31, 1995) (0.36)
of changing accounting for pre-contract costs.....................
-----------
Net loss as restated................................................. $ (0.35)
===========

The pro forma amounts reflect the effect of retroactive application on
pre-contract costs, net of amortization, and the related income tax benefits.

Pro forma amounts for the years ended December 31, 1995 and 1994 assuming
the change in accounting had been applied retroactively are as follows. Actual
net earnings per share amounts are presented for comparative purposes.

1995 1994
-------- ----------

Pro forma:
Net earnings............................................... $193,735 $1,675,722
Net earnings per share..................................... $ 0.02 $ 0.29
Actual:
Net earnings per share..................................... $ 0.31 $ 0.37

3. ACQUISITIONS

On June 14, 1994, the Company purchased covenants not to compete and
substantially all of the assets of Coach and Car Equipment Corporation ("Coach
and Car") for cash, an installment seller carryback note and the assumption of
substantially all of the Coach and Car liabilities. Coach and Car is a
manufacturer of seats for trains, subways, mass transit and other vehicles which
are principally operated by local government authorities. The acquisition of
Coach and Car has been accounted for using the purchase method of accounting,
and the results of operations of Coach and Car have been included in the
consolidated financial statements subsequent to the acquisition. The excess of
purchase price over the fair value of net assets acquired of $5,281,038 is being
amortized over 25 years, and covenants not to compete of $2,500,000 are being
amortized over 10 years.

F-10
84

SIMULA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED DECEMBER 31, 1996 -- (CONTINUED)

Consideration for this transaction consisted of the following:

Cash paid............................................................... $ 3,000,000
Seller note............................................................. 1,500,000
Liabilities assumed -- including $2,352,982 of bank debt paid at
closing............................................................... 9,422,148
-----------
Total......................................................... $13,922,148
===========

The assets acquired have been recorded as follows:

Current assets.......................................................... $ 2,923,585
Intangibles............................................................. 7,781,038
Property and equipment.................................................. 3,217,525
-----------
Total......................................................... $13,922,148
===========

On July 1, 1994, the Company purchased SOUTHtech, Inc. ("SOUTHtech") which
was a corporation owned by the Company's Chairman (the "Chairman") (96%), and
two unrelated minority shareholders (4%). SOUTHtech is a ceramics manufacturer
that provides parts for silicon wafer manufacturing by the semiconductor
industry. In determining the acquisition consideration, the Company obtained a
valuation opinion from an independent investment banker and the transaction was
approved by the disinterested members of the board of directors of the Company.
The acquisition consideration consisted of 178,582 shares of the Company's
common stock, of which 171,472 shares were issued to the Chairman and 7,110
shares were issued to one of the unrelated minority shareholders, and $4,606
cash, in lieu of stock, to the other unrelated minority shareholder. Because the
Company and SOUTHtech were entities under the common control of the Chairman,
the shares issued to the Chairman were recorded at the basis of his investment
in SOUTHtech and the shares issued to minority shareholders were recorded at
fair value. The excess of the Chairman's basis over his proportionate share of
SOUTHtech's net assets of $683,526 was recorded as a reduction in retained
earnings. The accounts of SOUTHtech have been included in the consolidated
financial statements subsequent to the acquisition.

Assets acquired and liabilities assumed in connection with the SOUTHtech
transaction were as follows:

Assets acquired......................................................... $ 378,014
Liabilities assumed..................................................... (1,010,760)
-----------
Net liabilities assumed....................................... $ (632,746)
===========

Consideration was recorded as follows:

Shares issued to the Chairman........................................... $ (682,383)
Shares issued to minority shareholders.................................. 45,031
Cash issued to minority shareholders.................................... 4,606
---------
Total......................................................... $ (632,746)
=========

During 1995, the ceramics technology used in the semiconductor industry and
associated assets of SOUTHtech were sold to a third party effective August 31,
1995. As a result, the Company received cash of $1,328,720 and is entitled to
guaranteed payments of $1,500,000 and contingent payments up to a maximum of
$1,750,000 based upon the future sales of the SOUTHtech ceramic product within
the semiconductor industry. The Company retained the ceramics technology and
assets associated with government and defense applications, and certain key
employees. In connection with this transaction, the Company reported $1,977,000
of technology sales and royalty revenue in 1995.

F-11
85

SIMULA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED DECEMBER 31, 1996 -- (CONTINUED)

On September 30, 1994, the Company purchased all of the operating assets of
Artcraft Industries Corp. ("Artcraft") for 67,228 shares of common stock valued
at $465,000 and the assumption of certain liabilities. Artcraft is engaged in
the manufacture, assembly and sale of railway and mass transit seating systems.
The acquisition has been accounted for using the purchase method of accounting,
and results of operations of Artcraft have been included in the consolidated
financial statements subsequent to the acquisition. The excess of the purchase
price over the fair value of net assets acquired of $734,531 is being amortized
over 25 years.

Consideration for the transaction consisted of the following:

67,228 shares of common stock............................................ $ 465,000
Liabilities assumed -- including $650,000 bank debt paid at closing...... 3,638,924
-----------
Total.......................................................... $4,103,924
===========

The assets acquired have been recorded as follows:

Current assets.......................................................... $ 1,669,393
Intangibles............................................................. 734,531
Property and equipment.................................................. 1,700,000
----------
Total......................................................... $ 4,103,924
==========

In addition, the Company acquired another small company for $93,000 in cash
and 23,833 shares of common stock.

During 1995, the Company completed its identification and quantification of
certain preacquisition contingencies related to its acquisition of Coach and
Car. As a result, the Company adjusted the original purchase allocation of this
acquisition resulting in a net increase in accrued liabilities and advances on
contracts and a decrease in debt owed to seller of $1,438,000. The Coach and Car
Asset Purchase Agreement ("Agreement") specifically provided to the Company the
right to offset against the purchase price any losses resulting from the failure
of seller to specifically disclose a liability. The Company has asserted an
offset for an undisclosed indemnifiable liability of $2.4 million. The Company
has continued to make the required payments pursuant to the terms of the seller
carryback note payable into an escrow account. As of December 31, 1996, the
payments made into this escrow account were $866,000. This amount is included in
other assets because the Company believes that the possibility is remote that
the seller will overturn the offset and believes that it is probable the funds
will be returned to the Company. The Agreement provides for arbitration to
settle disputes. During the fourth quarter of 1996, the seller completed the
formal procedures to dispute the Company's offset and seek arbitration, however,
the steps necessary to invoke arbitration proceedings have not been taken.

The following summarizes unaudited pro forma operating results for the
Company for the year ended December 31, 1994, assuming the acquisitions had
occurred on January 1, 1994.

1994
-----------

Revenues................................................................ $55,512,000
===========
Net earnings............................................................ $ 2,362,000
===========
Net earnings per share.................................................. $ .37
===========

F-12
86

SIMULA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED DECEMBER 31, 1996 -- (CONTINUED)

4. RECEIVABLES

At December 31, receivables include the following:

1996 1995
----------- -----------

United States Government:
Billed receivables...................................... $ 1,627,288 $ 2,926,891
Costs and estimated earnings in excess of billings...... 3,448,055 4,541,878
----------- -----------
Total United States Government............................ 5,075,343 7,468,769
----------- -----------
Other contracts:
Billed receivables...................................... 5,405,940 2,942,647
Costs and estimated earnings in excess of billings...... 11,732,859 10,244,769
----------- -----------
Total other contracts..................................... 17,138,799 13,187,416
Other trade receivable.................................... 3,113,208 4,301,569
Less allowance for doubtful accounts...................... (163,000) (143,000)
----------- -----------
Contract and trade receivables -- net..................... $25,164,350 $24,814,754
=========== ===========

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.

