10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

x Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended     September 30, 2002              or

o Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from                      to                     

Commission file number 1-12410

Simula, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Arizona	86-0320129
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

2625 S. Plaza Drive, Suite 100, Tempe, Arizona	85282
(Address of Principal Executive Offices)	(Zip Code)

(602) 631-4005

(Registrant’s Telephone Number, Including Area Code)

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant:

(1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports)

Yes [X] No [ ]

(2) has been subject to such filing requirements for the past 90 days.

Yes [X] No [ ]

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Class	Outstanding at September 30, 2002
Common Stock, $.01 par value	12,954,372

TABLE OF CONTENTS

		Consolidated Balance Sheets
		Unaudited Consolidated Statements of Operation
		Unaudited Consolidated Statements of Shareholders’ Deficit
		Unaudited Consolidated Statements of Cash Flows
		Note 1 — Basis of Presentation
	Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition.
	Item 3. Quantitative and Qualitative Disclosure about Market Risk
	Item 4. Controls and Procedures
PART II — OTHER INFORMATION
	Item 6. Exhibits and Reports
SIGNATURES
EX-10.41B
EX-10.41C
EX-10.45A
EX-99.1
EX-99.2

SIMULA, INC.

TABLE OF CONTENTS

	Page
PART I — FINANCIAL INFORMATION
Item 1 - Interim (unaudited) Consolidated Financial Statements
Consolidated Balance Sheets as of September 30, 2002 and December 31, 2001		2
Consolidated Statements of Operations for the Three and Nine Month Periods Ended September 30, 2002 and 2001		3
Consolidated Statement of Shareholders’ Deficit for the Nine Month Period Ended September 30, 2002		4
Consolidated Statements of Cash Flows for the Nine Month Periods Ended September 30, 2002 and 2001		5
Notes to Interim Consolidated Financial Statements		6-11
Item 2 - Management’s Discussion and Analysis of Results of Operations and Financial Condition		12-17
Item 3 - Quantitative and Qualitative Disclosure about Market Risk		17
Item 4 -Controls and Procedures		17
PART II — OTHER INFORMATION
Item 6 - Exhibits and Reports		18
SIGNATURES		20

SIMULA, INC. AND SUBSIDIARIES

Consolidated Balance Sheets
September 30, 2002 and December 31, 2001

			2002			2001
			(unaudited)
ASSETS
CURRENT ASSETS
	Cash and cash equivalents		$	462,466		$	362,319
	Contract and trade receivables — Net			25,672,997			26,441,295
	Inventories			6,858,705			7,384,222
	Deferred income taxes			1,818,000			2,596,000
	Prepaid expenses and other			665,015			915,547
		Total current assets		35,477,183			37,699,383
PROPERTY, EQUIPMENT, and LEASEHOLD IMPROVEMENTS — Net				11,378,665			10,545,449
DEFERRED INCOME TAXES				35,685,519			34,985,000
DEFERRED FINANCING COSTS				2,762,067			4,059,630
INTANGIBLES — Net				3,504,761			3,333,896
OTHER ASSETS				1,976,959			2,029,933
TOTAL			$	90,785,154		$	92,653,291
LIABILITIES AND SHAREHOLDERS’ DEFICIT
CURRENT LIABILITIES
	Revolving line of credit		$	8,985,373		$	11,488,639
	Trade accounts payable			8,308,039			6,972,576
	Other accrued liabilities			6,995,582			8,394,234
	Deferred revenue			1,173,775			1,540,247
	Accrued restructuring costs			1,470,764			1,313,931
	Liabilities of discontinued operations			640,529			—
	Advances on contracts			2,723,425			2,049,645
	Current portion of long-term debt			3,449,564			993,682
		Total current liabilities		33,747,051			32,752,954
DEFERRED REVENUE				507,030			1,367,002
DEFERRED LEASE COST				709,158			400,914
LONG-TERM DEBT — Less current portion				58,520,256			60,772,414
		Total liabilities		93,483,495			95,293,284
SHAREHOLDERS’ DEFICIT
	Preferred stock, $.05 par value — authorized 50,000,000 shares; none outstanding
	Common stock, $.01 par value — authorized 50,000,000 shares; issued 12,954,372 in 2002 and 12,892,858 in 2001			129,543			128,929
	Additional paid-in-capital			62,622,909			62,412,546
	Accumulated deficit			(63,235,305	)		(63,377,118	)
	Accumulated other comprehensive loss			(2,215,488	)		(1,804,350	)
		Total shareholders’ deficit		(2,698,341	)		(2,639,993	)
TOTAL			$	90,785,154		$	92,653,291

See notes to consolidated financial statements.

2

SIMULA, INC. AND SUBSIDIARIES

Unaudited Consolidated Statements of Operation

	Three Month Period Ended						Nine Month Period Ended
	September 30,						September 30,
	2002			2001			2002			2001
REVENUE	$	27,582,979		$	27,078,541		$	86,866,759		$	78,571,206
COST OF REVENUE		19,122,652			17,923,855			59,260,150			50,511,624
GROSS MARGIN		8,460,327			9,154,686			27,606,609			28,059,582
ADMINISTRATIVE EXPENSES		4,488,656			5,791,566			14,079,733			17,014,055
RESEARCH AND DEVELOPMENT		1,170,706			—			4,087,678			—
WRITE-DOWN NET ASSETS HELD FOR SALE		—			50,000			—			650,000
EMPLOYEE SEVERENCE EXPENSE		—			438,000			—			438,000
RESTRUCTURING CHARGES		762,459			—			762,459			479,000
OPERATING INCOME		2,038,506			2,875,120			8,676,739			9,478,527
INTEREST EXPENSE		(2,626,308	)		(2,640,180	)		(7,761,926	)		(7,808,701	)
(LOSS) INCOME BEFORE TAXES		(587,802	)		234,940			914,813			1,669,826
INCOME TAX BENEFIT (EXPENSE)		194,000			(86,000	)		(426,000	)		(621,000	)
(LOSS) INCOME BEFORE DISCONTINUED OPERATIONS AND EXTRAORDINARY ITEM		(393,802	)		148,940			488,813			1,048,826
LOSS FROM DISCONTINUED OPERATIONS, NET OF RELATED INCOME TAX BENEFIT OF $303,000		(347,000	)		—			(347,000	)		—
(LOSS) INCOME BEFORE EXTRAORDINARY ITEM		(740,802	)		148,940			141,813			1,048,826
EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT OF DEBT, NET OF RELATED INCOME TAX BENEFIT OF $1,633,000		—			(2,182,900	)		—			(2,182,900	)
NET (LOSS) INCOME	$	(740,802	)	$	(2,033,960	)	$	141,813		$	(1,134,074	)
(LOSS) INCOME PER COMMON SHARE — Basic (LOSS) INCOME BEFORE DISCONTINUED OPERATIONS AND EXTRAORDINARY ITEM	$	(0.03	)	$	0.01		$	0.04		$	0.09
LOSS FROM DISCONTINUED OPERATIONS		(0.03	)		—			(0.03	)		—
EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT OF DEBT		—			(0.18	)		—			(0.18	)
(LOSS) INCOME PER COMMON SHARE — Basic	$	(0.06	)	$	(0.17	)	$	0.01		$	(0.09	)
(LOSS) INCOME PER COMMON SHARE - Diluted (LOSS) INCOME BEFORE DISCONTINUED OPERATIONS AND EXTRAORDINARY ITEM	$	(0.03	)	$	0.01		$	0.04		$	0.09
LOSS FROM DISCONTINUED OPERATIONS		(0.03	)		—			(0.03	)		—
EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT OF DEBT		—			(0.18	)		—			(0.18	)
(LOSS) INCOME PER COMMON SHARE - Diluted	$	(0.06	)	$	(0.17	)	$	0.01		$	(0.09	)

See notes to consolidated financial statements.

3

SIMULA, INC. AND SUBSIDIARIES

Unaudited Consolidated Statements of Shareholders’ Deficit
Nine Month Period Ended September 30, 2002

										Accumulated
	Common Stock				Additional					Other			Total
					Paid-in		Accumulated			Comprehensive			Shareholders'			Comprehensive
	Shares		Amount		Capital		Deficit			Loss			Deficit			Loss
BALANCE, JANUARY 1, 2002		12,892,858	$	128,929	$	62,412,546	$	(63,377,118	)	$	(1,804,350	)	$	(2,639,993	)
Net Income								141,813						141,813		$	141,813
Issuance of stock		61,514		614		210,363								210,977
Gain on cash flow hedge											231			231			231
Foreign currency translation adjustment											(411,369	)		(411,369	)		(411,369	)
BALANCE,SEPTEMBER 30, 2002		12,954,372	$	129,543	$	62,622,909	$	(63,235,305	)	$	(2,215,488	)	$	(2,698,341	)	$	(269,325	)

See notes to consolidated financial statements.

4

SIMULA, INC. AND SUBSIDIARIES

Unaudited Consolidated Statements of Cash Flows
Nine Month Periods Ended September 30, 2002 and 2001

					2002			2001
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net income (loss)				$	141,813		$	(1,134,074	)
	Adjustment to reconcile net income (loss) to net cash provided by operating activities:
			Depreciation and amortization			3,182,575			3,370,986
			Deferred income taxes			77,481			(1,060,000	)
			Capitalized interest			1,139,531			348,808
			Non-cash equity compensation			109,971			74,000
			Loss from discontinued operations			640,529			—
			Loss on extinguishment of debt			—			3,815,900
			Loss on disposal of assets			97,261			—
			Restructuring charge			762,459			479,000
			Write down net assets held for sale			—			650,000
			Currency translation adjustment			(411,369	)		21,569
			Bad debt expense			236,067			—
	Changes in net assets and liabilities:
			Contract and trade receivables — net of advances			1,206,012			1,684,240
			Inventories			525,517			(562,178	)
			Prepaid expenses and other			250,762			60,119
			Other assets			52,974			(992,511	)
			Trade accounts payable			1,335,463			777,198
			Deferred revenue			(1,226,444	)		(2,002,938	)
			Deferred lease costs			308,244			152,790
			Restructuring reserve			(557,360	)		(695,763	)
			Other accrued liabilities			(1,398,652	)		(3,571,952	)
				Net cash provided by operating activities		6,472,834			1,415,194
CASH FLOWS FROM INVESTING ACTIVITIES:
			Purchase of property and equipment			(2,422,132	)		(3,578,633	)
			Costs incurred to obtain intangibles			(612,488	)		(1,034,525	)
				Net cash used in investing activities		(3,034,620	)		(4,613,158	)
CASH FLOWS FROM FINANCING ACTIVITIES:
			Net (payments) borrowings under line of credit			(2,503,266	)		3,312,562
			New borrowings net of costs			—			22,515,546
			Principal payments under other debt arrangements			(935,807	)		(23,113,012	)
			Repurchase stock options			—			(19,000	)
			Issuance of common shares			101,006			100,358
				Net cash (used in) provided by financing activities		(3,338,067	)		2,796,454
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS						100,147			(401,510	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD						362,319			746,078
CASH AND CASH EQUIVALENTS, END OF PERIOD					$	462,466		$	344,568
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
		Interest Paid			$	6,568,827		$	6,615,183
		Taxes Paid			$	484,254		$	63,873

See notes to consolidated financial statements.

5

Note 1 — Basis of Presentation

         The consolidated financial statements include the accounts of Simula, Inc. and its subsidiaries (collectively “we” and “our”). All of the subsidiaries are wholly owned. All intercompany transactions are eliminated in consolidation.

         We have prepared the accompanying interim consolidated financial statements in accordance with Generally Accepted Accounting Principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments and reclassifications considered necessary for a fair and comparable presentation have been included and are of a normal recurring nature. Operating results for the three and nine months ended September 30, 2002 is not necessarily indicative of the results that may be expected for the year ending December 31, 2002. Such interim financial statements should be read in conjunction with our consolidated financial statements and notes thereto included in our 2001 Form 10-K.

Note 2 — Inventories

         At September 30, 2002 and December 31, 2001, inventories consisted of the following:

		2002		2001
Raw Materials		$	4,974,866	$	5,308,956
Work in Progress			1,178,558		1,717,528
Finished Goods			705,281		357,738
	Total Inventories	$	6,858,705	$	7,384,222

Note 3 — Recently Issued Accounting Standards

         In July 2001, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” SFAS No. 146 requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. SFAS No. 146 replaces EITF Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring),” and will apply to exit or disposal activities initiated after December 31, 2002. We have reviewed the requirements of SFAS No. 146 and believe the adoption of this statement will not have a material impact on our financial statements.

Note 4 — Debt

         On September 30, 2002, we were not in compliance with certain non-monetary financial covenants under our Revolving Line of Credit (the “RLC”) and Senior Secured Note. On November 14, 2002, we received waivers of the non-compliance at September 30, 2002. On October 22, 2002, we modified and amended certain provisions of the RLC to increase the Revenue in Excess of Billing Loan Cap with scheduled quarterly reductions. Management believes that future operating cash flow and the remaining availability under our RLC should be sufficient to fund our operating cash requirement and debt service and we will also seek to sell assets and apply proceeds to debt reduction. In order to meet future covenants and debt maturities we will need asset sales or recapitalization.

Note 5 — Other Intangible Assets

         In January 2002, we adopted Statement of Financial Accounting Standards (SFAS) No. 142 “Goodwill and Other Intangible Assets.” SFAS No. 142 specifies that goodwill and certain intangible assets with indefinite lives no longer be amortized but instead be subject to periodic impairment testing. Intangible assets with finite lives will continue to be amortized over their respective useful lives and will be tested for impairment in accordance with SFAS No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets.” This statement, adopted January 1, 2002, supersedes SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,” and the accounting and reporting provisions of Accounting Principles Board (APB) Opinion No. 30, “Reporting the Results of Operations — Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions.”

         At September 30, 2002, all of our intangible assets with finite lives ranging from 15 to 20 years were principally comprised of technology patents with a total cost of $4,664,521, and accumulated amortization of $1,159,759. Intangible asset

6

amortization expense for the three months and nine months ended September 30, 2002 was approximately $75,000 and $223,000, respectively. Estimated amortization expense for the five succeeding fiscal years is as follows:

2002	$	298,000
2003		236,000
2004		236,000
2005		236,000
2006		236,000

Note 6 — Research and Development

         Our research and development efforts arise from funded development contracts and proprietary research and development. We previously tracked such costs excluding intercompany research and development activity on an annual basis only and included them in total selling, general and administrative expenses. As of fiscal year 2002, research and development costs are segregated and intercompany research and development activity is eliminated. Accordingly, comparative quarterly information is not available. Amounts arising from such efforts were as follows:

		Three Months Ended			Nine Months Ended
		September 30, 2002			September 30, 2002
Research and development expenses		$	1,170,706		$	4,087,678
Funded contracts:
	Revenue funded by customers	$	1,153,479			2,982,583
	Research and development expenses classified as cost of such revenue		(571,227	)		(1,807,629	)
Income on funded contracts		$	582,252			1,174,854

Note 7 — Restructuring

         In December 1999, we adopted a plan of restructuring that included the divestiture of our commercial airline seat manufacturing operation and in July 2002, we adopted a plan of restructuring focused on reducing workforce to align with a newly developed strategic focus. At September 30, 2002, there was $1,470,764 of remaining liability, which principally relates to lease obligations associated with the closed airline facility and other contracts as a part of the 1999 restructuring and severance obligations as part of the 2002 restructuring. A summary of the change in accrued restructuring is as follows:

	Facility Closure			Other Contracts			Severance		Total
Balance at December 31, 2001	$	833,931		$	480,000		$	—	$	1,313,931
July 2002 Restructuring		—			—			714,193		714,193
Cash payments		(252,947	)		(129,719	)		174,694		(557,360	)
Balance at September 30, 2002	$	580,984		$	350,281		$	539,499	$	1,470,764

         In addition to the charges in accrued restructuring, $48,266 in assets written off relating to moving manufacturing for our Automotive business to Mexico, is included in the restructuring charge for the three and nine months ended September 30, 2002.

7

Note 8 — Contingencies

         On April 25, 2002, the purchaser of our rail and mass transit seating business filed for Chapter 7 Bankruptcy. Although the purchaser assumed all obligations at the time of the sale in August 1999, we remained liable as guarantor under the facility lease and certain equipment operating leases. As of September 30, 2002, we recorded a reserve of $650,000 for potential settlements of the facility and equipment leases under guarantees and recorded a loss of $347,000, net of related taxes to discontinued operations. We have reached an agreement on the principal leases and are currently negotiating to settle the remaining guarantees and believe that the reserve established is adequate.

Note 9 — Derivative Instruments

         We have foreign currency exposure related to buying and selling in currencies other than the local currencies of our operating units. Our most significant foreign currency exchange exposure relates to the Euro. The magnitude of the exposure varies over time and we enter into agreements by which we seek to manage certain foreign exchange exposure in accordance with established policy guidelines. These arrangements primarily hedge cash flows for forecasted transactions involving receivables and payables. We have hedged transactions through December 16, 2002 and currently do not anticipate any existing gains or losses currently classified in Other Comprehensive Income to be reclassified into earnings.

