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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
SIMULA, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No Filing Fee required.
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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SIMULA, INC.
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 12, 1997
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The 1997 Annual Meeting of Shareholders of Simula, Inc. (the "Company")
will be held at The Buttes Mountain Resort, 2000 West Westcourt Way, Tempe,
Arizona, Thursday, June 12, 1997, at 2:00 p.m., Mountain Standard Time, for the
following purposes:
1. To vote for the election of eight Directors;
2. To vote on ratification of the selection of Deloitte & Touche,
LLP as the independent public accountants for the Company's
fiscal year 1997;
3. To vote on a proposed amendment to the Company's 1994 Stock
Option Plan; and
4. To transact such other business as may properly come before
the meeting or any adjournment thereof.
April 11, 1997 has been fixed as the record date for the determination
of the Shareholders entitled to notice of, and to vote at, this meeting or any
adjournment thereof. The list of Shareholders entitled to vote at this meeting
is available at the offices of Simula, Inc., 2700 North Central Avenue, Suite
1000, Phoenix, Arizona 85004 for examination by any Shareholder.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE SIGN,
DATE AND RETURN THE ENCLOSED PROXY, WHICH IS SOLICITED BY AND ON BEHALF OF THE
BOARD OF DIRECTORS. THE GIVING OF SUCH PROXY WILL NOT AFFECT YOUR RIGHT TO
REVOKE SUCH PROXY OR TO VOTE IN PERSON SHOULD YOU LATER DECIDE TO ATTEND THIS
MEETING.
By Order of the Board of Directors,
BRADLEY P. FORST
Secretary
Phoenix, Arizona
April 23, 1997
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SIMULA, INC.
2700 NORTH CENTRAL AVENUE
SUITE 1000
PHOENIX, ARIZONA 85004
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PROXY STATEMENT
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Proxies in the form enclosed are solicited by the Board of Directors of
Simula, Inc. (the "Company") for use at the 1997 Annual Meeting of Shareholders
of the Company to be held on June 12, 1997, and any adjournment thereof. The
proxy materials were mailed on or about April 23, 1997, to Shareholders of
record as of the close of business on April 11, 1997.
PROXIES
Execution of the enclosed proxy will not in any way affect a
Shareholder's right to attend the meeting and vote in person. Shareholders
giving proxies may revoke them at any time before they are exercised by filing
with the Secretary of the Company a written revocation or a duly executed proxy
bearing a later date, or by attending the meeting and voting in person.
The Company will bear the cost of solicitation of proxies, including
the charges and expenses of brokerage firms and others who forward proxy
materials to beneficial owners of stock. Solicitation by the Company will be by
mail, except for any incidental personal solicitation made by Directors,
officers and employees of the Company, who will receive no additional
compensation therefor.
ANNUAL REPORT
The Company's Annual Report accompanies this proxy. The Company's
Report on Form 10-K with financial statements for the fiscal year ended December
31, 1996, was filed with the United States Securities and Exchange Commission on
March 27, 1997. The Form 10-K is not incorporated by reference herein. The Form
10-K and any exhibit will be furnished to any requesting person who sets forth a
good faith representation that he or she was a beneficial owner of the Company's
Common Stock on April 11, 1997. The fee for furnishing a copy of the report and
any exhibit will be $3.00.
VOTING SECURITIES
As of April 11, 1997, the record date for Shareholders entitled to vote at
the meeting, there were 9,022,348 outstanding shares of the Company's Common
Stock. Each share of Common Stock is entitled to one vote on each matter to be
considered at the Annual Meeting. Cumulative voting for the election of
Directors is permitted. A majority of the total number of shares of Common Stock
outstanding constitutes a quorum. If a quorum is represented in person or by
proxy at the Annual Meeting, the affirmative vote
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of a majority of the shares will constitute the approval of the Shareholders.