5. INVENTORIES

At December 31, inventories consisted of the following:

1996 1995
----------- ----------

Raw materials............................................. $ 4,959,810 $3,319,958
Work-in-process........................................... 9,822,859 4,711,256
Finished goods............................................ 861,488 72,980
----------- ----------
Total inventories............................... $15,644,157 $8,104,194
=========== ==========

6. PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS

At December 31, property, equipment and leasehold improvements consisted of
the following:

1996 1995
----------- -----------

Land...................................................... $ 3,022,819 $ 3,022,819
Buildings and leasehold improvements...................... 5,533,291 4,467,697
Equipment................................................. 21,934,491 13,408,041
----------- -----------
Total..................................................... 30,490,601 20,898,557
Less accumulated depreciation............................. (7,134,576) (5,119,738)
----------- -----------
Property, equipment and leasehold
improvements -- net........................... $23,356,025 $15,778,819
=========== ===========

F-13
87

SIMULA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED DECEMBER 31, 1996 -- (CONTINUED)

7. INTANGIBLES AND DEFERRED COSTS

At December 31, intangibles consisted of the following:

1996 1995
----------- -----------

Covenants not to compete.................................. $ 4,989,356 $ 4,989,356
Excess of cost over net assets acquired................... 7,125,110 7,125,110
Patents and licenses...................................... 661,696 518,644
Other..................................................... 783,963 435,163
----------- -----------
Total..................................................... 13,560,125 13,068,273
Less accumulated amortization............................. (2,595,986) (1,613,268)
----------- -----------
Intangibles -- net.............................. $10,964,139 $11,455,005
=========== ===========

At December 31, deferred costs included the following:

1996 1995
-------- -----------

Deferred financing costs -- net............................ $928,728 $ 487,980
Deferred product and bid costs............................. 5,897,348
-------- ----------
Total deferred costs............................. $928,728 $ 6,385,328
======== ==========

8. REVOLVING LINE OF CREDIT

The Company has a $20,000,000 unsecured Revolving Line of Credit with a
bank, interest at LIBOR plus 2% or prime. There was $6,900,000 outstanding on
this line of credit as of December 31, 1996. The loan agreement encompassing
this line of credit and the $5,000,000 amortizing term loan (Note 9) contains
certain covenants that require the maintenance of a minimum tangible net worth
and certain defined financial ratios. The Company was in compliance with all of
the covenants of this loan agreement at December 31, 1996.

9. DEBT

Long-term debt at December 31 consisted of the following:

1996 1995
----------- -----------

10% Senior Subordinated Convertible Notes................. $14,300,000
12% Senior Subordinated Notes............................. 5,700,000 $ 5,700,000
Mortgage notes payable, interest at 9% and 10.4%, secured 2,918,243 2,990,329
by land and buildings with a carrying amount of
$6,172,885, due through 2017............................
Various loans payable, secured by property and 4,951,898 3,020,703
equipment...............................................
Obligations under capital leases, interest at 10% (Note 1,362,876 917,520
13).....................................................
----------- -----------
Total........................................... 29,233,017 12,628,552
Less current portion...................................... (4,536,508) (1,367,187)
----------- -----------
Long-term debt............................................ $24,696,509 $11,261,365
=========== ===========

In September 1996, the Company issued $14.3 million of Series C 10% Senior
Subordinated Convertible Notes (the "10% Notes") in a private placement to
accredited investors. The 10% Notes bear interest at 10% payable semi-annually
and are due in September 1999. The notes are convertible into common stock of
the Company at 103% of the average closing price of the Company's common stock
as quoted on the New York Stock Exchange for the 10 consecutive trading days
immediately preceding notice by the individual holder

F-14
88

SIMULA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED DECEMBER 31, 1996 -- (CONTINUED)

fixing the conversion price. Based upon the conversion prices fixed prior to
December 31, 1996 and the average market price of the Company's common stock for
the 10 days ended December 31, 1996 for the 10% Notes not yet fixed, the 10%
Notes would be convertible into approximately 930,000 shares of the Company's
common stock. The Company has the right to call the 10% Notes at par plus
accrued interest through the date of redemption any time after June 15, 1997 and
earlier under certain circumstances.

In December 1993, the Company issued $5.7 million of 12% Senior
Subordinated Notes ("12% Notes"), due in 1998. The 12% Notes are not subject to
redemption prior to maturity.

The Indenture relating to the 10% Notes and the 12% Notes contains certain
covenants including limitations on incurrence of additional indebtedness,
limitation on sale of assets, transactions with affiliates and payment of
dividends. In accordance with the Indenture, the Company may incur indebtedness
based upon the specified ratio of cash flow, as defined, to interest expense.
The Company was in compliance with all of the covenants of the Indenture at
December 31, 1996.

Subsequent to December 31, 1996, the Indenture was amended to eliminate the
covenants limiting additional indebtedness and restricted dividend payments. In
consideration for the consent of the holders of the 10% Notes, the 10% Notes
were amended to change the conversion ratio from 103% to 98% or reduce the
conversion price for the 10% Notes previously fixed by $.75 per share. In
addition, the Company's optional redemption date was extended from June 15, 1997
to December 15, 1997 and certain fees to be paid to the holders of the 10% Notes
were eliminated. Based on the revised terms of the 10% Notes and the average
market price for the Company's common stock for the 10 days ended December 31,
1996, the 10% Notes would be convertible into approximately 975,000 shares of
the Company's common stock.

The Company has a $5,000,000 amortizing term loan under the same loan
agreement encompassing the revolving line of credit (Note 8) for the financing
of U.S. based equipment with an outstanding balance at December 31, 1996 of
$3,682,479. Interest is payable at the LIBOR rate in effect at the time of the
drawdown plus 2%. The average interest rate on the outstanding balance at
December 31, 1996 is 7.8%.

The aggregate principal payments required for the five years subsequent to
December 31, 1996 are:

1997.................................................. $ 4,536,508
1998.................................................. 7,368,178
1999.................................................. 15,506,173
2000.................................................. 804,617
2001.................................................. 766,973
Thereafter............................................ 250,568
-----------
Total....................................... $29,233,017
===========

Interest expense for the years ended December 31 is comprised of the
following:

1996 1995 1994
---------- ---------- ----------

Interest....................................... $2,141,963 $1,679,086 $1,651,881
Amortization of deferred financing costs....... 234,644 350,768 179,624
---------- ---------- ----------
Interest expense..................... $2,376,607 $2,029,854 $1,831,505
========== ========== ==========

Based on borrowing rates currently available to the Company and the quoted
market price for the 12% Notes, the fair value of long-term debt at December 31,
1996 is approximately $29,500,000.

F-15
89

SIMULA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED DECEMBER 31, 1996 -- (CONTINUED)

10. INCOME TAXES

The income tax (benefit) provision for the years ended December 31 are as
follows:

1996 1995 1994
----------- ----------- ----------

Current...................................... $(2,160,000) $ 1,322,000 $1,004,000
Deferred..................................... (4,741,000) (1,126,000) 256,000
----------- ----------- ----------
(Benefit) provision for income
taxes............................ $(6,901,000) $ 196,000 $1,260,000
=========== =========== ==========

The Company's effective income tax rate differs from the federal statutory
tax rate at December 31 as follows:

1996 1995 1994
---- ---- ----

Federal statutory income tax rate.............................. 34.0% 34.0% 34.0%
State income taxes............................................. 5.3 6.0 4.6
Tax credits and other.......................................... 1.4 0.7 (1.2)
Utilization of tax losses...................................... 0 (33.8) 0
---- ---- ----
Effective rate................................................. 40.7% 6.9% 37.4%
==== ==== ====

The provision for deferred income taxes consists of the following:

1996 1995 1994
----------- ----------- --------

Accruals and reserves.............................. $(1,157,000) $ (946,000) $216,000
Depreciation and amortization expense.............. 560,000 268,000 40,000
Net operating loss carryforwards................... (3,867,000)
Minimum tax credit carryforwards................... (277,000)
Change in valuation allowance for tax loss
carryforwards.................................... (448,000)
----------- ----------- --------
Total.................................... $(4,741,000) $(1,126,000) $256,000
=========== =========== ========

The significant tax effected temporary differences comprising deferred
taxes at December 31 are as follows:

1996 1995
---------- ---------

Current:
Net operating loss carryforwards............................ $2,970,000
Accrued vacation and self insurance......................... 324,000 $ 177,000
Inventory and warranty reserves............................. 334,000
Other....................................................... 135,000 (185,000)
---------- ---------
Total current deferred tax asset (liability)........ 3,763,000 (8,000)
---------- ---------
Long-term:
Excess of tax over book depreciation and amortization....... (906,000) (346,000)
Recognition of contract revenue............................. 970,000 804,000
Net operating loss carryforwards............................ 1,345,000 448,000
Minimum tax credit carryforward............................. 287,000
Deferred start-up costs..................................... 352,000
Other....................................................... (266,000) (94,000)
---------- ---------
Total long-term deferred tax asset.................. 1,782,000 812,000
---------- ---------
Net deferred tax asset.............................. $5,545,000 $ 804,000
========== =========

F-16
90

SIMULA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED DECEMBER 31, 1996 -- (CONTINUED)

The valuation allowances associated with tax loss carryforwards as of
December 31 are as follows:

1996 1995
---------- ---------

Tax asset for loss carryforward............................... $4,536,000 $ 669,000
Valuation allowance........................................... (221,000) (221,000)
---------- ---------
Net deferred tax asset.............................. $4,315,000 $ 448,000
========== =========

At December 31, 1996, the Company had approximately $10,600,000 of net
operating loss carryforwards including $1,500,000 of net operating loss
carryforwards of an acquired subsidiary which expires through 2008.

The Company believes based on historical operating results and expectations
for the future that taxable income will more likely than not be sufficient to
utilize all of its recorded net operating loss carryforwards prior to their
expiration. The amount of the deferred tax asset considered realizable, however,
could be reduced in the near term if estimates of future taxable income during
the carryforward period are reduced.

The income tax receivable at December 31, 1996 represents estimated refunds
of income taxes paid in 1992 through 1995. The Company is in the process of
amending prior tax returns for the change in accounting (Note 2) and preparing
applications for net operating loss carrybacks.

11. SHAREHOLDERS' EQUITY

During 1996, the Company retired 82,500 shares of treasury stock which had
been acquired for a cost of $279,838.

The Company completed a secondary offering of common stock which closed and
was funded the second quarter of 1995. As a result of this offering, 2,328,750
shares were sold by the Company at $12 per share. The net proceeds from the
offering totaled $25,567,822.

12. 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.

Net periodic pension cost includes the following:

1996 1995 1994
--------- --------- --------

Service cost -- benefit earned during the year....... $ 235,167 $ 169,835 $205,195
Interest cost on projected benefit obligation........ 147,852 116,660 113,496
Actual return on Plan assets......................... (262,676) (257,497) (70,053)
Net amortization and deferral........................ 159,328 172,970 15,907
--------- --------- --------
Net periodic pension cost.................. $ 279,671 $ 201,968 $264,545
========= ========= ========

F-17
91

SIMULA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED DECEMBER 31, 1996 -- (CONTINUED)

The Plan's funded status and amounts recognized in the Company's balance
sheet at December 31 are as follows:

1996 1995
---------- ----------

Actuarial present value of benefit obligation:
Vested benefits........................................... $1,503,283 $1,310,868
Nonvested benefits........................................ 243,064 237,163
---------- ----------
Accumulated benefit obligation.............................. 1,746,347 1,548,031
Effect of projected future compensation increases........... 453,626 364,997
---------- ----------
Projected benefit obligation................................ 2,199,973 1,913,028
Plan assets at fair value................................... 1,729,919 1,375,252
---------- ----------
Plan assets less than projected benefit obligation.......... 470,054 537,776
Unrecognized prior service cost............................. 19,811 24,383
Unrecognized loss........................................... (185,107) (293,362)
Unrecognized transition liability........................... 90,442 96,094
---------- ----------
Accrued pension cost...................................... $ 395,200 $ 364,891
========== ==========

Assumptions at December 31 used in the accounting for the Plan were as
follows:

1996 1995 1994
---- ---- ----

Discount or settlement rate.................................... 7.50% 7.25% 8.25%
Rate of increase in compensation levels........................ 3.50% 3.50% 4.00%
Expected long-term rate of return on Plan assets............... 8.00% 8.00% 8.00%

The Plan's assets consist of money market accounts and investments in
common stocks, mutual funds, and corporate bonds.

In addition, the Company has 401(k) plans for substantially all employees
and one subsidiary has a union sponsored pension plan for union employees to
which the Company makes contractual contributions.

13. RELATED PARTY TRANSACTIONS

The Company has entered into various transactions with the Chairman. These
transactions are further described as follows:

a. The Company acquired SOUTHtech from the Chairman in 1994 as
described in Note 3.

b. The Chairman loaned the Company $1,650,000 in 1996 that was repaid
by the Company in 1996 and $2,000,000 in 1994 which was repaid by
the Company in 1995.

14. 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 totaling $2,274,565 and $1,042,604 (net of accumulated
depreciation of $681,283 and $248,683) are included in property and equipment as
of December 31, 1996 and 1995, respectively.

F-18
92

SIMULA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED DECEMBER 31, 1996 -- (CONTINUED)

The following is a schedule, by year, of minimum rental payments due under
the leases described above and for other operating leases for the years ending
December 31:

CAPITAL LEASES OPERATING LEASES
-------------- ----------------

1997.................................................... $ 633,610 $1,933,506
1998.................................................... 551,616 1,329,296
1999.................................................... 362,399 1,287,976
2000.................................................... 31,947 1,075,645
2001.................................................... 2,340 862,872
Thereafter.............................................. 2,786,158
---------- ----------
Total minimum lease payments............................ 1,581,912 $9,275,453
==========
Less amounts representing interest...................... (219,036)
----------
Present value of net minimum lease payments............. $1,362,876
==========

Rent expense was $1,966,271, $1,109,402, and $578,079 for the years ended
December 31, 1996, 1995 and 1994, respectively.

In connection with its decision to establish a facility in the United
Kingdom for the production of inflatable restraints for automobiles, the Company
negotiated certain grants with local and national authorities in the United
Kingdom. The total grant of approximately $3 million is anticipated to be
received through January 1999 as certain levels of capital expenditures and the
creation of jobs are met. These grants will be recognized as income in
accordance with the purpose of the grants in the periods in which such grants
are received.

15. STOCK OPTIONS

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 1,545,000 shares of common stock for
issuance under the Plan. In accordance with the terms of the 1994 Plan, 876,250
options have been granted. Information with respect to the Plans is as follows:

OPTION WEIGHTED AVERAGE
SHARES OPTION PRICE
-------- ----------------

Outstanding at January 1, 1994............................ 245,250 $ 3.25
Granted................................................. 161,250 $ 7.70
Exercised............................................... (24,075) $ 3.25
Canceled................................................ (1,500) $ 3.25
--------
Outstanding at December 31, 1994.......................... 380,925 $ 5.22
Granted................................................. 478,125 $13.62
Exercised............................................... (135,500) $ 4.93
Canceled................................................ (6,300) $ 3.25
--------
Outstanding at December 31, 1995.......................... 717,250 $10.85
Granted................................................. 360,550 $12.99
Exercised............................................... (104,471) $ 9.14
Canceled................................................ (51,400) $12.77
--------
Outstanding at December 31, 1996.......................... 921,929 $11.78
========

F-19
93

SIMULA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED DECEMBER 31, 1996 -- (CONTINUED)

Options are exercisable after 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, 1996, 1995,and 1994, exercisable options were 612,179, 239,125, and 219,675,
respectively.

