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Exhibit 10.24
CREDIT AGREEMENT
THIS AGREEMENT is entered into as of June 30, 1998, by and between
SIMULA, INC., an Arizona corporation ("Borrower"), and WELLS FARGO BANK,
NATIONAL ASSOCIATION ("Bank").
RECITAL
Borrower has requested from Bank the credit accommodations described
below (each, a "Credit" and collectively, the "Credits"), and Bank has agreed to
provide the Credits to Borrower on the terms and conditions contained herein.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Bank and Borrower hereby agree as follows:
ARTICLE I
THE CREDITS
SECTION 1.1. LINE OF CREDIT.
(a) Line of Credit. Subject to the terms and conditions of this
Agreement, Bank hereby agrees to make advances to Borrower from time to time up
to and including June 1, 1999, not to exceed at any time the aggregate principal
amount of Twenty Million Dollars ($20,000,000.00) ("Line of Credit"), the
proceeds of which shall be used to finance Borrower's working capital
requirements. Borrower's obligation to repay advances under the Line of Credit
shall be evidenced by a promissory note substantially in the form of Exhibit A
attached hereto ("Line of Credit Note"), all terms of which are incorporated
herein by this reference.
(b) Letter of Credit Subfeature. As a subfeature under the Line of
Credit, Bank agrees from time to time during the term thereof to issue standby
and/or sight commercial letters of credit for the account of Borrower (each, a
"Letter of Credit" and collectively, "Letters of Credit"); provided however,
that the form and substance of each Letter of Credit shall be subject to
approval by Bank, in its sole discretion; and provided further, that the
aggregate undrawn amount of all outstanding Letters of Credit shall not at any
time exceed Two Million Dollars ($2,000,000.00). No Letter of Credit shall have
an expiration date subsequent to the maturity date of the Line of Credit. The
undrawn amount of all Letters of Credit shall be reserved under the Line of
Credit and shall not be available for borrowings thereunder. Each Letter of
Credit shall be subject to
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the additional terms and conditions of the Letter of Credit Agreement and
related documents, if any, required by Bank in connection with the issuance
thereof (each, a "Letter of Credit Agreement" and collectively, "Letter of
Credit Agreements"). Each draft paid by Bank under a Letter of Credit shall be
deemed an advance under the Line of Credit and shall be repaid by Borrower in
accordance with the terms and conditions of this Agreement applicable to such
advances; provided however, that if advances under the Line of Credit are not
available, for any reason, at the time any draft is paid by Bank, then Borrower
shall immediately pay to Bank the full amount of such draft, together with
interest thereon from the date such amount is paid by Bank to the date such
amount is fully repaid by Borrower, at the rate of interest applicable to
advances under the Line of Credit. In such event Borrower agrees that Bank, in
its sole discretion, may debit any demand deposit account maintained by Borrower
with Bank for the amount of any such draft.
(c) Borrowing and Repayment. Borrower may from time to time during the
term of the Line of Credit borrow, partially or wholly repay its outstanding
borrowings, and reborrow, subject to all of the limitations, terms and
conditions contained herein or in the Line of Credit Note; provided however,
that the total outstanding borrowings under the Line of Credit shall not at any
time exceed the maximum principal amount available thereunder, as set forth
above.
SECTION 1.2. TERM LOAN.
(a) Term Loan. Subject to the terms and conditions of this Agreement,
Bank hereby agrees to make a loan to Borrower in the principal amount of Three
Million Five Hundred Seventy-Nine Thousand Four Hundred Fifty Dollars
($3,579,450.00) ("Term Loan"), the proceeds of which shall be used to refinance
Borrower's existing debt with Bank. Borrower's obligation to repay Term Loan
shall be evidenced by a promissory note substantially in the form of Exhibit B
attached hereto ("Term Note"), all terms of which are incorporated herein by
this reference.
(b) Repayment. The principal amount of Term Loan shall be repaid in
accordance with the provisions of the Term Note.
(c) Prepayment. Borrower may prepay principal on Term Loan solely in
accordance with the provisions of the Term Note.
SECTION 1.4. INTEREST/FEES.
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(a) Interest. The outstanding principal balance of the Line of Credit
and the Term Loan shall bear interest at the rate of interest set forth in the
Line of Credit Note and the Term Note.
(b) Computation and Payment. Interest shall be computed on the basis of
a 360-day year, actual days elapsed. Interest shall be payable at the times and
place set forth in the Line of Credit Note and the Term Note (collectively, the
"Notes").
(c) Commitment Fee. Borrower shall pay to Bank a non-refundable
commitment fee for the Line of Credit equal to $50,000.00, which fee shall be
due and payable in full on the date of this Agreement.
(d) Unused Commitment Fee. Borrower shall pay to Bank a fee equal to
one-half percent (.50%) per annum (computed on the basis of a 360-day year,
actual days elapsed) on the average daily unused amount of the Line of Credit,
which fee shall be calculated on a quarterly basis by Bank and shall be due and
payable by Borrower in arrears on each June 30, September 30, December 31 and
March 31.
(e) Letter of Credit Fees. Borrower shall pay to Bank fees upon the
issuance of each Letter of Credit, upon the payment or negotiation by Bank of
each draft under any Letter of Credit and upon the occurrence of any other
activity with respect to any Letter of Credit (including without limitation, the
transfer, amendment or cancellation of any Letter of Credit) determined in
accordance with Bank's standard fees and charges then in effect for such
activity.