Votes cast by proxy or in person at the meeting will be tabulated by the
election inspectors appointed for the meeting. The election inspectors will
treat abstentions as shares that are present and entitled to vote for purposes
of determining the presence of a quorum, but will be counted as unvoted for
purposes of determining approval of any matter. Under the rules of the New York
Stock Exchange, if a broker holding stock in "street name" indicates on the
proxy that it does not have discretionary authority as to certain shares to vote
on a particular matter, those shares will not be considered as present and
entitled to vote with respect to that matter and a "broker non-vote" will have
no effect on the voting on the matter. Subject to the foregoing, executed, duly
returned proxies will be voted as directed. If no specification is made, shares
represented by the proxy will be voted "for" matters presented for
consideration.
SECURITY OWNERSHIP OF CERTAIN PRINCIPAL
SHAREHOLDERS AND MANAGEMENT
The following table sets forth information with respect to the number
of shares of Common Stock of the Company, as of April 11, 1997, beneficially
owned by (a) individual Directors; (b) named executive officers; and (c) all
Directors and named executive officers of the Company as a group.
SHARES OWNED
NAME OF BENEFICIAL OWNER NUMBER (1) PERCENTAGE (2)
------------------------ -------------- --------------
Stanley P. Desjardins(3) ................................................ 3,543,052 39%
Donald W. Townsend(4) ................................................... 450,000 5%
Bradley P. Forst(5) ..................................................... 151,050 2%
Sean K. Nolen(6) ........................................................ 25,000 *
James C. Withers(7) ..................................................... 24,900 *
Robert D. Olliver(8) .................................................... 24,922 *
Scott E. Miller(9) ...................................................... 26,050 *
All Directors and officers
as a group (nine persons) .............................................. 4,244,974 47%
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(1) An * indicates ownership of less than 1% of the outstanding Common
Stock. 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 11, 1997 by the exercise of
stock options.
(2) The percentages shown include the shares of Common Stock which the
person will have the right to acquire within 60 days of April 11, 1997.
In calculating the percentage of ownership, all shares of Common Stock
which the identified person will have the right to acquire within 60
days of April 11, 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 beneficial owners 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.
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(5) Includes options to purchase 150,000 shares of Common Stock which are
presently exercisable. Does not include options for 50,000 shares not
exercisable before January 1998.
(6) Includes options to purchase 25,000 shares of Common Stock which are
presently exercisable. Does not include options for 150,000 shares not
exercisable before January 1998.
(7) Includes options to purchase 24,000 shares of Common Stock which are
presently exercisable. Does not include options for 1,500 shares not
exercisable before January 1998.
(8) Includes options to purchase 21,903 shares of Common Stock which are
presently exercisable. Does not include options for 1,500 shares not
exercisable before January 1998.
(9) Includes options to purchase 24,000 shares of Common Stock which are
presently exercisable. Does not include options for 1,500 shares not
exercisable before January 1998.
PROPOSAL NO. 1.
ELECTION OF DIRECTORS
The Articles of Incorporation of the Company provide for a Board of
Directors of not less than two nor more than fifteen in number and may be
altered as provided in the Company's bylaws. The term of office of all Directors
will expire at the 1998 Annual Meeting of Shareholders. Vacancies occurring
during a term may be filled by the Company's Board of Directors for the
remainder of the full term.
On February 20, 1997, the Company's Board of Directors nominated
Messrs. Stanley P. Desjardins, Donald W. Townsend, Bradley P. Forst, Sean K.
Nolen, James C. Withers, Robert D. Olliver, Ian Grant and Scott E. Miller for
re-election to the Board of Directors. On February 24, 1997, Mr. Ian Grant
resigned from the Board of Directors. On April 1, 1997, the Board nominated Mr.
John M. Leinonen to be the newest member of the Board of Directors.
Pursuant to the provisions of Arizona General Corporation Law, at each
election for Directors, every Shareholder entitled to vote at such election has
the right to vote, in person or by proxy, the number of shares owned by him for
as many persons as there are Directors to be elected for whose election he has a
right to vote, or to cumulate his votes by giving one candidate as many votes as
the number of such Directors multiplied by the number that his shares shall
equal, or by distributing such vote on the same principle among any number of
such candidates.
It is intended that the proxies will be voted for the nominees or for a
substitute nominee, in the case of any nominee who becomes unavailable, on a pro
rata basis among the nominees unless instructions to the contrary are indicated
on the accompanying proxy form.