The following information, aggregated by option price ranges, is applicable
to those shares outstanding at December 31, 1996:

Range of exercise prices.............................. $3.25 - $6.92 $12.50 - $16.13
Shares outstanding in range........................... 170,354 751,575
Weighted-average exercise price....................... $ 4.92 $ 13.34
Weighted-average remaining contractual life........... 5.7 years 4 years
Shares currently exercisable.......................... 170,354 441,825
Weighted-average exercise price of shares currently
exercisable......................................... $ 4.92 $ 13.56

The estimated fair value of options granted during 1996 was $5.27 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 years ended
December 31, 1996 and 1995 would have been reduced to the pro forma amounts
indicated below:

1996 1995
------------ ----------

Net (loss) income -- as reported.......................... $(10,049,914) $2,657,359
============ ==========
Net (loss) income -- pro forma............................ $(12,074,645) $ 293,848
============ ==========
(Loss) income per share -- as reported.................... $ (1.12) $ .31
============ ==========
(Loss) income per share -- pro forma...................... $ (1.35) $ .03
============ ==========

The fair value of each option grant is estimated on the date of grant using
the Black-Scholes options pricing model with the following weighted-average
assumptions used for grants: no dividend yield; expected volatility of 36%,
risk-free interest rate of 7%; and expected lives of five years.

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 4,500 shares have been awarded.

Employee Stock Purchase Plan

On June 20, 1996, the Company adopted the Employee Stock Purchase Plan
(Purchase Plan) 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 Purchase
Plan. The first offering period under the Purchase Plan began October 1, 1996.

16. MAJOR CUSTOMERS

Revenue from four major customers accounted for approximately 48%, 29%, and
66% of total revenue for the years ended December 31, 1996, 1995 and 1994.
Contract and trade receivables from these customers

F-20
94

SIMULA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED DECEMBER 31, 1996 -- (CONTINUED)

accounted for approximately 15%, 29%, and 39% of the total contract and trade
receivables at December 31, 1996, 1995 and 1994. The major customers included
all branches of the United States armed forces which accounted for 27%, 18% and
24% of total revenue for the years ended December 31, 1996, 1995 and 1994,
respectively. The Company has performed work for these customers since 1975 and
has no reason to believe that there will be any change in these customer
relationships.

For the years ended December 31, 1996 and 1995 export sales were
$15,826,109 and $6,760,819, respectively. For 1996, the export sales were
principally comprised of sales to customers in Canada, the United Kingdom,
Japan, and Turkey of $9,124,647, $2,278,212, $1,191,468, and $721,180. For 1995,
the export sales were principally comprised of sales to customers in Japan,
Canada, the United Kingdom and Korea of $2,522,419, $2,091,965, $1,105,558 and
$775,091. For the year ended December 31, 1994, export sales were less than 10%
of consolidated revenue.

17. 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:

1996 1995 1994
----------- ----------- -----------

Research and development expenses classified
as general and administrative expenses.... $ 1,915,649 $ 1,419,340 $ 687,686
=========== =========== ===========
Funded contracts:
Revenues funded by customers.............. $ 6,518,818 $ 3,901,662 $ 3,290,146
Research and development expenses
classified as cost of such revenue..... (8,587,658) (4,721,858) (3,165,130)
----------- ----------- -----------
Funded contract (deficiency) margin......... $(2,068,840) $ (820,196) $ 125,016
=========== =========== ===========

The above amounts do not include pre-contract costs which the Company began
expensing in 1996 (See Note 2). Pre-contract costs expended for the years ended
December 31, 1996, 1995 and 1994 were approximately $6,420,000, $4,438,000 and
$645,000, respectively.

18. SEGMENT REPORTING

During 1996, 1995 and 1994, the Company operated in three industry
segments. The Government and Defense segment, principally comprised of Simula
Government Products, Inc., includes the design and manufacture of crash
resistant components, energy absorbing devices, ballistics and composites
principally in connection with branches of the United States armed forces
procurement. The Simula Transportation Equipment Corporation
("SimTec" -- formerly known as Intaero) segment includes operations which
primarily manufacture seating systems for domestic and foreign passenger
airlines, rail other mass transit. The remaining segment, entitled Other,
includes general corporate operations and other subsidiaries engaged in
technology development and sales. Included in Other is Simula Automotive Safety
Devices, Inc. ("Simula ASD"), the entity which conducts substantially all of the
Company's operations encompassing inflatable

F-21
95

SIMULA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED DECEMBER 31, 1996 -- (CONTINUED)

restraints for automobiles. Through 1996, Simula ASD has not had any significant
revenue. Segment disclosures are as follows:

1996
-----------------------------------------------------------
GOVERNMENT
AND
DEFENSE SIMTEC OTHER TOTAL
----------- ----------- ----------- -----------

Revenue:
Contract revenue.................... $31,372,051 $23,636,852 $55,008,903
Product sales....................... 685,218 8,965,719 $ 847,467 10,498,404
Technology sales and royalties...... 254,650 254,650
----------- ----------- ----------- -----------
Total revenue............... $32,311,919 $32,602,571 $ 847,467 $65,761,957
=========== =========== =========== ===========
Operating (loss) income............... $ 1,355,917 $(6,327,689) $(4,254,298) $(9,226,070)
Identifiable assets................... 28,217,854 43,971,150 14,499,452 86,688,456
Depreciation and amortization......... 909,619 1,967,959 400,855 3,278,433
Capital expenditures.................. 2,916,342 2,470,336 4,220,542 9,607,220

1995
-----------------------------------------------------------
GOVERNMENT
AND
DEFENSE SIMTEC OTHER TOTAL
----------- ----------- ----------- -----------

Revenue:
Contract revenue.................... $24,753,600 $23,936,070 $48,689,670
Product sales....................... 5,673,264 $ 1,968,879 7,642,143
Technology sales and royalties...... 779,347 1,977,453 2,756,800
----------- ----------- ----------- -----------
Total revenue............... $25,532,947 $29,609,334 $ 3,946,332 $59,088,613
=========== =========== =========== ===========
Operating income...................... $ 3,294,791 $ 651,695 $ 496,651 $ 4,443,137
Identifiable assets................... 26,629,708 36,273,362 10,233,066 73,136,136
Depreciation and amortization......... 564,842 1,899,899 600,142 3,064,833
Capital expenditures.................. 1,829,664 1,459,651 1,478,142 4,767,457

1994
----------------------------------------------------------
GOVERNMENT
AND
DEFENSE SIMTEC OTHER TOTAL
----------- ----------- ---------- -----------

Revenue:
Contract revenue..................... $21,587,963 $12,126,010 $33,713,973
Product sales........................ 5,966,839 $1,031,379 6,998,218
Technology sales and royalties....... 445,603 445,603
----------- ----------- ---------- -----------
Total revenue................ $22,033,566 $18,092,849 $1,031,379 $41,157,794
=========== =========== ========== ===========
Operating income....................... $ 3,037,566 $ 2,168,567 $ (21,813) $ 5,184,320
Identifiable assets.................... 19,761,764 24,654,688 3,274,511 47,690,963
Depreciation and amortization.......... 516,510 763,418 371,190 1,651,118
Capital expenditures................... 586,178 0 670,674 1,256,852

For the years ended December 31, 1996 and 1995, inter-segment sales were
insignificant and total intercompany sales of $7,547,039 and $4,065,201,
respectively, have been eliminated. All revenue in 1994 was generated from sales
to unaffiliated customers.