SECTION 1.5. COLLECTION OF PAYMENTS. If not paid when and as due,
Borrower authorizes Bank to collect all principal, interest and fees due under
each Credit by charging Borrower's demand deposit account number 4159-541416
with Bank, or any other demand deposit account maintained by Borrower with Bank,
for the full amount thereof. Should there be insufficient funds in any such
demand deposit account to pay all such sums when due, the full amount of such
deficiency shall be immediately due and payable by Borrower.
SECTION 1.6. COLLATERAL.
As security for all indebtedness of Borrower to Bank under the Term
Loan, Borrower hereby grants to Bank security interests of first priority in all
Borrower's equipment, and Borrower shall cause its U.S.Subsidiaries to grant to
Bank security interests of first priority in all their equipment.
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All of the foregoing shall be evidenced by and subject to the terms of
such security agreements, financing statements and other documents as Bank shall
reasonably require, all in form and substance satisfactory to Bank. Borrower
shall reimburse Bank immediately upon demand for all costs and expenses incurred
by Bank in connection with any of the foregoing security, including without
limitation, filing and recording fees and costs of appraisals.
For purposes of this Agreement, "Subsidiaries" shall mean all business
associations directly or indirectly controlled by Borrower. As of the date
hereof, Borrower's Subsidiaries located in the United States (collectively, the
"U.S. Subsidiaries", are: Simula Transportation Equipment Corporation, Airline
Interiors, Inc., Coach and Car Equipment Corporation, Artcraft Industries Corp.,
Viatech, Inc., Intaero, Ltd., Simula Automotive Safety Devices,
Inc.("ASD-Simula"), Simula Safety Systems, Inc., Simula Technologies, Inc. and
International Center for Safety Education, Inc. As of the date hereof,
Borrower's Subsidiaries located outside of the United States (collectively, the
"Foreign Subsidiaries") are: Simula Protective Systems, U.K. and Simula ASD
Limited U.K.
SECTION 1.7. GUARANTIES. All indebtedness of Borrower to Bank shall be
guaranteed by Borrower's U.S. Subsidiaries in the principal amount of
Twenty-Five Million Dollars ($25,000,000.00) each, as evidenced by and subject
to the terms of guaranties in form and substance satisfactory to Bank.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Borrower makes the following representations and warranties to Bank,
which representations and warranties shall survive the execution of this
Agreement and shall continue in full force and effect until the full and final
payment, and satisfaction and discharge, of all obligations of Borrower to Bank
subject to this Agreement.
SECTION 2.1. LEGAL STATUS. Borrower and its Subsidiaries are
corporations, duly organized and existing and in good standing under the laws of
the state of their incorporation, and are qualified or licensed to do business
(and in good standing as a foreign corporation, if applicable) in all
jurisdictions in which such qualification or licensing is required or in which
the failure to so qualify or to be so licensed could have a material adverse
effect on Borrower or its Subsidiaries.
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SECTION 2.2. AUTHORIZATION AND VALIDITY. This Agreement, the Notes, and
each other document, contract and instrument required hereby or at any time
hereafter delivered to Bank in connection herewith (collectively, the "Loan
Documents") have been duly authorized, and upon their execution and delivery in
accordance with the provisions hereof will constitute legal, valid and binding
agreements and obligations of Borrower or the party which executes the same,
enforceable in accordance with their respective terms.
SECTION 2.3. NO VIOLATION. The execution, delivery and performance by
Borrower or its Subsidiaries of each of the applicable Loan Documents do not
violate any provision of any law or regulation, or contravene any provision of
the Articles of Incorporation or By-Laws of Borrower or its Subsidiaries, or
result in any breach of or default under any contract, obligation, indenture or
other instrument to which Borrower or its Subsidiaries is a party or by which
Borrower or its Subsidiaries may be bound.
SECTION 2.4. LITIGATION. There are no pending, or to the best of
Borrower's knowledge threatened, actions, claims, investigations, suits or
proceedings by or before any governmental authority, arbitrator, court or
administrative agency which could have a material adverse effect on the
financial condition or operation of Borrower or any of its Subsidiaries other
than those disclosed by Borrower to Bank in writing prior to the date hereof.
SECTION 2.5. CORRECTNESS OF FINANCIAL STATEMENT. The consolidated
financial statements of Borrower dated December 31, 1997 and March 31, 1998, a
true copy of which has been delivered by Borrower to Bank prior to the date
hereof, (a) is complete and correct and presents fairly the financial condition
of Borrower and its Subsidiaries, (b) discloses all liabilities of Borrower and
its Subsidiaries that are required to be reflected or reserved against under
generally accepted accounting principles, whether liquidated or unliquidated,
fixed or contingent, and (c) has been prepared in accordance with generally
accepted accounting principles consistently applied. Since the date of such
financial statement there has been no material adverse change in the financial
condition of Borrower or its Subsidiaries, nor has Borrower or its Subsidiaries
mortgaged, pledged, granted a security interest in or otherwise encumbered any
of its assets or properties except in favor of Bank or as otherwise permitted by
Bank in writing.
