<PAGE>
<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 9, 1997
REGISTRATION NO. 333-27197
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PROFLIGHT MEDICAL RESPONSE, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
COLORADO 4522 84-1200480
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
7211 S. PEORIA STREET,
LITTLETON, COLORADO 80112
(800) 949-5387
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
7211 S. PEORIA STREET,
LITTLETON, COLORADO 80112
(ADDRESS OF PRINCIPAL PLACE OF BUSINESS OR INTENDED PRINCIPAL PLACE OF BUSINESS)
------------------------
KEVIN L. BURKHARDT
7211 S. PEORIA STREET, LITTLETON, COLORADO 80112
(800) 949-5387
NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
------------------------
COPY OF ALL COMMUNICATIONS TO:
<TABLE>
<S> <C>
GERALD A. ADLER, ESQ. LAWRENCE G. NUSBAUM, ESQ.
MARY P. O'HARA, ESQ. GUSRAE, KAPLAN & BRUNO
BONDY & SCHLOSS LLP 120 WALL STREET
6 EAST 43RD ST., 25TH FLOOR NEW YORK, NY 10005
NEW YORK, NY 10017 PH: (212) 269-1400
PH: (212) 661-3535 FAX: (212) 809-5449
FAX: (212) 972-1677
</TABLE>
------------------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after this Registration Statement becomes effective.
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the same
offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
[CAPTION]
<TABLE>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
OFFERING AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE PRICE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED PER SHARE(2) PRICE(1)(2) FEE(3)
<S> <C> <C> <C> <C>
Common Stock............................ 1,380,000 Shares $ 4.00 $ 5,520,000 $ 576.00(3)
Redeemable Common Stock Purchase
Warrants.............................. 1,380,000 Warrants $ .10 $ 138,000 $ 14.40(3)
Common Stock(4)......................... 1,380,000 Shares $ 6.00 $ 8,280,000 $ 2,484.00
Underwriter's Option(5)................. 240,000 Shares -- $ 10 --
Common Stock(6)......................... 120,000 Shares $ 4.80 $ 576,000 $ 172.80
Underwriter's Common Stock Purchase
Warrants(7)........................... 120,000 Warrants $ .12 $ 14,400 $ 4.32
Common Stock(8)......................... 120,000 Shares $ 6.00 $ 720,000 $ 216.00
Total........................................................................................... $ 3,467.52
</TABLE>
(footnotes on next page)
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
________________________________________________________________________________
<PAGE>
<PAGE>
(footnotes from previous page)
(1) Includes 180,000 shares of Common Stock and Common Stock Purchase Warrants
that the Underwriter has the option to purchase from the Company to cover
over-allotments, if any. See 'Underwriting.'
(2) Estimated solely for the purpose of calculating the registration fee.
(3) Calculated pursuant to Rule 457(a) based on a bona fide estimate of the
maximum offering price. The amount of the fee for the 1,380,000 shares of
Common Stock and the 1,380,000 Common Stock Purchase Warrants offered hereby
has been adjusted to reflect the prior payment of the fee with respect to
900,000 shares and 900,000 Common Stock Purchase Warrants listed in the
Company's initial registration statement filing.
(4) Represents Common Stock reserved for issuance upon exercise of the
Redeemable Common Stock Purchase Warrants.
(5) Represents Underwriter's Option to purchase 120,000 shares of Common Stock
and 120,000 Common Stock Purchase Warrants.
(6) Represents Common Stock underlying Underwriter's Option.
(7) Represents Common Stock Purchase Warrants underlying Underwriter's Option.
(8) Represents Common Stock underlying Common Stock Purchase Warrants underlying
Underwriter's Option.
<PAGE>
<PAGE>
SUBJECT TO COMPLETION, DATED DECEMBER 9, 1997
PROSPECTUS
PROFLIGHT MEDICAL RESPONSE, INC.
1,200,000 SHARES OF COMMON STOCK AND
1,200,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
Proflight Medical Response, Inc., a Colorado corporation (the 'Company')
hereby offers (the 'Offering') 1,200,000 shares of common stock, $.001 par value
(the 'Common Stock') of the Company and 1,200,000 Redeemable Common Stock
Purchase Warrants (the 'Warrants'). The initial public offering prices of the
Common Stock and Warrants are $4.00 and $.10, respectively. The Offering is
being offered through First Liberty Investment Group, Inc. (the 'Underwriter').
See 'Underwriting.' The Common Stock and the Warrants offered hereby (sometimes
hereinafter collectively referred to as the 'Securities') will be separately
tradeable immediately upon issuance and may be purchased separately. Investors
will not be required to purchase shares of Common Stock and Warrants together or
in any particular ratio. Each Warrant entitles the holder to purchase one share
of Common Stock at an exercise price of $6.00 (the 'Exercise Price'), subject
to adjustment, for three years commencing the date of this Prospectus (the
'Closing Date').
The Warrants are redeemable, in whole or in part, by the Company at a price
of $.10 per Warrant, commencing twenty-four (24) months after the Closing Date
(provided that with the prior written consent of the Underwriter the Warrants
may be redeemed commencing twelve (12) months from the Closing Date) and prior
to the expiration, provided that (i) prior written notice of not less than
thirty (30) days is given to the Warrantholders, and (ii) the closing bid price
(as defined) of the Company's Common Stock for the twenty (20) consecutive
trading days immediately prior to the date on which the notice of redemption is
given, shall have exceeded $8.50 per share. Notwithstanding the foregoing,
Warrantholders shall have exercise rights until the close of business the day
preceding the date fixed for redemption.
Prior to this Offering, there has been no public market for the Common
Stock or the Warrants. There can be no assurance that a public market will
develop or be sustained for the Common Stock or the Warrants after the
completion of the Offering. The Offering prices of the Common Stock and the
Warrants, exercise price and other terms of the Warrants were established by
negotiations between the Company and the Underwriter and do not necessarily bear
any direct relationship to the Company's assets, earnings, book value, results
of operations or any other generally accepted criteria of value. The Company has
applied for listing of the Common Stock and the Warrants on the Nasdaq SmallCap
Market'sm' under the trading symbols 'PFLT' and 'PFLTW.' See 'Risk Factors' and
'Underwriting.'
------------------------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE AND
SUBSTANTIAL DILUTION AND SHOULD NOT BE PURCHASED BY ANYONE WHO CANNOT AFFORD THE
LOSS OF HIS OR HER ENTIRE INVESTMENT. SEE 'RISK FACTORS' BEGINNING ON PAGE 9 OF
THIS PROSPECTUS FOR CERTAIN INFORMATION THAT SHOULD BE CONSIDERED BY PROSPECTIVE
INVESTORS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(1) COMPANY(2)(3)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share...................................................................... $4.00 $0.40 $3.60
Per Warrant.................................................................... $.10 $.01 $.09
Total(3)....................................................................... $4,920,000 $492,000 $4,428,000
</TABLE>
(see notes on following page)
FIRST LIBERTY INVESTMENT GROUP, INC.
------------------------
, 1997
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION, OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
<PAGE>
(1) Does not include (i) an option issued to the Underwriter (the 'Underwriter's
Option') to purchase 120,000 shares of Common Stock at $4.80 per share and
120,000 Warrants at a price of $.12 per warrant, (ii) a non-accountable
expense allowance payable to the Underwriter equal to 3% of the gross
proceeds of the Offering, (iii) a consulting agreement providing for fees
totalling $120,000 payable in full to the Underwriter on the Closing Date
and (iv) a 5% sales commission on Warrants exercised through the
Underwriter. The Underwriter's Option is exercisable for a period of four
years commencing one year after the date of this Prospectus. The Company has
agreed to indemnify the Underwriter against, or contribute to losses arising
out of, certain liabilities, including liabilities under the Securities Act
of 1933, as amended. See 'Underwriting.'
(2) After deducting underwriting discounts and commissions, but before deducting
estimated Offering expenses of $422,000 in the aggregate, which includes the
Underwriter's non-accountable expense allowance all of which are payable by
the Company. See 'Underwriting.'
(3) The Securities are being sold on a 'firm commitment' basis. The Company has
granted the Underwriter an option, exercisable during the 45-calendar-day
period after the Closing Date, to purchase, at the initial public offering
price less underwriting discounts, up to an additional 180,000 shares of
Common Stock and 180,000 Common Stock Purchase Warrants, on the same terms
as the Securities offered hereby, solely to cover over-allotments, if any
(the 'Over-Allotment Option'). If the Over-Allotment Option is exercised in
full, the total price to the public will be $5,658,000, the total
Underwriting Discount and Commissions will be $735,540, and the total
Proceeds to the Company will be $4,922,460, before deducting estimated
offering expenses payable by the Company. See Note (2) above and
'Underwriting.'
------------------------
The Securities are being offered by the Underwriter named herein, as agent
for the Company, subject to prior sale, when, as and if accepted by them and
subject to certain legal matters to be approved by counsel and to certain other
conditions. The Company and the Underwriter reserve the right to withdraw,
cancel or modify the Offering and to reject any order in whole or in part.
The Company intends to furnish its stockholders with annual reports
containing audited financial statements of the Company, after the end of each
fiscal year, and make available such other periodic reports as the Company may
deem appropriate or as may be required by law.
A SIGNIFICANT NUMBER OF SECURITIES MAY BE SOLD TO CUSTOMERS OF THE
UNDERWRITER. SUCH CUSTOMERS MAY SUBSEQUENTLY ENGAGE IN THE SALE OR PURCHASE OF
THE SECURITIES THROUGH OR WITH THE UNDERWRITER. ALTHOUGH IT HAS NO OBLIGATION TO
DO SO, THE UNDERWRITER MAY BECOME A MARKET MAKER AND OTHERWISE EFFECT
TRANSACTIONS IN SECURITIES OF THE COMPANY, AND, IF IT PARTICIPATES IN SUCH
MARKET ACTIVITIES, MAY BE A DOMINATING INFLUENCE IN THE TRADING OF THE
SECURITIES. THE PRICES AND THE LIQUIDITY OF THE SECURITIES MAY BE SIGNIFICANTLY
AFFECTED BY THE DEGREE, IF ANY, OF THE PARTICIPATION OF THE UNDERWRITER IN SUCH
MARKET, SHOULD A MARKET ARISE.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET.
2
<PAGE>
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information, including the financial
statements and notes thereto, appearing elsewhere in this Prospectus. All share
and per share amounts reflect a fifty-for-one and a 3.85356-for-one stock split
of the Company's issued and outstanding Common Stock effective July 1996 and
January 1996, respectively. In December 1996, the Company contracted to acquire
all of the outstanding shares of capital stock of (i) Air Response, Inc., a New
York corporation ('Air Response') in a stock-for-stock exchange and (ii) Air
Response South, Inc., a Florida corporation ('Air Response South'), for cash.
Each of these corporations provide fixed wing air ambulance services. These
agreements were amended in April and May 1997. Pursuant to the terms of these
agreements, the acquisitions will close simultaneously with the closing of this
initial public offering. Unless the context otherwise requires, the term 'the
Company' includes Air Response and Air Response South. Except where otherwise
indicated, all information in this Prospectus assumes no exercise of the
Underwriter's Over-Allotment Option or Underwriter's Option. Each prospective
investor is urged to read this Prospectus in its entirety.
THE COMPANY
The Company is a national and international provider of fixed wing air
ambulance transport services for persons who are ill, injured or otherwise
incapacitated who need to be relocated and who may require emergency medical
care during flight. The Company currently operates from its main facility
located in Colorado, and bases in New York and Tennessee. The Company provides
its services throughout the United States, Canada, Europe, Mexico, Central
America, South America, Bermuda and the Mediterranean. In addition, the Company,
when operating at full capacity, has subcontracted its services by brokering its
air ambulance trips to other air transport providers. For the year ended
December 31, 1996, the Company, including Air Response and Air Response South,
had pro forma net sales of approximately $11.3 million.
As of the date hereof, the Company has an air ambulance fleet of 9 fixed
winged aircraft. The Company provides transport services in connection with the
relocation of patients requiring specialized medical procedures such as organ
transplants, cancer treatment, specialized cardiac surgery, burn care, stroke
care and advanced head and spinal cord surgery and rehabilitation to hospitals
recognized as national centers of excellence in these fields, for the
repatriation of patients who are injured or become ill away from home and in
connection with the transportation of non-ambulatory long-term care patients who
need to be relocated. The flights operated are on a non-emergency basis and are
generally long distance in nature. Emergency flights are usually contracted to
helicopters and such flights are generally short distances. The Company's
customers include individual patients, managed care companies, hospitals,
government agencies, national health insurance companies, health maintenance
organizations ('HMOs') and air ambulance brokers.
The Company believes that the need for non-emergency ambulance transport
services will increase as pressure on the health insurance industry to reduce
costs increases. The Company believes that it can capitalize on this market. The
Company believes that the fixed wing segment of the medical air transport
industry will grow as hospital consolidation produces regional health networks
responsible for patients spread over a greater geographic area. The Company also
believes, although no assurance can be given, that relocating patients with
specialized needs to hospitals recognized as national centers of excellence and
which have pricing agreements with insurers and HMOs will increase as a way to
provide high quality, cost effective health care. The fixed wing air ambulance
market is currently served by a number of small, regional companies lacking a
national presence and the ability to serve an insurance company or HMO on a
national basis. The Company believes that through the acquisitions of Air
Response and Air Response South (the 'Acquisitions') and by implementing its
business strategy, it will begin to establish a national presence while
continuing to ensure that patients receive the highest quality care. The
Company's beliefs in this paragraph are based upon management's experience and
an independent research report by Wintergreen Research, Inc., copyright 1995,
entitled 'Fixed Wing Air Medical Transport Market, 1991 - 2000.' No assurance
can be given that such beliefs will be realized or are predictive of future
developments. No assurance can be given that the facts, predictions or the
independent research report upon which such beliefs are premised are accurate.
3
<PAGE>
<PAGE>
The Company's business strategy over the next 24 months is to attempt to
become a leading national provider of fixed wing air ambulance services by:
Improving the efficiency of its existing operations by integrating the
operations of Air Response and Air Response South into the Company and by
providing additional management expertise, recognizing economies of scale,
introducing sophisticated operating systems and controls, instituting a
centralized dispatching function and providing a stronger, more stable
capital base.
Implementing strategic acquisitions of other air ambulance service
providers. The Company believes that opportunities exist to acquire
additional air ambulance service providers in the future that would
benefit from the efficiency, as well as the capital and management
resources of the Company. The Company regularly evaluates acquisition
possibilities and considers a number of factors in evaluating such
acquisition candidates, including the quality of management and medical
personnel, historical operating results, the demographic characteristics
of service areas, the regulatory environment in which such company
operates and the fee structure and reimbursement levels. In addition, by
combining existing companies, the Company hopes it will be able to deliver
fixed wing air ambulance services to insurance companies and other health
care providers at cost effective rates. Except as otherwise described in
this Prospectus, there are no present negotiations, arrangements or
understandings with respect to any potential material acquisitions.
Increasing its market share and expanding its operations by contracting
with insurers and HMOs seeking an air ambulance provider with national and
international capabilities and by appealing to individual consumers
through a prepaid service package. No assurances can be given that the
Company will be able to successfully negotiate additional contracts with
such parties on favorable terms, if at all, or otherwise expand its
operations.
The Company's senior management has extensive experience in the air
ambulance transport services business. Kevin L. Burkhardt, the Company's Chief
Executive Officer and President, has over 10 years experience in the air
ambulance industry and over 20 years experience in the aviation industry,
including experience as captain, flight instructor and corporate pilot. Jane S.
Burkhardt, the Company's Secretary and medical and legal coordinator, received
her B.S. degree in nursing in 1981 from the University of Wisconsin and her JD
degree in 1990 from St. Louis University Law School. Mrs. Burkhardt has over 14
years experience in the nursing industry and was a registered nurse and risk
manager for Presbyterian/St. Lukes Medical Center. Donald Jones will, upon
closing of the Offering, serve as the Company's Vice President of Sales and a
Director of the Company. Mr. Jones has over 13 years experience in the air
ambulance industry, including experience as flight coordinator, and director of
marketing and sales. David Cohen, the Company's Chief Financial Officer and
Treasurer, has over 30 years of management and financial experience. Mr. Cohen
was the chief financial officer of Air Resources Corp., a public company which
manufactures adhesives and held various senior management positions for two
aircraft sales corporations.
In April 1997, the Company entered into an Amended Agreement and Plan of
Reorganization with Air Response and Louis R. Capece, Jr., which agreement was
further amended in May 1997, pursuant to which the Company agreed to acquire at
the closing of the Offering, subject to the terms and conditions contained
therein, all of the outstanding capital stock of Air Response in exchange for
506,250 shares of Common Stock of the Company to be issued two years from the
closing of the Offering. If the Company completes a second public offering, Mr.
Capece has a put option to sell to the Company such number of shares of Common
Stock at the then current market value, equal to 20% of the net proceeds of such
offering not to exceed $1,000,000. Under the terms of the put option, the
Company is obligated to purchase such shares once the put option is exercised.
The Company simultaneously entered into an Amended Stock Purchase and Sale
Agreement with Air Response South and Louis R. Capece, Jr. pursuant to which the
Company agreed to acquire at the closing of the Offering, subject to the terms
and conditions contained therein, all of the outstanding capital stock of Air
Response South for $2,000,000 of which $1,000,000 is payable upon closing of the
Offering with the balance due two years from such date.
The Company was incorporated in May 1992. The Company's executive offices
are located at 7211 S. Peoria St., Englewood, CO 80112 and its telephone number
is (800) 949-5387.
4
<PAGE>
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered......................... 1,200,000 shares(1)
Redeemable Common Stock Purchase Warrants
Offered.................................... 1,200,000 Warrants(1)
Common Stock Outstanding Before the
Offering................................... 2,665,607 shares(1)(2)
Common Stock Outstanding After the
Offering................................... 3,865,607 shares(1)(2)
Warrants Outstanding Before Offering......... -0-
Warrants Outstanding After Offering.......... 1,200,000 Warrants(1)(3)
Exercise Terms.......................... Each Warrant entitles the holder to purchase one share of Common
Stock for $6.00, during the three (3) year period commencing on
the date hereof, subject to adjustment in certain circumstances.
See 'Description of Securities -- Warrants.'
Expiration Date......................... , 2000 (three years after the Closing Date).
Redemption.............................. Redeemable by the Company, in whole or in part, at a price of $.10
per Warrant, commencing twenty-four (24) months after the Closing Date
(provided that with the prior written consent of the Underwriter, the
Warrants may be redeemed commencing twelve (12) months from the Closing
Date) upon not less than thirty (30) days prior written notice to
the holders of such Warrants, provided that the closing bid price
(as defined in the Warrant Agreement) of the Company's Common Stock
for the twenty (20) consecutive trading days immediately prior to the
date on which the notice of redemption is given, shall have exceeded
$8.50 per share.
Use of Proceeds.............................. The net proceeds from the Offering will be used to pay the first
payment in connection with the acquisition of Air Response South,
to repay indebtedness incurred in connection with its bridge
financing and certain short term notes, to fund costs relating to
its expansion strategy and for general corporate purposes,
including working capital. See 'Use of Proceeds.'
Risk Factors................................. An investment in the Securities offered hereby involves a high
degree of risk and immediate substantial dilution to the public
investors. See 'Risk Factors' and 'Dilution.'
Proposed Trading Symbols(4):
Nasdaq SmallCap Market'sm'
Common Stock............................ PFLT
Warrants................................ PFLTW
</TABLE>
- ------------
(1) Does not include 180,000 shares of Common Stock or 180,000 Common Stock
Purchase Warrants that may be sold by the Company pursuant to the
Underwriter's Over-Allotment Option.
(2) Does not include: (i) 350,000 shares of Common Stock reserved for issuance
under the Company's stock option plan; (ii) 506,250 shares of Common Stock
which will be issued to Louis R. Capece, Jr., in connection with the
acquisition of Air Response, two years from the closing of the Offering,
(iii) 1,200,000 shares reserved for issuance upon exercise of the Warrants
offered hereby; (iv) 1,100,000 shares reserved for issuance upon exercise of
other outstanding options; and (v) 120,000 shares of Common Stock and
120,000 Common Stock Purchase Warrants issuable upon
(footnotes continued on next page)
5
<PAGE>
<PAGE>
(footnotes continued from previous page)
exercise of the Underwriter's Option, including 120,000 shares of Common
Stock issuable upon exercise of the Common Stock Purchase Warrants which are
included in and issuable upon exercise of the Underwriter's Option; (vi)
180,000 shares of Common Stock and 180,000 Common Stock Purchase Warrants
issuable upon exercise of the Underwriter's Over-Allotment Option; (vii) up
to 1,018,786 shares of Common Stock issuable to certain employees of the
Company if the Company achieves a minimum of $1,000,000 in pretax profits
before depreciation and amortization, in either of the first two years from
the date of this Prospectus; and (viii) 10,000 shares of Common Stock to be
issued to an Officer at the closing of the Offering. See
'Management -- Stock Option Plan,' 'Certain Transactions,' 'Description of
Securities' and 'Underwriting.'
(3) Does not include Underwriter's Options or the 120,000 Warrants issuable upon
exercise thereof.
(4) The Company has applied to have the Common Stock and Warrants approved for
quotation on the Nasdaq SmallCap Market'sm' and believes it will meet the
initial listing requirements upon consummation of the Offering. However, no
assurance can be given that the Company will be approved for listing. There
is also no assurance that, if listed, it will be able to satisfy the
criteria for continued quotation on the Nasdaq SmallCap Market'sm' following
the Offering. See 'Risk Factors -- Listing and Continued Quotation on the
Nasdaq SmallCap Market.'sm'
6
<PAGE>
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The following table sets forth summary historical financial data of (i)
Proflight for the years ended December 31, 1996 and 1995 and for nine months
ended September 30, 1997 and 1996 and (ii) Air Response and Air Response South
for the years ended December 31, 1996 and 1995 and for the nine months ended
September 30, 1997 and 1996. The historical financial data for the years ended
December 31, 1996 and 1995 are derived from the audited financial statements of
Proflight, Air Response and Air Response South. The financial statements of
Proflight have been audited by Grant Thornton LLP, independent certified public
accountants, whose report thereon has been modified to include an explanatory
paragraph which refers to various matters which raise substantial doubt about
Proflight's ability to continue as a going concern and are included elsewhere in
this Prospectus. The combined financial statements of Air Response and Air
Response South for the years ended December 31, 1996 and 1995 have been audited
by Staff Maikels & Ciampino, P.C., independent certified public accountants,
which statements are included elsewhere in this Prospectus. The summary
historical financial data should be read in conjunction with the financial
statements and notes thereto of Proflight, Air Response and Air Response South
and 'Management's Discussion and Analysis of Financial Condition and Results of
Operations' included elsewhere in this Prospectus. The financial data for
Proflight, Air Response and Air Response South for the nine months ended
September 30, 1997 and 1996 are unaudited, but, in the opinion of management of
the respective companies, reflect all adjustments (consisting only of normal
recurring adjustments) necessary for a fair representation of results for all
interim periods. The operating results for interim periods are not necessarily
indicative of results for the full fiscal year. The following table also sets
forth pro forma financial data of the Company as if the Acquisitions (which will
close simultaneously with the closing of this Offering) had occurred as of
September 30, 1997 for balance sheet results and as of January 1, 1996 for
operating data. The pro forma financial data was derived from the unaudited pro
forma financial statements appearing elsewhere in this Prospectus. The summary
pro forma financial data should be read in conjunction with the Company's pro
forma financial statements and the notes thereto. The pro forma balance sheet
data as of September 30, 1997 and the pro forma statement of operations for the
year ended December 31, 1996 and nine months ended September 30, 1997 are
unaudited, but, in the opinion of management, reflect all adjustments necessary
for a fair presentation of pro forma results of operations. The pro forma
operating results are not necessarily indicative of the Company's future results
of operations.
SUMMARY HISTORICAL FINANCIAL DATA
<TABLE>
<CAPTION>
THE COMPANY AIR RESPONSE AND AIR RESPONSE SOUTH
------------------------------------------------- -------------------------------------------------
NINE MONTHS ENDED TWELVE MONTHS ENDED NINE MONTHS ENDED TWELVE MONTHS ENDED
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
----------------------- ----------------------- ----------------------- -----------------------
1997 1996 1996 1995 1997 1996 1996 1995
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA
Historical:
Net sales............. $3,749,190 $2,942,888 $3,906,211 $2,885,535 $6,537,380 $5,908,145 $7,658,243 $5,875,929
Flying operations and
maintenance......... 2,948,083 2,097,970 3,001,507 1,960,671 4,331,274 3,844,043 4,875,505 3,850,363
Promotion and sales... 85,305 96,838 255,616 31,909 372,560 435,207 447,061 663,686
General,
administrative
expense............. 946,683 478,901 650,036 353,969 1,491,410 1,043,196 1,538,761 1,099,404
Depreciation and
amortization........ 222,748 329,720 377,930 276,538 297,650 277,339 396,139 339,230
Profit (loss) from
operation........... (453,629) (60,541) (378,878) 262,448 44,486 308,360 400,777 (76,754)
Interest expense...... 227,126 180,812 287,188 150,254 108,197 69,355 136,148 117,719
Other income
(expense)........... 536,642 -- 34 4,915 (8,704) (240,302) (349,590) (215,510)
Income tax
(benefit)........... -- -- -- -- 5,874 (49,309) (38,747) (98,065)
Net profit (loss)..... (144,113) (241,353) (666,032) 117,109 (78,289) 48,012 (46,214) (311,918)
</TABLE>
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SUMMARY UNAUDITED PRO FORMA FINANCIAL DATA
<TABLE>
<CAPTION>
NINE MONTHS ENDED TWELVE MONTHS ENDED
SEPTEMBER 30, 1997 DECEMBER 31, 1996
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<S> <C> <C>
Pro Forma Operating Data:
Net sales...................................................... $ 9,428,760 $11,314,454
Flying operations.............................................. 6,421,547 7,627,012
Promotion and sales............................................ 457,865 702,677
General and administrative expense............................. 2,438,093 2,188,797
Depreciation and amortization.................................. 716,148 1,035,069
Total operating expense........................................ 10,033,653 11,553,555
Operating loss................................................. (604,893) (239,101)
Other income (expense)......................................... 139,116 (844,223)
Income tax (expense) benefit................................... (50,874) 38,747
Net loss....................................................... (471,651) (1,044,577)
Per share data:
Net loss....................................................... $ (0.15)(4) $ (0.33)(4)
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
---------------------------------------------
ACTUAL(1) PRO FORMA(2) ADJUSTED(3)
----------- ------------ --------------
<S> <C> <C> <C>
Balance Sheet Data:
Working capital (deficit).................................. $ (954,133) $(3,072,943) $ 933,057
Total assets............................................... 3,715,316 9,569,366 12,972,366
Long term obligations...................................... 2,385,080 4,476,872 4,476,872
Retained earnings (deficit)................................ (255,118) (255,118) (255,118)
Stockholders' equity (deficit)............................. (221,741) 1,803,259 5,809,259
</TABLE>
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(1) Represents Proflight Medical Response.
(2) Includes Air Response and Air Response South.
(3) The adjusted pro forma data includes adjustments that reflect the effects of
the Acquisitions, including the sale of 1,200,000 shares of Common Stock and
1,200,000 Warrants offered hereby and the application of the net proceeds.
(4) Based on 3,171,857 shares which do not include (i) 1,200,000 shares of
Common Stock offered hereby, or (ii) 10,000 shares of Common Stock being
offered to an officer as a bonus at the closing of the Offering.
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RISK FACTORS
An investment in the Securities offered hereby involves a high degree of
risk. Prior to making any investment decision, prospective investors should
carefully consider the following risk factors together with the other
information presented in this Prospectus including the financial statements (and
notes thereto).
HISTORY OF LOSSES; ACCUMULATED DEFICIT; NO HISTORY OF COMBINED OPERATIONS.
Proflight reported a net loss for the year ended December 31, 1996 of $666,032
and net income for the year ended December 31, 1995 of $117,109. Air Response
and Air Response South, on a combined basis, reported a net loss of $46,214 and
$311,918 for the years ended December 31, 1996 and 1995, respectively. On a pro
forma basis, after giving effect to the Acquisitions, the Company would have had
a net loss for the year ended December 31, 1996 of $1,044,577. As of December
31, 1996, Proflight had an accumulated deficit in stockholders' equity of
$543,878. Proflight reported a net loss for the period ended September 30, 1997
of $144,113. Air Response and Air Response South reported a net loss, on a
combined basis, of $78,289. On a pro forma basis, after giving effect to the
Acquisition, the Company would have had a net loss for the period ended
September 30, 1997 of $471,651. As of September 30, 1997, Proflight has
accumulated deficit in stockholders' equity of $221,741. For the remaining
current fiscal year, the Company may incur additional losses which may be
substantial as a result of, among other things, its expansion strategy. There
can be no assurance that the Company's operations will be profitable in the
future or if achieved, that such profitability will be sustained. The Company
will consummate the Acquisitions on closing of the Offering, and to date, each
of the companies has been operating as a separate, independent entity. The
Company's profitability will depend upon, among other factors, the ability of
its management to integrate these entities into a single cohesive business
entity with a single business philosophy. There can be no assurance that the
Company's management will be successful in managing the combined operations or
in implementing the Company's business strategy. See 'Management's Discussion
and Analysis of Financial Condition and Results of Operations.'
MODIFICATION OF AUDITOR'S OPINION; GOING CONCERN. Proflight's independent
accountants have included an explanatory paragraph in their report on
Proflight's financial statements at December 31, 1996 and 1995, which states
that Proflight has accumulated a deficit in stockholders' equity of $543,878
through December 31, 1996 and total current liabilities exceed total current
assets by approximately $1,080,311 as of December 31, 1996, all of which raise
substantial doubt about Proflight's ability to continue as a going concern. See
'Financial Statements and Report of Independent Certified Public Accountants'
included elsewhere in this Prospectus.
EXPANSION STRATEGY. The Company's success will depend, in large measure,
upon management's ability to successfully implement its business strategy to
expand the Company's operations and enhance its national and international
presence by improving the efficiency of its existing operations including
integrating the operations of Air Response and Air Response South, implementing
strategic acquisitions of other air ambulance service providers and increasing
its market share by contracting with insurers and HMOs. The Company currently
has no agreements or understandings, nor is it engaged in any negotiations with
respect to any acquisitions other than those contemplated herein with Air
Response and Air Response South. The Company has a contract with Aetna Health
Management, Inc. ('Aetna') to provide air transport services. The Company's
contract with Aetna does not guarantee any specific amount of revenues. For the
year ended December 31, 1996, Aetna represented 5.57% of the Company's revenues.
However, the Company does not have any other agreements with insurers or HMOs.
There can be no assurance that suitable growth opportunities or acquisitions or
strategic alliances can be identified, consummated or successfully implemented
or that the Company's expansion strategy will result in profitability.
RISKS ASSOCIATED WITH ACQUISITIONS. The Company is not currently
considering the acquisition of any business, other than those of Air Response,
Inc. and Air Response South, Inc. discussed elsewhere in this Prospectus, or
entering into a joint venture with any other business, individual or other
entity. From time to time in the future, the Company may enter into negotiations
with respect to potential acquisitions or joint ventures, some of which may
result in preliminary agreements. In the course of such negotiations and/or due
diligence, these negotiations and/or preliminary agreements may be abandoned or
terminated, and the Company may incur significant transaction expenses (such as
legal and accounting fees) despite the abandonment or termination of such
negotiation or agreement.
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NEED FOR ADDITIONAL FINANCING. The Company anticipates that the proceeds
from the Offering, together with projected cash flow from operations, will be
sufficient to fund its operations, including its proposed expansion, for at
least the next 12 months. However, there can be no assurance that events
affecting the Company's operations will not result in the Company depleting its
funds before that time. The Company may need to raise additional funds to
continue to implement its expansion strategy. There can be no assurance that
additional financing will be available, or, if available, that such financing
will be on terms favorable to the Company. Failure to obtain such additional
financing could have a material adverse effect on the Company. The Company
anticipates issuing additional securities to fund its expansion, either to raise
capital to fund internal growth or as principal consideration for acquisitions.
There can be no assurance that the Company will be able to successfully finance
its expansion or that the Company's securities will be acceptable consideration
to acquisition candidates. The failure of the Company to successfully implement
its expansion strategy may negatively impact the Company's competitive position
and its future results of operations. See 'Use of Proceeds,' 'Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources' and the Company's financial
statements and notes thereto.
PROCEEDS FOR ACQUISITION PAYMENT AND DEBT REPAYMENT; BROAD DISCRETION IN
APPLICATION OF PROCEEDS. Approximately 37% of the net proceeds of this Offering
will be used to pay the first payment in connection with the acquisition of Air
Response South and to repay certain short term notes and to repay the bridge
lenders. In addition, approximately $1,003,000 (23%) of the net proceeds of this
Offering will be used for general corporate purposes, including working capital.
Accordingly, management will have broad discretion over the use of proceeds. See
'Use of Proceeds.'
GOVERNMENTAL REGULATION. The Company is subject to governmental regulation
at the federal and state levels. At the federal level, the Company is subject to
regulation by the Federal Aviation Administration ('FAA') and the Occupational
Safety and Health Administration ('OSHA'). The FAA regulations are primarily
related to flight safety issues, and to govern flight operating procedures,
aircraft and equipment standards, maintenance and inspections, flight crew
standards, training and limitations, weather requirements and record keeping
requirements. The OSHA regulations are primarily designed to protect the
employees of the Company. Certain of the states in which the Company operates
regulate various aspects of its business. The Company's business is subject to
state requirements including, business licenses, training and certification of
medical personnel, the scope of services that may be provided by medical
personnel, staffing requirements, medical control and procedures. Applicable
federal and state laws and regulations are subject to change. Any changes could
adversely affect the Company's operations as well as the air ambulance business
in general. The Company believes, based upon management's experience, that it is
in substantial compliance with all regulatory requirements applicable to its
business. The failure to be in compliance with any applicable governmental
regulations could adversely affect the business, financial condition or results
of operations of the Company. See 'Business -- Governmental Regulation.'
POSSIBLE ADVERSE CHANGES IN REIMBURSEMENT RATES OR COVERAGE; MEDICARE,
MEDICAID AND HEALTH CARE REFORM. A substantial portion (18% for the year ended
December 31, 1996) of the Company's revenue is attributable to payments received
from third-party payors, including Medicare, Medicaid, HMOs, state-run insurance
pools and private insurers. The revenue, cash flow and profitability of the
Company, like those of other companies in the health care industry, will be
affected by the continuing efforts of third-party payors to control expenditures
for health care. In addition, reimbursement can be influenced by the financial
instability of private third-party payors and by budget pressures and cost
shifting by governmental payors. With regard to Medicare and Medicaid
reimbursement, Congress has consistently attempted to curb federal spending on
these programs. The Company cannot predict whether any health care or Medicare
or Medicaid reform measures will be enacted, and if they are enacted, what
effect they may have on the Company's business. No assurances can be given that
future funding and reimbursement levels will be favorable to the Company. A
reduction in coverage or reimbursement rates by third-party payors, whether in
the private or government sector, could have a material adverse effect on the
Company's business, financial condition or results of operations.
LIABILITY INSURANCE. The Company's air ambulance operations involve the
risks of potential liability incurred by the Company in the event of, among
other things, accidents involving the Company's
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airplanes and medical malpractice. The Company maintains aircraft insurance with
a maximum liability per occurrence of up to $20,000,000 along with hull coverage
(similar to auto collision insurance) for the value of the aircraft. The annual
premiums cost approximately $15,000 per aircraft and $7,000 per piston aircraft.
In addition, the Company carries medical liability insurance in the amount of
$1,000,000 per claim and $3,000,000 in the aggregate per incident with an annual
premium of approximately $19,000. Although the Company currently maintains
insurance coverage which it believes is adequate to cover the risks of potential
liability against the Company, there can be no assurance that the coverage
limits of its insurance are adequate or that the Company will be able to
continue to obtain such insurance policies in the future or that the Company
will be able to continue to obtain insurance rates which will not negatively
impact the Company's earnings. The inability of the Company to maintain adequate
liability insurance could have a material adverse effect on its business,
financial condition or results of operations.
COMPETITION. The air ambulance service industry is a highly competitive and
highly fragmented industry. The Company competes with other fixed wing air
ambulance companies which operate their own fleets of airplanes. The Company
believes, based upon management's experience and the Wintergreen Research
Report, that each of these companies are small with a market share of less than
5%. The Company also competes with brokers who do not own their own fleets but
act as middlemen who market air ambulance services by generally auctioning such
services to the lowest bidder. The Company believes that brokers control a large
percentage of the air medical transport business and keep prices in the industry
very low. The Company's major competitors include Global Air Ambulance,
(Clearwater, Florida), Advanced Air Ambulance, (Miami, Florida), Critical Air
Care, (Atlanta, Georgia) and Aeronational Air Ambulance, (Pittsburgh,
Pennsylvania). The Company believes, based upon management's experience, that
air ambulance service providers compete primarily on the basis of quality of
service, performance and prices. The Company anticipates that its one-way
pricing structure will allow the Company to be competitive in the industry. In
addition to present competition, other companies with significantly greater
economic resources than the Company including potential customers of the Company
such as insurance companies, HMOs and health care facilities that do not
currently provide air ambulance services may enter the air ambulance service
business. Entry into such business by such entities could adversely affect the
business, financial condition or results of operations of the Company. See
'Business -- Competition.'
BENEFITS TO PRINCIPAL SHAREHOLDERS: POTENTIAL CONFLICT OF INTEREST. The
Company has entered into employment contracts with certain employees, pursuant
to which four of such contracts obligate the Company to issue in the aggregate
1,015,000 shares of Common Stock to four individuals if the Company achieves
pre-tax profits, before depreciation and amortization, of at least $1 million in
either of the first two years from the date of this Prospectus. If the Company
achieves, based upon the year-end audited financial statements of the Company,
this earnings benchmark, the Company would be obligated to issue such shares and
as a consequence, would be required to recognize a charge against its earnings
at the fair market value on the date such shares are earned of the Company's
common stock. Based on the offering price the charge would be approximately
$4,060,000. A charge against earnings in such amount could materially and
adversely affect the Company's ability to continue the maintenance criteria for
eligibility for quotation on the NASDAQ SmallCap Market. See 'Management --
Employment Agreements.' Each of the four individuals is a director of the
Company, and such four constitute a majority of the Company's Board of Directors
as presently constituted. Three of the four individuals are existing
shareholders of the Company. Finally, all existing shareholders of the Company
will benefit from the increase in tangible book value per share of Common Stock
resulting from this Offering. See 'Dilution.'
DEPENDENCE ON KEY PERSONNEL. The Company is dependent on the experience,
abilities and continued service of Kevin L. Burkhardt, the Company's Chief
Executive Officer and President. The Company has entered into an employment
agreement with Mr. Burkhardt and the loss of his services or any other key
personnel could have a material adverse effect on the Company's business,
financial condition and results of operations. The Company intends to obtain
$1,000,000 of key man life insurance on the life of Kevin L. Burkhardt. In
addition, the Company's future success depends in large part upon its ability to
attract and retain highly qualified personnel. The Company faces competition for
11
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such personnel from other companies and organizations, many of which have
significantly greater resources than the Company. There can be no assurance that
the Company will be able to attract and retain the necessary personnel on
acceptable terms or at all. See 'Management.'
ABSENCE OF PUBLIC MARKET; DETERMINATION OF OFFERING PRICE; VOLATILITY.
Prior to the Offering, there has been no public trading market for the Company's
Common Stock or Warrants (collectively, the 'Securities') and there can be no
assurance that an active trading market for either the Common Stock or the
Warrants will develop following the Offering or, if developed, will be
sustained. The initial public offering prices of the Common Stock and Warrants
were determined by negotiations between the Company and the Underwriter and may
not necessarily bear any relationship to the Company's assets, earnings, book
value, results of operations or any other generally accepted criteria of value.
There can be no assurance that the Common Stock and Warrants will trade in the
public market at or above the initial public offering price following the
closing of the Offering. The trading price of the Common Stock and Warrants
could be subject to significant fluctuations in response to variations in
quarterly operating results and other factors and such fluctuations could cause
the market price of the Common Stock and Warrants to fluctuate substantially. In
addition, the stock markets of the United States have from time to time,
experienced significant price and volume fluctuations that are unrelated or
disproportionate to the operating performance of individual companies. Such
fluctuations may adversely affect the price of the Common Stock and Warrants.
See 'Underwriting.'
LACK OF UNDERWRITING HISTORY. The Underwriter was incorporated on August
11, 1958 and first registered as a broker-dealer on October 3, 1958. Prior to
this Offering, although the Underwriter has participated as a selling group
member in two underwritings, it has not participated as a sole or co-manager in
any public offerings. Prospective purchasers of the Common Stock and Warrants
offered hereby should consider the Underwriter's lack of experience in being a
manager of an underwritten public offering. There can be no assurance that such
lack of experience will not have a material adverse effect upon the Offering.
See 'Underwriting.'
LISTING AND CONTINUED QUOTATION ON THE NASDAQ SMALLCAP MARKET'sm'. The
Company has applied to have the Common Stock and Warrants approved for quotation
on the Nasdaq SmallCap Market'sm' and believes it will meet the initial listing
requirements upon consummation of the Offering, although no assurance can be
given that the Company will be approved for listing. There also can be no
assurance that, if listed, it will be able to satisfy the criteria for continued
quotation on the Nasdaq SmallCap Market'sm' following the Offering. Failure to
meet the maintenance criteria in the future may result in the Common Stock and
Warrants not being eligible for quotation on the Nasdaq SmallCap Market'sm' or
otherwise. In such event, an investor may find it more difficult to dispose of,
or to obtain accurate quotations as to the market value of the Common Stock or
Warrants. See 'Description of Securities.'
NASDAQ SMALLCAP MAINTENANCE REQUIREMENTS; PENNY STOCK REGULATION. The
trading of the Company's Securities on the NASDAQ SmallCap Market'sm' is
conditioned upon the Company meeting certain asset, capital surplus and stock
price tests. To maintain eligibility on the NASDAQ SmallCap Market, the Company
is required to maintain total net tangible assets in excess of $2,000,000,
capital and surplus in excess of $1,000,000 and a bid price of $1.00 per share.
If the Company fails any of these tests, the Securities may be delisted from
trading on the NASDAQ SmallCap Market. In the absence of the Common Stock being
quoted on the NASDAQ SmallCap Market, or the Company's having $2,000,000 in
stockholders' equity, trading in the Common Stock would be covered by Rule 15g-9
promulgated under the Securities Exchange Act of 1934 (the 'Exchange Act'), for
non-NASDAQ and non-exchange listed securities. Under such rule, broker-dealers
who recommend such securities to persons other than established customers and
accredited investors must make a special written suitability determination for
the purchaser and receive the purchaser's written agreement to a transaction
prior to sale. Securities are exempt from this rule if the market price is at
least $5.00 per share.
The Commission has adopted regulations that generally define a 'penny
stock' to be any equity security that has a market price of less than $5.00 per
share or an exercise price of less than $5.00 per share, subject to certain
exceptions. Such exceptions include an equity security listed on NASDAQ, and an
equity security issued by an issuer that has (i) net tangible assets of at least
$2,000,000, if such issuer
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has been in continuous operation for three years, (ii) net tangible assets of at
least $5,000,000, if such issuer has been in continuous operation for less than
three years, or (iii) average revenue of at least $6,000,000 for the preceding
three years. Unless an exception is available, the regulations require the
delivery, prior to any transaction involving a penny stock, of a risk disclosure
schedule explaining the penny stock market and the risks associated therewith.
If the Company's securities were to become subject to the regulations
applicable to penny stocks, the market liquidity for the securities would be
severely affected, limiting the ability of broker-dealers to sell the securities
and the ability of purchasers in this Offering to sell their securities in the
secondary market. There is no assurance that trading in the Company's securities
will not be subject to these or other regulations that would adversely affect
the market for such securities.
POTENTIAL SIGNIFICANT FUTURE CHARGE AGAINST EARNINGS. The Company has
entered into employment contracts with three of its employees and an arrangement
with one of its directors, whereby such persons will receive in the aggregate
1,018,786 shares of Common Stock if the Company achieves net earnings, before
depreciation, amortization and income taxes, of at least $1 million in either
of the first two years after the date of this Prospectus. See 'Management --
Employment Agreements.' If the Company achieves, based upon the year-end
audited financial statements of the Company, this earnings benchmark, the
Company would be obligated to issue such shares and as a consequence, would be
required to recognize a charge against its earnings at the fair market value,
on the date such shares are earned, of the Company's common stock. Based on the
offering price the charge would be approximately $4,060,000. A charge against
earnings in such amount could materially and adversely affect the Company's
ability to continue satisfying the maintenance criteria for eligibility for
quotation on the NASDAQ SmallCap Market'sm'. In addition, this transaction also
could adversely affect the price of the stock.
POTENTIAL SIGNIFICANT FUTURE DILUTION. The Company has entered into
employment contracts with three employees and an arrangement with one of its
directors, whereby such persons will receive in the aggregate 1,018,786 shares
of Common Stock if the Company achieves net income, before depreciation and
amortization, of at least $1 million in either of the first two years after
the date of this Prospectus. See 'Management -- Employment Agreements.' If the
Company achieves this income benchmark, the Company would be obligated to issue
such shares and as a consequence, investors in the Offering would experience
immediate and substantial dilution. At September 30, 1997, the net tangible
book value of the Company was approximately $(1,530,345) or $(.57) per share.
Giving effect to the issuance of an additional 1,018,786 shares at that date,
the net tangible book value would have been $(.42) per share. The adjusted pro
forma net tangible book value at September 30, 1997 was $2,726,391 or $0.62 per
share. Giving effect to the issuance of an additional 1,018,786 shares at that
date, the adjusted pro forma net tangible book value would have been $0.50 per
share. Thus giving effect to the issuance of 1,018,786 shares increases dilution
to new investors from $3.38 to $3.50. See 'Dilution'.
POSSIBLE ADVERSE EFFECTS OF ISSUANCE OF PREFERRED STOCK. The Company's
Amended and Restated Articles of Incorporation, as of March 28, 1997, authorizes
the issuance of 500,000 shares of Preferred Stock, par value $1.00, with
designations, rights and preferences as determined from time to time by the
Board of Directors ('Preferred Stock'). As a result of the foregoing, the Board
of Directors can issue, without further stockholder approval, Preferred Stock
with dividend, liquidation, conversion, voting or other rights that could
adversely affect the voting power or other rights of the holders of the Common
Stock. The issuance of Preferred Stock could, under certain circumstances,
discourage, delay or prevent a change in control of the Company. In addition,
the issuance of Preferred Stock could dilute the rights of holders of the Common
Stock and the market price of the Common Stock. Although the Company has no
plans to issue any shares of Preferred Stock, there can be no assurance that it
will not issue Preferred Stock at some future date.
IMMEDIATE AND SUBSTANTIAL DILUTION; NO DIVIDENDS ANTICIPATED. Purchasers of
the shares of Common Stock offered hereby will incur immediate and substantial
dilution of the net tangible book value of the Common Stock of $3.38 per share
(or 84.5%) from the initial public offering price of $4.00 per share. In
addition, an immediate increase in the Company's net tangible book value of
$1.19 per share to the existing shareholders will result upon the consummation
of the Offering. Thus, the net tangible book value per share will be
significantly lower than the price per share paid by the public investors. The
public investors, therefore, will bear most of the risk of loss, while effective
control of the
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Company will remain in the hands of the present shareholders. The Company has
never paid any dividends on its Common Stock and does not anticipate the payment
of dividends in the foreseeable future. See 'Dividend Policy' and 'Dilution.'
SHARES ELIGIBLE FOR FUTURE SALE; EXERCISE OF REGISTRATION RIGHTS. Upon the
consummation of the Offering, there will be 4,381,857 shares of Common Stock
outstanding, of which 3,181,857 shares of Common Stock are 'restricted
securities' under Rule 144 under the Securities Act of 1933, as amended (the
'Securities Act'). In the future, these restricted shares may be sold only
pursuant to a registration statement under the Securities Act or an applicable
exemption, including pursuant to Rule 144. The Securities and Exchange
Commission ('Commission') has amended Rule 144, effective April 29, 1997,
reducing the holding period before shares subject to Rule 144 become eligible
for sale in the public market. Under the revised Rule 144, a person who has
owned Common Stock for one year may, under certain circumstances, sell within
any three-month period, a number of shares of Common Stock that does not exceed
the greater of 1% of the then outstanding shares of Common Stock or the average
weekly trading volume during the four calendar weeks prior to such sale. In
addition, a person who is not deemed to have been an affiliate of the Company at
any time during the three months preceding a sale, and who has beneficially
owned the restricted securities for the last two years is entitled to sell all
such shares without regard to the volume limitations, current public information
requirements, manner of sale provisions and notice requirements. Sales or the
expectation of sales of a substantial number of shares of Common Stock in the
public market following this Offering could adversely affect the prevailing
market price of the Common Stock. Except as otherwise described herein, the
Company, its officers and directors and shareholders have agreed with the
Underwriter not to directly or indirectly register, issue, offer, sell, offer to
sell, contract to sell, hypothecate, pledge or otherwise dispose of any shares
of Common Stock (or any securities convertible into or exercisable or
exchangeable for shares of Common Stock) for a period of two years from the date
of this Prospectus, except that shares held by Srotnac Group LLC are subject
to a one-year lock up period, after which they may be sold with the prior
written consent of the Underwriter, which consent shall not be unreasonably
withheld. See 'Shares Eligible for Future Sale.'
The holders of the Underwriter's Option have been granted registration
rights with respect to the 120,000 shares and 120,000 Warrants issuable upon
exercise of the Underwriter's Option. The sale, or availability for sale, of the
outstanding Common Stock underlying the Underwriter's Warrants and the shares
issued to Steve Cantor or his companies, in the public market subsequent to the
Offering could adversely affect the prevailing market price of the Common Stock
and could impair the Company's ability to raise additional capital. See
'Description of Capital Stock -- Registration Rights' and 'Shares Eligible for
Future Sale.'
POTENTIAL ADVERSE EFFECT OF REDEMPTION OF WARRANTS. The Warrants offered
hereby are redeemable, in whole or in part, at a price of $.10 per Warrant,
commencing twenty-four (24) months after the Closing Date (except with the prior
written consent of the Underwriter permitting redemption commencing twelve (12)
months from the Closing Date), and prior to their expiration; provided that (i)
prior notice of not less than 30 days is given to the Warrantholders; and (ii)
the closing bid price of the Company's Common Stock for the twenty (20)
consecutive trading days immediately prior to the date on which the notice of
redemption is given, shall have exceeded $8.50 per share. Warrantholders shall
have exercise rights until the close of the business day preceding the date
fixed for redemption. Notice of redemption of the Warrants could force the
holders to exercise the Warrants and pay the Exercise Price at a time when it
may be disadvantageous for them to do so, or to sell the Warrants at the current
market price when they might otherwise wish to hold them, or to accept the
redemption price, which may be substantially less than the market value of the
Warrants at the time of redemption. The Company has agreed to use its best
efforts to keep the registration statement current in connection with any
proposed exercise of the Warrants. Further, the Warrants may not be exercised
unless the registration statement pursuant to the Securities Act covering the
underlying shares of Common Stock is current and such shares have been qualified
for sale, or there is an exemption from applicable qualification requirements,
under the securities laws of the state of residence of the holder of the
Warrants. Although the Company does not presently intend to do so, the Company
reserves the right to call the Warrants for redemption whether or not such
underlying shares are not, or cannot be, registered in the applicable states.