         The derivative instruments previously discussed contain an element of risk that counterparties may be unable to meet the terms of the agreements. However, limiting the counterparties to major banks that meet established credit guidelines minimizes such risk. We may place collateral for these financial instruments that are primarily dependent upon the instruments time to maturity. Management does not expect to incur any losses as a result of counterparty default.

Note 10 — Segment Reporting

         We are a holding company for wholly owned subsidiaries, which operate in two primary business segments. Our Aerospace and Defense segment includes operations that design and manufacture crash resistant components, energy absorbing devices, and ballistic armor principally for branches of the United States armed forces. Our Commercial Products segment in 2002 includes operations encompassing inflatable restraints and related technology for automobiles, products derived from our proprietary technology and polymer materials and in 2001 also includes the airline soft goods manufacturing operation. All other activity, included in Other, represents general corporate operations, including unallocated interest and technology sales and royalties.

         For the three-month periods ended September 30, 2002 and 2001, inter-segment sales were insignificant and total intercompany sales of $4,081 and $315,303, respectively, have been eliminated.

			2002
			Aerospace and
			Defense		Commercial Products		Other			Total
Revenue:
	Contract revenue		$	18,665,972	$	—	$	—		$	18,665,972
	Product sales:
		Automotive safety systems		—		8,396,174		—			8,396,174
		Other		—		14,945		—			14,945
	Technology sales and royalties			—		321,196		184,692			505,888
Total revenue			$	18,665,972	$	8,732,315	$	184,692		$	27,582,979
Operating income (loss)			$	2,482,387	$	466,443	$	(910,325	)	$	2,038,506

			2001
			Aerospace and
			Defense		Commercial Products		Other		Total
Revenue:
	Contract revenue		$	16,287,379	$	—	$	—	$	16,287,379
	Product sales:
		Automotive safety systems		—		8,528,814		—		8,528,814
		Other		—		1,876,099		—		1,876,099
	Technology sales and royalties			95,874		290,375		—		386,249
Total revenue			$	16,383,253	$	10,695,288	$	—	$	27,078,541
Operating income (loss)			$	2,125,507	$	275,051	$	474,562	$	2,875,120

9

         For the nine-month periods ended September 30, 2002 and 2001, inter-segment sales were insignificant and total intercompany sales of $51,559 and $735,923, respectively, have been eliminated.

			2002
			Aerospace and
			Defense		Commercial Products			Other			Total
Revenue:
	Contract revenue		$	59,039,168	$	—		$	—		$	59,039,168
	Product sales:
		Automotive safety systems		—		25,725,539			—			25,725,539
		Other		—		199,317			—			199,317
	Technology sales and royalties			—		865,854			1,036,881			1,902,735
Total revenue			$	59,039,168	$	26,790,710		$	1,036,881		$	86,866,759
Operating income (loss)			$	9,868,013	$	(315,145	)	$	(876,129	)	$	8,676,739

			2001
			Aerospace and
			Defense		Commercial Products		Other			Total
Revenue:
	Contract revenue		$	45,502,868	$	—	$	—		$	45,502,868
	Product sales:
		Automotive safety systems		—		26,817,792		—			26,817,792
		Other		—		5,199,999		—			5,199,999
	Technology sales and royalties			190,893		859,654		—			1,050,547
Total revenue			$	45,693,761	$	32,877,445	$	—		$	78,571,206
Operating income (loss)			$	7,316,754	$	3,286,050	$	(1,124,277	)	$	9,478,527

10

Note 11 — Earnings per share

         The following is a reconciliation of the numerators and denominators of basic and diluted per share computations. For the three months ended September 30, 2002, the effect of 187,944 shares related to stock options were not used in determining dilutive earnings per share because the result would have been anti-dilutive. Additionally, for the three month and nine month periods ended September 30, 2002 and 2001, the effect of 1,774,074 shares to be issued upon conversion of the 8% Senior Subordinated Convertible Notes was not used in determining dilutive earnings per share because the result would have been anti-dilutive.

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2002			2001			2002			2001
(Loss) income before discontinued operations and extraordinary item	$	(393,802	)	$	148,940		$	488,813		$	1,048,826
Loss from discontinued operations, net of related income tax benefit		(347,000	)					(347,000	)
Extraordinary loss on early extinguishment of debt					(2,182,900	)					(2,182,900	)
Net (loss) earnings available to common shareholders	$	(740,802	)	$	(2,033,960	)	$	141,813		$	(1,134,074	)
Basis weighted average shares outstanding		12,939,056			12,228,726			12,914,148			12,206,505
Effect of dilutive securities		—			324,602			262,726			427,973
Diluted weighted average shares outstanding		12,939,056			12,553,328			13,176,874			12,634,478
(Loss) earnings per common share — basic:
(Loss) income before discontinued operations and extraordinary item	$	(0.03	)	$	0.01		$	0.04		$	0.09
Loss from discontinued operations		(0.03	)		—			(0.03	)		—
Extraordinary loss on early extinguishment of debt		—			(0.18	)		—			(0.18	)
Basic per share amounts	$	(0.06	)	$	(0.17	)	$	0.01		$	(0.09	)
(Loss) earnings per common share — diluted:
Income before discontinued operations and extraordinary item	$	(0.03	)	$	—		$	0.04		$	—
Loss from discontinued operations		(0.03	)		0.01			(0.03	)		0.09
Extraordinary loss on early extinguishment of debt		—			(0.18	)		—			(0.18	)
Diluted per share amounts	$	(0.06	)	$	(0.17	)	$	0.01		$	(0.09	)

*******

11

Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition.

Results of Operations

Three and Nine-Month Periods Ended September 30, 2002 Compared to
Three and Nine-Month Periods Ended September 30, 2001

CONSOLIDATED

	Three Months Ended												Nine Months Ended
	September 30,												September 30,
										Percent												Percent
(In thousands)	2002			2001			Change			Inc (Dec)			2002			2001			Change			Inc (Dec)
Revenue	$	27,583		$	27,079		$	504			2	%	$	86,867		$	78,571		$	8,296			11	%
Gross margin		8,460			9,155			(695	)		-8	%		27,607			28,060			(453	)		(2	%)
Administrative and research and development expense		5,659			5,792			(133	)		(2	%)		18,167			17,014			1,153			7	%
Restructuring charges		762			—			762			100	%		762			479			283			59	%
Operating income		2,039			2,875			(836	)		(29	%)		8,677			9,479			(802	)		(8	%)
Interest expense, net		2,627			2,640			(13	)		0	%		7,762			7,809			(44	)		(1	%)
(Loss) income before tax		(588	)		235			(823	)		(350	%)		915			1,670			(755	)		(45	%)
Tax (benefit) expense		(194	)		86			(280	)		(326	%)		426			621			(195	)		(31	%)
Gross margin as a percentage of revenue		31	%		34	%								32	%		36	%
Administrative and research and development expenses as a percentage of revenue		21	%		21	%								21	%		22	%
Effective tax rate		(33	%)		37	%								47	%		37	%

AEROSPACE & DEFENSE

	Three Months Ended											Nine Months Ended
	September 30,											September 30,
									Percent											Percent
(In thousands)	2002			2001			Change		Inc (Dec)			2002			2001			Change		Inc (Dec)
Revenue	$	18,666		$	16,383		$	2,283		14	%	$	59,039		$	45,694		$	13,345		29	%
Gross margin		5,985			5,780			205		4	%		20,008			16,743			3,265		20	%
Gross margin as a percentage of revenue		32	%		35	%							34	%		37	%

12

COMMERCIAL PRODUCTS

	Three Months Ended												Nine Months Ended
	September 30,												September 30,
										Percent												Percent
(In thousands)	2002			2001			Change			Inc (Dec)			2002			2001			Change			Inc (Dec)
Revenue	$	8,732		$	10,695		$	(1,963	)		-18	%	$	26,791		$	32,877		$	(6,086	)		-19	%
Gross margin		2,290			3,375			(1,085	)		-32	%		6,562			11,317			(4,755	)		-42	%
Gross margin as a percentage of revenue		26	%		32	%								24	%		34	%

Results of Operations for the Three-Month Period Ended September 30, 2002

         Revenue for the three-month period ended September 30, 2002 increased 2% compared to revenue in the same period for 2001. Revenue for the period grew 14% in the Aerospace and Defense segment. The increase in revenue was primarily due to increased production and contract fulfillment with respect to our armor product line. However, revenue increases were reduced by rework costs related to Small Arms Protective Insert (“SAPI”) body armor products. We estimated that the voluntary rework of the SAPI plates would cost approximately $1.0 million, thereby increasing total costs to the contract and impacting percentage complete. Additionally, revenues were negatively impacted by decreases in our parachute product lines. Revenue from the Commercial Products segment declined 18% primarily due to the disposal of our airline soft goods manufacturing operation in Atlanta, Georgia, which contributed revenue of $1.8 million during the three months ended September 30, 2001. Excluding this revenue, Commercial Products revenue decreased 2% during the comparable period due to pricing pressure in the automotive business.

         Gross margin as a percent of sales decreased to 31% for the three-month period ended September 30, 2002 from 34% for the comparable period in 2001. Gross margin as a percent of sales in our Aerospace and Defense segment declined to 32% for the three months ended September 30, 2002 from 35% for the same period in 2001. This decrease was attributable primarily to rework costs related to SAPI as stated above. Gross margin as a percent of sales in our Commercial Products segment declined to 26% for the three months ended September 30, 2002 from 32% for the same period in 2001. The decrease in gross margin in the Commercial Products segment was attributable to a shift in product mix to next generation automotive products where cost reduction activity has taken longer than anticipated to mitigate pricing pressure.

         Administrative and research and development expenses for the three-month period ended September 30, 2002 decreased $ 133,000 or 2% as compared to the same 2001 period. This decrease was primarily attributable to cost savings reductions related to the sale of the airline soft goods division in 2001 and other cost reductions company wide, offset by increased sales and marketing expenses. Administrative and research and development expenses as a percentage of sales for both three month periods ended September 30, 2002 and 2001 was 21%.

         Operating income for the three-month period ended September 30, 2002 was $2 million compared to $2.9 million for the same period in 2001. The 2002 operating income for the three-month period was negatively impacted by the $762,000 restructuring charge and the $1.0 million SAPI rework while the 2001 operating income for the three-month period included a $50,000 write-down for our former Atlanta assets and a $438,000 charge related to employee severance.

         Interest expense for each of the three months ended September 30, 2002 and 2001 was $2.6 million. Cash paid for interest for each of the three months ended September 30, 2002 and 2001 was $2.8 million.

13

         Income Taxes — Our effective income tax rate for the three months ended September 30, 2002 was a tax benefit of 33% as compared to a tax expense of 37% in the comparable 2001 period. We recorded a benefit for the three months ended September 30, 2002 due to the unanticipated loss for the quarter and the determination that the year to date tax rate is properly reflected in the financial statements.

Results of Operations for the Nine-Month Period Ended September 30, 2002

         Revenue for the nine months ended September 30, 2002 increased 11% compared to revenue in the same period for 2001. Revenue for the period grew 29% in the Aerospace and Defense segment from $45.7 million to $59 million primarily due to increased production and contract fulfillment with respect to our armor product lines but was negatively impacted by the SAPI rework costs discussed previously. Revenue from the Commercial Products segment declined 19% primarily due to the disposal in 2001 of our airline soft goods manufacturing operation in Atlanta, Georgia, which contributed revenue of $4.9 million during the nine months ended September 30, 2001. Excluding this revenue, Commercial Products revenue decreased 4% during the comparable period, which was attributable to continued pricing pressures in our automotive safety business.

         Gross margin as a percent of sales decreased to 32% for the nine-month period ended September 30, 2002 from 36% for the same period in 2001. Gross margin in our Aerospace and Defense segment decreased to 34% for the nine-month period ended September 30, 2002 from 37% for the same period in 2001. The decrease was primarily due to the favorable impact of our Cockpit Air Bag System (“CABS”) revenue recorded in the second quarter of 2001, which was a one time payment by the customer for development costs related to CABS of approximately $1.0 million with no associated cost of revenue as well the SAPI rework cost of $1.0 million in 2002 discussed above. Gross margin as a percent of sales in our Commercial Products segment decreased to 24% for the nine-month period ended September 30, 2002 from 34% for the comparable 2001 period. This decrease was attributable to continued pricing pressure on existing platforms and the shift in product mix to next generation products where cost reduction has not kept pace with pricing pressure.

         Administrative and research and development expenses for the nine month period ended September 30, 2002 increased $1.2 million or 7% as compared to the same 2001 period. This increase was primarily due to increased development costs attributable to our DCI technology and increased sales and marketing expenses, offset by cost savings related to the sale in 2001 of the airline soft goods division and other cost reductions company-wide. Administrative and research and development expenses as a percentage of revenue for the nine months ended September 30, 2002 and 2001 was 21% and 22%, respectively.

         Operating income for the nine-month period ended September 30, 2002 was $8.7 million compared to $9.5 million for the same period in 2001. The 2002 operating income for the nine-month period was negatively impacted by the $762,000 restructuring charge and the $1.0 million estimated to complete SAPI rework, while the 2001 operating income includes a restructuring charge of $479,000 related to headcount reductions and facility shutdown costs, a $650,000 charge related to a write-down of our former Atlanta assets and a $438,000 charge related to employee severance, offset by $1.0 million of revenue recognized from the recovery of CABS development costs as described above.

         Interest expense for the nine months ended September 30, 2002 was $7.8 million compared to $7.8 million for the comparable 2001 period. Cash paid for interest for the nine-month period ended September 30, 2002 was $6.6 million compared to $6.5 million for the same period in 2001.

         Income Taxes — Our effective income tax rate for the nine months ended September 2002 was 47% as compared to 37% in the comparable 2001 period. The increase in our tax rates reflects higher profits in less than favorable tax jurisdictions.

14

Liquidity and Capital Resources

         Our ability to fund debt service and working capital requirements during the next quarter and year is dependent upon improved cash flows generated from operations, borrowing availability under our revolving line of credit (“RLC”), proceeds from potential asset and technology licensing or sales, and potential recapitalization transactions.

         We continually review our revenue and cost forecasts so that we can react to changes in our operations and liquidity position. The amount and timing of Department of Defense procurement and future constraints on certain raw materials and their costs could impact our ability to generate Aerospace and Defense revenue and income. In our Commercial Products segment sales contracts for our automotive products are based upon the estimated production of the next year’s requirements of the original equipment manufacture’s (“OEMs”). Our ability to maintain Commercial Products revenue will be impacted by our ability to successfully compete in an increasingly price competitive market and to properly hedge our foreign currency transaction risk. See “Risks and Uncertainties in the Business and Forward-Looking Information” and “Quantitative and Qualitative Disclosure about Market Risk"

         Our ability to generate sufficient cash flow from operations is principally dependent upon our ability to continue to increase revenue and contain or reduce operating expenses. At September 30, 2002, we had cash and cash equivalents of $462,466 compared to $362,319 at December 31, 2001. Our RLC had outstanding borrowings of $9.0 million and remaining borrowing availability of $0.9 million at September 30, 2002 as compared to outstanding borrowings of $11.5 million and a remaining borrowing availability of $3.7 million at December 31, 2001. The decrease in availability was principally attributable to some shipping delays on our SAPI contract and to scheduled reductions of the RLC maximum advance limit through June 30, 2002. On October 22, 2002, we modified and amended certain provisions of the RLC. The amendment modified and increased the Revenue in Excess of Billing Loan Cap and increased availability with scheduled quarterly reductions. On November 8, 2002, we executed a contract modification providing for progress billings alleviating the liquidity issue attributable to SAPI. On November 12, 2002, our RLC had outstanding borrowings of $10.3 million and remaining borrowing availability of $5.9 million. Because of our federal and certain state net operating loss carryforwards, we are not a significant cash taxpayer. We may, however, encounter additional funding requirements to fund expansion, meet increased working capital needs or satisfy outstanding guarantees. Management believes that future operating cash flow and the remaining availability under our RLC should be sufficient to fund our operating cash requirement and debt service and we will also seek to sell assets and apply proceeds to debt reduction. In order to meet covenants and long-term debt maturities we will need asset sales proceeds or recapitalization transactions.

         On September 30, 2002, we were not in compliance with certain non-monetary financial covenants under our “RLC” and Senior Secured Note. On November 14, 2002, we received waivers of the non-compliance at September 30, 2002.

         On April 25, 2002, the purchaser of our rail and mass transit seating business filed for Chapter 7 Bankruptcy. Although the purchaser assumed all obligations at the time of the sale in August 1999, we remained liable as guarantor under the facility lease and certain equipment operating leases. As of September 30, 2002, we recorded a reserve of $650,000 for settlements of the facility and equipment leases under guarantees and recorded a loss of $347,000, net of related taxes to discontinued operations. We have reached an agreement on the principal leases and are currently negotiating settlement of the remaining guarantees and believe that the reserve established is adequate.