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SECTION 2.6. INCOME TAX RETURNS. Borrower has no knowledge of any
pending assessments or adjustments of Borrower's or its Subsidiaries' income tax
payable with respect to any year.
SECTION 2.7. NO SUBORDINATION. There is no agreement, indenture,
contract or instrument to which Borrower or any of its Subsidiaries is a party
or by which Borrower or any its Subsidiaries may be bound that requires the
subordination in right of payment of any of Borrower's or its Subsidiaries'
obligations subject to this Agreement to any other obligation of Borrower or its
Subsidiaries.
SECTION 2.8. PERMITS, FRANCHISES. Borrower and its Subsidiaries
possess, and will hereafter possess, all permits, consents, approvals,
franchises and licenses required and rights to all trademarks, trade names,
patents, and fictitious names, if any, necessary to enable Borrower and its
Subsidiaries to conduct the business in which they are now engaged in compliance
with applicable law.
SECTION 2.9. ERISA. Borrower and its Subsidiaries are in compliance in
all material respects with all applicable provisions of the Employee Retirement
Income Security Act of 1974, as amended or recodified from time to time
("ERISA"); Borrower and its Subsidiaries have not violated any provision of any
defined employee pension benefit plan (as defined in ERISA) maintained or
contributed to by Borrower or its Subsidiaries (each, a "Plan"); no Reportable
Event as defined in ERISA has occurred and is continuing with respect to any
Plan initiated by Borrower or its Subsidiaries; Borrower and its Subsidiaries
have met its minimum funding requirements under ERISA with respect to each Plan;
and each Plan will be able to fulfill its benefit obligations as they come due
in accordance with the Plan documents and under generally accepted accounting
principles.
SECTION 2.10. OTHER OBLIGATIONS. Borrower and its Subsidiaries are not
in default on any obligation for borrowed money, any purchase money obligation
or any other material lease, commitment, contract, instrument or obligation.
SECTION 2.11. ENVIRONMENTAL MATTERS. Except as disclosed by Borrower to
Bank in writing prior to the date hereof, Borrower and its Subsidiaries are in
compliance in all material respects with all applicable federal or state
environmental, hazardous waste, health and safety statutes, and any rules or
regulations adopted pursuant thereto, which govern or affect any of Borrower's
or its Subsidiaries' operations and/or properties, including without limitation,
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, the Superfund Amendments and Reauthorization Act of 1986, the Federal
Resource
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Conservation and Recovery Act of 1976, and the Federal Toxic Substances Control
Act, as any of the same may be amended, modified or supplemented from time to
time. None of the operations of Borrower or its Subsidiaries are the subject of
any federal or state investigation evaluating whether any remedial action
involving a material expenditure is needed to respond to a release of any toxic
or hazardous waste or substance into the environment. Borrower and its
Subsidiaries have no material contingent liability in connection with any
release of any toxic or hazardous waste or substance into the environment.
2.12. ACTIVE SUBSIDIARIES. Except for the U.S. Subsidiaries and Foreign
Subsidiaries listed in Section 1.6, there are no other existing Subsidiaries.
ARTICLE III
CONDITIONS
SECTION 3.1. CONDITIONS OF INITIAL EXTENSION OF CREDIT. The obligation
of Bank to grant any of the Credits is subject to the fulfillment to Bank's
satisfaction of all of the following conditions:
(a) Approval of Bank Counsel. All legal matters incidental to the
granting of each of the Credits shall be satisfactory to Bank's counsel.
(b) Documentation. Bank shall have received, in form and substance
satisfactory to Bank, each of the following, duly executed:
(i) This Agreement and the Notes.
(ii) Corporate Borrowing Resolution.
(iii) Certificate of Incumbency.
(iv) Articles of Incorporation.
(v) Continuing Guaranties from all guarantors listed in Section
1.7.
(vi) Security Agreement: Equipment.
(vii) Third Party Security Agreement.
(viii) UCC Financing Statement.
(ix) Such other documents as Bank may require under any other
Section of this Agreement.
(c) Financial Condition. There shall have been no material adverse
change, as determined by Bank, in the financial condition or business of
Borrower or any guarantor hereunder, nor any material decline, as determined by
Bank, in the market value of any collateral required hereunder or a substantial
or material portion of the assets of Borrower or any such guarantor.
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(d) Insurance. Borrower shall have delivered to Bank evidence of
insurance coverage on all Borrower's and Borrower's Subsidiaries property, in
form, substance, amounts, covering risks and issued by companies satisfactory to
Bank, and where required by Bank, with loss payable endorsements in favor of
Bank.
SECTION 3.2. CONDITIONS OF EACH EXTENSION OF CREDIT. The obligation of
Bank to make each extension of credit requested by Borrower hereunder shall be
subject to the fulfillment to Bank's satisfaction of each of the following
conditions:
(a) Compliance. The representations and warranties contained herein and
in each of the other Loan Documents shall be true on and as of the date of the
signing of this Agreement and on the date of each extension of credit by Bank
pursuant hereto, with the same effect as though such representations and
warranties had been made on and as of each such date, and on each such date, no
Event of Default as defined herein, and no condition, event or act which with
the giving of notice or the passage of time or both would constitute such an
Event of Default, shall have occurred and be continuing or shall exist.
(b) Documentation. Bank shall have received all additional documents
which may be required in connection with such extension of credit.