Such restrictions could have the effect of preventing certain Warrantholders
14
<PAGE>
<PAGE>
from liquidating their Warrants. Further, in the event the Company does not have
a current registration statement in effect, the Company would be unable to call
the Warrants for redemption. See 'Description of Securities -- Warrants.'
CURRENT PROSPECTUS AND STATE BLUE SKY REGISTRATION REQUIRED TO EXERCISE
WARRANTS. Holders of the Warrants will have the right to exercise the Warrants
for the purchase of shares of Common Stock only if a current prospectus relating
to such shares is then in effect and only if the shares are qualified for sale
under the securities laws of the applicable state or states or exempt therefrom.
The Company has undertaken and intends to file and keep current a prospectus
which will permit the purchase and sale of the Common Stock underlying the
Warrants, but there can be no assurance that the Company will be able to do so.
Although the Company intends to seek to qualify for sale the shares of Common
Stock underlying the Warrants in those states in which the securities are to be
offered, no assurance can be given that such qualification will occur. In
addition, purchasers may buy Warrants in the aftermarket or may move to
jurisdictions in which the shares of Common Stock issuable upon exercise of the
Warrants are registered or qualified during the period that the Warrants are
exercisable. In such event, the Company would be unable to issue shares to those
persons desiring to exercise their Warrants unless and until the shares could be
registered or qualified for sale in the jurisdiction in which such purchasers
reside, or an exemption to such qualification exists or is granted in such
jurisdiction. The Warrants may lose or be of no value if a prospectus covering
the shares issuable upon the exercise thereof is not kept current or if such
underlying shares are not, or cannot be, registered in the applicable states.
See 'Description of Securities -- Warrants.'
RELATIONSHIP OF UNDERWRITERS TO TRADING. The Underwriter may act as a
broker and/or dealer with respect to the purchase or sale of the Securities in
the Nasdaq SmallCap Market where each is expected to trade. The Underwriter also
may act as the Company's agent in connection with any future solicitation of
warrantholders to exercise their Warrants. Unless granted an exemption by the
Commission from Regulation M under the Exchange Act, the Underwriter will be
prohibited from engaging in any market-making activities or solicited brokerage
activities with regard to the Company's securities during a period beginning
nine business days prior to the commencement of any such solicitation and ending
on the later of the termination of such solicitation activity or the termination
(by waiver or otherwise) of any right the Underwriter may have to receive a fee
for the exercise of the Warrants following such solicitation. As a result, the
Underwriter and soliciting broker/dealers may be unable to continue to make a
market in the Company's securities during certain periods while the exercise of
Warrants is being solicited. Such a limitation, while in effect, could impair
the liquidity and market price of the Securities.
UNDERWRITER'S OPTION AND REGISTRATION RIGHTS. In connection with this
Offering, the Company has agreed to sell to the Underwriter, for $10, the
Underwriter's Option which entitles the Underwriter to purchase up to 120,000
shares of Common Stock and 120,000 Warrants, as well as 120,000 shares of Common
Stock issuable on exercise of such Warrants. The securities issuable upon
exercise of the Underwriter's Option are identical to those offered pursuant to
this prospectus. The Underwriter's Option is exercisable for a period of four
years commencing one year from the Effective Date. The exercise of the
Underwriter's Option may dilute the value of the shares of Common Stock to be
acquired by holders of the Option, may adversely affect the Company's ability to
obtain equity capital, and, if the Common Stock issuable upon the exercise of
the Underwriters' Warrants are sold in the public market, may adversely affect
the market price of the Common Stock. The Underwriter has been granted certain
'piggyback' and demand registration rights for a period of five years from the
Effective Date with respect to the registration under the Securities Act of the
securities directly or indirectly issuable upon exercise of the Underwriter's
Option. The exercise of such rights could result in substantial expense to the
Company. See 'Underwriting.'
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Common Stock offered
hereby at an initial public offering price of $4.00 per share, after deduction
of underwriting discounts and commissions, and other Offering expenses including
the Underwriter's non-accountable expense allowance, will be approximately
$4,006,000 (and $4,802,400 if the Underwriter's over-allotment option is fully
exercised).
15
<PAGE>
<PAGE>
The Company intends to use the net proceeds as follows: (i) payment of
approximately $1,000,000 to Louis R. Capece, Jr. pursuant to the amended stock
purchase and sale agreement for Air Response South; (ii) approximately $125,000
to repay bridge lenders pursuant to 10% promissory notes issued in March 1997,
in a bridge financing, due upon closing of an initial public offering, which
funds were used for legal, accounting and, printing expenses in connection with
this Offering and an earlier aborted offering and expenses in connection with
moving to new facilities; (iii) approximately $478,000 to repay short term
notes, including approximately $375,000 to pay off a line of credit of Air
Response, secured by accounts receivable with Central National Bank,
Canajoharie, New York, approximately $33,000 to pay Andrew Hiestand for the
balance owed for the purchase of his stock in January 1996, approximately
$20,000 to pay Charles W. Bartholomew, a director of the Company, on a loan made
to the Company in November, 1993 with an original balance of $75,000, and
$50,000 to pay off a short-term note to Steven Cantor that was used as operating
capital; (iv) $1,400,000 to fund costs related to the Company's expansion
strategy, including approximately $250,000 for down payment on a maintenance
facility, approximately $200,000 for the purchase of additional aircraft parts
inventory, approximately $100,000 for expenses associated with the Company's new
facilities, the upgrade of the Company's computer network and the purchase of
new dispatch software, approximately $200,000 for marketing, and approximately
$650,000 for leasing and equipping an aircraft; and (v) approximately $1,003,000
for general corporate purposes, including working capital.
The foregoing uses of proceeds are estimates only and there may be
significant variations in the uses of proceeds due to, among other things,
changes in the Company's business or financial condition or economic
circumstances. Accordingly, the Company reserves the right to reallocate among
the foregoing uses upon any such change.
The Company anticipates that the proceeds from the Offering, together with
projected cash flow from operations, will be sufficient to fund its operations,
including its proposed expansion, for approximately 12 months. If the
Underwriters exercises the over-allotment option, the Company intends to add the
net proceeds of such exercise to working capital. However, there can be no
assurance that events affecting the Company's operations will not result in the
Company depleting its funds before that time. The Company may need to raise
substantial additional funding through public or private financings, corporate
collaborations or other sources. However, there can be no assurance that
additional financings will be available through any of these sources or, if
available, that such financing will be on acceptable terms. See 'Risk
Factors -- Need for Additional Financing' and 'Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources.'
Pending application of the net proceeds of the Offering, the Company will
make temporary investments in certificates of deposit, money market accounts
established by major commercial banks or financial institutions, United States
government obligations or high-grade commercial paper.
DIVIDEND POLICY
The Company has never paid cash dividends on its Common Stock and does not
anticipate paying dividends in the foreseeable future. The Company currently
intends to retain future earnings, if any, to finance its expansion strategy.
The payment of future cash dividends by the Company on its Common Stock will be
at the discretion of the Board of Directors and will depend on the Company's
earnings (if any), financial condition, cash flows, capital requirements, and
contractual prohibitions with respect to the payment of dividends and other
considerations as the Board of Directors may consider relevant.
16
<PAGE>
<PAGE>
CAPITALIZATION
The following table sets forth as of September 30, 1997 (i) the 'actual'
capitalization of Proflight; (ii) the 'pro forma' capitalization of the Company
giving effect to (a) its historical capitalization and (b) the Acquisitions, and
(iii) the 'pro forma as adjusted' capitalization of the Company giving effect to
the 'pro forma' capitalization and the issuance of the Securities offered hereby
(at an initial public offering price of $4.00 per share and $.10 per Warrant),
after deduction of underwriting discounts and commissions and estimated Offering
expenses payable by the Company and the application of a portion of the net
proceeds therefrom to repay indebtedness.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
----------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
---------- ----------- -----------
<S> <C> <C> <C>
Total current liabilities................................... $1,551,977 $ 3,289,235 $ 2,686,235
Long-term debt.............................................. 2,385,080 4,476,872 4,476,872
Stockholders' equity
Common Stock -- $.001 par value
Authorized -- 20,000,000 shares, 2,665,607 shares
issued and outstanding
Pro forma -- 3,171,857 shares
As adjusted -- 4,381,857 shares............................. 2,666 3,172 4,382(1)(2)
Additional paid-in capital (deficit)........................ 30,711 2,055,205 6,059,995(1)(2)
Retained earnings (deficit)................................. (255,118) (255,118) (255,118)
---------- ----------- -----------
Total Stockholders' equity (deficit)........................ (221,741) 1,803,259 5,809,259
---------- ----------- -----------
Total capitalization................................... $3,715,316 $ 9,569,366 $12,972,366
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
- ------------
(1) Reflects the issuance of 1,200,000 shares of Common Stock and 1,200,000
Warrants offered hereby; 506,250 shares to be issued for the purchase of Air
Response, 10,000 shares of Common Stock to be issued as a bonus to an
officer of the Company at the closing of the Offering.
(2) Reflects the receipt of $4,006,000 in net proceeds from the issuance of
1,200,000 shares of Common Stock at $4.00 per share of 1,200,000 Warrants at
$.10 per Warrant, after deduction of underwriting discounts and commissions
and Offering expenses estimated at $914,000.
17
<PAGE>
<PAGE>
DILUTION
At September 30, 1997, the pro forma net tangible book value of the Company
was a deficit of approximately $(1,530,345), or $(0.57) per share of Common
Stock after giving effect to the Acquisitions as if they occurred on such date.
Net tangible book value (deficit) per share is determined by dividing tangible
book value (total tangible assets less total liabilities) by the number of
shares of Common Stock issued and outstanding at that date. After giving effect
to (i) the sale of the 1,200,000 shares of Common Stock offered hereby (at an
initial public offering price of $4.00 per share) and the application of the net
proceeds therefrom, after deducting underwriting discounts and commissions and
Offering expenses; (ii) the issuance of 506,250 shares of Common Stock to Louis
R. Capece, Jr. in connection with the acquisition of Air Response two years from
the closing of the Offering; (iii) 10,000 shares of Common Stock to be issued as
a bonus to an officer of the Company at the closing of the Offering, the
adjusted pro forma net tangible book value of the Company at September 30, 1997
after giving effect to the Acquisitions as if they occurred on such date would
have been $2,726,391 or $0.62 per share. This represents an immediate increase
in net tangible book value of $1.19 per share to existing shareholders and an
immediate dilution of $3.38 per share to investors purchasing shares of Common
Stock in the Offering. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price................................................ $4.00
Net tangible book value (deficit) per share at September 30, 1997............... $(0.57)
Increase in net tangible book value per share attributable to new investors..... $ 1.19
Pro forma net tangible book value per share after the Offering....................... $0.62
Dilution per share to new investors.................................................. $3.38
</TABLE>
------------------------
If the underwriter exercises the over-allotment option in full, the pro
forma net tangible book value will be $3,642,851 or $0.80 per share, resulting
in an immediate dilution of $3.22 per share or 80.5% to New Investors.
The following table summarizes, on a pro forma basis, as of September 30,
1997 the difference between existing shareholders and new investors with respect
to the number and percentage of shares of Common Stock purchased from the
Company, and the total consideration per share paid (at the assumed initial
public offering price of $4.00 per share):
<TABLE>
<CAPTION>
SHARES
PURCHASED(1)(2) TOTAL CONSIDERATION AVERAGE
-------------------- ----------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
--------- ------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders................. 3,181,857 73% $2,023,000 29% $0.64
New investors......................... 1,200,000 27 4,920,000 71 4.00
------- -------
100.0% 100.0%
------- -------
------- -------
</TABLE>
- ------------
(1) Does not include: (i) 350,000 shares of Common Stock reserved for issuance
under the Option Plan; (ii) 1,200,000 shares reserved for issuance upon
exercise of the Warrants offered hereby; (iii) 1,100,000 shares reserved for
issuance upon exercise of other outstanding options and warrants; and (iv)
120,000 shares of Common Stock and 120,000 Warrants issuable upon exercise
of the Underwriter's Option. See 'Management -- Stock Option Plan.'
'Description of Capital Stock' and 'Underwriting.'
(2) Includes (i) the issuance of 506,250 shares of Common Stock to Louis R.
Capece, Jr. in connection with the acquisition of Air Response two years
from the closing of the Offering; (ii) 300,000 shares of Common Stock issued
in January 1997 to certain bridge lenders and (iii) 25,000 shares of Common
Stock issued in March 1997 to certain bridge lenders; (iv) 10,000 shares of
Common Stock to be issued to an Officer, (v) and the retirement of 884,393
shares of Common Stock to treasury. See 'Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources' and 'Certain Transactions.'
18
<PAGE>
<PAGE>
SELECTED FINANCIAL DATA
The following table sets forth summary historical financial data of (i)
Proflight for the years ended December 31, 1996 and 1995 and for nine months
ended September 30, 1997 and 1996 and (ii) Air Response and Air Response South
for the years ended December 31, 1996 and 1995 and for the nine months ended
September 30, 1997 and 1996. The historical financial data for the years ended
December 31, 1996 and 1995 are derived from the audited financial statements of
Proflight, Air Response and Air Response South. The financial statements of
Proflight have been audited by Grant Thornton LLP, independent certified public
accountants, whose report thereon has been modified to include an explanatory
paragraph which refers to various matters which raise substantial doubt about
Proflight's ability to continue as a going concern and are included elsewhere in
this Prospectus. The combined financial statements of Air Response and Air
Response South for the years ended December 31, 1996 and 1995 have been audited
by Staff Maikels & Ciampino, P.C. independent certified public accountants,
which statements are included elsewhere in this Prospectus. The summary
historical financial data should be read in conjunction with the financial
statements and notes thereto of Proflight, Air Response and Air Response South
and 'Management's Discussion and Analysis of Financial Condition and Results of
Operations' included elsewhere in this Prospectus. The financial data for
Proflight, Air Response and Air Response South for the nine months ended
September 30, 1997 and 1996 are unaudited, but, in the opinion of management, of
the respective companies, reflect all adjustments (consisting only of normal
recurring adjustments) necessary for a fair representation of results for all
interim periods. The operating results for interim periods are not necessarily
indicative of results for the full fiscal year. The following table also sets
forth pro forma financial data of the Company as if the Acquisitions (which will
close simultaneously with the closing of this Offering) had occurred as of
September 30, 1997 for balance sheet results and as of January 1, 1996 for
operating data. The pro forma financial data was derived from the unaudited pro
forma financial statements appearing elsewhere in this Prospectus. The summary
pro forma financial data should be read in conjunction with the Company's pro
forma financial statements and the notes thereto. The pro forma balance sheet
data as of September 30, 1997 and the pro forma statement of operations for the
year ended December 31, 1996 and nine months ended September 30, 1997 are
unaudited, but, in the opinion of management, reflect all adjustments necessary
for a fair presentation of pro forma results of operations. The pro forma
operating results are not necessarily indicative of the Company's future results
of operations.
SUMMARY HISTORICAL FINANCIAL DATA
<TABLE>
<CAPTION>
THE COMPANY AIR RESPONSE AND AIR RESPONSE SOUTH
------------------------------------------------- ---------------------------------------------
NINE MONTHS ENDED TWELVE MONTHS ENDED NINE MONTHS ENDED TWELVE MONTHS ENDED
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
----------------------- ----------------------- ----------------------- ---------------------
1997 1996 1996 1995 1997 1996 1996 1995
---------- ---------- ---------- ---------- ---------- ---------- --------- ---------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating data
Historical:
Net sales................. $3,749,190 $2,942,888 $3,906,211 $2,885,535 $6,537,380 $5,908,145 $7,658,243 $5,875,929
Flying operations and
maintenance............. 2,948,083 2,097,970 3,001,507 1,960,671 4,331,274 3,844,043 4,875,505 3,850,363
Promotion and sales....... 85,305 96,838 255,616 31,909 372,560 435,207 447,061 663,686
General, administrative
expense................. 946,683 478,901 650,036 353,969 1,491,410 1,043,196 1,538,761 1,099,404
Depreciation and
amortization............ 222,748 329,720 377,930 276,538 297,650 277,339 396,139 339,230
Profit (loss) from
operation............... (453,629) (60,541) (378,878) 262,448 44,486 308,360 400,777 (76,754)
Interest expense.......... 227,126 180,812 287,188 150,254 108,197 69,355 136,148 117,719
Other income (expense).... 536,642 -- 34 4,915 (8,704) (240,302) (349,590) (215,510)
Income tax (benefit)...... -- -- -- -- 5,874 (49,309) (38,747) (98,065)
Net profit (loss)......... (144,113) (241,353) (666,032) 117,109 (78,289) 48,012 (46,214) (311,918)
</TABLE>
19
<PAGE>
<PAGE>
SUMMARY UNAUDITED PRO FORMA FINANCIAL DATA
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, TWELVE MONTHS ENDED
1997 DECEMBER 31, 1996
----------------- -------------------
<S> <C> <C>
Pro Forma Operating Data:
Net sales........................................................ $ 9,428,760 $11,314,454
Flying operations................................................ 6,421,547 7,627,012
Promotion and sales.............................................. 457,865 702,677
General and administrative expense............................... 2,438,093 2,188,797
Depreciation and amortization.................................... 716,148 1,035,069
Total operating expense.......................................... 10,033,653 11,553,555
Operating loss................................................... (604,893) (239,101)
Other income (expense)........................................... 139,116 (844,223)
Income tax (expense) benefit..................................... (50,874) 38,747
Net loss......................................................... (471,651) (1,044,577)
Per share data:
Net (loss)....................................................... $ (0.15)(4) $ (0.33)(4)
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
---------------------------------------------
ACTUAL PRO FORMA ADJUSTED
----------- ------------ --------------
<S> <C> <C> <C>
Balance Sheet Data:
Working capital (deficit).................................. $ (954,133) $(3,072,943) $ 933,057
Total assets............................................... 3,715,316 9,569,366 12,972,366
Long term obligations...................................... 2,385,080 4,476,872 4,476,872
Retained earnings (deficit)................................ (255,118) (255,118) (255,118)
Stockholders' equity (deficit)............................. (221,741) 1,803,259 5,809,259
</TABLE>
- ------------
(1) Represents Proflight.
(2) Includes Proflight, Air Response and Air Response South.
(3) The adjusted pro forma data includes adjustments that reflect the effects of
the Acquisitions including the sale of 1,200,000 shares of Common Stock and
1,200,000 Warrants offered hereby and the application of the net proceeds.
(4) Based on 3,171,857 shares which do not include (i) 1,200,000 shares of
Common Stock offered hereby or (ii) 10,000 shares of Common Stock being
offered to an officer as a bonus at the Closing of the Offering.
20
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the financial statements and notes thereto appearing elsewhere in this
Prospectus.
OVERVIEW AND PLAN OF OPERATION
The Company was formed in May 1992 under the name Proflight, Inc. and is a
national and international provider of fixed wing air ambulance transport
services for persons who are ill, injured or otherwise incapacitated who need to
be relocated and who may require emergency medical care during flight. In March
of 1997 the Company changed its name to Proflight Medical Response, Inc.
('Proflight'). The Company has contracted to acquire Air Response, Inc., a New
York corporation ('Air Response') and Air Response South, Inc., a Florida
corporation ('Air Response South') which acquisitions (the 'Acquisitions') will
close simultaneously with the closing of the Offering. See 'Certain
Transactions -- Acquisition of Air Response and Air Response South.'
The revenues of the Company are primarily derived from service fees for air
medical transport services. The number of transports and rates as well as the
source affect revenues in different ways. Greater revenues are derived from
third party and direct patient paid trips as compared to transports arranged by
brokers.
The Company's business strategy over the next 24 months is to become a
leading national provider of fixed wing air ambulance services by:
Improving the efficiency of its existing operations by integrating the
operations of Air Response and Air Response South and by providing
additional management expertise, recognizing economies of scale,
introducing sophisticated operating systems and controls, instituting a
centralized dispatching function and providing a stronger, more stable
capital base.
Implementing strategic acquisitions of other air ambulance service
providers. The Company believes that opportunities exist to acquire
additional air ambulance service providers in the future that would
benefit from the efficiency, as well as the capital and management
resources of the Company. The Company regularly evaluates acquisition
possibilities and considers a number of factors in evaluating such
acquisition candidates, including the quality of management and medical
personnel, historical operating results, the demographic characteristics
of service areas, the regulatory environment in which such company
operates and the fee structure and reimbursement levels. In addition, by
combining existing companies, the Company hopes it will be able to deliver
fixed wing air ambulance services to insurance companies and other health
care providers at cost effective rates. Except as otherwise described in
this Prospectus, there are no present negotiations, arrangements or
understandings with respect to any potential material acquisitions.
Increasing its market share and expanding its operations by contracting
with insurers and HMOs seeking an air ambulance provider with national and
international capabilities and by appealing to individual consumers
through a prepaid service package. No assurances can be given that the
Company will be able to successfully negotiate additional contracts with
such parties on favorable terms, if at all, or otherwise expand its
operations.
The Company is continuing to expand services through the purchase of
additional aircraft resulting in increased revenues, more efficient use of
current aircraft, proportionately lower operating costs and the acquisition of
Air Response and Air Response South. Overall, the Company believes, based upon
management's experience, this should provide higher gross margins. It is hoped
that this combination will allow all three companies to operate more efficiently
through elimination of certain duplicative general and administrative costs,
purchasing discounts on fuel, and more efficient use of each aircraft. The
Company believes, based upon management's experience, that these actions will
provide growth and improve the Company's operating and financial condition,
providing the opportunity to continue as a going concern. See ' -- Effects of
Combination.'
21
<PAGE>
<PAGE>
RESULTS OF OPERATIONS
PROFLIGHT MEDICAL RESPONSE, INC.
The following sets forth, in tabular form, a comparison of the results of
operations for Proflight for the years ended December 31, 1996 and 1995, and
nine months ended September 30, 1997 and 1996.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
---------------- ----------------
1997 1996 1996 1995
----- ----- ----- -----
<S> <C> <C> <C> <C>
Net sales................................................. 100.0% 100.0% 100.0% 100.0%
Flying operations and maintenance......................... 76.8% 71.29% 76.8% 67.9%
Promotion and sales....................................... 2.2% 3.3% 6.5% 1.1%
General and administrative expenses....................... 25.2% 16.3% 16.6% 12.2%
Depreciation and amortization............................. 6.0% 11.2% 9.7% 9.5%
Interest expense.......................................... 6.1% 6.1% 7.4% 5.2%
Other (income)............................................ (14.3%) -- -- --
Net income (loss)......................................... (3.8%) (8.2%) (17.0%) 4.1%
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
Net Sales. Net Sales increased by $806,302 to $3,749,190 as compared to
$2,942,888 for the same period in 1996. This increase was attributed to more
sales generated through advertising.
Flying Operations and Maintenance. Flying operations and maintenance
increased by $850,113 to $2,948,083 as compared to $2,097,970 in 1996. This
increase was mostly due to increased fuel costs, and the need to use other
operator's aircraft when company owned planes were flying. These higher direct
expenses are expected to decrease proportionally because of volume fuel
discounts in addition to owning a larger fleet of aircraft as a result of the
acquisition.
Promotion and Sales Expense. Promotion and sales expense decreased $11,533
to $85,305 as compared to $96,838 for the same period in 1996. This decrease was
due mostly to better directing funds to advertising and promotion activities.
More direct calls were made in lieu of personal visits. Direct mailing replaced
some convention participation which resulted in increased sales and reduced
advertising costs.
General and Administrative Expense. General and administrative expenses
increased $467,782 to $946,683 as compared to $478,901 for the same period in
1996. This increase was mostly due to $227,986 of expenses associated with IPO
costs that were written off when the previous offering was aborted, higher
salaries of some current employees and costs associated with moving to a larger
facility. Also effecting the increase was greater costs associated with higher
sales.
Depreciation and Amortization. Depreciation and amortization decreased
$106,972 to $222,748 as compared with $329,720 for the same period in 1996. This
was mostly due to the sale of two aircraft in October of 1996 and one in
February of 1997.
Interest Expense. Interest expense increased $46,314 to $227,126 as
compared to $180,812 for the same period in 1996. This increase was due mostly
to interest paid on more expensive aircraft and the cost for factoring accounts
receivable, which was implemented in February of 1997.
Other (Income). Other income of ($536,642) resulted from the sale of a Lear
35A jet aircraft.
Net Loss. Net loss was $144,113 as compared to $241,353 for the same period
in 1996. This increase was due to the factors discussed above.
THE YEARS ENDED DECEMBER 31, 1996 AND 1995
Net Sales. Net sales increased by $1,020,676 to $3,906,211 for the year
ended December 31, 1996 as compared to $2,885,535 for the year ended December
31, 1995. This increase was attributable to the addition of an aircraft which
allowed the Company to provide transport services to customers previously turned
down. The Company also provided more non-medical charter flights than in the
previous year. In addition, the Company increased its marketing efforts in 1996.
The addition of an aircraft does not necessarily mean that the Company's other
planes are flying at 100% capacity. An additional aircraft gives the Company, at
any given time, a greater opportunity of getting a trip. The determination of
whether or not the Company is awarded a particular trip is based upon
availability, location and maintenance status.
22
<PAGE>
<PAGE>
Flying Operations and Maintenance: Flying operations and maintenance
increased $1,040,836 to $3,001,507 for the year ended December 31, 1996 as
compared to $1,960,671 for the year ended December 31, 1995. This increase was
primarily due to increased fuel, parts and other expenses related to higher
sales. This increase was also due to costs relating to expansion, such as
training personnel, training flights, and the leasing of an aircraft, which
have increased these expenses disproportionately to income but are expected
to help yield greater revenues in the future.
Promotion and Sales: Promotion and sales increased $223,707 to $255,616 for
the year ended December 31, 1996 as compared to $31,909 for the year ended
December 31, 1995. This increase was due to increased marketing expenditures
including direct mailings, attending medical conventions, and travel to
potential customers. The Company expects these large increases to show results
by the end of the current fiscal year.
General and Administrative Expenses: General and administrative expenses
increased by $296,067 to $650,036 for the year ended December 31, 1996 as
compared to $353,969 for the year ended December 31, 1995. The increase was
primarily due to hiring additional employees and training them. In addition, the
Company had one time expenses consisting of employee severance pay and increased
costs in connection with the acquisition of Air Response. These one time
expenses removed bring the percentage of these expenses in proportion with
increased income.
Depreciation and Amortization. Depreciation and amortization increased by
$101,392 to $377,930 for the year ended December 31, 1996 as compared to
$276,538 for the year ended December 31, 1995. This increase was primarily due
to the purchase of a more expensive aircraft and an increase in the number of
hours flown.
Interest Expense. Interest expense was $287,188 for the year ended December
31, 1996 as compared to $150,254 for the year ended December 31, 1995. This
increase in interest expense was primarily due to the purchase of a more
expensive aircraft and bridge financing.
Net Income (Loss). Net income (loss) for the year ended December 31, 1996
was $(666,032) as compared to $117,109 for the year ended December 31, 1995. The
loss was due to the increase in costs and expenses described above.
AIR RESPONSE AND AIR RESPONSE SOUTH
RESULTS OF OPERATIONS
The following sets forth, in tabular form, a comparison of the results of
operations for Air Response and Air Response South for the nine months ended
September 30, 1996 and 1995 and the years ended December 31, 1996 and 1995.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER YEAR ENDED
30, DECEMBER 31,
---------------- ----------------
1997 1996 1996 1995
----- ----- ----- -----
<S> <C> <C> <C> <C>
Net sales................................................. 100.0% 100.0% 100.0% 100.0%
Flying operations and maintenance......................... 66.3% 65.1% 63.7% 65.5%
Promotion and sales....................................... 5.7% 7.4% 5.8% 11.2%
General and administrative expenses....................... 22.8% 17.7% 20.1% 18.7%
Depreciation and amortization............................. 4.6% 4.7% 5.2% 5.8%
Interest expense.......................................... 1.7% 1.2% 1.8% 2.0%
Other income (expense).................................... 0.1% 4.1% (4.6%) (3.7%)
Net income (loss)......................................... (1.2%) 0.8% (0.6%) (5.3%)
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
Net Sales. Net sales increased by $629,235 to $6,537,380 as compared to
$5,908,145 for the same period in 1996. This increase was attributed to more
sales generated through an increase in sales activities and having access to
more aircraft. The latter was a result of the Company working less competitively
with Proflight Medical Response in anticipation of the upcoming acquisition.
Flying Operations and Maintenance. Flying operations and maintenance
increased by $487,231 to $4,331,274 as compared to $3,844,043 in 1996. This
increase was mostly due to increased fuel costs and higher sales.
Promotion and Sales Expense. Promotion and sales expense decreased $62,647
to $372,560 as compared to $435,207 for the same period in 1996. This decrease
was due to eliminating or reducing the
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size of some yellow page advertising and negotiating better prices in some
directory advertising markets.
General and Administrative Expense. General and administrative expenses
increased $448,214 to $1,491,410 as compared to $1,043,196 for the same period
in 1996. This increase was mostly due to higher salaries of some current
employees. In addition, in August the Company moved its Florida and New York
operations to Colorado in anticipation of the acquisition which resulted in
substantial one time moving costs. Also affecting the increase were greater
costs associated with higher sales.
Depreciation and Amortization. Depreciation and amortization increased
$20,311 to $297,650 as compared to $277,339 for the same period in 1996. This
was due to the cost of some engine overhaul work that was capitalized.
Interest Expense. Interest expense increased $38,842 to $108,197 as
compared to $69,355 for the same period in 1996. This increase was due mostly to
the refinancing of several of the Company's aircraft to help pay engine overhaul
costs.
Other Expense. Other expense decreased $231,598 to $8,704 as compared to
$240,302 for the same period in 1996. This decrease was due to capitalized
engine work that was expensed in 1996 when the engines were replaced.
Net Earnings. Net earnings decreased to $(78,289) as compared to $48,012
for the same period in 1996. This increase was due to the factors discussed
above.
THE YEARS ENDED DECEMBER 31, 1996 AND 1995
Net Sales. Net Sales increased by $1,782,314 to $7,658,243 for the twelve
months ended December 31, 1996 as compared to $5,875,929 for the twelve months
ended December 31, 1995. This increase was attributed to increased marketing
efforts and an increase in demand for air ambulance service. The latter was
caused by health insurance companies finding it less expensive to move patients
to their own provider network where they get preferred rates.
Flying Operations and Maintenance. Flying operations and maintenance
increased by $1,025,142 to $4,875,505 for the twelve months ended December 31,
1996 as compared to $3,850,363 for the twelve months ended December 31, 1995.
This increase was primarily due to increased sales. In addition, fuel costs and
pilot and nurses salaries increased (because of strong employment opportunities
for these professionals), along with increased expenses due to engine overhauls
and the lease of a new aircraft.
Promotion and Sales Expense. Promotion and sales expense decreased $216,625
to $447,061 for the twelve months ended December 31, 1996 as compared to
$663,686 for the twelve months ended December 31, 1995. This decrease was due to
consolidation of yellow page advertising contracts.
General and Administrative Expense. General and administrative expense
increased $439,357 to $1,538,761 for the twelve months ended December 31, 1996
as compared to $1,099,404 for the twelve months ended December 31, 1995. This
increase was due mostly to higher expenses associated with higher sales. These
expenses include greater salaries and benefits due to the hiring of additional
employees and increasing compensation and commissions to sales personnel
relating to increased sales.
Depreciation and Amortization. Depreciation and amortization increased
$56,909 to $396,139 for the twelve months ended December 31, 1996 as compared
with $339,230 for the twelve months ended December 31, 1995. This increase was
mostly due to additional equipment asset base.
Interest Expense. Interest expense increased $18,429 to $136,148 for the
twelve months ended December 31, 1996 from $117,719 for the twelve months ended
December 31, 1995. This increase was due to refinancing of aircraft.
Other Expense. Other expense was $349,590 for the twelve months ended
December 31, 1996 as compared to $215,510 for the twelve months ended December
31, 1995. This increase was due mainly to a charge for asset abandonment offset
by a decrease in bad debt write offs from an affiliate.
Net Loss. Net loss was $46,214 for the twelve months ended December 31,
1996 as compared to $311,918 for the twelve months ended December 31, 1995. This
decrease was due to the factors discussed above.
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended September 30, 1997, Proflight had a net
increase in cash of $59,370 resulting in an ending cash balance of $59,370.
During this period net cash used in operating activities
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was $344,075. Cash provided from investing activities was $1,666,040 primarily
due to the sale of an aircraft. Net cash used in financing activities was
$1,262,595 due to the repayment of notes payable.
As of September 30, 1997, ProFlight had a working capital deficiency of
$954,133. This deficiency decreased from December 31, 1996 by $126,178 as a
result of an increase in cash and accounts receivable balances.
Air Response and Air Response South had a decrease in cash of $53,330 for
the nine months ended September 30, 1997. During this period net cash of
$283,945 was provided by operating activities, $219,054 in cash was used in
investing activities to purchase property and equipment. A total of $118,221 in
cash was used in financing activities primarily for officers receivables. Cash
and cash equivalents had a balance of $238,967 at September 30, 1997.
At September 30, 1997, Air Response and Air Response South had a working
capital deficiency of $843,810. This deficiency increased by $465,607 from the
December 31, 1996 deficiency of $378,203 due to increases in accounts payable
and current portion of notes payable.
Proflight had a net decrease in cash of approximately $21,600 for the year
ended December 31, 1996 resulting in an overdraft of $19,910 at December 31,
1996. Cash used in operating activities during 1996 was approximately $199,000.
Cash used in investing activities was approximately $4,059,000, primarily due to
the acquisition of additional aircraft. Cash provided by financing activities
was approximately $4,256,000 consisting primarily of net borrowings from the
Company's bank and other lenders of approximately $4,184,000, and by net
proceeds from the sale of stock of $100,000.
As of December 31, 1996, Proflight had a working capital deficiency of
$1,080,311 compared to a deficiency of $157,341 as of December 31, 1995. This
deficiency increased by approximately $742,000 due to additional current
maturities of long-term obligations and an increase in accounts payable and
accrued liabilities of approximately $293,000.
Air Response and Air Response South had an increase in cash and cash
equivalents of approximately $217,000 for the twelve-month period ended December
31, 1996.
Approximately $618,000 in cash was provided from operating activities. Net
cash used in investing activities was approximately $981,000, due to
approximately $596,000 in purchases of equipment and approximately $385,000 in
advances to an officer and affiliate. Net proceeds from additional debt with the
Company's bank and other lenders provided cash from financing activities of
approximately $580,000.
During fiscal 1995, Proflight had four customers whose sales each accounted
for 10% or more of net sales. During fiscal 1996, Proflight had two such major
customers. In addition, the Company is due approximately $132,000 in accounts
receivable and $200,000 in a note receivable from Air Response whose sales
accounted for 10% and 8% of net sales during 1995 and 1996, respectively.
Air Response and Air Response South had a working capital deficiency of
approximately $378,000 as of December 31, 1996, compared to a deficiency in
working capital of approximately $774,000 as of December 31, 1995.
Historically, Proflight has financed its working capital requirements to
date from private bridge financings, borrowings, issuance of its Common Stock
and internally generated cash flow. For the year ended December 31, 1996, the
Company financed its working capital requirements as follows: approximately 50%
was financed through private bridge financings, approximately 20% from
borrowings, approximately 10% from the sale of common stock and approximately
20% from internally generated cash flow. Air Response and Air Response South
have financed its working capital requirements by internally generated cash flow
and factoring accounts receivable.
As of December 31, 1996, the Company had total current liabilities of
$1,555,109 of which $1,176,000 will be paid out of the proceeds. The balance of
$379,109 will be paid out of operations. The Company defaulted on a note, during
fiscal 1996, the balance of which was $85,009 at December 31, 1996. The holder
of the note has agreed to renew the note, and the Company plans to pay the
balance out of the proceeds of the offering. As of September 30, 1997, the
remaining balance owed was approximately $33,000.
In order for the Company to obtain sufficient financing to purchase a 1973
Learjet 25B-XR in March, 1995, it was necessary for the Company to have an
accomodator guarantee repayment of a loan. In exchange, the accomodator is paid
a fee of $100 per month for each month that the loan is outstanding.
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In October 1996, the Company loaned $200,000 to Air Response. The note
bears interest at the rate of 10% per annum and is payable in two installments
of $100,000 plus accrued interest on May 14, 1998 and May 14, 2000. See 'Certain
Transactions -- Loan to Air Response.'
In October 1996, Proflight, in a private placement, sold to subscribers an
aggregate of $350,000 principal amount notes bearing interest at the rate of 10%
per annum and issued 700,000 shares of Common Stock. In May 1997, the
subscribers in the private placement released and discharged the Company from
any and all obligations arising out of the promissory notes and agreed to cancel
such notes.
In January 1997, Proflight, in a private placement, sold to subscribers an
aggregate of $150,000 principal amount notes bearing interest at the rate of 10%
per annum and issued 300,000 shares of Common Stock. In May 1997, the
subscribers in the private placement released and discharged the Company from
any and all obligations arising out of the promissory notes and agreed to cancel
such notes.
In March 1997, Proflight, in a private placement, sold to subscribers an
aggregate of $125,000 principal amount notes bearing interest at the rate of 10%
per annum and issued 25,000 shares of Common Stock.
Presently, the Company does approximately 50% of its billing through
insurance companies. In some cases this billing is indirect through brokers
which are customers of the Company. Generally, payment is received within 60-90
days. This delay in collection weakens the Company's cash flow. The Company
finances its receivables to help alleviate this cash flow problem. The Company
plans to initiate electronic billing to help speed up the collection process and
hopes to eliminate the need for factoring in the future.
The Company anticipates that the net proceeds from the Offering, together
with cash flow from operations should be sufficient to fund the Company's
operations, including its proposed expansion, for approximately 12 months.
However, there can be no assurance that events affecting the Company's
operations will not result in the Company depleting its funds before that time.
The Company may be required to raise substantial additional funds to continue to
fund operating expenses or its expansion strategy. There can be no assurance
that the Company will be able to obtain such additional financing or that such
financing, if available, will be on acceptable terms. See 'Risk Factors -- Need
for Additional Financing' and 'Use of Proceeds.'
EFFECTS OF COMBINATION
The Company believes that operating efficiencies will be achieved through
integration of the operations. The Company anticipates cost savings after the
combination in the areas of fuel, parts, marketing and advertising and
personnel. The Company has obtained preliminary quotes from aviation fuel and
part suppliers which will provide the Company with fuel and part cost
reductions. Fuel reductions are available because of the anticipated increase in
the volume of aviation fuel to be purchased as well as an increase in the number
of fueling sites needed and part reductions are available because the Company
plans to purchase larger quantities at one time. The Company believes that it
will realize cost savings in marketing and advertising expenses by eliminating
duplicated efforts. The Company also believes cost savings will also be realized
by the elimination of overstaffing and duplicative positions which will arise
through combination and the closing of the Company's facilities in New York and
Florida. For example, the Company believes cost savings will be realized in
areas such as accounts receivable and bookkeeping, which will be centralized.
The Company believes that effective aircraft and crew deployment will be a
significant factor in reducing operational costs. The Company intends to enhance
its computer system which will detail the ready status and location positions of
its aircraft and crews. The computer system will be able to analyze data on
demographics, usage frequency and similar factors to help determine optimal
fleet deployment.
The Company will begin to incur increased expenses not reflected in the
Company's historical financial statements, including increased salaries for
senior management and key employees as well as other costs related to the
establishment of its corporate and administrative infrastructure, such as lease
costs, accounting and legal costs.
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BUSINESS
THE COMPANY
The Company is a national and international provider of fixed wing air
ambulance transport services for persons who are ill, injured or otherwise
incapacitated who need to be relocated and who may require emergency medical
care during flight. The Company currently operates from facilities located in
Colorado, New York and Florida and upon consummation of the Offering plans to
consolidate its operations into its Colorado facilities. The Company provides
its services throughout the United States, Canada, Europe, Mexico, Central
America, South America, Bermuda and the Mediterranean. In addition, the Company,
when operating at full capacity, has subcontracted its services by brokering its
air ambulance trips to other air transport providers. For the year ended
December 31, 1996, the Company, including Air Response and Air Response South,
had pro forma net sales of approximately $11.3 million.
As of the date hereof the Company has an air ambulance fleet of 9 fixed
winged aircraft. The Company provides transport services in connection with the
relocation of patients requiring specialized medical procedures such as organ
transplants, cancer treatment, specialized cardiac surgery, burn care, stroke
care and advanced head and spinal cord surgery and rehabilitation to hospitals
recognized as national centers of excellence in these fields, for the
repatriation of patients who are injured or become ill away from home and in
connection with the transportation of non-ambulatory long-term care patients who
need to be relocated. The flights operated are on a non-emergency basis and are
generally long distance in nature. Emergency flights are usually contracted to
helicopters and such flights are generally short distances. The Company's
customers include individual patients, managed care companies, hospitals,
government agencies, national health insurance companies, HMOs and air ambulance
brokers.
The Company believes that the need for non-emergency ambulance transport
services, will increase as pressure on the health insurance industry to reduce
costs increases. The Company believes that it can capitalize on this market. The
Company believes that the fixed wing segment of the medical air transport
industry will grow as hospital consolidation produces regional health networks
responsible for patients spread over a greater geographic area. The Company also
believes, although no assurance can be given, that relocating patients with
specialized needs to hospitals recognized as national centers of excellence and
which have pricing agreements with insurers and HMOs will increase as a way to
provide high quality, cost effective health care. The fixed wing air ambulance
market is currently served by a number of small, regional companies lacking a
national presence and the ability to serve an insurance company or HMO on a
national basis. The Company believes that through the acquisitions of Air
Response and Air Response South and by implementing its business strategy, it
will begin to establish a national presence while continuing to ensure that
patients receive the highest quality care. The Company's beliefs in this
paragraph are based upon management's experience and an independent research
report, presumed to be accurate and truthful as of its publication, by
Wintergreen Research, Inc. copyright 1995, entitled 'Fixed Wing Air Medical
Transport Market 1991 - 2000.' No assurance can be given that such beliefs will
be realized or are predictive of future developments. No assurance can be given
that the facts, predictions or the independent research report upon which such
beliefs are premised are accurate.
The Company's senior management has extensive experience in the air
ambulance transport services business. Kevin L. Burkhardt, the Company's Chief
Executive Officer and President, has over 10 years experience in the air
ambulance industry and over 20 years experience in the aviation industry,
including as captain, flight instructor and corporate pilot. Jane S. Burkhardt,
the Company's Secretary and medical and legal coordinator, received her B.S.
degree in nursing in 1981 from the University of Wisconsin and her JD degree in
1990 from St. Louis University Law School. Mrs. Burkhardt has over 14 years
experience in the nursing industry and was a registered nurse and risk manager
for Presbyterian/St. Lukes Medical Center. Donald Jones will, upon consummation
of the Offering, serve as the Company's Vice President of Sales and a Director
of the Company. Mr. Jones has over 13 years experience in the air ambulance
industry, including flight coordinator, and director of marketing and sales.
David Cohen, the Company's Chief Financial Officer and Treasurer, has over 30
years of management and financial experience. Mr. Cohen was the chief financial
officer of Air Resources Corp., a public company which manufacturers adhesives
and held various senior management positions for two aircraft sales
corporations.
In April 1997, the Company entered into an Amended Agreement and Plan of
Reorganization with Air Response and Louis R. Capece, Jr., which agreement was
amended in May 1997, pursuant to which
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the Company agreed to acquire at the closing of the Offering, subject to the
terms and conditions contained therein, all of the outstanding capital stock of
Air Response in exchange for 506,250 shares of Common Stock of the Company to be
issued two years from the closing of the Offering. If the Company completes a
second public offering, Mr. Capece has the option to put such number of shares
of Common Stock at the then current market value, equal to 20% of the net
proceeds of such offering to the Company, not to exceed $1,000,000. The Company
simultaneously entered into an Amended Stock Purchase and Sale Agreement with
Air Response South and Louis R. Capece, Jr. pursuant to which the Company agreed
to acquire at the closing of the Offering, subject to the terms and conditions
contained therein, all of the outstanding capital stock of Air Response South
for $2,000,000 of which $1,000,000 is payable upon closing of the Offering with
the balance due two years from such date.
BUSINESS STRATEGY
The Companies' business strategy over the next 24 months is to attempt to
become a leading national provider of fixed wing air ambulance services by:
Improving the efficiency of its existing operations by integrating the
operations of Air Response and Air Response South and by providing
additional management expertise, recognizing economies of scale,
introducing sophisticated operating systems and controls, instituting a
centralized dispatching function and providing a stronger, more stable
capital base.
Implementing strategic acquisitions of other air ambulance service
providers. The Company believes that opportunities exist to acquire
additional air ambulance service providers in the future that would
benefit from the efficiency, as well as the capital and management
resources of the Company. The Company regularly evaluates acquisition
possibilities and considers a number of factors in evaluating such
acquisition candidates, including the quality of management and medical
personnel, historical operating results, the demographic characteristics
of service areas, the regulatory environment in which such company
operates and the fee structure and reimbursement levels. In addition, by
combining existing companies, the Company hopes it will be able to deliver
fixed wing air ambulance services to insurance companies and other health
care providers at cost effective rates. Except as otherwise described in
this Prospectus, there are no present negotiations, arrangements or
understandings with respect to any potential material acquisitions.
Increasing its market share and expanding its operations by contracting
with insurers and HMOs seeking an air ambulance provider with national and
international capabilities and by appealing to individual consumers
through a prepaid service package. No assurances can be given that the
Company will be able to successfully negotiate additional contracts with
such parties on favorable terms, if at all, or otherwise expand its
operations.
MEDICAL TRANSPORT SERVICES
The Company provides fixed wing air ambulance transport services for
individual patients, HMOs, insurance companies and individual hospitals and
other providers of medical care. If necessary the Company provides 'bed to bed'
service, arranging for ground ambulance transportation, specialized medical care
during transport, overnight accommodations, and any other incidentals necessary
to a successful transport. The Company is able to provide air transport services
at any of the three recognized levels of medical care, Basic Life Support
(patients who may need CPR), Advanced Life Support (patients who need medication
and respiratory monitoring) and Critical Care (patients who are severely ill or
injured).
The level of treatment provided to a patient during transportation is
dependent upon the patient's condition. Basic Life Support is mostly
preventative in nature. It is appropriate for patients needing minimal external
life support, but in need of monitoring or potential care during flight.
Aircraft involved in the transport of patients requiring Basic Life Support must
have both the equipment and personnel on board capable of handling and treating
a medical emergency.
The Company provides air transport for patients needing Advanced Life
Support services. Aircraft suited to transporting these patients must have all
personnel and equipment necessary to provide Basic Life Support functions as
well as the capability to perform cardiac defibrillation, control dysrhythmias,
administer drugs and establish and maintain respiratory airways. In addition,
medical personnel on
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board the aircraft must be capable of providing care for the condition causing
the need for the transport. Patients requiring Advanced Life Support care may
typically be suffering from trauma, burns, or cardiac failure, as well as a
variety of other conditions.
Finally, the Company provides air transport services to patients who are
severely ill or injured in need of Critical Care, the highest level of care. To
properly provide Critical Care services, highly and specifically trained
physicians and flight nurses must be part of the on board aircraft crew. It is
important that these medical personnel have specialized training to enable them
to perform services in an aeromedical environment. The Company has the required
personnel and equipment to provide these high level medical services.
The Company employs full-time registered nurses that accompany patients on
all medical flights. The nurses are given air ambulance training when they are
hired and on-going training every six months. In addition, the Company can
supply other medical professionals including medical doctors, respiratory
therapists and other medical personnel, if required by the patient.
The Company charges for its services on a retail and wholesale basis.
Flights are charged by the hour with additional costs for medical and
international fees. Cost per flight hour range from approximately $500 for
piston aircraft to $1500 for jet aircraft. Generally, high volume users like air
ambulance brokers and insurance companies receive up to a 20% discount.
Catering, ground medical, and other services are added to the basic charges.
MEDICAL PERSONNEL AND QUALITY ASSURANCE
The Company believes, based upon management's experience, that hiring and
maintaining highly qualified personnel, including physicians and nurses is
essential to its future success. Although the Company has not had a problem
attracting such persons to date, the loss of these persons or the inability to
attract and retain sufficient numbers of qualified personnel could have a
material adverse effect on the Company's business, financial condition and
results of operations.
The medical care provided during transports is provided pursuant to
established medical treatment protocols which were established based upon the
professional advice and direction of the Company's medical directors. Proflight,
Air Response and Air Response South each has its own medical director.
Initially, the Company will retain the medical directors of each Company.
However, these positions may be consolidated where legally and operationally
practical. Any medical treatment beyond that contained in the treatment
protocols requires an order from the patient's attending physician. Physician
orders are submitted to the Company with all case documentation, prior to
delivery of the patient to the Company for transport. Physician orders are then
reviewed by the Company's medical director to insure proper handling of the
patient. In some circumstances, the medical director may change the physician's
orders if 'in flight' conditions warrant alterations.
DISPATCHING
The Company intends to implement a centralized dispatching system for the
air ambulance operations. The Company plans to purchase a dispatch program
called 'Omnis 7' which is designed to schedule transports as well as keep track
of those in progress. The program features a visual mapped display of the
location of the aircraft which can help dispatchers select the aircraft in the
best proximity for a future flight. In addition, the program has an extensive
database with airport, hotel, and fueling information. An additional module can
be added that allows the aircraft's maintenance and pilot data to be stored and
analyzed. The cost of the entire Omnis 7 program is approximately $25,000.
Computer hardware for the dispatch system will cost about $15,000. When
implemented, this system will allow the Company to dispatch aircraft from the
most advantageous of its locations and enhance the Company's ability to avoid
one way trips with empty return flights. By ensuring that the Company's aircraft
are efficiently used, the dispatching system is expected to reduce the Company's
cost per transport.
The Company plans to have a dispatch center staffed at least six full-time
dispatch personnel that work in shifts to provide 24 hour a day coverage. They
will be supported by sales personnel that price the trips to the customers.
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MARKETING
Presently, the Company relies on advertising in national telephone
directories and direct mail to attract customers. The Company has enhanced its
current marketing strategy through the hiring, under a six year employment
contract, of Donald Jones, an air ambulance marketing specialist. Mr. Jones has
an extensive customer list of hospitals, insurance companies, and other users of
air medical transport. Mr. Jones will implement a sales strategy using the
Company's existing sales and marketing staff.
The Company believes, based upon management's experience, that the air
ambulance transport market may be broken down into two distinct market segments,
the 'directed' market and the 'independent' market. The directed market segment
consists of accounts that send all or most of their ambulance service needs to a
single designated service provider, whether by contract or practice. These
accounts include insurance companies, HMOs, other managed care providers and
hospitals. The Company intends to market this segment both through the use of
personal contacts and media advertising, which will include direct mail,
advertising in national telephone directories, advertising in trade publication,
advertising on the internet and participation in trade shows.