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THE BOARD OF DIRECTORS
The following table sets forth certain information with respect to the
individuals who are nominated for election as Directors.
NAME AGE POSITION
---- --- --------
Stanley P. Desjardins 63 Chairman of the Board of Directors
Donald W. Townsend 57 President and Director
Bradley P. Forst 43 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
John M. Leinonen 59 Director
Stanley P. Desjardins. Mr. Desjardins founded the Company in 1975 and
has served as its 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 Ultrasytems, 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. Mr. Townsend has served as President since October
1994. He was Executive Vice President from 1989 to 1994, Treasurer and Secretary
from 1986 until 1994, and has been a Director since 1989. 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. Mr. Forst joined the Company as Vice President and
General Counsel in early 1995, and became Secretary and a Director in August
1995. Prior to joining the Company, Mr. Forst was engaged in the private
practice of law in Phoenix, Arizona, from 1985 to 1995. Included among his
clients was the Company, for whom 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. Mr. Forst received his J.D. from the
University of Tulsa College of Law in 1978, and his LL.M. from Columbia
University School of Law in New York City in 1981.
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Sean K. Nolen. Mr. Nolen joined the Company as Vice President of
Finance, Chief Financial Officer and Treasurer, and as a Director in April 1996.
Prior to joining the Company, from 1984 to 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 received his B.S. in Accountancy from Northern Arizona
University. Mr. Nolen is a Certified Public Accountant.
James C. Withers. Mr. 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 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. Mr. 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. Mr. Miller has served as a Director of the Company
since January 1995. Mr. Miller is a Director of Investment Banking of H.D. 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.
John M. Leinonen. Mr. Leinonen is Vice President, Automotive Business
Development, for Failure Analysis Associates, Inc. Failure Analysis is an
analytical, testing, and safety engineering services firm based in Menlo Park,
California. From 1960 to 1995, Mr. Leinonen was employed by Ford Motor Company,
where for over a 22 year period he directed all activities in Ford's automotive
safety office, including vehicle safety assurance, safety regulations and
planning, and production vehicle safety and compliance. Mr. Leinonen was
President of the Society of Automotive Engineers ("SAE") in 1995, and has served
six years as a member of SAE's Board of Directors. Mr. Leinonen received his
M.S. in Mechanical Engineering from the University of Michigan in 1960 and is a
Registered Professional Engineer.
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. Outside 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.
BUSINESS OF THE BOARD OF DIRECTORS
During the fiscal year ended December 31, 1996, the Company's Board of
Directors held six meetings. No director attended fewer than 75% of these
meetings.
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AUDIT COMMITTEE
The Company's Audit Committee is comprised of Messrs. Withers, Olliver
and Miller, all of whom are independent Directors. The functions of the Audit
Committee are to receive reports with respect to loss contingencies, the public
disclosure or financial statement notation of which may be legally required; the
annual review and examination of those matters that relate to a financial and
performance audit of the Company's employee benefit plans; to recommend to the
Company's Board of Directors the selection, retention and termination of the
Company's independent accountants; to review the professional services, proposed
fees and independence of such accountants; and to provide for the periodic
review and examination of management performance in selected aspects of
corporate responsibility. The Audit Committee held two meetings during the
fiscal year ended December 31, 1996.
COMPENSATION COMMITTEE
The Company's Compensation Committee consists of Messrs. Withers,
Olliver and Miller, all of whom are independent (non-employee) Directors. The
functions of the Compensation Committee are to review annually the performance
of the Chairman and President and other executive officers whose compensation is
subject to the review and recommendation by the Committee to the Company's Board
of Directors. Additionally, the Compensation Committee's role is to review
compensation of outside Directors for service on the Company's Board of
Directors and for service on committees of the Company's Board of Directors, and
to review the level and extent of applicable benefits provided by the Company
with respect to health and medical coverage, stock options and other stock plans
and benefits. The Compensation Committee held three meetings during the fiscal
year ended December 31, 1996. See "Report Of The Compensation Committee" and
"Interlocks and Insider Participation" in the following sections.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires each director and executive officer of the Company, and
each person who owns more than ten percent (10%) of a registered class of the
Company's equity securities to file by specific dates with the Securities and
Exchange Commission (the "SEC") reports of ownership and reports of change of
ownership of equity securities of the Company. Officers, Directors, and 10%
stockholders are required by the SEC to furnish the Company with copies of all
Section 16(a) forms they file. The Company is required to report in this report,
any failure of its Directors and executive officers to file by the relevant due
date, any of these reports during the Company's fiscal year. To the Company's
knowledge, all Section 16(a) filing requirements were complied with during the
fiscal year ended December 31, 1996.