         Operating activities provided approximately $6.5 million of cash during the nine months ended September 30, 2002 as compared to $1.4 million for the comparable period in 2001. The increase in cash provided by operations was attributable to less overall working capital required as compared to the prior 2001 period, which required heavier reductions in deferred revenue, restructuring reserves and other current liabilities.

15

         Investing activities used $3 million during the nine months ended September 30, 2002, principally attributable to the purchase of manufacturing equipment in both of our business segments and additional investment in our patent portfolio.

         Financing activities used net cash of $3.3 million for the nine months ended September 30, 2002, compared to $2.8 million provided by financing activities for the same period in 2001. Cash used in financing activities during the nine months ended September 30, 2002 primarily related to reduced borrowings under the RLC and scheduled payments under debt arrangements. Cash provided from financing activities was due primarily to increased borrowing under our RLC in 2001.

         We believe we have sufficient manufacturing capacity, at September 30, 2002, to meet our anticipated future delivery requirements. We may, however, seek strategic partners for the joint development of capital intensive manufacturing capacity for new high technology products. We may also seek to obtain additional capital should demand for our products exceed current capacity. The raising of capital in public or private markets will depend primarily upon prevailing market conditions and the demand for our products and technologies.

Research and Development

         Historically, we have made significant investments in research and development. Our research and development expenditures have fluctuated based on available government-funded contracts and available company funding. We anticipate that future fluctuations will continue as a result of our efforts to expand product lines and enhance our existing technologies.

Risks and Uncertainties in the Business and Forward-Looking Information

         A wide variety of factors affect our projected operating and financial results and can adversely impact our revenues, profitability and cash flows. Our liquidity and available working capital largely depend upon our cash flow from operations and, potentially, upon proceeds from asset sales or licensing. Improved cash flow from operations will depend on our ability to continue to implement our cost cutting initiatives. Continued compliance with our debt covenants is a requirement for maintaining access to funds available under our RLC.

         Many of our products are subassemblies in final products. We act as subcontractor to defense industry prime contractors and as a component supplier to automotive (“OEM”) and first tier systems suppliers. Accordingly, we are reliant on others to gain and retain market acceptance for our products, and we must continue to demonstrate that our products will provide advantages to the manufacturers of final products, including increasing product safety and providing such manufacturers with competitive cost advantages.

         Although we have long established relationships with a number of our Aerospace and Defense customers, we do not have significant long-term supply contracts with any of these customers. Our customers typically do not commit to long-term production schedules and, as a result, customer orders generally are subject to cancellation or delay. Reliance upon defense contracts involves certain risks, including dependence on congressional appropriations and changes in governmental policies that reflect military and political developments.

         In our Commercial Products segment, we operate in the highly competitive automotive safety industry. As most of our competitors have greater resources than we do and since products become commoditized over time, our success in this industry is largely dependent on our ability to innovate. Our ability to compete effectively in this industry also depends on our ability to remain competitive in pricing, service, and performance. In addition, automotive OEMs continually exert downward pressure on prices, forcing us cut costs and to innovate in order to maintain margins and projected volumes from year to year.

16

         Other factors pertinent to our ability to meet our current and future financial projections include:

• our relationship with our senior lenders and on-going compliance with loan terms and covenants;

• our relationship with significant customers and maintenance of preferred supplier relationships with them that are renegotiated frequently;

• our leveraged status and the level and cost of our debt;

• the continued reduction of our fixed expenses;

• ability to monetize assets including through sales of certain assets or technologies at a favorable price;

• our ability to continue to provide design and manufacturing services, products and new product applications that compare favorably on the basis of time to introduction, cost, and performance with those of our competitors;

• the cyclical nature of the automobile industry and other markets addressed by our products;

• the level and makeup of military expenditures;

• contract mix and shifting production and delivery schedules among our market segments;

• the amount of resources available for independent research and development;

• proof of concept and production validation of certain of our new technologies and proposed products, as well as our financial ability to establish manufacturing capacity for such products; and

• technological changes introduced by competitors and customers.

         As used throughout this report, the words “estimate,” “anticipate,” “expect,” “should,” “intend,” “project,” “target,” or other expressions that indicate future events identify forward-looking statements which are made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. We undertake no obligation to update any of these forward-looking statements to reflect events or circumstances after the date on which such statements were made or to reflect the occurrence of unanticipated events. Actual results and trends may differ materially. Risks include those described herein and in our registration statements and periodic reports filed with the U.S. Securities and Exchange Commission.

Item 3. Quantitative and Qualitative Disclosure about Market Risk

         We have currency exposures related to buying and selling in currencies other than the local currency in which we operate. These exposures may impact future earnings and/or operating cash flows. Currently, our most significant exposure relates to the Euro and the British Pound. We have supply contracts for our ITS® that are Euro denominated. We also maintain a manufacturing facility in the United Kingdom for which we fund its operating expenses in British Pounds. During the second quarter of 2002, we entered into foreign currency hedge transactions to mitigate our associated risks. The magnitude of the exposure varies over time and we enter into agreements by which we seek to manage certain portions of our foreign exchange exposure in accordance with established policy guidelines. These arrangements primarily hedge cash flows for forecasted transactions involving receivables and payables. We have hedged transactions through December 16, 2002 and currently do not anticipate any existing gains or losses currently classified in Other Comprehensive Income to be reclassified into earnings.

Item 4. Controls and Procedures

         As of a date within 90 days prior to the date of the filing of this report, our Chief Executive Officer and Chief Financial Officer have reviewed and evaluated the effectiveness of our disclosure controls and procedures, which included inquires made of certain other of our employees. Based on their evaluation, our Chief Executive Officer and Chief Financial Officer have each concluded that our disclosure controls and procedures are effective and sufficient to ensure that we record, process, summarize and report information required to be disclosed by us in our periodic reports filed under the Securities Exchange Act within the time periods specified by the Securities and Exchange Commission’s rules and forms. Subsequent to the date of their evaluation, there have not been any significant changes in our internal controls or in other factors that could significantly affect these controls, including any corrective action with regard to significant deficiencies and material weaknesses.

17

PART II — OTHER INFORMATION

Item 6. Exhibits and Reports

a) The following Exhibits are included pursuant to Item 601 of Regulation S-K.

No.	Description	Reference
3.1	Articles of Incorporation of Simula, Inc., as amended and restated	(2)
3.2	Bylaws of Simula, Inc., as amended and restated	(1)
4.7	Indenture dated April 1, 1997, in connection with the Company’s issuance of the 8% Senior Subordinated Convertible Notes due May 1, 2004.	(6)
10.11	1992 Stock Option Plan, as amended effective September 15, 1998.	(3)
10.12	1992 Restricted Stock Plan	(1)
10.21	1994 Stock Option Plan, as amended effective September 15, 1998.	(3)
10.26	Simula, Inc. Employee Stock Purchase Plan	(2)
10.27	Outside Directors Equity Plan	(9)
10.37	Simula, Inc. 1999 Incentive Stock Option Plan Form of Employment Agreements between the Company and Bradley P. Forst	(4)
10.41	Financing Agreement with The CIT Group/Business Credit, Inc. dated December 30,1999 Simula, Inc. 1999 Incentive Stock Option Plan	(5)
10.41A	Amendment Number Three to Financing Agreement between the Company and The CIT Group/Business Credit, Inc. dated September 26, 2001.	(7)
10.41B	Amendment Number Five to Financing Agreement between the Company and The CIT Group/Business Credit, Inc. dated June 30, 2002.	*
10.41C	Amendment Number Seven to Financing Agreement between the Company and The CIT Group/Business Credit, Inc. dated October 22, 2002.	*
10.45	Loan Agreement between the Company and Allied Capital Corporation dated September 26, 2001.	(7)
10.45A	Loan Waiver and Amendment between the Company and Allied Capital Corporation dated August 19, 2002.	*
10.46	Employment Agreement between the Company and Bradley P. Forst dated November 12, 2001, effective October 1, 2000.	(7)
10.48	Employment Agreement between the Company and Joseph Coltman dated December 13, 2001, effective October 13, 2000.	(8)
10.49	Employment Agreement between the Company and John S. Hodgson dated February 1, 2002, effective February 11, 2002.	(8)
99.1	Certification by Chief Executive Officer pursuant to section 906 of Sarbanes-Oxley Act	*
99.2	Certification by Chief Financial Officer pursuant to section 906 of Sarbanes-Oxley Act	*

18

* Filed herewith

(1)	Filed with Registration Statement on Form S-18, No. 33-46152-LA, under the Securities Act of 1933, effective April 13, 1992.
(2)	Filed with Definitive Proxy on May 15, 1996, for the Company’s Annual Meeting of Shareholders held on June 20, 1996.
(3)	Filed with report on Form 10-Q for the quarter ended September 30, 1998.
(4)	Filed with Definitive Proxy on May 14, 1999, for the Company’s Annual Meeting of Shareholders held on June 17, 1999.
(5)	Filed with report on Form 10-K for the year ended December 31, 1999.
(6)	Filed with report on Form 10-Q for the quarter ended March 31, 2000.
(7)	Filed with report on Form 10-Q for the quarter ended September 30, 2001.
(8)	Filed with report on Form 10-K for the year ended December 31, 2001.
(9)	Filed with Registration Statement on Form S-8, effective March 28, 2002.

(b) Reports on Form 8-K

(1)	Report on Form 8-K dated August 14, 2002, furnishing notification of late filing on Form 12b-25
(2)	Report on Form 8-K dated August 26, 2002, discussing certain revisions to the Company board charter

19

SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report on Form 10-Q for the quarter ended September 30, 2002 to be signed on its behalf by the undersigned thereunto duly authorized.

	SIMULA, INC.
DATE: November 14, 2002	/s/ John S. Hodgson
	JOHN S. HODGSON Executive Vice President Chief Financial Officer

20

CERTIFICATIONS

I, Bradley P. Forst, certify that:

1.	I have reviewed the quarterly report on Form 10-Q of Simula, Inc.;
2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

(a)	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
(b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures as of the date within 90 days prior to the filing date of the quarterly report (the “Evaluation Date”); and
(c)	presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize, and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in the quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

/s/ Bradley P. Forst

Bradley P. Forst
Chief Executive Officer
November 14, 2002

21

CERTIFICATIONS

I, John S. Hodgson, certify that:

7.	I have reviewed the quarterly report on Form 10-Q of Simula, Inc.;
8.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
9.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
10.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

(d)	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
(e)	evaluated the effectiveness of the registrant’s disclosure controls and procedures as of the date within 90 days prior to the filing date of the quarterly report (the “Evaluation Date”); and
(f)	presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

11. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(c)	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize, and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
(d)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

12. The registrant’s other certifying officers and I have indicated in the quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

/s/ John S. Hodgson

John S. Hodgson
Chief Financial Officer
November 14, 2002

22

Exhibit Index

No.	Description	Reference
3.1	Articles of Incorporation of Simula, Inc., as amended and restated	(2)
3.2	Bylaws of Simula, Inc., as amended and restated	(1)
4.7	Indenture dated April 1, 1997, in connection with the Company’s issuance of the 8% Senior Subordinated Convertible Notes due May 1, 2004.	(6)
10.11	1992 Stock Option Plan, as amended effective September 15, 1998.	(3)
10.12	1992 Restricted Stock Plan	(1)
10.21	1994 Stock Option Plan, as amended effective September 15, 1998.	(3)
10.26	Simula, Inc. Employee Stock Purchase Plan	(2)
10.27	Outside Directors Equity Plan	(9)
10.37	Simula, Inc. 1999 Incentive Stock Option Plan Form of Employment Agreements between the Company and Bradley P. Forst	(4)
10.41	Financing Agreement with The CIT Group/Business Credit, Inc. dated December 30,1999 Simula, Inc. 1999 Incentive Stock Option Plan	(5)
10.41A	Amendment Number Three to Financing Agreement between the Company and The CIT Group/Business Credit, Inc. dated September 26, 2001.	(7)
10.41B	Amendment Number Five to Financing Agreement between the Company and The CIT Group/Business Credit, Inc. dated June 30, 2002.	*
10.41C	Amendment Number Seven to Financing Agreement between the Company and The CIT Group/Business Credit, Inc. dated October 22, 2002.	*
10.45	Loan Agreement between the Company and Allied Capital Corporation dated September 26, 2001.	(7)
10.45A	Loan Waiver and Amendment between the Company and Allied Capital Corporation dated August 19, 2002.	*
10.46	Employment Agreement between the Company and Bradley P. Forst dated November 12, 2001, effective October 1, 2000.	(7)
10.48	Employment Agreement between the Company and Joseph Coltman dated December 13, 2001, effective October 13, 2000.	(8)
10.49	Employment Agreement between the Company and John S. Hodgson dated February 1, 2002, effective February 11, 2002.	(8)
99.1	Certification by Chief Executive Officer pursuant to section 906 of Sarbanes-Oxley Act	*
99.2	Certification by Chief Financial Officer pursuant to section 906 of Sarbanes-Oxley Act	*

* Filed herewith

(1)	Filed with Registration Statement on Form S-18, No. 33-46152-LA, under the Securities Act of 1933, effective April 13, 1992.
(2)	Filed with Definitive Proxy on May 15, 1996, for the Company’s Annual Meeting of Shareholders held on June 20, 1996.
(3)	Filed with report on Form 10-Q for the quarter ended September 30, 1998.
(4)	Filed with Definitive Proxy on May 14, 1999, for the Company’s Annual Meeting of Shareholders held on June 17, 1999.
(5)	Filed with report on Form 10-K for the year ended December 31, 1999.
(6)	Filed with report on Form 10-Q for the quarter ended March 31, 2000.
(7)	Filed with report on Form 10-Q for the quarter ended September 30, 2001.
(8)	Filed with report on Form 10-K for the year ended December 31, 2001.
(9)	Filed with Registration Statement on Form S-8, effective March 28, 2002.