The independent market consists of transport requests originating from
individual patients and referral sources such as individual physicians. The
Company's marketing campaign addresses this segment of the market by local
advertising in telephone directories, advertising on the internet, and direct
mail campaigns.
BILLING AND COLLECTION
Since the Company's air ambulance services are on a non-emergency basis,
the Company is not required to transport patients without regard to a patient's
insurance coverage or ability to pay. The Company ensures that a prospective
patient is able to pay the Company's fees, either through appropriate insurance
coverage or other resources and frequently is paid in advance for its services.
Consequently, the Company's provisions for uncompensated care is generally lower
than it would be if the Company provided emergency air ambulance transportation.
On a consolidated basis for the year ended December 31, 1996, the Company
derived approximately 9% of its net revenue directly from private insurers,
including prepaid health plans and other non-government sources, 3% from
governmental payors and 88% directly from patients and private sources.
INSURANCE
The Company's air ambulance operations involve the risks of potential
liability against the Company in the event of, among other things, accidents
involving the Company's airplanes and medical malpractice. The Company maintains
aircraft insurance with a maximum liability per occurrence of up to $20,000,000
along with hull coverage (similar to auto collision insurance) for the value of
the aircraft. The annual premiums cost approximately $15,000 per aircraft and
$7,000 per piston aircraft annually. In addition, the Company carries medical
liability insurance in the amount of $1,000,000 for each claim and $3,000,000 in
the aggregate for each incident with an annual premium of approximately $19,000.
Although the Company currently maintains insurance coverage which it believes is
adequate, there can be no assurance that the coverage limits of its insurance
are adequate or that the Company will be able to continue to obtain such
insurance in the future or that the Company will be able to continue to obtain
such insurance rates which will not negatively impact the Company's earnings.
The inability of the Company to maintain adequate liability insurance could have
a material adverse effect on its business, financial condition or results of
operations.
COMPETITION
The air ambulance service industry is a highly competitive and highly
fragmented industry. The Company competes with other fixed wing air ambulance
companies which operate their own fleets of airplanes. The Company believes,
based upon management's experience and the Wintergreen Research report, that
each of these companies are small with a market share of less than 5%. The
Company also competes with brokers who do not own their own fleets but act as
middlemen who market air ambulance services by generally auctioning the service
to the lowest bidder. The Company believes that brokers control a large
percentage of the air medical transport business and keep prices in the industry
very low. The Company's major competitors include Global Air Ambulance,
(Clearwater, Florida), Advanced Air Ambulance, (Miami, Florida), Critical Air
Care, (Atlanta, Georgia) and Aeronational
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Air Ambulance, (Pittsburgh, Pennsylvania). The Company believes, based upon
management's experience, that air ambulance service providers compete primarily
on the basis of quality of service, performance and prices. The Company provides
one way pricing on most of its domestic flights. Patients are charged from point
of pick up to final destination, allowing the Company in most cases to charge
less than other operators that charge on a round trip basis. The Company's
aircraft and crews very rarely stay in one location more than one night due to
the Company's high volume of transports requests from all over the world. Having
aircraft at several locations at any given time, gives the Company a competitive
bidding edge.
In addition to present competition, other companies with significantly
greater economic resources than the Company including potential customers of the
Company such as insurance companies, HMOs and health care facilities not
currently providing air ambulance services, may enter the air ambulance service
business. Entry into such business by such entities could adversely affect the
business, financial condition or results of operations of the Company.
GOVERNMENT REGULATION
The Company is subject to governmental regulation at the federal and state
levels. At the federal level, the Company is subject to regulation by the
Federal Aviation Administration ('FAA') and the Occupational Safety and Health
Administration ('OSHA'). The FAA regulations are primarily related to flight
safety issues, and govern flight operating procedures, aircraft and equipment
standards, maintenance and inspections, flight crew standards, training and
limitations, weather requirements and record keeping requirements. The OSHA
regulations are primarily designed to protect the employees of the Company.
Certain of the states in which the Company operates regulate various
aspects of its business. The Company's business is subject to state requirements
including, business licenses, training and certification of medical personnel,
the scope of services that may be provided by medical personnel, staffing
requirements, medical control and procedures.
Since the Company was established, it has met all FAA regulations necessary
to provide the services offered. The Company has also met all OSHA standards and
state and federal licensing requirements for the medical and business services
offered.
Applicable federal and state laws and regulations are subject to change.
Any changes could adversely affect the Company's operations as well as the air
ambulance business in general. The Company believes, based upon management's
experience, that it is in substantial compliance with all regulatory
requirements applicable to its business. The failure to be in compliance with
any applicable governmental regulations could adversely affect the business,
financial condition or results of operations of the Company.
EMPLOYEES
As of the date hereof, the Company employed 34 full-time employees and five
part-time employees, of whom fourteen are employed as flight crew, eight are
employed as medical personnel, six are employed as mechanics, three are employed
as dispatchers, three are employed in sales and five are employed in general or
administrative positions. The Company believes that the success of its business
will depend, in part, on its ability to attract and retain highly qualified
personnel. The Company's employees are not a party to any collective bargaining
agreements. The Company believes that it has good relations with its employees.
LEGAL PROCEEDINGS
In March 1997, the Company and the Company's President were named in a
lawsuit Susan Fuller v. Proflight, Inc., Kevin Burkhardt, Andrew Hiestand and
James Fuller, filed in Arapahoe County District Court, Colorado which alleges
that the plaintiff's former husband merged a business into the Company to
conceal and otherwise preclude plaintiff from receiving plaintiff's share of her
former husband's interest in the Company. The amount sought is $820,000, of
which $250,000 is for emotional distress and $410,000 is for exemplary damages.
The lawsuit is in its early stages, and the Company is unable to predict the
outcome of this matter. Accordingly, no provision has been made for the
litigation in the financial statements. In April 1997, the Company filed a
motion to dismiss as the alternative to a motion for summary judgement, which
the Company previously filed and which was denied. In September of 1997, Mr.
James Fuller filed a separate complaint against the Company claiming that he is
entitled to compensation for the value of shares of the Company's Common Stock
which he alleges he owns. No
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amount was stated in the suit. The Company maintains that Mr. Fuller never paid
the agreed upon price for the shares and therefore never owned them. Moreover,
Mr. Fuller signed the shares back to the Company in December 1994. The Company
is trying to have the two Fuller cases consolidated and tried jointly. The
Company, through its counsel, intends to vigorously defend against this action.
No assurance can be made that the Company will reach a satisfactory resolution
of the above stated proceedings. Failure to reach such a resolution could have a
material adverse effect on the Company's financial condition or cash reserves.
PROPERTIES
The Company's executive offices are located in approximately 9,364 square
feet of office space at Arapahoe County Airport at 7211 South Peoria Street,
Suite 200, Englewood, Colorado 80112. The lease is a seven year lease expiring
in June 2004. The lease is at a rental of approximately $11,700 per month.
Pursuant to an oral agreement the Company will continue to occupy a portion of
hanger space at 12420 East Control Tower Road, Englewood, CO 80112 for aircraft
maintenance at a monthly rental rate of approximately $2,000 per month.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
directors and executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------------------------------------- --- ------------------------------------
<S> <C> <C>
Kevin L. Burkhardt...................................... 38 Chief Executive Officer, President,
Director
Jane S. Burkhardt....................................... 40 Secretary, Director
David H. Cohen.......................................... 55 Chief Financial Officer, Treasurer
Donald Jones............................................ 37 Vice President of Sales, Director
Charles W. Bartholomew.................................. 61 Director
Steven B. Myers......................................... 37 Director
Arthur G. Rosenberg..................................... 59 Director
Louis R. Capece, Jr..................................... 49 Director
</TABLE>
The business experience of each of the directors and executive officers of
the Company for at least the last five years is as follows:
Kevin L. Burkhardt has served as Chief Executive Officer, President and a
Director of Proflight since its inception in May 1992. From April 1991 to March
1992, Mr. Burkhardt was a learjet captain for HPH Aviation, a learjet charter
corporation. From July 1990 to April 1991, Mr. Burkhardt was a learjet captain
and corporate pilot for Great Plains Resources, a company engaged in the oil
industry. From February 1989 to April 1990, Mr. Burkhardt was a learjet captain
for PC Air, a learjet charter corporation. From January 1987 to February 1989,
Mr. Burkhardt was a learjet captain for American Jet, an air ambulance
corporation. Kevin L. Burkhardt and Jane S. Burkhardt are husband and wife.
Jane S. Burkhardt has served as Secretary and a Director of Proflight since
its inception in May 1992 and is responsible for establishing all medical
policies and procedures, establishing required medical equipment, establishing
risk management of medical operations and liaison between medical director and
medical staff. From August 1991 to July 1994, Mrs. Burkhardt was a risk manager
for Presbyterian/St. Lukes Medical Center. From December 1989 to July 1991, Mrs.
Burkhardt was a part-time RN for Presbyterian/St. Luke's Medical Center. From
June 1989 to July 1991, Mrs. Burkhardt was an associate attorney at Wood, Ris &
Hames. Kevin L. Burkhardt and Jane S. Burkhardt are husband and wife.
David Cohen has served as Chief Financial Officer and Treasurer of
Proflight since August 1993. From January 1990 to June 1993, Mr. Cohen was the
chief financial officer of Air Resources Corp., a manufacturer of adhesives.
From January 1982 to January 1990, Mr. Cohen was the chief executive officer of
Aim Aircraft, Inc., an aircraft sales corporation and from 1979 to 1982, Mr.
Cohen was the sales manager for Aim Aircraft. From 1975 to 1978, Mr. Cohen was
the president of Basin Aviation, an aircraft sales, charter and flight training
corporation. Mr. Cohen is the author of a book entitled FBO (fixed based
operations) Management as well as the author of an aircraft brokering manual.
Donald Jones will, upon consummation of the Offering, serve as the
Company's Vice President of Sales and a Director. From August 1992 to the
present, Mr. Jones has been the director of sales and marketing and the flight
coordinator for Air Response and Air Response South. From August 1984 to August
1992, Mr. Jones held various positions at Air Ambulance Network, an air
ambulance brokerage company, including director of sales and flight coordination
and director of marketing.
Charles W. Bartholomew has served as a Director of Proflight since November
1993. From September 1988 to September 1994, Mr. Bartholomew was the program
manager for CTA Incorporated, a company which was an aerospace and information
systems contractor to the United States government. Mr. Bartholomew was
responsible for several information system engineering contracts with the United
States Air Force and directed approximately 30 engineering professionals in such
capacity.
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Steven B. Myers has served as a Director of Proflight since February 1996.
Since 1993, Mr. Myers has been the Company's director of marketing and
contracting. From 1980 to 1993, Mr. Myers was engaged in real estate investing
and property management.
Arthur G. Rosenberg has served as a Director of Proflight since January
1997. Since 1986, Mr. Rosenberg has served as vice president of acquisitions for
The Associated Companies, a real estate development company. Mr. Rosenberg is a
practicing attorney admitted to the New York State Bar in 1962. For five years,
Mr. Rosenberg was general counsel to ITT Levitt & Sons, Inc., an international
home builder. Mr. Rosenberg is also a director of Mike's Original, Inc., EcoTyre
Technologies, Inc., Wall Street Records, Inc. and Phar-Mor, Inc. which are
publicly traded companies.
Louis R. Capece, Jr. will, upon consummation of the Offering, become a
Director of the Company and a consultant. Since 1986 and 1993, Mr. Capece has
served as president of Air Response and Air Response South, respectively. Since
1982 and 1993, Mr. Capece has served as president of Response Medical Transport
Service, Inc. and Response Aviation, Inc., respectively. Response Medical
Transport Service, Inc. provides ground ambulance transportation services.
Response Aviation, Inc. provides airport services.
All directors hold office until the next annual meeting of shareholders or
until their successors are elected and qualified. Officers are appointed by the
Board of Directors and serve at the discretion of the Board. All of the
executive officers of the Company have employment agreements with the Company.
See ' -- Employment Agreements.'
EXECUTIVE COMPENSATION
The Company did not pay any compensation exceeding $100,000 to its
executive officers for the year ended December 31, 1996. Kevin L. Burkhardt, the
Company's President and Chief Executive Officer received approximately $71,000
during this period. See ' -- Employment Agreements.'
EMPLOYMENT AGREEMENTS
In March 1997, the Company entered into an amended employment agreement
with Donald Jones to serve as the Company's Vice President of Sales. The
employment agreement is for a six-year term commencing upon consummation of the
Offering and is subject to successive automatic renewal periods of one year
unless earlier terminated. Mr. Jones is to receive a 5% increase in his base
salary in years four, five and six. Pursuant to the terms of this employment
agreement, Mr. Jones is required to devote his full business time and attention
to fulfill his duties and responsibilities to the Company. Mr. Jones will
receive a base salary of $150,000 per annum. In addition, Mr. Jones will receive
a stock bonus in the total amount of 250,000 common shares if the Company
achieves a minimum of $1 million in pretax profits, before depreciation and
amortization, in either of the first two years from the date of this Prospectus,
provided, however, that such stock bonus will not be granted if it would
negatively affect the listing of the Company's Common Stock on the Nasdaq
Smallcap. Such bonus is subject to vesting at a rate of 50% upon realization by
the Company of the minimum $1 million in pretax profits and 25% on each of the
next two anniversaries thereof. The Company has agreed to pay Mr. Jones a
relocation bonus of $100,000 and reasonable relocation expenses. Mr. Jones will
also have the right to participate in all benefit plans afforded to other
comparable officers during the term of the agreement, including, executive
incentive plan, stock option plan, monetary bonus plan, participation or extra
compensation plan, pension plan, profit sharing plan, disability insurance,
health and major medical insurance. Mr. Jones's employment agreement contains
certain confidentiality and non-competition provisions. Either the Company or
Mr. Jones may cancel the agreement for any reason after six years upon 60 days
prior notice.
On March 31, 1997, the Company entered into an employment agreement with
Kevin L. Burkhardt, the Company's President and Chief Executive Officer for a
term of five years with successive automatic renewal periods of one year with a
base salary of $90,000 for the first year and 10% increases in each of the
following years. Mr. Burkhardt will receive a $25,000 one time bonus if he
consummates another acquisition. In addition, Mr. Burkhardt will receive a stock
bonus in the total amount of 336,658 shares of Common Stock if the Company
achieves a minimum of $1 million in pretax profits, before depreciation and
amortization, in either of the first two years from the date of this Prospectus,
provided,
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however, that such stock bonus will not be granted if it would negatively affect
the listing of the Company's Common Stock on the Nasdaq SmallCap. Such bonus is
subject to vesting at a rate of 50% upon realization by the Company of the
minimum profits and 25% on each of the next two anniversaries thereof. Pursuant
to the terms of this employment agreement, Mr. Burkhardt is required to devote
his full business time and attention to fulfill his duties and responsibilities
to the Company. Mr. Burkhardt will also have the right to participate in all
benefit plans afforded to all executive officers during the term of the
agreement, including, executive incentive plan, stock option plan, monetary
bonus plan, participation or extra compensation plan, pension plan, profit
sharing plan, disability insurance, health and major medical insurance.
On October 31, 1997, the Company entered into an employment agreement with
Steven Myers to serve as Assistant Vice President of Marketing, for a term of
five years with successive automatic renewal periods of one year with a base
salary of $70,000. In addition, Mr. Myers will receive a stock bonus in the
total amount of 231,138 shares of Common Stock if the Company achieves a minimum
of $1 million in pretax profits, before depreciation and amortization, in either
of the first two years from the date of this Prospectus, provided, however, that
such stock bonus will not be granted if it would negatively affect the listing
of the Company's Common Stock on the Nasdaq SmallCap. Such bonus is subject to
vesting at a rate of 50% upon realization by the Company of the minimum profits
and 25% on each of the next two anniversaries thereof.
On March 31, 1997, the Company entered into an employment agreement with
David Cohen, the Company's Chief Financial Officer and Treasurer, for a term of
three years with successive automatic renewal periods of one year with a base
salary of $70,000. Pursuant to the terms of this employment agreement, Mr. Cohen
is required to devote his full business time and attention to fulfill his duties
and responsibilities to the Company. Mr. Cohen will also have the right to
participate in all benefit plans afforded to all executive officers during the
term of the agreement, including, executive incentive plan, stock option plan,
monetary bonus plan, participation or extra compensation plan, pension plan,
profit sharing plan, disability insurance, health and major medical insurance.
On March 31, 1997, the Company entered into an employment agreement with
Jane S. Burkhardt, the Company's Secretary, for a term of three years with
successive automatic renewal periods of one year with a base salary of $36,000.
Pursuant to the terms of this employment agreement, Mrs. Burkhardt is required
to devote 20 hours per week to fulfill her duties and responsibilities to the
Company. Mrs. Burkhardt will also have the right to participate in all benefit
plans afforded to all executive officers during the term of the agreement,
including, executive incentive plan, stock option plan, monetary bonus plan,
participation or extra compensation plan, pension plan, profit sharing plan,
disability insurance, health and major medical insurance.
The Company also intends to issue a stock bonus to Charles Bartholomew in
the amount of 200,990 common shares subject to the same requirements and vesting
as those for Messrs. Jones, Burkhardt, and Myers.
CONSULTING AGREEMENTS
In April, 1997, the Company entered into a three year consulting agreement
with Louis R. Capece, Jr. Under the terms of the agreement, Mr. Capece has
agreed to devote a minimum of 100 hours per month to the Company. Mr. Capece
will be paid an aggregate of $52,000 per year. The Company or Mr. Capece may
cancel the consulting agreement for any reason after one year upon 60 days prior
notice.
STOCK OPTION PLAN
The Board of Directors plans to submit to the shareholders a stock option
plan (the 'Option Plan'). The Option Plan provides for the grant of incentive
stock options ('ISOs'), intended to qualify for preferential tax treatment under
Section 422 of the Internal Revenue Code of 1986, as amended, and nonstatutory
stock options ('NSOs') that do not qualify for such treatment. Only employees
(including officers and directors who are also employees) of the Company or any
of its subsidiaries are eligible to receive grants of ISOs. Employees, officers,
directors, consultants, contractors and advisers of the Company or any
subsidiary are eligible to receive grants of NSOs. The purpose of the Option
Plan is to enable the Company to attract and retain exemplary directors,
employees, agents and consultants.
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No options can be granted under the Option Plan at less than 100% of the fair
market value of the Company's securities on the date of grant.
The Option Plan provides that a maximum of 350,000 shares of Common Stock
may be issued upon the exercise of options granted under the Option Plan. If an
option granted under the Option Plan expires or terminates for any reason
without having been exercised in full, then the unpurchased shares subject to
that option will be available for additional option grants. No shares of Common
Stock underlying any stock options issued under the Plan may be registered on
Form S-8 or any successor form for two years after the closing date.
The Option Plan will be administered by the Board of Directors of the
Company which will determine, in its discretion, among other things, the
recipients of grants, whether a grant will consist of ISOs or NSOs, or a
combination thereof, and the number of shares of Common Stock to be subject to
such options. The Board of Directors of the Company may, in its discretion,
delegate its powers, duties and responsibilities under the Option Plan to a
committee consisting of two or more directors who are 'disinterested persons'
within the meaning of Rule 16b-3 promulgated under the Securities Exchange Act
of 1934, as amended.
LIMITATIONS ON PERSONAL LIABILITY OF DIRECTORS
The Colorado Corporation Code, as revised, in general, allows corporations
to indemnify their directors and officers against reasonable expenses incurred
in connection with a proceeding if the director and/or officer acted in good
faith and in a manner the person believed to be in or not opposed to the best
interests of the corporation. In the case of a criminal action, the director or
officer must have had no reasonable cause to believe that the person's conduct
was unlawful. Under current law, a corporation may not indemnify a director or
officer in connection with a proceeding by or in the right of the corporation in
which the director or officer was adjudged liable to the corporation or if the
director or officer derived an improper personal benefit.
The Company's Articles of Incorporation and Bylaws provide that the Company
shall indemnify its directors and officers to the fullest extent permitted by
the Colorado Law.
The Company will enter into an indemnification agreement ('Indemnification
Agreement') with each of its directors and officers. Each Indemnification
Agreement will provide that the Company will indemnify the indemnitee against
expenses, including reasonable attorneys' fees, judgments, penalties, fines and
amounts paid in settlement actually and reasonably incurred by him or her in
connection with any civil or criminal action or administrative proceeding
arising out of his or her performance of his or her duties as a director or
officer, other than an action instituted by the director or officer. Such
indemnification is available if the indemnitee acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal action, had no
reasonable cause to believe his or her conduct was unlawful. Each
Indemnification Agreement also will require that the Company indemnify the
director or other party thereto in all cases to the fullest extent permitted by
applicable law. The term of the Indemnification Agreement will be the later of
(i) ten (10) years after the date that the indemnitee ceases to serve as a
director or officer of the Company, or (ii) the final termination of all
proceedings, as defined in the Indemnification Agreement, in which the
indemnitee is granted rights of indemnification.
Each Indemnification Agreement will permit the indemnitee to bring suit to
seek recovery of amounts due under such Indemnification Agreement and will
require that the Company indemnify the director or other party thereto in all
cases to the fullest extent permitted by applicable law. Although the Company
intends to seek to obtain directors' and officers' liability insurance, such
insurance is generally very expensive. If the Company is not able to obtain
directors' and officers' liability insurance to cover amounts, any payments made
by the Company under an Indemnification Agreement will have an adverse impact on
the Company.
It is the position of the Commission that insofar as indemnification for
liabilities arising under the Securities Act may be permitted to directors,
officers and controlling persons of the Company pursuant to the foregoing
provisions, or otherwise, that such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
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PRINCIPAL SHAREHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of Common Stock, as of the date of this Prospectus, and as
adjusted to reflect the sale by the Company of the Securities offered hereby, by
(i) each person who is known by the Company to beneficially own more than five
percent of the outstanding Common Stock, (ii) each director of the Company,
(iii) each of the Company's named executive officers, and (iv) all directors and
executive officers of the Company as a group. The information presented assumes
no exercise of the Warrants offered hereby.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF CLASS (1)
BENEFICIALLY OWNED ---------------------------------
BENEFICIAL OWNER PRIOR TO OFFERING BEFORE OFFERING AFTER OFFERING
- ------------------------------------------------------------- ------------------ --------------- --------------
<S> <C> <C> <C>
Kevin L. Burkhardt and Jane S. Burkhardt(2).................. 437,908 14.1% 10.1%
David Cohen(3)............................................... -- -- --
Charles W. Bartholomew(4).................................... 261,438 9.0% 6.3%
Steven B. Myers(5)........................................... 300,664 10.1% 7.2%
Arthur G. Rosenberg(6)....................................... 25,000 * *
Louis R. Capece, Jr.(8)...................................... -- -- --
Donald Jones(9).............................................. -- -- --
Srotnac Group, LLC(7)........................................ 1,475,000 55.3% 38.0%
All executive officers and directors as a group (7
persons)................................................... 1,025,010 38.4 26.4%
</TABLE>
- ------------
* Less than 1%.
(1) Unless otherwise indicated, each person has sole investment and voting
power with respect to the shares indicated, subject to community property
laws, where applicable. The number of shares of Common Stock outstanding
prior to the Offering is 2,665,607. For purposes of this table, a person or
group of persons is deemed to have 'beneficial ownership' of any shares
which such person has the right to acquire within 60 days. For purposes of
computing the percentage of outstanding shares held by each person or group
of persons named above, any security which such person or group of persons
has the right to acquire within 60 days after such date is deemed to be
outstanding for the purpose of computing the percentage ownership for such
person or persons, but is not deemed to be outstanding for the purpose of
computing the percentage of ownership of any other person.
(2) Includes options to purchase 437,908 shares of Common Stock at an exercise
price of $4.00 per share. Mr. and Mrs. Burkhardt's business address is 7211
S. Peoria St., Englewood, Colorado 80112. Mr. and Mrs. Burkhardt are
husband and wife and own their shares as joint tenants.
(3) Excludes 10,000 shares of Common Stock Mr. Cohen will be issued as a bonus
at the completion of the Offering. Mr. Cohen's business address is 7211 S.
Peoria St., Englewood, Colorado 80112.
(4) Includes options to purchase 261,438 shares of Common Stock at an exercise
price of $4.00 per share. Mr. Bartholomew's home address is 2150 Oak Hills
Drive, Colorado Springs, CO 80919.
(5) Includes options to purchase 300,654 shares of Common Stock at an exercise
price of $4.00 per share. Mr. Myers's home address is 5769 S. Andes Street,
Aurora, CO 80033.
(6) Includes options to purchase 25,000 shares of Common Stock exercisable at
$1.00 per share. Mr. Rosenberg's business address is 7979 Old Georgetown
Road, Suite 800, Bethesda, Maryland 20814.
(7) Srotnac Group, LLC's mailing address is P.O. Box 473, Babylon, NY 11702.
(8) Excludes 506,250 shares of Common Stock which will be issued to Mr. Capece
in connection with the acquisition of Air Response two years from the
closing of the Offering. Mr. Capece's address is 10845 Bayshore Drive,
Windermere, Florida 34786. See 'Certain Transactions -- Acquisition of Air
Response and Air Response South.'
(9) Mr. Jones's address is 5776 S. Fulton Way, Englewood, CO 80111.
CERTAIN TRANSACTIONS
ACQUISITION OF AIR RESPONSE AND AIR RESPONSE SOUTH
In April 1997, the Company entered into an Amended Agreement and Plan of
Reorganization with Air Response and Louis R. Capece, Jr., which agreement was
amended in May 1997, pursuant to which the Company agreed to acquire at the
closing of the Offering, subject to the terms and conditions
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contained therein, all of the outstanding capital stock of Air Response in
exchange for 506,250 shares of Common Stock of the Company, valued at $4.00
per share, to be issued two years from the closing of the Offering. If the
Company completes a second public offering, Mr. Capece has a put option to
sell to the Company such number of shares of Common Stock at the then current
market value, equal to 20% of the net proceeds of such second offering, not to
exceed $1,000,000. Under the terms of such put option, the Company is obligated
to purchase the shares offered. Simultaneously, the Company entered into an
Amended Stock Purchase and Sale agreement with Air Response South and Louis
R. Capece, Jr. pursuant to which the Company agreed to acquire at the closing
of the Offering, subject to the terms and conditions contained therein, all of
the outstanding capital stock of Air Response South for $2,000,000 of which
$1,000,000 is payable upon closing of the Offering with the balance payable
two years from the closing of the Offering.
The Acquisitions will close simultaneously with the closing of the
Offering. The Company entered into a consulting agreement with Louis R. Capece,
Jr. which agreement is effective as of the closing of the Offering. In
connection with the Acquisitions, Mr. Capece covenanted that he will not, for a
period of five years from closing, compete with the Company. Mr. Capece has the
right to nominate two members to the Company's Board of Directors. Mr. Capece
has nominated himself and Donald Jones as nominees to the Board of Directors.
See 'Management.'
LOAN TO AIR RESPONSE
In October 1996, the Company loaned $200,000 to Air Response. The note
bears interest at the rate of 10% per annum and is payable in two installments
of $100,000 plus accrued interest thereon on May 14, 1998 and May 14, 2000.
TRANSACTIONS WITH DIRECTORS AND EXECUTIVE OFFICERS
In October 1993, Charles W. Bartholomew, a Director of the Company, entered
into a stock purchase agreement pursuant to which he purchased 18% of the then
outstanding shares of Common Stock of the Company for $75,000 and loaned an
additional $75,000 to the Company. Interest for the first 24 months of the loan
was in the form of an additional 2% ownership interest in the Company
(constituting a rate of approximately 8%). Thereafter, interest on the loan was
at the rate of 10% per annum due December 1997.
As of September 30, 1997, Air Response and Air Response South have a
receivable due from its sole shareholder, Louis R. Capece, Jr., in the amount of
approximately $475,000. This amount will be offset from the shares to be issued
to Mr. Capece. Mr. Capece, upon consummation of the Offering, will be a director
of the Company.
In January 1996, Steven B. Myers, a Director of the Company, purchased
231,214 shares of Common Stock from the Company for $100,000 or $.43 per share.
In February 1997, Donald Jones entered into a six year employment agreement
with the Company to serve as the Company's Vice President of Sales upon
consummation of the Offering. In April of 1997, Mr. Jones's employment agreement
was amended to provide for a stock bonus, receivable by Mr. Jones over a period
of 3-4 years, provided the Company achieves minimum pre-tax profits of $1
million, before depreciation and amortization, in either of the first two years
from the date of this Prospectus. See 'Management -- Employment Agreement.'
In April 1997, Kevin L. Burkhardt, the Company's Chief Executive Officer,
President and a Director entered into a five-year employment agreement with the
Company. See 'Management -- Employment Agreement.'
In April 1997, Jane S. Burkhardt, the Company's Secretary and a Director,
entered into a three-year employment agreement with the Company. See
'Management -- Employment Agreement.'
In April 1997, David Cohen, the Company's Chief Financial Officer and
Treasurer, entered into a three-year employment agreement with the Company. See
'Management -- Employment Agreement.'
In May 1997, Kevin L. Burkhardt and Jane S. Burkhardt agreed to return
218,954 shares of Common Stock to the Company solely in exchange for options to
purchase 437,908 shares of Common
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Stock at an exercise price of $4.00 per share. The options are five-year options
exercisable upon closing of the Offering. The Underwriter believed there were
too many shares outstanding and as a condition of underwriting this Offering
and required these shares to be returned to treasury and the Company in
consideration for returning these shares issued the individuals options.
In May 1997, Charles W. Bartholomew agreed to return 130,719 shares of
Common Stock to the Company solely in exchange for options to purchase 261,438
shares of Common Stock at an exercise price of $4.00 per share. The options are
five-year options exercisable upon closing of the offering. The Underwriter
believed there were too many shares outstanding and as a condition of
underwriting this Offering required these shares to be retired and the Company,
in consideration for returning these shares, issued the individuals options.
In September of 1997, Steven B. Myers agreed to return 150,327 shares of
Common Stock to the Company solely in exchange for options to purchase 300,654
shares of Common Stock at an exercise price of $4.00 per share. The options are
five-year options exercisable upon closing of the Offering. The Underwriter
believed there were too many shares outstanding and as a condition of
underwriting this Offering required these shares to be returned to treasury and
the Company, in consideration for returning these shares, issued the individuals
options.
In September of 1997, each of Messrs. Burkhardt, Bartholomew and Myers
agreed to return an additional 168,329, 100,495 and 115,569 shares of Common
Stock to the Company, respectively, in exchange for an agreement by the Company
to issue to them 336,658, 200,990 and 231,138 shares of Common Stock,
respectively, over a period of 3-4 years, provided the Company achieves minimum
pre-tax profits of $1 million, before depreciation and amortization, in either
of the first two years from the date of this Prospectus. See
'Management -- Employment Agreements.'
In October of 1997, David H. Cohen, the Company's CFO, was offered 10,000
shares of Common Stock as a bonus to be issued upon completion of the public
offering. The Company has agreed to pay for any additional tax liability the
stock bonus adds to his income.
TRANSACTIONS WITH PRINCIPAL SHAREHOLDERS
In January 1996, the Company issued Steven A. Cantor, 1,475,000 shares of
Common Stock for business and financial services valued at $50,000. This
represented 67% of the then issued and outstanding shares of Common Stock. The
value of these shares were appraised by Zweifler Financial Research at $.03 per
share. Mr. Cantor has provided investment banking services to the Company. Mr.
Cantor transferred his shares to Srotnac Group, LLC, a company which is 98%
owned by Mr. Cantor.
In October 1996, the Company completed a bridge financing pursuant to which
it sold 70 units ('Units') each Unit consisting of a $5,000 principal amount
promissory note bearing interest at a rate of 10% and 10,000 shares of the
Company's Common Stock or an aggregate of $350,000 promissory notes and 700,000
shares of Common Stock. In January 1997, the Company sold an additional 30
units, or an aggregate of 300,000 additional shares of Common Stock and
$150,000, promissory notes.
As a condition of the Underwriter underwriting this Offering, the
Underwriter required that the bridge lenders forgive the entire $500,00 of
principal of the promissory notes (and all interest due thereunder) sold in
October 1996 or January 1997. Company's indebtedness and that the funds loaned
to the Company be allocated to the purchase price of the shares of Common Stock.
In May 1997, the bridge lenders in the October 1996 and January 1997 private
placements released and discharged the Company from any and all obligations
arising out of promissory notes aggregating $500,000 and agreed to cancel such
notes.
Air Response purchases both fuel and oil from Response Aviation, Inc.
('Aviation'), a company wholly-owned by the Companies' shareholder. The total
amount of purchases for the years ended December 31, 1996 and 1995 approximated
$172,000 and $154,000, respectively. Due to the common ownership between Air
Response and Response Aviation, the prices for fuel and oil charged by
Response Aviation to Air Response may not be indicative of the prices that
Response may be able to obtain if common ownership did not exist.
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DESCRIPTION OF SECURITIES
GENERAL
The Company amended its articles of incorporation in February 1997, which
increased the authorized capital stock of the Company to 20,500,000 shares, of
which 20,000,000 shares are Common Stock, par value $.001 per share, and 500,000
are Preferred Stock, par value $1.00 per share.
COMMON STOCK
As of the date of this Prospectus, there are 2,665,607 shares of Common
Stock outstanding and 32 record stockholders. Upon consummation of the Offering,
3,875,607 shares of Common Stock will be issued and outstanding, excluding (i)
350,000 shares of Common Stock reserved for issuance under the Company's stock
option plan (ii) 506,250 shares of Common Stock which will be issued to Louis R.
Capece, Jr., in connection with the acquisition of Air Responses, two years from
the closing of the Offering; (iii) 1,200,000 shares reserved for issuance upon
exercise of the Warrants offered hereby; (iv) 1,100,000 shares reserved for
issuance upon exercise of other outstanding options and warrants; (v) 180,000
shares of Common Stock issuable upon exercise of the Underwriter's Option.
Holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the shareholders. Holders of Common
Stock do not have any cumulative voting rights for the election of directors.
Subject to preferences that may be applicable to any outstanding shares of
Preferred Stock, the holders of Common Stock are entitled to receive ratably
such dividends, if any, as may be declared by the Board of Directors from time
to time out of funds legally available for that purpose. Upon any liquidation,
dissolution or winding up of the Company, whether voluntary or involuntary,
holders of Common Stock are entitled to receive pro rata all assets of the
Company available for distribution to its shareholders after payment or
provision for payment of debts and other liabilities of the Company and the
liquidation preferences of any then outstanding shares of Preferred Stock. The
shares of Common Stock are neither redeemable nor convertible, except for the
put which will be issued to Mr. Capece and the holders thereof have no
preemptive or subscription rights to purchase any securities of the Company. See
'Certain Transactions -- Acquisition of Air Response and Air Response South.'
PREFERRED STOCK
As of the date of this Prospectus, no shares of Preferred Stock are
outstanding. The Board of Directors has the authority to issue Preferred Stock
in one or more series and to determine the powers, preferences and rights and
the qualifications, limitations or restrictions granted to or imposed upon any
series of Preferred Stock and to fix the number of shares constituting any
series and the designation of such series without any further vote or action by
the shareholders of the Company. Any Preferred Stock designated by the Board may
have voting, conversion, liquidation preference, redemption, dividend and other
rights which are superior to the Common Stock. The issuance of Preferred Stock
may have the effect of delaying, deferring or preventing a change in control of
the Company without further action by the shareholders, may discourage bids for
the Company's Common Stock and may adversely affect the market price of and the
voting and other rights of the Common Stock.
OPTIONS AND WARRANTS
As of the date hereof, other than as described in the Registration
Statement, there are no outstanding options or warrants to purchase, or
securities convertible into, Common Stock of the Company.
REDEEMABLE COMMON STOCK PURCHASE WARRANTS
The Warrants will be issued pursuant to a warrant agreement (the 'Warrant
Agreement') among the Company, the Underwriter and American Securities Transfer
& Trust, Inc., the warrant agent, and will be evidenced by warrant certificates
in registered form.
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Each Warrant entitles the holder to purchase one share of Common Stock at
an exercise price of $6.00 per share, subject to adjustment, for three years
commencing on the Closing Date.
The exercise price of the Warrants and the number and the shares of Common
Stock or other securities and property issuable upon exercise of the Warrants
are subject to adjustment in certain circumstances, including stock splits,
stock dividends, subdivisions, combinations, reclassification or issuances of
stock at a price lower than the current market price. Additionally, an
adjustment will be made upon the sale of all or substantially all of the assets
of the Company in order to enable the holders of the Warrants to purchase the
kind and number of shares of stock or other securities or property (including
cash) receivable in such event by a holder of the number of shares of Common
Stock that might otherwise have been purchased upon exercise of the Warrants.
The Warrants do not confer upon the holder any voting or any other rights
of a shareholder of the Company. Upon notice to the holders of the Warrants, the
Company has the right to reduce the exercise or extend the expiration date of
the Warrants.
Warrants may be exercised upon surrender of the Warrant certificate
evidencing those Warrants on or prior to the expiration date (or earlier
redemption date) of the Warrants to the Warrant Agent, with the form of
'Election to Purchase' on the reverse side of the Warrant certificate completed
and executed as indicated, accompanied by payment of the full exercise price (in
United States funds, by cash or certified bank check payable to the order of the
Warrant Agent) for the number of Warrants being exercised.
No fractional shares will be issued upon exercise of the Warrants. However,
if a holder of a Warrant exercised all Warrants then owned of record by him, the
Company will pay to that holder in lieu of the issuance of any fractional share
which would otherwise be issuable, an amount in cash based on the market value
of the Common Stock on the last trading day prior to the exercised date.
No Warrant will be exercisable unless at the time of exercise the Company
has filed with the Securities and Exchange Commission a current prospectus
covering the issuance of shares of Common Stock issuable upon exercise of the
Warrants and the issuance of shares has been registered or qualified or is
deemed to be exempt from registration or qualification under the securities laws
of the state of residence of the holder of the Warrant. The Company has
undertaken to use its best efforts to maintain a current prospectus relating to
the issuance of shares of Common Stock upon the exercise of the Warrants until
the expiration of the Warrants, subject to the terms of the Warrant Agreement.
While it is the Company's intention to maintain a current prospectus, there is
no assurance that it will be able to do so.
The Warrants are redeemable, in whole or in part, by the Company at a price
of $.10 per Warrant, commencing twenty-four (24) months the closing date (except
the Warrants may be redeemed commencing twelve (12) months following the closing
date with the Underwriter's express written consent), and prior to their
expiration, provided that (i) prior written notice of not less than 30 days is
given to the Warrantholders and (ii) the closing bid price (as defined) of the
Company's Common Stock for the twenty (20) consecutive trading days immediately
prior to the date on which the notice of redemption is given, shall have
exceeded $8.50 per share. The Warrantholders shall have exercise rights until
the close of business, the day preceding the date fixed for redemption.
REGISTRATION RIGHTS
In connection with the acquisition of Air Response, the Company has granted
Louis R. Capece, Jr., upon the issuance of 506,250 shares of Common Stock two
years from the closing of the Offering, certain 'piggyback' registration rights
(other than a Registration Statement on Form S-4 or Form S-8 or successor form
thereto). These registration rights are not limited to a term and are subject to
approval of any underwriter for the Company. See 'Certain Transactions.'
Upon the consummation of the Offering, the Company will sell to the
Underwriter an Option to purchase 120,000 shares of Common Stock, and 120,000
Warrants, which may be exercised for an additional 120,000 shares of Common
Stock for $10. The Underwriter's Option will be exercisable for a period of four
years commencing one year from the date of this Prospectus. In addition, holders
of the Underwriter's Option will have certain demand or piggy-back registration
rights during the period the
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Underwriter's Option is exercisable with respect to the Underwriter's Option
and the underlying shares of Common Stock. See 'Underwriting.'
TRANSFER AGENT
American Securities Transfer & Trust, Inc., 1825 Lawrence Street, Denver,
CO 80202-1817, will serve as the Company's transfer agent for the Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
Upon the consummation of the Offering, the Company will have outstanding an
aggregate of 3,875,607 shares of Common Stock of which 2,675,607 are 'restricted
securities' under Rule 144 under the Securities Act of 1933, as amended (the
'Securities Act') (exclusive of (i) the 350,000 shares of Common Stock reserved
for issuance under the Option Plan; (ii) 506,250 shares of Common Stock which
will be issued to Louis R. Capece, Jr. in connection with the acquisition of Air
Response, two years from the closing of the Offering; (iii) 1,200,000 shares
reserved for issuance upon exercise of the Warrants offered hereby, (iv)
1,100,000 shares reserved for issuance upon exercise of other outstanding
options and warrants; (iv) 180,000 shares of Common Stock issuable upon exercise
of the Underwriter's Warrants. All of the 1,200,000 shares of Common Stock sold
in the Offering will be freely tradeable without restriction under the
Securities Act except for any shares purchased by 'affiliates' of the Company
(as that term is defined in the rules and regulations under the Securities Act).
In the future, these restricted shares may be sold only pursuant to a
registration statement under the Securities Act or an applicable exemption,
including the exemption provided by Rule 144. The Securities and Exchange
Commission ('Commission') has amended Rule 144, effective April 29, 1997,
reducing the holding period before shares subject to Rule 144 become eligible
for sale in the public market. Under the revised Rule 144, a person who has
owned Common Stock for one year may, under certain circumstances, sell within
any three-month period, a number of shares of Common Stock that does not exceed
the greater of 1% of the then outstanding shares of Common Stock or the average
weekly trading volume during the four calendar weeks prior to such sale. In
addition, a person who is not deemed to have been an affiliate of the Company at
any time during the three months preceding a sale, and who has beneficially
owned the restricted securities for the last two years is entitled to sell all
such shares without regard to the volume limitations, current public information
requirements, manner of sale provisions and notice requirements. Sales or the
expectation of sales of a substantial number of shares of Common Stock in the
public market following this Offering could adversely affect the prevailing
market price of the Common Stock. In addition, the sale of substantial amounts
of Common Stock acquired through the exercise of the (i) options granted, or
(ii) Underwriter's Option could adversely affect prevailing market prices for
the Common Stock. Except as otherwise described herein, the Company and its
officers, directors and shareholders have agreed with the Underwriter not to,
directly or indirectly, register, issue, offer, sell, offer to sell, contract to
sell, hypothecate, pledge or otherwise dispose of any shares of Common Stock,
(or any securities convertible into or exercisable or exchangeable for shares of
Common Stock), for a period of two years from the date of this Prospectus,
except that shares held by Srotnac Group LLC are subject to a one-year lock-up
period after which they may be sold with the prior written consent of the
Underwriter, which consent shall not be unreasonably withheld. The Underwriter's
consent may be based on several factors, including, but not limited to the
financial performance of the Company and market conditions, including price and
trading volume of the Company's Common Stock.
UNDERWRITING
First Liberty Investment Group, Inc. (the 'Underwriter') has agreed,
subject to the terms and conditions of the Underwriting Agreement, to purchase
from the Company and the Company has agreed to sell on a firm commitment basis
1,200,000 shares of Common Stock and 1,200,000 Warrants offered hereby, not
including the Over-Allotment Option. The Underwriter is committed to purchase
all Securities offered hereby, if any, such as purchases subject to certain
conditions, which may be waived by the Underwriter in its sole discretion,
specified in the Underwriting Agreement, including, but not limited to, the
failure of the Company to have its securities approved on Nasdaq SmallCap.
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The Underwriter has advised the Company that it proposes to offer the
Securities to the public at the public offering price set forth on the cover
page of this Prospectus and that it may allow to certain dealers who are members
of the National Association of Securities Dealers, Inc. ('NASD') concessions not
in excess of $ per share of Common Stock and $ per Warrant.
The Company has agreed to pay to the Underwriter a non-accountable,
non-refundable expense allowance of 3% of the gross proceeds of this Offering.
The Company has also agreed to pay all expenses in connection with qualifying
the Common Stock and Warrants offered hereby for sale under the laws of such
states as the Underwriter may designate, including expenses of counsel retained
for such purpose by the Underwriter.
The Company has agreed to sell to the Underwriter for $10, upon
consummation of this Offering, the Underwriter's Option exercisable to purchase
up to 120,000 shares of Common Stock and up to 120,000 Warrants to purchase
Common Stock. The Underwriter's Option may not be sold, transferred, assigned or
hypothecated for one year from the date of this Prospectus, except to the
officers or partners of the Underwriter and members of the selling group, and
are exercisable during the four-year period commencing one year from the
Effective Date (the 'Option Exercise Term'). During the Option Exercise Term,
the holders of the Underwriter's Option are given, at nominal cost, the
opportunity to profit from a rise in the market price of the Common Stock. To
the extent that the Underwriter's Option is exercised, in whole or in part,
dilution to the interests of the Company's shareholders will occur. Further, the
terms upon which the Company will be able to obtain additional equity capital
may be adversely affected since the holders of the Underwriter's Option can be
expected to exercise at a time when the Company would, in all likelihood, be
able to obtain any needed capital on terms more favorable to the Company than
those provided in the Underwriter's Option. Subject to certain limitations and
exclusions, the Company has agreed, at the request of the holders of a majority
of the Underwriter's Option to register the Underwriter's Option and the
underlying shares of Common Stock under the Securities Act on two occasions (one
at the Company's expense and one at the holder's expense) during the Option
Exercise Term and to include such Underwriter's Option and the underlying shares
of Common Stock in any appropriate registration statement which is filed by the
Company during the seven years following the date of this Prospectus.
The Company has granted to the Underwriter the Over-Allotment Option,
exercisable during the 45 calendar day period after the Closing Date, to
purchase from the Company at the initial public offering price less underwriting
discounts, up to an additional 180,000 shares of Common Stock and 180,000
Warrants, exercisable for up to an additional 180,000 shares of Common Stock, on
the same terms as the Securities offered hereby, solely to cover
over-allotments, if any. In addition, the Underwriter may short sell Securities
in its syndicate account in excess of the Securities offered hereby and included
in its over-allotment option and cover such short sales by purchases of
Securities in the open market or otherwise.
The Underwriter has informed the Company that it does not expect sales to
be made to discretionary accounts in excess of one percent (1%) of the
Securities offered hereby.
In the event the Underwriter exercises its registration rights to effect
the distribution of the Common Stock underlying the Underwriter's Option, the
Underwriter and any holder of such securities who is a market maker in the
Company's securities, prior to such distribution, will be unable to make a
market in the Company's securities for up to a period of nine days prior to the
commencement of such distribution and until such distribution is completed. If
the Underwriter ceases making a market, the market and market prices for the
Securities may be adversely affected, and the holders thereof may be unable to
sell such securities.
The Company has agreed to engage and pay for, on the Underwriter's behalf,
a consultant selected by the Underwriter and approved by the Company who is an
expert in the industry in which the Company does business to analyze the
Company's prospects and respond to the Underwriter's questions and concerns
regarding the offering of Securities hereby. The aggregate expenses of such
consultant shall not exceed $10,000.
Additionally, the Underwriter has been engaged by the Company as its
warrant solicitation agent and pursuant thereto may participate in the
solicitation of the exercise of the Warrants. Upon the exercise of the Warrants,
the Company will pay the Underwriter a commission of 5% of the aggregate
exercise price of the Warrants exercised. In accordance with the NASD Notice to
Members 92-98, no
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fee shall be paid: (i) upon the exercise of warrants where the market price
of the underlying Common Stock is lower than the exercise price; (ii) upon
the exercise of any Warrants not solicited by the Underwriter, (iii) for
the exercise of Warrants held in any discretionary account; or (iv) upon the
exercise of Warrants where disclosure of compensation arrangements has not been
made and documents have not been provided to customers both as part of the
original offering and at the time of exercise. Further, the exercise of any
Warrant shall be presumed unsolicited unless the holder of such Warrant states
in writing that the transaction was solicited by the Underwriter.
Notwithstanding the foregoing, no fees will be paid to the Underwriter or any
other NASD members upon exercise of the Warrants within the first twelve months
from the Effective Date.
In connection with the solicitation of Warrant exercises, unless granted an
exemption by the Commission from Regulation M under the Exchange Act, the
Underwriter and any other soliciting broker-dealer will be prohibited from
engaging in any market-making activities with respect to the Securities for the
period commencing either two or nine business days (depending on the market
price of the Company's shares of Common Stock) prior to any solicitation
activity with respect to the exercise of Warrants until the later of (i) the
termination of such solicitation activity or (ii) the termination (by waiver or
otherwise) of any rights which the Underwriter or any other soliciting
broker-dealer may have to receive a fee for the exercise of Warrants following
such solicitation. As a result, the Underwriter or other soliciting
broker-dealer may be unable to provide a market for the Company's securities,
should it desire to do so, during certain periods in which the Warrants are
exercisable.
In addition, the Company has agreed to enter into a financial consulting
agreement with the Underwriter, which will act as a management and financial
consultant for the Company for a period of two years, commencing upon the
consummation of this Offering, for an aggregate fee of $120,000, all of which is
payable in full at the Closing.
Except as otherwise described herein, the Company has agreed not to issue
any equity and/or other securities for a period of two (2) years from the
Closing Date without the express prior written consent of the Underwriter.
The Company and all of its current shareholders have agreed not to offer,
sell, contract to sell or otherwise dispose of any shares of Common Stock or
rights to acquire shares of Common Stock without the prior consent of the
Underwriter for a period of two (2) years from the Closing Date, except for
shares owned by Srotnac Group LLC which are subject to a one-year lock-up period
from the Closing Date, after which such shares may be sold with the
Underwriter's prior written consent, which consent shall not be unreasonably
withheld. The Underwriter's consent may be based on a number of factors,
including, but not limited to the financial performance of the Company and
market conditions, including price and trading volume of the Company's Common
Stock.
Although the Underwriting Agreement will provide that the Underwriter may
designate for election one person to the Company's Board of Directors, the
Underwriter has advised the Company that it has not selected such individual and
has no immediate plans to do so. If the Underwriter elects not to assert such
right, then it may designate one person to attend all Board of Directors
meetings as an observer. In the event that such an individual is designated,
such individual shall receive reimbursement of expenses for attending the
meetings of the Board of Directors.
The Company has agreed to indemnify the Underwriter against certain civil
liabilities, including liabilities under the Securities Act. To the extent this
section may purport to provide exculpation from possible liabilities arising
under the Federal securities laws, it is the opinion of the Commission that such
indemnification is against public policy and is therefore unenforceable.
The foregoing is a summary of the principal terms of the Underwriting
Agreement, the Underwriter's Warrant and the Financial Advisory and Investment
Banking Agreement. Reference is made to the copies of the Underwriting
Agreement, the Underwriter's Warrants and the Financial Advisory and Investment
Banking Agreement which will be filed as exhibits to the Registration Statement
of which this Prospectus forms a part.
The Underwriter was incorporated on August 11, 1958, and first registered
as a broker-dealer on October 3, 1958. Prior to this Offering, although the
Underwriter has participated as a selling group member in two underwritings, it
has not participated as a sole or co-manager in any public offerings.