ARTICLE IV
AFFIRMATIVE COVENANTS
Borrower covenants that so long as Bank remains committed to extend
credit to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Bank under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower shall, unless Bank otherwise consents in
writing:
SECTION 4.1. PUNCTUAL PAYMENTS. Punctually pay all principal, interest,
fees or other liabilities due under any of the Loan Documents at the times and
place and in the manner specified therein.
SECTION 4.2. ACCOUNTING RECORDS. Maintain and cause its Subsidiaries to
maintain, adequate books and records in accordance with generally accepted
accounting principles consistently applied, and permit, and cause its
Subsidiaries to permit, any representative of Bank, at any reasonable time, to
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inspect, audit and examine such books and records, to make copies of the same,
and to inspect the properties of Borrower and its Subsidiaries.
SECTION 4.3. FINANCIAL STATEMENTS. Provide to Bank all of the
following, in form and detail satisfactory to Bank:
(a) not later than 120 days after and as of the end of each fiscal
year, a unqualified consolidated and consolidating financial statement on Form
10-k of Borrower and its Subsidiaries, audited by a certified public accountant
acceptable to Bank, to include a balance sheet and income statement;
(b) not later than 45 days after and as of the end of each fiscal
quarter, a consolidated and consolidating financial statement of Borrower and
its Subsidiaries on Form 10-Q, prepared by Borrower, to include a balance sheet
and income statement;
(c) contemporaneously with each annual and quarterly financial
statement of Borrower required hereby, a certificate of the president or chief
financial officer of Borrower that said financial statements are accurate and
that there exists no Event of Default nor any condition, act or event which with
the giving of notice or the passage of time or both would constitute an Event of
Default;
(d) from time to time such other information as Bank may reasonably
request.
SECTION 4.4. COMPLIANCE. Preserve and maintain and cause its
Subsidiaries to preserve and maintain, all material licenses, permits,
governmental approvals, rights, privileges and franchises necessary for the
conduct of business; and comply with the provisions of all documents pursuant to
which Borrower or its Subsidiaries are organized and/or which govern Borrower's
or its Subsidiaries' continued existence and with the requirements of all laws,
rules, regulations and orders of any governmental authority applicable to
Borrower and its Subsidiaries and/or their business.
SECTION 4.5. INSURANCE. Maintain and keep in force, and cause its
Subsidiaries to maintain and keep in force, insurance of the types and in
amounts customarily carried in lines of business similar to that of Borrower or
its Subsidiaries, including but not limited to fire, extended coverage, public
liability, flood, property damage and workers' compensation, with all such
insurance carried with companies and in amounts satisfactory to Bank, and
deliver to Bank from time to time at Bank's request schedules setting forth all
insurance then in effect.
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SECTION 4.6. FACILITIES. Keep, and cause its Subsidiaries to keep, all
properties useful or necessary to Borrower's and its Subsidiaries' business in
good repair and condition, and from time to time make necessary repairs,
renewals and replacements thereto so that such properties shall be fully and
efficiently preserved and maintained.
SECTION 4.7. TAXES AND OTHER LIABILITIES. Pay and discharge when due,
and cause its Subsidiaries to pay and discharge when due, any and all
indebtedness, obligations, assessments and taxes, both real or personal,
including without limitation federal and state income taxes and state and local
property taxes and assessments, except such (a) as Borrower or its Subsidiaries
may in good faith contest or as to which a bona fide dispute may arise, and (b)
for which Borrower or its Subsidiaries have made provision, to Bank's
satisfaction, for eventual payment thereof in the event obligated to make such
payment.
SECTION 4.8. LITIGATION. Promptly give notice in writing to Bank of any
litigation pending or threatened against Borrower or any of its Subsidiaries
with a claim in excess of $500,000.00.
SECTION 4.9. FINANCIAL CONDITION. Maintain Borrower's and its
Subsidiaries' financial condition as follows using generally accepted accounting
principles consistently applied and used consistently with prior practices
(except to the extent modified by the definitions herein), with compliance
determined commencing with Borrower's consolidated financial statements for the
period ending June 30, 1998:
(a) Current Ratio not at any time less than 2.0 to 1.0 measured on a
rolling four quarter, with "Current Ratio" defined as total current assets
divided by total current liabilities less current maturities of Subordinated
Debt, with "Subordinated Debt" defined as all loans that are fully subordinated
to all indebtedness of Borrower and its Subsidiaries to Bank pursuant to
subordination terms and provisions acceptable to Bank.
(b) Total Liabilities divided by Tangible Net Worth not at any time
greater than 1.0 to 1.0, with "Total Liabilities" defined as the aggregate of
current liabilities and non-current liabilities less Subordinated Debt, and with
"Tangible Net Worth" defined as the aggregate of total stockholders' equity plus
Subordinated Debt less any intangible assets (including deferred financing
costs).
(c) Net income after taxes not less than $1.00 on an annual basis,
determined as of each fiscal year end, and pre-tax profit
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not less than $1.00 for any two consecutive fiscal quarters, determined as of
the end of each fiscal quarter.