EX-10.41B 3 p67201exv10w41b.txt EX-10.41B EXHIBIT 10.41 B THE CIT GROUP/ BUSINESS CREDIT, INC. 300 South Grand Avenue, Third Floor Los Angeles, California 90071 Dated as of June 30, 2002 Re: Amendment Number Five and Waiver re Financing Agreement SIMULA, INC. AND SUBSIDIARIES 2700 North Central Avenue, Suite 1000 Phoenix, Arizona 85004 Gentlemen: Reference is made to the Financing Agreement between The CIT Group/Business Credit, Inc. as lender thereunder (CITBC), and Simula, Inc. and its subsidiaries, as borrowers thereunder (collectively, the "Companies"), dated as of December 31, 1999, as the same may be amended from time to time (the "Financing Agreement"). Initially capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in the Financing Agreement. The Companies have requested that CITBC waive compliance with and amend certain provisions of the Financing Agreement and CITBC has agreed to do so subject to the terms hereof. Therefore, pursuant to mutual agreement, it is hereby agreed as follows: I. WAIVER OF COMPLIANCE WITH FINANCIAL COVENANTS. With respect only to compliance as of the Fiscal Quarter ended June 30, 2002, CITBC hereby waives compliance with the financial covenants in Section 7, Paragraph 10, subparagraphs (b), (c), (e) and (f), as set forth below, but only to the extent of the breach of such covenants as set forth below. (b)The required minimum consolidated Fixed Charge Coverage Ratio of the Companies for the four consecutive Fiscal Quarter period ended June 30, 2002, of not less than 1.25:1.00, as compared to the actual realized ratio of 1.20:1.00. (c)On a cumulative basis, at the end of the Fiscal Quarter ended June 30, 2002, for the prior four Fiscal Quarter period then ended, the required minimum consolidated EBITDA of at least $14,500,000, as compared to the actual realized amount of $14,063,418. (e)At the end of the Fiscal Quarter ended June 30k, 2002, for the prior four Fiscal Quarter period then ended, the required minimum ratio of Indebtedness to EBITDA, on a consolidated basis, of not more than 4.80:1.00, as compared to the actual realized ratio of 5.22:1.00. (f)Maintain, at the end of the Fiscal Quarter ended June 30, 2002, for the prior four Fiscal Quarter period then ended, the required minimum Interest Coverage Ratio of at least 2.05:1.00, as compared to the actual realized ratio of 1.91:1.00. 25 II. AMENDMENT TO ADD DEFINITION OF ASD CAPITAL EXPENDITURES. Section 1 of the Financing Agreement is hereby amended to add the following: ASD CAPITAL EXPENDITURES shall mean Capital Expenditures made by the Companies in connection with the operation of Simula Automotive Safety Devices, Inc. and/or Simula Automotive Safety Devices, Ltd. III. AMENDMENT TO ADD DEFINITION OF ASD CAPITAL LEASE OBLIGATIONS. Section 1 of the Financing Agreement is hereby amended to add the following: ASD CAPITALIZED LEASE OBLIGATIONS shall mean capitalized lease obligations incurred by the Companies in connection with the operation of Simula Automotive Safety Devices, Inc. and/or Simula Automotive Safety Devices, Ltd. IV. AMENDMENT TO DEFINITION OF EBITDA. THE DEFINITION OF EBITDA SET FORTH IN SECTION 1 OF THE FINANCING AGREEMENT IS HEREBY AMENDED AND REPLACED IN ITS ENTIRETY BY THE FOLLOWING: EBITDA shall mean, for the period in question, the sum of (a) the after-tax net income (or loss) of the Companies on a consolidated basis for such period determined in accordance with GAAP, plus (b) to the extent deducted in determining such after-tax net income, the sum of (i) Interest Expense during such period, plus (ii) all provisions for any federal, state, local and/or foreign income taxes made by the Companies during such period (whether paid or deferred), plus (iii) all depreciation and amortization expenses of the Companies during such period, plus (iv) any extraordinary losses during such period, plus (v) any losses incurred in connection with the repayment in full on or about the date hereof of the Companies' obligations owing to LLCP, including accrued interest, fees and costs in connection therewith, plus (vi) any losses from the sale or other disposition of property other than in the ordinary course of business during such period, plus (vii) all non-cash expenses during such period arising from the use of capital stock of Parent to pay compensation minus (c) to the extent added in determining such after-tax net income, the sum of (i) any extraordinary gains during such period, plus (ii) any gains from the sale or other disposition of property other than in the ordinary course of business during such period, plus (iii) any revenue realized by the Companies in respect of settlement payments received pursuant to that certain Settlement Agreement dated as of September 27, 2000 among certain Companies and Autoliv AB, Autoliv GmbH, Autoliv France SNC, Autoliv ASP, Inc., Autoliv North America, Inc. and Autoliv, Inc., plus (iv) any sale price adjustments made by any Company in respect of components sold pursuant to such Settlement Agreement, all determined in accordance with GAAP; provided, however, that notwithstanding the foregoing, for the fiscal quarters ending March 31, 2001 and June 30, 2001, EBITDA for such fiscal quarters shall be deemed to be $3,802,000 and $4,382,000, respectively. Notwithstanding anything set forth in the Financing Agreement to the contrary, the Companies shall be permitted to add back, in the calculation of EBITDA, any GAAP-recognized restructuring costs associated with the cost reduction plan previously delivered by the Companies to Allied (the "Restructuring Costs"), provided, however, that (i) the Companies shall only be permitted to add back Restructuring Costs to the extent they are incurred during the third quarter of fiscal year 2002, and (ii) the amount of Restructuring Costs that the Companies shall be permitted to add back in the calculation of EBITDA shall be limited to $900,000, in the aggregate. V. AMENDMENT TO FINANCIAL COVENANTS. Paragraph 10 of Section 7 of the Financing Agreement is hereby amended and replace in its entirety by the following: 10. Until termination of the Financing Agreement and payment and satisfaction in full of all Obligations hereunder, the Companies shall: 26 (a)not have net income (determined in accordance with GAAP but excluding from the calculation thereof any extraordinary losses resulting from the refinancing by Allied of Indebtedness owing to LLCP) for any Fiscal Quarter of less than zero, provided, however that for the Fiscal Quarter ending September 30, 2002, the Companies shall be permitted to add back Restructuring Costs in the calculation of net income, to the extent such costs are incurred during the third quarter of fiscal year 2002, in an amount not to exceed $900,000, in the aggregate. (b)maintain at the end of each Fiscal Quarter a consolidated Fixed Charge Coverage Ratio of the Companies for the four consecutive Fiscal Quarter period then ended of not less than the following: Fiscal Quarter ended 9/30/02 - 1.025:1.00 Fiscal Quarter ended 12/31/02 - 1.125:1.00 Fiscal Quarter ended 3/31/03 - 1.15:1.00 Fiscal Quarter ended 6/30/03 and thereafter - 1.20:1.00 (c)maintain, on a cumulative basis, at the end of each Fiscal Quarter for the prior four Fiscal Quarter period then ended, EBITDA on a consolidated basis of at least the following amounts: Fiscal Quarter ended 9/30/02 - $12,000,000 Fiscal Quarter ended 12/31/02 - $13,250,000 Fiscal Quarter ended 3/31/03 - $13,750,000 Fiscal Quarter ended 6/30/03 and thereafter - $14,000,000 (d) maintain at the end of each month EBITDA on a consolidated basis of at least $500,000. (e)maintain, at the end of each Fiscal Quarter for the prior four Fiscal Quarter period then ended, a ratio of Indebtedness to EBITDA, on a consolidated basis, of not more than the following amounts. Fiscal Quarter ended 9/30/02 - 6.10:1.00 Fiscal Quarter ended 12/31/02 - 5.60:1.00 Fiscal Quarter ended 3/31/03 - 5.40:1.00 Fiscal Quarter ended 6/30/03 and thereafter - 4.00:1.00 (f)maintain, at the end of each Fiscal Quarter for the prior four Fiscal Quarter period then ended, an Interest Coverage Ratio of at least the following amounts. Fiscal Quarter ended 9/30/02 - 1.65:1.00 Fiscal Quarter ended 12/31/02 - 1.90:1.00 Fiscal Quarter ended 3/31/03 - 1.95:1.00 Fiscal Quarter ended 6/30/03 and thereafter - 2.00:1.00 VI. AMENDMENT TO PARAGRAPH 11 (CAPITAL EXPENDITURES) TO SECTION 7. Paragraph 11 of Section 7 of the Financing Agreement is hereby amended and replaced by the following: Without the prior written consent of CITBC, the Companies will not and will not permit any of their subsidiaries to: 27 (a) enter into any Operating Lease (other than with respect to real property) if after giving effect thereto the aggregate obligations with respect to Operating Leases of the Companies during any Fiscal Year would exceed $800,000; (b)make any ASD Capital Expenditure or enter into any ASD Capitalized Lease Obligation, if the sum of (i) the aggregate amount of all ASD Capital Expenditures (including the ASD Capital Expenditure in question) made by the Companies and their Subsidiaries during such fiscal quarter period of the Companies ending as of the dates set forth below, plus (ii) the aggregate amount of all ASD Capitalized Lease Obligations (including the ASD Capitalized Lease Obligation in question) made or required to be made by the Companies and their Subsidiaries during such fiscal quarter period of the Companies ending as of the dates set forth below, would exceed the amount set forth below opposite each such date: Fiscal Quarter ended 9/30/02 - $300,000 Fiscal Quarter ended 12/31/02 - $300,000 Fiscal Quarter ended 3/31/03 - $300,000 Fiscal Quarter ended 6/30/03 and thereafter - $150,000; (c)make any Capital Expenditure or enter into any capitalized lease, if the sum of (i) the aggregate amount of all Capital Expenditures (including the Capital Expenditure in question) made by the Companies and their Subsidiaries during each four (4) consecutive fiscal quarter period of the Companies ending as of the dates set forth below, other than ASD Capital Expenditures, plus (ii) the aggregate amount of all capitalized lease obligations (including the capitalized lease in question) made or required to be made by the Companies and their Subsidiaries during each such four (4) consecutive fiscal quarter period of the Companies ending as of the dates set forth below, other than ASD Capitalized Lease Obligations, would exceed the amount set forth below opposite each such date: Fiscal Quarter ended 9/30/02 - $3,000,000 Fiscal Quarter ended 12/31/02 - $3,500,000 Fiscal Quarter ended 3/31/03 - $3,750,000 Fiscal Quarter ended 6/30/03 and thereafter - $3,850,000; (d) make any DCI Capital Expenditures; or (e) incur any DCI Capitalized Lease Obligations. VII. CONFIRMATION OF GUARANTY. The Companies, as Guarantors, hereby confirm that the Guaranty, dated December 30, 1999, executed by the Guarantors in favor of CITBC guarantying the repayment of the Obligations remains in full force and effect notwithstanding this Amendment and Waiver. VIII. GENERAL TERMS. 1. To the extent any of the terms and provision of the Financing Agreement and/or the Loan Documents conflict or are inconsistent with the terms hereof, the terms of this Amendment and Waiver shall govern. 2. The effectiveness of this Amendment and Waiver is conditioned upon receipt by CITBC of: 28 (a) an executed counterpart of this Amendment and Waiver executed by the Companies. (b) an executed counterpart of an amendment and waiver substantively identical to this Amendment and Waiver executed by the Companies and Allied Capital Corporation with respect to the loan documents between such parties. (c) payment of a non-refundable fee of $45,000 which shall be paid as a loan advance under the Financing Agreement. (d) payment in full of all fees and expenses of CITBC incurred in connection with this Amendment and Waiver. 3. This Amendment and Waiver may be executed in two (2) or more counterparts, each of which shall constitute an original but all of which when taken together shall constitute but one (1) agreement, and shall become effective when copies hereof which, when taken together, bear the original signatures of each of the parties hereto are delivered to CITBC. Except as set forth herein no other waiver, consent or change in the terms or provisions of the Financing Agreement or any other Loan Document is intended or implied. By execution hereof, the Companies represent and warrant to CITBC that no material adverse change has occurred in the financial condition, business, prospects, profits, operations or assets of the Companies since June 30, 2002. If the foregoing is in accordance with your understanding, please so indicate by signing and returning the enclosed copy of this Waiver. Very truly yours, THE CIT GROUP/BUSINESS CREDIT, INC. By: /s/ James Karnowski ------------------------------ Title: Vice President ------------------------------ 29 AGREED: SIMULA, INC., an Arizona corporation By: /s/ Bradley P. Forst ---------------------------- Title: President and CEO ------------------------- SAI CAPITAL CORP., f/k/a SIMULA ARTCRAFT INDUSTRIES, INC., an Arizona corporation By: /s/ Benjamin G. Clark ---------------------------- Title: President ------------------------- AI CAPITAL CORP. , an Arizona corporation By: /s/ Benjamin G. Clark ---------------------------- Title: President ------------------------- SIMULA TRANSPORTATION EQUIPMENT CORPORATION, an Arizona corporation By: /s/ Benjamin G. Clark ---------------------------- Title: President ------------------------- INTERNATIONAL CENTER FOR SAFETY EDUCATION, INC., an Arizona corporation By: /s/ Benjamin G. Clark ---------------------------- Title: Secretary ------------------------- SIMULA AUTOMOTIVE SAFETY DEVICES, INC., an Arizona corporation By: /s/ Benjamin G. Clark ---------------------------- Title: Secretary ------------------------- SIMULA COMPOSITES CORPORATION, an Arizona corporation By: /s/ Benjamin G. Clark ---------------------------- Title: President ------------------------- 30 SIMULA POLYMER SYSTEMS, INC., an Arizona corporation By: /s/ Benjamin G. Clark ---------------------------- Title: Secretary ------------------------- SIMULA SAFETY SYSTEMS, INC., an Arizona corporation By: /s/ Benjamin G. Clark ---------------------------- Title: Assistant Secretary ------------------------- SIMULA TECHNOLOGIES, INC.. an Arizona corporation By: /s/ Benjamin G. Clark ---------------------------- Title: Secretary ------------------------- SIMULA AUTOMOTIVE SAFETY DEVICES, LIMITED, an Arizona corporation By: /s/ Benjamin G. Clark ---------------------------- Title: Secretary ------------------------- CCEC CAPITAL CORP., an Arizona corporation By: /s/ Benjamin G. Clark ---------------------------- Title: President ------------------------- 31 EX-10.41C 4 p67201exv10w41c.txt EX-10.41C EXHIBIT 10.41C THE CIT GROUP/ BUSINESS CREDIT, INC. 300 South Grand Avenue, Third Floor Los Angeles, California 90071 Dated as of October 22, 2002 SIMULA, INC. AND SUBSIDIARIES 2700 North Central Avenue, Suite 1000 Phoenix, Arizona 85004 Re: Amendment Number Seven to Financing Agreement Ladies and Gentlemen: Reference is made to the Financing Agreement between The CIT Group/Business Credit, Inc. as lender thereunder ("CITBC"), and Simula, Inc. and its subsidiaries, as borrowers thereunder (collectively, the "Companies"), dated as of December 31, 1999, as the same may be amended from time to time (the "Financing Agreement"). Initially capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in the Financing Agreement. The Companies have requested to modify and amend certain provisions of the Financing Agreement and CITBC has agreed to do so subject to the terms hereof. Therefore, pursuant to mutual agreement, it is hereby agreed as follows: I. AMENDMENT TO DEFINITION OF REVENUE IN EXCESS OF BILLING LOAN CAP. Upon the satisfaction of the conditions set forth herein, the definition of Revenue in Excess of Billing Loan Cap set forth in Section 1 of the Financing Agreement shall be amended and replaced in its entirety by the following: REVENUE IN EXCESS OF BILLING LOAN CAP shall mean $3,500,000, from September 30, 2002 through and including December 31, 2002, $3,000,000 commencing January 1, 2002 through and including March 31, 2003, $2,500,000 commencing April 1, 2003 through and including June 30, 2003, $2,000,000 commencing July 1, 2003 through and including August 31, 2003, and $1,500,000 commencing September 1, 2003 and thereafter, provided, however that in the event that the sale of SASD is consummated, the definition of Revenue in Excess of Billing Loan Cap shall mean $0. II. AMENDMENT TO REVOLVING LOANS. Upon the satisfaction of the conditions set forth herein, Paragraph 1 of Section 3 of the Financing Agreement shall be amended and replaced in its entirety by the following: 1. CITBC agrees, subject to the terms and conditions of this Financing Agreement from time to time, and within x) the Availability and y) the Line of Credit, but subject to CITBC's right to make "overadvances", to make loans and advances to each of the Companies on a revolving basis (i.e. subject to the limitations set forth herein, the Companies may borrow, repay and re-borrow Revolving Loans). Such loans and advances to each Company shall be in amounts up to the sum of: a) outstanding Eligible Accounts Receivable of such Company multiplied by 32 the Accounts Receivable Advance Percentage, plus b) the lesser of (x) the Revenue in Excess of Billing Loan Cap and (y) outstanding Revenue in Excess of Billing of such Company multiplied by the Revenue in Excess of Billing Advance Percentage, plus c) the lesser of (x) the Inventory Loan Cap and (y) the aggregate value of Eligible Inventory of such Company as determined at the lower of cost or market multiplied by the Inventory Advance Percentage. Each request shall constitute, unless otherwise disclosed in writing to CITBC, a representation and warranty by the Companies that (i) after giving effect to the requested advance, no Default or Event of Default has occurred and (ii) such requested Revolving Loan is within the Line of Credit and Availability. All requests for loans and advances must be received by an officer of CITBC no later than 1:00 p.m., New York time, of the day on which such loans and advances are required. Should CITBC for any reason honor requests for advances in excess of the limitations set forth herein, such advances shall be considered "overadvances" and shall be made in CITBC's sole discretion, subject to any additional terms CITBC deems necessary. III. GENERAL TERMS. 1.To the extent any of the terms and provision of the Financing Agreement and/or the Loan Documents conflict or are inconsistent with the terms hereof, the terms of this Amendment shall govern. 2.The effectiveness of the modifications set forth in this Amendment is expressly conditioned upon: (e) receipt by CITBC of an executed counterpart of this Amendment executed by the Companies; (f) receipt by CITBC of payment in full of all fees and expenses of CITBC incurred in connection with this Amendment and Waiver; and (g) the receipt by CITBC of evidence satisfactory to CITBC, in its sole discretion, that Allied Capital Corporation has consented to the modifications set forth herein, as prescribed by the terms of the Intercreditor Agreement, on terms satisfactory to CITBC, in its sole discretion. 4.This Amendment may be executed in two (2) or more counterparts, each of which shall constitute an original but all of which when taken together shall constitute but one (1) agreement, and shall become effective when copies hereof which, when taken together, bear the original signatures of each of the parties hereto are delivered to CITBC. Except as set forth herein no other amendment, waiver, consent or change in the terms or provisions of the Financing Agreement or any other Loan Document is intended or implied. By execution hereof, the Companies represent and warrant to CITBC that, except as disclosed to CITBC, no material adverse change has occurred in the financial condition, business, prospects, profits, operations or assets of the Companies. If the foregoing is in accordance with your understanding, please so indicate by signing and returning the enclosed copy of this Amendment. Very truly yours, THE CIT GROUP/BUSINESS CREDIT, INC. By: /s/ James Karnowski -------------------------------------- Title: Vice President ----------------------------------- 33 AGREED: SIMULA, INC., an Arizona corporation By: /s/ John S. Hodgson -------------------------------- Title: Vice President and CFO ----------------------------- SAI CAPITAL CORP., an Arizona corporation By: /s/ Benjamin G. Clark -------------------------------- Title: President ----------------------------- AI CAPITAL CORP., an Arizona corporation By: /s/ Benjamin G. Clark -------------------------------- Title: President ----------------------------- SIMULA TRANSPORTATION EQUIPMENT CORPORATION, an Arizona corporation By: /s/ Benjamin G. Clark -------------------------------- Title: President ----------------------------- INTERNATIONAL CENTER FOR SAFETY EDUCATION, INC., an Arizona corporation By: /s/ Benjamin G. Clark -------------------------------- Title: Secretary ----------------------------- SIMULA AUTOMOTIVE SAFETY DEVICES, INC., an Arizona corporation By: /s/ Benjamin G. Clark -------------------------------- Title: Secretary ----------------------------- SIMULA COMPOSITES CORPORATION, an Arizona corporation By: /s/ Benjamin G. Clark -------------------------------- Title: President ----------------------------- 34 SIMULA POLYMER SYSTEMS, INC., an Arizona corporation By: /s/ Benjamin G. Clark -------------------------------- Title: Secretary ----------------------------- SIMULA SAFETY SYSTEMS, INC., an Arizona corporation By: /s/ Benjamin G. Clark -------------------------------- Title: Assistant Secretary ----------------------------- SIMULA TECHNOLOGIES, INC. an Arizona corporation By: /s/ Benjamin G. Clark -------------------------------- Title: Secretary ----------------------------- SIMULA AUTOMOTIVE SAFETY DEVICES, LIMITED, an Arizona corporation By: /s/ Benjamin G. Clark -------------------------------- Title: Secretary ----------------------------- CCEC CAPITAL CORP., an Arizona corporation By: /s/ Benjamin G. Clark -------------------------------- Title: President ----------------------------- 35 EX-10.45A 5 p67201exv10w45a.txt EX-10.45A EXHIBIT 10.45A WAIVER AND AMENDMENT NO. 1 TO LOAN AGREEMENT This WAIVER AND AMENDMENT NO. 1 TO LOAN AGREEMENT (this "Amendment") is dated as of August 19, 2002 by and among Allied Capital Corporation, a Maryland corporation ("Holder"), Simula, Inc., an Arizona corporation ("Simula"), and the direct and indirect subsidiaries of Simula listed on the signature pages hereof. WHEREAS, Simula, the Subsidiaries of Simula (collectively with Simula, the "Companies") and Holder are parties to a certain Loan Agreement dated as of September 26, 2001 (as amended, supplemented or otherwise modified from time to time, the "Loan Agreement"); WHEREAS, certain Events of Default exist under the Loan Agreement as a result of the Companies' failure to have (i) Consolidated EBITDA of at least $14,500,000 for the four (4) consecutive fiscal quarter period ended June 30, 2002, in violation of Section 4.13(a) of the Loan Agreement, (ii) a Fixed Charge Coverage Ratio of at least 1.25 to 1.0 for the four (4) consecutive fiscal quarter period ended June 30, 2002, in violation of Section 4.13(b) of the Loan Agreement, (iii) a Consolidated Debt to EBITDA Ratio, calculated as of June 30, 2002 and for the four (4) consecutive fiscal quarter period then ended, of not more than 4.80 to 1.0, in violation of Section 4.13(c) of the Loan Agreement, and (iv) an Interest Coverage Ratio of at least 2.05 to 1.0 for the four (4) consecutive fiscal quarter period ended June 30, 2002, in violation of Section 4.13(f) of the Loan Agreement (collectively, the "Existing Events of Default"); and WHEREAS, the Companies have requested that Holder (a) waive the Existing Events of Default, and (b) amend the Loan Agreement in certain respects. NOW THEREFORE, in consideration of the mutual conditions and agreements set forth in the Loan Agreement and this Amendment, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. DEFINITIONS. Capitalized terms used in this Amendment, unless otherwise defined herein, shall have the meanings ascribed to such terms in the Loan Agreement. 2. WAIVER. In reliance upon the representations and warranties of the Companies set forth in Section 5 below and subject to the prior satisfaction of the conditions to effectiveness set forth in Section 4 below, Holder hereby waives the Existing Events of Default. The foregoing waiver only applies to the Existing Events of Default and shall not be deemed to constitute a waiver of any other Defaults or Events of Default that may now be in existence or that may hereafter occur, or of any rights or remedies that Holder may have under the Loan Agreement, the other Loan Documents or applicable law with respect thereto, all of which rights and remedies are specifically reserved. 3. AMENDMENTS. In reliance upon the representations and warranties of the Companies set forth in Section 5 below and subject to the prior satisfaction of the conditions to effectiveness set forth in Section 4 below, the Loan Agreement is hereby amended as follows: 3.1. Section 4.8 of the Loan Agreement is hereby amended and restated in its entirety, as follows: "Section 4.8 Board Meetings. Simula will hold meetings of its Board of Directors at least four times a year; will allow at least one designee of the Holder to attend and participate on an observer basis in such meeting and all meetings of committees of such Board either in person or via video or teleconference and at Company's expense; and will provide the Holder with the same prior notice received by directors to meetings, and written materials as given to the directors; provided, however, that if any such Board desires to act by unanimous written consent in lieu of a meeting, it may do so if the Holder receives, prior to their adoption, a copy of the resolutions to be adopted in the same manner and at 36 the same time as provided to the directors and provided, further, that in the event any other Company at any time or from time to time holds meetings of its Board of Directors and/or desires to act by unanimous written consent in lieu of a meeting, then the provisions of this Section 4.8 shall also apply to such Company. The designee of the Holder may only be excluded from any such meeting or a portion thereof if (i) the Board of Directors will be discussing matters (x) pertaining to the Loan, and (y) in which Holder and Simula have interests that are directly adverse to each other, and (ii) a member of the Board of Directors has requested that the designee not be present." 3.2. Section 4.13 of the Loan Agreement is hereby amended and restated in its entirety, as follows: "Section 4.13 Financial Covenants. Notwithstanding Section 5.10 hereof or any other covenant herein, the Companies will maintain the following financial covenants, as reflected on the Companies' books of account in accordance with GAAP: (a) Minimum Consolidated EBITDA. The Companies will have a Consolidated EBITDA, determined for each four (4) consecutive fiscal quarter period of the Companies ending as of the dates set forth below, of at least the amount set forth below opposite each such date:

FOUR QUARTERS ENDING MINIMUM EBITDA -------------------- -------------- September 30, 2002 $12,000,000 December 31, 2002 $13,250,000 March 31, 2003 $13,750,000 June 30, 2003 $14,000,000 September 30, 2003 $15,200,000 December 31, 2003, and each $15,200,000 March 31, June 30, September 30 and December 31 thereafter

(b) Minimum Fixed Charge Coverage Ratio. The Companies will have a Fixed Charge Coverage Ratio, determined for each four (4) consecutive fiscal quarter period of the Companies ending as of the dates set forth below, of at least the amounts set forth below opposite each such date:

FOUR QUARTERS ENDING AMOUNT -------------------- ------ September 30, 2002 1.025 to 1.0 December 31, 2002 1.125 to 1.0 March 31, 2003 1.15 to 1.0 June 30, 2003 1.20 to 1.0 September 30, 2003 1.35 to 1.0 December 31, 2003, and each 1.35 to 1.0 March 31, June 30, September 30 and December 31 thereafter

37 (c) Maximum Consolidated Debt to EBITDA Ratio. The Companies will have a Consolidated Debt to EBITDA Ratio determined as of each date set forth below, of not more than the amounts set forth below opposite each such date:

FOUR QUARTERS ENDING AMOUNT -------------------- ------ September 30, 2002 6.10 to 1.0 December 31, 2002 5.60 to 1.0 March 31, 2003 5.40 to 1.0 June 30, 2003 4.00 to 1.0 September 30, 2003 4.00 to 1.0 December 31, 2003, and each 00 to 1.0 March 31, June 30, September 30 and December 31 thereafter

(d) Capital Expenditures and Capitalized Leases. No Company will, nor will any Company permit any of its Subsidiaries to, make any Capital Expenditure or enter into any capitalized lease, if the sum of (i) the aggregate amount of all Capital Expenditures (including the Capital Expenditure in question) made by the Companies and their Subsidiaries during each four (4) consecutive fiscal quarter period of the Companies ending as of the dates set forth below, other than ASD Capital Expenditures, plus (ii) the aggregate amount of all capitalized lease obligations (including the capitalized lease in question) made or required to be made by the Companies and their Subsidiaries during each such four (4) consecutive fiscal quarter period of the Companies ending as of the dates set forth below, other than ASD Capitalized Lease Obligations, would exceed the amount set forth below opposite each such date:

FOUR QUARTERS ENDING AMOUNT -------------------- ------ September 30, 2002 $3,000,000 December 31, 2002 $3,500,000 March 31, 2003 $3,750,000 June 30, 2003 $3,850,000 September 30, 2003 $3,750,000 December 31, 2003, and each $3,500,000 March 31, June 30, September 30 and December 31 thereafter

38 (e) ASD Capital Expenditures and Capitalized Leases. No Company will, nor will any Company permit any of its Subsidiaries to, make any ASD Capital Expenditure or enter into any ASD Capitalized Lease Obligation, if the sum of (i) the aggregate amount of all ASD Capital Expenditures (including the ASD Capital Expenditure in question) made by the Companies and their Subsidiaries during each fiscal quarter of the Companies ending as of the dates set forth below, plus (ii) the aggregate amount of all ASD Capitalized Lease Obligations (including the ASD Capitalized Lease Obligation in question) made or required to be made by the Companies and their Subsidiaries during each such fiscal quarter of the Companies ending as of the dates set forth below, would exceed the amount set forth below opposite each such date:

FISCAL QUARTER ENDING AMOUNT --------------------- ------ September 30, 2002 $300,000 December 31, 2002 $300,000 March 31, 2003 $300,000 June 30, 2003 $150,000 September 30, 2003 $150,000 December 31, 2003, and each $150,000 March 31, June 30, September 30 and December 31 thereafter

(f) Minimum Interest Coverage Ratio. The Companies will have an Interest Coverage Ratio, determined for each four (4) consecutive fiscal quarter period of the Companies ending as of the dates set forth below, of at least the amounts set forth below opposite each such date:

FOUR QUARTERS ENDING AMOUNT -------------------- ------ September 30, 2002 1.65 to 1.0 December 31, 2002 1.90 to 1.0 March 31, 2003 1.95 to 1.0 June 30, 2003 2.00 to 1.0 September 30, 2003 2.10 to 1.0 December 31, 2003, and each 2.10 to 1.0 March 31, June 30, September 30 and December 31 thereafter

(g) Minimum Monthly Consolidated EBITDA. The Companies will have a Consolidated EBITDA, for each month, determined as of the last day of such month, of at least $500,000. The Companies hereby agree that in addition to the requirements set forth in Section 4.2 herein, the Companies shall also provide to Holder, in writing, each month, a written certification by a Responsible Officer containing the computations evidencing the Companies' compliance with the minimum monthly Consolidated EBITDA covenant contained in this subsection 4.13(g) (or, in the event of any non-compliance, containing a statement to such effect)." 39 3.3 Section 20.1 of the Loan Agreement is hereby amended by adding the following definitions thereto: "ASD Capital Expenditures" means Capital Expenditures made by the Companies in connection with the operation of Simula Automotive Safety Devices, Inc. and/or Simula Automotive Safety Devices, Ltd.; "ASD Capitalized Lease Obligations" means capitalized lease obligations incurred by the Companies in connection with the operation of Simula Automotive Safety Devices, Inc. and/or Simula Automotive Safety Devices, Ltd.; 3.4 Subsections 4.13(d) and 4.13(e) of the form of Compliance Certificate set forth at Exhibit A to the Loan Agreement are hereby amended and restated in their entirety, as set forth on Exhibit A hereto. 4. Conditions. The effectiveness of this Amendment is subject to the following conditions precedent: (a) Each Company shall have delivered to Holder a manually executed original of this Amendment; (b) The Companies shall have paid to Holder the Amendment Fee (as defined below); (c) The Companies shall have delivered to Holder an agreement executed by each Company and CIT in form and substance satisfactory to Holder (the "CIT Amendment"), pursuant to which, among other things, (i) CIT shall have waived all Defaults and Events of Default (as such terms are defined in the CIT Financing Agreement) in existence as of the date hereof under the CIT Financing Agreement, which waiver shall be subject to no conditions to effectiveness other than those substantially similar to those set forth herein, and (ii) CIT and the Companies shall have agreed to amend the financial covenants set forth in the CIT Financing Agreement such that the financial covenants therein are the same as the financial covenants set forth in the Loan Agreement, as amended hereby; (d) After giving effect to the waiver set forth in Section 2, no Default or Event of Default shall be in existence as of the date hereof; and (e) After giving effect to the CIT Amendment, no Default or Event of Default (as such terms are defined in the CIT Financing Agreement) shall be in existence as of the date hereof under the CIT Financing Agreement. 5. REPRESENTATIONS AND WARRANTIES. To induce Holder to enter into this Amendment, the Companies represent and warrant to Holder that (a) the execution, delivery and performance of this Amendment has been duly authorized by all requisite corporate action on the part of the Companies and that this Amendment has been duly executed and delivered by the Companies, and (b) except for the Existing Events of Default, no Default or Event of Default shall have occurred and be continuing before and immediately after giving effect to this Amendment. 6. WAIVER FEE. The Companies hereby agree, jointly and severally, to pay to Holder an amendment fee (the "Amendment Fee") in the amount of $100,000. 7. ADDITIONAL AGREEMENTS. Notwithstanding anything contained in this Amendment or in the Loan Agreement to the contrary, Holder and Companies hereby agree as follows: 40 7.1 Notwithstanding the Consolidated Debt to EBITDA Ratio covenant set forth in clause (c) of Section 4.13 of the Loan Agreement, in the event that the Companies shall fail to have a Consolidated Debt to EBITDA Ratio, calculated as of June 30, 2003 and for the four (4) consecutive fiscal quarter period then ending, of less than 4.0 to 1.0, the Companies agree, jointly and severally, to pay to Holder a fee (the "Performance Fee") in the amount of $1,000,000, which Performance Fee shall be fully-earned and payable in full in cash on July 31, 2003. 7.2 On or before October 31, 2002, the Companies shall engage a financial consultant acceptable to Holder, in Holder's reasonable discretion (the "Financial Consultant"), to advise the Companies with respect to strategic planning and refinancing opportunities for the Companies. Holder and the Companies further agree that in the event that the Companies fail to engage the Financial Consultant on or prior to October 31, 2002 pursuant to the terms set forth herein, commencing on November 1, 2002 the Principal Balance shall bear interest pursuant to the terms set forth in Section 1.4 of the Loan Agreement. 7.3 On or before October 31, 2002, the Companies shall have delivered to Holder, in form and substance satisfactory to Holder in Holder's sole discretion, all of the agreements, instruments and documents required or requested by Allied to create an enforceable lien under the laws of the countries set forth below with respect to the following federally registered patents registered or applied for registration in such countries, together with evidence satisfactory to Allied, in Allied's sole discretion, showing that such agreements, instruments and documents have been registered pursuant to the laws of such jurisdictions: (i) Patent No. 5,839,753, registered in Germany, Italy, Japan and South Korea; (ii) Patent No. 6,126,194, registered in Germany, Italy, Japan and South Korea; (iii) Patent No. 5,322,322, registered in Germany, Italy, Japan and South Korea; (iv) Patent No. 5,480,181, registered in Germany, Italy, Japan and South Korea; (v) Patent No. 5,253,826, registered in Great Britain; (vi) Patent No. 5,962,617, registered in Italy, Japan and The Netherlands; and (vii) Patent No. 6,127,505, registered in Italy, Japan and The Netherlands (collectively, the "Foreign I.P. Deliveries"). The Companies hereby acknowledge and agree that if the Companies shall fail to make any of the Foreign I.P. Deliveries on or before October 31, 2002, (a) such failure shall constitute an Event of Default, (b) on November 1, 2002, the Companies shall pay, jointly and severally, a fee to Holder in the amount of $25,000, and (c) until all of the Foreign I.P. Deliveries are made to Holder, the Companies shall pay additional fees to Holder in the amount of $25,000 each, payable on the first day of each month thereafter, until all of the Foreign I.P. Deliveries have been made to Holder pursuant to the terms set forth herein. 7.4 From and following the date hereof, no Company shall (i) make any DCI Capital Expenditures, or (ii) incur any DCI Capitalized Lease Obligations. 7.5 Notwithstanding anything set forth in the Loan Agreement or in this Amendment to the contrary, from and following the date hereof, the Companies shall be permitted to add back, in the calculation of EBITDA, any GAAP-recognized restructuring costs associated with the cost reduction plan previously delivered by the Companies to Holder (the "Restructuring Costs"), provided, however, that (i) the Companies shall only be permitted to add back Restructuring Costs to the extent they are incurred during the third quarter of fiscal year 2002, and (ii) the amount of Restructuring Costs that the Companies shall be permitted to add back in the calculation of EBITDA shall be limited to $900,000, in the aggregate. 41 8. SEVERABILITY. Any provision of this Amendment held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Amendment and the effect thereof shall be confined to the provision so held to be invalid or unenforceable. 9. REFERENCES. Any reference to the Loan Agreement contained in any document, instrument or agreement executed in connection with the Loan Agreement shall be deemed to be a reference to the Loan Agreement as modified by this Amendment. 10. COUNTERPARTS. This Amendment may be executed in one or more counterparts, each of which shall constitute an original, but all of which taken together shall be one and the same instrument. 11. RATIFICATION. The terms and provisions set forth in this Amendment shall modify and supersede all inconsistent terms and provisions of the Loan Agreement and shall not be deemed to be a consent to the modification or waiver of any other term or condition of the Loan Agreement. Except as expressly modified and superseded by this Amendment, the terms and provisions of the Loan Agreement are ratified and confirmed and shall continue in full force and effect. [SIGNATURE PAGES FOLLOW] 42 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective duly authorized officers on the date first written above. SIMULA, INC., an Arizona corporation By /s/ Bradley P. Forst -------------------------------- Its President and CEO THE SUBSIDIARIES OF SIMULA, INC.: AI CAPITAL CORP., an Arizona corporation By /s/ Benjamin G. Clark -------------------------------- Its President ------------------------------- CCEC CAPITAL CORP., an Arizona corporation By /s/ Benjamin G. Clark -------------------------------- Its President ------------------------------- INTERNATIONAL CENTER FOR SAFETY EDUCATION, INC., an Arizona corporation By /s/ Benjamin G. Clark -------------------------------- Its Secretary ------------------------------- SAI CAPITAL CORP., an Arizona corporation f/k/a Simula Artcraft Industries, Inc. By /s/ Benjamin G. Clark -------------------------------- Its President ------------------------------- SIMULA AUTOMOTIVE SAFETY DEVICES, INC., an Arizona corporation By /s/ Benjamin G. Clark -------------------------------- Its Secretary ------------------------------- 43 SIMULA COMPOSITES CORPORATION, a Delaware corporation By /s/ Benjamin G. Clark -------------------------------- Its President -------------------------------- SIMULA POLYMER SYSTEMS, INC., an Arizona corporation By /s/ Benjamin G. Clark -------------------------------- Its Secretary -------------------------------- SIMULA SAFETY SYSTEMS, INC., an Arizona corporation By /s/ Benjamin G. Clark -------------------------------- Its Assistant Secretary -------------------------------- SIMULA TECHNOLOGIES, INC., an Arizona corporation By /s/ Benjamin G. Clark -------------------------------- Its Secretary -------------------------------- SIMULA TRANSPORTATION EQUIPMENT CORPORATION, an Arizona corporation By /s/ Benjamin G. Clark -------------------------------- Its President -------------------------------- SIMULA AUTOMOTIVE SAFETY DEVICES, LTD., a United Kingdom limited company By /s/ Benjamin G. Clark -------------------------------- Its Secretary -------------------------------- HOLDER: ALLIED CAPITAL CORPORATION By /s/ David Unger -------------------------------- Its Principal -------------------------------- 44 EXHIBIT A CAPITAL EXPENDITURES AND CAPITALIZED LEASES (4.13(d)) Expenditures for capital improvements for the applicable measurement period (other than ASD Capital Expenditures, as defined below) $_________________ Plus: the aggregate amount of all capitalized lease obligations (other than ASD Capitalized Lease Obligations) made by the Companies and their Subsidiaries during the period $_________________ Total Capital Expenditures and capitalized lease obligations $ ================= Permitted Capital Expenditures and capitalized lease obligations for the period $_________________ In Compliance Yes/No ASD CAPITAL EXPENDITURES AND CAPITALIZED LEASE OBLIGATIONS (4.13(e)) ASD Capital Expenditures are defined as follows: Capital Expenditures to date made in connection with the operation of Simula Automotive Safety Devices, Inc. and/or Simula Automotive Safety Devices, Ltd. $_________________ Plus: Capitalized lease obligations incurred to date in connection with the operation of Simula Automotive Safety Devices, Inc. and/or Simula Automotive Safety Devices, Ltd. $_________________ Total ASD Capital Expenditures and ASD Capitalized Lease Obligations $ ================= Total Permitted ASD Capital Expenditures and ASD Capitalized Lease Obligations $_________________ In Compliance Yes/No 45 EX-99.1 6 p67201exv99w1.txt EX-99.1 EXHIBIT 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Simula, Inc. (the "Company") on Form 10-Q for the period ending September 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Bradley P. Forst, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ Bradley P. Forst ----------------------------- Bradley P. Forst Chief Executive Officer November 14, 2002 23 EX-99.2 7 p67201exv99w2.txt EX-99.2 EXHIBIT 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Simula, Inc. (the "Company") on Form 10-Q for the period ending September 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, John S. Hodgson, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (3) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (4) the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ John S. Hodgson ------------------------------- John S. Hodgson Chief Financial Officer November 14, 2002 24 -----END PRIVACY-ENHANCED MESSAGE-----