F-22
96

SIMULA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED DECEMBER 31, 1996 -- (CONTINUED)

19. UNAUDITED QUARTERLY FINANCIAL INFORMATION

1996
-----------------------------------------------------------
FIRST SECOND THIRD FOURTH
----------- ----------- ----------- -----------

Revenue............................... $16,742,512 $19,615,830 $12,914,643 $16,488,972
Cost of revenue....................... 12,316,453 15,478,516 10,765,168 16,679,039
Gross margin.......................... 4,426,059 4,137,314 2,149,475 (190,067)
(Loss) earnings before cumulative
effect of an accounting change...... 121,932 (305,428) (2,087,492) (4,538,978)
Cumulative effect of an accounting
change.............................. (3,239,948)
Net (loss)............................ (3,118,016) (305,428) (2,087,492) (4,538,978)
Net (loss) per common and equivalent
share............................... $ (.35) $ (.03) $ (.23) $ (.51)

1995
-----------------------------------------------------------
FIRST SECOND THIRD FOURTH
----------- ----------- ----------- -----------

Revenue............................... $13,580,842 $15,030,715 $14,694,204 $15,782,852
Cost of revenue....................... 8,954,807 9,632,276 11,811,431 8,637,957
Gross margin.......................... 4,626,035 5,398,439 2,882,773 7,144,895
Net earnings (loss)................... 616,077 936,995 (305,818) 1,410,105
Net earnings (loss) per common and
equivalent share.................... $ .09 $ .11 $ (.04) $ .15

1994
----------------------------------------------------------
FIRST SECOND THIRD FOURTH
----------- ---------- ----------- -----------

Revenue................................ $ 6,900,072 $7,558,741 $12,875,330 $13,823,651
Cost of revenue........................ 4,370,264 4,667,947 9,157,490 9,512,909
Gross margin........................... 2,529,808 2,890,794 3,717,840 4,310,742
Net earnings........................... 334,798 513,707 603,372 662,546
Net earnings per common and equivalent
share................................ $ .07 $ .10 $ .10 $ .10

20. SUBSIDIARY SUMMARY COMBINED FINANCIAL INFORMATION

DECEMBER 31,
---------------------------
1996 1995
----------- -----------

Balance Sheet Data:
Current assets.................................................... $42,633,627 $33,549,956
Noncurrent assets................................................. 35,303,018 35,133,898
Current liabilities............................................... 65,076,973 43,931,292
Noncurrent liabilities............................................ 861,634 4,183,615
Subsidiary equity................................................. 11,998,038 20,568,947

F-23
97

SIMULA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED DECEMBER 31, 1996 -- (CONTINUED)

YEAR ENDED DECEMBER 31,
-------------------------------------------
1996 1995 1994
----------- ----------- -----------

Income Statement Data:
Revenue............................................. $65,761,957 $59,088,613 $41,059,321
Gross margin........................................ 10,522,781 19,731,851 13,851,527
(Loss) earnings before cumulative effect of change
in accounting principle........................... (5,066,920) 3,626,339 3,148,581
Net (loss) earnings................................. (8,289,385) 3,626,339 3,148,581

The above summary combined financial information ("the Combined Financial
Information") of Simula's subsidiaries ("the Subsidiaries") are presented
because the Subsidiaries have guaranteed the Notes contemplated to be issued as
set forth in this Registration Statement. The Subsidiaries included in the
Combined Financial Information presented above are all wholly-owned and
constitute all of the Company's direct and indirect subsidiaries. The guarantees
of the Subsidiaries of the Notes are full, unconditional, and joint and several.
Separate financial statements of the Subsidiaries are not presented because
management has determined that they would not be material to investors. There
are no significant restrictions on the Company's ability to obtain funds from
the Subsidiaries by dividend or loan.

F-24
98

GOVERNMENT AND DEFENSE PRODUCTS

Photo of crashworthy Photo of cockpit airbag system Photo of crashworthy
armored CH-53 Sea Stallion ("CABS") for military helicopters. energy- absorbing Osprey
helicopter seat. Photo of inflatable body and head tilt-rotor aircraft seat.
restraint system ("IBAHRS") for
military helicopters.

TECHNOLOGY DEVELOPMENT

Photo of drop tower test facility and two computer animations of crash dummies.

Through the use of crash tests conducted at the Company's facilities and
computer simulations of crash events, the Company's biomechanical engineers
study human body dynamics in crash situations in order to develop safety
technologies and products.
99

======================================================

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY THE SHARES BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION WOULD BE UNLAWFUL OR TO ANY PERSON TO WHOM IT IS UNLAWFUL. UNDER NO
CIRCUMSTANCES SHALL THE DELIVERY OF THIS PROSPECTUS OR ANY SALE MADE PURSUANT TO
THIS PROSPECTUS CREATE ANY IMPLICATION THAT INFORMATION CONTAINED IN THIS
PROSPECTUS IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS.

------------------------

TABLE OF CONTENTS

PAGE
----

Prospectus Summary.................... 3
Risk Factors.......................... 8
Use of Proceeds....................... 17
Price Range of Common Stock........... 17
Capitalization........................ 18
Dividend Policy....................... 18
Selected Consolidated Financial
Data................................ 19
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 21
Business.............................. 29
Management............................ 43
Certain Transactions.................. 51
Principal Shareholders................ 52
Description of Notes.................. 54
Certain Federal Income Tax
Considerations...................... 65
Description of Other Capital Stock and
Debt Securities..................... 68
Underwriting.......................... 70
Legal Opinions........................ 71
Experts............................... 71
Incorporation of Certain Documents by
Reference........................... 71
Additional Information................ 71
Index to Financial Statements......... F-1

======================================================

$30,000,000

SIMULA LOGO W/O NAME

SIMULA, INC.

% SENIOR SUBORDINATED

CONVERTIBLE NOTES

DUE , 2004

--------------------
PROSPECTUS
--------------------
HD BROUS & CO., INC.

BREAN MURRAY & CO., INC.

L.H. FRIEND, WEINRESS,
FRANKSON & PRESSON, INC.

, 1997

======================================================
100

SIMULA, INC.

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following is an itemized statement of all expenses in connection with
the issuance and distribution of the securities to be registered. These expenses
will be deducted from the gross proceeds of the offering. The information
contained below is subject to future contingencies. An asterisk to the right of
a dollar figure denotes that the figure is an estimate and the exact amount to
be expended for that category is not yet known.

Registration Fee.................................................. $ 12,000
Transfer Agent's Fee.............................................. 10,000
Legal Fees........................................................ 150,000
New York Stock Exchange Listing Fee............................... 30,000
Accounting Fees................................................... 75,000
Printing and Engraving Costs...................................... 90,000
Other............................................................. 33,000
--------
Total................................................... $400,000
========

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

ARTICLE 10 of the Company's Amended and Restated Articles of Incorporation
provides that the personal liability of the directors to the Company and its
shareholders for monetary damages by reason of their conduct as directors shall
be limited or eliminated to the fullest extent permitted by Arizona law. In
A.R.S. Sec. 10-202(B) (1), Arizona corporate law limits or eliminates the
liability of a director of a corporation for money damages for any action taken
or not taken as a director in all instances except: (i) where a director
receives financial benefits to which he is not entitled; (ii) any intentional
infliction of harm on the corporation or its shareholders; (iii) the making of
unlawful distributions; and (iv) intentional violations of criminal law.

Section 12.01 of the Company's Bylaws further provides that the Company
shall indemnify and pay the expenses of directors, officers, employees, trustees
or agents of or for the Company to the fullest extent permitted by Arizona law.
In A.R.S. Sec. 10-850 et seq., Arizona corporate law provides that a corporation
may provide indemnification if: (i) the director's conduct was in good faith;
(ii) the director reasonably believed: (x) in the case of conduct in an official
capacity with the corporation, that the conduct was in its best interests, or
(y) in all other cases, that the conduct was at least not opposed to its best
interests; and (iii) in the case of criminal proceedings, the director had no
reasonable cause to believe the conduct was unlawful.

Directors may not be indemnified in connection with proceedings brought by
or in the right of the Company in which the director was adjudged liable to the
Company or in connection with any other proceeding charging improper personal
benefit to the director, whether or not involving action in the director's
official capacity, in which the director was adjudged liable on the basis that
personal benefit was improperly received by the director. Under Arizona law,
indemnification in connection with a proceeding by or in the right of the
Company is limited to reasonable expenses incurred in connection with the
proceeding.

Arizona law also provides for mandatory and court-ordered indemnification
in certain instances, including on behalf of officers, employees and agents of
the Company who are not also directors.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

In June 1994, the Company sold $6.5 million in aggregate principal amount
of its Series B 9% Senior Subordinated Convertible Notes ("Convertible Notes").
The Convertible Notes were sold pursuant to exemptions from registration under
the Securities Act of 1933 (" '33 Act"), Section 4(2), and Regulation D
thereunder, and comparable provisions of states' securities laws. The
Convertible Notes were convertible to

II-1
101

Common Stock, and 947,562 shares of the Company's Common Stock were registered
and offered pursuant to a Prospectus dated July 26, 1994 for shares of Common
Stock issuable upon the conversion of the Convertible Notes. In addition, 19,674
shares of the Company's Common Stock were registered and offered pursuant to a
Prospectus dated December 28, 1994 for remaining shares of Common Stock issuable
for accrued interest. As of the date of this Registration Statement, all
Convertible Notes have been converted into Common Stock.