LIMITATION ON LIABILITY OF DIRECTORS
The General Corporation Law of the State of Arizona, under which the
Company is organized, was amended in full effective January 1, 1996. Subsequent
to such modification of the Arizona Corporate Code, the Company, through
resolution of its Board of Directors and approval of its Shareholders at the
1996 Annual Meeting, amended and restated its Articles of Incorporation,
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 in 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
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harm on the corporation or its shareholders; (iii) the making of unlawful
distributions; and (iv) intentional violations of criminal law.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In August 1996, Mr. Desjardins lent $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.
In 1995, it was determined by management that the regulatory burdens
that were imposed on the Company's 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.
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.
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EXECUTIVE COMPENSATION
The following table sets forth the total compensation received by the
Company's 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(#)
- --------------------------- ---- --------- -------- --------------- ---------------
Stanley P. Desjardins .................. 1996 $200,000
Chairman of the Board 1995 200,000
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 Counsel, 1995 140,000 56,250
and Secretary(4)
Sean K. Nolen........................... 1996 120,000 25,000
Vice President of Finance, Chief
Financial Officer, and Treasurer(5)
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(1) Included as salary are nominal amounts which the Company contributes to the
401(k) accounts of Messrs. Desjardins and Townsend. See "Executive
Compensation -- 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 from the Company 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 from the Company for 1996 was
$80,000.
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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 shall 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 identical terms as those contained in Mr.
Desjardins' employment agreement.
In addition to the foregoing, the Company has also entered into change
of control employment agreements with six key employees and 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 Option Plans."
STOCK OPTIONS AND BENEFIT PLANS
Stock Option Plans
In 1992, the Company 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. 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. The 1994
Plan currently reserves up to 1,545,000 shares of Common Stock for issuance
under the Plan. Through December 31, 1996, a total of 876,250 options had been
granted pursuant to the 1994 Plan. The Company is proposing, as part of this
Proxy, to increase the number of shares reserved under the 1994 Plan by 955,000,
for a total number of shares reserved under such Plan of 2,500,000. See
"PROPOSAL NO. 3 - AMENDMENT OF THE COMPANY'S 1994 STOCK OPTION PLAN."
Except as to the number of shares reserved for issuance under the 1992
Plan and the 1994 Plan, respectively, the provisions, terms and conditions of
the two plans, which are hereafter collectively
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referred to as the "Plans," are substantially the same. 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 may be awarded in the form
of incentive stock options or non-statutory options, a substantially greater
number of incentive stock options were and have been awarded under the 1992 Plan
and 1994 Plan, respectively, and it is anticipated that a substantially greater
number of remaining incentive stock options will be awarded under the 1994 Plan.
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 ten 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 twelve 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 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, shall
be determined by the Compensation Committee.
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
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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 "Executive Compensation - 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 services to the Company the right
to purchase up to an aggregate of 19,500 shares of Common Stock at $.01 per
share. The Restricted Stock Plan is intended to allow the Company to provide
awards of Common Stock to Directors or long-term employees who have provided
valuable past services to the Company. The Restricted Stock Plan authorizes
disinterested members of the Board of Directors to determine the persons to whom
the restricted stock plan will be granted and the terms and conditions and
restrictions of such awards. As of the date of this Proxy Statement, 4,500
shares have been issued under the Restricted Stock Plan.