EX-10.41B

                                                                 EXHIBIT 10.41 B


                      THE CIT GROUP/ BUSINESS CREDIT, INC.
                       300 South Grand Avenue, Third Floor
                          Los Angeles, California 90071

                                   Dated as of
                                  June 30, 2002

         Re: Amendment Number Five and Waiver re Financing Agreement


SIMULA, INC. AND SUBSIDIARIES
2700 North Central Avenue, Suite 1000
Phoenix, Arizona  85004

Gentlemen:

Reference is made to the Financing Agreement between The CIT Group/Business
Credit, Inc. as lender thereunder (CITBC), and Simula, Inc. and its
subsidiaries, as borrowers thereunder (collectively, the "Companies"), dated as
of December 31, 1999, as the same may be amended from time to time (the
"Financing Agreement"). Initially capitalized terms used herein and not
otherwise defined herein shall have the meanings ascribed to such terms in the
Financing Agreement.

The Companies have requested that CITBC waive compliance with and amend certain
provisions of the Financing Agreement and CITBC has agreed to do so subject to
the terms hereof.

Therefore, pursuant to mutual agreement, it is hereby agreed as follows:

I. WAIVER OF COMPLIANCE WITH FINANCIAL COVENANTS. With respect only to
   compliance as of the Fiscal Quarter ended June 30, 2002, CITBC hereby waives
   compliance with the financial covenants in Section 7, Paragraph 10,
   subparagraphs (b), (c), (e) and (f), as set forth below, but only to the
   extent of the breach of such covenants as set forth below.

      (b)The required minimum consolidated Fixed Charge Coverage Ratio of the
         Companies for the four consecutive Fiscal Quarter period ended June 30,
         2002, of not less than 1.25:1.00, as compared to the actual realized
         ratio of 1.20:1.00.

      (c)On a cumulative basis, at the end of the Fiscal Quarter ended June 30,
         2002, for the prior four Fiscal Quarter period then ended, the required
         minimum consolidated EBITDA of at least $14,500,000, as compared to the
         actual realized amount of $14,063,418.

      (e)At the end of the Fiscal Quarter ended June 30k, 2002, for the prior
         four Fiscal Quarter period then ended, the required minimum ratio of
         Indebtedness to EBITDA, on a consolidated basis, of not more than
         4.80:1.00, as compared to the actual realized ratio of 5.22:1.00.

      (f)Maintain, at the end of the Fiscal Quarter ended June 30, 2002, for
         the prior four Fiscal Quarter period then ended, the required minimum
         Interest Coverage Ratio of at least 2.05:1.00, as compared to the
         actual realized ratio of 1.91:1.00.

                                       25

II.  AMENDMENT TO ADD DEFINITION OF ASD CAPITAL EXPENDITURES. Section 1 of the
     Financing Agreement is hereby amended to add the following:

      ASD CAPITAL EXPENDITURES shall mean Capital Expenditures made by the
      Companies in connection with the operation of Simula Automotive Safety
      Devices, Inc. and/or Simula Automotive Safety Devices, Ltd.

III. AMENDMENT TO ADD DEFINITION OF ASD CAPITAL LEASE OBLIGATIONS. Section 1 of
     the Financing Agreement is hereby amended to add the following:

      ASD CAPITALIZED LEASE OBLIGATIONS shall mean capitalized lease obligations
      incurred by the Companies in connection with the operation of Simula
      Automotive Safety Devices, Inc. and/or Simula Automotive Safety Devices,
      Ltd.

IV.  AMENDMENT TO DEFINITION OF EBITDA. THE DEFINITION OF EBITDA SET FORTH IN
     SECTION 1 OF THE FINANCING AGREEMENT IS HEREBY AMENDED AND REPLACED IN ITS
     ENTIRETY BY THE FOLLOWING:

            EBITDA shall mean, for the period in question, the sum of (a) the
            after-tax net income (or loss) of the Companies on a consolidated
            basis for such period determined in accordance with GAAP, plus (b)
            to the extent deducted in determining such after-tax net income, the
            sum of (i) Interest Expense during such period, plus (ii) all
            provisions for any federal, state, local and/or foreign income taxes
            made by the Companies during such period (whether paid or deferred),
            plus (iii) all depreciation and amortization expenses of the
            Companies during such period, plus (iv) any extraordinary losses
            during such period, plus (v) any losses incurred in connection with
            the repayment in full on or about the date hereof of the Companies'
            obligations owing to LLCP, including accrued interest, fees and
            costs in connection therewith, plus (vi) any losses from the sale or
            other disposition of property other than in the ordinary course of
            business during such period, plus (vii) all non-cash expenses during
            such period arising from the use of capital stock of Parent to pay
            compensation minus (c) to the extent added in determining such
            after-tax net income, the sum of (i) any extraordinary gains during
            such period, plus (ii) any gains from the sale or other disposition
            of property other than in the ordinary course of business during
            such period, plus (iii) any revenue realized by the Companies in
            respect of settlement payments received pursuant to that certain
            Settlement Agreement dated as of September 27, 2000 among certain
            Companies and Autoliv AB, Autoliv GmbH, Autoliv France SNC, Autoliv
            ASP, Inc., Autoliv North America, Inc. and Autoliv, Inc., plus (iv)
            any sale price adjustments made by any Company in respect of
            components sold pursuant to such Settlement Agreement, all
            determined in accordance with GAAP; provided, however, that
            notwithstanding the foregoing, for the fiscal quarters ending March
            31, 2001 and June 30, 2001, EBITDA for such fiscal quarters shall be
            deemed to be $3,802,000 and $4,382,000, respectively.
            Notwithstanding anything set forth in the Financing Agreement to the
            contrary, the Companies shall be permitted to add back, in the
            calculation of EBITDA, any GAAP-recognized restructuring costs
            associated with the cost reduction plan previously delivered by the
            Companies to Allied (the "Restructuring Costs"), provided, however,
            that (i) the Companies shall only be permitted to add back
            Restructuring Costs to the extent they are incurred during the third
            quarter of fiscal year 2002, and (ii) the amount of Restructuring
            Costs that the Companies shall be permitted to add back in the
            calculation of EBITDA shall be limited to $900,000, in the
            aggregate.

V.   AMENDMENT TO FINANCIAL COVENANTS. Paragraph 10 of Section 7 of the
     Financing Agreement is hereby amended and replace in its entirety by the
     following:

      10.   Until termination of the Financing Agreement and payment and
            satisfaction in full of all Obligations hereunder, the Companies
            shall:

                                       26

      (a)not have net income (determined in accordance with GAAP but excluding
         from the calculation thereof any extraordinary losses resulting from
         the refinancing by Allied of Indebtedness owing to LLCP) for any Fiscal
         Quarter of less than zero, provided, however that for the Fiscal
         Quarter ending September 30, 2002, the Companies shall be permitted to
         add back Restructuring Costs in the calculation of net income, to the
         extent such costs are incurred during the third quarter of fiscal year
         2002, in an amount not to exceed $900,000, in the aggregate.

      (b)maintain at the end of each Fiscal Quarter a consolidated Fixed Charge
         Coverage Ratio of the Companies for the four consecutive Fiscal Quarter
         period then ended of not less than the following:

            Fiscal Quarter ended 9/30/02 - 1.025:1.00
            Fiscal Quarter ended 12/31/02 - 1.125:1.00
            Fiscal Quarter ended 3/31/03 - 1.15:1.00
            Fiscal Quarter ended 6/30/03 and thereafter - 1.20:1.00

      (c)maintain, on a cumulative basis, at the end of each Fiscal Quarter for
         the prior four Fiscal Quarter period then ended, EBITDA on a
         consolidated basis of at least the following amounts:

            Fiscal Quarter ended 9/30/02 - $12,000,000
            Fiscal Quarter ended 12/31/02 - $13,250,000
            Fiscal Quarter ended 3/31/03 - $13,750,000
            Fiscal Quarter ended 6/30/03 and thereafter - $14,000,000

      (d) maintain at the end of each month EBITDA on a consolidated basis of at
         least $500,000.

      (e)maintain, at the end of each Fiscal Quarter for the prior four Fiscal
         Quarter period then ended, a ratio of Indebtedness to EBITDA, on a
         consolidated basis, of not more than the following amounts.

            Fiscal Quarter ended 9/30/02 - 6.10:1.00
            Fiscal Quarter ended 12/31/02 - 5.60:1.00
            Fiscal Quarter ended 3/31/03 - 5.40:1.00
            Fiscal Quarter ended 6/30/03 and thereafter - 4.00:1.00

      (f)maintain, at the end of each Fiscal Quarter for the prior four Fiscal
         Quarter period then ended, an Interest Coverage Ratio of at least the
         following amounts.

            Fiscal Quarter ended 9/30/02 - 1.65:1.00
            Fiscal Quarter ended 12/31/02 - 1.90:1.00
            Fiscal Quarter ended 3/31/03 - 1.95:1.00
            Fiscal Quarter ended 6/30/03 and thereafter - 2.00:1.00

VI.  AMENDMENT TO PARAGRAPH 11 (CAPITAL EXPENDITURES) TO SECTION 7. Paragraph 11
     of Section 7 of the Financing Agreement is hereby amended and replaced by
     the following:

      Without the prior written consent of CITBC, the Companies will not and
      will not permit any of their subsidiaries to:

                                       27

      (a) enter into any Operating Lease (other than with respect to real
         property) if after giving effect thereto the aggregate obligations with
         respect to Operating Leases of the Companies during any Fiscal Year
         would exceed $800,000;

      (b)make any ASD Capital Expenditure or enter into any ASD Capitalized
         Lease Obligation, if the sum of (i) the aggregate amount of all ASD
         Capital Expenditures (including the ASD Capital Expenditure in
         question) made by the Companies and their Subsidiaries during such
         fiscal quarter period of the Companies ending as of the dates set forth
         below, plus (ii) the aggregate amount of all ASD Capitalized Lease
         Obligations (including the ASD Capitalized Lease Obligation in
         question) made or required to be made by the Companies and their
         Subsidiaries during such fiscal quarter period of the Companies ending
         as of the dates set forth below, would exceed the amount set forth
         below opposite each such date:

            Fiscal Quarter ended 9/30/02 - $300,000
            Fiscal Quarter ended 12/31/02 - $300,000
            Fiscal Quarter ended 3/31/03 - $300,000
            Fiscal Quarter ended 6/30/03 and thereafter - $150,000;

      (c)make any Capital Expenditure or enter into any capitalized lease, if
         the sum of (i) the aggregate amount of all Capital Expenditures
         (including the Capital Expenditure in question) made by the Companies
         and their Subsidiaries during each four (4) consecutive fiscal quarter
         period of the Companies ending as of the dates set forth below, other
         than ASD Capital Expenditures, plus (ii) the aggregate amount of all
         capitalized lease obligations (including the capitalized lease in
         question) made or required to be made by the Companies and their
         Subsidiaries during each such four (4) consecutive fiscal quarter
         period of the Companies ending as of the dates set forth below, other
         than ASD Capitalized Lease Obligations, would exceed the amount set
         forth below opposite each such date:

            Fiscal Quarter ended 9/30/02 - $3,000,000
            Fiscal Quarter ended 12/31/02 - $3,500,000
            Fiscal Quarter ended 3/31/03 - $3,750,000
            Fiscal Quarter ended 6/30/03 and thereafter - $3,850,000;

      (d) make any DCI Capital Expenditures; or

      (e) incur any DCI Capitalized Lease Obligations.

VII. CONFIRMATION OF GUARANTY. The Companies, as Guarantors, hereby confirm that
     the Guaranty, dated December 30, 1999, executed by the Guarantors in favor
     of CITBC guarantying the repayment of the Obligations remains in full force
     and effect notwithstanding this Amendment and Waiver.

VIII. GENERAL TERMS.

      1. To the extent any of the terms and provision of the Financing Agreement
         and/or the Loan Documents conflict or are inconsistent with the terms
         hereof, the terms of this Amendment and Waiver shall govern.

      2. The effectiveness of this Amendment and Waiver is conditioned upon
         receipt by CITBC of:

                                       28

   (a) an executed counterpart of this Amendment and Waiver executed by the
      Companies.

   (b) an executed counterpart of an amendment and waiver substantively
      identical to this Amendment and Waiver executed by the Companies and
      Allied Capital Corporation with respect to the loan documents between such
      parties.

   (c) payment of a non-refundable fee of $45,000 which shall be paid as a loan
      advance under the Financing Agreement.

   (d) payment in full of all fees and expenses of CITBC incurred in connection
      with this Amendment and Waiver.

   3. This Amendment and Waiver may be executed in two (2) or more counterparts,
      each of which shall constitute an original but all of which when taken
      together shall constitute but one (1) agreement, and shall become
      effective when copies hereof which, when taken together, bear the original
      signatures of each of the parties hereto are delivered to CITBC.