(d) EBITDA Coverage Ratio, on a year-to-date basis not less than 1.25
to 1.0 for the quarters ending March 31, 1998; June 30, 1998 and September 30,
1998, and 1.50 to 1.0 as of fiscal year ending December 31, 1998; and 1.50 to
1.0 as of the end of each fiscal quarter thereafter measured on a rolling
four-quarter basis, with "EBITDA" defined as net profit before tax plus interest
expense, depreciation expense and amortization expense, and with "EBITDA
Coverage Ratio" defined as EBITDA divided by the aggregate of total interest
expense plus the prior period current maturity of long-term debt excluding the
prior period current maturity of subordinated debt.
SECTION 4.10. NOTICE TO BANK. Promptly (but in no event more than five
(5) days after the occurrence of each such event or matter) give written notice
to Bank in reasonable detail of: (a) the occurrence of any Event of Default, or
any condition, event or act which with the giving of notice or the passage of
time or both would constitute an Event of Default; (b) any change in the name or
the organizational structure of Borrower or any of its Subsidiaries; (c) the
occurrence and nature of any Reportable Event or Prohibited Transaction, each as
defined in ERISA, or any funding deficiency with respect to any Plan; or (d) any
termination or cancellation of any insurance policy which Borrower or its
Subsidiaries are required to maintain, or any uninsured or partially uninsured
loss through liability or property damage, or through fire, theft or any other
cause affecting Borrower's or its Subsidiaries' property in excess of an
aggregate of $1,000,000.00.
SECTION 4.11. YEAR 2000 COMPLIANCE. Perform all acts reasonably
necessary to ensure that (a) Borrower and its Subsidiaries and any business in
which Borrower or any of its Subsidiaries holds a substantial interest, and (b)
all customers, suppliers and vendors that are material to Borrower's or its
Subsidiaries' business, become Year 2000 Compliant in a timely manner. Such acts
shall include, without limitation, performing a comprehensive review and
assessment of all of Borrower's and its Subsidiaries's systems and adopting a
detailed plan, with itemized budget, for the remediation, monitoring and testing
of such systems. As used herein, "Year 2000 Compliant" shall mean, in regard to
any entity, that all software, hardware, firmware, equipment, goods or systems
utilized by or material to the business operations or financial condition of
such entity, will properly perform date sensitive functions before, during and
after the year 2000. Borrower shall, and shall cause its Subsidiaries to,
immediately upon request, provide to Bank such certifications or other evidence
of Borrower's and its
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Subsidiaries' compliance with the terms hereof as Bank may from time to time
require.
Section 4.12. MANAGEMENT. Continue to employ on a full-time basis Mr.
Donald Townsend.
ARTICLE V
NEGATIVE COVENANTS
Borrower further covenants that so long as Bank remains committed to
extend credit to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Bank under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower will not without Bank's prior written
consent:
SECTION 5.1. USE OF FUNDS. Use any of the proceeds of any of the
Credits except for the purposes stated in Article I hereof.
SECTION 5.2. OTHER INDEBTEDNESS. Create, incur, assume or permit to
exist, nor permit any of its Subsidiaries to create, incur, assume or permit to
exist, any indebtedness or liabilities resulting from borrowings, loans or
advances, whether secured or unsecured, matured or unmatured, liquidated or
unliquidated, joint or several, except the liabilities of Borrower or its
Subsidiaries to Bank, and any other liabilities of Borrower or its Subsidiaries
existing as of, and disclosed to Bank prior to, the date hereof, and:
(a) unsecured trade, utility or accounts payable in the ordinary course
of business;
(b) off-balance sheet leases;
(c) liabilities permitted pursuant to Section 5.7;
(d) unsecured notes of Borrower to its Subsidiaries;
(e) Simula ASD Limited U.K. may enter into a loan with a lender outside
of the United States for the purpose of establishing a European manufacturing
plant as long as such indebtedness does not exceed $3,000,000.00; and
(f) Subordinated Debt [as defined in Section 4.9(a)] so long as such
Subordinated Debt does not exceed in the aggregate $65,000,000.00 and the
proceeds thereof are used for working
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capital purposes, capital expenditures and/or the reduction of any other
existing indebtedness.
SECTION 5.3. MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Merge into or
consolidate, nor permit any of its Subsidiaries to merge into or consolidate
with any other entity except intercompany consolidations; make any substantial
change in the nature of Borrower's or any of its Subsidiaries' businesses as
conducted as of the date hereof; acquire, nor permit any of its Subsidiaries to
acquire, all or substantially all of the assets of any other entity; nor sell,
lease, transfer or otherwise dispose of, nor permit any of its Subsidiaries to
sell, lease, transfer or otherwise dispose of, all or a substantial or material
portion of its assets except in the ordinary course of its business.
SECTION 5.4. GUARANTIES. Guarantee or become liable, nor permit any of
its Subsidiaries to guarantee or become liable, in any way as surety, endorser
(other than as endorser of negotiable instruments for deposit or collection in
the ordinary course of business), accommodation endorser or otherwise for, nor
pledge or hypothecate any assets of Borrower, nor permit any of its Subsidiaries
to pledge or hypothecate any assets, as security for, any liabilities or
obligations of any other person or entity, except any of the foregoing in favor
of Bank and the guaranty of any permitted Subordinated Debt [as defined in
Section 4.9 (a)] provided such guaranty is junior to all obligations and
indebtedness of Borrower and any of its Subsidiaries to Bank, pursuant to an
Intercreditor Agreement in form and substance satisfactory to Bank.