Options Granted under Plans
In 1996 the Board of Directors approved the recommendation of the
Compensation Committee and granted certain incentive stock options under the
Plans to key employees. The options granted are exercisable for a total of
212,250 shares under the 1994 Plan. The options granted in fiscal 1997 are
disclosed in the section "Security Ownership of Certain Principal Shareholders
and Management."
The following table sets forth information regarding options granted
in fiscal 1996 to executive officers named in the Summary Compensation Table:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(Individual Grants)
PERCENT OF POTENTIAL REALIZABLE
NUMBER OF TOTAL VALUE AT ASSUMED
SECURITIES OPTIONS/ ANNUAL RATES
UNDERLYING SARS EXERCISE OF STOCK PRICE
OPTIONS/ GRANTED TO OR BASE APPRECIATION FOR
SARS EMPLOYEES IN PRICE EXPIRATION OPTION TERM(1)
NAME GRANTED(1) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ---- ---------- ----------- ------ ---- ----- ------
Donald W. Townsend ...... 70,000 20% $12.75 2006 $1,453,883 $2,315,145
Bradley P. Forst ........ 50,000 14% 12.75 2006 1,038,488 1,653,675
Sean K. Nolen............ 25,000 7% 16.13 2006 656,691 1,045,706
- ----------
(1) Calculated from a base price equal to the exercise price of each option,
which was the fair market value of the Common Stock on the date of grant.
The amounts represent only certain assumed rates of appreciation. Actual
gains, if any, on stock option exercises and Common Stock holdings cannot be
predicted, and there can be no assurance that the gains set forth on the
table will be achieved. Further, the number shown is the gross dollar value
of the Common Stock, but does not give effect to the payment of the purchase
price to exercise the option, and thus does not represent the net value or
net gain, and does not reflect the taxes payable on such gain.
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FISCAL YEAR END OPTION/SAR VALUES
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT FISCAL YEAR END OPTIONS/SARS AT FISCAL YEAR END
NAME (#)EXERCISABLE/UNEXERCISABLE ($)(1)EXERCISABLE/UNEXERCISABLE
---- ------------------------------- --------------------------------
Donald W. Townsend ......................... 96,600/70,000 $240,938/52,500
Bradley P. Forst ........................... 56,250/50,000 -0-/37500
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 ten 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 are 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.
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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 from 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 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. 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.
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REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee is comprised of three outside
(non-employee) Directors. The compensation of the Company's Chairman and
President is set by the Committee and the compensation for other executive
officers is set by the Board after consideration of Committee recommendations.
The Committee's objectives are first to provide that executive compensation is
competitive and second, to align compensation with increases in Shareholders'
value.
In developing policies for fiscal 1996, the Compensation Committee
relied upon the report of an independent compensation consulting firm retained
in 1995 to provide advice to the Committee with respect to executive
compensation. Additionally, in 1996 the Committee instructed the Company's
finance department to review publicly filed documents and prepare an analysis of
compensation levels in a peer group of companies of similar size, lines of
business, and geographic area. Based on these two studies, the Committee, as it
did last year, again concluded that cash compensation paid to executive officers
was below competitive levels generally. Fiscal 1996 compensation places the
Company's executive officers in the lowest quartile range for management in
public corporations in related industries or with similar market capitalization.
Based upon the reports described above, the Committee reiterates its
policy that the Company should be competitive in total compensation, and include
as a part of total compensation opportunities for equity ownership. The
Committee believes that matters to be considered in determining overall
compensation should include (i) the level of responsibility, knowledge and
experience required, and (ii) competitive factors, which criteria will be
reviewed on an annual basis. The Committee also believes that in lieu of, or as
a supplement to cash compensation, stock options motivate its employees to serve
the Company in a manner that will provide the best overall return to the
Company's shareholders, and the Committee seeks to grant stock options to key
employees in a manner consistent with such belief. Having reviewed the
performance of the Company's executive officers for the fiscal year 1996, the
Compensation Committee approved the grant of significant additional stock
options to executive officers in 1996. The Committee decided that based on a
fiscal 1996 financial results, in lieu of cash compensation, option grants were
the preferred form of compensation in the best interests of the Company. The
Committee determined to not raise salaries for the Company's officers in 1996.