Prospective purchasers of the Common Stock and Warrants offered hereby should
consider the Underwriter's lack of experience in being a manager of an
underwritten public offering.
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Prior to this Offering, there has been no public market for the Common
Stock or the Warrants. Accordingly, the Offering and exercise price of such
Securities being offered hereby was determined, in large part, by negotiations
between the Company and the Underwriters on an arbitrary basis and bear no
direct relationship to the assets, earnings, book value, results of operations
or other recognized criterion of value. Factors considered in determining such
prices, in addition to prevailing market conditions, include the history of and
the business prospects of the Company, as well as such other factors as were
deemed relevant, including an evaluation of management and the general economic
climate. The prices should in no event, however, be regarded as an indication of
any future market price of the Common Stock or the Warrants.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Bondy & Schloss LLP, New York, NY. Gerald A. Adler, a
partner of Bondy & Schloss LLP indirectly owns an aggregate of 2,500 shares of
Common Stock of the Company. Certain legal matters in connection with the
Offering will be passed upon for the Underwriter by Gusrae, Kaplan & Bruno,
New York, NY.
EXPERTS
The audited balance sheets of Proflight Medical Response, Inc. as of
December 31, 1996 and 1995, the audited statements of operations, cash flows and
stockholders' equity (deficit) for the year ended December 31, 1996 and 1995
have been included herein and in the Registration Statement in reliance upon the
report appearing elsewhere herein of Grant Thornton LLP, independent certified
public accountants, whose report thereon has been modified to include an
explanatory paragraph which refers to various matters which raise substantial
doubt about Proflight's ability to continue as a going concern, and upon the
authority of said firm as experts in accounting and auditing. The audited
combined balance sheet of Air Response and Air Response South as of December 31,
1996, the audited combined statements of operations and retained earnings and
cash flows, for the years ended December 31, 1996 and 1995 have been included
herein and in the Registration Statement in reliance upon the report appearing
elsewhere herein of Staff Maikels & Ciampino, P.C., independent certified public
accountants, and upon the authority of said firm as experts in accounting and
auditing.
ADDITIONAL INFORMATION
The Company has filed a Registration Statement on Form SB-2 (together with
all amendments, schedules and exhibits thereto, the 'Registration Statement')
under the Securities Act with respect to the Securities offered hereby. This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all the information set forth in the Registration Statement to which
reference is hereby made. Statements made in this Prospectus as to the contents
of any contract, agreement or other document referred to are not necessarily
complete. With respect to each such contract, agreement or other document filed
as an exhibit to the Registration Statement, reference hereby is made to the
exhibit for a more complete description of the matter involved, and each such
statement shall be deemed qualified in its entirety by such reference. For
further information with respect to the Company and the Securities offered
hereby, reference is made to the Registration Statement. The Registration
Statement filed by the Company may be inspected, without charge, at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, NW, Washington, DC 20549 and at the Commission's regional
offices at 1801 California Street, Suite 4800, Denver, Colorado 80202-2648 and 7
World Trade Center, Suite 1300, New York, NY 10048. Copies of such material also
may be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, NW, Washington, DC 20549, upon payment of certain fees prescribed by the
Commission. Electronic registration statements made through the Electronic Data
Gathering, Analysis and Retrieval system are publicly available through the
Commission's Web site (http://www.sec.gov).
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PROFLIGHT MEDICAL RESPONSE, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE NO.
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<S> <C>
PROFLIGHT MEDICAL RESPONSE, INC.
Report of Independent Certified Public Accountants................................................ F-2
Balance Sheet as at December 31, 1996 and 1995.................................................... F-3
Statements of Operations For the Years Ended December 31, 1996 and 1995........................... F-4
Statements of Stockholders' Deficit For the Years Ended December 31, 1996 and 1995................ F-5
Statements of Cash Flows For the Years Ended December 31, 1996 and 1995........................... F-6
Notes to Financial Statements..................................................................... F-7
PROFLIGHT MEDICAL RESPONSE, INC. (UNAUDITED)
Condensed Combined Balance Sheets as at September 30, 1997 (Unaudited)............................ F-13
Condensed Combined Statements of Operations For the Nine Month Period Ended September 30, 1997 and
1996 (Unaudited)................................................................................. F-14
Condensed Combined Statements of Cash Flows For the Nine Month Period Ended September 30, 1997 and
1996 (Unaudited)................................................................................. F-15
Notes to Financial Statements (Unaudited)......................................................... F-16
AIR RESPONSE, INC. AND AIR RESPONSE SOUTH, INC.
Independent Auditors' Report -- Staff Maikels & Ciampino, P.C..................................... F-21
Combined Balance Sheet as at December 31, 1996.................................................... F-22
Combined Statements of Operations and Retained Earnings For the Years Ended December, 1996 and
1995............................................................................................. F-23
Combined Statements of Cash Flows For the Years Ended September 30, 1996 and 1995................. F-24
Notes to Financial Statements..................................................................... F-25
AIR RESPONSE AND AIR RESPONSE SOUTH, INC. (UNAUDITED)
Condensed Combined Balance Sheets as at September 30, 1997 and September 30, 1996 (Unaudited)..... F-31
Condensed Combined Statements of Operations For the Nine Month Period Ended September 30, 1997 and
1996 (Unaudited)................................................................................. F-32
Condensed Combined Statements of Cash Flows For the Nine Month Period Ended September 30, 1997 and
1996 (Unaudited)................................................................................. F-33
Notes to Financial Statements (Unaudited)......................................................... F-34
PROFLIGHT MEDICAL RESPONSE, INC. PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
Pro Forma Presentation Statement.................................................................. F-35
Pro Forma Statement of Operations For the Year Ended December 31, 1996 (Unaudited)................ F-36
Pro Forma Consolidated Balance Sheet as of September 30, 1997 (Unaudited)......................... F-37
Pro Forma Statement of Operations For the Nine Months Ended September 30, 1997 (Unaudited)........ F-39
</TABLE>
F-1
<PAGE>
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
PROFLIGHT MEDICAL RESPONSE, INC.
We have audited the accompanying balance sheets of Proflight Medical
Response, Inc. (a Colorado corporation) as of December 31, 1996 and 1995 and the
related statements of operations, stockholders' deficit and cash flows for each
of the years then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Proflight Medical Response,
Inc. as of December 31, 1996 and 1995 and the results of its operations and cash
flows for each of the years then ended, in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in note B to the
financial statements, the Company's total current liabilities exceed total
current assets as of December 31, 1996, the Company experienced a significant
loss in 1996 and the Company has a stockholder's deficit as of December 31,
1996. These factors raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to these matters are
also described in note B. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
GRANT THORNTON LLP
Denver, Colorado
January 16, 1997 (except for note K,
Subsequent Events, as to which the
date is February 17, 1997, and note F,
Commitments and Contingencies -- Litigation,
as to which the date is April 24, 1997)
F-2
<PAGE>
<PAGE>
PROFLIGHT MEDICAL RESPONSE, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1995
---------- ----------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents........................................................ $ -- $ 1,684
Accounts receivable, trade
Air Response, Inc.............................................................. 131,887 46,600
Other.......................................................................... 369,908 313,782
---------- ----------
501,795 360,382
Less allowance for doubtful accounts........................................ 40,000 28,647
---------- ----------
461,795 331,739
Other current assets............................................................. 13,003 8,705
---------- ----------
Total current assets................................................... 474,798 342,124
Property and equipment -- at cost
Aircraft......................................................................... 4,281,883 1,760,873
Furniture and fixtures........................................................... 22,997 17,755
Medical equipment................................................................ 160,262 102,185
---------- ----------
4,465,142 1,880,813
Less accumulated depreciation and amortization.............................. (337,013) (405,233)
---------- ----------
4,128,129 1,475,580
Other assets
Note receivable -- Air Response, Inc............................................. 200,000 --
Deferred loan costs, less accumulated amortization of $16,250 in 1996............ 93,750 --
Deferred offering costs.......................................................... 10,000 --
Cost of intangible business asset, less accumulated amortization of $4,000....... 26,000 --
Other............................................................................ 42,489 --
---------- ----------
372,239 --
---------- ----------
Total assets........................................................... $4,975,166 $1,817,704
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Current portion of notes payable
Stockholders................................................................ $ 369,694 $ 56,160
Other....................................................................... 572,253 143,502
Bank overdraft................................................................... 19,910 --
Accounts payable -- trade........................................................ 495,791 281,031
Accrued liabilities.............................................................. 97,461 18,772
---------- ----------
Total current liabilities.............................................. 1,555,109 499,465
Notes payable, less current portion
Stockholders..................................................................... -- 10,000
Other............................................................................ 3,963,935 1,360,520
---------- ----------
3,963,935 1,370,520
---------- ----------
Total liabilities...................................................... 5,519,044 1,869,985
Commitments and contingencies......................................................... -- --
Stockholders' deficit
Common stock -- authorized 20,000,000 shares of $.001 par value; issued and
outstanding, 3,225,000 and 1,156,068 for 1996 and 1995, respectively............ 3,225 1,156
Paid-in capital (deficit)........................................................ (436,098) 143,662
Preferred stock -- authorized 500,000 shares of $1.00 par value; none issued and
outstanding..................................................................... -- --
---------- ----------
(432,873) 144,818
Accumulated deficit.............................................................. (111,005) (197,099)
---------- ----------
Total stockholders' deficit............................................ (543,878) (52,281)
---------- ----------
Total liabilities and stockholders' deficit....................... $4,975,166 $1,817,704
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
<PAGE>
PROFLIGHT MEDICAL RESPONSE, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------
1996 1995
---------- ----------
<S> <C> <C>
Operating revenue
Air ambulance.................................................................... $3,090,527 $2,310,276
Medical.......................................................................... 607,490 515,578
Passenger........................................................................ 175,068 14,486
Maintenance...................................................................... 33,126 45,195
---------- ----------
Total operating revenue..................................................... 3,906,211 2,885,535
Operating expenses
Flying operations................................................................ 2,410,300 1,617,651
Maintenance...................................................................... 591,207 343,020
Promotion and sales.............................................................. 255,616 31,909
General and administrative....................................................... 650,036 353,969
Depreciation and amortization.................................................... 377,930 276,538
---------- ----------
Total operating expenses.................................................... 4,285,089 2,623,087
---------- ----------
Operating income (loss)............................................................... (378,878) 262,448
Nonoperating expenses (income)
Interest expense................................................................. 287,188 150,254
Other, net....................................................................... (34) (4,915)
---------- ----------
Total nonoperating expenses................................................. 287,154 145,339
---------- ----------
Net earnings (loss)......................................................... $ (666,032) $ 117,109
---------- ----------
---------- ----------
Net earnings (loss) per share......................................................... $(.19) $.03
---------- ----------
---------- ----------
Weighted average number of shares outstanding......................................... 3,525,000 3,525,000
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
<PAGE>
PROFLIGHT MEDICAL RESPONSE, INC.
STATEMENTS OF STOCKHOLDERS' DEFICIT
YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
COMMON STOCK
------------------- PAID-IN (ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT) TOTAL
--------- ------ --------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1995....................... 1,156,068 $1,156 $ 137,162 $ (314,208) $(175,890)
Net earnings..................................... -- -- 117,109 117,109
Capital contribution recognized in lieu of
interest payment............................... -- -- 6,500 -- 6,500
--------- ------ --------- ------------ ---------
Balance at December 31, 1995..................... 1,156,068 1,156 143,662 (197,099) (52,281)
Net loss......................................... -- -- -- (666,032) (666,032)
Transfer of S-corporation accumulated deficit to
paid-in capital................................ -- -- (752,126) 752,126 --
Cost of 387,282 shares of common stock retired... (387,282) (387 ) (12,678) -- (13,065)
Common stock issued for cash..................... 231,214 231 99,769 -- 100,000
Common stock, issued for bridge loans............ 1,475,000 1,475 48,525 -- 50,000
Common stock issued for bridge loans............. 700,000 700 34,300 -- 35,000
Common stock issued for services................. 30,000 30 1,470 -- 1,500
Common stock issued in conjunction with loan..... 20,000 20 980 -- 1,000
--------- ------ --------- ------------ ---------
Balance at December 31, 1996..................... 3,225,000 $3,225 $(436,098) $ (111,005) $(543,878)
--------- ------ --------- ------------ ---------
--------- ------ --------- ------------ ---------
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
<PAGE>
PROFLIGHT MEDICAL RESPONSE, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-----------------------
1996 1995
---------- ---------
<S> <C> <C>
Increase (decrease) in cash and cash equivalents.......................................
Cash flows from operating activities
Net earnings (loss)............................................................... $ (666,032) $ 117,109
Adjustment to reconcile net earnings (loss)
to net cash provided by operating activities
Depreciation and amortization................................................ 377,930 276,538
Stock issued for services.................................................... 2,500 --
Imputed interest on note..................................................... -- 6,500
Changes in assets and liabilities............................................
(Increase) in accounts receivable....................................... (130,060) (127,248)
(Increase) in other assets.............................................. (76,787) (8,705)
Increase in accounts payable............................................ 214,760 39,184
Increase in accrued liabilities......................................... 78,689 4,219
---------- ---------
Net cash provided by (used in) operating activities................ (199,000) 307,597
Cash flows from investing activities
Acquisition of property and equipment............................................. (3,858,564) (384,743)
Issuance of note receivable....................................................... (200,000) --
---------- ---------
Net cash flows used in investing activities........................ (4,058,564) (384,743)
Cash flows from financing activities...................................................
Increase in deferred costs........................................................ (35,000) --
Proceeds from sale of stock....................................................... 100,000 --
Retirement of common stock........................................................ (13,065) --
Increase (decrease) in bank overdraft............................................. 19,910 (43,419)
Principal payments on notes payable............................................... (175,745) (133,071)
Proceeds from notes payable....................................................... 4,359,780 255,320
---------- ---------
Net cash provided by financing activities.......................... 4,255,880 78,830
---------- ---------
Net increase (decrease) in cash and cash equivalents............... (1,684) 1,684
Cash and cash equivalents, beginning of year........................................... 1,684 --
---------- ---------
Cash and cash equivalents, end of year................................................. $ -- $ 1,684
---------- ---------
---------- ---------
Supplemental disclosure of cash flow information
Cash paid during the year for interest....................................... $ 262,808 $ 148,215
Supplemental schedule of noncash investing and financing activities
Common stock issued for promotion and financing services..................... 85,000 --
Capital contribution recognized in lieu of interest payment.................. -- 6,500
Property and equipment acquired through long-term debt financing............. -- 480,000
Refinancing of long-term debt................................................ 435,687 836,680
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
<PAGE>
PROFLIGHT MEDICAL RESPONSE, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of Proflight Medical Response, Inc.'s (the Company) significant
accounting policies consistently applied in the preparation of the accompanying
financial statements follows:
1. HISTORY AND BUSINESS ACTIVITY
Proflight Medical Response, Inc. provides airborne transport for patients
who are critically ill, injured or otherwise incapacitated such that they may
require emergency medical care during flight. Services are provided by the
Company for hospital patients who need to be transported to other hospitals;
hospital patients who need to be transported to residences or nursing homes and
other convalescent facilities; organ transplant harvest teams and harvested
organs and significant numbers of vacationers who become ill or injured during
trips. The flights operated are generally long distance in nature and they
include international as well as domestic transport.
2. CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all
highly liquid cash investments with an original maturity of three months or less
to be cash equivalents.
3. PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Major additions, betterments,
and renewals are capitalized. Maintenance and repairs are charged to operating
expenses as they are incurred. Depreciation and amortization to estimated
residual values are computed on the straight-line basis for the aircraft; the
units of production method for aircraft engines/overhauls; the double-declining
method is used for all other property and equipment, over the estimated useful
lives of the related assets as follows:
<TABLE>
<S> <C>
Aircraft.......................................................... 20 years
Aircraft engines/overhauls........................................ Estimated flight hours
Furniture and fixtures............................................ 5 - 7 years
Medical equipment................................................. 7 years
</TABLE>
4. DEFERRED OFFERING COSTS
The Company has deferred the costs in connection with the proposed public
offering (note B). The costs will be charged against common stock if the
offering is successful, or will be charged to expense if the offering is
unsuccessful.
5. EARNINGS (LOSS) PER SHARE
Earnings (loss) per share is computed by dividing net income (loss) by the
weighted average number of shares outstanding during the period. During the
years ended December 31, 1995 and 1996, the Company effected a 50 to 1 and
3.85356 to one stock split, respectively. All shares and per share amounts have
been retroactively restated to reflect the splits. In addition, the weighted
average calculation considers all stock issued in 1996 and 300,000 shares issued
in January, 1997 to be outstanding as of January 1, 1995.
6. INCOME TAXES
In 1995, income taxes on net earnings are payable personally by the
stockholders pursuant to an election under Subchapter S of the Internal Revenue
Code not to have the Company taxed as a corporation. Accordingly, no provision
has been made for Federal income taxes.
In October 1996, the Company lost its S corporation status as a result of
issuing stock to the corporation. Therefore, the Company will be taxed as a C
corporation for a portion of 1996. Accordingly, the accumulated deficit has been
closed to paid-in capital as of November 1, 1996. For
F-7
<PAGE>
<PAGE>
PROFLIGHT MEDICAL RESPONSE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
1996, deferred income taxes are provided for items which are reported for tax
purposes in different periods than in the financial statements. See note I for a
summary of the income tax provision.
7. USE OF ESTIMATES
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE B -- REALIZATION OF ASSETS
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of the
Company as a going concern. However, as shown in the accompanying financial
statements, the Company experienced a $666,032 loss during 1996 and has
accumulated a deficit in stockholders' equity of $543,878 through December 31,
1996. In addition, total current liabilities exceed total current assets by
approximately $1,080,000 as of December 31, 1996.
In view of the matters described in the preceding paragraph, recoverability
of a major portion of the recorded asset amounts shown in the accompanying
balance sheet is dependent upon continued operations of the Company, which in
turn is dependent upon the Company's ability to meet its financing requirements
on a continuing basis, to maintain present financing, and to succeed in its
future operations. The financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset amounts or
amounts and classification of liabilities that might be necessary should the
Company be unable to continue in existence.
Management plans to continue expanding services through the purchase of
additional aircraft, resulting in increased revenues, more efficient use of
current aircraft, and proportionately lower operating costs. Management believes
this should provide a higher gross margin. In addition, the Company is pursuing
additional financing from outside sources, including an initial public offering
(IPO) (see note E). With the proceeds of the IPO, management intends to acquire
a company which will more than double current sales. Management believes this
combination will allow both companies to operate more efficiently through
elimination of certain duplicate general and administrative costs, purchasing
discounts on aircraft fuel, and more efficient use of each aircraft. Management
believes that these actions will provide growth and improve the Company's
operating and financial condition, providing the opportunity to continue as a
going concern.
NOTE C -- NOTE RECEIVABLE - AIR RESPONSE, INC.
In 1996, the Company loaned $200,000 to Air Response, Inc., a company it
intends to purchase (see note E -- Acquisition), who is also a major customer.
The note bears interest at 10%. The note is payable in two installments of
$100,000 plus accrued interest on May 14, 1998 and May 14, 2000.
NOTE D -- DEFERRED LOAN COSTS
During 1996 the Company issued 1,475,000 shares and 700,000 shares of
Common Stock in conjunction with obtaining bridge loan financing. This stock was
recorded at a fair value of $.03 per share and $.05 per share, respectively, and
will be amortized as interest expense over the one year term of the Notes.
F-8
<PAGE>
<PAGE>
PROFLIGHT MEDICAL RESPONSE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE E -- NOTES PAYABLE
Notes payable at December 31 consisted of the following:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Shareholders
10.0% note to a shareholder, issued on October 28, 1993, with interest
on the loan for the first 24 months to be in the form of additional
ownership in the Company. Thereafter, to be paid in sixteen monthly
installments of $5,026, including interest; due March 1997. At
December 31, 1996, the entire balance is in default and is reflected
as current........................................................... $ 19,694 $ 66,160
10.0% notes with nineteen shareholders payable in full, principal and
interest, on the earlier of one year from date of each note or upon
closing of an initial public offering................................ 350,000 --
---------- ----------
369,694 66,160
Less current maturities................................................ 369,694 56,160
---------- ----------
$ -- $ 10,000
---------- ----------
---------- ----------
Other
9.75% note due in monthly installments of $5,304 including interest,
due December 20, 2002; refinanced in 1996; collateralized by a 1969
Learjet 24B and other key components................................. $ -- $ 322,000
11.0% note due in monthly installments of $7,576 including interest,
due March 20, 2005; refinanced in 1996; collateralized by a 1971
Learjet 25C and other key components. Guaranteed by certain
stockholders......................................................... -- 526,334
10.5% note due in monthly installments of $8,023 including interest,
due February 14, 2000; refinanced in 1996; collateralized by a 1973
Learjet 25B-XR and other key components. Guaranteed by certain
stockholders......................................................... -- 435,688
9.75% note due in monthly installments of $19,419 including interest,
due November 10, 2006; collateralized by a 1978 Learjet 35A and other
equipment............................................................ 1,477,646 --
9.75% note due in 60 monthly installments of $14,720, including
interest, beginning December 15, 1996, with a balloon payment of
$322,284 due on December 15, 2001; collateralized by a 1973 Learjet
25B and other equipment. Guaranteed by certain stockholders.......... 886,139 --
10.5% note due in 59 monthly installments of $17,717, including
interest, beginning June 30, 1996, with a balloon payment of $841,995
due on May 31, 2001, collateralized by a 1978 Learjet 35A. Guaranteed
by certain stockholders.............................................. 1,268,241 --
10.5% note due in 55 monthly installments of $6,513, including
interest, beginning November 15, 1996, with a balloon payment of
$324,627 due on June 15, 2001; collateralized by a 1978 Learjet 35A.
Guaranteed by certain stockholders................................... 478,053 --
10.0% note, issued January 16, 1996, due in monthly installments of
$1,500, with the balance due on July 16, 1996. Defaulted in 1996 and
interest rate increased to 20.0%; entire balance reflected as
current.............................................................. 85,009 --
10.25% line of credit with bank, due February 27, 1997................. 43,100 --
</TABLE>
(table continued on next page)
F-9
<PAGE>
<PAGE>
PROFLIGHT MEDICAL RESPONSE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(table continued from previous page)
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
3% plus prime note with monthly interest only payments, due May 20,
1997; secured by a third lien on a 1973 Learjet 25B-XR and a second
interest in all accounts receivable and certain medical equipment.... 100,000 --
11.0% note with monthly interest only payments and annual principal
payments of $22,000 for March 1996, $44,000 for March 1997 and
$154,000 for March, 1998; secured by a secondary lien in a 1973
Learjet 25B-XR and other key components, as well as all accounts
receivable, and certain medical equipment and other assets as
specified in the agreement........................................... $ 198,000 $ 220,000
---------- ----------
4,536,188 1,504,022
Less current maturities..................................................... 572,253 143,502
---------- ----------
$3,963,935 $1,360,520
---------- ----------
---------- ----------
</TABLE>
The aggregate maturities of the notes payable are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- ------------------------
<S> <C>
1997 ...................................... $ 941,947
1998 ...................................... 485,679
1999 ...................................... 366,532
2000 ...................................... 405,054
2001 ...................................... 1,799,327
Thereafter ...................................... 907,343
----------
$4,905,882
----------
----------
</TABLE>
NOTE F -- COMMITMENTS AND CONTINGENCIES
LEASES
The Company leased aircraft, office space and office equipment under
operating lease arrangements. Total lease payments were $86,738 and $24,734 for
the years ended December 31, 1996 and 1995, respectively. In addition, as part
of the aircraft lease, the Company is required to make monthly payments of $150
per engine hour flown. A total of $12,720 was recognized in 1996 as maintenance
expense.
The minimum rental commitments under the noncancelable lease agreements are
as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- ------------------------
<S> <C>
1997 ........................................ $181,788
1998 ........................................ 143,495
--------
$325,283
--------
--------
</TABLE>
ACQUISITION
As of December 31, 1996, the Company has signed a letter of intent to
acquire Air Response, Inc. and Air Response South, Inc., air ambulance companies
based in New York and Florida. The purchase price for these companies is
$2,000,000, of which $1,000,000 is payable on the closing by the Company of an
initial public offering (IPO) and $1,000,000 is payable two years from the date
of the closing of the IPO. In addition, the Company will issue shares of common
stock equal to $2,500,000 based upon the initial public offering price two years
from the closing of the offering to the former shareholder of Air Response, Inc.
and Air Response South, Inc.
F-10
<PAGE>
<PAGE>
PROFLIGHT MEDICAL RESPONSE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
In conjunction with the proposed public offering, the Company has also
signed an agreement to retain its attorneys for anticipated legal work. The
estimated range of legal fees for this work is between $75,000 and $100,000.
LITIGATION
In March 1997, the Company and the Company's President were named in a
lawsuit Susan Fuller v. Proflight, Inc., Kevin Burkhardt, Andrew Hiestand and
James Fuller, Arapahoe County District Court, Colorado which alleges that the
plaintiff's former husband merged a business into the Company to conceal and
otherwise preclude plaintiff from receiving plaintiff's share of her former
husband's interest in the Company. The lawsuit is in its early stages and the
Company is unable to predict the outcome of this matter and no provision has
been provided for in the financial statements. In April 1997, the Company filed
a motion to dismiss as is the alternative for summary judgment. The Company,
through its counsel, intends to vigorously defend against this action.
NOTE G -- MAJOR CUSTOMERS
The Company had approximate sales to major customers as follows:
<TABLE>
<CAPTION>
CUSTOMER 1996 1995
- ---------------------------------------------------------------------- ---- ----
<S> <C> <C>
A..................................................................... 13% 17%
B..................................................................... 10% 12%
C..................................................................... 8% 10%
D (Air Response, Inc.)................................................ 8% 10%
</TABLE>
In addition, the Company is due approximately $132,000 in accounts
receivable and $200,000 in a note receivable (see note C) from Air Response,
Inc. This customer is the company Proflight intends to purchase as discussed in
note E -- Acquisition.
NOTE H -- ACCOMMODATION AGREEMENT
In order for the Company to obtain sufficient financing to purchase a 1973
Learjet 25B-XR, it was necessary for the Company to have an accommodator
guarantee repayment of a loan. In exchange, the accommodator is paid a fee of
$100 per month for each month that the loan is outstanding.
NOTE I -- INCOME TAXES
There is no income tax expense or benefit for 1996. The provision for
income taxes differs from the amount determined by applying the statutory rate
to net income before taxes, due to the following reasons for the year ended
December 31, 1996:
<TABLE>
<S> <C>
Income tax benefit at statutory rate............................................. $(246,000)
Benefit for Subchapter S loss.................................................... 205,000
Change in valuation allowance.................................................... 52,000
Other............................................................................ (11,000)
---------
Income tax benefit............................................................... $ --
---------
---------
</TABLE>
Components of deferred tax assets at December 31, 1996 are as follows:
<TABLE>
<S> <C>
Net operating loss carryforwards................................................. $ 34,000
Allowance for bad debts.......................................................... 15,000
Accruals......................................................................... 3,000
---------
52,000
Valuation allowance.............................................................. (52,000)
---------
Net assets....................................................................... $ --
---------
---------
</TABLE>
F-11
<PAGE>
<PAGE>
PROFLIGHT MEDICAL RESPONSE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
For pro forma purposes, there would be no income tax expense for 1995, as
the Company would have net operating loss carryovers available from prior years
to offset any taxable income. The Company has net operating loss carryforwards
for tax purposes of approximately $93,000 which expire in the year 2011.
NOTE J -- DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instrument for which it is practicable to estimate
that value.
CASH AND CASH EQUIVALENTS
The carrying amount approximates fair value because of the short maturity
of those instruments.
NOTES RECEIVABLE
It is not considered practicable to estimate the fair value of the note
receivable due to the related-party nature of the transaction.
NOTES PAYABLE
Carrying amount approximates fair value as the interest rates approximate
market rates at December 31, 1996 and 1995.
NOTE K -- SUBSEQUENT EVENTS
On January 14, 1997, the Company paid $42,600 on a note payable that was in
default at December 31, 1996. The balance of the note was $85,009 at December
31, 1996.
On January 13, 1997, the Company received an additional $150,000 in a
bridge loan from an existing shareholder. The Company issued 300,000 shares of
common stock to the noteholder. The note bears interest at 10% and is due on the
earlier of one year from the date of the note or upon closing of an initial
public offering.
On February 17, 1997, the Company amended its Articles of Incorporation to
have the authority to issue 500,000 shares of $1 par value preferred stock and
increased the number of authorized common shares to 20,000,000. In addition, the
Company changed its name from Proflight, Inc. to Proflight Medical Response,
Inc. These changes have been given retroactive treatment.
F-12
<PAGE>
<PAGE>
PROFLIGHT MEDICAL RESPONSE, INC.
CONDENSED COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents..................................................... $ 59,370 $ --
Accounts receivable, trade.................................................... 569,767 501,795
Less allowance for doubtful accounts..................................... (40,000) (40,000)
------------- ------------
529,767 461,795
Other current assets.......................................................... 8,707 13,003
------------- ------------
Total current assets..................................................... 597,844 474,798
Property and equipment -- at cost
Aircraft...................................................................... 3,118,526 4,281,883
Furniture and fixtures........................................................ 40,700 22,997
Medical equipment............................................................. 164,787 160,262
------------- ------------
3,324,013 4,465,142
Less accumulated depreciation and amortization........................... (548,030) (337,013)
------------- ------------
2,775,983 4,128,129
Other assets....................................................................... 341,489 372,239
------------- ------------
$ 3,715,316 $4,975,166
------------- ------------
------------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Current portion, notes payable
Stockholders................................................................ $ 194,857 $ 369,694
Other....................................................................... 571,811 572,253
Bank overdraft................................................................ 1,449 19,910
Accounts payable -- trade..................................................... 699,321 495,791
Accrued liabilities........................................................... 84,539 97,461
------------- ------------
Total current liabilities................................................ 1,551,977 1,555,109
Notes payable, less current portion
Stockholders.................................................................. -- --
Other......................................................................... 2,385,080 3,963,935
------------- ------------
2,385,080 3,963,935
------------- ------------
Total liabilities.................................................................. 3,937,057 5,519,044
Stockholders' equity (deficit)
Common stock -- authorized 20,000,000 shares of $.001 par value: 2,665,607
issued and outstanding at September 30, 1997, 3,225,000 issued and
outstanding at December 31, 1996............................................. 2,666 3,225
Paid in capital (deficit)..................................................... 30,711 (436,098)
Preferred stock -- authorized 500,000 at $1.00 par value: none issued and
outstanding.................................................................. -- --
Accumulated (deficit)......................................................... (255,118) (111,005)
------------- ------------
Total stockholder (deficit).............................................. (221,741) (543,878)
------------- ------------
Total liabilities and stockholders deficit.......................... $ 3,715,316 $4,975,166
------------- ------------
------------- ------------
</TABLE>
F-13
<PAGE>
<PAGE>
PROFLIGHT MEDICAL RESPONSE, INC.
CONDENSED COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ ------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Operating revenue........................................ $1,214,946 $1,205,291 $3,749,190 $2,942,888
Flying operations........................................ 819,503 639,816 2,287,675 1,722,489
Maintenance.............................................. 219,391 98,927 660,408 375,481
Promotion and sales...................................... 23,852 53,148 85,305 96,838
General and administration............................... 489,796 212,888 946,683 478,901
Depreciation and amortization............................ 55,686 108,704 222,748 329,720
---------- ---------- ---------- ----------
Total operating expenses....................... 1,608,228 1,113,483 4,202,819 3,003,429
---------- ---------- ---------- ----------
Operaring income (loss).................................. (393,282) 91,808 (453,629) (60,541)
Nonoperating expenses (income)
Sale of aircraft.................................... (536,642)
Interest expense.................................... 68,970 83,370 227,126 180,812
---------- ---------- ---------- ----------
Total nonoperating expenses (income)........... 68,970 83,370 (309,516) 180,812
Income (loss) before taxes............................... (462,252) 8,438 (144,113) (241,353)
Income taxes............................................. -- -- -- --
---------- ---------- ---------- ----------
Net earnings (loss)............................ $ (462,252) $ 8,438 $ (144,113) $ (241,353)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net earnings (loss) per share............................ $(0.17) $0.002 $(0.05) $(0.07)
Number of shares outstanding............................. 2,665,607 3,525,000 2,665,607 3,525,000
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
F-14
<PAGE>
<PAGE>
PROFLIGHT MEDICAL RESPONSE, INC.
CONDENSED COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1997 1996
----------- -----------
<S> <C> <C>
Increase (decrease) in cash and cash equivalents
Cash flows from operating activities
Net earnings (loss)............................................................ $ (144,113) $ (241,353)
Adjustment to reconcile net earnings (loss) to net cash provided by (used in)
operating activities
Gain on sale of aircraft.................................................. (536,642) --
Depreciation and amortization............................................. 222,748 498,887
Changes in assets and Liabilities
Decrease (increase) in accounts receivable........................... (67,972) (72,528)
Decrease in prepaids................................................. 4,296 --
(Increase) in other assets........................................... (13,000) (29,170)
(Decrease) increase in accounts payable.............................. 203,530 115,317
(Decrease) in accrued liabilities.................................... (12,922) 498,714
----------- -----------
Net cash provided by (used in) operating activities....................... (344,075) 770,867
Cash flows from investing activities
Net sale of property and equipment........................................ 1,666,040 --
----------- -----------
Net purchase of property and equipment.................................... -- (1,728,191)
Cash flows from financing activities
Increase in deferred costs..................................................... 10,000 --
Proceeds from sale of stock.................................................... 500,000 100,000
Repurchase of company stock.................................................... -- (190,000)
Repayment of bank overdraft.................................................... (18,461) --
Principal payments on long-term debt........................................... (382,184) --
Proceeds from notes payable.................................................... 175,000 1,065,854
Repayment of notes payable..................................................... (1,546,950) --
----------- -----------
Net cash provided by (used in) financing activities....................... (1,262,595) 975,854
Net increase in cash and cash equivalents................................. 59,370 18,530
Cash and cash equivalents, beginning of period...................................... -- 1,684
----------- -----------
Cash and cash equivalents, end of period............................................ $ 59,370 $ 20,214
----------- -----------
----------- -----------
Supplemental disclosure of cash flow information
Cash paid during the period for interest....................................... $ 227,126 $ 180,812
Stock issued for debt.......................................................... 16,250 --
Notes forgiven from bridge lenders............................................. 500,000 --
</TABLE>
F-15
<PAGE>
<PAGE>
PROFLIGHT MEDICAL RESPONSE, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. SUMMARY OF ACCOUNTING POLICIES
The accompanying unaudited condensed combined financial statements of
Proflight Medical Response, Inc. (the Company) have been prepared in accordance
with generally accepted accounting principles for interim financial information
and pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, they do not include all of the information and notes
required by generally accepted accounting principles for annual financial
statements.
The accompanying unaudited condensed combined financial statements and
disclosures reflect all adjustments (consisting only of normal recurring
adjustments) which, in the opinion of the management, are necessary for fair
presentation of the results of operations, financial position, and cash flow of
the Company. The results of operations for the periods indicated are not
necessarily indicative of the results for the full year.
NOTE 2. STOCK OPTIONS
The Company has chosen to account for stock based compensation using the
intrinsic value method prescribed in Accounting Principles Broad Opinion No. 25,
'Accounting for Stock issued to Employees', and related interpretations.
Accordingly, compensation cost for stock options is measured as the excess, if
any, of the quoted market price of the Company's stock at the date of grant over
the exercise price.
NOTE 3. REALIZATION OF ASSETS
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of the
Company as a going concern. However, as shown in the accompanying financial
statements, the Company experienced a $144,113 loss during the nine months ended
September 30, 1997 and has accumulated a deficit in stockholders' equity of
$221,741 through September 30, 1997. In addition, total current liabilities
exceed total current assets by approximately $954,133 as of September 30, 1997.
In view of the matters described in the preceding paragraph, recoverability
of a major portion of the recorded asset amounts shown in the accompanying
balance sheet is dependent upon continued operations of the Company, which in
turn is dependent upon the Company's ability to meet its financing requirements
on a continuing basis, to maintain present financing, and to succeed in its
future operations. The financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset amounts or
amounts and classification of liabilities that might be necessary should the
Company be unable to continue in existence.
Management plans to continue expanding services through the purchase of
additional aircraft, resulting in increased revenues, more efficient use of
current aircraft, and proportionately lower operating costs. Management believes
this should provide a higher gross margin. In addition, the Company is pursuing
additional financing from outside sources, including an initial public offering
(IPO). With the proceeds of the IPO, management intends to acquire a company
which will more than double current sales. Management believes this combination
will allow both companies to operate more efficiently through elimination of
certain duplicate general and administrative costs, purchasing discounts on
aircraft fuel, and more efficient use of each aircraft. Management believes that
these actions will provide growth and improve the Company's operating and
financial condition, providing the opportunity to continue as a going concern.
F-16
<PAGE>
<PAGE>
PROFLIGHT MEDICAL RESPONSE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
NOTE 4. DEPRECIATION
The company owns the following aircraft. They have been depreciated using
the 20 year straight line method for the aircraft's airframe. The engines are
depreciated separately based on $50 (Lear 25) and $108 (Lear 35A) per engine
hour flown.
<TABLE>
<CAPTION>
AMOUNT OWED
AS OF
SEPTEMBER
30,
TYPE OF AIRCRAFT DATE OF PURCHASE PURCHASE PRICE 1997
- ----------------------------------------------------- ---------------- -------------- -----------
<S> <C> <C> <C>
1973 Lear 25B........................................ 04/01/95 $ 893,698 $ 824,242
1976 Lear 35A........................................ 05/31/96 1,480,000 1,206,534
MSP for the Lear 35A................................. 08/15/96 481,669 456,337
</TABLE>
NOTE 5. LOAN FROM DIRECTOR
In November of 1993, a stock purchase agreement was entered into by the
Company and a current director for the purchase of 20% of the Company's stock
for $75,000 plus a loan of $75,000. The loan is being repaid in 16 monthly
payments of $5,026.42 each, which includes interest of 10% APR. Balance owed as
of 9-30-97 is $19,857.08 which has been extended for payment, at 10%APR, until
11-30-97.
NOTE 6. EQUIPMENT LOANS
The Company has notes to the following lenders on each of its aircraft:
<TABLE>
<CAPTION>
AMOUNT MONTHLY
AIRCRAFT LENDER FINANCED (APR)% PAYMENT
- ----------------------------------------- ------------------ ---------- ------ -------
<S> <C> <C> <C> <C>
Lear 25B................................. Norwest Bank $ 893,698 9.75 $14,720(a)
Lear 35A................................. Textron Financial 1,313,000 10.5 17,717(b)
Lear 35A msp............................. Textron Financial 481,669 10.5 6,513(c)
</TABLE>
- ------------
All of aircraft loans are personally guaranteed by one or more of the Company's
President and two directors.
(a) 60 monthly payments of $14,720 each conclude in November of 2001, with a
final payment of $319,786 due December 1, 2001.
(b) 59 monthly payments of $17,717 with a final payment of $841,995 due May 31,
2001.
(c) Engine maintenance insurance including overhauls for Lear 35A. 55 monthly
payments of $6,513 with a final payment of $324,627 due June 15, 2001.
NOTE 7. NOTES PAYABLE
In March of 1995 the company entered into a loan agreement to help with the
down payment and start up costs of the Lear 25B aircraft. The note was for
$220,000 at 11% APR due March 17, 1998 and secured by the Lear 24B. Terms are:
$22,000 due March 17, 1996 (which has been paid), $44,000 due March 17, 1997,
and balance of $154,000 due March 17, 1998. In March of 1997 the remaining
balance of $198,000 was extended to 9-30-98 with interest at 11% APR due
monthly. In February of 1996, the Company established a $50,000 credit line with
a bank to help its cash flow position. Terms are interest only monthly until
maturity in February of 1998. In May of 1996 the Company entered into a loan
agreement to help with the down payment and initial start up costs associated
with the Lear 35A. The note for $100,000 is interest only for 12 months based on
prime plus 3%. In March of 1997 the loan was extended to 9-30-98 with interest
only payments based on Cont. prime plus 3%, due monthly. In February of 1997 the
Company received a $150,000 loan to help offset slow receivables. The terms of
the note is interest only on prime plus 3% per month, payable monthly. The note
is due November 30, 1997. In March the Company received a $125,000 bridge loan
to be repaid a IPO or in one year,
F-17
<PAGE>
<PAGE>
PROFLIGHT MEDICAL RESPONSE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
whichever occurs sooner. Interest on the loan is 10% APR and 25,000 shares of
common stock. In September of 1997 a shareholder loaned the Company $50,000 at
8% APR. Principal and interest is due on demand. In July of 1997 the Company
extended a note with a former shareholder to December of 1997. The balance of
this note as of September 30, 1997 is $35,291. Monthly installments of $1500 are
being paid to cover interest at 20% APR, with the balance being applied to
principle.
NOTE 8. LEASES
In December of 1996, the Company entered into a two year lease agreement on
a Lear 25B aircraft. Terms are for a $13,000 per month lease payment along with
$150 per engine hour flown. Minimum commitment under the noncancellable lease is
$325,000. In February Two the Company entered into a seven year office building
lease for 9364 sq. feet of office space at 7211 S. Peoria Street, Englewod, CO.
Monthly rental is $11,705. The Company moved to the facilities in June of 1997.
NOTE 9. RELATED PARTY TRANSACTIONS
In April of 1997 bridge loans from shareholders totaling $500,000 were
forgiven. In April of 1997 shares totaling 500,000 were retired that were owned
by the President and Directors in return for options to purchase 1,000,000
shares of common stock at $4.00 per share. In September of 1997 the President
and Directors agreed to retire an additional 384,393 shares in return for future
potential incentives. These incentives include the issuance of 768,786 shares of
common stock to the President and two directors if the Company achieves minimum
pre-tax profits of $1 million, before depreciation and amortization, in either
of the first two years from the date of this Prospectus.
NOTE 10. EMPLOYMENT AGREEMENTS
In March 1997, the Company entered into an amended employment agreement
with Donald Jones to serve as the Company's Vice President of Sales. The
employment agreement is for a six-year term commencing upon consummation of the
Offering and is subject to successive automatic renewal periods of one year
unless earlier terminated. Mr. Jones is to receive a 5% increase in his base
salary in years four, five and six. Pursuant to the terms of this employment
agreement, Mr. Jones is required to devote his full business time and attention
to fulfill his duties and responsibilities to the Company. Mr. Jones will
receive a base salary of $150,000 per annum. In addition, Mr. Jones will receive
a stock bonus in the total amount of 250,000 common shares if the Company
achieves a minimum of $1 million in pretax profits, before depreciation and
amortization, in either of the first two years from the date of this Prospectus,
provided, however, that such stock bonus will not be granted if it would
negatively affect the listing of the Company's Common Stock on the Nasdaq
Smallcap. Such bonus is subject to vesting at a rate of 50% upon realization by
the Company of the minimum $1 million in pretax profits and 25% on each of the
next two anniversaries thereof. The Company has agreed to pay Mr. Jones a
relocation bonus of $100,000 and reasonable relocation expenses. Mr. Jones will
also have the right to participate in all benefit plans afforded to other
comparable officers during the term of the agreement, including, executive
incentive plan, stock option plan, monetary bonus plan, participation or extra
compensation plan, pension plan, profit sharing plan, disability insurance,
health and major medical insurance. Mr. Jones's employment agreement contains
certain confidentiality and non-competition provisions. Either the Company or
Mr. Jones may cancel the agreement for any reason after six years upon 60 days
prior notice.
On March 31, 1997, the Company entered into an employment agreement with
Kevin L. Burkhardt, the Company's President and Chief Executive Officer for a
term of five years with successive automatic renewal periods of one year with a
base salary of $90,000 for the first year and 10% increases in each of the
following years. Mr. Burkhardt will receive a $25,000 one time bonus if he
consummates another acquisition. In addition, Mr. Burkhardt will receive a stock
bonus in the total amount of 336,658
F-18
<PAGE>
<PAGE>
PROFLIGHT MEDICAL RESPONSE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
shares of Common Stock if the Company achieves a minimum of $1 million in pretax
profits, before depreciation and amortization, in either of the first two years
from the date of this Prospectus. Such bonus is is subject to vesting at a rate
of 50% upon realization by the Company of the minimum profits and 25% on each of
the next two anniversaries thereof. Pursuant to the terms of this employment
agreement, Mr. Burkhardt is required to devote his full business time and
attention to fulfill his duties and responsibilities to the Company. Mr.
Burkhardt will also have the right to participate in all benefit plans afforded
to all executive officers during the term of the agreement, including, executive
incentive plan, stock option plan, monetary bonus plan, participation or extra
compensation plan, pension plan, profit sharing plan, disability insurance,
health and major medical insurance.
On October 31, 1997, the Company entered into an employment agreement with
Steven Myers to serve as Assistant Vice President of Marketing, for a term of
five years with successive automatic renewal periods of one year with a base
salary of $70,000. In addition, Mr. Myers will receive a stock bonus in the
total amount of 231,138 shares of Common Stock if the Company achieves a minimum
of $1 million in pretax profits, before depreciation and amortization, in either
of the first two years from the date of this Prospectus. Such bonus is subject
to vesting at a rate of 50% upon realization by the Company of the minimum
profits and 25% on each of the next two anniversaries thereof.
On March 31, 1997, the Company entered into an employment agreement with
David Cohen, the Company's Chief Financial Officer and Treasurer, for a term of
three years with successive automatic renewal periods of one year with a base
salary of $70,000. Pursuant to the terms of this employment agreement, Mr. Cohen
is required to devote his full business time and attention to fulfill his duties
and responsibilities to the Company. Mr. Cohen will also have the right to
participate in all benefit plans afforded to all executive officers during the
term of the agreement, including, executive incentive plan, stock option plan,
monetary bonus plan, participation or extra compensation plan, pension plan,
profit sharing plan, disability insurance, health and major medical insurance.
On March 31, 1997, the Company entered into an employment agreement with
Jane S. Burkhardt, the Company's Secretary, for a term of three years with
successive automatic renewal periods of one year with a base salary of $36,000.
Pursuant to the terms of this employment agreement, Mrs. Burkhardt is required
to devote 20 hours per week to fulfill her duties and responsibilities to the
Company. Mrs. Burkhardt will also have the right to participate in all benefit
plans afforded to all executive officers during the term of the agreement,
including, executive incentive plan, stock option plan, monetary bonus plan,
participation or extra compensation plan, pension plan, profit sharing plan,
disability insurance, health and major medical insurance.
The Company also intends to issue a stock bonus to Charles Bartholomew in
the amount of 200,990 common shares subject to the same requirements and vesting
as those for Messrs. Jones, Burkhardt, and Myers.
NOTE 11. LEGAL PROCEEDINGS
In March 1997, the Company and the Company's President were named in a
lawsuit Susan Fuller v. ProFlight, Inc., Kevin Burkhardt, Andrew Iliestand and
James Fuller, filed in Arapahoe County District Court, Colorado which alleges
that the plaintiff's former husband merged a business into the Company to
conceal and otherwise preclude plaintiff from receiving plaintiff's share of her
former husband's interest in the Company. The amount sought is $820,000, of
which $250,000 is for emotional distress and $410,000 is for exemplary damages.
The lawsuit is in its early stages, and the Company is unable to predict the
outcome of this matter. Accordingly, no provision has been made for the
litigation in the financial statements. In April 1997, the Company filed a
motion to dismiss as the alternative to a motion for summary judgement, which
the Company previously filed and which was denied. In September of 1997, Mr.
James Fuller filed a separate complaint against the Company claiming that he is
entitled to compensation for the value of shares of the Company's Common Stock
which he alleges he
F-19
<PAGE>
<PAGE>
PROFLIGHT MEDICAL RESPONSE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
owns. No amount was stated in the suit. The Company maintains that Mr. Fuller
never paid the agreed upon price for the shares and therefore never owned them.
Moreover, Mr. Fuller signed the shares back to the Company in December 1994. The
Company is trying to have the two Fuller cases consolidated and tried jointly.
The Company, through its counsel, intends to vigorously defend against this
action. No assurance can be made that the Company will reach a satisfactory
resolution of the above stated proceedings. Failure to reach such a resolution
could have a material adverse effect on the Company's financial condition or
cash reserves.
NOTE 12. OTHER
SUBSEQUENT EVENTS
In January of 1997, the Company issued an option to purchase 25,000 shares
of common stock at $1.00 per share to a director of the Company. In March of
1997, the Company issued an option to purchase 25,000 shares common stock at
$4.00 per share to Tom Cox in consideration for extending the due date on
certain notes.
In October of 1997 the Company signed a letter of intent with First Liberty
Investment Group to act as managing underwriter on a firm commitment basis for a
$4,920,000 IPO. The underwriting calls for the sale of 1,200,000 shares of
common stock at $4.00 per share and 1,200,000 warrants at $0.10 each. The IPO is
scheduled for December of 1997.
F-20
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
AIR RESPONSE, INC. and
AIR RESPONSE SOUTH, INC.
Fort Plain, New York 13339
We have audited the accompanying combined balance sheet of AIR RESPONSE,
INC. (a New York corporation) and AIR RESPONSE SOUTH, INC. (a Florida
corporation) (combined 'the Companies') as of December 31, 1996 and the
statements of operations and retained earnings, and cash flows for the years
ended December 31, 1996 and 1995. These financial statements are the
responsibility of the Companies' management. Our responsibility is to express an
opinion on the financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of Air Response, Inc.
and Air Response South, Inc. as of December 31, 1996, and the combined results
of their operations and their cash flows for the years ended December 31, 1996
and 1995 in conformity with generally accepted accounting principles.
June 13, 1997
STAFF MAIKELS & CIAMPINO P.C.
Albany, New York
F-21
<PAGE>
<PAGE>
AIR RESPONSE, INC. AND AIR RESPONSE SOUTH, INC.
COMBINED BALANCE SHEET
DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents...................................................................... $ 254,799
Cash and cash equivalents -- restricted........................................................ 37,498
Accounts receivable, net of allowance for doubtful accounts of $46,660......................... 523,964
Other receivables.............................................................................. 24,734
Prepaid expenses............................................................................... 297,369
Refundable income taxes........................................................................ 53,105
----------
Total current assets...................................................................... 1,191,469
----------
Property and equipment, at cost:
Aircraft fleet................................................................................. 2,535,598
Machinery and equipment........................................................................ 196,557
Office equipment............................................................................... 28,196
----------
Total property and equipment.............................................................. 2,760,351
Less -- accumulated depreciation............................................................... 1,320,008
----------
Property and equipment, net............................................................... 1,440,343
----------
Other assets:
Due from officer............................................................................... 322,422
Deposits....................................................................................... 12,800
----------
Total other assets........................................................................ 335,222
----------
Total assets......................................................................... $2,967,034
----------
----------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Line of credit................................................................................. $ 374,984
Accounts payable............................................................................... 997,532
Current maturities of long-term debt........................................................... 173,954
Accrued expenses............................................................................... 8,844
Income taxes payable........................................................................... 14,358
Due to affiliate............................................................................... 66,601
----------
Total current liabilities................................................................. 1,636,273
Long-term debt, less current maturities............................................................. 1,346,606
----------
Total liabilities......................................................................... 2,982,879
----------
Commitments and contingencies:
Stockholder's equity:
Common stock................................................................................... 2,000
Retained earnings (deficit).................................................................... (17,845)
----------
Total stockholder's equity................................................................ (15,845)
----------
Total liabilities and stockholder's equity........................................... $2,967,034
----------
----------
</TABLE>
See accompanying notes to financial statements.