In September 1996, the Company sold $14.3 million in aggregate principal
amount of its Series C 10% Senior Subordinated Convertible Notes ("10% Notes").
The 10% Notes were issued pursuant to the Company's Indenture dated December 17,
1993 and Supplemental Indenture dated September 12, 1996. The private placement
was made through HD Brous & Co., Inc., a NASD member firm, and other selected
dealers. The 10% Notes were sold pursuant to exemptions from registration under
the '33 Act, Section 4(2), and Regulation D in reliance on Rule 506 thereunder,
and comparable provisions of states' securities laws. The 10% Notes are
convertible to Common Stock of the Company at a conversion price which may be
fixed by each Noteholder at the equivalent of 98% of the average closing price
of the Company's Common Stock on the NYSE for the 10 day period immediately
preceding notice to the Company of such an election to fix the conversion price.
If not earlier converted, the 10% Notes are redeemable by the Company in whole
or in part on a pro rata basis, at par value plus all accrued interest payable
through the date of redemption, at any time upon 30 days written notice to the
Noteholders in accordance with the following: (i) from September 12, 1996 until
December 15, 1997, the 10% Notes may be redeemed by the Company after the
closing price of the Company's Common Stock as quoted on the NYSE has equaled or
exceeded $25.00 for any 10 consecutive trading days and (ii) after December 15,
1997, the Company may redeem the 10% Notes at any time at par value plus all
accrued interest payable through the date of redemption. Of the 1,931,140 shares
of the Company's Common Stock being registered pursuant to this Registration
Statement, 1,430,000 shares are being registered to account for the prospective
issuance of Common Stock in the full amount of principal and interest on the 10%
Notes outstanding at any given time upon notice of the Noteholders of such
holders' election to convert their 10% Notes into Common Stock at 98% of the
prices which they may have fixed for conversion. As of the date of this
Registration Statement, no 10% Notes have been converted into Common Stock.

Other than the foregoing transactions, the Registrant has not offered or
sold any unregistered securities within the last three years.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

a. Exhibits. The following Exhibits are included pursuant to Regulation
S-K.

NO. DESCRIPTION REFERENCE
- ------- --------------------------------------------------------------------------- ---------

*1 Form of Underwriting Agreement
++3.1 Articles of Incorporation of Simula, Inc., as amended and restated
3.2 Bylaws of Simula, Inc., as amended and restated............................ (1)
++4.1 Specimen of Common Stock Certificate
4.2 Indenture dated December 17, 1993 (including cross-reference sheet to Trust
Indenture Act), as amended................................................. (3)
++4.5 Supplemental Indenture No. 2 dated September 12, 1996, entered into in
connection with the Registrant's issuance of Series C 10% Senior
Subordinated Convertible Notes
4.6 Form of Supplemental Indenture No. 3, effective March 14, 1997, amending
the Indenture of Simula, Inc. dated December 17, 1993...................... (11)
*4.7 Form of Indenture in connection with the issuance of the % Senior
Subordinated Convertible Notes
*5.1 Opinion of Counsel
8. Re tax matters, see 5.1 above
10.8 Employment Agreement between Registrant and Stanley P. Desjardins.......... (1)

II-2
102

NO. DESCRIPTION REFERENCE
- ------- --------------------------------------------------------------------------- ---------

10.9 Employment Agreement between Registrant and Donald W. Townsend............. (1)
10.11 1992 Stock Option Plan..................................................... (1)
10.12 1992 Restricted Stock Plan................................................. (1)
10.15 Asset Purchase Agreement dated August 2, 1993 between Simula, Inc. and
Airline Interiors, Inc..................................................... (2)
10.16 Asset Purchase Agreement dated June 14, 1994, among Simula, Inc., CCEC
Acquisition Corp. and Coach and Car Equipment Corporation.................. (4)
10.18 Asset Purchase Agreement dated September 30, 1994, among Simula, Inc.,
Artcraft Acquisition Corp., and Artcraft Industries Corp. ................. (5)
10.21 1994 Stock Option Plan..................................................... (6)
10.22 Agreements dated January 27, 1995 with Autoliv AB, including license
agreement, frame supply agreement and joint development agreement.......... (7)
10.23 Agreement with Jetstream Aircraft Limited.................................. (7)
10.24 Amended Loan Agreement with Wells Fargo Bank, N.A. dated December 20,
1996....................................................................... (11)
10.25 Asset Purchase Agreement dated November 1, 1995, between Comfab, Inc. and
Stanley P. Desjardins, d/b/a Desjardins Engineering; Services Agreement
dated November 1, 1995, between Simula, Inc. and Comfab, Inc.; Promissory
Note of Stanley P. Desjardins, d/b/a Desjardins Engineering, dated November
1, 1995, for the purchase price of Comfab, Inc. ........................... (8)
10.26 Simula, Inc. Employee Stock Purchase Plan.................................. (9)
++10.27 Promissory Note representing $650,000 loan from Stanley P. Desjardins dated
August 12, 1996
++10.28 Promissory Note representing $1,000,000 loan from Stanley P. Desjardins
dated August 14, 1996
10.29 Form of Change of Control Agreements Between the Company and Key Management
Personnel.................................................................. (11)
@11. Earnings Per Share
@12. Ratio of Earnings to Fixed Charges
18. Preference Letter re: change in accounting principles...................... (10)
@21. Subsidiaries of Registrant
*23. Consent of Independent Auditors
24. Powers of Attorney -- Directors............................................ (11)
25. Statement of Eligibility of Trustee on Form T-1 for Indenture dated
December 17, 1993 (without Indenture) (bound separately)................... (3)

- ---------------
* Filed herewith.

+ To be filed by amendment.

++ Filed with original Registration Statement on Form S-3, dated October 4,
1996.

@ Filed with Amendment No. 2 to Registration Statement on Form S-3, dated March
31, 1997.

(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 current Report on Form 8-K, dated August 2, 1993.

II-3
103

(3) Filed with Registration Statement on Form SB-2, No. 33-61028 under the
Securities Act of 1933, effective December 10, 1993.

(4) Filed with current Report on Form 8-K, dated June 14, 1994.

(5) Filed with current Report on Form 8-K, dated September 30, 1994.

(6) Filed with Registration Statement on Form SB-2, No. 33-87582, under the
Securities Act of 1933, effective December 28, 1994.

(7) Filed with Registration Statement on Form S-1, No. 33-89186, under the
Securities Act of 1933, effective March 28, 1995, as amended by
Post-Effective Amendment No. 1, effective March 31, 1995.

(8) Filed with Report on Form 10-K for the year ended December 31, 1995.

(9) Filed with Definitive Proxy on May 14, 1996, for the Company's Annual
Meeting of Shareholders held on June 20, 1996.

(10) Filed with Report on Form 10-Q/A for the quarter ended June 30, 1996.

(11) Filed with Report on Form 10-K for the year ended December 31, 1996.

b.1. Financial Statements. The financial statements of the Company are
included in the Prospectus beginning at page F-1.

b.2. Financial Statement Schedules. All schedules are included in the
financial statements of the Company or are included in Part II of the
Registration Statement.

ITEM 17. UNDERTAKINGS

RULE 415

a. The undersigned registrant hereby undertakes:

a.1. To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:

(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of Securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;

(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement;

a.2. That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new Registration Statement relating to the Securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.

a.3. To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.

II-4
104

e. Incorporated Annual and Quarterly Reports.

The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is
sent or given, the latest annual report to security holders that is
incorporated by reference in the prospectus and furnished pursuant to and
meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities
Exchange Act of 1934; and, where interim financial information required to
be presented by Article 3 of Regulation S-X are not set forth in the
prospectus, to deliver, or cause to be delivered to each person to whom the
prospectus is sent or given, the latest quarterly report that is
specifically incorporated by reference in the prospectus to provide such
interim financial information.

h. Request for acceleration of effective date.

Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

II-5
105

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Phoenix, State of Arizona
on April 18, 1997.

SIMULA, INC.

By /s/ DONALD W. TOWNSEND
------------------------------------
Donald W. Townsend, President

Pursuant to the requirements of the Securities Act of 1933, the
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

SIGNATURE AND TITLE DATE
- -------------------------------------------- --------------------------------------------

/s/ DONALD W. TOWNSEND April 18, 1997
- --------------------------------------------
Donald W. Townsend, President, Chief
Operating Officer, and Director

/s/ BRADLEY P. FORST April 18, 1997
- --------------------------------------------
Bradley P. Forst, Vice President, General
Counsel, Secretary and Director

/s/ SEAN K. NOLEN April 18, 1997
- --------------------------------------------
Sean K. Nolen, Vice President, Treasurer,
Chief Financial Officer, and Director

* April 18, 1997
- --------------------------------------------
Stanley P. Desjardins, Chairman

* April 18, 1997
- --------------------------------------------
James C. Withers, Director

* April 18, 1997
- --------------------------------------------
Robert D. Olliver, Director

* April 18, 1997
- --------------------------------------------
Scott E. Miller, Director

*By: /s/ BRADLEY P. FORST April 18, 1997
---------------------------------------
Bradley P. Forst,
Attorney-in-Fact

II-6
106

SIGNATURES

SIMULA HOLDINGS, INC.

By /s/ STANLEY P. DESJARDINS

------------------------------------

Stanley R. Desjardins, President

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Bradley P. Forst or Sean K. Nolen,
or either of them, as his attorney-in-fact, each with full power of
substitution, for him in any and all capacities, to sign any and all amendments
to this Registration Statement, including post-effective amendments and any and
all new registration statements filed pursuant to Rule 462 under the Securities
Act in connection with or related to the offering contemplated by this
Registration Statement, as amended, and to file the same, with exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each said attorney-in-fact
or his substitute or substitutes may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, the
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

SIGNATURE AND TITLE DATE
- -------------------------------------------- --------------------------------------------

/s/ STANLEY P. DESJARDINS April 18, 1997
- --------------------------------------------
Stanley P. Desjardins, President, and
Director

/s/ BRADLEY P. FORST April 18, 1997
- --------------------------------------------
Bradley P. Forst, Assistant Secretary and
Director

/s/ SEAN K. NOLEN April 18, 1997
- --------------------------------------------
Sean K. Nolen, Secretary, Treasurer and
Director

/s/ DONALD W. TOWNSEND April 18, 1997
- --------------------------------------------
Donald W. Townsend, Director

II-7
107

SIGNATURES

SIMULA GOVERNMENT PRODUCTS, INC.

By /s/ STANLEY P. DESJARDINS

------------------------------------

Stanley P. Desjardins, President

POWER OF ATTORNEY

Pursuant to the requirements of the Securities Act of 1933, the
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

SIGNATURE AND TITLE DATE
- -------------------------------------------- --------------------------------------------

/s/ STANLEY P. DESJARDINS April 18, 1997
- --------------------------------------------
Stanley P. Desjardins, President, Chief
Operating Officer, and Director

/s/ MIKE HAERLE April 18, 1997
- --------------------------------------------
Mike Haerle, Secretary and Tresurer, and
Chief Financial Officer

/s/ BRADLEY P. FORST April 18, 1997
- --------------------------------------------
Bradley P. Forst, Assistant Secretary

/s/ SEAN K. NOLEN April 18, 1997
- --------------------------------------------
Sean K. Nolen, Assistant Treasurer

/s/ DONALD W. TOWNSEND April 18, 1997
- --------------------------------------------
Donald W. Townsend, Director

II-8
108

SIGNATURES

SIMULA TECHNOLOGIES, INC.

By /s/ JOSEPH COLTMAN

------------------------------------

Joseph Coltman, President

POWER OF ATTORNEY

Pursuant to the requirements of the Securities Act of 1933, the
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

SIGNATURE AND TITLE DATE
- -------------------------------------------- --------------------------------------------

/s/ JOSEPH COLTMAN April 18, 1997
- --------------------------------------------
Joseph Coltman, President and Director

/s/ BRADLEY P. FORST April 18, 1997
- --------------------------------------------
Bradley P. Forst, Assistant Secretary and
Director

/s/ SEAN K. NOLEN April 18, 1997
- --------------------------------------------
Sean K. Nolen, Secretary, Treasurer and
Director

/s/ STANLEY P. DESJARDINS April 18, 1997
- --------------------------------------------
Stanley P. Desjardins, Director

/s/ DONALD W. TOWNSEND April 18, 1997
- --------------------------------------------
Donald Townsend, Director

II-9
109

SIGNATURES

SAFETY EQUIPMENT, INC. (SEI)

By /s/ STANLEY P. DESJARDINS

------------------------------------

Stanley P. Desjardins, President

POWER OF ATTORNEY

Pursuant to the requirements of the Securities Act of 1933, the
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

SIGNATURE AND TITLE DATE
- -------------------------------------------- --------------------------------------------

/s/ STANLEY P. DESJARDINS April 18, 1997
- --------------------------------------------
Stanley P. Desjardins, President and
Director

/s/ BARRY SHOPE April 18, 1997
- --------------------------------------------
Barry Shope, Secretary and Director

/s/ BRADLEY P. FORST April 18, 1997
- --------------------------------------------
Bradley P. Forst, Assistant Secretary

/s/ SEAN K. NOLEN April 18, 1997
- --------------------------------------------
Sean K. Nolen, Treasurer

/s/ DONALD W. TOWNSEND APRIL 18, 1997
- --------------------------------------------
DONALD W. TOWNSEND, DIRECTOR

II-10
110

SIGNATURES

SEDONA SCIENTIFIC, INC.

By /s/ VERN DORRELL

------------------------------------

Vern Dorrell, President

POWER OF ATTORNEY

Pursuant to the requirements of the Securities Act of 1933, the
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

SIGNATURE AND TITLE DATE
- -------------------------------------------- --------------------------------------------

/s/ VERN DORRELL April 18, 1997
- --------------------------------------------
Vern Dorrell, President and Director

/s/ BRADLEY P. FORST April 18, 1997
- --------------------------------------------
Bradley P. Forst, Assistant Secretary

/s/ SEAN K. NOLEN April 18, 1997
- --------------------------------------------
Sean K. Nolen, Treasurer

/s/ DONALD W. TOWNSEND April 18, 1997
- --------------------------------------------
Donald W. Townsend, Director

/s/ RANDALL TAYLOR April 18, 1997
- --------------------------------------------
Randall Taylor, Director

II-11
111

SIGNATURES

INTERNATIONAL CENTER FOR SAFETY
EDUCATION

By /s/ STANLEY P. DESJARDINS

------------------------------------

Stanley P. Desjardins, President

POWER OF ATTORNEY

Pursuant to the requirements of the Securities Act of 1933, the
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

SIGNATURE AND TITLE DATE
- -------------------------------------------- --------------------------------------------

/s/ STANLEY P. DESJARDINS April 18, 1997
- --------------------------------------------
Stanley P. Desjardins, President and
Director

/s/ BRADLEY P. FORST April 18, 1997
- --------------------------------------------
Bradley P. Forst, Secretary

/s/ SEAN K. NOLEN April 18, 1997
- --------------------------------------------
Sean K. Nolen, Treasurer

/s/ DONALD W. TOWNSEND April 18, 1997
- --------------------------------------------
Donald W. Townsend, Director

II-12
112

SIGNATURES

SIMULA TRANSPORTATION EQUIPMENT
CORPORATION

By /s/ DONALD RUTTER

------------------------------------

Donald Rutter, President

POWER OF ATTORNEY

Pursuant to the requirements of the Securities Act of 1933, the
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

SIGNATURE AND TITLE DATE
- -------------------------------------------- --------------------------------------------

/s/ DONALD RUTTER April 18, 1997
- --------------------------------------------
Donald Rutter, President and Director

/s/ INAM KHAN April 18, 1997
- --------------------------------------------
Inam Khan, Secretary, Treasurer

/s/ BRADLEY P. FORST April 18, 1997
- --------------------------------------------
Bradley P. Forst, Assistant Secretary and
Director

/s/ SEAN K. NOLEN April 18, 1997
- --------------------------------------------
Sean K. Nolen, Vice President, Assistant
Treasurer

/s/ DONALD W. TOWNSEND April 18, 1997
- --------------------------------------------
Donald W. Townsend, Director

II-13
113

SIGNATURES

AIRLINE INTERIORS, INC.