The Committee may recommend increases in mid or late 1997.
Stock option grants are made pursuant to two methods: (i)
discretionary awards, such as those made to segments of the Company whose
importance to its overall success is not easily quantifiable by reference to
operational data, such as executive management and research and development
functions, and (ii) formula-based awards granted at both the Company's corporate
and subsidiary levels, awarded upon the achievement of certain defined
performance targets or goals. Both methods were utilized by the Committee during
the Company's 1996 fiscal year.
Specifically, in 1996 the Compensation Committee awarded stock options
to the President and other executive officers in connection with performance and
achievement of objectives for the Company including, record revenues;
assimilation of acquired companies and management of significant investments in
new product manufacturing capacity; the Company's listing on NYSE; the
implementation of an annual strategic planning exercise and report; the adoption
of a financial reporting system including monthly subsidiary performance to
budget target reviews; broadening of management responsibility for new areas
including investor relations, shareholder relations, and regulatory and
government relations; and the attainment of additional Company financing through
new or amended bank credit facilities, a private placement of debt securities,
and efforts made in connection with equity capital offerings.
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In an effort to encourage equity ownership in the Company by its
executive officers through the exercise of stock options, in 1996 the Committee
adopted a plan to provide such executives with tax assistance in connection with
the option exercises which they may make from time to time. Typically, in order
to exercise their options, executive officers are required to sell a portion of
the shares purchased to provide the funds to pay for the option exercises.
Because of the immediate exercise and sale, certain favorable tax aspects of the
options under the relevant IRS rules are eliminated. The Compensation Committee
determined that to ensure that executive officers of the Company have the
incentive to exercise their options, the Company may pay such taxes for the
accounts of the executives. Such payments are fully deductible by the Company as
a compensation expense. The amounts do not accrue to the executive officers
themselves, but are paid directly to state and federal taxing authorities. For
fiscal 1996, Mr. Townsend received tax assistance in connection with the
exercise of options.
In 1996, the Committee authorized the purchase of key-man life
insurance for six key employees and members of executive management. These
policies, purchased in early 1997, provide that in the event of death during the
term of employment, a portion of the death benefit proceeds will be paid to the
Company and a portion to the employee's designated beneficiary.
Presently, Stanley Desjardins and Donald Townsend are retained
pursuant to employment agreements. In the interest of furthering the Company's
ability to attract and retain quality managers, the Compensation Committee also
approved agreements which provide for severance pay and the immediate vesting of
stock options in the event of a change in control of the Company. Six key
employees and members of executive management have such agreements with the
Company. The terms of the employment agreements currently in place, including a
discussion of changes in control generally, are disclosed herein under the
section "EXECUTIVE COMPENSATION -- Employment Agreements."
This report is submitted by the undersigned members of the
Compensation Committee.
Robert D. Olliver
James C. Withers
Scott E. Miller
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee consists of Messrs. Miller,
Olliver and Withers, all of whom are independent disinterested Directors for
purposes of administering the stock option plans under SEC Rule 16(b)(3). These
individuals do not serve on the Compensation Committees of other corporations.
STOCK PERFORMANCE GRAPH
The graph on the following page shows the Company's total return to
Shareholders compared to three indices over the period from December 31, 1992
(the last day of the fiscal year following the Company's initial public
offering), through December 31, 1996, the last day of the most recent fiscal
year.
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Due to the fact that it is difficult to find a line of business index
or peer group index of comparable companies, the indices were selected to
represent (i) the stock market as a whole; and (ii) companies with similar
market capitalization to the Company.
The cumulative total return shown on the Stock Performance Graph
indicates historical results only, and is not necessarily indicative of future
results. The Performance Graph shall not be deemed incorporated by reference by
any general statement into any filing under the Securities Act of 1933 or under
the Securities Exchange Act of 1934.