Except as set forth herein no other waiver, consent or change in the terms or
provisions of the Financing Agreement or any other Loan Document is intended or
implied. By execution hereof, the Companies represent and warrant to CITBC that
no material adverse change has occurred in the financial condition, business,
prospects, profits, operations or assets of the Companies since June 30, 2002.
If the foregoing is in accordance with your understanding, please so indicate by
signing and returning the enclosed copy of this Waiver.


                                    Very truly yours,

                                    THE CIT GROUP/BUSINESS CREDIT, INC.

                                    By: /s/ James Karnowski
                                        ------------------------------

                                    Title: Vice President
                                        ------------------------------

                                       29

AGREED:

SIMULA, INC.,
an Arizona corporation

By: /s/ Bradley P. Forst
    ----------------------------

Title: President and CEO
       -------------------------

SAI CAPITAL CORP., f/k/a
SIMULA ARTCRAFT INDUSTRIES, INC.,
an Arizona corporation

By: /s/ Benjamin G. Clark
    ----------------------------

Title: President
       -------------------------


AI CAPITAL CORP. ,
an Arizona corporation

By: /s/ Benjamin G. Clark
    ----------------------------

Title: President
       -------------------------


SIMULA TRANSPORTATION EQUIPMENT CORPORATION,
an Arizona corporation

By: /s/ Benjamin G. Clark
    ----------------------------

Title: President
       -------------------------


INTERNATIONAL CENTER FOR
SAFETY EDUCATION, INC.,
an Arizona corporation

By: /s/ Benjamin G. Clark
    ----------------------------

Title: Secretary
       -------------------------


SIMULA AUTOMOTIVE SAFETY
DEVICES, INC.,
an Arizona corporation

By: /s/ Benjamin G. Clark
    ----------------------------

Title: Secretary
       -------------------------


SIMULA COMPOSITES
CORPORATION,
an Arizona corporation

By: /s/ Benjamin G. Clark
    ----------------------------

Title: President
       -------------------------

                                       30

SIMULA POLYMER SYSTEMS, INC.,
an Arizona corporation

By: /s/ Benjamin G. Clark
    ----------------------------

Title: Secretary
       -------------------------


SIMULA SAFETY SYSTEMS, INC.,
an Arizona corporation

By: /s/ Benjamin G. Clark
    ----------------------------

Title: Assistant Secretary
       -------------------------


SIMULA TECHNOLOGIES, INC..
an Arizona corporation

By: /s/ Benjamin G. Clark
    ----------------------------

Title: Secretary
       -------------------------


SIMULA AUTOMOTIVE SAFETY
DEVICES, LIMITED,
an Arizona corporation

By: /s/ Benjamin G. Clark
    ----------------------------

Title: Secretary
       -------------------------


CCEC CAPITAL CORP.,
an Arizona corporation

By: /s/ Benjamin G. Clark
    ----------------------------

Title: President
       -------------------------

                                       31

EX-10.41C

                                                                 EXHIBIT 10.41C

                      THE CIT GROUP/ BUSINESS CREDIT, INC.
                       300 South Grand Avenue, Third Floor
                          Los Angeles, California 90071


                                   Dated as of
                                October 22, 2002


SIMULA, INC. AND SUBSIDIARIES
2700 North Central Avenue, Suite 1000
Phoenix, Arizona  85004

Re:   Amendment Number Seven to Financing Agreement


Ladies and Gentlemen:

Reference is made to the Financing Agreement between The CIT Group/Business
Credit, Inc. as lender thereunder ("CITBC"), and Simula, Inc. and its
subsidiaries, as borrowers thereunder (collectively, the "Companies"), dated as
of December 31, 1999, as the same may be amended from time to time (the
"Financing Agreement"). Initially capitalized terms used herein and not
otherwise defined herein shall have the meanings ascribed to such terms in the
Financing Agreement.

The Companies have requested to modify and amend certain provisions of the
Financing Agreement and CITBC has agreed to do so subject to the terms hereof.

Therefore, pursuant to mutual agreement, it is hereby agreed as follows:

I. AMENDMENT TO DEFINITION OF REVENUE IN EXCESS OF BILLING LOAN CAP. Upon the
   satisfaction of the conditions set forth herein, the definition of Revenue in
   Excess of Billing Loan Cap set forth in Section 1 of the Financing Agreement
   shall be amended and replaced in its entirety by the following:

      REVENUE IN EXCESS OF BILLING LOAN CAP shall mean $3,500,000, from
      September 30, 2002 through and including December 31, 2002, $3,000,000
      commencing January 1, 2002 through and including March 31, 2003,
      $2,500,000 commencing April 1, 2003 through and including June 30, 2003,
      $2,000,000 commencing July 1, 2003 through and including August 31, 2003,
      and $1,500,000 commencing September 1, 2003 and thereafter, provided,
      however that in the event that the sale of SASD is consummated, the
      definition of Revenue in Excess of Billing Loan Cap shall mean $0.

II. AMENDMENT TO REVOLVING LOANS. Upon the satisfaction of the conditions set
   forth herein, Paragraph 1 of Section 3 of the Financing Agreement shall be
   amended and replaced in its entirety by the following:

      1. CITBC agrees, subject to the terms and conditions of this Financing
         Agreement from time to time, and within x) the Availability and y) the
         Line of Credit, but subject to CITBC's right to make "overadvances", to
         make loans and advances to each of the Companies on a revolving basis
         (i.e. subject to the limitations set forth herein, the Companies may
         borrow, repay and re-borrow Revolving Loans). Such loans and advances
         to each Company shall be in amounts up to the sum of: a) outstanding
         Eligible Accounts Receivable of such Company multiplied by

                                       32

         the Accounts Receivable Advance Percentage, plus b) the lesser of (x)
         the Revenue in Excess of Billing Loan Cap and (y) outstanding Revenue
         in Excess of Billing of such Company multiplied by the Revenue in
         Excess of Billing Advance Percentage, plus c) the lesser of (x) the
         Inventory Loan Cap and (y) the aggregate value of Eligible Inventory of
         such Company as determined at the lower of cost or market multiplied by
         the Inventory Advance Percentage. Each request shall constitute, unless
         otherwise disclosed in writing to CITBC, a representation and warranty
         by the Companies that (i) after giving effect to the requested advance,
         no Default or Event of Default has occurred and (ii) such requested
         Revolving Loan is within the Line of Credit and Availability. All
         requests for loans and advances must be received by an officer of CITBC
         no later than 1:00 p.m., New York time, of the day on which such loans
         and advances are required. Should CITBC for any reason honor requests
         for advances in excess of the limitations set forth herein, such
         advances shall be considered "overadvances" and shall be made in
         CITBC's sole discretion, subject to any additional terms CITBC deems
         necessary.

III.  GENERAL TERMS.

      1.To the extent any of the terms and provision of the Financing Agreement
         and/or the Loan Documents conflict or are inconsistent with the terms
         hereof, the terms of this Amendment shall govern.

      2.The effectiveness of the modifications set forth in this Amendment is
         expressly conditioned upon:

         (e) receipt by CITBC of an executed counterpart of this Amendment
            executed by the Companies;

         (f) receipt by CITBC of payment in full of all fees and expenses of
            CITBC incurred in connection with this Amendment and Waiver; and

         (g) the receipt by CITBC of evidence satisfactory to CITBC, in its sole
            discretion, that Allied Capital Corporation has consented to the
            modifications set forth herein, as prescribed by the terms of the
            Intercreditor Agreement, on terms satisfactory to CITBC, in its sole
            discretion.

      4.This Amendment may be executed in two (2) or more counterparts, each of
        which shall constitute an original but all of which when taken together
        shall constitute but one (1) agreement, and shall become effective when
        copies hereof which, when taken together, bear the original signatures
        of each of the parties hereto are delivered to CITBC.

Except as set forth herein no other amendment, waiver, consent or change in the
terms or provisions of the Financing Agreement or any other Loan Document is
intended or implied. By execution hereof, the Companies represent and warrant to
CITBC that, except as disclosed to CITBC, no material adverse change has
occurred in the financial condition, business, prospects, profits, operations or
assets of the Companies. If the foregoing is in accordance with your
understanding, please so indicate by signing and returning the enclosed copy of
this Amendment.

                                    Very truly yours,

                                    THE CIT GROUP/BUSINESS CREDIT, INC.

                                    By: /s/ James Karnowski
                                        --------------------------------------

                                    Title: Vice President
                                           -----------------------------------


                                       33

AGREED:

SIMULA, INC.,
an Arizona corporation

By: /s/ John S. Hodgson
    --------------------------------
Title: Vice President and CFO
       -----------------------------


SAI CAPITAL CORP.,
an Arizona corporation

By: /s/ Benjamin G. Clark
    --------------------------------
Title: President
       -----------------------------


AI CAPITAL CORP.,
an Arizona corporation

By: /s/ Benjamin G. Clark
    --------------------------------
Title: President
       -----------------------------


SIMULA TRANSPORTATION EQUIPMENT CORPORATION,
an Arizona corporation

By: /s/ Benjamin G. Clark
    --------------------------------
Title: President
       -----------------------------


INTERNATIONAL CENTER FOR
SAFETY EDUCATION, INC.,
an Arizona corporation

By: /s/ Benjamin G. Clark
    --------------------------------
Title: Secretary
       -----------------------------

SIMULA AUTOMOTIVE SAFETY
DEVICES, INC.,
an Arizona corporation

By: /s/ Benjamin G. Clark
    --------------------------------
Title: Secretary
       -----------------------------


SIMULA COMPOSITES CORPORATION,
an Arizona corporation

By: /s/ Benjamin G. Clark
    --------------------------------
Title: President
       -----------------------------

                                       34

SIMULA POLYMER SYSTEMS, INC.,
an Arizona corporation

By: /s/ Benjamin G. Clark
    --------------------------------
Title: Secretary
       -----------------------------


SIMULA SAFETY SYSTEMS, INC.,
an Arizona corporation

By: /s/ Benjamin G. Clark
    --------------------------------
Title: Assistant Secretary
       -----------------------------


SIMULA TECHNOLOGIES, INC.
an Arizona corporation

By: /s/ Benjamin G. Clark
    --------------------------------
Title: Secretary
       -----------------------------


SIMULA AUTOMOTIVE SAFETY
DEVICES, LIMITED,
an Arizona corporation

By: /s/ Benjamin G. Clark
    --------------------------------
Title: Secretary
       -----------------------------


CCEC CAPITAL CORP.,
an Arizona corporation

By: /s/ Benjamin G. Clark
    --------------------------------
Title: President
       -----------------------------

                                       35

EX-10.45A

                                                                  EXHIBIT 10.45A


                 WAIVER AND AMENDMENT NO. 1 TO LOAN AGREEMENT

            This WAIVER AND AMENDMENT NO. 1 TO LOAN AGREEMENT (this "Amendment")
is dated as of August 19, 2002 by and among Allied Capital Corporation, a
Maryland corporation ("Holder"), Simula, Inc., an Arizona corporation
("Simula"), and the direct and indirect subsidiaries of Simula listed on the
signature pages hereof.

            WHEREAS, Simula, the Subsidiaries of Simula (collectively with
Simula, the "Companies") and Holder are parties to a certain Loan Agreement
dated as of September 26, 2001 (as amended, supplemented or otherwise modified
from time to time, the "Loan Agreement");

            WHEREAS, certain Events of Default exist under the Loan Agreement as
a result of the Companies' failure to have (i) Consolidated EBITDA of at least
$14,500,000 for the four (4) consecutive fiscal quarter period ended June 30,
2002, in violation of Section 4.13(a) of the Loan Agreement, (ii) a Fixed Charge
Coverage Ratio of at least 1.25 to 1.0 for the four (4) consecutive fiscal
quarter period ended June 30, 2002, in violation of Section 4.13(b) of the Loan
Agreement, (iii) a Consolidated Debt to EBITDA Ratio, calculated as of June 30,
2002 and for the four (4) consecutive fiscal quarter period then ended, of not
more than 4.80 to 1.0, in violation of Section 4.13(c) of the Loan Agreement,
and (iv) an Interest Coverage Ratio of at least 2.05 to 1.0 for the four (4)
consecutive fiscal quarter period ended June 30, 2002, in violation of Section
4.13(f) of the Loan Agreement (collectively, the "Existing Events of Default");
and

            WHEREAS, the Companies have requested that Holder (a) waive the
Existing Events of Default, and (b) amend the Loan Agreement in certain
respects.

            NOW THEREFORE, in consideration of the mutual conditions and
agreements set forth in the Loan Agreement and this Amendment, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:

1.  DEFINITIONS. Capitalized terms used in this Amendment, unless otherwise
    defined herein, shall have the meanings ascribed to such terms in the Loan
    Agreement.

2.  WAIVER. In reliance upon the representations and warranties of the Companies
    set forth in Section 5 below and subject to the prior satisfaction of the
    conditions to effectiveness set forth in Section 4 below, Holder hereby
    waives the Existing Events of Default. The foregoing waiver only applies to
    the Existing Events of Default and shall not be deemed to constitute a
    waiver of any other Defaults or Events of Default that may now be in
    existence or that may hereafter occur, or of any rights or remedies that
    Holder may have under the Loan Agreement, the other Loan Documents or
    applicable law with respect thereto, all of which rights and remedies are
    specifically reserved.

3.  AMENDMENTS. In reliance upon the representations and warranties of the
    Companies set forth in Section 5 below and subject to the prior satisfaction
    of the conditions to effectiveness set forth in Section 4 below, the Loan
    Agreement is hereby amended as follows:

    3.1. Section 4.8 of the Loan Agreement is hereby amended and restated in its
    entirety, as follows:

            "Section 4.8   Board Meetings.

        Simula will hold meetings of its Board of Directors at least four times
        a year; will allow at least one designee of the Holder to attend and
        participate on an observer basis in such meeting and all meetings of
        committees of such Board either in person or via video or teleconference
        and at Company's expense; and will provide the Holder with the same
        prior notice received by directors to meetings, and written materials as
        given to the directors; provided, however, that if any such Board
        desires to act by unanimous written consent in lieu of a meeting, it may
        do so if the Holder receives, prior to their adoption, a copy of the
        resolutions to be adopted in the same manner and at

                                       36

        the same time as provided to the directors and provided, further, that
        in the event any other Company at any time or from time to time holds
        meetings of its Board of Directors and/or desires to act by unanimous
        written consent in lieu of a meeting, then the provisions of this
        Section 4.8 shall also apply to such Company. The designee of the Holder
        may only be excluded from any such meeting or a portion thereof if (i)
        the Board of Directors will be discussing matters (x) pertaining to the
        Loan, and (y) in which Holder and Simula have interests that are
        directly adverse to each other, and (ii) a member of the Board of
        Directors has requested that the designee not be present."

    3.2. Section 4.13 of the Loan Agreement is hereby amended and restated in
    its entirety, as follows:

            "Section 4.13   Financial Covenants.