F-22
<PAGE>
<PAGE>
AIR RESPONSE, INC. AND AIR RESPONSE SOUTH, INC.
COMBINED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Air ambulance revenue................................................................. $7,658,243 $5,875,929
---------- ----------
Operating expenses
Flying operations................................................................ 4,495,123 3,475,847
Advertising...................................................................... 447,061 663,686
Repairs and maintenance.......................................................... 380,382 374,516
Depreciation..................................................................... 396,139 339,230
General and administrative....................................................... 1,538,761 1,099,404
---------- ----------
Total operating expenses.................................................... 7,257,466 5,952,683
---------- ----------
Income (loss) from operations......................................................... $ 400,777 $ (76,754)
---------- ----------
Other income (expense)
Loss on disposal of property and equipment....................................... (381,216) (63,875)
Bad debt expense -- affiliate.................................................... (18,328) (189,312)
Interest income.................................................................. 6,510 7,507
Interest expense................................................................. (136,148) (117,719)
Miscellaneous.................................................................... 43,444 30,170
---------- ----------
Total other income (expense)................................................ (485,738) (333,229)
---------- ----------
Loss before income taxes.............................................................. (84,961) (409,983)
Income tax benefit.................................................................... (38,747) (98,065)
---------- ----------
Net loss.............................................................................. (46,214) (311,918)
Retained earnings -- beginning of year................................................ 28,369 340,287
---------- ----------
Retained earnings (deficit) -- end of year............................................ $ (17,845) $ 28,369
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to financial statements.
F-23
<PAGE>
<PAGE>
AIR RESPONSE, INC. AND AIR RESPONSE SOUTH, INC.
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Cash flows from operating activities
Net loss........................................................................... $ (46,214) $(311,918)
Adjustments to reconcile net loss to net cash provided by operations:
Depreciation.................................................................. 396,139 339,230
Loss on disposal of property and equipment.................................... 381,216 63,875
Deferred income taxes......................................................... 0 19,009
Provision for doubtful accounts............................................... 39,674 30,952
Bad debt expense -- affiliate................................................. 18,328 189,312
(Increase) decrease in assets:
Accounts receivable...................................................... 79,821 (186,874)
Other receivables........................................................ (24,734) 0
Refundable income taxes.................................................. 64,835 (117,940)
Prepaid expenses......................................................... (140,130) (141,017)
Deposits and other assets................................................ (12,250) 18,908
Increase (decrease) in liabilities:
Accounts payable......................................................... (10,803) 576,487
Income taxes payable..................................................... 14,358 (78,051)
Accrued expenses......................................................... (142,296) 53,678
--------- ---------
Net cash provided by operating activities................................ 617,944 455,651
--------- ---------
Cash flows from investing activities
Purchases of property and equipment................................................ (595,817) (377,441)
Net advances to officer............................................................ (308,893) (18,564)
Net advances to affiliates......................................................... (76,377) (98,008)
--------- ---------
Net cash used by investing activities.................................... (981,087) (494,013)
--------- ---------
Cash flows from financing activities
Net borrowings under line of credit................................................ 451 339,533
Proceeds from long-term debt....................................................... 798,074 0
Repayments of long-term debt....................................................... (218,277) (257,456)
--------- ---------
Net cash provided by financing activities................................ 580,248 82,077
--------- ---------
Net increase in cash and cash equivalents............................................... 217,105 43,715
Cash and cash equivalents -- beginning of year.......................................... 75,192 31,477
--------- ---------
Cash and cash equivalents -- end of year................................................ $ 292,297 $ 75,192
--------- ---------
--------- ---------
</TABLE>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Income taxes paid....................................................................... $ 0 $ 92,862
--------- ---------
--------- ---------
Interest paid........................................................................... $ 136,148 $ 122,914
--------- ---------
--------- ---------
</TABLE>
NON-CASH INVESTING AND FINANCING ACTIVITIES
In 1996, the Companies refinanced certain debt associated with their
aircraft fleet. This refinancing amounted to $557,775 and has been excluded from
the statement of cash flows.
See accompanying notes to financial statements.
F-24
<PAGE>
<PAGE>
AIR RESPONSE, INC. AND AIR RESPONSE SOUTH, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF COMBINATION
The accompanying financial statements present the combined financial
results of Air Response, Inc. ('Response') and Air Response South, Inc.
('Response South') (combined 'the Companies'), which are wholly-owned by a
common shareholder. All significant intercompany accounts have been eliminated
in combination.
ORGANIZATION AND BUSINESS ACTIVITY
The Companies provide air ambulance services throughout the United States
and coordinate air ambulance services internationally through other carriers.
The Companies' aircraft are located in New York and Florida.
USE OF ESTIMATES
The process of preparing financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
regarding certain types of assets, liabilities, income and expenses. Such
estimates primarily relate to unsettled transactions and events as of the date
of the financial statements. Accordingly, upon settlement, actual results may
differ from estimated amounts.
REVENUE RECOGNITION
Revenue is recognized when services have been performed and is reported net
of contractual allowances.
CASH AND CASH EQUIVALENTS
The Companies consider all short-term investments having a maturity of
three months or less, when purchased, to be cash equivalents. There were no cash
equivalents at December 31, 1996.
ACCOUNTS RECEIVABLE -- ALLOWANCE FOR DOUBTFUL ACCOUNTS
The Companies provide for doubtful accounts receivable using the allowance
method based on outstanding accounts at year-end and management's estimation of
collectibility of these accounts.
MEDICAL SUPPLIES
It is the Companies' policy to expense all purchases of medical supplies as
incurred as large quantities of these items are generally not held in an
inventory for long periods.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation is computed using
the double-declining balance and straight-line methods over the estimated useful
lives of the assets, which range from five to seven years.
Expenditures for maintenance and repairs which do not extend the useful
lives of the assets are charged to income as incurred.
INCOME TAXES
The Companies account for income taxes under the provisions of the
Financial Accountant Standards Board Statement No. 109, 'Accounting for Income
Taxes'.
F-25
<PAGE>
<PAGE>
AIR RESPONSE, INC. AND AIR RESPONSE SOUTH, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996 AND 1995
GOVERNMENTAL REGULATION
Response is subject to the rules and regulations of the Federal Aviation
Administration (FAA) and the New York State Department of Health. Response South
is regulated by the State of Florida Department of Health and Rehabilitative
Services.
(2) LONG-TERM DEBT
Long-term debt as of December 31, 1996 consisted of the following:
<TABLE>
<S> <C>
Note payable to Cessna Finance Corporation -- Payable in monthly installments of $2,728
including interest at prime plus 1.5% (9.75% at December 31, 1996), maturing December
2000; secured by aviation equipment and equipment installed therein..................... $ 111,564
Note payable to Textron Financial Corporation -- Payable in monthly installments of $6,526
including interest at prime plus 1.5% (9.75% at December 31, 1996), maturing October
2006. This note is secured by aviation equipment and equipment installed therein and is
guaranteed corporately by Response Aviation, Inc. and Response Medical Transport, Inc.
(affiliated companies), and personally guaranteed by the Companies'
president/shareholder................................................................... 494,085
Note payable to Cessna Finance Corporation -- Payable in monthly installments of $2,069
including interest at prime plus 2% (10.25% at December 31, 1996), maturing August 1999;
secured by aviation equipment and equipment installed therein........................... 63,956
Note payable to Cessna Finance Corporation -- Payable in monthly installments of $4,149
including interest at prime plus 1.25% (9.5% at December 31, 1996), maturing September
2003; secured by aviation equipment and equipment installed therein. This note is
personally guaranteed by the Companies' president/shareholder........................... 247,114
Note payable to Textron Financial Corporation -- Payable in monthly installments of $5,429
including interest at prime plus 1.5% (9.75% at December 31, 1996), maturing December
2001. This note is secured by aviation equipment and equipment installed therein and is
guaranteed corporately by Response Aviation, Inc. and Response Medical Transport, Inc.
(affiliated companies), and personally guaranteed by the Companies'
president/shareholder................................................................... 257,000
Note payable to Proflight Medical Response, Inc. -- Payable in two installments of
$100,000 plus accrued interest at 10% on May 14, 1998 and 2000.......................... 200,000
Note payable to Textron Financial Corporation -- Payable in monthly installments of $3,057
including interest at prime plus 1.5% (9.75% at December 31, 1996), maturing October
2001. This note is secured by aviation equipment and equipment installed therein and is
guaranteed corporately by Response Aviation, Inc. and Response Medical Transport, Inc.
(affiliated companies), and personally guaranteed by the Companies'
president/shareholder................................................................... 140,944
Note payable to Central National Bank -- Payable in monthly installments of $385 including
interest at prime plus 2% (10.25% at December 31, 1996), maturing February 1998. This
note is secured by aviation equipment, real estate owned by the Companies'
president/shareholder and the personal guarantee of the Companies'
president/shareholder................................................................... 5,897
----------
Total long-term debt................................................................. 1,520,560
Less current maturities.............................................................. 173,954
----------
Total long-term debt, less current maturities........................................ $1,346,606
----------
----------
</TABLE>
F-26
<PAGE>
<PAGE>
AIR RESPONSE, INC. AND AIR RESPONSE SOUTH, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996 AND 1995
Based on borrowing rates currently available to the Companies for loans
with similar terms and maturities, the fair value of long-term debt approximates
the recorded amounts.
Maturities of long-term debt as of December 31, 1996 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, PRINCIPAL PAYMENT
- ------------------------------------------------------------------------- -------------------
<S> <C>
1997............................................................ $ 173,954
1998............................................................ 287,628
1999............................................................ 200,578
2000............................................................ 300,412
2001............................................................ 177,422
Thereafter...................................................... 380,566
-------------------
Total...................................................... $ 1,520,560
-------------------
-------------------
</TABLE>
(3) LINE OF CREDIT/CASH AND CASH EQUIVALENTS-RESTRICTED
Response has a $375,000 line of credit with Central National Bank, with a
balance outstanding of $374,984 as of December 31, 1996. The line is secured by
specific accounts receivable as designated at the time of each advance, a cash
reserve of 10% of the outstanding borrowings on the line and the personal
guarantee of the stockholder. A finance charge of 2.85% of the receivables is
charged by the bank and deducted from the loan proceeds. Repayments are made
upon collection of the receivables. In addition, the bank is entitled to a
finance charge of 1.5% of the unremitted receivables outstanding over thirty
days. Total charges incurred by Response for the years ended December 31, 1996
and 1995 pursuant to this facility were approximately $129,000 and $72,000,
respectively.
(4) STOCKHOLDER'S EQUITY
Common stock of the entities consists of the following:
<TABLE>
<CAPTION>
SHARES
-----------------------------------
AUTHORIZED ISSUED OUTSTANDING
---------- ------ -----------
<S> <C> <C> <C>
Response:
Voting common stock; no par value.............................. 200 100 100
Response South:
Non-voting, Series A common stock;
$.01 par value............................................... 100,000 0 0
Voting, Series B common stock;
$.01 par value............................................... 100,000 51,000 51,000
</TABLE>
F-27
<PAGE>
<PAGE>
AIR RESPONSE, INC. AND AIR RESPONSE SOUTH, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996 AND 1995
(5) INCOME TAXES
The Companies provide for income taxes using the applicable statutory
rates. The components of income taxes for the years ended December 31, 1996 and
1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Current:
Current tax expense........................................................ $ 14,358 $ 533
Fuel tax credit............................................................ (53,105) (85,020)
Benefit from net operating loss carryback.................................. 0 (32,587)
Deferred:
Deferred tax benefit, net.................................................. (28,246) (84,340)
Change in valuation allowance.............................................. 28,246 103,349
-------- --------
Income tax benefit.................................................... $(38,747) $(98,065)
-------- --------
-------- --------
</TABLE>
The following are the differences between the income tax provision
(benefit) and the amount computed by applying the federal statutory income tax
rate of 34% to income (loss) before taxes for the years ended December 31, 1996
and 1995:
<TABLE>
<CAPTION>
1996 1995
-------- ---------
<S> <C> <C>
Tax (benefit) at U.S. statutory rates.......................................... $(28,887) $(139,394)
State income taxes (benefit), net of federal tax benefit....................... (4,554) (21,975)
Fuel tax credit................................................................ (53,105) (85,020)
Permanent differences.......................................................... 31,692 42,441
Change in valuation allowance.................................................. 28,246 103,349
Other.......................................................................... (12,139) 2,534
-------- ---------
Income tax benefit........................................................ $(38,747) $ (98,065)
-------- ---------
-------- ---------
</TABLE>
Deferred income taxes at December 31, 1996 are as follows:
<TABLE>
<S> <C>
Deferred tax assets:
Non-deductible reserves............................................................... $ 19,597
Alternative minimum tax credit carryforwards -- Federal............................... 91,205
Net operating loss carryforwards -- Federal........................................... 133,007
Net operating loss carryforwards -- State............................................. 54,006
---------
$ 297,815
Valuation allowance.............................................................. (168,090)
---------
Total deferred tax assets........................................................ 129,725
Deferred tax liabilities:
Accelerated depreciation.............................................................. $(129,725)
---------
Net deferred taxes............................................................... $ 0
---------
---------
</TABLE>
At December 31, 1996, Response had approximately $91,000 in alternative
minimum tax credit carryforwards which may be used to offset future federal
income tax.
At December 31, 1996, Response had net operating loss carryforwards for
federal and state purposes of approximately $391,000 and $675,000, respectively.
These carryforwards begin to expire in 2009.
F-28
<PAGE>
<PAGE>
AIR RESPONSE, INC. AND AIR RESPONSE SOUTH, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996 AND 1995
(6) ADVERTISING COSTS
The Companies incur costs for yellow page advertising in local phone
directories. The advertisements remain listed for the life of the directory,
generally twelve months. The Companies pay the cost of this advertising prior to
publication of the directory and amortize those costs over a twelve month period
beginning with the month that the phone directory is distributed to the public.
At December 31, 1996, $282,727 of advertising was reported as assets and is
included as a prepaid expense. Advertising expense relating to the directory
advertising was $396,587 and $503,096 for the years ended December 31, 1996 and
1995, respectively.
(7) COMMITMENTS AND CONTINGENCIES
Response is a defendant in a lawsuit with alleged claims approximating $
100,000 plus unspecified damages which arose from a transaction in 1991 related
to the purchase of an aircraft. Management believes the suit is completely
without merit and will continue to vigorously defend its position.
(8) RELATED PARTY TRANSACTIONS
Response purchases both fuel and oil from Response Aviation, Inc.
('Aviation'), a company wholly-owned by the Companies' shareholder. The total
amount of purchases for the years ended December 31, 1996 and 1995 approximated
$172,000 and $154,000, respectively. Due to the common ownership between
Response and Aviation, the prices for fuel and oil charged by Aviation to
Response may not be indicative of the prices that Response may be able to obtain
if common ownership did not exist.
Response advanced approximately $200,000 to Aviation in the form of notes
receivable and working capital advances. These balances were deemed
uncollectible and written-off to expense as a bad debt in 1996 and 1995.
The Companies have a receivable due from an officer, the sole shareholder
of the Companies, amounting to $322,422 at December 31, 1996. This amount is due
on demand and is non-interest bearing. It is not the Companies' intent to
collect these balances within the next fiscal year.
Response owes Response Medical Transport, Inc. ('Medical') $66,601 at
December 31, 1996. This amount represents net advances to Response for working
capital purposes. No interest is charged on these outstanding balances.
Response leases hangar space from Aviation at Fulton County New York
Airport. Related rental expense for the years ended December 31, 1996 and 1995
was $18,000 and $18,000, respectively.
Certain of Response's expenses are paid by Medical and allocated back to
Response. These charges, including office salaries and benefits, and rent and
utilities at the Nelliston, New York office, were approximately $66,000 and
$118,000 for the years ended December 31, 1996 and 1995, respectively.
(9) EMPLOYEE BENEFIT PLANS
Response and Response South both have voluntary defined contribution
savings plans covering all of their employees who have met certain age and
length of service requirements. The plan qualifies under Section 401(k) of the
Internal Revenue Code. The Companies may provide discretionary matching
contributions each year. Matching contributions totaled $6,357 and $7,367 for
the years ended December 31, 1996 and 1995, respectively.
F-29
<PAGE>
<PAGE>
AIR RESPONSE, INC. AND AIR RESPONSE SOUTH, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996 AND 1995
(10) OPERATING LEASE
Response leases a 1972 Learjet which requires monthly payments of $8,798
through July 2003. Minimum lease payments under this agreement are as follows:
<TABLE>
<CAPTION>
FOR THE YEAR MINIMUM
ENDING DECEMBER 31, LEASE PAYMENT
- ------------------------------------------------------------------------------ -------------
<S> <C>
1997................................................................... $ 105,576
1998................................................................... 105,576
1999................................................................... 105,576
2000................................................................... 105,576
2001................................................................... 105,576
Thereafter............................................................. 167,162
-------------
$ 695,042
-------------
-------------
</TABLE>
(11) SUBSEQUENT EVENT
In May 1997, the Companies and the Companies' shareholder entered into an
Amended Agreement and Plan of Reorganization with Proflight Medical Response,
Inc. (Proflight), an unaffiliated entity, whereby Proflight agreed to acquire
all of the outstanding capital stock of the Companies. This acquisition is
contingent upon the success of the initial public offering of Proflight's
securities.
F-30
<PAGE>
<PAGE>
AIR RESPONSE AND AIR RESPONSE SOUTH, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents..................................................... $ 197,297 $ 254,799
Cash and cash equivalents -- restricted....................................... 41,670 37,498
Accounts receivable, trade.................................................... 955,034 570,624
Less allowance for doubtful accounts..................................... (48,339) (46,660)
------------- ------------
1,145,662 816,261
Other current assets............................................................... 268,016 375,208
------------- ------------
Total current assets..................................................... 1,413,678 1,191,469
Property and equipment -- at cost
Aircraft inventory............................................................ 2,738,524 2,535,598
Office, medical and shop equipment............................................ 240,881 224,753
------------- ------------
2,979,405 2,760,351
Less accumulated depreciation and amortization................................ (1,635,353) (1,320,008)
------------- ------------
1,344,052 1,440,343
Other Assets:
Note due from officer......................................................... 447,278 322,422
Investment in common stock.................................................... 180,000
Other......................................................................... 12,800 12,800
------------- ------------
640,078 335,222
------------- ------------
Total assets............................................................. $ 3,397,808 $2,967,034
------------- ------------
------------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable -- trade..................................................... $ 1,583,746 $ 997,532
Current portion, notes payable................................................ 300,000 173,954
Line of credit................................................................ 367,726 374,984
Accrued liabilities........................................................... 6,016 23,202
Due to affiliate.............................................................. 66,601
------------- ------------
Total current liabilities................................................ 2,257,488 1,636,273
Notes payable, less current portion........................................... 1,234,453 1,346,606
------------- ------------
Total liabilities........................................................ 3,491,941 2,982,879
------------- ------------
Stockholders' equity (deficit)
Common stock -- Air Response South authorized 100,000 shares of non-voting
$0.01 par value; issued and outstanding 0 and authorized 100,000 shares of
voting at $0.01 par value; issued and outstanding 51,000 shares Air Response;
authorized 200 shares of voting, no par value, issued and outstanding 100
shares....................................................................... 2,000 2,000
Retained earnings (deficit)................................................... (96,133) (17,845)
------------- ------------
Total stockholder equity (deficit)....................................... (94,133) (15,845)
------------- ------------
Total liabilities and stockholders' equity.......................... $ 3,397,808 $2,967,034
------------- ------------
------------- ------------
</TABLE>
F-31
<PAGE>
<PAGE>
AIR RESPONSE AND AIR RESPONSE SOUTH, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ ------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Operating revenue........................................ $2,588,780 $2,056,771 $6,537,380 $5,908,145
Flying operations........................................ 1,520,339 1,176,743 3,768,966 3,416,011
Maintenance.............................................. 260,700 121,150 562,308 428,032
Promotion and sales...................................... 135,568 94,579 372,560 435,207
General and administration............................... 536,647 425,025 1,491,410 1,043,196
Depreciation and amortization............................ 97,268 90,900 297,650 277,339
---------- ---------- ---------- ----------
Total operating expense........................ 2,550,522 1,908,397 6,492,894 5,599,785
---------- ---------- ---------- ----------
Operating income......................................... 38,258 148,374 44,486 308,360
Other (income) expense
Interest expense.................................... 45,391 23,382 108,197 69,355
Other............................................... -- 117,333 8,704 240,302
---------- ---------- ---------- ----------
Total non-operating expense.................... 45,391 140,715 116,901 309,657
Income (loss) before taxes.......................... (7,133) 7,659 (72,415) (1,297)
Income taxes (benefit).............................. -- 5,874 (49,309)
Net earnings (loss)............................ $ (7,133) $ 7,659 $ (78,289) 48,012
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net earnings (loss) per share............................ $(0.14) $0.15 $(1.54) $0.94
------- ----- ------- -----
------- ----- ------- -----
Weighted average number of shares outstanding............ 51,000 51,000 51,000 51,000
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
F-32
<PAGE>
<PAGE>
AIR RESPONSE AND AIR RESPONSE SOUTH, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
1997 1996
--------- ---------
<S> <C> <C>
Increase (decrease) in cash and cash equivalents
Cash flows from operating activities:
Net earnings............................................................. $ (78,289) $ 48,012
Adjustment to reconcile net earnings (loss) to net cash provided by
operating activities
Depreciation and amortization....................................... 315,345 277,339
(Increase) decrease in accounts receivable.......................... (357,997) 125,155
(Increase) decrease in other current assets......................... (97,542) 86,353
Due to/from affiliate............................................... (66,601) (39,429)
Increase (decrease) in accounts payable............................. 586,214 (119,612)
(Increase) in accrued liabilities................................... (17,185) (82,612)
--------- ---------
Net cash provided by operating activities................................ 283,945 295,206
Cash flows from investing activities (acquisition) of property and
equipment................................................................... (219,054) (235,824)
--------- ---------
Net cash flows from investing activities................................. (219,054) (235,824)
Cash flows from financing activities:
(Increase) in officers receivables....................................... (124,856) (48,817)
(Decrease) in line of credit............................................. (7,258) (11,997)
Principal (payments) increase on long-term debt.......................... 13,893 (56,768)
--------- ---------
Net cash (used) provided by financing activities.................... (118,221) (117,582)
Net (decrease) in cash and cash equivalents......................... (53,330) (58,200)
Cash and cash equivalents, beginning of period................................ 292,297 75,192
--------- ---------
Cash and cash equivalents, end of period...................................... $ 238,967 $ 16,992
--------- ---------
--------- ---------
</TABLE>
F-33
<PAGE>
<PAGE>
AIR RESPONSE AND AIR RESPONSE SOUTH INC
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -- SUMMARY OF ACCOUNTING POLICIES
The accompanying unaudited condensed combined financial statements of Air
Response and Air Response South (collectively, the Company) have been prepared
in accordance with generally accepted accounting principles for interim
financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, they do not include all of the
information and notes required by generally accepted accounting principles for
annual financial statements.
The accompanying unaudited condensed combined financial statements and
disclosures reflect all adjustments which, in the opinion of the management, are
necessary for fair presentation of the results of operations, financial
position, and cash flow of the Company. The results of operations for the
periods indicated are not necessarily indicative of the results for the full
year.
NOTE 2
The company owns the following aircraft:
<TABLE>
<CAPTION>
AMOUNT
DATE OF PURCHASE OWED
TYPE OF AIRCRAFT PURCHASE PRICE AS OF 9/30/97
- --------------------------------------------------------- -------- -------- -------------
<S> <C> <C> <C>
Lear 24.................................................. 10/90 $477,860 $ 225,873
Lear 25.................................................. 5/94 629,964 468,223
Navajo................................................... 6/93 136,500 48,392
Cessna 340............................................... 10/92 129,000 123,210
Cessna 421............................................... 9/94 160,065 94,022
MU2...................................................... 6/91 243,919 224,734
</TABLE>
NOTE 3
The Company has notes to the following lenders on each of its aircraft:
<TABLE>
<CAPTION>
AMOUNT MO.
AIRCRAFT LENDER FINANCED (APR)% PAYMENT
- ---------------------------------------- ------------------ -------- ------------------ -------
<S> <C> <C> <C> <C>
Lear 24................................. Textron $257,000 Prime + 1.5% $5,429
Lear 25................................. Textron 500,000 Prime + 1.5% 6,526
Navajo.................................. Cessna Finance 118,000 8.0% APR 2,069
Cessna 340.............................. Textron 145,000 Prime + 1.5% 3,057
Cessna 421.............................. Cessna Finance 150,300 9.25% APR 2,728
MU2..................................... Cessna Finance 253,850 Prime + 1.5% 4,149
</TABLE>
NOTE 4
The Company has a receivable due from an officer, the sole shareholder of
the Companies, amounting to $447,278 on September 30, 1997. This amount is due
on demand and is non-interest bearing. It is not the Company's intention to
demand payment on this Note within the next fiscal year.
NOTE 5
The Company has a $375,000 factoring account collateralized by accounts
receivable and guaranteed by an officer. Rates are 2.9% per invoice sold plus a
1.5% finance charge of the unremitted receivables outstanding over 30 days. A
reserve account of least $35,000 is required to pay invoices that have been
factored over 90 days old.
NOTE 6
In August of 1997 committed to purchase 50% of the stock of Traveler's
Emergency Network ('TEN') for $180,000. 'TEN' provides emergency services to
travelers directly and through travel agencies. The terms of the purchase are
for 18 payments of $10,000 each beginning August 25, 1997.
F-34
<PAGE>
<PAGE>
PRO FORMA FINANCIAL STATEMENTS OF
PROFLIGHT AND AIR RESPONSE AND AIR RESPONSE SOUTH
The following unaudited pro forma consolidated statement of operations of
Proflight and Air Response and Air Response South for the year ended December
31, 1996 and nine months ended September 30, 1997 is presented as if the
acquisition had occurred on January 1, 1996. The pro forma consolidated balance
sheet assumes the acquisition occurred as of September 30, 1997. The acquisition
is to be treated as a purchase transaction.
The pro forma consolidated financial statements are derived from the
respective historical financial statements of Proflight and Air Response and Air
Response South. The pro forma balance sheet combines Proflight's September 30,
1997 balance sheet with Air Response and Air Response South's September 30, 1997
balance sheet. The pro forma statement of operations combines Air Response and
Air Response South's historical statement of earnings for the twelve months
ended December 31, 1996 and nine months ended September 30, 1997 with
Proflight's historical statement of operations for the year ended December 31,
1996 and nine months ended September 30, 1997.
The pro forma data is presented for informational purposes only and may not
be indicative of the future results of operations and financial position of the
Company or what the results of operations and financial position of the Company
would have been had the acquisition occurred immediately prior to the periods
indicated.
Assumptions underlying the pro forma adjustments are described in the
accompanying notes which should be read in conjunction with the statements.
These statements should also be read in conjunction with the attached financial
statements of Air Response and Air Response South, and notes thereto.
F-35
<PAGE>
<PAGE>
PROFLIGHT MEDICAL RESPONSE, INC.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
--------------------------------
AIR RESPONSE AND PRO FORMA
PROFLIGHT AIR RESPONSE SOUTH ADJUSTMENTS(C) PRO FORMA
---------- ------------------ -------------- ------------
<S> <C> <C> <C> <C>
Net Sales.............................................. $3,906,211 $7,658,243 $ (250,000)(1) $ 11,314,454
Operating expense
Flying operations and maintenance................. 3,001,507 4,875,505 (250,000)(1) 7,627,012
Promotion and sales............................... 255,616 447,061 702,677
General and administrative........................ 650,036 1,538,761 2,188,797
Depreciation and amortization..................... 377,930 396,139 261,000(2) 1,035,069
---------- ------------------ -------------- ------------
Total operating expense...................... 4,285,089 7,257,466 11,000 11,553,555
Operating income (loss)...................... (378,878) 400,777 (239,101)
Nonoperating expenses (income)
Interest expense.................................. 287,188 136,148 71,331(3) 494,667
Other expense and (income)........................ (34) 349,590 -- 349,556
---------- ------------------ -------------- ------------
287,154 485,738 844,223
Income tax (benefit)................................... (38,747) (38,747)
---------- ------------------ -------------- ------------
Net income (loss)...................................... $ (666,032) $ (46,214) $ (332,331) $ (1,044,577)
---------- ------------------ -------------- ------------
---------- ------------------ -------------- ------------
Per share data
Net income (loss)................................. (0.33)
------
------
Average shares.................................... 3,171,857
---------
---------
</TABLE>
- ------------
(C) The adjustments to the historical statements of operations reflect the
following:
(1) Elimination of 1996 intercompany sales.
(2) Recognition of $161,000 of goodwill amortization and an additional
$100,000 in aircraft depreciation expense.
(3) Recognition of interest expense on new debt with Air Response
shareholder.
F-36
<PAGE>
<PAGE>
PROFLIGHT MEDICAL RESPONSE, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
----------------------------
AIR RESPONSE
AND AIR PRO FORMA
PROFLIGHT RESPONSE SOUTH AJUSTMENT(A) PRO FORMA PRO FORMA(B)
---------- -------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Current Assets
Cash and cash equivalents............. $ 59,370 $ 197,297 $(1,000,000)(1) $ (743,333) $4,006,000(1)
(603,000)(2)
Restricted cash....................... 41,670 41,670
Accounts receivable................... 529,767 906,695 (320,230)(3) 1,116,232
Other current assets.................. 8,707 268,016 (475,000)(4) (198,277)
---------- -------------- ------------- ----------- ------------
Total current assets.............. 597,844 1,413,678 (1,795,230) 216,292 3,403,000
---------- -------------- ------------- ----------- ------------
Fixed Assets
Aircraft, property and equipment at
cost................................ 3,324,013 2,979,405 1,117,868(2) 7,421,286
Less accumlated depreciation and
amortization........................ (548,030) 1,635,353 (2,183,383)
Other assets.............................. 341,489 640,078 (200,000)(3) 781,567
Goodwill.................................. 3,333,604(1) 3,333,604
---------- -------------- ------------- ----------- ------------
Total assets...................... $3,715,316 $3,397,808 $ 2,456,242 $ 9,569,366 $3,403,000
---------- -------------- ------------- ----------- ------------
---------- -------------- ------------- ----------- ------------
Current Liabilities
Accounts payable...................... 699,321 1,583,746 (320,230)(3) 1,952,837
Current portion of notes.............. 766,668 667,725 (200,000)(3) 1,234,393 (603,000)(2)
--
Accrued liabilities................... 85,988 6,017 92,005
---------- -------------- ------------- ----------- ------------
Total current liabilities......... 1,551,977 2,257,488 (520,230) 3,289,235 (603,000)
Long term debt............................ 2,385,080 1,234,453 857,339(1) 4,476,872 --
---------- -------------- ------------- ----------- ------------
Total liabilities................. 3,937,057 3,491,941 337,109 7,766,107 (603,000)
---------- -------------- ------------- ----------- ------------
Stockholders' Equity
Common Stock, par value .001 for
Proflight and $10.00 for Air
Response and Air Response South.....
Proflight has 2,665,607 shares issued
and outstanding. Air Response has
100 shares and AR South has 51,000
shares.............................. 2,666 2,000 (1,494)(1) 3,172 1,210(1)
Additional paid-in capital,
(deficit)........................... 30,711 -- 2,024,494(1)(4) 2,055,205 4,918,790(1)
Retained Earnings (deficit)........... (255,118) (96,133) 96,133(1) (255,118) (914,000)(1)
---------- -------------- ------------- ----------- ------------
Total Stockholders' Equity........ (221,741) (94,133) 2,119,133 1,803,259 4,006,000
---------- -------------- ------------- ----------- ------------
$3,715,316 $3,397,808 $ 2,456,242 $ 9,569,366 $3,403,000
---------- -------------- ------------- ----------- ------------
---------- -------------- ------------- ----------- ------------
<CAPTION>
AJUSTED PRO
FORMA
-----------
<S> <C>
Current Assets
Cash and cash equivalents............. $ 3,262,667
Restricted cash....................... 41,670
Accounts receivable................... 1,116,232
Other current assets.................. (198,277)
-----------
Total current assets.............. 3,619,292
-----------
Fixed Assets
Aircraft, property and equipment at
cost................................ 7,421,286
Less accumlated depreciation and
amortization........................ (2,183,383)
Other assets.............................. 781,567
Goodwill.................................. 3,333,604
-----------
Total assets...................... $12,972,366
-----------
-----------
Current Liabilities
Accounts payable...................... 1,962,837
Current portion of notes.............. 631,393
Accrued liabilities................... 92,005
-----------
Total current liabilities......... 2,686,235
Long term debt............................ 4,476,872
-----------
Total liabilities................. 7,163,107
-----------
Stockholders' Equity
Common Stock, par value .001 for
Proflight and $10.00 for Air
Response and Air Response South.....
Proflight has 2,665,607 shares issued
and outstanding. Air Response has
100 shares and AR South has 51,000
shares.............................. 4,382
Additional paid-in capital,
(deficit)........................... 6,059,995
Retained Earnings (deficit)........... (255,118)
-----------
Total Stockholders' Equity........ 5,809,259
-----------
$12,972,366
-----------
-----------
</TABLE>
- ------------
(A) The pro forma adjustments to the historical balance sheets using purchase
acquisition accounting reflect the acquisition of Air Response and Air Response
South (Air Response) by Proflight. The adjustments reflect the following:
(1) Estimated purchase price of $4,500,000, comprised of $1,000,000 in cash
payable on the closing of an initial public offering, a
noninterest-bearing note payable of $1,000,000 due in two years from
the IPO closing date (discounted), and shares of stock equal to
$2,500,000, less debt to the Company of $475,000, based upon the
initial public offering price issued within two years from closing of
the offering. The adjustments reflect the allocation of that purchase
price to the net assets acquired. Goodwill is being amortized over 20
years using the straight-line method.
(2) A $1,117,868 adjustment in the basis of aircraft and medical equipment
acquired to fair market value.
(3) Elimination of intercompany receivables/payables of $320,230 and
$200,000.
F-37
<PAGE>
<PAGE>
RECONCILIATION OF ACQUISITION
<TABLE>
<S> <C>
Consideration paid.............................................................. $4,500,000
Less discount on note........................................................... (142,661)
----------
Net consideration.......................................................... $4,357,339
----------
----------
Net assets acquired............................................................. $ (94,133)
Adjustment of aircraft basis to FMV............................................. 1,117,868
Goodwill........................................................................ 3,333,604
----------
$4,357,339
----------
----------
</TABLE>
(4) To adjust number of shares paid for acquisition to reflect the
elimination of loan to officer.
(B) The adjustments to pro forma represent:
(1) The offering of 1,200,000 shares of common stock and 1,200,000
redeemable common stock purchase warrants and 10,000 shares of common
stock given to an officer as a bonus. The initial public offering
prices of common stock and warrants are $4.00 and $.10, respectively.
The proceeds are recognized net of underwriter discounts and costs of
639,000 and attorney fees, printing costs, consulting fees, and
miscellaneous closing costs totalling 275,000.
(2) Payment of debt with proceeds from offering.
F-38
<PAGE>
<PAGE>
PROFLIGHT MEDICAL RESPONSE, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
--------------------------------
AIR RESPONSE
AND PRO FORMA
PROFLIGHT AIR RESPONSE SOUTH ADJUSTMENTS(C) PRO FORMA
---------- ------------------ -------------- -----------
<S> <C> <C> <C> <C>
Income..................................... $3,749,190 $6,537,380 $ (857,810)(1) $ 9,428,760
Operating expense
Flying operations..................... 2,287,675 3,768,966 $ (857,810)(1) 5,198,831
Maintenance........................... 660,408 562,308 1,222,716
Promotion and sales................... 85,305 372,560 457,865
General and administrative............ 946,683 1,491,410 2,438,093
Depreciation and amortization......... 222,748 297,650 195,750(2) 716,148
---------- ------------------ -------------- -----------
Total operating expense.......... 4,202,819 6,492,894 (662,060) 10,033,653
Operating income (loss).......... (453,629) 44,486 (195,750) (604,893)
Nonoperating expenses (income)
Sale of aircraft...................... (536,642) (536,642)
Interest expense...................... 227,126 108,197 53,499(3) 388,822
Other expense and (income)............ 8,704 8,704
---------- ------------------ -------------- -----------
(309,516) 116,901 53,499 (139,116)
Income tax................................. 5,874
---------- ------------------ -------------- -----------
Net income (loss).......................... $ (144,113) $ (78,289) $ (249,249) $ (471,651)
---------- ------------------ -------------- -----------
---------- ------------------ -------------- -----------
Per share data
Net income............................ $(0.15)
-------
-------
Average shares........................ 3,171,857
</TABLE>
- ------------
(C) The adjustments to the historical statements of operations reflect the
following:
(1) Elimination of 1997 intercompany sales.
(2) Recognition of $120,750 of goodwill amortization and an additional
$75,000 in depreciation expense, due to revaluation of aircraft assets.
(3) Recognition of interest expense on new debt with Air Response
shareholder.
F-39
<PAGE>
<PAGE>
_____________________________ _____________________________
NO UNDERWRITER, DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING TO SELL OR A SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary.......................................................................................................... 3
Risk Factors................................................................................................................ 9
Use of Proceeds............................................................................................................. 15
Dividend Policy............................................................................................................. 16
Capitalization.............................................................................................................. 17
Dilution.................................................................................................................... 18
Selected Financial Data..................................................................................................... 19
Management's Discussion and Analysis of Financial Condition and Results of Operations....................................... 21
Business.................................................................................................................... 27
Management.................................................................................................................. 33
Principal Shareholders...................................................................................................... 37
Certain Transaction......................................................................................................... 37
Description of Securities................................................................................................... 40
Shares Eligible For Future Sale............................................................................................. 42
Underwriting................................................................................................................ 42
Legal Matters............................................................................................................... 45
Experts..................................................................................................................... 45
Additional Information...................................................................................................... 45
Index to Financial Statements............................................................................................... F-1
</TABLE>
------------------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS EFFECTING TRANSACTIONS IN THE SHARES OF COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
PROFLIGHT MEDICAL
RESPONSE, INC.
1,200,000 SHARES OF
COMMON STOCK
AND 1,200,000 REDEEMABLE COMMON STOCK
PURCHASE WARRANTS
--------------------------
PROSPECTUS
--------------------------
FIRST LIBERTY INVESTMENT
GROUP, INC.
, 1997
_____________________________ _____________________________
<PAGE>
<PAGE>
PART II
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Colorado Corporation Code, as revised, in general, allows corporations
to indemnify their directors and officers against reasonable expenses incurred
in connection with a proceeding, if the person acted in good faith and in a
manner the person believed to be in or not opposed to the best interests of the
corporation. In the case of a criminal action, the director or officer must have
had no reasonable cause to believe that the person's conduct was unlawful. Under
current law, a corporation may not indemnify a director or officer in connection
with a proceeding by or in the right of the corporation in which the director or
officer was adjudged liable to the corporation or if the director or officer
derived an improper personal benefit.
The Company's Articles of Incorporation and By-Laws provide that the
Company shall indemnify its directors and officers to the fullest extent
permitted by the Colorado Law.
The Company will enter into an indemnification agreement ('Indemnification
Agreement') with each of its directors and officers. Each Indemnification
Agreement will provide that the Company will indemnify the indemnitee against
expenses, including reasonable attorneys' fees, judgments, penalties, fines and
amounts paid in settlement actually and reasonably incurred by him or her in
connection with any civil or criminal action or administrative proceeding
arising out of his performance of his duties as a director or officer, other
than an action instituted by the director or officer. Such indemnification is
available if the indemnitee acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Company, and, with
respect to any criminal action, had no reasonable cause to believe his conduct
was unlawful. Each Indemnification Agreement also will require that the Company
Indemnify the director or other party thereto in all cases to the fullest extent
permitted by applicable law. The term of the Indemnification Agreement will be
the later of (i) ten (10) years after the date that the indemnitee ceases to
serve as a director or officer of the Company, or (ii) the final termination of
all proceedings, as defined in the Indemnification Agreement, in which the
indemnitee is granted rights of indemnification.
Each Indemnification Agreement will permit the indemnitee to bring suit to
seek recovery of amounts due under such Indemnification Agreement and will
require that the Company indemnify the director or other party thereto in all
cases to the fullest extent permitted by applicable law. Although the Company
intends to seek to obtain directors' and officers' liability insurance, such
insurance is generally very expensive. If the Company is not able to obtain
directors' and officers' liability insurance to cover amounts, any payments made
by the Company under an Indemnification Agreement will have an adverse impact on
the Company.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses to be borne by the
Company (also referred to herein as the Registrant) in connection with the
issuance and distribution of the shares of Common Stock pursuant to the Offering
(other than underwriting discounts and commissions).
<TABLE>
<S> <C>
SEC registration fee....................................................................... $1,186.36
NASD filing fee............................................................................ $ *
Nasdaq SmallCap Market'sm'................................................................. $ *
Legal fees and expenses.................................................................... $ *
Accounting fees............................................................................ $ *
Blue Sky fees and expenses................................................................. $ *
Printing and engraving expenses............................................................ $ *
Underwriter's non-accountable expense allowance............................................ $ 117,450
Underwriter's consulting fee............................................................... $ 120,000
Miscellaneous.............................................................................. $ *
---------
Total fees and expenses.................................................................... $ *
---------
---------
</TABLE>
- ------------
* To be completed by amendment
II-1
<PAGE>
<PAGE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
The following paragraphs set forth certain information with respect to all
securities sold by the Company within the past three years without registration
under the Securities Act of 1933, as amended (the 'Securities Act'). The
information includes the names of the purchasers, the date of issuance, the
title and number of securities sold and the consideration received by the
Company for the issuance of these shares.
In January 1996, Steven B. Myers, a Director of the Company, purchased
231,214 shares of Common Stock from the Company for $100,000. These shares of
Common Stock were issued by the Company without registration under the
Securities Act by reason of the exemption from registration afforded by the
provisions of Section 4(2) thereof, as transactions by an issuer not involving a
public offering. In September 1997, Mr. Myers agreed to return 115,569 shares of
Common Stock to the Company in exchange for an amendment to his employment
agreement which provides for the issue of 230,000 shares if the Company achieves
minimum pre-tax profits of $1 million, before depreciation and amortization, in
either of the two years following the effective date of the Registration
Statement.
In January 1996, the Company issued Steven A. Cantor, 1,475,000 shares of
Common Stock valued at $50,000. Mr. Cantor has provided investment banking
services to the Company. These shares of Common Stock were issued by the Company
without registration under the Securities Act by reason of the exemption from
registration afforded by the provisions of Section 4(2) thereof, as transactions
by an issuer not involving a public offering.
In November 1996, the Company issued 5,000 shares of Common Stock to
Loselle Greenwalt valued at $250. These shares of Common Stock were issued by
the Company without registration under the Securities Act by reason of the
exemption from registration afforded by the provisions of Section 4(2) thereof,
as transactions by an issuer not involving a public offering.
In November 1996, the Company issued 20,000 shares of Common Stock to Tom
Cox valued at $1,000. These shares of Common Stock were issued by the Company
without registration under the Securities Act by reason of the exemption from
registration afforded by the provisions of Section 4(2) thereof, as transactions
by an issuer not involving a public offering.
In November 1996, the Company issued 25,000 shares of Common Stock to Brett
Abrams valued at $1,250. These shares of Common Stock were issued by the Company
without registration under the Securities Act by reason of the exemption from
registration afforded by the provisions of Section 4(2) thereof, as transactions
by an issuer not involving a public offering.
In January 1997, the Company issued Arthur G. Rosenberg, a director of the
Company an option to purchase 25,000 shares of Common Stock of the Company at an
exercise price of $1.00 per share as an incentive to become a director of the
Corporation. These shares of Common Stock were issued by the Company without
registration under the Securities Act by reason of the exemption from
registration afforded by the provisions of Section 4(2) thereof, as transactions
by an issuer not involving a public offering.
In March 1997, the Company issued Tom Cox an option to purchase 25,000
shares of Common Stock of the Company at an exercise price of $4.00 per share in
consideration for Mr. Cox extending the due date of certain notes. These shares
of Common Stock were issued by the Company without registration under the
Securities Act by reason of the exemption from registration afforded by the
provisions of Section 4(2) thereof, as transactions by an issuer not involving a
public offering.
In April 1997, the Company entered into an Amended Agreement and Plan of
Reorganization with Air Response and Louis R. Capece, Jr., which agreement was
amended in May 1997, pursuant to which the Company agreed to acquire at the
closing of the Offering, subject to the terms and conditions contained therein,
all of the outstanding capital stock of Air Response in exchange for 506,250
shares of Common Stock of the Company to be issued two years from the closing of
the Offering. If the Company completes a second public offering, Mr. Capece has
the option to put such number of shares of Common Stock at the then current
market value, equal to 20% of the net proceeds of such offering, to the Company,
not to exceed $1,000,000. The Company simultaneously entered into an Amended
Stock Purchase and Sale Agreement with Air Response South and Louis R. Capece
Jr. pursuant to which the Company agreed to acquire at the closing of the
Offering, subject to the terms and conditions
II-2
<PAGE>
<PAGE>
contained therein, all of the outstanding capital stock of Air Response South
for $2,000,000 of which $1,000,000 is payable upon closing of the Offering with
the balance due two years from such date.
In May 1997, Kevin L. Burkhardt and Jane S. Burkhardt agreed to return
218,954 shares of Common Stock to the Company in exchange for options to
purchase 437,908 shares of Common Stock at an exercise price of $4.00 per share.
The options are five year options exercisable upon closing of the offering. The
Underwriter believed there were too many shares outstanding and as a condition
of underwriting this Offering required these shares be retired and the Company
in consideration for returning these shares issued the individual warrants.
These shares were exchanged by reason of an exemption from registration afforded
by the provisions of Section 4(1) and 4(2). In September of 1997, Mr. Burkhardt
agreed to return 168,329 shares of Common Stock to the Company in exchange for
an amendment to his employment agreement which provides for the issue of 336,658
shares to Mr. Burkhardt, over the next 3-4 years, if the Company achieves
minimum pre-tax profits of $1 million, before depreciation and amortization, in
either of the two years following the effective date of the Registration
Statement.
In May 1997, Charles W. Bartholomew agreed to return 130,719 shares of
Common Stock to the Company in exchange for options to purchase 261,438 shares
of Common Stock at an exercise price of $4.00 per share. The options are five
year options exercisable upon closing of the offering. The Underwriter believed
there were too many shares outstanding and as a condition of underwriting this
Offering required these shares be returned to treasury and the Company in
consideration for returning these shares issued the individual warrants. These
shares were exchanged by reason of an exemption from registration afforded by
the provisions of Sections 4(1) and 4(2). In September of 1997, Mr. Bartholomew
agreed to return 100,495 shares of Common Stock to the Company and retired in
exchange for the Company's agreement to issue of 200,990 shares to Mr.
Bartholomew, over the next 3-4 years, if the Company achieves minimum pre-tax
profits of $1 million, before depreciation and amortization, in either of the
two years following the effective date of the Registration Statement.
In May 1997, Steven B. Myers agreed to return 150,327 shares of Common
Stock to the Company in exchange for options to purchase 300,654 shares of
Common Stock at an exercise price of $4.00 per share. The options are five year
options exercisable upon closing of the offering. The Underwriter believed there
were too many shares outstanding and as a condition of underwriting this
Offering and required these shares be retired. In consideration for returning
these shares issued the individual warrants. In September of 1997, Mr. Myers
agreed to return 115,569 shares of Common Stock in exchange for the Company's
agreement to issue 231,138 shares to Mr. Myers, over the next 3-4 years, if the
Company achieves minimum pre-tax profits of $1 million before depreciation and
amortization, in either of the two years following the effective date of the
Registration Statement. These shares were exchanged by reason of an exemption
from registration afforded by the provisions of Sections 4(1) and 4(2).
The Company has agreed to sell to the Underwriter for $10, upon
consummation of this Offering, the Underwriter's Option exercisable to purchase
up to 120,000 shares of Common Stock and 120,000 Warrants at an exercise price
of $4.80 per share.
The following shares of Common Stock were issued by the Company without
registration under the Securities Act in accordance with Rule 506 of Regulation
D of the Securities Act.
II-3
<PAGE>
<PAGE>
In October 1996, the Company completed a private placement issuing 70 Units
of the Company's securities ('Units'), each Unit consisting of a $5,000
principal amount 10% promissory note and 10,000 shares of the Company's Common
Stock. The following shares of Common Stock were issued by the Company without
registration under the Securities Act in accordance with Rule 506 of Regulation
D of the Securities Act. The offering was to 'Accredited Investors' only as that
term is defined in Rule 501 promulgated under the Securities Act.
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES DATE
- -------------------------------------------------------------------------------- --------- ---------
<S> <C> <C>
Alphanet Communications Corp.................................................... 20,000 10/31/96
Barbara Banach and Sally Miglio................................................. 10,000 10/31/96
Cindy Bermingham custodian for Maverick Bermingham.............................. 5,000 10/31/96
Brite Lite Industries, Inc...................................................... 30,000 10/31/96
Annette Cantor.................................................................. 325,000 10/31/96
Charlene Cantor................................................................. 5,000 10/31/96
Rosemary D'Amato................................................................ 5,000 10/31/96
Tiffany D'Amato................................................................. 5,000 10/31/96
Merchant Investors Management Limited........................................... 30,000 10/31/96
Dolores Miller.................................................................. 30,000 10/31/96
Corey Morrison.................................................................. 20,000 10/31/96
Sherry Cantor Morrison.......................................................... 5,000 10/31/96
Josephine Pace.................................................................. 20,000 10/31/96
Gregory Pollack................................................................. 5,000 10/31/96
Sean Reid....................................................................... 5,000 10/31/96
River Rock Equities, Inc. ...................................................... 150,000 10/31/96
RII Partners, Inc............................................................... 30,000 10/31/96
</TABLE>
In January 1997, the Company issued 300,000 additional shares of Common
Stock and $150,000, 10% promissory note. The following shares of Common Stock
were issued by the Company without registration under the Securities Act in
accordance with Rule 506 of Regulation D of the Securities Act. The offering was
to 'Accredited Investors' only as that term is defined in Rule 501 promulgated
under the Securities Act.
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES DATE
- -------------------------------------------------------------------------------- --------- ---------
<S> <C> <C>
Morbury Corporation............................................................. 160,000 01/13/97
Valinvest Corp.................................................................. 140,000 01/10/97
</TABLE>
In March 1997, the Company issued 25,000 additional shares of Common Stock
and $125,000, 10% promissory note. The following shares of Common Stock were
issued by the Company without registration under the Securities Act in
accordance with Rule 506 of Regulation D of the Securities Act. The offering was
to 'Accredited Investors' only as that term is defined in Rule 501 promulgated
under the Securities Act.