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STOCK PERFORMANCE GRAPH
Comparison of Five-Year Cumulative Total Return*
Simula, Inc., Russell 3000 Index
Nasdaq Composite Index and the S&P 600 Small Cap Index
[GRAPH]
*Assumes $100 invested in Simula, Inc., Russell 3000 Index, Nasdaq Composite
Index and S&P 600 Small Cap Index on December 31, 1992.
VALUE OF $100 INVESTMENT
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
Simula, Inc. $100.00 $114.38 $479.23 $599.04 $431.31
Russell 3000 Index $100.00 $108.14 $105.46 $140.88 $167.91
Nasdaq Composite Index $100.00 $114.75 $111.08 $155.42 $190.71
S&P 600 Small Cap Index $100.00 $117.59 $110.74 $142.40 $171.07
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PROPOSAL NO. 2.
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Company's Board of Directors, acting upon the recommendation of its
Audit Committee, has selected and is submitting to Shareholders for their
confirmation the appointment of Deloitte & Touche, LLP, as auditors for the
Company for its current fiscal year ending December 31, 1997. The approval of
the Shareholders is being sought because of the importance of independent public
accountants in a publicly held corporation. If the Shareholders do not approve
the appointment of Deloitte & Touche, the Company's Board of Directors will
reconsider its selection of independent accountants.
For the year ended December 31, 1996, Deloitte & Touche provided audit
services to the Company, including examination of the annual consolidated
financial statements of the Company, review of unaudited quarterly financial
information, assistance and consultation in connection with filing the Company's
Reports to the Securities and Exchange Commission ("SEC") on Forms 10-Q and
10-K, registration statements on Forms S-3 and S-8 and other filings with the
SEC, and consultation in connection with various audit-related and accounting
matters.
Each year, the Audit Committee will review and approve in advance the
scope of the annual audit by the Company's independent accountants. The Audit
Committee will also be advised of significant non-audit professional services
provided by such accountants to assess whether the rendering of such services
would impair the independence of the firm.
It is intended that the proxies will be voted in favor of ratifying the
selection of the Company's independent accountants unless instructions to the
contrary are indicated on the accompanying proxy form.
PROPOSAL NO. 3
PROPOSAL TO AMEND THE COMPANY'S 1994 STOCK OPTION PLAN
The Company's Board of Directors has approved amendments to the
Company's 1994 Stock Option Plan ("1994 Plan") which, if so approved, will
increase the number the shares reserved for issuance pursuant to the 1994 Plan
by 955,000. For a discussion of the terms of the 1994 Plan, see "Executive
Compensation -- Stock Options and Benefit Plans."
In August 1994, the Company's Board of Directors adopted the 1994
Plan, and the Plan was subsequently approved by the Shareholders of the Company
at the 1995 Annual Meeting and amended by the Shareholders at the 1996 Annual
Meeting. The current proposal, if approved by the Shareholders, would increase
the number of shares reserved for issuance under the 1994 Plan by 955,000.
The Compensation Committee of the Board of Directors of the Company
has determined that in order to continue to compensate the Company's executive
officers and key employees at competitive levels, and to provide incentives to
such key personnel by providing an equity stake in the Company's performance, it
is in the best interests of the Company to continue to award such individuals
with stock options. See "Report Of The Compensation Committee" in this Proxy
Statement. In order to further the policy of the Compensation Committee, the
Board of Directors has determined that the 1994 Plan should be amended to
increase the number of shares of the Company's Common Stock reserved and thus
available for issuance pursuant to options granted under the Plan.
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Upon approval of the Shareholders, the 1994 Plan will be amended in
the foregoing manner pursuant to Section 13 of the Plan.
OTHER MATTERS
The Company's Board of Directors is not presently aware of any matters
to be presented at the meeting other than those described above. However, if
other matters properly come before the meeting, it is the intention of the
persons named in the accompanying proxy to vote said proxy on such matters in
accordance with their judgment.
SHAREHOLDER PROPOSALS
Any Shareholder desiring to have a proposal included in the Company's
Proxy Statement for its 1998 Annual Meeting must deliver such proposal (which
must comply with the requirements of Rule 14a-8 promulgated under the Securities
Exchange Act of 1934) to the Company's principal executive offices not later
January 1, 1998.
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