SECTION 5.5. LOANS, ADVANCES, INVESTMENTS. Make any loans or advances
to or investments in any person or entity, nor permit any of its Subsidiaries to
make any loans or advances to or investments in any person or entity, except any
of the foregoing existing as of, and disclosed to Bank prior to, the date
hereof, or as may otherwise be authorized under this Agreement, and additional
loans or advances in amounts not to exceed an aggregate of $500,000.00
outstanding or committed at any one time.
SECTION 5.6. DIVIDENDS, DISTRIBUTIONS. Declare or pay any dividend or
distribution either in cash, stock or any other property on Borrower's stock now
or hereafter outstanding, nor redeem, retire, repurchase or otherwise acquire
any shares of any class of Borrower's stock now or hereafter outstanding.
SECTION 5.7. PLEDGE OF ASSETS. Mortgage, pledge, grant or permit to
exist a security interest in, or lien upon, nor permit any of its Subsidiaries
to mortgage, pledge, grant or permit to
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exist a security interest in, or lien upon, all or any portion of Borrower's or
any of its Subsidiaries' assets now owned or hereafter acquired, located in the
United States, except any of the foregoing in favor of Bank or which is existing
as of, and disclosed to Bank in writing prior to, the date hereof, and:
(a) security interests held by the United States Small Business
Administration securing debt not in excess of $400,000.00;
(b) existing non-computer capital leases not in excess of $350,000.00
and any consolidation of any existing capital leases so long as no additional
assets of the Borrower or any of its Subsidiaries are taken as security;
(c) security interests on the real and personal property located at,
and associated with, the European manufacturing facility financed by Simula ASD
Limited U.K.;
(d) future purchase money security interests for computer equipment, or
capital leases or direct loans for computer equipment, not to exceed $500,000.00
in the aggregate at any time; and
(e) a mortgage on real property to be purchased in North Carolina in
support of its SEI Division (aka Safety Equipment International) to secure
indebtedness in an amount not exceeding $1,100,000.00.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.1. The occurrence of any of the following shall constitute an
"Event of Default" under this Agreement:
(a) Borrower shall fail to pay when due any principal, interest, fees
or other amounts payable under any of the Loan Documents.
(b) Any financial statement or certificate furnished to Bank in
connection with, or any representation or warranty made by Borrower or any other
party under this Agreement or any other Loan Document shall prove to be
incorrect, false or misleading in any material respect when furnished or made.
(c) Any default in the performance of or compliance with any
obligation, agreement or other provision contained herein or in any other Loan
Document (other than those referred to in subsections (a) and (b) above), and
with respect to any such
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default which by its nature can be cured, such default shall continue for a
period of twenty (20) days from its occurrence.
(d) Any default in the payment or performance of any obligation, or any
defined event of default, under the terms of any contract or instrument (other
than any of the Loan Documents) pursuant to which Borrower or any guarantor
hereunder has incurred any debt or other liability to any person or entity,
including Bank, in excess of $500,000.00 in outstanding principal.
(e) The filing of a notice of judgment lien against Borrower or any
guarantor hereunder; or the recording of any abstract of judgment against
Borrower or any guarantor hereunder in any county in which Borrower or such
guarantor has an interest in real property; or the service of a notice of levy
and/or of a writ of attachment or execution, or other like process, against the
assets of Borrower or any guarantor hereunder; or the entry of a judgment
against Borrower or any guarantor hereunder; and with respect to all of the
foregoing, there is no dismissal within sixty days thereof.
(f) Borrower or any guarantor hereunder shall become insolvent, or
shall suffer or consent to or apply for the appointment of a receiver, trustee,
custodian or liquidator of itself or any of its property, or shall generally
fail to pay its debts as they become due, or shall make a general assignment for
the benefit of creditors; Borrower or any guarantor hereunder shall file a
voluntary petition in bankruptcy, or seeking reorganization, in order to effect
a plan or other arrangement with creditors or any other relief under the
Bankruptcy Reform Act, Title 11 of the United States Code, as amended or
recodified from time to time ("Bankruptcy Code"), or under any state or federal
law granting relief to debtors, whether now or hereafter in effect; or any
involuntary petition or proceeding pursuant to the Bankruptcy Code or any other
applicable state or federal law relating to bankruptcy, reorganization or other
relief for debtors is filed or commenced against Borrower or any guarantor
hereunder which is not dismissed within forty-five days of the filing thereof,
or Borrower or any such guarantor shall file an answer admitting the
jurisdiction of the court and the material allegations of any involuntary
petition; or Borrower or any such guarantor shall be adjudicated a bankrupt, or
an order for relief shall be entered against Borrower or any such guarantor by
any court of competent jurisdiction under the Bankruptcy Code or any other
applicable state or federal law relating to bankruptcy, reorganization or other
relief for debtors.
(g) The occurrence of any adverse change in the financial condition of
Borrower, or any of its Subsidiaries, that Bank, in
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its reasonable discretion, deems material, or if Bank, in good faith shall
believe that the prospect of payment or performance by Borrower of its
obligations under any of the Loan Documents is impaired.