<TABLE>
<CAPTION>
NUMBER OF PROMISSORY
NAME SHARES NOTE DATE
- ------------------------------------------------------------------- --------- ---------- ---------
<S> <C> <C> <C>
Barry and Elizabeth Mevorach JTWROS................................ 2,500 $ 12,500 03/31/97
Raymond G. Hancock................................................. 2,500 $ 12,500 03/31/97
Barbara Banach..................................................... 17,500 $ 87,500 03/31/97
North Shore Financial Money Purchase Plan DLJSC-FBO
Richard Banach................................................... 2,500 $ 12,500 03/31/97
</TABLE>
II-4
<PAGE>
<PAGE>
ITEM 27. EXHIBITS
<TABLE>
<C> <S>
** 1.1 -- Form of Underwriting Agreement.
** 1.2 -- Master Agreement Among underwriters.
* 2.1 -- Amended Agreement and Plan of Reorganization, dated April 8, 1997, by and among, Proflight, Louis R.
Capece, Jr. And Air Response, Inc.
* 2.2 -- Amended Stock Purchase Agreement, dated April 8, 1997, by and among, Proflight, Louis R. Capece, Jr.
And Air Response South, Inc.
3.1 -- Amended and Restated Articles of Incorporation.
3.2 -- Bylaws.
** 4.1 -- Form of Certificate for Shares of Common Stock.
** 4.2 -- Form of Underwriter's Warrant.
5.1 -- Opinion and Consent of Loselle Greenawalt Kaplan Blair & Adler.
10.1 -- Lease Agreement dated February 27, 1997, between the Company and Airplaza Co., Inc.
10.2 -- Air Ambulance Transport Services Agreement dated February 9, 1996, by and between the Company and Aetna
Health Management, Inc.
10.3 -- Promissory Note and Accommodation Agreement dated March 17, 1995, between the Company and Lear Three,
L.L.C.
**10.4 -- First Promissory Note Extension, dated March 26, 1997, between the Company and Lear Three, L.L.C.
10.5 -- Promissory Note dated May 20, 1996, between the Company and Lear Three, L.L.C.
**10.6 -- Second Promissory Note Extension, dated March 26, 1997, between the Company and Lear Three, L.L.C.
10.7 -- Promissory Note date May 31, 1996, between the Company and Textron Financial Corporation.
10.8 -- Security Agreement dated May 31, 1996, between the Company and Textron Financial Corporation.
10.9 -- Promissory Note dated October 8, 1996, between the Company and Textron Financial Corporation.
10.10 -- Aircraft Lease Agreement dated November 15, 1996, between the Company and Superior Transport Service,
Inc.
10.11 -- Promissory Note dated November 13, 1996, between the Company and Norwest Equipment Finance, Inc.
10.12 -- Agreement Under Standards dated October 13, 1994, between the Company and the Arapahoe County Public
Airport Authority.
**10.13 -- Amended Employment Agreement dated May 1997, by and between the Company and Donald Jones.
10.14 -- Employment Agreement dated March 1997, by and between the Company and Kevin L. Burkhardt.
10.15 -- Employment Agreement dated March 1997, by and between the Company and David Cohen.
10.16 -- Employment Agreement dated March 1997, by and between the Company and Jane S. Burkhardt.
10.17 -- Consulting Agreement dated April 1997, by and between the Company and Louis R. Capece, Jr.
10.18 -- Agreement dated April 30, 1995, between Air Response, Inc. and Central National Bank Canajoharie.
10.19 -- Note and Security Agreement dated February 24, 1993, between Air Response, Inc. and Cessna Finance
Corporation.
10.20 -- Aircraft Lease Agreement dated June 27, 1996, between Air Response, Inc. and U.S. Bancorp Leasing &
Financial.
10.21 -- Promissory Note dated September 20, 1996, between Air Response, Inc. and Cessna Finance Corporation.
10.22 -- Promissory Note dated October 23, 1996, between Air Response, Inc. and Textron Financial Corporation.
10.23 -- Promissory Note dated October 23, 1996, between Air Response, Inc. and Textron Financial Corporation.
**10.24 -- Insurance Policy between the Company and Nationair Insurance Agency.
*10.25 -- Stock Option Plan
</TABLE>
(table continued on next page)
II-5
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<PAGE>
(table continued from previous page)
<TABLE>
<C> <S>
*10.26 -- Escrow Agreement
**10.27 -- Employment Agreement dated , 1997 by and between the Company and Steven B. Myers.
*23.1 -- Consent of Grant Thornton LLP
23.2 -- Consent of Loselle Greenawalt Kaplan Blair & Adler (included Exhibit 5.1).
*23.3 -- Consents of Staff Maikels and Ciampino, P.C.
23.4 -- Consents of Kaufman Rossin & Co., P.C.
24.1 -- Power of Attorney.
</TABLE>
- ------------
* Filed herewith
** To be filed by amendment.
ITEM 28. UNDERTAKINGS
(a) The Registrant will,
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that which
was registered) any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the 'Calculation of
Registration Fee' table in the effective registration statement.
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
(b) The Registrant will provide to the Underwriter at the closing
certificates in such denominations and registered in such names as required by
the Underwriter to permit prompt delivery to each purchaser.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
II-6
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<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as
amended, the registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements of filing on Form SB-2 and authorized this
Amendment No. 1 to the registration statement to be signed on its behalf by the
undersigned, in the City of New York, State of New York on the 8th day of
December, 1997.
PROFLIGHT MEDICAL RESPONSE, INC.
By: /S/ KEVIN L. BURKHARDT
...................................
KEVIN L. BURKHARDT, PRESIDENT
In accordance with the requirements of the Securities Act of 1933, as
amended, this Amendment No. 1 to the registration statement was signed by the
following persons in the capacities indicated on the dates stated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------- -------------------
<C> <S> <C>
/s/ KEVIN L. BURKHARDT Chief Executive Officer, President, Director December 8, 1997
.........................................
(KEVIN L. BURKHARDT)
/s/ JANE S. BURKHARDT Secretary, Director December 8, 1997
.........................................
(JANE S. BURKHARDT)
/s/ DAVID COHEN Chief Financial Officer, Treasurer, Chief December 8, 1997
......................................... Accounting Officer
(DAVID COHEN)
* Director December 8, 1997
.........................................
(ARTHUR G. ROSENBERG)
* Director December 8, 1997
.........................................
(CHARLES W. BARTHOLOMEW)
* Director December 8, 1997
.........................................
(STEVEN B. MYERS)
*By: /S/ KEVIN L. BURKHARDT
.........................................
KEVIN L. BURKHARDT
ATTORNEY-IN-FACT
</TABLE>
II-7
<PAGE>
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each director and officer whose
signature appears below constitutes and appoints Kevin L. Burkhardt and David
Cohen, or either of them, as such person's true and lawful attorneys-in-fact and
agents, will full powers of substitution and re-substitution, for such person in
name, place and stead, to sign in any and all amendments (including
post-effective amendments) to this Registration Statement on Form SB-2, in any
and all capacities, and to file the same, with all exhibits thereto and all
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto such attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
such attorneys-in-fact and agents, or any of them, may lawfully do or cause to
be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, as
amended, this Registration Statement was signed by the following persons in the
capacities and on the dates stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------- -------------------
<C> <S> <C>
/s/ KEVIN L. BURKHARDT Chief Executive Officer, President, Director May 15, 1997
.........................................
(KEVIN L. BURKHARDT)
/s/ JANE S. BURKHARDT Secretary, Director May 15, 1997
.........................................
(JANE S. BURKHARDT)
/s/ DAVID COHEN Chief Financial Officer, Treasurer, Chief May 15, 1997
......................................... Accounting Officer
(DAVID COHEN)
/s/ ARTHUR G. ROSENBERG Director May 15, 1997
.........................................
(ARTHUR G. ROSENBERG)
/s/ CHARLES W. BARTHOLOMEW Director May 15, 1997
.........................................
(CHARLES W. BARTHOLOMEW)
/s/ STEVEN B. MYERS Director May 15, 1997
.........................................
(STEVEN B. MYERS)
</TABLE>
II-8
STATEMENT OF DIFFERENCES
------------------------
The service mark symbol shall be expressed as......................... 'sm'
The section symbol shall be expressed as.............................. 'SS'
<PAGE>
<PAGE>
AMENDED AGREEMENT AND PLAN OF REORGANIZATION
AMENDED AGREEMENT AND PLAN OF REORGANIZATION, dated April 8, 1997, by
and among, PROFLIGHT MEDICAL RESPONSE, INC., a Colorado corporation with its
principal office at 12420 East Control Tower Road, Englewood, Colorado 80112
(the "Purchaser"),LOUIS R. CAPECE, JR. who resides at 10845 Bayshore Drive,
Windermere, Florida 34786 (the "Shareholder"), AIR RESPONSE, INC., a New York
corporation with its principal office at Orlando Executive Airport, 469B Herndon
Avenue, Hanger 72, Orlando, Florida 32803 (the "Company").
W I T N E S E T H:
WHEREAS, the Purchaser desires to acquire and the Shareholder wishes to
transfer, on the terms and subject to the conditions and in the manner reflected
below, all of the outstanding shares of capital stock of the Company; and
WHEREAS, the Purchaser is not prepared or willing to proceed with the
contemplated transaction without the support, agreements and representations of
the Company and Shareholder contained in this Agreement and is proceeding in
reliance upon such support, agreements and representations; and
<PAGE>
<PAGE>
WHEREAS, the Shareholder and the Company are not prepared or willing to
proceed with the contemplated transaction without the support, agreements and
representations of the Purchaser contained in this Agreement and are proceeding
in reliance upon such support, agreements and representations;
NOW, THEREFORE, the parties to this AMENDED AGREEMENT AND PLAN OF
REORGANIZATION do hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 General Construction: For Purposes hereof, except as otherwise
expressly provided:
1.1.1 Defined terms include the plural as well as the singular;
1.1.2 All accounting terms not otherwise defined have the meanings
assigned under generally accepted accounting principles;
1.1.3 All references to schedules and exhibits are to all the
schedules and exhibits attached to this Agreement; and
1.1.4 Pronouns of either qender or neuter shall include, as
appropriate, the other pronoun forms.
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1.2 Definitions: As used in this Agreement, the following terms shall have
the following definitions.
1.2.1 Affiliate: When used with respect to a person, an "affiliate" of
that person is a person controlling, controlled by, or under common control
with that person.
1.2.2 Agreement: This Amended Agreement and Plan of Reorganization,
including all of its schedules and exhibits and all other documents
specifically referred to in this Agreement that have been or are to be
delivered by a party to this Agreement to another such party in connection
with the Transaction and this Agreement and including all duly adopted
amendments, modifications, and supplements to or for this Agreement,
schedules, exhibits and other documents. Except as otherwise provided, all
schedules, other documents required to be delivered by a party to this
Agreement shall be completed or delivered 10 days prior to the Closing.
1.2.3 Audited Financial Statements: With respect to the Company,
audited financial statements for the twelve months ended May 31, 1996 and
1995.
1.2.4 Closinq: As defined in Section 9.1.
1.2.5 Closinq Date: As defined in Section 9.1.
1.2.6 Company Balance Sheet: Balance Sheet as of May 31, 1996,
included in the Audited Financial Statements.
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1.2.7 Consulting and Non-Competition Aqreement: As defined in Section
2.3.
1.2.8 EEO: Equal Employment Opportunity Act of 1972.
1.2.9 Entity: A corporation, partnership, sole proprietorship, joint
venture, or other form of organization business, whether active or formed
for the conduct of a passive.
1.2.10 ERISA: The Employee Retirement Income Security Act of 1974, as
amended and in effect at the time of execution of this Agreement.
1.2.11 GAAP: Generally accepted accounting principles, as in effect on
the date of any statement, report or determination that purports to be, or
is required to be, prepared or made in accordance with GAAP. All references
herein to financial statements prepared in accordance with GAAP shall mean
in accordance with GAAP consistently applied throughout the periods to
which reference is made.
1.2.12 Inventories: The stock of goods held by the Company from time
to time in the ordinary course of the business of the Company, in the form
in which such inventories then are held or after incorporating with other
goods or items, or the like.
1.2.13 IPO: The Purchaser's filing of an initial public offering on
Form SB-2 or other similar form with the Securities and Exchange
Commission.
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1.2.14 Liabilities: At any point in time (the "Determination Time"),
the obligations of a person or Entity, whether known or unknown, contingent
or absolute, recorded on its books or not, arising or resulting in any
obligations or way from facts, events, agreements, occurrences that existed
or transpired at a prior point in time, or resulted from the passage of
time to the Determination Time, but not including obligations accruing or
payable after the Determination Time to the extent (but arise under
benefits, or only to the extent) that such obligations (1) previously
existing agreements for services, other considerations, and (2) accrue or
become payable with respect to services benefits, or other considerations
received by the person or Entity after the Determination Time.
1.2.15 Loan: The November 1996 loan by the Purchaser to the Company
for the aggregate sum of Two Hundred Thousand ($200,000) Dollars with
interest at the rate of ten (10%) percent per annum.
1.2.16 OSHA: The Occupational Safety and Health Act of 1970.
1.2.17 Permits: Any permits, licenses, orders, approvals, franchises,
registrations, authorizations or other approvals from any federal, state,
local and foreign governmental or regulatory body or authority (public or
self-regulatory).
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1.2.18 Subsidiary: A corporation with respect which another Entity
owns, directly or indirectly, shares entitling it to elect a majority of
the Board of Directors or in which it has a majority of the equity
interest.
1.2.19 Transaction: The acquisition of all the outstanding shares of
capital stock of the Company by the Purchaser from the Shareholder, as
provided in Article II of this Agreement.
1.2.20 Unaudited Financial Statements: With respect to the Company,
financial statements for the six month periods ending November 30, 1995 and
November 30, 1996 and for the three months ended February 28, 1996 and
1997.
ARTICLE II
THE TRANSACTION
2.1 The Transaction: Subject to the terms, conditions, provisions and
limitations contained in this Agreement, the Purchaser, in reliance upon the
representations and warranties of the Shareholder and the Company made herein
and in the schedules and exhibits annexed hereto, will at the Closing, acquire
from the Shareholder and the Shareholder, in reliance upon the representations
and warranties of the Purchaser made herein and in the schedules and exhibits
annexed hereto, will at the Closing transfer, convey and assign to the
Purchaser, free and clear of any and all liens, charges or other encumbrance,
100 shares of common stock, no par value of the Company, comprising all of the
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issued and outstanding shares of capital stock of the Company and representing
his entire ownership of equity securities of the Company, in exchange for the
number of shares of common stock, par value $.001, of the Purchaser equal to an
amount of $1,500,000, as follows: In calculating the number of shares of the
value of common stock to which shareholder shall be entitled, each share of
common stock shall be the per share price to the stock is sold in the IPO. The
public at which the common Shareholder's shares will not be registered under the
Securities Act of 1933 and will be legended to that effect. The Shareholder's
shares shall be issued and delivered thirteen months from the Closing of the
IPO. It is the intention of the parties that this transaction qualify as a
reorganization within the meaning of Section 368(a)(B) of the Internal Revenue
Code of 1986, as amended.
2.2 CONSULTING AND NON COMPETITION AQREEMENTS: Prior to the Closing, the
Purchaser will enter into a consulting and non-competition agreement
with the Shareholder (the "Consulting and Non-Competition Agreement")
in the form annexed hereto as EXHIBIT 2.2 which agreement will take
effect as of the Closing Date.
2.3 RIGHT OF FIRST REFUSAL: In the event that this Agreement is not
consummated, for any reason and until the Loan is repaid, the Purchaser
shall have a right of first refusal, for a period of ninety days, after
receipt of written notice, to meet the terms of any other offer for the
common stock and/or business of the Company. In
7
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<PAGE>
the event the Purchaser, in its discretion decides not to meet such
terms and the terms of the offer are subsequently changed, the
Purchaser shall be given an additional thirty days to meet the revised
terms of any said Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDER AND THE COMPANY
The Shareholder and the Company make the following representations and
warranties to the Purchaser, each of which shall be deemed material:
3.1 VALID CORPORATE EXISTENCE: OUALIFICATION: The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of New York. The Company has the corporate power and authority to carry on
its business as now being conducted. The Company is duly qualified as a foreign
corporation to do business, and is in good standing in each jurisdiction where
the character of the properties owned or leased by it, or the nature of its
activities is such that the qualification as a foreign corporation in that
jurisdiction is required by law. SCHEDULE 3.1 hereto lists all jurisdictions in
which the Company is qualified to do business. Except as indicated on SCHEDULE
3.1, there is no jurisdiction in which failure to qualify would have a material
adverse effect on the Company or its assets, properties or business. A copy of
the Company's Certificate of Incorporation (certified by the
8
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<PAGE>
appropriate official of the State of New York) and By-Laws and minute books
(certified by the Company's Secretary), as amended to date, which will be
delivered to the Purchaser at or prior to the Closing, are true and complete
copies of those documents as now in effect. The minute books of the Company
contain accurate records of all meetings of its Board of Directors, and
stockholders since its incorporation, and accurately reflect all transactions
referred to therein.
3.2 CAPITALIZATION: The authorized capital stock of the Company
consists of 200 shares of common stock, no par value. There is no other capital
stock authorized for issuance. As of the date hereof, there are 100 shares of
common stock validly issued and outstanding, fully paid and non-assessable and
no shares are reserved for issuance nor are there outstanding any options,
warrants, convertible instruments or other rights, agreements or commitments to
acquire common stock of the Company.
3.3 CORPORATE AUTHORITY: BINDING NATURE OF AGREEMENT: The Company has
the power to enter into this Agreement and to carry out its obligation
hereunder. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by the Board of
Directors of the Company and no other corporate proceedings on the part of the
Company are necessary to authorize the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby. This Agreement
constitutes the valid and binding obligation of the Company and is enforceable
in accordance with its terms.
9
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3.4 CONSENTS: Except as set forth in SCHEDULE 3.4, there are no
consents of governmental and other regulatory agencies, foreign or domestic, and
of other third parties required to be received by or on the part of the
Shareholder or the Company, to enable it to enter into and carry out this
Agreement in all material respects.
3.5 FINANCIAL STATEMENTS: The Company, prior to the Closing Date, will
deliver to the Purchaser, the Audited Financial Statements of the Company and
the Unaudited Financial Statements of the Company. All of the historical
financial statements contained in such documents will have been prepared from
the books and records of the Company. The Audited Financial Statements will be
prepared in accordance with GAAP, and fairly and accurately reflect the
financial position and condition of the Company as at the dates and for the
periods indicated. Without limiting the foregoing, at the date of the Company
Balance Sheet, the Company will have owned each of the assets included in
preparation of the Company Balance Sheet, and the valuation of such assets in
the Company Balance Sheet will not be for more than their fair saleable value
(on an item by item basis) at that date; and the Company will have no
Liabilities other than those included in the Company Balance Sheet, nor any
Liabilities in amounts in excess of the amounts included for them in the Company
Balance Sheet. The Unaudited Financial Statements to be included in the
documents described above in this Section will be prepared in a manner
consistent with the basis of
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<PAGE>
presentation used in the Audited Financial Statements, and fairly present the
financial position and condition of the Company as, at and for the periods
indicated, subject to normal year end adjustments, none of which will be
material. From the date hereof, through the Closing Date, the Company will
continue to prepare financial statements on the same basis that it has done so
in the past, will promptly deliver the same to the Purchaser, and agrees that
from and after such delivery, the foregoing representations will be applicable
to each financial statement so prepared and delivered. The Audited Financial
Statements for the year ended May 31, 1996 will be prepared by Staff, Michaels &
Ciampino, independent certified public accountants, whose report thereon is
included therein. The Audited Financial Statements for the year ended May 31,
1995 were prepared by Kaufman, Rossin & Co., independent certified public
accountants, whose report thereon is included therein.
3.6 NO UNDISCLOSED LIABILITIES: Except as set forth in the Company
Balance sheet included in the Audited Financial Statements or as set forth in
SCHEDULE 3.6, the Company has no material debts, liabilities or obligations,
known or unknown, contingent or absolute, except those arising in the ordinary
course of business of the Company and consistent with past practice.
3.7 ACTIONS SINCE THE COMPANY BALANCE SHEET: Except as set forth and
reflected in this Agreement or in SCHEDULE 3.7, since the date of the Company
Balance Sheet, the Company has not:
11
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3.7.1 incurred any material obligation or liability, known or unknown,
absolute or contingent, except those arising in the ordinary and usual
course of its business and those incurred in connection with the
transactions contemplated by this Agreement;
3.7.2 issued or sold. or aqreed to issue or sell any capital stock of
the Company or any securities convertible into or rights to acquire any
such capital stock or any dividend or distribution declared, set aside or
paid on any such capital stock;
3.7.3 discharged or satisfied any lien or encumbrance, except in the
ordinary and usual course of business, or paid or satisfied any liability,
absolute or contingent, other than as at the Company Balance Sheet in the
ordinary and usual course of business and those incurred by this in
connection with the transactions contemplated by this Agreement;
3.7.4 made any wage or salary increases or granted any bonuses other
than wage and salary increases and bonuses granted in accordance with its
normal salary increase and bonus policies;
3.7.5 mortgaged, pledged or subjected to any lien, pledge, charge or
other encumbrance any of its properties or assets, or permitted any of its
property or assets to be subjected to any lien or other encumbrance, except
in the ordinary and usual course of business;
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3.7.6 sold, assigned or transferred any of its properties or assets,
except in the ordinary and usual course of business;
3.7.7 entered into any transaction or course of conduct not in the
ordinary and usual course of business;
3.7.8 waived any rights of substantial value, or canceled, modified or
waived any indebtedness for borrowed money held by it, except in the
ordinary and usual course of business;
3.7.9 made any loans or advances to any person or assumed, guaranteed,
endorsed or otherwise became responsible for the obligations of any person;
or
3.7.10 incurred any indebtedness for borrowed money (except for
endorsement, for collection or deposit of negotiable instruments received
in the ordinary and usual course of business).
3.8 NO ADVERSE DEVELOPMENTS: Except as set forth in SCHEDULE 3.8, since
the date of the Company Balance Sheet, there has not been:
3.8.1 any material adverse changes in the assets, properties,
operations, financial condition or prospects of the Company;
3.8.2 any damage, destruction or loss, whether covered by insurance or
not, having a material adverse effect on the business, operations,
financial condition or prospects of the Company;
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3.8.3 any entry into or termination of any material commitment,
contract, agreement or transaction affecting the Company, including,
without limitation, any material borrowing or capital expenditure or sale
or other disposition of any material asset or assets, other than this
agreement and agreements executed in the ordinary and usual course of
business;
3.8.4 any transfer of or right granted under any material lease,
license, agreement, patent, trademark, trade name or copyright;
3.8.5 default or breach by the Company in any material respect under
any contract or Permit; or
3.8.6 any event other than in the ordinary and usual course of business
which could be reasonably expected to have a material adverse effect upon
the business of the Company, and after reasonable inquiry by the
Shareholder and the Company, they know of no development or threatened
development of a nature that is, or which could be reasonably expected to
have a materially adverse effect upon the business of the Company or upon
any of its assets, properties, operations or financial condition.
3.9 TAXES: All tax returns of the Company which are due have been duly
filed and are correct and all taxes, assessments and other governmental charges
upon the Company which are shown to be due and payable thereon have been paid.
All tax returns of the Company which become due prior to the Closing shall be
timely filed by the Company. The Company does not know of any ongoing
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tax audit, proposed tax deficiency, assessment, charge or levy against it, the
payment of which is not adequately provided for on the books of the Company. The
Company will provide to the Purchaser prior to the Closing a true and correct
copy of its tax returns for the prior three years, and any returns filed
subsequent to the date hereof.
3.10 OWNERSHIP OF ASSETS: Except as set forth on SCHEDULE 3.10(i), the
Company owns outright, and has good, marketable and insurable title to all of
its assets and properties reflected in the Company Balance Sheet except as the
same may have been disposed of in the ordinary course of business since the
Company Balance Sheet date, free and clear of all liens, mortgages, pledges,
conditional sales agreements, restrictions on transfer or other encumbrances or
charges whatsoever. The Company does not own any patents, copyrights,
trademarks, trade names or other similar intangible assets except as set forth
in SCHEDULE 3.10(ii). No other person has any ownership or similar right in, or
contractual or other right to acquire any such right in, any of the Company's
assets. The Shareholder and the Company do not know of any potential action by
any party, governmental or other and no proceedings with respect thereto have
been instituted of which the Company has notice that would materially effect the
Company's ability to use and to utilize each of such assets in its business.
SCHEDULE 3.10(iii) sets forth a listing of all aircraft owned by the Company,
including a description thereof. Each such aircraft has been maintained in
accordance with Part 135 of the regulations of
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the Federal Aviation Administration, and the Company has completely and
accurately maintained all records required by Part 135 of the regulations of the
Federal Aviation Administration for such aircraft. SCHEDULE 3.10(iv) sets forth
a listing of all records required to be maintained. The Company will provide to
the Purchaser prior to the Closing a true and correct copy of all records listed
in SCHEDULE 3.10(iv). Except as set forth on SCHEDULE 3.10(v), all properties
and other assets owned by the Company or used by the Company in the conduct of
its business are in good operating condition and repair (ordinary wear and tear
excepted), are suitable for the conduct of its business as presently conducted,
have been properly maintained, and do not require any maintenance or repairs
except for routine maintenance and repairs that are not material in nature or in
cost.
3.11 INSURANCE: Polices of fire, liability, workers compensation and
other forms of insurance maintained by the Company, which are usual and
customary in the business of the Company as to amount and scope, and are
adequate to protect the Company against any reasonably foreseeable risk of loss,
including business interruption, are listed on SCHEDULE 3.11 and identifies for
each policy, the carrier, amount of coverage, annual premium, risks covered,
placing broker or agent, and other relevant information as to each. All policies
listed on SCHEDULE 3.11 have been provided to the Purchaser prior to the
Closing. All premiums have been currently paid on such policies, and all
policies will be maintained and, if necessary, renewed through the Closing Date.
Neither the Shareholder nor the Company have
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failed to give any notice or present any claim under any such policy and there
are no claims outstanding under any such policy as to which any insurance
company is denying liability or defending under a reservation of rights clause
or otherwise. Anything to the contrary herein notwithstanding in the event any
liability insurance policy is a "claims-made" policy, prior to Closing, the
Company shall purchase an extension to the policy commonly referred to as a
"tail, which shall cover all liability claims made against the Company for a
period of five (5) years after Closing, to the extent that the Company can get
this long an extension.
3.12 LITIGATION. COMPLIANCE WITH LAW: Except as set forth in SCHEDULE
3.12, there are no pending or threatened actions, suits, proceedings or
governmental investigations or reviews relating to the Company or any of its
properties, assets or business or, to the knowledge of the Shareholder or the
Company, any order, injunction, award or decree outstanding, against the Company
or against or relating to any of its properties, assets or business; and the
Shareholder and the Company, after reasonable inquiry, knows of no basis for any
such action, suits or proceedings or any such governmental investigations,
reviews, orders, injunctions or decrees. To the knowledge of the Shareholder and
the Company, the Company is not in violation of any material law, regulation,
ordinance, order, injunction, decree, award, or other requirement of any
governmental body, court or arbitrator relating to its properties, assets or
business.
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3.13 Compliance with Instruments. etc.: The Company is not:
3.13.1 in default under any indenture, agreement or instrument to which
it is a party or by which it is bound; or
3.13.2 in violation of its Certificate of Incorporation, By-Laws or of
any applicable law.
3.14 INVENTORIES: All Inventories of the Company, whether or not
reflected in the Company Balance Sheet are of a quality and quantity usable and
salable in the ordinary course of business, except for obsolete items and items
of below standard quality, all of which in the aggregate are immaterial in
amount. Items included in such Inventories are carried on the books of the
Company, and are valued on the Company Balance Sheet, at the lower of cost or
market and, in any event, at not greater than their net realizable value, on an
item-by-item basis, after appropriate deductions for cost of completion,
marketing costs, transportation expense and allocation of overhead. To the best
knowledge of the Company, the Inventory is unadulterated and does not contain
any ingredient or substances prohibited by pertinent laws, rules or regulations
and all labels for and printed materials relating to the Inventory correctly
represent the ingredients thereto and comply with all laws, rules or regulations
pertaining to the labeling of the products comprising the Inventory. SCHEDULE
3.14 hereto includes a full and complete listing of all of the Company's
inventory, if any, for items having a value of $1,000 or more.
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3.15 PERMITS AND LICENSES: The Company has all material Permits of all
federal, state, local and foreign governmental or regulatory bodies required of
it to carry on its business as presently conducted; all such Permits are in full
force and effect, and to the knowledge of the Shareholder and the Company, after
reasonable inquiry, no suspension or cancellation of any of such Permits is
threatened and the Company is in compliance with all material requirements,
standards and procedures of the federal, state, local and foreign governmental
bodies which have issued such Permits. Schedule 3.15(i) hereto lists all Permits
held by the Company in connection with its business. All Permits listed on
SCHEDULE 3.15(i) have been provided to the Purchaser prior to the Closing. As to
any such Permit that has expired or is about to expire, the Company has promptly
applied for a renewal of the same and expects the same to be renewed in the
usual course. Except as disclosed on SCHEDULE 3.15(ii) hereto, no consent of,
approval of, or notification to the authority issuing any Permit is necessary
due to the execution of this Agreement or the consummation of the Transaction.
Upon consummation of the Transaction, the Company will continue to be entitled
to all authority and benefits conferred by any such Permits and shall be
lawfully entitled to use such Permits in connection with the operations of its
business, provided the Purchaser has received, when applicable, approval for the
transfer of such permits.
3.16 TRADE NAMES: SCHEDULE 3.16 identifies each trade name, fictitious
business name, or similar name under which the Company has conducted any part of
its business since inception.
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3.17 REAL PROPERTY: The Company owns no real property and leases the
real property listed in SCHEDULE 3.17 .
3.18 INTEREST IN COMPETITOR, SUPPLIERS OR CUSTOMERS:
Except as set forth in Schedule 3.18, none of the officers, directors
or shareholders of the Company or, to the best of their knowledge, members of
their immediate families owns an interest in any person or firm which is a
competitor, supplier or customer of or to the Company or, has an existing
contractual relationship with the Company.
3.19 ACCOUNTS PAYABLE: The accounts payable reflected on the Company
Balance Sheet do, and those reflected in the most recent balance sheet included
in the Unaudited Financial Statements do, and those reflected on the books of
the Company at the time of the Closing will, reflect all amounts owed by the
Company in respect of trade accounts due and other Payables of the Company, and
the actual Liability of the Company in respect of such obligations was not and
will not be, on any of such dates, in excess of the amounts, so reflected on the
balance sheets or the books of the Company, as the case may be.
3.20 ACCOUNTS RECEIVABLE: All Accounts receivable of the Company,
whether or not reflected in the Company Balance Sheet, represent transactions in
the ordinary course of business, and are current and collectible net of any
reserves shown on such Balance Sheet (which reserves are adequate and were
calculated consistent with past practice). SCHEDULE 3.20 specifically identifies
the aging of Receivables as of December 16, 1996.
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3.21 EMPLOYEES: To their best knowledge, the Company has complied with
all laws, regulations and orders relating to the employees of its business,
including but not limited to OSHA, EEO, ERISA, and wages and hours. None of the
Company's employees is represented by any labor union or collective bargaining
agent. The Company does not maintain or make any employer contributions under
any bonus, profit sharing compensation, or other plans, agreements, trusts,
funds, or arrangements for the benefit of directors, officers or employees of,
or whose principal responsibilities relate to, the Company, and there are no
employment, consulting, severance, or indemnification arrangements, agreements,
or understandings between the Company and any current or former directors,
officers or other employees (or Affiliates thereof) of, or whose principal
responsibilities relate to, the Company. SCHEDULE 3.21 identifies all present
employees of the Company and their respective salaries. The Company is not, and
following the Closing will not be, bound by any express or implied contract or
agreement to employ, directly or as a consultant or otherwise, any person for
any specific period of time, except as set forth pursuant to the provisions
hereof.
3.22 AGREEMENTS AND OBLIGATIONS: PERFORMANCE: SCHEDULE 3.22 sets forth
a list of material agreements to which the Company is a party or is otherwise
bound. Other than these material agreements, the Company is not party to or
bound by any:
3.22.1 written or oral agreement or other contractual commitment,
understanding or obligation which
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involves aggregate payments or receipts in excess of $25,000 that cannot be
canceled on 30 days or less notice without penalty or premium or any
continuing obligation or liability;
3.22.2 contractual obligation or contractual liability of any kind to
the Shareholder which will not be canceled on or prior to the Closing
except as otherwise provided by this Agreement;
3.22.3 contract, arrangement, commitment or understanding with its
customers or any officer, employee, stockholder, director, representative
or agent thereof for the repurchase of products, sharing of fees, the
rebating of charges to such customers, bribes, kickbacks from such
customers or other similar arrangements;
3.22.4 contract for the purchase or sale of any materials, products or
supplies or for any services, which commits or will commit it for a fixed
term;
3.22.5 contract of employment with any employee not terminable at will
without penalty or premium or any continuing obligation or liability,
except as otherwise provided by this Agreement;
3.22.6 deferred compensation, bonus or incentive plan or agreement not
canceled at will without penalty or premium or any continuing obligation or
liability which will not be canceled on or prior to the Closing;
3.22.7 management or consulting agreement not terminable at will
without penalty or premium or any
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continuing obligation or liability which the Company and each such
individual agree to cancel on the Closing Date;
3.22.8 lease for real or personal property (including borrowings
thereon) license or royalty agreements;
3.22.9 union or other collective bargaining agreement;
3.22.10 agreement, commitment or understanding relating to indebtedness
for borrowed money;
3.22.11 contract which, by its terms, requires the consent of any party
thereto, to the consummation of the transactions contemplated hereby;
3.22.12 contract containing covenants limiting the freedom of the
Company to engage or compete in any line or business or with any person in
any geographical area;
3.22.13 contract or option relating to the acquisition or sale of any
business;
3.22.14 voting trust agreement or similar agreement;
3.22.15 option for the purchase of any asset, tangible or intangible;
or
3.22.16 other contract, agreement, commitment or understanding which
materially affects any of its properties, assets or business, whether
directly or indirectly, or which was entered into other than in the
ordinary course of business.
A truly and correct copy of each of the material agreements of the
Company listed in SCHEDULE 3.22 has been delivered to the Purchaser prior to the
Closing. The Company has in all material
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respects performed all material obligations required to be performed by it to
date under all agreements to which it is a party and is not in default in any
material respect under any of its agreements and has received no notice of any
default or alleged default which has not heretofore been cured or which notice
has not heretofore been withdrawn.
3.23 Cooperation with Proflight in Filing IPO: The Shareholder and the
company shall cause its officers, directors, employees, accountants and
attorneys to cooperate fully with the Purchaser in connection with the filing of
a registration statement with the Securities and Exchange Commission.
3.24 No Subsidiaries: The Company does not have any subsidiaries and
does not own directly or indirectly any equity interest in any other business or
Entity.
3.25 No Breach: Neither the execution and delivery of this Agreement
nor compliance by the Shareholder and the Company with any of the provisions
hereof nor the consummation of the transactions contemplated hereby, will:
3.25.1 violate or, alone or with notice or the passage of time, result
in the material breach or termination of, or otherwise give any contracting
party the right to terminate, or declare a default under, the terms of any
material agreement or other material document or undertaking, oral or
written to which the Company is a party or by which its properties or
assets may be bound;
3.25.2 result in the imposition of any lien, mortgage, security
interest, pledge, encumbrance, easement,
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claim or other restriction or charge on any of the assets of the Company,
and will not alter or impair any of the assets of the Company nor the
Purchaser's ability to utilize in the same manner in which they are
currently utilized by the Company in connection with its business;
3.25.3 violate any judgment, order, injunction, decree or award
against, or binding upon, the Company or upon its properties or assets; or
3.25.4 violate any law or regulation of any jurisdiction relating to
the Company, its assets or properties.
3.26 BROKERS: All negotiations relative to this Agreement and the
Transaction contemplated hereby have been carried on directly with the Purchaser
without the intervention of any broker, finder, investment banker or other third
party. The Shareholder and the Company have not engaged, consented to, or
authorized any broker, finder, investment banker or other third party to act on
its behalf, directly or indirectly, as a broker or finder in connection with
this Agreement and the Transaction, and the Shareholder and the Company agree to
indemnify the Purchaser against, and to hold the Purchaser harmless from any
claim for brokerage or similar commission or other compensation which may be
made against the Purchaser by any third party in connection with any of the
transactions contemplated hereby which claim is based upon any action by the
Shareholder or the Company.
3.27 UNTRUE OR OMITTED FACTS: No representation, warranty, document,
certificates or other writings furnished by
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the Shareholder or the Company in this Agreement contains any untrue statement
of a material fact, or omits to state a fact necessary in order to make such
representations, warranties or statements not materially misleading.
3.28 CUSTOMERS: During the last twelve months, (i) no customer which
accounted for more than 5% of the sales in any one of the last three fiscal
years, (ii) no customers which in the aggregate accounted for more than 10% of
the sales of the Company in any one of the last three fiscal years, and/or (iii)
no other customer of material importance to the Company, has (a) canceled,
terminated or delivered written or, to the knowledge of the Shareholder, oral
notice to the Company threatening to cancel or terminate its relationship with
the Company or (b) materially decreased or delivered written or, to the
knowledge of the Shareholder, oral notice to the Company threatening to decrease
materially its usage of the Company's services.
3.29 SHAREHOLDER'S NON-INTERFERENCE: The Shareholder agrees that from
the date hereof until five (5) years from the Closing Date, he shall not induce
or attempt to induce, or assist others in inducing or attempting to induce, any
person who was employed by the Company prior to the Closing Date and who
continues to be employed by the Company on or after the Closing Date to
terminate his or its relationship with the Company or in any other manner to
interfere with the relationship between the Company and any such person.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser makes the following representations and warranties to the
Shareholder, each of which shall be deemed material:
4.1 VALID CORPORATE EXISTENCE: QUALIFICATION: The Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Colorado. The Purchaser has the corporate power and authority to
carry on its business as now being conducted. The Purchaser is duly qualified as
a foreign corporation to do business, and is in good standing in each
jurisdiction where the character of the properties owned or leased by it, or the
nature of its activities is such that the qualification as a foreign corporation
in that jurisdiction is required by law. SCHEDULE 4.1 hereto lists all
jurisdiction in which the Purchaser is qualified to do business. Except as
indicated on SCHEDULE 4.1, there is no jurisdiction in which failure to qualify
would have a material adverse effect on the Purchaser or its assets, properties
or business. A copy of the Purchaser's Certificate of Incorporation (certified
by the appropriate official of the State of Colorado) and By-Laws and minute
books (certified by the Purchaser's Secretary), as amended to date, which will
be delivered to the Shareholder at or prior to the Closing, are true and
complete copies of those documents as now in effect. The minute books of the
Purchaser contain accurate records of all meetings of its Board of Directors,
and stockholders since its incorporation, and accurately reflect all
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transactions referred to therein.
4.2 CORPORATE AUTHORITY: BINDING NATURE OF AGREEMENT: The Purchaser has
the power to enter into this Agreement and to carry out its obligation
hereunder. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by the Board of
Directors of the Purchaser and no other corporate proceedings on the part of the
Purchaser are necessary to authorize the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby. This
Agreement constitutes the valid and binding obligation of the Purchaser and is
enforceable in accordance with its terms.
4.3 CONSENTS: There are no consents of governmental and other
regulatory agencies, foreign or domestic, and of other third parties required to
be received by or on the part of the Purchaser, to enable it to enter into and
carry out this Agreement in all material respects.
4.4 BROKERS: All negotiations relative to this Agreement and the
Transaction contemplated hereby have been carried on directly with the
Shareholder and the Company without the intervention of any broker, finder,
investment banker or other third party. The Purchaser has not engaged, consented
to, or authorized any broker, finder, investment banker or other third party to
act on its behalf, directly or indirectly, as a broker or finder in connection
with this Agreement and the Transaction, and the Purchaser agrees to indemnify
the Shareholder and the Company against, and to hold the Shareholder and the
Company
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harmless from any claim for brokerage or similar commission or other
compensation which may be made against the Shareholder or the Company by any
third party in connection with any of the transactions contemplated hereby which
claim is based upon any action by the Purchaser.
ARTICLE V
COVENANTS OF THE SHAREHOLDER AND THE COMPANY
5.1. COVENANTS OF THE SHAREHOLDER AND THE COMPANY: The Shareholder and
the Company hereby each covenant to, from and after the date hereof and until
the Closing or earlier termination of this Agreement, without the prior written
consent of the Purchaser:
5.1.1 BEST EFFORTS: To take every action reasonably required of it and
use its best efforts to satisfy the conditions to closing set forth in this
Agreement and otherwise to ensure the prompt and expedient consummation of
the Transaction substantially as contemplated by this Agreement, and will
exert all reasonable efforts to cause the Transaction to be consummated,
provided in all instances that the representations and warranties of the
Purchaser in this Agreement are and remain true and accurate and that the
covenants and agreements of the Purchaser in this Agreement are satisfied
or appear capable of being satisfied and subject, at all times, to the
right and ability of the
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directors of the Company to satisfy their fiduciary obligations.
5.1.2 ACCESS AND INFORMATION: To afford the officers, attorneys,
accountants and other authorized representatives of the Purchaser
(collectively, the "Representatives"), free and full access, during regular
business hours and upon reasonable notice, to all of its books, records,
contracts, commitments and properties (including, without limitation, tax
returns) at the Purchaser's own expense, to review, examine and investigate
the books, records and properties of the Company to determine the accuracy
of the representations and warranties made by the Shareholder and the
Company. The Shareholder and the Company shall cause its employees,
accountants and attorneys to cooperate fully with said review, examination
and investigation. The Company shall promptly furnish to the Purchaser (i)
all communications to its directors or to its shareholders, generally, (ii)
internal monthly financial statements when and as available, and (iii) all
other information concerning its business properties and personnel as the
Purchaser may reasonably request.
5.1.3 INSURANCE: To maintain in full force and effect insurance
coverage of a type and amount customary in its business, but not less than
presently in effect.
5.1.4 DISCHARGE TAXES AND INDEBTEDNESS: To pay and discharge, as they
become due, all taxes, assessments, debts, claims and other governmental or
non-governmental
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charges lawfully imposed upon or incurred by it or the properties and
assets of the Company, except taxes, assessments, debts, claims and charges
contested in good faith in appropriate proceedings for which the Company
shall have set aside adequate reserves for the payment of such tax,
assessment, debt, claim or charge. The Company shall provide the Purchaser,
upon the Purchaser's request, evidence of payment of such taxes,
assessments, debts, claims and charges satisfactory to the Purchaser.
5.1.5 COMPLIANCE WITH AGREEMENTS: COMPLIANCE WITH LAWS: To comply with
the terms and conditions of all material agreements, commitments or
instruments to which the Shareholder or the Company is a party or by which
he or it may be bound. The Shareholder and the Company shall duly comply in
all material respect with any material laws, ordinances, rules and
regulations of any foreign, federal, state or local government or any
agency thereof, or any writ, order or decree, and conform to all valid
requirements of governmental authorities relating to the conduct of its
business, properties and assets. The Company also covenants to file all tax
returns as they become due prior to the Closing.
5.1.6 NO INDEBTEDNESS: Not to incur any obligation or liability,
absolute or contingent, except for those incurred in the ordinary and usual
course of its business or in connection with the transactions contemplated
by this Agreement.
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5.1.7 NO DIVIDEND, RETIREMENT OR PURCHASE OF STOCK: Not to declare or
pay any dividend or distribution, in cash or otherwise, on any shares of
stock of the Company or redeem, return, purchase or otherwise acquire
directly or indirectly any shares of stock.
5.1.8 CONDUCT OF BUSINESS PRIOR TO CLOSING:
(i) to conduct its business only in the ordinary and usual course
and make no material change in any of its business practices and
policies;
(ii) to use its best efforts to preserve its business organization
intact, to keep available the services of its present employees and
consultants and to preserve its good will;
(iii) to maintain good relationships with suppliers, lenders,
creditors, employees, customers and others having business or financial
relationships with them;
(iv) it shall not (a) amend its Certificate of Incorporation or
By-Laws or (b) split, combine, or reclassify any of its outstanding
securities;
(v) it shall not (a) adopt, enter into, or amend any bonus, profit
sharing, compensation, stock option, warrant, pension, retirement,
deferred compensation, employment, severance, termination, or other
employee benefit plan, agreement, trust fund, or arrangement for the
benefit or welfare of any officer,
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director or employee of the Company or (b) agree to any material (in
relation to historical compensation) increase in compensation payable
or to become payable to, or any increase in the contractual term of
employment of, any such employee, except in the ordinary course of
business in accordance with past practice;
(vi) it shall not sell, lease, mortgage, encumber, or otherwise
dispose of or grant any interest in any of its assets or properties
except for sales, encumbrances and other dispositions or grants in the
ordinary course of business and consistent with past practice and
except for liens for taxes not yet due or liens or encumbrances that
are not material in amount or effect and do not impair the use of the
property, or as specifically provided for or permitted in this
Agreement;
(vii) it shall not enter into, or terminate,any material
contract, agreement, commitment, or understanding;
(viii) it will not hold any meetings of its board of directors, or
any committee thereof, or of its shareholders, without giving a
representative selected by the Purchaser the option to attend the same
(although the Company may request that such representative absent
himself during that portion of any such meeting that pertains to issues
arising under
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this Agreement); and
(ix) it shall immediately notify the Purchaser of any event or
occurrence or emergency material to, and not in the ordinary and usual
course of business.
5.1.9 NO BREACH: Not to voluntarily take any action or do anything
which will cause a breach of or default respecting its covenants,
representations or warranties set forth herein and promptly to notify the
Purchaser of any event or fact which represents or is likely to cause such
a breach or default.
5.1.10 NO SOLICITATION: From the date hereof through the Closing Date,
the Shareholder and the Company shall not, directly or indirectly, through
any officer, employee, agents, advisors, representatives or others (i)
solicit, encourage or initiate any discussions with, or negotiate or
otherwise deal with, or provide any information to any person or Entity,
other than the Purchaser and its officers, employees, agents, advisors
or representatives, concerning the Company or relating to any merger,
acquisition or purchase of all or any portion of the assets of, or any
equity interest in the Company and (ii) except with the prior written
consent of the Purchaser, disclose, directly or indirectly, to any person
any information concerning the business and properties of the Company or
afford to any person access to the properties, books or records of the
Company. The Shareholder shall immediately
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cease and cause to be terminated any existing discussions or negotiations
with any parties other than the Purchaser conducted heretofore with respect
to the Transaction. The Company will notify the Purchaser immediately upon
receipt of any inquiry, offer or proposal relating to any of the foregoing.
None of the foregoing shall prohibit providing information to others in a
manner in keeping with the ordinary course of business of the Company or
providing information to government authorities.
5.1.11 PUBLICITY: Prior to the Closing, any written news releases by
the Company pertaining to this Agreement or the Transaction shall be
submitted to the Purchaser for review and approval prior to release by the
Company, and shall be released only in a form approved by the Purchaser,
provided, however, that such approval shall not be unreasonably withheld,
and (b) such review and approval shall not be required, if prior review and
approval would prevent the timely and accurate dissemination of such press
release as required to comply, in the judgment of counsel, with any
applicable law, rule or policy.
5.1.12 UPDATING OF SCHEDULES AND EXHIBITS: The Company and Shareholder
shall notify the Purchaser of any changes, additions or events which may
cause any change in or addition to any Schedules and Exhibits delivered by
it under this Agreement, promptly after the occurrence of the same and at
the Closing by the delivery of updates of all Schedules and Exhibits. No
notification pursuant to this
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Section shall be deemed to cure any breach of any representation or
warranty made in this Agreement unless the Purchaser specifically agrees
thereto in writing nor shall any such notification be considered to
constitute or give rise to a waiver by the Purchaser of any condition set
forth in this Agreement.
ARTICLE VI
COVENANTS OF THE PURCHASER
6.1. COVENANTS OF THE PURCHASER: The Purchaser hereby covenants to,
from and after the date hereof and until the Closing or earlier termination of
this Agreement:
6.1.1 BEST EFFORTS: To take every action reasonably required of in and
use its best efforts to satisfy the conditions to closing set forth in this
Agreement and otherwise to ensure the prompt and expedient consummation of
the Transaction substantially as contemplated by this Agreement, and will
exert all reasonable efforts to cause the Transaction to be consummated,
provided in all instances that the representations and warranties of the
Shareholder and the Company in this Agreement are and remain true and
accurate and that the covenants and agreements of the Shareholder and the
Company in this Agreement are satisfied or appear capable of being
satisfied and subject, at all times, to the right and ability of the
directors of the Purchaser to
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satisfy their fiduciary obligations.
6.1.2 ELECTION TO BOARD: Upon Closing, the Purchaser shall take such
action as may be necessary to cause the Board of Directors of the Purchaser
to nominate and recommend to the shareholders of the Purchaser, as members
of the Board, for so long as the shareholder owns or has rights to own,
directly or indirectly, at least 220,000 shares of common stock, at any
annual or special meeting of stockholders of the Purchaser called for the
purpose of voting on the election of directors, or by consensual action of
shareholders of the Purchaser with respect to the election of directors,
two of the Shareholder's designees.
6.1.3 REGISTRATION OF SHAREHOLDER'S SHARES: If the Purchaser, at any
time after the IPO, proposes to register any of its securities under the
Securities Act of 1933, as amended (other than in connection with capital
raising for a merger or acquisition or pursuant to Form S-4 or Form S-8 or
other comparable form), the Purchaser shall request that the managing
underwriter or sole underwriter of such underwritten public offering
include the shares of common stock of the Shareholder (the "Registrable
Securities") in such registration. If such managing underwriter agrees to
include any of the Registrable Securities in the underwritten offering, the
Purchaser shall, at such time, give prompt written notice to the
Shareholder of its intention to effect such registration and of such
Shareholders' rights under such proposed registration, and
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upon the request of the Shareholder delivered to the Purchaser, within
twenty (20) days after giving of such notice (which request shall specify
the Registrable Securities intended to be disposed of by such Shareholder
and the intended method of disposition thereof), the Purchaser shall
include such Registrable Securities held by such Shareholder in such
registration; provided, however, that:
(i) If, at any time after giving such written notice of the Purchaser's
intention to register any of the Shareholder's Registrable Securities
and prior to the effective date of the registration statement filed in
connection with such registration, the Purchaser shall determine for
any reason not to register or to delay the registration of such
Registrable securities, at its sole election, the Purchaser may give
written notice of such determination to the Shareholder and thereupon
shall be relieved of its obligation to register any Registrable
Securities issued or issuable in connection with such registration (but
not from its obligation to pay registration expenses in connection
therewith or to register the Registrable Securities in a subsequent
registration); and, in the case of a determination to delay a
registration, shall thereupon be permitted to delay registering any
Registrable Securities for the same period as the delay in respect of
securities being registered for the Purchaser.