        Notwithstanding Section 5.10 hereof or any other covenant herein, the
        Companies will maintain the following financial covenants, as reflected
        on the Companies' books of account in accordance with GAAP:

        (a) Minimum Consolidated EBITDA. The Companies will have a Consolidated
            EBITDA, determined for each four (4) consecutive fiscal quarter
            period of the Companies ending as of the dates set forth below, of
            at least the amount set forth below opposite each such date:



                  FOUR QUARTERS ENDING              MINIMUM EBITDA
                  --------------------              --------------
                                                 
                  September 30, 2002                 $12,000,000

                  December 31, 2002                  $13,250,000

                  March 31, 2003                     $13,750,000

                  June 30, 2003                      $14,000,000

                  September 30, 2003                 $15,200,000

                  December 31, 2003, and each        $15,200,000
                  March 31, June 30,
                  September 30 and December
                  31 thereafter


        (b) Minimum Fixed Charge Coverage Ratio. The Companies will have a Fixed
            Charge Coverage Ratio, determined for each four (4) consecutive
            fiscal quarter period of the Companies ending as of the dates set
            forth below, of at least the amounts set forth below opposite each
            such date:



                  FOUR QUARTERS ENDING                  AMOUNT
                  --------------------                  ------
                                                    
                  September 30, 2002                   1.025 to 1.0

                  December 31, 2002                    1.125 to 1.0

                  March 31, 2003                       1.15 to 1.0

                  June 30, 2003                        1.20 to 1.0

                  September 30, 2003                   1.35 to 1.0

                  December 31, 2003, and each          1.35 to 1.0
                  March 31, June 30, September
                  30 and December 31 thereafter


                                       37

        (c) Maximum Consolidated Debt to EBITDA Ratio. The Companies will have a
            Consolidated Debt to EBITDA Ratio determined as of each date set
            forth below, of not more than the amounts set forth below opposite
            each such date:



                  FOUR QUARTERS ENDING                  AMOUNT
                  --------------------                  ------
                                                    
                  September 30, 2002                   6.10 to 1.0

                  December 31, 2002                    5.60 to 1.0

                  March 31, 2003                       5.40 to 1.0

                  June 30, 2003                        4.00 to 1.0

                  September 30, 2003                   4.00 to 1.0

                  December 31, 2003, and each           00 to 1.0
                  March 31, June 30, September
                  30 and December 31 thereafter


        (d) Capital Expenditures and Capitalized Leases. No Company will, nor
            will any Company permit any of its Subsidiaries to, make any Capital
            Expenditure or enter into any capitalized lease, if the sum of (i)
            the aggregate amount of all Capital Expenditures (including the
            Capital Expenditure in question) made by the Companies and their
            Subsidiaries during each four (4) consecutive fiscal quarter period
            of the Companies ending as of the dates set forth below, other than
            ASD Capital Expenditures, plus (ii) the aggregate amount of all
            capitalized lease obligations (including the capitalized lease in
            question) made or required to be made by the Companies and their
            Subsidiaries during each such four (4) consecutive fiscal quarter
            period of the Companies ending as of the dates set forth below,
            other than ASD Capitalized Lease Obligations, would exceed the
            amount set forth below opposite each such date:



                  FOUR QUARTERS ENDING                  AMOUNT
                  --------------------                  ------
                                                   
                  September 30, 2002                  $3,000,000

                  December 31, 2002                   $3,500,000

                  March 31, 2003                      $3,750,000

                  June 30, 2003                       $3,850,000

                  September 30, 2003                  $3,750,000

                  December 31, 2003, and each         $3,500,000
                  March 31, June 30, September
                  30 and December 31 thereafter


                                       38

        (e) ASD Capital Expenditures and Capitalized Leases. No Company will,
            nor will any Company permit any of its Subsidiaries to, make any ASD
            Capital Expenditure or enter into any ASD Capitalized Lease
            Obligation, if the sum of (i) the aggregate amount of all ASD
            Capital Expenditures (including the ASD Capital Expenditure in
            question) made by the Companies and their Subsidiaries during each
            fiscal quarter of the Companies ending as of the dates set forth
            below, plus (ii) the aggregate amount of all ASD Capitalized Lease
            Obligations (including the ASD Capitalized Lease Obligation in
            question) made or required to be made by the Companies and their
            Subsidiaries during each such fiscal quarter of the Companies ending
            as of the dates set forth below, would exceed the amount set forth
            below opposite each such date:



                  FISCAL QUARTER ENDING                 AMOUNT
                  ---------------------                 ------
                                                    
                  September 30, 2002                   $300,000

                  December 31, 2002                    $300,000

                  March 31, 2003                       $300,000

                  June 30, 2003                        $150,000

                  September 30, 2003                   $150,000

                  December 31, 2003, and each          $150,000
                  March 31, June 30, September
                  30 and December 31 thereafter



        (f) Minimum Interest Coverage Ratio. The Companies will have an Interest
            Coverage Ratio, determined for each four (4) consecutive fiscal
            quarter period of the Companies ending as of the dates set forth
            below, of at least the amounts set forth below opposite each such
            date:



                  FOUR QUARTERS ENDING                  AMOUNT
                  --------------------                  ------
                                                    
                  September 30, 2002                   1.65 to 1.0

                  December 31, 2002                    1.90 to 1.0

                  March 31, 2003                       1.95 to 1.0

                  June 30, 2003                        2.00 to 1.0

                  September 30, 2003                   2.10 to 1.0

                  December 31, 2003, and each          2.10 to 1.0
                  March 31, June 30, September
                  30 and December 31 thereafter


        (g) Minimum Monthly Consolidated EBITDA. The Companies will have a
            Consolidated EBITDA, for each month, determined as of the last day
            of such month, of at least $500,000. The Companies hereby agree that
            in addition to the requirements set forth in Section 4.2 herein, the
            Companies shall also provide to Holder, in writing, each month, a
            written certification by a Responsible Officer containing the
            computations evidencing the Companies' compliance with the minimum
            monthly Consolidated EBITDA covenant contained in this subsection
            4.13(g) (or, in the event of any non-compliance, containing a
            statement to such effect)."

                                       39

     3.3 Section 20.1 of the Loan Agreement is hereby amended by adding the
     following definitions thereto:

            "ASD Capital Expenditures" means Capital Expenditures made by the
            Companies in connection with the operation of Simula Automotive
            Safety Devices, Inc. and/or Simula Automotive Safety Devices, Ltd.;

            "ASD Capitalized Lease Obligations" means capitalized lease
            obligations incurred by the Companies in connection with the
            operation of Simula Automotive Safety Devices, Inc. and/or Simula
            Automotive Safety Devices, Ltd.;

     3.4 Subsections 4.13(d) and 4.13(e) of the form of Compliance Certificate
     set forth at Exhibit A to the Loan Agreement are hereby amended and
     restated in their entirety, as set forth on Exhibit A hereto.

     4.   Conditions. The effectiveness of this Amendment is subject to the
          following conditions precedent:

        (a) Each Company shall have delivered to Holder a manually executed
            original of this Amendment;

        (b) The Companies shall have paid to Holder the Amendment Fee (as
            defined below);

        (c) The Companies shall have delivered to Holder an agreement executed
            by each Company and CIT in form and substance satisfactory to Holder
            (the "CIT Amendment"), pursuant to which, among other things, (i)
            CIT shall have waived all Defaults and Events of Default (as such
            terms are defined in the CIT Financing Agreement) in existence as of
            the date hereof under the CIT Financing Agreement, which waiver
            shall be subject to no conditions to effectiveness other than those
            substantially similar to those set forth herein, and (ii) CIT and
            the Companies shall have agreed to amend the financial covenants set
            forth in the CIT Financing Agreement such that the financial
            covenants therein are the same as the financial covenants set forth
            in the Loan Agreement, as amended hereby;

        (d) After giving effect to the waiver set forth in Section 2, no Default
            or Event of Default shall be in existence as of the date hereof; and

        (e) After giving effect to the CIT Amendment, no Default or Event of
            Default (as such terms are defined in the CIT Financing Agreement)
            shall be in existence as of the date hereof under the CIT Financing
            Agreement.

     5.   REPRESENTATIONS AND WARRANTIES. To induce Holder to enter into this
          Amendment, the Companies represent and warrant to Holder that (a) the
          execution, delivery and performance of this Amendment has been duly
          authorized by all requisite corporate action on the part of the
          Companies and that this Amendment has been duly executed and delivered
          by the Companies, and (b) except for the Existing Events of Default,
          no Default or Event of Default shall have occurred and be continuing
          before and immediately after giving effect to this Amendment.

     6.   WAIVER FEE. The Companies hereby agree, jointly and severally, to pay
          to Holder an amendment fee (the "Amendment Fee") in the amount of
          $100,000.

     7.   ADDITIONAL AGREEMENTS. Notwithstanding anything contained in this
          Amendment or in the Loan Agreement to the contrary, Holder and
          Companies hereby agree as follows:

                                       40

     7.1  Notwithstanding the Consolidated Debt to EBITDA Ratio covenant set
          forth in clause (c) of Section 4.13 of the Loan Agreement, in the
          event that the Companies shall fail to have a Consolidated Debt to
          EBITDA Ratio, calculated as of June 30, 2003 and for the four (4)
          consecutive fiscal quarter period then ending, of less than 4.0 to
          1.0, the Companies agree, jointly and severally, to pay to Holder a
          fee (the "Performance Fee") in the amount of $1,000,000, which
          Performance Fee shall be fully-earned and payable in full in cash on
          July 31, 2003.

     7.2  On or before October 31, 2002, the Companies shall engage a financial
          consultant acceptable to Holder, in Holder's reasonable discretion
          (the "Financial Consultant"), to advise the Companies with respect to
          strategic planning and refinancing opportunities for the Companies.
          Holder and the Companies further agree that in the event that the
          Companies fail to engage the Financial Consultant on or prior to
          October 31, 2002 pursuant to the terms set forth herein, commencing on
          November 1, 2002 the Principal Balance shall bear interest pursuant to
          the terms set forth in Section 1.4 of the Loan Agreement.

     7.3  On or before October 31, 2002, the Companies shall have delivered to
          Holder, in form and substance satisfactory to Holder in Holder's sole
          discretion, all of the agreements, instruments and documents required
          or requested by Allied to create an enforceable lien under the laws of
          the countries set forth below with respect to the following federally
          registered patents registered or applied for registration in such
          countries, together with evidence satisfactory to Allied, in Allied's
          sole discretion, showing that such agreements, instruments and
          documents have been registered pursuant to the laws of such
          jurisdictions: (i) Patent No. 5,839,753, registered in Germany, Italy,
          Japan and South Korea; (ii) Patent No. 6,126,194, registered in
          Germany, Italy, Japan and South Korea; (iii) Patent No. 5,322,322,
          registered in Germany, Italy, Japan and South Korea; (iv) Patent No.
          5,480,181, registered in Germany, Italy, Japan and South Korea; (v)
          Patent No. 5,253,826, registered in Great Britain; (vi) Patent No.
          5,962,617, registered in Italy, Japan and The Netherlands; and (vii)
          Patent No. 6,127,505, registered in Italy, Japan and The Netherlands
          (collectively, the "Foreign I.P. Deliveries"). The Companies hereby
          acknowledge and agree that if the Companies shall fail to make any of
          the Foreign I.P. Deliveries on or before October 31, 2002, (a) such
          failure shall constitute an Event of Default, (b) on November 1, 2002,
          the Companies shall pay, jointly and severally, a fee to Holder in the
          amount of $25,000, and (c) until all of the Foreign I.P. Deliveries
          are made to Holder, the Companies shall pay additional fees to Holder
          in the amount of $25,000 each, payable on the first day of each month
          thereafter, until all of the Foreign I.P. Deliveries have been made to
          Holder pursuant to the terms set forth herein.

     7.4  From and following the date hereof, no Company shall (i) make any DCI
          Capital Expenditures, or (ii) incur any DCI Capitalized Lease
          Obligations.

     7.5  Notwithstanding anything set forth in the Loan Agreement or in this
          Amendment to the contrary, from and following the date hereof, the
          Companies shall be permitted to add back, in the calculation of
          EBITDA, any GAAP-recognized restructuring costs associated with the
          cost reduction plan previously delivered by the Companies to Holder
          (the "Restructuring Costs"), provided, however, that (i) the Companies
          shall only be permitted to add back Restructuring Costs to the extent
          they are incurred during the third quarter of fiscal year 2002, and
          (ii) the amount of Restructuring Costs that the Companies shall be
          permitted to add back in the calculation of EBITDA shall be limited to
          $900,000, in the aggregate.

                                       41

     8.   SEVERABILITY. Any provision of this Amendment held by a court of
          competent jurisdiction to be invalid or unenforceable shall not impair
          or invalidate the remainder of this Amendment and the effect thereof
          shall be confined to the provision so held to be invalid or
          unenforceable.

     9.   REFERENCES. Any reference to the Loan Agreement contained in any
          document, instrument or agreement executed in connection with the Loan
          Agreement shall be deemed to be a reference to the Loan Agreement as
          modified by this Amendment.

     10.  COUNTERPARTS. This Amendment may be executed in one or more
          counterparts, each of which shall constitute an original, but all of
          which taken together shall be one and the same instrument.

     11.  RATIFICATION. The terms and provisions set forth in this Amendment
          shall modify and supersede all inconsistent terms and provisions of
          the Loan Agreement and shall not be deemed to be a consent to the
          modification or waiver of any other term or condition of the Loan
          Agreement. Except as expressly modified and superseded by this
          Amendment, the terms and provisions of the Loan Agreement are ratified
          and confirmed and shall continue in full force and effect.


                            [SIGNATURE PAGES FOLLOW]



                                       42

            IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their respective duly authorized officers on
the date first written above.

                                 SIMULA, INC.,
                                 an Arizona corporation


                                 By  /s/ Bradley P. Forst
                                    --------------------------------
                                 Its President and CEO

                                 THE SUBSIDIARIES OF SIMULA, INC.:
                                 AI CAPITAL CORP.,
                                 an Arizona corporation

                                 By  /s/ Benjamin G. Clark
                                    --------------------------------
                                 Its President
                                     -------------------------------

                                 CCEC CAPITAL CORP.,
                                 an Arizona corporation

                                 By  /s/ Benjamin G. Clark
                                    --------------------------------
                                 Its  President
                                     -------------------------------

                                 INTERNATIONAL CENTER FOR SAFETY EDUCATION,
                                 INC., an Arizona corporation

                                 By /s/ Benjamin G. Clark
                                    --------------------------------
                                 Its  Secretary
                                     -------------------------------

                                 SAI CAPITAL CORP., an Arizona corporation
                                 f/k/a Simula Artcraft Industries, Inc.

                                 By /s/ Benjamin G. Clark
                                    --------------------------------
                                 Its President
                                     -------------------------------

                                 SIMULA AUTOMOTIVE SAFETY DEVICES, INC., an
                                 Arizona corporation

                                 By /s/ Benjamin G. Clark
                                    --------------------------------
                                 Its Secretary
                                     -------------------------------

                                       43

                                 SIMULA COMPOSITES CORPORATION,
                                 a Delaware corporation

                                 By /s/ Benjamin G. Clark
                                    --------------------------------
                                 Its President
                                    --------------------------------

                                 SIMULA POLYMER SYSTEMS, INC.,
                                 an Arizona corporation

                                 By /s/ Benjamin G. Clark
                                    --------------------------------
                                 Its Secretary
                                    --------------------------------

                                 SIMULA SAFETY SYSTEMS, INC.,
                                 an Arizona corporation

                                 By /s/ Benjamin G. Clark
                                    --------------------------------
                                 Its Assistant Secretary
                                    --------------------------------

                                 SIMULA TECHNOLOGIES, INC.,
                                 an Arizona corporation

                                 By /s/ Benjamin G. Clark
                                    --------------------------------
                                 Its Secretary
                                    --------------------------------

                                 SIMULA TRANSPORTATION EQUIPMENT CORPORATION,
                                 an Arizona corporation

                                 By /s/ Benjamin G. Clark
                                    --------------------------------
                                 Its President
                                    --------------------------------

                                 SIMULA AUTOMOTIVE SAFETY DEVICES, LTD., a
                                 United Kingdom limited company

                                 By /s/ Benjamin G. Clark
                                    --------------------------------
                                 Its Secretary
                                    --------------------------------

                                     HOLDER:

                                 ALLIED CAPITAL CORPORATION

                                 By /s/ David Unger
                                    --------------------------------
                                 Its Principal
                                    --------------------------------

                                       44

                                    EXHIBIT A


              CAPITAL EXPENDITURES AND CAPITALIZED LEASES (4.13(d))

                                                                                 
Expenditures for capital improvements for the applicable measurement period
(other than ASD Capital Expenditures, as defined below)                             $_________________

Plus: the aggregate amount of all capitalized lease obligations (other than ASD
Capitalized Lease Obligations) made by the Companies and their Subsidiaries
during the period                                                                   $_________________

Total Capital Expenditures and capitalized lease obligations                        $
                                                                                     =================

Permitted Capital Expenditures and capitalized lease obligations for the period     $_________________

In Compliance                                                                                   Yes/No




      ASD CAPITAL EXPENDITURES AND CAPITALIZED LEASE OBLIGATIONS (4.13(e))
                                                                                 
ASD Capital Expenditures are defined as follows:

Capital Expenditures to date made in connection with the operation of Simula
Automotive Safety Devices, Inc. and/or Simula Automotive Safety Devices, Ltd.
                                                                                    $_________________

Plus:    Capitalized lease obligations incurred to date in connection with the
         operation of Simula Automotive Safety Devices, Inc. and/or Simula
         Automotive Safety Devices, Ltd.
                                                                                    $_________________

Total ASD Capital Expenditures and ASD Capitalized Lease Obligations
                                                                                    $
                                                                                     =================

Total Permitted ASD Capital Expenditures and ASD Capitalized Lease Obligations
                                                                                    $_________________

In Compliance                                                                                   Yes/No







                                       45

EX-99.1

                                                                    EXHIBIT 99.1

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Simula, Inc. (the "Company") on Form
10-Q for the period ending September 30, 2002 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I, Bradley P. Forst,
Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that:

(1)      the Report fully complies with the requirements of Section 13(a) or
         15(d) of the Securities Exchange Act of 1934; and

(2)      the information contained in the Report fairly presents, in all
         material respects, the financial condition and result of operations of
         the Company.



                              /s/ Bradley P. Forst
                              -----------------------------
                              Bradley P. Forst
                              Chief Executive Officer
                              November 14, 2002

                                       23

EX-99.2

                                                                    EXHIBIT 99.2

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Simula, Inc. (the "Company") on Form
10-Q for the period ending September 30, 2002 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I, John S. Hodgson, Chief
Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(3)      the Report fully complies with the requirements of Section 13(a) or
         15(d) of the Securities Exchange Act of 1934; and

(4)      the information contained in the Report fairly presents, in all
         material respects, the financial condition and result of operations of
         the Company.



                              /s/ John S. Hodgson
                              -------------------------------
                              John S. Hodgson
                              Chief Financial Officer
                              November 14, 2002


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