(h) The dissolution or liquidation of Borrower or any guarantor
hereunder; or Borrower or any such guarantor, or any of its directors,
stockholders or members, shall take action seeking to effect the dissolution or
liquidation of Borrower or such guarantor.
SECTION 6.2. REMEDIES. Upon the occurrence of any Event of Default: (a)
all indebtedness of Borrower under each of the Loan Documents, any term thereof
to the contrary notwithstanding, shall at Bank's option and without notice
become immediately due and payable without presentment, demand, protest or
notice of dishonor, all of which are hereby expressly waived by each Borrower;
(b) the obligation, if any, of Bank to extend any further credit under any of
the Loan Documents shall immediately cease and terminate; and (c) Bank shall
have all rights, powers and remedies available under each of the Loan Documents,
or accorded by law, including without limitation the right to resort to any or
all security for any of the Credits and to exercise any or all of the rights of
a beneficiary or secured party pursuant to applicable law. All rights, powers
and remedies of Bank may be exercised at any time by Bank and from time to time
after the occurrence of an Event of Default, are cumulative and not exclusive,
and shall be in addition to any other rights, powers or remedies provided by law
or equity.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. NO WAIVER. No delay, failure or discontinuance of Bank in
exercising any right, power or remedy under any of the Loan Documents shall
affect or operate as a waiver of such right, power or remedy; nor shall any
single or partial exercise of any such right, power or remedy preclude, waive or
otherwise affect any other or further exercise thereof or the exercise of any
other right, power or remedy. Any waiver, permit, consent or approval of any
kind by Bank of any breach of or default under any of the Loan Documents must be
in writing and shall be effective only to the extent set forth in such writing.
SECTION 7.2. NOTICES. All notices, requests and demands which any party
is required or may desire to give to any other party under any provision of this
Agreement must be in writing delivered to each party at the following address:
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BORROWER: SIMULA, INC.
2700 N Central Avenue, Suite 1000
Phoenix, AZ 85004
BANK: WELLS FARGO BANK, NATIONAL ASSOCIATION
Arizona RCBO #3839
100 West Washington, 25th Fl.
Phoenix, AZ 85003
or to such other address as any party may designate by written notice to all
other parties. Each such notice, request and demand shall be deemed given or
made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by
mail, upon the earlier of the date of receipt or three (3) days after deposit in
the U.S. mail, first class and postage prepaid; and (c) if sent by telecopy,
upon receipt.
SECTION 7.3. COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall pay to
Bank immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys' fees (to include outside
counsel fees and all allocated costs of Bank's in-house counsel), expended or
incurred by Bank in connection with (a) the negotiation and preparation of this
Agreement and the other Loan Documents (up to a maximum amount of $5,000.00 with
respect to attorney fees), Bank's continued administration hereof and thereof,
and the preparation of any amendments and waivers hereto and thereto, (b) the
enforcement of Bank's rights and/or the collection of any amounts which become
due to Bank under any of the Loan Documents, and (c) the prosecution or defense
of any action in any way related to any of the Loan Documents, including without
limitation, any action for declaratory relief, whether incurred at the trial or
appellate level, in an arbitration proceeding or otherwise, and including any of
the foregoing incurred in connection with any bankruptcy proceeding (including
without limitation, any adversary proceeding, contested matter or motion brought
by Bank or any other person) relating to any Borrower or any other person or
entity.
SECTION 7.4. SUCCESSORS, ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties; provided however, that
Borrower may not assign or transfer its interest hereunder without Bank's prior
written consent. Bank reserves the right to sell, assign, transfer, negotiate or
grant participations in all or any part of, or any interest in, Bank's rights
and benefits under each of the Loan Documents. In connection therewith, Bank may
disclose all documents and information which Bank now has or may hereafter
acquire relating to any of the Credits (provided that, absent the
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occurrence and continuation of an Event of Default, the recipient has accepted
the information subject to a confidentiality agreement with respect to
non-public information), Borrower or its business, any guarantor hereunder or
the business of such guarantor, or any collateral required hereunder.
SECTION 7.5. ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other
Loan Documents constitute the entire agreement between Borrower and Bank with
respect to the Credits and supersede all prior negotiations, communications,
discussions and correspondence concerning the subject matter hereof. This
Agreement may be amended or modified only in writing signed by each party
hereto.
SECTION 7.6. NO THIRD PARTY BENEFICIARIES. This Agreement is made and
entered into for the sole protection and benefit of the parties hereto and their
respective permitted successors and assigns, and no other person or entity shall
be a third party beneficiary of, or have any direct or indirect cause of action
or claim in connection with, this Agreement or any other of the Loan Documents
to which it is not a party.
SECTION 7.7. TIME. Time is of the essence of each and every provision
of this Agreement and each other of the Loan Documents.
SECTION 7.8. SEVERABILITY OF PROVISIONS. If any provision of this
Agreement shall be prohibited by or invalid under applicable law, such provision
shall be ineffective only to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or any remaining provisions
of this Agreement.
SECTION 7.9. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which when executed and delivered shall be deemed to be
an original, and all of which when taken together shall constitute one and the
same Agreement.
SECTION 7.10. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Arizona.
SECTION 7.11. ARBITRATION.