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(ii) If the managing underwriter in such underwritten offering shall
advise the Purchaser that it declines to include a portion or all of
the Registrable Securities requested by the Shareholder to be included
in the registration statement, then, distribution of all or a specified
portion of the Registrable Securities shall be excluded from such
registration statement (in case of an exclusion as to a portion of such
Registrable Securities, such portion to be allocated among the
shareholders in proportion to the respective numbers of Registrable
Securities requested to be registered by each such selling
shareholder). In such event the Purchaser shall give the Shareholder
prompt notice of the number of Registrable Securities excluded.
6.1.4 REFINANCING AND INDEMNIFICATION: (a) The Purchaser agrees to use
its best efforts to have the Shareholder and all third parties released
from all guarantees and collateral given by the Shareholder in his personal
capacity and any such third parties in connection with the Aircraft & Lease
Agreement and Schedule thereto with U.S. Bancorp Leasing and Financial. In
the event such release has not occurred by the Closing, the Purchaser shall
continue to use its best efforts to obtain such release(s). In addition,
the Purchaser hereby agrees to indemnify Shareholders and any such third
party guarantors from any and all loss or damage accruing to them as a
result of any such guarantee.
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(b) The Purchaser agrees to use its best efforts to refinance the
equipment listed in SCHEDULE 6.1.4(b), except the leased aircraft, or (ii)
obtain releases for any personal guarantors given and collateral given by
Shareholder in his personal capacity and/or any third parties, all within 15
days from the Closing, or soon thereafter as is reasonably possible from the
Closing Date until the actions described in (i) or (ii) above have occurred. The
Purchaser shall indemnify Shareholder and any such third party guarantors from
any and all loss or damage accruing to them as a result of any such guarantees.
ARTICLE VII
CONDITIONS PRECEDENT TO THE OBLIGATION
OF THE SHAREHOLDER AND THE COMPANY TO CLOSE
The obligation of the Shareholder and the Company to enter into and
complete the Closing is subject to the fulfillment, prior to the Closing Date,
of each of the following conditions, any one or more of which may be waived by
the Shareholder or the Company:
7.1 CONSENTS, LICENSES AND PERMITS: The Purchasers shall have obtained
all consents, licenses, permits approvals ana authorizations and waivers of
third parties necessary for the performance by it of all of its obligations
under this Agreement.
7.2 REPRESENTATIONS AND WARRANTIES: All representations and warranties
of the Purchaser set forth in this Agreement and in any written statement or
other document delivered pursuant
40
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<PAGE>
hereto or in connection with the Transaction contemplated hereby shall be true
in all material respects as at the Closing Date, as if made at the Closing and
as of the Closing Date.
7.3 COVENANTS: The Purchaser shall have performed and complied in all
material respects with all covenants and each of its agreements and obligations
required by this Agreement to be performed or complied with prior to or at the
Closing.
7.4 NO ACTIONS: No action, suit, proceeding or investigation shall have
been instituted against the Purchaser, and be continuing before a court or by a
governmental body or agency, or shall have been threatened and be unresolved, to
restrain or to prevent or to obtain damages in respect of, the carrying out of
the transactions contemplated hereby, or which might materially affect the right
of the Company and the Shareholder in the Transaction after the Closing Date, or
which might have a materially adverse effect thereon.
7.5 CERTIFICATE: The Shareholder and the Company shall have received a
certificate dated the Closing Date, signed by the President and Secretary of the
Purchaser as to the satisfaction of the conditions contained in Sections 7.2 and
7.3.
7.6 ADDITIONAL DOCUMENTS: The Purchaser shall have delivered all such
certified resolutions, certificates and documents as the Shareholder or the
Company or its counsel may have reasonably requested, including but not limited
to a Certificate of Good Standing and Certificate of Incorporation from the
Secretary of State of Colorado, dated no earlier than fifteen (15) days prior to
the Closing Date.
41
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<PAGE>
7.7 APPROVAL OF COUNSEL: All actions, proceedings, instruments and
documents required to carry out this Agreement or incidental thereto, and all
other related legal matters, shall have been approved as to form and substance
by counsel to the Shareholder and the Company, which opinion shall be
substantially in the form of EXHIBIT 7.7.
ARTICLE VIII
CONDITIONS PRECEDENT TO THE
OBLIGATION OF THE PURCHASER TO CLOSE
The obligation of the Purchaser to enter into and complete the Closing
is subject to the fulfillment, prior to the Closing Date, of each of the
following conditions, any one or more of which may be waived by the Shareholder
and the Purchaser:
8.1 CONSENTS, LICENSES AND PERMITS: The Shareholder and the Company
shall have obtained all consents, licenses, permits approvals and authorizations
and waivers of third parties necessary for the performance by them of all of
their obligations under this Agreement.
8.2 REPRESENTATIONS AND WARRANTIES: All representations and warranties
of the Shareholder and the Company set forth in this Agreement and in any
written statement or other document delivered pursuant hereto or in connection
with the Transaction contemplated hereby shall be true in all material respects
as at the Closing Date, as if made at the Closing and as of the Closing Date.
42
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<PAGE>
8.3 COVENANTS: The Shareholder and the Company shall have performed and
complied in all material respects with all covenants and each of its agreements
and obligations required by this Agreement to be performed or complied with
prior to or at the Closing.
8.4 NO ACTIONS: No action, suit, proceeding or investigation shall have
been instituted, and be continuing before a court or by a governmental body or
agency, or shall have been threatened and be unresolved, to restrain or to
prevent or to obtain damages in respect of, the carrying out of the transactions
contemplated hereby, or which might materially affect the right of the Purchaser
to own or to operate or control the assets, properties and business of the
Company and/or the Shareholder after the Closing Date, or which might have a
materially adverse effect thereon.
8.5 CERTIFICATE: The Purchaser shall have received a certificate dated
the Closing Date, signed by the President and Secretary of the Company as to the
satisfaction of the conditions contained in Sections 8.2 and 8.3.
8.6 ADDITIONAL DOCUMENTS: The Shareholder and the Company shall have
delivered all such certified resolutions, certificates and documents as the
Purchaser or its counsel may have reasonably requested, including but not
limited to a Certificate of Good Standing and certified Certificate of
Incorporation from the Secretary of State of New York, dated no earlier than
fifteen (15) days prior to the Closing Date.
43
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<PAGE>
8.7 APPROVAL OF COUNSEL AND ACCOUNTANTS: All actions, proceedings,
instruments and documents required to carry out this Agreement or incidental
thereto, and all other related legal matters, shall have been approved as to
form and substance by counsel to the Purchaser, which opinion shall be
substantially in the form of EXHIBIT 8.7.
8.8 CONSULTING AND NON-COMPETITIVE AGREEMENTS: The Shareholders and the
Company shall have delivered the Consulting and Non-Competition Agreement to the
Purchaser and said agreement shall take effect on the Closing Date.
8.9 FINANCIALS: The Shareholder and the Company shall have delivered
the Audited Financial Statements and the Unaudited Financial Statements to the
Purchaser which statements shall be reasonably satisfactory to the Purchaser.
ARTICLE IX
CLOSING
9.1 LOCATION AND TIME: The Closing provided for herein shall take place
at the offices of Loselle Greenawalt Kaplan Blair & Adler, 140 East 45th Street,
New York, New York 10017, at 9:30 a.m., the earlier of September 1, 1997, or
within 7 days of the closing date of IPO, or at such other time and place as may
be mutually agreed to by the parties hereto. The date of the Closing is referred
to in this Agreement as the "Closing Date" or the "Closing."
44
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<PAGE>
9.2 ITEMS TO BE DELIVERED BY THE SHAREHOLDER OR THE COMPANY: At the
Closing, the Shareholder and/or the Company will deliver or cause to be
delivered to the Purchaser:
9.2.1 Stock certificate and stock power for 100 shares of common stock
of the Company;
9.2.2 The Consulting and Non Competition Agreement;
9.2.3 The certificates required by Section 8.5;
9.2.4 Such other certified resolutions, documents and certificates as
are required to be delivered by the Shareholder or the Company pursuant
to the provisions of the Agreement; and
9.2.4 Bills of Sale and Assignments of the listed Agreements, as set
forth in SCHEDULE 9.2.5.
9.3 ITEMS TO BE DELIVERED BY THE PURCHASER: At the Closing, the
Purchaser will deliver or cause to be delivered to the Shareholder:
9.3.1 The certificates required by Section 7.5; and
9.3.2 Such other certified resolutions, documents and certificates as
are required to be delivered by the Purchaser pursuant to the provisions of
the Agreement.
ARTICLE X
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
10.1 SURVIVAL: Except as set forth in SCHEDULE 10.1, the parties hereto
agree that their respective representations and warranties shall survive the
execution and delivery of this Agreement and the consummation of the
transactions provided for
45
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<PAGE>
herein, for a period of six years from the Closing Date, with the exception of
those regarding taxes set forth in Section 3.8 which shall survive until the
expiration of the respective periods within which such taxes may be assessed,
notwithstanding any investigations made by any party hereto and any knowledge
which any party may have regarding a breach of a representation or warranty by
another party.
10.2 INDEMNIFICATION BY SHAREHOLDER AND THE COMPANY: The Shareholder
and the Company shall indemnify, save and keep the Purchaser, its successors and
assigns, forever harmless against and from all liabilities, demands, claims,
actions or causes of action, assessments, losses, penalties, costs, damages or
expenses, including reasonable attorneys' fees and expenses, of every kind,
nature and description, fixed or contingent, sustained or incurred by Purchaser,
its successors or assigns arising out of, resulting from, based upon or in
connection with:
10.2.1 any representation or warranty made by the Shareholder and the
Company to the Purchaser herein or any violation of agreements or covenants or
any instrument or document delivered to Purchaser in connection herewith being
incorrect in any material respect provided a claim is asserted by the Purchaser
within six (6) years of the Closing Date.
10.2.2 the failure of the Shareholder or the Company to comply with, or
the breach by Shareholder or the Company of any of the covenants and agreements
in this Agreement to be performed by Shareholder or the Company.
The Company and the Shareholder shall be obligated to indemnify
46
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<PAGE>
and hold harmless Purchaser pursuant to this Section 10.2 only to the extent
that the aggregate of all idemnifiable losses exceeds $75,000.
10.3 INDEMNIFICATION BY THE PURCHASER: The Purchaser shall indemnify,
save and keep the Shareholder and the Company, their successors and assigns,
forever harmless against and from all liabilities, demands, claims, actions or
causes of action, assessments, losses, penalties, costs, damages or expenses,
including reasonable attorneys' fees and expenses, of every kind, nature and
description, fixed or contingent, sustained or incurred by Shareholder and the
Company, its successors or assigns arising out of, resulting from, based upon or
in connection with:
10.3.1 any representation or warranty made by Purchaser to Shareholder
or the Company herein or any violation of agreements or covenants or any
instrument or document delivered to Shareholder and the Company in connection
herewith being incorrect in any material respect provided a claim is asserted by
Shareholder or the Company within six (6) years of the Closing Date.
10.3.2 the failure of the Purchaser to comply with, or the breach by
the Purchaser of any of the covenants and agreements in this Agreement to be
performed by the Purchaser;
10.4 DEFENSE OF CLAIMS: A party entitled to indemnification hereunder
(an "Indemnified Party") agrees to notify each party required to indemnity
hereunder (an "Indemnifying Party") with reasonable promptness of any claim
asserted against it in respect
47
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<PAGE>
of which any Indemnifying Party may be liable under this Agreement, which
notification shall be accompanied by a written statement setting forth the basis
of such claim and the manner of calculation thereof. An Indemnifying Party shall
have the right to defend any such claim at its or his own expense and with
counsel of its or his choice; provided, however, that such counsel shall have
been approved by the Indemnified Party prior to engagement, which approval shall
not be unreasonably withheld or delayed; and provided further, that the
Indemnified Party may participate in such defense, if it so chooses, with its
own counsel and at its own expense.
10.5 RIGHTS WITHOUT PREJUDICE: The rights of the parties under this
Article X are without prejudice to any other rights or remedies that it may have
by reason of this Agreement or as otherwise provided by law.
ARTICLE XI
TERMINATION AND WAIVER
11.1 TERMINATION: This Agreement and the Transaction may be terminated
at any time prior to the Closing:
11.1.1 By mutual consent of the Company and the Purchaser;
11.1.2 By the Company if any of the conditions set forth in
Article VII, and by the Purchaser if any of the conditions set forth in Article
VIII hereof, shall not have been fulfilled on or prior to the Closing date, or
shall become
48
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<PAGE>
incapable of fulfillment, and shall not have been waived. In the event this
agreement is terminated as described above, this Agreement shall be void and of
no force and effect.
11.2 REPAYMENT OF LOAN: In the event this Agreement is terminated for
any reason, the parties recognize that the terms of the Loan shall remain in
effect.
11.3 REMEDIES:
11.3.1 If the Shareholder and/or the Company defaults under the
Agreement prior to Closing, the Shareholder and the Company recognize that
the Purchaser will suffer irreparable damages and that it will be
difficult, if not impossible, to compute the Purchaser's actual damages.
The parties, therefore agree, that the Shareholder and the Company's
obligations hereunder shall be subject to a decree for specific performance
by any court of competent jurisdiction. The rights set forth in this
Section 11.3.1 shall be in addition to, and not in lieu of, any other
rights and remedies available to the Purchaser at law or in equity.
11.3.2 If the Purchaser defaults under the Agreement prior to Closing,
the parties recognize that the terms of the Loan shall remain in effect.
11.4 WAIVER: Any condition to the performance of the Company,
Shareholder and the Purchaser which legally may be waived on or prior to the
Closing Date may be waived at any time by the party entitled to the benefit
thereof by action taken or authorized by an instrument in writing executed by
the relevant party or parties. The failure of any party at any time or times
49
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<PAGE>
to require performance of any provision hereof shall in no manner affect the
right of such party as a later time to enforce the same. No waiver by any party
of the breach of any term, covenant, representation or warranty contained in
this Agreement as a condition to such party's obligations hereunder shall
release or affect any liability resulting from such breach, and no waiver of any
nature, whether by conduct or otherwise, in any one or more instances, shall be
deemed to be or construed as further or continuing waiver of any such condition
or of any breach of any other term, covenant, representation or warranty of this
Agreement.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 EXPENSES: Each of the parties hereto shall bear his or its own
expenses in connection herewith, including any expenses incurred if the proposed
transaction is abandoned at any time prior to the consummation thereof.
12.2 CONFIDENTIAL INFORMATION: Each party agrees that such party and
its representatives will hold in strict confidence all information and documents
received from the other parties and, if the transactions herein contemplated
shall not be consummated, each party will continue to hold such information and
documents in strict confidence and will return to such other parties all such
documents (including the exhibits attached to this Agreement) then in such
receiving party's possession without retaining copies thereof; provided,
however, that each party's
50
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<PAGE>
obligations under this Section 12.2 to maintain such confidentiality shall not
apply to any information or documents that are in the public domain at the time
furnished by the others or that become in the public domain thereafter through
any means other than as a result of any act of the receiving party or of its
agents, officers, directors or stockholders which constitutes a breach of this
Agreement, or that are required by applicable law to be disclosed or which the
Purchaser furnishes to its attorneys, accountants, underwriters or other persons
it deems necessary or advisable in connection with the preparation of its IPO.
The parties agree that the remedy at law for any breach of this Section 12.2
will be inadequate and a non-breaching party will be entitled to injunctive
relief to compel the breaching party to perform or refrain from action required
or prohibited hereunder.
12.3 MODIFICATION, TERMINATION OR WAIVER: This Agreement may be
amended, modified, superseded or terminated, and any of the terms, covenants,
representations, warranties or conditions hereof may be waived, but only by a
written instrument executed by the party waiving compliance. The failure of any
party at any time or times to require performance of any provisions hereof shall
in no manner affect the right of such party at a later time to enforce the same.
12.4 NOTICES: All notices, requests, demands and communications under
or in respect hereof shall be deemed to have been duly given and made if in
writing (including fax) if delivered by hand or certified mail (airmail if
51
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<PAGE>
dispatched to a foreign country) to the party concerned at its address appearing
below or sent by fax to the number and with a copy as below indicated. Service
shall be deemed to be effective: so far as delivery by hand is concerned when
handed to the recipient or left at the recipient's address; by post two days
after posting (seven days if sent to a foreign country); by fax on the same day
as dispatch and receipt is confirmed. The said addresses and fax numbers are as
follows:
If to Shareholder and Company:
Louis R. Capece, Jr.
10845 Bayshore Drive
Windermere, FL 34786
Tel.: 407-876-9307
Fax: 407-876-9307
with a copy to:
Richard F. Taylor, Jr., Esq.
231 Walton Street, Suite 225
Syracuse, New York 13202
Tel.: 315-475-1421
Fax: 315-475-1431
If to Purchaser:
Kevin L. Burkhardt
Proflight Medical Response, Inc.
12420 East Control Tower Road
Englewood, Colorado 80112
Tel.: 800-949-5387
Fax: 303-799-1367
with a copy to:
Gerald A. Adler, Esq.
Loselle Greenawalt Kaplan Blair & Adler
Two Grand Central Tower
140 East 45th Street
New York, New York 10017
Tel.: 212-986-6850
Fax.: 212-956--6852
52
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<PAGE>
The parties may change the persons, addresses and fax numbers to which the
notices or other communications are to be sent by giving written notice of any
such change in the manner provided herein for giving notice.
12.5 BINDING EFFECT AND ASSIGNMENT: This Agreement shall be binding
upon and inure to the benefit of the successors and assigns of the parties
hereto; provided, however, that no assignment of any rights or delegation of any
obligations provided for herein may be made by any party without the express
written consent of the other parties.
12.6 ENTIRE AGREEMENT: This Agreement contains the entire agreement
between the parties with respect to the subject matter hereof.
12.7 SCHEDULES AND EXHIBITS: All schedules and exhibits annexed hereto
and the documents and instruments referred to herein or required to be delivered
simultaneously herewith or at the Closing are expressly made a part of this
Agreement as fully as though completely set forth herein, and all references to
this Agreement herein or in any of such schedules, exhibits, documents, or
instruments shall be deemed to refer to and include all such schedules,
exhibits, documents and instruments.
12.8 GOVERNING LAW: This Agreement shall be governed by, and construed
in accordance with the laws of the State of Colorado applicable to agreements
made and to be performed entirely within that State, excluding the choice of law
rules
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<PAGE>
thereof.
12.9 COUNTERPARTS: This Agreement may be executed in counterparts, each
of which shall be deemed to be an original, but which together shall constitute
one and the same instrument.
12.10 SECTION HEADINGS: The section headings contained in this
Agreement are inserted for conveniences of reference only and shall not affect
the meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has duly executed this
agreement as of the day and year first above written.
AIR RESPONSE, INC.
By: /s/ Louis R. Capece, Jr.
----------------------------------
Louis R. Capece, Jr.,
President
/s/ Louis R. Capece, Jr.
----------------------------------
Louis R. Capace, Jr.
PROFLIGHT MEDICAL RESPONSE,
INC.
By: /s/ Kevin L. Burkhardt
----------------------------------
Kevin L. Burkhardt,
President
54
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<PAGE>
SCHEDULE 3.1
Valid Corporate Existence; Qualification
New York
<PAGE>
<PAGE>
SCHEDULE 3.4
Consents
None except see schedule 3.15(ii).
<PAGE>
<PAGE>
SCHEDULE 3.6
No Undisclosed Liabilities
None
<PAGE>
<PAGE>
SCHEDULE 3.7
Actions Since the Company Balance Sheet
3.7.1 The Company may have refinanced some or all of its Aircraft since the date
of the Company Balance Sheet.
3.7.9 The Company has made loans to Shareholder, some or all of which may have
been made subsequent to the date of the Company Balance Sheet.
<PAGE>
<PAGE>
SCHEDULE 3.8
No Adverse Developments
3.8.3 See Schedule 3.7.1
<PAGE>
<PAGE>
SCHEDULE 3.9
Taxes
The time for filing the New York State and Federal Tax Returns for the fiscal
year ended May 31, 1996 has been extended to February 15, 1996. It is expected
that the amount due, if any, will be minimal.
<PAGE>
<PAGE>
SCHEDULE 3.10
Ownership of Assets
3.10.(i) All of the Company's Aircraft are subject to liens to be specifically
identified within 30 days, except for the Aircraft identified in 7, below, which
is leased from U.S. BanCorp pursuant to a lease agreement dated June 27, 1996.
3.10.(iii) The following aircraft, except for the Aircraft identified in 7,
below, are owned by the Company:
1. 1972 Mitsubishi MU-b-35, Registration No. N3330K, Serial
No. 551.
2. 1976 Cessna 340A, Registration No. N98600, Serial No.
340A0054.
3. 1976 Piper PA-31-350, Registration No. N621PG, Serial
No. 31-7652049.
4. Cessna 421B, Registration No. N918WK, Serial No.
421B0956.
5. 1967 Lear Jet 24, Registration No. N777-MR, Serial No.
24-142.
6. Lear Jet 25, Registration No. N846YC, Serial No. 012.
7. Lear Jet 25B, Registration No. N700FC, Serial No. 082.
<PAGE>
<PAGE>
SCHEDULE 3.12
Litigation
First Presidential Corporation v. Air Response, Inc. and Louis ("Rusty") Capece;
Cause No. 216,285; (Travis County, Texas)
Attached are copies of:
ORDER SUSTAINING OBJECTION OF DEFENDANT LOUIS ("RUSTY") CAPECE TO PERSONAL
JURISDICTION AND DISMISSING CASE dated 5/20/94
Letter from Charles O. Grigson. Esq. ("Grigson") to Staff, Maiklels, and
Ciampino, P.C. dated September 12, 1994.
Letters from Grigson to Richard F. Taylor, Jr., Esq. dated February 22 and May
17, 1995.
Additional information will be supplied prior to Closing.
<PAGE>
<PAGE>
[LETTERHEAD OF CHARLES O. GRIGSON]
May 17, 1995
Mr. Richard F. Taylor, Jr. Esquire
One Lincoln Center, Suite 710
Syracuse, NY 13202
VIA FAX #315/475-1431
RE: First Presidential Corporation
v. Air Response, Inc., and
Louise ("Rusty") Capece; Cause
NO. 216,285; (Travis County,
Texas)
Dear Mr. Taylor:
The status of the above lawsuit has not changed since my previous
correspondence regarding the status dated February 22, 1995. A copy of that
correspondence is forwarded along with this fax. The inactivity does not
necessarily mean that the case will go away. Additionally, I am forwarding a
copy of the order which dismissed Mr. Capece in his individual capacity from the
lawsuit.
Please let me know if you have any further questions.
Sincerely,
/s/ Charles O. Grigson
Charles O. Grigson
COG/sg
cc: Air Response, Inc.
<PAGE>
<PAGE>
[LETTERHEAD OF CHARLES O. GRIGSON]
February 22, 1995
Mr. Richard F. Taylor, Jr. Esquire
One Lincoln Center, Suite 710
Syracuse, NY 13202
VIA FAX & REGULAR MAIL
RE: First Presidential Corporation
v. Air Response, Inc., and
Louise ("Rusty") Capece; Cause
NO. 216,285; (Travis County,
Texas)
Dear Mr. Taylor:
I am writing you regarding the status of the above referenced lawsuit.
I am enclosing a copy of a status letter I previously sent regarding this case.
There has been very little activity in the months since this letters was sent.
Please let me know if you need any additional information.
Sincerely,
/s/ Charles O. Grigson
Charles O. Grigson
COG/sg
cc: Ray Lasky
Air Response, Inc.
<PAGE>
<PAGE>
[LETTERHEAD OF CHARLES O. GRIGSON]
September 12, 1994
Staff, Maikels, and Ciampino, P.C.
10 Colvin Avenue
Albany, NY 12201
VIA FEDERAL EXPRESS
RE: First Presidential Corporation
v. Air Response, Inc., and
Louise ("Rusty") Capece; Cause
NO. 216,285; (Travis County,
Texas)
TO WHOM IT MAY CONCERN:
I am in receipt of a request by Air Response, Inc. that you be
furnished information about the lawsuit in Texas in which I represent Air
Response, Inc.
I. PENDING LITIGATION
A. Nature of the Litigation: The case is styled First Presidential
Corporation v. Air Response, Inc. It is pending in the County Court at Law
Number Two of Travis County, Texas. It has been given cause number 216,285. This
lawsuit arose out of a transaction occurring in early 1991 in which Air Reponse,
Inc. purchased an Mu-2 airplane from First Presidential Corporation for
approximately $300,000.00. As part of the transaction Air Response conveyed to
First Presidential a Cessna 421A airplane, a separate zero time engine and
miscellaneous parts for the Cessna airplane.
First Presidential filed this lawsuit against Air Response, Inc. in
March 1993. First Presidential's chief allegation is that the zero time engine
was not in fact a zero time engine. First Presidential has alleged several
alternative theories of recovery, i.e., common law fraud, negligent
misrepresentation, breach of contract, breach of warranty and a violation of the
Texas Deceptive Trade Practices-Consumer Protection Act. First Presidential
claims that it has been damaged in the amount of the value of the zero time
engine (approximately $30,000.00) and lost profits (approximately $70,000.00).
Additionally, First Presidential has alleged it is entitled to additional
damages, attorney's fees and costs of court. Air Response, Inc. has denied all
allegations of First Presidential.
<PAGE>
<PAGE>
[Letterhead of Charles O. Grigson]
September 12, 1994
Staff, Maikels and Ciampino, P.C.
10 Colvin Avenue
Albany, NY 12201
VIA FEDERAL EXPRESS
RE: First Presidential Corporation v. Air
Response, Inc. and Louis ("Rusty")
Capece; Cause No. 216,285; (Travis
County, Texas)
TO WHOM IT MAY CONCERN:
I am in receipt of a request by Air Response, Inc. that you be
furnished information about the lawsuit pending in Texas in which I represent
Air Response, Inc.
I. PENDING LITIGATION
A. Nature of the Litigation: The case is styled First Presidential
Corporation v. Air Response, Inc. It is pending in the County Court at Law
Number Two of Travis County, Texas. It has been given cause number 216,285. This
lawsuit arose out of a transaction occurring in early 1991 in which Air
Response, Inc. purchased an Mu-2 airplane from First Presidential Corporation
for approximately $300,000.00. As part of the transaction Air Response conveyed
to First Presidential a Cessna 421A airplane, a separate zero time engine and
miscellaneous parts for the Cessna airplane.
First Presidential filed this lawsuit against Air Response, Inc. in
March 1993. First Presidential's chief allegation is that the zero time engine
was not in fact a zero time engine. First Presidential has alleged several
alternative theories of recovery, i.e., common law fraud, negligent
misrepresentation, breach of contract, breach of warranty and a violation of the
Texas Deceptive Trade Practices-Consumer Protection Act. First Presidential
claims that it has been damaged in the amount of the value of the zero time
engine (approximately $30,000.00) and lost profits (approximately $70,000.00).
Additionally, First Presidential has alleged it is entitled to additional
damages, attorney's fees and costs of court. Air Response, Inc. has denied all
allegations of First Presidential.
<PAGE>
<PAGE>
Mr. Ray Lasky
Vice President
Air Response, Inc.
September 9, 1994
Page 2
Staff, Maikels and Ciampino, P.C.
September 12, 1994
Page -2-
B. Progress of the Case: Air Response, Inc. initially denied that Texas
courts had jurisdiction to resolve this dispute. A hearing was held in May 1994
on this issue. The court determined that it does have jurisdiction over Air
Response, Inc. The parties have engaged in limited discovery such as responding
to requests for documents and answering interrogatories. No trial date had been
set and it will be several months before a trial date should be set. The
discovery that has been done is very limited and numerous depositions will need
to be taken by both parties before they can be ready for trial.
C. Management's Response to Litigation: Air Response, Inc. has
contested this case vigorously from the beginning because management of Air
Response, Inc. believes that this lawsuit is nothing more than a shakedown
attempt by First Presidential Corporation to recover money out of a transaction
in which First Presidential received the bulk of the consideration. Obviously if
Air Response were able to resolve the case by settlement for an amount which was
equivalent to the cost of defending the lawsuit, the undersigned would recommend
to management of Air Response to seriously consider such an offer. At this time
it is not possible to resolve the case for cost of defense.
D. Evaluation of Likelihood of an Unfavorable Outcome: As within any
lawsuit it is always extremely difficult to state a predicted outcome of the
case. In this case I do not believe that the outcome of a trial on the merits
would be unfavorable to Air Response, Inc. Nevertheless, there is always the
possibility that a case can be lost regardless of how meritorious your defense
is, or how strong your evidence is. In a jury trial no one can accurately
predict the outcome of a case. Additionally, there may be other factors that are
discovered during depositions of the parties, expert witnesses, and third party
witnesses that may affect the outcome of the case.
II. UNASSERTED CLAIMS AND ASSESSMENTS
In my opinion there are no claims that can be made by First
Presidential against Air Response, Inc. that have not already been asserted in
this lawsuit. Although the claims made by First Presidential may vary, I do not
believe that there exists any possible claim that has been unasserted by First
Presidential.
<PAGE>
<PAGE>
Mr. Ray Lasky
Vice President
Air Response, Inc.
September 9, 1994
Page 3
Staff, Maikels and Ciampino, P.C.
September 12, 1994
Page -3-
III. TIME FRAME OF RESPONSE
This response to your auditors includes all matters of which I am aware
that existed as of May 31, 1994 through the date of this response. Any
limitations or qualifications regarding matters requested by your auditors are
identified in the previous portions of this letter along with the reasons for
such limitations.
IV. INDEBTEDNESS
As of the date of this response, Air Response, Inc. is indebted to me
for legal fees and expenses in the amount of $5,600.98 for services rendered
through September 1, 1994.
I hope this letter is sufficient for your auditors. If you or they have
any questions, please do not hesitate to contact me.
Sincerely,
/s/ Charles O. Grigson
Charles O. Grigson
COG/sg
Enclosures
cc: Air Response, Inc.
<PAGE>
<PAGE>
FIRST PRESIDENTIAL CORPORATION 'SS' IN THE COUNTY COURT
'SS'
V. 'SS' AT LAW NUMBER TWO
'SS'
AIR RESPONSE, INC. and 'SS'
LOUIS ("RUSTY") CAPECE 'SS' TRAVIS COUNTY, TEXAS
ORDER SUSTAINING OBJECTION OF DEFENDANT LOUIS
("RUSTY") CAPECE TO PERSONAL JURISDICTION AND DISMISSING CASE
On the 2nd day of May, 1994, a hearing was held on the special
appearance of Defendant Louis ("Rusty") Capece filed in this case pursuant to
Rule 120a of the Texas Rules of Civil Procedure. Defendant Capece filed a
special appearance pursuant to Rule 120a in which he objected to the
jurisdiction of this court over his person.
After considering the pleadings, the affidavits and attachments filed
by the parties, the responses of the parties to discovery, and the oral
testimony and exhibits admitted at the hearing, this Court finds that it has no
personal jurisdiction over Louis ("Rusty") Capece. Defendant Capece's objection
to jurisdiction should therefore be sustained and the case against him should be
dismissed. It is accordingly
ORDERED, ADJUDGED and DECREED that the objection to jurisdiction filed
pursuant to Rule 120a by Louis ("Rusty") Capece is hereby sustained; that
Plaintiff's case against Louis ("Rusty") Capece is hereby dismissed for lack of
personal jurisdiction; that costs of court are hereby taxed against Plaintiff,
for which execution shall issue if not timely paid.
/s/ J. DAVID PHILLIPS
J. DAVID PHILLIPS
PRESIDING JUDGE
5/20/94
1
<PAGE>
<PAGE>
SCHEDULE 3.14
Inventory
To be supplied before the Closing.
<PAGE>
<PAGE>
SCHEDULE 3.15(i)
List of Permits
New York State Department of Health Certificate of Ambulance Operating
Authority to Response Medical Transport Service, Inc. for Montgomery, Schoharie
and Herkimer Counties, including a fixed wing variance. Approval to transfer
this permit is required.
Federal Aviation Authority Part 135 Certificate. Approval for operation
under this permit subsequent to the Closing is required.
New York State Department of Taxation and Finance - Sales Tax
Certificate of Authority, Identification Number 16-1338132. Approval of this
permit may be required.
From time to time Company performs services for Air Response South,
Inc. and during such times may operate under permits held by Air Response South,
Inc.
<PAGE>
<PAGE>
SCHEDULE 3.15(ii)
Permits, Consent, etc.
New York State Department of Health Certificate of Ambulance Operating
Authority to Response Medical Transport Service, Inc. for Montgomery, Schoharie
and Herkimer Counties, including a fixed wing variance. Approval to transfer
this permit is required.
Federal Aviation Authority Part 135 Certificate. Approval to transfer
this permit is required.
From time to time Company performs services for Air Response South,
Inc. and during such times may operate under permits held by Air Response South,
Inc. Approval to transfer those permits is required.
See Schedule 3.15(i) regarding the Sales Tax Certificate of Authority.
<PAGE>
<PAGE>
SCHEDULE 3.16
Trade Names
None
<PAGE>
<PAGE>
SCHEDULE 3.18
Interest in Competitor, Suppliers or Customers
From time to time, the Company receives services from Response Aviation, Inc.,
Response Medical Transport Services, Inc. and provides services to Air Response
South, Inc., all of which are solely owned by Shareholder.
<PAGE>
<PAGE>
SCHEDULE 3.2O
Accounts Receivable Aging
See attached.
<PAGE>
<PAGE>
AGED RECEIVABLES REPORT
12/16/96
<TABLE>
<CAPTION>
NUMBER LAST NAME FIRST NAME CURRENT 30-60 DAYS 60-90 DAYS 91+ DAYS TOTAL
- ------ --------- ---------- ------- ---------- ---------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
1557 LUNAU ERICH 10400.00 0.00 0.00 0.00 10400.00
1549 LYNN HARRY 15200.00 0.00 0.00 0.00 15200.00
1566 MARNAR MAURICE 13100.00 0.00 0.00 0.00 13100.00
1531 MCDONALD GREG 5200.00 0.00 0.00 0.00 5200.00
1375 NEWMAN SANDERS 0.00 0.00 3660.00 0.00 3660.00
1401 NORTH JOHN 0.00 0.00 10000.00 0.00 10000.00
1570 O'CONNOR RANDAL 4450.00 0.00 0.00 0.00 4450.00
1861 OLIVER JAMES 0.00 0.00 550.00 0.00 550.00
1563 PASCORELLA MARTIN 4454.00 0.00 0.00 0.00 4450.00
1315 PAYNE TOMISHA 0.00 0.00 0.00 5900.00 5900.00
1188 PIENDLE CHARLES 0.00 0.00 0.00 5800.00 5800.00
1518 PRISONER 4450.00 0.00 0.00 0.00 4450.00
1521 PRISONER 5490.00 0.00 0.00 0.00 5490.00
1525 PRISONER 7288.00 0.00 0.00 0.00 7288.00
1498 PROCUREMENT ORGAN 0.00 1178.00 0.00 0.00 1178.00
5800 PROFLIGHT 17000.00 0.00 0.00 0.00 17000.00
1270 RECHTER CHARLES 0.00 0.00 0.00 3890.00 3890.00
1319 REISCHEL KRISTEN 0.00 0.00 0.00 75.96 75.96
1561 ROBINSON VIRGINIA 5200.00 0.00 0.00 0.00 5200.00
1551 RODRIGUEZ LLADESLDA 4480.00 0.00 0.00 0.00 4480.00
1373 ROLLASON WENDELL 0.00 0.00 7498.00 0.00 7498.00
1567 RUCKDESCHEL RYAN 8612.00 0.00 0.00 0.00 8612.00
501 SHREWSBURY CHERYL 0.00 0.00 0.00 6860.00 6860.00
1103 SHROEDER DERRICK 0.00 0.00 0.00 264.70 264.70
1293 SINGLETARY SALLY 0.00 0.00 0.00 4100.00 4100.00
1444 SMOOT JAMES 0.00 12650.00 0.00 0.00 12650.00
1458 SOLODYNA DENISE 0.00 5252.00 0.00 0.00 5252.00
1548 STANG MICHAEL 6800.00 0.00 0.00 0.00 6800.00
445 STARFLIGHT AVIATION 0.00 16600.00 0.00 0.00 16600.00
2900 SUNCOAST CHARTER 0.00 0.00 0.00 2262.00 2262.00
1493 TENDEL DENNIS 0.00 11880.00 0.00 0.00 11880.00
1534 TERHUNE NANCY 6225.00 0.00 0.00 0.00 6225.00
1181 THOMAS EDWARD 0.00 0.00 0.00 3360.00 3360.00
1085 THOMSON GERALD 0.00 0.00 0.00 907.00 907.00
1900 TRANSNORTH 0.00 0.00 3100.00 0.00 3100.00
1519 WELTAN MICHAEL 4850.00 0.00 0.00 0.00 4850.00
1501 YAZBAK EUGENE 0.00 3600.00 0.00 0.00 3600.00
--------- --------- -------- -------- ---------
TOTAL DOLLARS 282663.00 168578.00 85712.00 67605.86 604558.86
</TABLE>
(2)
<PAGE>
<PAGE>
AGED RECEIVABLES REPORT
12/16/96
<TABLE>
<CAPTION>
FLAG DESCRIPTION CURRENT 30-60 DAYS 60-90 DAYS 91+ DAYS TOTAL
- ---- ----------- ------- ---------- ---------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
B BROKER TRIPS 24540.00 0.00 0.00 0.00 24540.00
C COMMERICAL INSURANCE 17516.00 0.00 0.00 0.00 17516.00
D PRIVATE PAY 37200.00 0.00 0.00 0.00 37200.00
B1 BROKER 0-15 65060.00 8400.00 0.00 0.00 73460.00
C1 COMMERCIAL 0-15 111489.00 69430.00 0.00 0.00 180919.00
P1 PRIVATE PAY 0-15 26858.00 1178.00 550.00 0.00 28586.00
B2 BROKER 15-30 0.00 27500.00 0.00 0.00 27500.00
C2 COMMERCIAL INS. 15-30 0.00 27742.00 15104.00 0.00 42846.00
P2 PRIVATE PAY 15-30 0.00 34328.00 0.00 340.66 34668.66
B3 BROKER 30-45 0.00 0.00 7600.00 20762.00 28362.00
C3 COMMERCIAL INS. 30-45 0.00 0.00 62458.00 41685.00 104143.00
D3 MEDICAID CLAIMS 30-45 0.00 0.00 0.00 4100.00 4100.00
P3 PRIVATE PAY 30-45 0.00 0.00 0.00 718.20 718.20
---------- ---------- --------- --------- ----------
TOTALS 282663.00 168576.00 85712.00 67605.86 604558.86
</TABLE>
(3)
<PAGE>
<PAGE>
SCHEDULE 3.17
Real Property
This is inaccurate and incomplete. To be updated prior to Closing.
Company is party to a Lease dated as of June 1, 1994 with Response Aviation,
Inc. for Company's use of hangar and office facilities at the Fulton County, New
York airport.
Use of office space in Nelliston, New York
Hangar in Kentucky. Is it ARS?
<PAGE>
<PAGE>
SCHEDULE 3.20
Accounts Receivable Aging
See attached.
<PAGE>
<PAGE>
SCHEDULE 3.21
Employees
See attached. It will be updated prior to Closing.
<PAGE>
<PAGE>
AIR RESPONSE INC.
EMPLOYEE LIST
Active Employees Only
11/21/96
Employee Name Employee ID Title
- ------------- ----------- -----
BAKSA, JAMES 129520684 Nurse
BARBER, ANNE M. 056440576 Nurse
BLOCK, CARL M. 089608047 Nurse
BRADSHAW, BRYON 117609330 Mechanic
COZINE, LOU 106441638 Mechanic
CRISTIANO, THOMAS J. 101542637 Pilot
DRISKILL, RICKIE 406826809 Nurse
DUDLEY, DAVID 172482724 Pilot
DYER, DAVID 088505824 Nurse
EDWARDS, EDITH L. 032480657 Nurse
EYSTER, CHARLES E. 184460837 Pilot
FLOWERS, KATHLEEN 267370956 Nurse
GALLT, A. DWAYNE 101564390 Paramedic
GLENN, DR JOHN 067408927 Physician
GREENWOOD, GARY R. 071548609 Respiratory Therapist
GROW MD, JOSEPH 403725520 Physician
HAMLET, JUDY 407069695 Nurse
HIGGINS, KAREN L. 100383297 Nurse
HOLLOWAY, REGINA K. 405023647 Nurse
HUNT, EDWARD P. 083609104 Paramedic
JENNINGS, ROBERT L. 075447868 Mechanic
KAMP, KENNETH J. 091409934 Pilot
KAMP, KENNETH J. KAMP Pilot
KELLER, CAROL J. 122500859 Nurse
LEE, SOO SILL 213781628 Nurse
<PAGE>
<PAGE>
AIR RESPONSE INC.
EMPLOYEE LIST
Active Employees Only
11/21/96
Employee Name Employee ID Title
- ------------- ----------- -----
MARSHALL, JOE 402980597 Pilot
MITCHELL, ANITA L. 346543097 Nurse
MORGAN, CHRISTINE M. 295423287 Office
MURPHY, LEO T. 063369350 Paramedic
MYERS, GENE G. 049669218 Paramedic
MOYES, JEFF 271640686 Pilot
MOYES, JEFF NOYES Pilot
RAGHAVAN MD, KRISHAN 121704367 Physician
RINAKI, BASSAM 111529572 Nurse
ROBERTS, CAROL 049565531 Nurse
SAPONARO, LISA M. 053489586 Nurse
SEMBRAT, MELANIE M. 122587552 Paramedic
SHAVER, TIMOTHY B. 078462455 Mechanic
SMITH, KELLY B. 065606591 Nurse
THOMAS, CAROL S. 327463674 Nurse
THOMSEN, JAMES M. 087666727 Nurse
THOMSON JR., WILLIAM J. 113688856 Nurse
THROGMORTON, RACHELLE 406213990 Nurse
VAINOSKY, EDWARD R. 034302278 Nurse
WELCH, PETER G. 073480847 Nurse
WORTH, DEBORAH 122489648 Nurse
YATES, RYAN R. 407314331 Nurse
<PAGE>
<PAGE>
SCHEDULE 3.22
Agreements and Obligations; Performance
None
All Aircraft Financing Agreements. A lease agreement covering one Aircraft.
This Schedule will be revised within 30 days to include those documents.
<PAGE>
<PAGE>
SCHEDULE 4.1
Colorado
<PAGE>
<PAGE>
SCHEDULE 6.1.4
Guarantees
All of the Aircraft financing agreements are personally guaranteed by
Shareholder, and in some instances, by third parties.
The lease of the Aircraft identified as #7 in Schedule 3.10 is personally
guaranteed by Shareholder, and in some instances, by third parties.
Any additional similar guarantees for other obligations of the Company will be
disclosed within thirty days.
<PAGE>
<PAGE>
AMENDED STOCK PURCHASE AND SALE AGREEMENT
AMENDED STOCK PURCHASE AND SALE AGREEMENT, dated April 8, 1997, by and
among, PROFLIGHT MEDICAL RESPONSE, INC., a Colorado corporation with its
principal office at 12420 East Control Tower Road, Englewood, Colorado 80112
(the "Purchaser"), LOUIS R. CAPECE, JR. who resides at 10845 Bayshore Drive,
Windermere, Florida 34786 (the "Shareholder"), and AIR RESPONSE SOUTH, INC., a
Florida corporation with its principal office at Orlando Executive Airport, 469B
Herndon Avenue, Hanger 72, Orlando, Florida 32803 (the "Company").
W I T N E S E T H:
WHEREAS, the Purchaser desires to acquire and the Shareholder wishes to
transfer, on the terms and subject to the conditions and in the manner reflected
below, all of the outstanding shares of capital stock of the Company; and
WHEREAS, the Purchaser is not prepared or willing to proceed with the
contemplated transaction without the support, agreements and representations of
the Company and Shareholder contained in this Agreement and is proceeding in
reliance upon such support, agreements and representations; and
<PAGE>
<PAGE>
WHEREAS, the Shareholder and the Company are not prepared or willing to
proceed with the contemplated transaction without the support, agreements and
representations of the Purchaser contained in this Agreement and are proceeding
in reliance upon such support, agreements and representations;
NOW, THEREFORE, the parties to this AMENDED STOCK PURCHASE AND SALE
AGREEMENT do hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 GENERAL CONSTRUCTION: For purposes hereof, except as otherwise
expressly provided:
1.1.1 Defined terms include the plural as well as the singular;
1.1.2 All accounting terms not otherwise defined have the meanings
assigned under generally accepted accounting principles;
1.1.3 All references to schedules and exhibits are to all the
schedules and exhibits attached to this Agreement; and
1.1.4 Pronouns of either gender or neuter shall include, as
appropriate, the other pronoun forms.
1.2 Definitions: As used in this Agreement, the following terms shall
have the following definitions.
2
<PAGE>
<PAGE>
1.2.1 Affiliate: When used with respect to a person, an "affiliate"
of that person is a person controlling, controlled by, or under common
control with that person.
1.2.2 Agreement: This Amended Stock Purchase and Sale Agreement,
including all of its schedules and exhibits and all other documents
specifically referred to in this Agreement that have been or are to be
delivered by a party to this Agreement to another such party in
connection with the Transaction and this Agreement and including all
duly adopted amendments, modifications, and supplements to or for this
Agreement, schedules, exhibits and other documents. Except as otherwise
provided, all schedules, exhibits and other documents required to be
delivered by a party to this Agreement shall be completed or delivered
10 days prior to the Closing.
1.2.3 Audited Financial Statements: With respect to the Company, for
the twelve month periods ended May 31, 1996 and 1995.
1.2.4 Closing: As defined in Section 9.1.
1.2.5 Closing Date: As defined in Section 9.1.
1.2.6 Company Balance Sheet: Balance Sheet as of May 31, 1996
included in the Audited Financial Statements.
1.2.7 Consulting and Non-Competition Agreement: As defined in
Section 2.3.
3
<PAGE>
<PAGE>
1.2.8 EEO: Equal Employment Opportunity Act of 1972.
1.2.9 Entity: A corporation, partnership, sole proprietorship, joint
venture, or other form of organization formed for the conduct of a
business, whether active or passive.
1.2.10 ERISA: The Employee Retirement Income Security Act of 1974,
as amended and in effect at the time of execution of this Agreement.
1.2.11 GAAP: Generally accepted accounting principles, as in effect
on the date of any statement, report or determination that purports to
be, or is required to be, prepared or made in accordance with GAAP. All
references herein to financial statements prepared in accordance with
GAAP shall mean in accordance with GAAP consistently applied throughout
the periods to which reference is made.
1.2.12 Inventories: The stock of goods held by the Company from time
to time in the ordinary course of the business of the Company, in the
form in which such inventories then are held or after incorporating with
other goods or items, or the like.
1.2.13 IPO: The Purchaser's filing of an initial public offering on
Form SB-2 or other similar form with the Securities and Exchange
Commission.
1.2.14 Liabilities: At any point in time (the "Determination Time"),
the obligations of a person or Entity, whether known or unknown,
contingent or absolute, recorded on its
4
<PAGE>
<PAGE>
books or not, arising or resulting in any way from facts, events,
agreements, obligations or occurrences that existed or transpired at a
prior point in time, or resulted from the passage of time to the
Determination Time, but not including obligations accruing or payable
after the Determination Time to the extent (but only to the extent) that
such obligations (l) arise under previously existing agreements for
services, benefits, or other considerations, and (2) accrue or become
payable with respect to services benefits, or other considerations
received by the person or Entity after the Determination Time.
1.2.15 Loan: The November 1996 loan by the Purchaser to Air
Response, Inc. for the aggregate sum of Two Hundred Thousand ($200,000)
Dollars with interest at the rate of ten (10%) percent per annum.
1.2.16 OSHA: The Occupational Safety and Health Act of 1970.
1.2.17 Permits: Any permits, licenses, orders, approvals,
franchises, registrations, authorizations or other approvals from any
federal, state, local and foreign governmental or regulatory body or
authority (public or self-regulatory).
1.2.18 Subsidiary: A corporation with respect to which another
Entity owns, directly or indirectly, shares entitling it to elect a
majority of the Board of Directors or in which it has a majority of the
equity interest.
1.2.19 Transaction: The acquisition of all the outstanding shares of
capital stock of the Company by the
5
<PAGE>
<PAGE>
Purchaser from the Shareholder, as provided in Article II of this
Agreement.
1.2.20 Unaudited Financial Statements: With respect to the Company
for the six months ended November 30, 1996 and 1995 and for the three
months ended February 28, 1997 and 1996.
ARTICLE II
THE TRANSACTION
2.1 The Transaction: 2.1.1 Subject to the terms, conditions, provisions
and limitations contained in this Agreement, the Purchaser, in reliance upon the
representations and warranties of the Shareholder and the Company made herein
and in the schedules and exhibits annexed hereto, will at the Closing, acquire
from the Shareholder and the Shareholder, in reliance upon the representations
and warranties of the Purchaser made herein and in the schedules and exhibits
annexed hereto, will at the Closing transfer, convey and assign to the
Purchaser, free and clear of any and all liens, charges or other encumbrance,
51,000 shares of common stock, par value $.01, of the Company, comprising all of
the issued and outstanding shares of capital stock of the Company and
representing his entire ownership of equity securities of the Company, for Two
Million Dollars ($2,000,000) and for
6
<PAGE>
<PAGE>
the number of shares of common stock, par value $.001, of the Purchaser equal to
an amount of $1,000,000. In calculating the number of shares of common stock to
which shareholder shall be entitled, the value of each share of common stock
shall be the per share price to the public at which the common stock is sold in
the IPO. The Shareholder's shares will not be registered under the Securities
Act of 1933 and will be legended to that effect. The Shareholder's shares shall
be issued thirteen months from the closing of the IPO.
2.1.2 Anything to the contrary herein notwithstanding, if the
Purchaser completes a second public offering, the Shareholder has the
option to put such number of shares of common stock, at the then current
market value, equal to 20% of the net proceeds of such offering to the
Purchaser, not to exceed $1,000,000. In the event a second public
offering occurs prior to the expiration of thirteen months from the
closing of the IPO, the shareholder shall have the right to be paid cash
without the actual issuance of the applicable shares.
2.2 Manner of Payment: The cash portion of the purchase price set forth
in Section 2.1.1 shall be payable as follows:
2.2.1 $1,000,000 shall be due and payable on the earlier of six
months from the date hereof or upon closing of the Purchaser's IPO.
7
<PAGE>
<PAGE>
2.2.2 $1,000,000 shall be due and payable two years from the closing
date of the Purchaser's IPO.
2.2.3 Cash payments shall be made by wire transfer of federal funds
to such account or accounts of the Shareholder as shall be communicated
to the Purchaser in writing or by certified funds on the dates set forth
above.
2.3 Consulting and Non-Competition Agreement Prior to the Closing Date,
the Purchaser will enter into a consulting and non-competition agreement with
the Shareholder (the "Consulting and Non-Competition Agreement") in the form
annexed hereto as EXHIBIT 2.3 which agreement will take effect as of the Closing
Date.