By /s/ WILLIAM BEASLEY

------------------------------------

William Beasley, President

POWER OF ATTORNEY

Pursuant to the requirements of the Securities Act of 1933, the
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

SIGNATURE AND TITLE DATE
- -------------------------------------------- --------------------------------------------

/s/ WILLIAM BEASLEY April 18, 1997
- --------------------------------------------
William Beasley, Chief Operating Officer and
Director

/s/ BRUCE MERATI April 18, 1997
- --------------------------------------------
Bruce Merati, Secretary, Treasurer

/s/ BRADLEY P. FORST April 18, 1997
- --------------------------------------------
Bradley P. Forst, Assistant Secretary

/s/ SEAN K. NOLEN April 18, 1997
- --------------------------------------------
Sean K. Nolen, Assistant Treasurer

/s/ DONALD RUTTER April 18, 1997
- --------------------------------------------
Donald Rutter, Director

/s/ RANDALL TAYLOR APRIL 18, 1997
- --------------------------------------------
RANDALL TAYLOR, DIRECTOR

II-14
114

SIGNATURES

COACH & CAR EQUIPMENT CORPORATION

By /s/ EUGENE GERMAINE

------------------------------------

Eugene Germaine, President

POWER OF ATTORNEY

Pursuant to the requirements of the Securities Act of 1933, the
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

SIGNATURE AND TITLE DATE
- -------------------------------------------- --------------------------------------------

/s/ EUGENE GERMAINE April 18, 1997
- --------------------------------------------
Eugene Germaine, President and Secretary

/s/ BRADLEY P. FORST April 18, 1997
- --------------------------------------------
Bradley P. Forst, Assistant Secretary

/s/ SEAN K. NOLEN April 18, 1997
- --------------------------------------------
Sean K. Nolen, Treasurer

/s/ DONALD RUTTER April 18, 1997
- --------------------------------------------
Donald Rutter, Director

/s/ RANDALL TAYLOR April 18, 1997
- --------------------------------------------
Randall Taylor, Director

/s/ DONALD W. TOWNSEND April 18, 1997
- --------------------------------------------
Donald W. Townsend, Director

II-15
115

SIGNATURES

AIRCRAFT INDUSTRIES CORPORATION

By /s/ DONALD RUTTER

------------------------------------

Donald Rutter, President

POWER OF ATTORNEY

Pursuant to the requirements of the Securities Act of 1933, the
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

SIGNATURE AND TITLE DATE
- -------------------------------------------- --------------------------------------------

/s/ DONALD RUTTER April 18, 1997
- --------------------------------------------
Donald Rutter, Chief Operating Officer and
Director

/s/ CAROL SANCHEZ April 18, 1997
- --------------------------------------------
Carol Sanchez, Secretary, Treasurer

/s/ JOSEPH APPELMAN April 18, 1997
- --------------------------------------------
Joseph Appelman, General Manager

/s/ BRADLEY P. FORST April 18, 1997
- --------------------------------------------
Bradley P. Forst, Assistant Secretary

/s/ SEAN K. NOLEN April 18, 1997
- --------------------------------------------
Sean K. Nolen, Assistant Treasurer and
Director

/s/ DONALD W. TOWNSEND April 18, 1997
- --------------------------------------------
Donald W. Townsend, Director

II-16
116

SIGNATURES

INTAERO, LTD.

By /s/ DONALD RUTTER

------------------------------------

Donald Rutter, President

POWER OF ATTORNEY

Pursuant to the requirements of the Securities Act of 1933, the
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

SIGNATURE AND TITLE DATE
- -------------------------------------------- --------------------------------------------

/s/ DONALD RUTTER April 18, 1997
- --------------------------------------------
Donald Rutter, President and Director

/s/ INAM KHAN April 18, 1997
- --------------------------------------------
Inam Khan, Secretary, Treasurer

/s/ JAMES CAIN April 18, 1997
- --------------------------------------------
James Cain, General Manager

/s/ BRADLEY P. FORST April 18, 1997
- --------------------------------------------
Bradley P. Forst, Assistant Secretary and
Director

/s/ SEAN K. NOLEN April 18, 1997
- --------------------------------------------
Sean K. Nolen, Assistant Treasurer and
Director

/s/ DONALD W. TOWNSEND April 18, 1997
- --------------------------------------------
Donald W. Townsend, Director

II-17
117

SIGNATURES

VIATECH, INC.

By /s/ HARRY JONES

------------------------------------

Harry Jones, President

POWER OF ATTORNEY

Pursuant to the requirements of the Securities Act of 1933, the
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

SIGNATURE AND TITLE DATE
- -------------------------------------------- --------------------------------------------

/s/ HARRY JONES April 18, 1997
- --------------------------------------------
Harry Jones, President, and Chief Operating
Officer

/s/ DONALD W. TOWNSEND April 18, 1997
- --------------------------------------------
Donald W. Townsend, Secretary, Treasurer and
Director

/s/ BRADLEY P. FORST April 18, 1997
- --------------------------------------------
Bradley P. Forst, Assistant Secretary

/s/ SEAN K. NOLEN April 18, 1997
- --------------------------------------------
Sean K. Nolen, Assistant Treasurer

/s/ STANLEY P. DESJARDINS April 18, 1997
- --------------------------------------------
Stanley P. Desjardins, Director

II-18
118

SIGNATURES

SIMULA AUTOMOTIVE SAFETY DEVICES
(ASD-Simula), INC.

By /s/ JAMES SAUNDERS

------------------------------------

James Saunders, President

POWER OF ATTORNEY

Pursuant to the requirements of the Securities Act of 1933, the
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

SIGNATURE AND TITLE DATE
- -------------------------------------------- --------------------------------------------

/s/ JAMES SAUNDERS April 18, 1997
- --------------------------------------------
James Saunders, President, Chief Operating
Officer, and Director

/s/ BRADLEY P. FORST April 18, 1997
- --------------------------------------------
Bradley P. Forst, Secretary

/s/ SEAN K. NOLEN April 18, 1997
- --------------------------------------------
Sean K. Nolen, Treasurer and Director

/s/ DONALD W. TOWNSEND April 18, 1997
- --------------------------------------------
Donald W. Townsend, Director

/s/ RANDALL TAYLOR April 18, 1997
- --------------------------------------------
Randall Taylor, Director

II-19
119

SIGNATURES

SIMULA AUTOMOTIVE SAFETY DEVICES
LIMITED

By /s/ ALAN DORWARD

------------------------------------

Alan Dorward, General Manager,
Operating Officer

POWER OF ATTORNEY

Pursuant to the requirements of the Securities Act of 1933, the
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

SIGNATURE AND TITLE DATE
- -------------------------------------------- --------------------------------------------

/s/ ALAN DORWARD April 18, 1997
- --------------------------------------------
Alan Dorward, General Manager, Operating
Officer and Director

/s/ DAVID LINKLATER April 18, 1997
- --------------------------------------------
David Linklater, Finance Manager, Financial
Officer

/s/ DONALD W. TOWNSEND April 18, 1997
- --------------------------------------------
Donald W. Townsend, Director

/s/ RANDALL TAYLOR April 18, 1997
- --------------------------------------------
Randall Taylor, Director

/s/ JAMES SAUNDERS April 18, 1997
- --------------------------------------------
James Saunders, Director

/s/ BRADLEY FORST April 18, 1997
- --------------------------------------------
Bradley Forst, Secretary

II-20