(a) Arbitration. Upon the demand of any party, any Dispute shall be
resolved by binding arbitration (except as set forth in (e) below) in accordance
with the terms of this Agreement. A "Dispute" shall mean any action, dispute,
claim or controversy of any kind, whether in contract or tort, statutory or
common law, legal or equitable, now existing or hereafter arising under or in
connection with, or in any way pertaining to, any of the Loan
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Documents, or any past, present or future extensions of credit and other
activities, transactions or obligations of any kind related directly or
indirectly to any of the Loan Documents, including without limitation, any of
the foregoing arising in connection with the exercise of any self-help,
ancillary or other remedies pursuant to any of the Loan Documents. Any party may
by summary proceedings bring an action in court to compel arbitration of a
Dispute. Any party who fails or refuses to submit to arbitration following a
lawful demand by any other party shall bear all costs and expenses incurred by
such other party in compelling arbitration of any Dispute.
(b) Governing Rules. Arbitration proceedings shall be administered by
the American Arbitration Association ("AAA") or such other administrator as the
parties shall mutually agree upon in accordance with the AAA Commercial
Arbitration Rules. All Disputes submitted to arbitration shall be resolved in
accordance with the Federal Arbitration Act (Title 9 of the United States Code),
notwithstanding any conflicting choice of law provision in any of the Loan
Documents. The arbitration shall be conducted at a location in Arizona selected
by the AAA or other administrator. If there is any inconsistency between the
terms hereof and any such rules, the terms and procedures set forth herein shall
control. All statutes of limitation applicable to any Dispute shall apply to any
arbitration proceeding. All discovery activities shall be expressly limited to
matters directly relevant to the Dispute being arbitrated. Judgment upon any
award rendered in an arbitration may be entered in any court having
jurisdiction; provided however, that nothing contained herein shall be deemed to
be a waiver by any party that is a bank of the protections afforded to it under
12 U.S.C. Section 91 or any similar applicable state law.
(c) No Waiver; Provisional Remedies, Self-Help and Foreclosure. No
provision hereof shall limit the right of any party to exercise self-help
remedies such as setoff, foreclosure against or sale of any real or personal
property collateral or security, or to obtain provisional or ancillary remedies,
including without limitation injunctive relief, sequestration, attachment,
garnishment or the appointment of a receiver, from a court of competent
jurisdiction before, after or during the pendency of any arbitration or other
proceeding. The exercise of any such remedy shall not waive the right of any
party to compel arbitration hereunder.
(d) Arbitrator Qualifications and Powers; Awards. Arbitrators must be
active members of the Arizona State Bar or retired judges of the state or
federal judiciary of Arizona with expertise in the substantive law applicable to
the subject matter of the Dispute. Arbitrators are empowered to resolve Disputes
by
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summary rulings in response to motions filed prior to the final arbitration
hearing. Arbitrators (i) shall resolve all Disputes in accordance with the
substantive law of the state of Arizona, (ii) may grant any remedy or relief
that a court of the state of Arizona could order or grant within the scope
hereof and such ancillary relief as is necessary to make effective any award,
and (iii) shall have the power to award recovery of all costs and fees, to
impose sanctions and to take such other actions as they deem necessary to the
same extent a judge could pursuant to the Federal Rules of Civil Procedure, the
Arizona Rules of Civil Procedure or other applicable law. Any Dispute in which
the amount in controversy is $5,000,000 or less shall be decided by a single
arbitrator who shall not render an award of greater than $5,000,000 (including
damages, costs, fees and expenses). By submission to a single arbitrator, each
party expressly waives any right or claim to recover more than $5,000,000. Any
Dispute in which the amount in controversy exceeds $5,000,000 shall be decided
by majority vote of a panel of three arbitrators; provided however, that all
three arbitrators must actively participate in all hearings and deliberations.
(e) Judicial Review. Notwithstanding anything herein to the contrary,
in any arbitration in which the amount in controversy exceeds $25,000,000, the
arbitrators shall be required to make specific, written findings of fact and
conclusions of law. In such arbitrations (i) the arbitrators shall not have the
power to make any award which is not supported by substantial evidence or which
is based on legal error, (ii) an award shall not be binding upon the parties
unless the findings of fact are supported by substantial evidence and the
conclusions of law are not erroneous under the substantive law of the state of
Arizona, and (iii) the parties shall have in addition to the grounds referred to
in the Federal Arbitration Act for vacating, modifying or correcting an award
the right to judicial review of (A) whether the findings of fact rendered by the
arbitrators are supported by substantial evidence, and (B) whether the
conclusions of law are erroneous under the substantive law of the state of
Arizona. Judgment confirming an award in such a proceeding may be entered only
if a court determines the award is supported by substantial evidence and not
based on legal error under the substantive law of the state of Arizona.
(f) Miscellaneous. To the maximum extent practicable, the AAA, the
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the Dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business, by applicable law or
regulation, or to the extent
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necessary to exercise any judicial review rights set forth herein. If more than
one agreement for arbitration by or between the parties potentially applies to a
Dispute, the arbitration provision most directly related to the Loan Documents
or the subject matter of the Dispute shall control. This arbitration provision
shall survive termination, amendment or expiration of any of the Loan Documents
or any relationship between the parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
WELLS FARGO BANK,
SIMULA, INC. NATIONAL ASSOCIATION
By: ______________________ By: _______________________
Timothy Dillingham
Title: ___________________ Vice President
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