2.4 Right of First Refusal: In the event that this Agreement is not
consummated, for any reason and until the Loan is repaid, the Purchaser shall
have a right of first refusal, for a period of ninety days, after receipt of
written notice, to meet the terms of any other offer for the common stock and/or
business of the Company. In the event the Purchaser, in its discretion decides
not to meet such terms and the terms of the offer are subsequently changed, the
Purchaser shall be given an additional thirty days to meet the revised terms of
any said agreement.
8
<PAGE>
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDER AND THE COMPANY
The Shareholder and the Company make the following representations and
warranties to the Purchaser, each of which shall be deemed material:
3.1 Valid Corporate Existence; Qualification: The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Florida. The Company has the corporate power and authority to
carry on its business as now being conducted. The Company is duly qualified as a
foreign corporation to do business, and is in good standing in each jurisdiction
where the character of the properties owned or leased by it, or the nature of
its activities is such that the qualification as a foreign corporation in that
jurisdiction is required by law. SCHEDULE 3.1 hereto lists all jurisdictions in
which the Company is qualified to do business. Except as indicated on SCHEDULE
3.1, there is no jurisdiction in which failure to qualify would have a material
adverse effect on the Company or its assets, properties or business. A copy of
the Company's Certificate of Incorporation (certified by the appropriate
official of the State of Florida) and By-Laws and minute books (certified by the
Company's Secretary), as amended to date, which will be delivered to the
Purchaser at or prior to the Closing, are true and complete copies of those
documents as
9
<PAGE>
<PAGE>
now in effect. The minute books of the Company contain accurate records of all
meetings of its Board of Directors, and stockholders since its incorporation,
and accurately reflect all transactions referred to therein.
3.2 CAPITALIZATION: The authorized capital stock of Company consists of
100,000 shares of common stock, Series A, $.01 par value per share, of which no
shares are issued and outstanding and 100,000 shares of common stock, Series B,
$.01 par value per share. There is no other capital stock authorized for
issuance. As of the date hereof, there are 51,000 outstanding shares of Series
B, $.01 par value per share common stock validly issued and outstanding, fully
paid and non-assessable and no shares are reserved for issuance nor are there
outstanding any options, warrants, convertible instruments or other rights,
agreements or commitments to acquire common stock of the Company.
3.3 CORPORATE AUTHORITY; BINDING NATURE OF AGREEMENT: The Company has
the power to enter into this Agreement and to carry out its obligation
hereunder. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by the Board of
Directors of the Company and no other corporate proceedings on the part of the
Company are necessary to authorize the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby. This Agreement
constitutes the valid and binding obligation of the Company and is enforceable
in
10
<PAGE>
<PAGE>
accordance with its terms.
3.4 CONSENTS: Except as set forth in SCHEDULE 3.4, there are no consents
of governmental and other regulatory agencies, foreign or domestic, and of other
third parties required to be received by or on the part of the Shareholder or
the Company, to enable it to enter into and carry out this Agreement in all
material respects.
3.5 FINANCIAL STATEMENTS: The Company, prior to the Closing Date, will
deliver to the Purchaser, the Audited Financial Statements of the Company and
the Unaudited Financial Statements of the Company. All of the historical
financial statements contained in such documents will have been prepared from
the books and records of the Company. The Audited Financial Statements will be
prepared in accordance with GAAP, and fairly and accurately reflect the
financial position and condition of the Company as at the dates and for the
periods indicated. Without limiting the foregoing, at the date of the Company
Balance Sheet, the Company will have owned each of the assets included in
preparation of the Company Balance Sheet, and the valuation of such assets in
the Company Balance Sheet will not be for more than their fair saleable value
(on an item by item basis) at that date; and the Company will have no
Liabilities other than those included in the Company Balance Sheet, nor any
Liabilities in amounts in excess of the amounts included for them in the Company
Balance Sheet. The Unaudited Financial Statements to be included in the
documents described above in this Section
11
<PAGE>
<PAGE>
will be prepared in a manner consistent with the basis of presentation used in
the Audited Financial Statements, and fairly present the financial position and
condition of the Company as, at and for the periods indicated, subject to normal
year end adjustments, none of which will be material. From the date hereof,
through the Closing Date, the Company will continue to prepare financial
statements on the same basis that it has done so in the past, will promptly
deliver the same to the Purchaser, and agrees that from and after such delivery,
the foregoing representations will be applicable to each financial statement so
prepared and delivered. The Audited Financial Statements for the year ended May
31, 1996 will be prepared by Staff, Michaels & Ciampino, independent certified
public accountants, whose report thereon is included therein. The Audited
Financial Statements for the year ended May 31, 1995 were prepared by Kaufman,
Rossin & Co., independent certified public accountants, whose report therein is
included therein.
3.6 NO UNDISCLOSED LIABILITIES: Except as set forth in the Company
Balance sheet included in the Audited Financial Statements or as set forth in
SCHEDULE 3.6, the Company has no material debts, liabilities or obligations,
known or unknown, contingent or absolute, except those arising in the ordinary
course of business of the Company and consistent with past practice.
3.7 ACTIONS SINCE THE COMPANY BALANCE SHEET: Except as set forth and
reflected in this Agreement or in SCHEDULE 3.7,
12
<PAGE>
<PAGE>
since the date of the Company Balance Sheet, the Company has not:
3.7.1 incurred any material obligation or liability, known or
unknown, absolute or contingent, except those arising in the ordinary
and usual course of its business and those incurred in connection with
the transactions contemplated by this Agreement;
3.7.2 issued or sold, or agreed to issue or sell any capital stock
of the Company or any securities convertible into or rights to acquire
any such capital stock or any dividend or distribution declared, set
aside or paid on any such capital stock;
3.7.3 discharged or satisfied any lien or encumbrance, except in the
ordinary and usual course of business, or paid or satisfied any
liability, absolute or contingent, other than as at the Company Balance
Sheet in the ordinary and usual course of business and those incurred in
connection with the transactions contemplated by this Agreement;
3.7.4 made any wage or salary increases or granted any bonuses other
than wage and salary increases and bonuses granted in accordance with
its normal salary increase and bonus policies;
3.7.5 mortgaged, pledged or subjected to any lien, pledge, charge or
other encumbrance any of its properties or assets, or permitted any of
its property or assets to be subjected to any lien or other
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encumbrance, except in the ordinary and usual course of business;
3.7.6 sold, assigned or transferred any of its properties or assets,
except in the ordinary and usual course of business;
3.7.7 entered into any transaction or course of conduct not in the
in the ordinary and usual course of business;
3.7.8 waived any rights of substantial value, or cancelled, modified
or waived any indebtedness for borrowed money held by it, except in the
ordinary and usual course of business;
3.7.9 made any loans or advances to any person or assumed,
guaranteed, endorsed or otherwise became responsible for the obligations
of any person; or
3.7.10 incurred any indebtedness for borrowed money (except for
endorsement, for collection or deposit of negotiable instruments
received in the ordinary and usual course of business).
3.8 No Adverse Developments: Except as set forth in SCHEDULE 3.8, since
the date of the Company Balance Sheet, there has not been:
3.8.1 any material adverse changes in the assets, properties,
operations, financial condition or prospects of the Company;
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3.8.2 any damage, destruction or loss, whether covered by insurance
or not, having a material adverse effect on the business, operations,
financial condition or prospects of the Company;
3.8.3 any entry into or termination of any material commitment,
contract, agreement or transaction affecting the Company, including,
without limitation, any material borrowing or capital expenditure or
sale or other disposition of any material asset or assets, other than
this Agreement and agreements executed in the ordinary and usual course
of business;
3.8.4 any transfer of or right granted under any material lease,
license, agreement, patent, trademark, trade name or copyright;
3.8.5 default or breach by the Company in any material respect under
any contract or Permit; or
3.8.6 any event other than in the ordinary and usual course of
business which could be reasonably expected to have a material adverse
effect upon the business of the Company, and after reasonable inquiry by
the Shareholder and the Company, they know of no development or
threatened development of a nature that is, or which could be reasonably
expected to have a materially adverse effect upon the business of the
Company or upon any of its assets, properties, operations or financial
condition.
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3.9 TAXES: All tax returns of the Company which are due have been duly
filed and are correct and all taxes, assessments and other governmental charges
upon the Company which are shown to be due and payable thereon have been paid.
All tax returns of the Company which become due prior to the Closing shall be
timely filed by the Company. The Company does not know of any ongoing tax audit,
proposed tax deficiency, assessment, charge or levy against it, the payment of
which is not adequately provided for on the books of the Company. The Company
will provide to the Purchaser prior to the Closing a true and correct copy of
its tax returns for the prior three years and any returns filed subsequent to
the date hereof.
3.10 OWNERSHIP OF ASSETS: Except as set forth on SCHEDULE 3.10(i), the
Company owns outright, and has good, marketable and insurable title to all of
its assets and properties reflected in the Company Balance Sheet except as the
same may have been disposed of in the ordinary course of business since the
Company Balance Sheet date, free and clear of all liens, mortgages, pledges,
conditional sales agreements, restrictions on transfer or other encumbrances or
charges whatsoever. The Company does not own any patents, copyrights,
trademarks, trade names or other similar intangible assets except as set forth
in SCHEDULE 3.10(ii). No other person has any ownership or similar right in, or
contractual or other right to acquire any such right in, any of the Company's
assets. The Shareholder and the Company do not know of any potential action
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by any party, governmental or other and no proceedings with respect thereto have
been instituted of which the Company has notice that would materially effect the
Company's ability to use and to utilize each of such assets in its business.
SCHEDULE 3.10(iii) sets forth a listing of all aircraft owned by the Company,
including a description thereof. Each such aircraft has been maintained in
accordance with Part 135 of the regulations of the Federal Aviation
Administration, and the Company has completely and accurately maintained all
records required by Part 135 of the regulations of the Federal Aviation
Administration for such aircraft. SCHEDULE 3.10(iv) sets forth a listing of all
records required to be maintained. The Company will provide to the Purchaser
prior to the Closing a true and correct copy of all records listed in SCHEDULE
3.10(iv). Except as set forth on SCHEDULE 3.10(v), all properties and other
assets owned by the Company or used by the Company in the conduct of its
business are in good operating condition and repair (ordinary wear and tear
excepted), are suitable for the conduct of its business as presently conducted,
have been properly maintained, and do not require any maintenance or repairs
except for routine maintenance and repairs that are not material in nature or in
cost.
3.11 INSURANCE: Polices of fire, liability, workers compensation and
other forms of insurance maintained by the Company, which are usual and
customary in the business of the Company as to amount and scope, and are
adequate to protect the Company against any reasonably foreseeable risk of loss,
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including business interruption, are listed on SCHEDULE 3.11 and identifies for
each policy, the carrier, amount of coverage, annual premium, risks covered,
placing broker or agent, and other relevant information as to each. All policies
listed on SCHEDULE 3.11 have been provided to the Purchaser prior to the
Closing. All premiums have been currently paid on such policies, and all
policies will be maintained and, if necessary, renewed through the Closing Date.
Neither the Shareholder nor the Company have failed to give any notice or
present any claim under any such policy and there are no claims outstanding
under any such policy as to which any insurance company is denying liability or
defending under a reservation of rights clause or otherwise. Anything to the
contrary herein notwithstanding in the event any liability insurance policy is a
"claims made" policy, prior to Closing, the Company shall purchase an extension
to the policy commonly referred to as a "tail", which shall cover all liability
claims made against the Company for a period of five (5) years after Closing, to
the extent that the Company can get this long an extension.
3.12 LITIGATION, COMPLIANCE WITH LAW: Except as set forth in SCHEDULE
3.12, there are no pending or threatened actions, suits, proceedings or
governmental investigations or reviews relating to the Company or any of its
properties, assets or business or, to the knowledge of the Shareholder or the
Company, any order, injunction, award or decree outstanding, against the Company
or against or relating to any of its properties, assets
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or business; and the Shareholder and the Company, after reasonable inquiry,
knows of no basis for any such action, suits or proceedings or any such
governmental investigations, reviews, orders, injunctions or decrees. To the
knowledge of the Shareholder and the Company, the Company is not in violation of
any material law, regulation, ordinance, order, injunction, decree, award, or
other requirement of any governmental body, court or arbitrator relating to its
properties, assets or business.
3.13 COMPLIANCE WITH INSTRUMENTS; ETC.: The Company is not:
3.13.1 in default under any indenture, agreement or instrument
to which it is a party or by which it is bound; or
3.13.2 in violation of its Certificate of Incorporation, By-Laws
or of any applicable law.
3.14 INVENTORIES: All Inventories of the Company, whether or not
reflected in the Company Balance Sheet are of a quality and quantity usable and
salable in the ordinary course of business, except for obsolete items and items
of below standard quality, all of which in the aggregate are immaterial in
amount. Items included in such Inventories are carried on the books of the
Company, and are valued on the Company Balance Sheet, at the lower of cost or
market and, in any event, at not greater than their net realizable value, on an
item-by-item basis, after appropriate deductions for cost of completion,
marketing costs, transportation expense and allocation of overhead. To the best
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knowledge of the Company, the Inventory is unadulterated and does not contain
any ingredient or substances prohibited by pertinent laws, rules or regulations
and all labels for and printed materials relating to the Inventory correctly
represent the ingredients thereto and comply with all laws, rules or regulations
pertaining to the labeling of the products comprising the Inventory. SCHEDULE
3.14 hereto includes a full and complete listing of all of the Company's
inventory, if any, for items having a value of $1,000 or more.
3.15 PERMITS AND LICENSES: The Company has all material Permits of all
federal, state, local and foreign governmental or regulatory bodies required of
it to carry on its business as presently conducted; all such Permits are in full
force and effect, and to the knowledge of the Shareholder and the Company, after
reasonable inquiry, no suspension or cancellation of any of such Permits is
threatened and the Company is in compliance with all material requirements,
standards and procedures of the federal, state, local and foreign governmental
bodies which have issued such Permits. SCHEDULE 3.15(i) hereto lists all Permits
held by the Company in connection with its business. All Permits listed on
SCHEDULE 3.15(i) have been provided to the Purchaser prior to the Closing. As to
any such Permit that has expired or is about to expire, the Company has promptly
applied for a renewal of the same and expects the same to be renewed in the
usual course. Except as disclosed on SCHEDULE 3.15(ii) hereto, no consent of,
approval of, or notification to the authority issuing
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any Permit is necessary due to the execution of this Agreement or the
consummation of the Transaction. Upon consummation of the Transaction, the
Company will continue to be entitled to all authority and benefits conferred by
any such Permits and shall be lawfully entitled to use such Permits in
connection with the operations of its business, provided the Purchaser has
received, when applicable, approval for the transfer of such permits.
3.16 TRADE NAMES: SCHEDULE 3.16 identifies each trade name, fictitious
business name, or similar name under which the Company has conducted any part of
its business since inception.
3.17 REAL PROPERTY: The Company owns no real property and
leases the real property listed in SCHEDULE 3.17.
3.18 INTEREST IN COMPETITOR. SUPPLIERS OR CUSTOMERS:
Except as set forth in Schedule 3.18, none of the officers, directors or
shareholders of the Company or, to the best of their knowledge, members of their
immediate families owns an interest in any person or firm which is a competitor,
supplier or customer of or to the Company or, has an existing contractual
relationship with the Company.
3.19 ACCOUNTS PAYABLE: The accounts payable reflected on the Company
Balance Sheet do, and those reflected in the most recent balance sheet included
in the Unaudited Financial Statements do, and those reflected on the books of
the Company at the time of the Closing will, reflect all amounts owed by the
Company in respect
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of trade accounts due and other Payables of the Company, and the actual
Liability of the Company in respect of such obligations was not and will not be,
on any of such dates, in excess of the amounts, so reflected on the balance
sheets or the books of the Company, as the case may be.
3.20 ACCOUNTS RECEIVABLE: All Accounts receivable of the Company,
whether or not reflected in the Company Balance Sheet, represent transactions in
the ordinary course of business, and are current and collectible net of any
reserves shown on such Balance Sheet (which reserves are adequate and were
calculated consistent with past practice). SCHEDULE 3.20 specifically identifies
the aging of Receivables, as of December 16, 1996.
3.21 Employees: To their best knowledge, the Company has complied with
all laws, regulations and orders relating to the employees of its business,
including but not limited to OSHA, EEO, ERISA, and wages and hours. None of the
Company's employees is represented by any labor union or collective bargaining
agent. The Company does not maintain or make any employer contributions under
any bonus, profit sharing compensation, or other plans, agreements, trusts,
funds, or arrangements for the benefit of directors, officers or employees of,
or whose principal responsibilities relate to, the Company, and there are no
employment, consulting, severance, or indemnification arrangements, agreements,
or understandings between the Company and any current or former directors,
officers or other employees (or Affiliates thereof) of, or whose principal
responsibilities relate to, the Company. SCHEDULE 3.21 identifies all present
employees of the Company and their respective salaries. The
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Company is not, and following the Closing will not be, bound by any express or
implied contract or agreement to employ, directly or as a consultant or
otherwise, any person for any specific period of time, except as set forth
pursuant to the provisions hereof.
3.22 AGREEMENTS AND OBLIGATIONS; PERFORMANCE: SCHEDULE 3.22 sets forth a
list of material agreements to which the Company is a party or is otherwise
bound. Other than these material agreements, the Company is not party to or
bound by any:
3.22.1 written or oral agreement or other contractual commitment,
understanding or obligation which involves aggregate payments or
receipts in excess of $25,000 that cannot be canceled on 30 days or less
any continuing notice without penalty or premium or obligation or
liability;
3.22.2 contractual obligation or contractual liability of any kind
to the Shareholder which will not be canceled on or prior to the Closing
except as otherwise provided by this Agreement;
3.22.3 contract, arrangement, commitment or understanding with its
customers or any officer, employee, stockholder, director,
representative or agent thereof for the repurchase of products, sharing
of fees, the rebating of charges to such customers, bribes, kickbacks
from such customers or other similar arrangements;
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3.22.4 contract for the purchase or sale of any materials, products
or supplies or for any services, which commits or will commit it for a
fixed term;
3.22.5 contract of employment with any employee not terminable at
will without penalty or ANY continuing obligation or liability,
otherwise provided by this Agreement;
3.22.6 deferred compensation, bonus or incentive plan or agreement
not cancelable at will without penalty or premium or any continuing
obligation or liability which will not be canceled on or prior to the
Closing;
3.22.7 management or consulting agreement not terminable at will
without penalty or premium or any continuing obligation or liability
which the Company and each such individual agree to cancel on the
Closing Date;
3.22.8 lease for real or personal property (including borrowings
thereon) license or royalty agreements;
3.22.9 union or other collective bargaining agreement;
3.22.10 agreement, commitment or understanding relating to
indebtedness for borrowed money;
3.22.11 contract which, by its terms, requires the consent of any
party thereto, to the consummation
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of the transactions contemplated hereby;
3.22.12 contract containing covenants limiting the freedom of the
Company to engage or compete in any line or business or with any person
in any geographical area:
3.22.13 contract or option relating to the acquisition or sale of
any business;
3.22.14 voting trust agreement or similar agreement;
3.22.15 option for the tangible or intangible; or
3.22.16 other contract, agreement, commitment or understanding which
materially affects any of its properties, assets or business, whether
directly or indirectly, or which was entered into other than in the
ordinary course of business.
A truly and correct copy of each of the material agreements of the Company
listed in SCHEDULE 3.22 has been delivered to the Purchaser prior to the
Closing. The Company has in all material respects performed all material
obligations required to be performed by it to date under all agreement to which
it is a party and is not in default in any material respect under any of its
agreements and has received no notice of any default or alleged default which
has not heretofore been cured or which notice has not heretofore been
withdrawn.
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3.23 COOPERATION WITH PROFLIGHT IN FILING IPO: The Shareholder and the
Company shall cause its officers, directors, employees, accountants and
attorneys to cooperate fully with the Purchaser in connection with the filing of
a registration statement with the Securities and Exchange Commission.
3.24 No Subsidiaries: The Company does not have any subsidiaries and
does not own directly or indirectly any equity interest in any other business or
Entity.
3.25 No Breach: Neither the execution and delivery of this Agreement nor
compliance by the Shareholder and the Company with any of the provisions hereof
nor the consummation of the transactions contemplated hereby, will:
3.25.1 violate or, alone or with notice or the passage of time,
result in the material breach or termination of, or otherwise give any
contracting party the riqht to terminate, or declare a default under,
the agreement or other material oral or written to which the terms of
any material document or undertaking, Company is a party or by which its
properties or assets may be bound;
3.25.2 result in the imposition of any lien, mortgage, security
interest, pledge, encumbrance, easement, claim or other restriction or
charge on any of the assets of the Company, and will not alter or impair
any of the assets of the Company nor the Purchaser's ability to utilize
in the same manner in
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which they are currently utilized by the Company in connection with its
business;
3.25.3 violate any judgment, order, decree or award against, or
binding upon, or upon its properties or assets; or
3.25.4 violate any law or regulation of any jurisdiction relating to
the Company, its assets or properties.
3.26 Brokers: All negotiations relative to this Agreement and the
Transaction contemplated hereby have been carried on directly with the Purchaser
without the intervention of any broker, finder, investment banker or other third
party. The Shareholder and the Company have not engaged, consented to, or
authorized any broker, finder, investment banker or other third party to act on
its behalf, directly or indirectly, as a broker or finder in connection with
this Agreement and the Transaction, and the Shareholder and the Company agree to
indemnify the Purchaser against, and to hold the Purchaser harmless from any
claim for brokerage or similar commission or other compensation which may be
made against the Purchaser by any third party in connection with any of the
transactions contemplated hereby which claim is based upon any action by the
Shareholder or the Company.
3.27 Untrue or Omitted Facts: No representation, warranty, document,
certificates or other writings furnished by the Shareholder or the Company in
this Agreement contains any untrue statement of a material fact, or omits to
state a fact
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necessary in order to make such representations, warranties or statements not
materially misleading.
3.28 CUSTOMERS: During the last twelve months, (i) no customer which
accounted for more than 5% of the sales in any one of the last three fiscal
years, (ii) no customers which in the aggregate accounted for more than 10% of
the sales of the Company in any one of the last three fiscal years, and/or (iii)
no other customer of material importance to the Company, has (a) canceled,
terminated or delivered written or, to the knowledge of the Shareholder, oral
notice to the Company threatening to cancel or terminate its relationship with
the Company or (b) materially decreased or delivered written or, to the
knowledge of the Shareholder, oral notice to the Company threatening to decrease
its usage of the Company's services.
3.29 SHAREHOLDER'S NON-INTERFERENCE: The Shareholder agrees that from
the date hereof until five (5) years from the Closing Date, he shall not induce
or attempt to induce, or assist others in inducing or attempting to induce, any
person who was employed by the Company prior to the Closing Date and who
continues to be employed by the Company on or after the Closing Date to
terminate his or its relationship with the Company or in any other manner to
interfere with the relationship between the Company any such person.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser makes the following representations and warranties to the
Shareholder each of which shall be deemed material:
4.1 Valid Corporate Existence; Qualification: The Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Colorado. The Purchaser has the corporate power and authority to
carry on its business as now being conducted. The Purchaser is duly qualified as
a foreign corporation to do business, and is in good standing in each
jurisdiction where the character of the properties owned or leased by it, or the
nature of its activities is such that the qualification as a foreign corporation
in that jurisdiction is required by law. SCHEDULE 4.1 hereto lists all
jurisdiction in which the Purchaser is qualified to do business. Except as
indicated on SCHEDULE 4.1. there is no jurisdiction in which failure to qualify
would have a material adverse effect on the Purchaser or its assets, properties
or business. A copy of the Purchaser's Certificate of Incorporation (certified
by the appropriate official of the State of Colorado) and By-Laws and minute
books (certified by the Purchaser's Secretary), as amended to date, which will
be delivered to the Shareholder at or prior to the Closing, are true and
complete copies of those documents as now in effect. The minute books of the
Purchaser contain accurate records of all meetings of its Board of Directors,
and
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stockholders since its incorporation, and accurately reflect all transactions
referred to therein.
4.2 CORPORATE AUTHORITY: BINDING NATURE OF AGREEMENT: The Purchaser has
the power to enter into this Agreement and to carry out its obligation
hereunder. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by the Board of
Directors of the Purchaser and no other corporate proceedings on the part of the
Purchaser are necessary to authorize the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby. This
Agreement constitutes the valid and binding obligation of the Purchaser and is
enforceable in accordance with its terms.
4.3 CONSENTS: There are no consents of governmental and other regulatory
agencies, foreign or domestic, and of other third parties required to be
received by or on the part of the Purchaser, to enable it to enter into and
carry out this Agreement in all material respects.
4.4 BROKERS: All negotiations relative to this Agreement and the
Transaction contemplated hereby have been carried on directly with the
Shareholder and the Company without the intervention of any broker, finder,
investment banker or other third party. The Purchaser has not engaged, consented
to, or authorized any broker, finder, investment banker or other third party to
act on its behalf, directly or indirectly, as a broker or finder in connection
with this Agreement and the Transaction,
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and the Purchaser agrees to indemnify the Shareholder and the Company against,
and to hold the Shareholder and the Company harmless from any claim for
brokerage or similar commission or other compensation which may be made against
the Shareholder or the Company by any third party in connection with any of the
transactions contemplated hereby which claim is based upon action by the
Purchaser.
ARTICLE V
COVENANTS OF THE SHAREHOLDER AND THE COMPANY
5.1 COVENANTS OF THE SHAREHOLDER AND THE COMPANY: The Shareholder and
the Company hereby each covenant to, from and after the date hereof and until
the Closing or earlier termination of this Agreement, without the prior written
consent of the Purchaser:
5.1.1 BEST EFFORTS: To take every action reasonably required of
it and use its best efforts to satisfy the conditions to closing set
forth in this Agreement and otherwise to ensure the prompt and expedient
consummation of the Transaction substantially as contemplated by this
Agreement, and will exert all reasonable efforts to cause the
Transaction to be consummated, provided in all instances that the
representations and warranties of the Purchaser in this Agreement are
and remain true and accurate and that the
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covenants and agreements of the Purchaser in this Agreement are
satisfied or appear capable of being satisfied and subject, at all
times, to the right and ability of the directors of the Company to
satisfy their fiduciary obligations.
5.1.2 ACCESS AND INFORMATION: To afford the officers, attorneys,
accountants and other authorized representatives of the Purchaser
(collectively, the "Representatives"), free and full access, during
regular business hours and upon reasonable notice, to all of its books,
records, contracts, commitments and properties (including, without
limitation, tax returns) at the Purchaser's own expense, to review,
examine and investigate the books, records and properties of the Company
to determine the accuracy of the representations and warranties made by
the Shareholder and the Company. The Shareholder and the Company shall
cause its employees, accountants and attorneys to cooperate fully with
said review, examination and investigation. The Company shall promptly
furnish to the Purchaser (i) all communications to its directors or to
its shareholders, generally, (ii) internal monthly financial statements
when and as available, and (iii) all other information concerning its
business properties and personnel as the Purchaser may reasonably
request.
5.1.3 INSURANCE: To maintain in full force and effect insurance
coverage of a type and amount customary in
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its business, but not less than presently in effect.
5.1.4 DISCHARGE TAXES AND INDEBTEDNESS: To pay and discharge, as
they become due, all taxes, assessments, debts, claims and other
governmental or non-governmental charges lawfully imposed upon or
incurred by it or the properties and assets of the Company, except
taxes, assessments, debts, claims and charges contested in good faith in
appropriate proceedings for which the Company shall have set aside
adequate reserves for the payment of such tax, assessment, debt, claim
or charge. The Company shall provide the Purchaser, upon the evidence of
payment of such taxes, claims and charges satisfactory to the Purchaser.
The Company also covenants to file all tax returns as they become due
prior to the Closing.
5.1.5 COMPLIANCE WITH AGREEMENTS: COMPLIANCE WITH LAWS: To
comply with the terms and conditions of all material agreements,
commitments or instruments to which the Shareholder or the Company is a
party or by which he or it may be bound. The Shareholder and the Company
shall duly comply in all material respect with any material laws,
ordinances, rules and regulations of any foreign, federal, state or
local government or any agency thereof, or any writ, order or decree,
and conform to all valid requirements of governmental authorities
relating to the conduct of its business, properties and assets.
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5.1.6 NO INDEBTEDNESS: Not to incur any obligation or liability,
absolute or contingent, except for those incurred in the ordinary and
usual course of its business or in connection with the transactions
contemplated by this Agreement.
5.1.7 NO DIVIDEND. RETIREMENT OR PURCHASE OF STOCK: Not to
declare or pay any dividend or distribution, in cash or otherwise, on
any shares of stock of the Company or redeem, return, purchase or
otherwise acquire directly or indirectly any shares of stock.
5.1.8 CONDUCT OF BUSINESS PRIOR TO CLOSING:
(i) to conduct its business only in the ordinary and usual
course and make no material change in any of its business practices
and policies;
(ii) to use its best efforts to preserve its business
organization intact, to keep available the services of its present
employees and consultants and to preserve its good will;
(iii) to maintain good relationships with suppliers, lenders,
creditors, employees, customers and others having business or
financial relationships with them:
(iv) it shall not (a) amend its Certificate of Incorporation
or By-Laws or (b) split, combine, or reclassify any of its
outstanding securities;
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(v) it shall not (a) adopt, enter into, or amend any bonus,
profit sharing, compensation, stock option, warrant, pension,
retirement, deferred compensation, employment, severance,
termination, or other employee benefit plan, agreement, trust fund,
or arrangement for the benefit or welfare of any officer, director
or employee of the Company or (b) agree to any material (in relation
to historical compensation) increase in compensation payable or to
become payable to, or any increase in the contractual term of
employment of, any such employee, except in the ordinary course of
business in accordance with past practice;
(vi) it shall not sell, lease, mortgage, encumber, or
otherwise dispose of or grant any interest in any of its assets or
properties except for sales, encumbrances and other dispositions or
grants in the ordinary course of business and consistent with past
practice and except for liens for taxes not yet due or liens or
encumbrances that are not material in amount or effect and do not
impair the use of the property, or as specifically provided for or
permitted in this Agreement;
(vii) it shall not enter into, or terminate, any material
contract, agreement, commitment, or understanding;
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(viii) it will not hold any meetings of its board of
directors, or any committee thereof, or of its shareholders, without
giving a representative selected by the Purchaser the option to
attend the same (although the Company may request that such
representative absent himself during that portion of any such
meeting that pertains to issues arising under this Agreement); and
(ix) it shall immediately notify the Purchaser of any event or
occurrence or emergency material to, and not in the ordinary and
usual course of business.
5.1.9 No Breach: Not to voluntarily take any action or do anything
which will cause a breach of or default respecting its covenants,
representations or warranties set forth herein and promptly to notify
the Purchaser of any event or fact which represents or is likely to
cause such a breach or default.
5.1.10 No Solicitation: From the date hereof through the Closing
Date, the Shareholder and the Company shall not, directly or indirectly,
through any officer, employee, agents, advisors, representatives or
others (i) solicit, encourage or initiate any discussions with, or
negotiate or otherwise deal with, or provide any information to any
person or Entity, other than the Purchaser and its officers, employees,
agents, advisors or representatives,
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concerning the Company or relating to any merger, acquisition or
purchase of all or any portion of the assets of, or any equity interest
in the Company and (ii) except with the prior written consent of the
Purchaser, disclose, directly or indirectly, to any person any
information concerning the business and properties of the Company or
afford to any person access to the properties, books or records of the
Company. The Shareholder shall immediately cease and cause to be
terminated any existing discussions or negotiations with any parties
other than the Purchaser conducted heretofore with respect to the
Transaction. The Company will notify the Purchaser immediately upon
receipt of any inquiry, offer or proposal relating to any of the
foregoing. None of the foregoing shall prohibit providing information to
others in a manner in keeping with the ordinary course of business of
the Company or providing information to government authorities.
5.1.11 Publicity: Prior to the Closing, any written news releases by the
Company pertaining to this Agreement or the Transaction shall be
submitted to the Purchaser for review and approval prior to release by
the Company, and shall be released only in a form approved by the
Purchaser, provided, however, that such approval shall not be
unreasonably withheld, and (b) such review and approval shall not be
required, if prior review and approval would prevent the timely and
accurate dissemination of such
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press release as required to comply, in the judgment of counsel, with
any applicable law, rule or policy.
5.1.12 UPDATING OF SCHEDULES AND EXHIBITS: The Company and
Shareholder shall notify the Purchaser of any changes, additions or
events which may cause any change in or addition to any Schedules and
Exhibits delivered by it under this Agreement, promptly after the
occurrence of the same and at the Closing by the delivery of updates of
all Schedules and Exhibits. No notification pursuant to this. Section
shall be deemed to cure any breach of any representation or warranty
made in this Agreement unless the Purchaser specifically agrees thereto
in writing nor shall any such notification be considered to constitute
or give rise to a waiver by the Purchaser of any condition set forth in
this Agreement.
ARTICLE VI
COVENANTS OF THE PURCHASER
6.1. COVENANTS OF THE PURCHASER: The Purchaser hereby covenants to, from
and after the date hereof and until the Closing or earlier termination of this
Agreement:
6.1.1 Best Efforts: To take every action reasonably required of in
and use its best efforts to satisfy the conditions to closing set forth
in this Agreement and otherwise to ensure the prompt and expedient
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consummation of the Transaction substantially as contemplated by this
Agreement, and will exert all reasonable efforts to cause the
Transaction to be consummated provided in all instances that the
representations and warranties of the Shareholder and the Company in
this Agreement are and remain true and accurate and that the covenants
and agreements of the Shareholder and the Company in this Agreement are
satisfied or appear capable of being satisfied and subject, at all
times, to the right and ability of the directors of the Purchaser to
satisfy their fiduciary obligations.
6.1.2 Election to Board: Upon Closing, the Purchaser shall take such
action as may be necessary to cause the Board of Directors of the
Purchaser to nominate and recommend to the shareholders of the
Purchaser, as members of the Board for so long as the shareholder owns
or has rights to own, directly or indirectly, at least 220,000 shares of
common stock, at any annual or special meeting of stockholders of the
Purchaser called for the purpose of voting on the election of directors,
or by consensual action of shareholders of the Purchaser with respect to
the election of directors, two of the Shareholder's designees.
6.1.3 REGISTRATION OF SHAREHOLDER'S SHARES: If the Purchaser, at any
time after the IPO, proposes to register any of its securities under the
Securities Act of 1933, as amended (other than in connection with
capital raising for a merger or
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acquisition or pursuant to Form S-4 or Form S-8 or other comparable
form), the Purchaser shall request that the managing underwriter or sole
underwriter of such underwritten public offering include the shares of
common stock of the Shareholder (the "Registrable Securities") in such
registration. If such managing underwriter agrees to include any of the
Registrable Securities in the underwritten offering, the Purchaser
shall, at such time, give prompt written notice to the Shareholder of
its intention to effect such registration and of such Shareholders'
rights under such proposed registration, and upon the request of the
Shareholder delivered to the Purchaser, within twenty (20) days after
giving of such notice (which request shall specify the Registrable
Securities intended to be disposed of by such Shareholder and the
intended method of disposition thereof), the Purchaser shall include
such Registrable Securities held by such Shareholder in such
registration; provided, however, that:
(i) If, at any time after giving such written notice of the
Purchaser's intention to register any of the Shareholder's
Registrable Securities and prior to the effective date of the
registration statement filed in connection with such registration,
the Purchaser shall determine for any reason not to register or to
delay the registration of such Registrable Securities, at its sole
election, the Purchaser may give written notice of such
determination to the Shareholder and thereupon shall be relieved of
its obligation to register any
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Registrable Securities issued or issuable in connection with such
registration (but not from its obligation to pay registration
expenses in connection therewith or to register the Registrable
Securities in a subsequent registration); and, in the case of a
determination to delay a registration, shall thereupon be permitted
to delay registering any Registrable Securities for the same period
as the delay in respect of securities being registered for the
Purchaser.
(ii) If the managing underwriter in such underwritten offering
shall advise the Purchaser that it declines to include a portion or
all of the Registrable Securities requested by the Shareholder to be
included in the registration statement, then, distribution of all or
a specified portion of the Registrable Securities shall be excluded
from such registration statement (in case of an exclusion as to a
portion of such Registrable Securities, such portion to be allocated
among the shareholders in proportion to the respective numbers of
Registrable Securities requested to be registered by each such
selling shareholder). In such event the Purchaser shall give the
Shareholder prompt notice of the number of Registrable Securities
excluded.
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ARTICLE VII
CONDITIONS PERCENT TO THE OBLIGATION
OF THE SHAREHOLDER AND THE COMPANY TO CLOSE
The obligation of the Shareholder and the Company to enter into and
complete the Closing is subject to the fulfillment, prior to the Closing Date,
of each of the following conditions, any one or more of which may be waived by
the Shareholder or the Company:
7.1 CONSENTS, LICENSES AND PERMITS: The Purchaser shall have obtained
all consents, licenses, permits approvals and authorizations and waivers of
third parties necessary for the performance by it of all of its obligations
under this Agreement.
7.2 REPRESENTATIONS AND WARRANTIES: All representations and warranties
of the Purchaser set forth in this Agreement and in any written statement or
other document delivered pursuant hereto or in connection with the Transaction
contemplated hereby shall be true in all material respects as at the Closing
Date, as if made at the Closing and as of the Closing Date.
7.3 COVENANTS: The Purchaser shall have performed and complied in all
material respects with all covenants and each of its agreements and obligations
required by this Agreement to be performed or complied with prior to or at the
Closing.
7.4 NO ACTIONS: No action, suit, proceeding or investigation shall have
been instituted against the Purchaser, and be continue in a before a court or
by a governmental body or agency, or shall have been threatened and be
unresolved, to
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restrain or to prevent or to obtain damages in respect of, the carrying out of
the transactions contemplated hereby, or which might materially affect the right
of the Company and the Shareholder in the Transaction after the Closing Date, or
which might have a materially adverse effect thereon.
7.5 CERTIFICATE: The Shareholder and the Company shall have received a
certificate dated the Closing Date, signed by the President and Secretary of the
Purchaser as to the satisfaction of the conditions contained in Sections 7.2 and
7.3.
7.6 ADDITIONAL DOCUMENTS: The Purchaser shall have delivered all such
certified resolutions, certificates and documents as the Shareholder or the
Company or its counsel may have reasonably requested, including but not limited
to a Certificate of Good Standing and Certificate of Incorporation from the
Secretary of State of Colorado, dated no fifteen (15) days prior to the Closing
Date.
7.7 APPROVAL OF COUNSEL: All actions, instruments and documents required
to carry out this Agreement or proceedings, and all other related legal matters,
shall as to form and substance by counsel to the incidental thereto, have been
approved Shareholder and the Company, which opinion shall be substantially in
the form of EXHIBIT 7.7.
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ARTICLE VIII
CONDITIONS PRECEDENT TO THE
OBLIGATION OF THE PURCHASER TO CLOSE
The obligation of the Purchaser to enter into and complete the Closing
is subject to the fulfillment, prior to the Closing Date, of each of the
following conditions, any one or more of which may be waived by the Shareholder
and the Purchaser:
8.1 CONSENTS. LICENSES AND PERMITS: The Shareholder and the Company
shall have obtained all consents, licenses, permits approvals and authorizations
and waivers of third parties necessary for the performance by them of all of
their obligations under this Agreement.
8.2 REPRESENTATIONS AND WARRANTIES: All representations and warranties
of the Shareholder and the Company set forth in this Agreement and in any
written statement or other document delivered pursuant hereto or in connection
with the Transaction contemplated hereby shall be true in all material respects
as at the Closing Date, as if made at the Closing and as of the Closing Date.
8.3 COVENANTS: The Shareholder and the Company. shall have performed and
complied in all material respects with all covenants and each of its agreements
and obligations required by this Agreement to be performed or complied with
prior to or at the Closing.
8.4 NO ACTIONS: No action, suit, proceeding or investigation shall have
been instituted, and be continuing
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<PAGE>
before a court or by a governmental body or agency, or shall have been
threatened and be unresolved, to restrain or to prevent or the carrying out of
the or which might materially to obtain damages in respect of, transactions
contemplated hereby, affect the right of the Purchaser to own or to operate or
control the assets, properties and business of the Company and/or the
Shareholder after the Closing Date, or which might have a materially adverse
effect thereon.
8.5 CERTIFICATE: The Purchaser shall have received a certificate dated
the Closing Date, signed by the President and Secretary of the Company as to the
satisfaction of the conditions contained in Sections 8.2 and 8.3.
8.6 ADDITIONAL DOCUMENTS: The Shareholder and the Company shall have
delivered all such certified resolutions, certificates and documents as the
Purchaser or its counsel may have reasonably requested, including but not
limited to a Certificate of Good Standing and certified Certificate of
Incorporation from the Secretary of State of Florida, dated no earlier than
fifteen (15) days prior to the Closing Date.
8.7 Approval of Counsel and Accountants: All proceedings, instruments
and documents required to carry out this Agreement or incidental thereto, and
all other related legal matters, shall have been approved as to form and
substance by counsel to the Purchaser, which opinion shall be substantially ln
the form of EXHIBIT 8.7.
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<PAGE>
8.8. CONSULTING AND NON-COMPETITION AGREEMENT: The Shareholder and the
Company shall have delivered the Consulting and Non-Competition Agreement to the
Purchaser and said agreement shall take effect on the Closing Date.
8.9 FINANCIALS: The Shareholder and the Company shall have delivered the
Audited Financial Statements and the Unaudited Financial Statements to the
Purchaser which statements shall be reasonably satisfactory to the Purchaser.
ARTICLE IX
CLOSING
9.1 Location and Time: The Closing provided for herein shall take place
at the offices of Loselle Greenawalt Kaplan Blair & Adler, 140 East 45th Street,
New York, New York 10017, at 9:30 a.m. the earlier of September 1, 1997 or
within 7 days of the closing date of the IPO or at such other time and place as
may be mutually agreed to by the parties hereto. The date of the Closing is
referred to in this Agreement as the "Closing Date" or the "Closing."
9.2 ITEMS TO BE DELIVERED BY THE SHAREHOLDER OR THE COMPANY: At the
Closing, the Shareholder and/or the Company will deliver or cause to be
delivered to the Purchaser:
9.2.1 Stock certificate and stock power for 51,000 shares of
common stock of the company;
9.2.2 The Consulting and Non Competition Agreement;
9.2.3 The certificates required by Section 8.5;
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9.2.4 Such other certified resolutions, documents and
certificates as required to be delivered by the Shareholder or the
Company pursuant to the provisions of the Agreement; and
9.2.5 Bills of Sale and Assignments of the listed Agreements, as
set forth in SCHEDULE 9.2.5.
9.3 ITEMS TO BE DELIVERED TO THE PURCHASER: At the Closing, the
Purchaser will deliver or cause to be delivered to the Shareholder:
9.3.1 $1,000,000 by official bank or certified check payable to
the Shareholder.
9.3.2 A promissory note in the original principal amount of
$1,000,000 payable to the order of the Shareholder in the form and
substance as set forth in EXHIBIT 9.3.2.
9.3.3 The certificates required by Section 7.5; and
9.3.4 Such other certified resolutions, documents and
certificates as are required to be delivered by the Purchaser pursuant
to the provisions of the Agreement.
ARTICLE X
SURVIVAL OF REPRESENTATIONS: INDEMNIFICATION
10.1 Survival: Except as set forth in SCHEDULE 10.1, the parties hereto
agree that their respective representations and warranties shall survive the
execution and delivery of this Agreement and the consummation of the
transactions provided for herein, for a period of six (6) years from the Closing
Date, with the exception of those regarding taxes set forth in Section 3.8
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<PAGE>
which shall survive until the expiration of the respective periods within which
such taxes may be assessed, notwithstanding any investigations made by any party
hereto and any knowledge which any party may have regarding a breach of a
representation or warranty by another party.
10.2 INDEMNIFICATION BY SHAREHOLDER AND THE COMPANY: The Shareholder and
the Company shall indemnify, save and keep the Purchaser, its successors and
assigns, forever harmless against and from all liabilities, demands, claims,
actions or causes of action, assessments, losses, penalties costs, damages or
expenses, including reasonable attorneys' fees and expenses, of every kind,
nature and description, fixed or contingent, sustained or incurred by Purchaser,
its successors or assigns arising out of, resulting from, based upon or in
connection with:
10.2.1 any representation or warranty made by the Shareholder
and the Company to the Purchaser herein or any violation of agreements
or covenants or any instrument or document delivered to Purchaser in
connection herewith being incorrect in any material respect provided a
claim is asserted by the Purchaser within six (6) years of the Closing
Date.
10.2.2 the failure of the Shareholder or the Company to comply
with, or the breach by Shareholder or the Company of any of the
covenants and agreements in this Agreement to be performed by
Shareholder or the Company.
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The Company and the Shareholder shall be obligated to indemnify and
hold harmless Purchaser pursuant to this Section 10.2 only to the
extent that the aggregate of all indemnifiable losses exceeds $75,000.
10.3 Indemnification by the Purchaser: The Purchaser shall indemnify,
save and keep the Shareholder and the Company, their successors and assigns,
forever harmless against and from all liabilities, demands, claims, actions or
causes of action, assessments, losses, penalties, costs, damages including
reasonable attorneys' fees and expenses, or expenses, of every kind, nature and
description, fixed or contingent, sustained or incurred by Shareholder and the
Company, its successors or assigns arising out of, resulting from, based upon or
in connection with:
10.3.1 any representation or warranty made by Purchaser to
Shareholder or the Company herein or any violation of agreements or
covenants or any instrument or document delivered to Shareholder and the
Company in connection herewith being incorrect in any material respect
provided a claim is asserted by Shareholder or the Company within six
(6) years of the Closing Date.
10.3.2 the failure of the Purchaser to comply with, or the
breach by the Purchaser of any of the covenants and agreements in this
Agreement to be performed by the Purchaser:
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10.4 DEFENSE OF CLAIMS: A party entitled to indemnification hereunder
(an "Indemnified Party") agrees to notify each party required to indemnity
hereunder (an "Indemnifying Party") with reasonable promptness of any claim
asserted against it in respect of which any Indemnifying Party may be liable
under this Agreement, which notification shall be accompanied by a written
statement setting forth the basis of such claim and the manner of calculation
thereof. An Indemnifying Party shall have the right to defend any such claim at
its or his own expense and with counsel of its or his choice; provided, however,
that such counsel shall have been approved by the Indemnified Party prior to
engagement, which approval shall not be unreasonably withheld or delayed; and
provided further, that the Indemnified Party may participate in such defense, if
it so chooses, with its own counsel and at its own expense.
10.5 RIGHTS WITHOUT PREJUDICE: The rights of the parties under this
Article X are without prejudice to any other rights or remedies that it may have
by reason of this Agreement or as otherwise provided by law.
ARTICLE XI
TERMINATION AND WAIVER
11.1 TERMINATION: This Agreement and the Transaction may be terminated
at any time prior to the Closing:
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11.1.1 By mutual consent of the Company and the Purchaser;
11.1.2 By the Company if any of the conditions set forth in
Article VII, and by the Purchaser if any of the conditions set forth in
Article VIII hereof, shall not have been fulfilled on or prior to the
Closing date, or shall become incapable of fulfillment, and shall not
have been waived.
In the event this agreement is terminated as described above, this Agreement
shall be void and of no force and effect.
11.2 REPAYMENT OF LOAN: In the event this Agreement is terminated for
any reason, the parties recognize that the terms of the Loan shall remain in
effect.
11.3 REMEDIES:
11.3.1 If the Shareholder and/or the Company defaults under the
Agreement, prior to Closing, the Shareholder and the Company recognize
that the Purchaser will suffer irreparable damage and that it will be
difficult if not impossible, to compute the Purchaser's actual damages.
The parties, therefore agree, that the Shareholder and the Company's
obligations hereunder shall be subject to a decree for specific
performance by any court of competent jurisdiction. The rights set forth
in this Section 11.3.1 shall be in addition to, and not in lieu of, any
other rights and remedies available to the Purchaser at law or in
equity.
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11.3.2. If the Purchaser defaults under the Agreement, prior to
Closing, the parties recognize that the terms of the Loan shall remain
in effect.
ll.4 WAIVER: Any condition to the performance of the Company,
Shareholder and the Purchaser which legally may be waived on or prior to the
Closing Date may be waived at any time by the party entitled to the benefit
thereof by action taken or authorized by an instrument in writing executed by
the relevant party or parties. The failure of any party at any time or times to
require performance of any provision hereof shall in no manner affect the right
of such party as a later time to enforce the same. No waiver by any party of the
breach of any term, covenant, representation or warranty contained in this
Agreement as a condition to such party's obligations hereunder shall release or
affect any liability resulting from such breach, and no waiver of any nature,
whether by conduct or otherwise, in any one or more instances, shall be deemed
to be or construed as further or continuing waiver of any such condition or of
any breach of any other term, covenant, representation or warranty of this
Agreement.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 EXPENSES: Each of the parties hereto shall bear his or its own
expenses in connection herewith, including any expenses if the proposed
transaction is abandoned at any time prior to the
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consummation thereof.
12.2 CONFIDENTIAL INFORMATION: Each party agrees that such party and its
representatives will hold in strict confidence all information and documents
received from the other parties and, if the transactions herein contemplated
shall not be consummated, each party will continue to hold such information and
documents in strict confidence and will return to such other parties all such
documents (including the exhibits attached to this Agreement) then in such
receiving party's possession without retaining copies thereof; provided,
however, that each party's obligations under this Section 12.2 to maintain such
confidentiality shall not apply to any information or documents that are in the
public domain at the time furnished by the others or that become in the public
domain thereafter through any means other than as a result of any act of the
receiving party or of its agents, officers, directors or stockholders which
constitutes a breach of this Agreement, or that are required by applicable law
to be disclosed or which the Purchaser furnishes to its attorneys, accountants,
underwriters or other persons it deems necessary or advisable in connection with
the preparation of its IPO. The parties agree that the remedy at law for any
breach of this Section 12.2 will be inadequate and a non-breaching party will be
entitled to injunctive relief to compel the breaching party to perform or
refrain from action required or prohibited hereunder.
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12.3 MODIFICATION, TERMINATION OR WAIVER: This Agreement may be amended,
modified, superseded or terminated, and any of the terms, covenants,
representations, warranties or conditions hereof may be waived, but only by a
written instrument executed by the party waiving compliance. The failure of any
party at any time or times to require performance of any provisions hereof shall
in no manner affect the right of such party at a later time to enforce the same.
12.4 NOTICES: All notices, requests, demands and communications under or
in respect hereof shall be deemed to have been duly given and made if in writing
(including fax) if delivered by hand or left at a posted pre-paid registered or
certified mail (airmail is dispatched to a foreign country) to the party
concerned at its address appearing below or sent by fax to the number and with a
copy as below indicated. Service shall be deemed to be effective: so far as
delivery by hand is concerned when handed to the recipient or left at the
recipient's address; by post two days after posting (seven days if sent to a
foreign country; by fax on the same day as dispatch and receipt is confirmed.
The said addresses and fax numbers are as follows:
If to Shareholder and Company:
Louis R. Capece, Jr.
10845 Bayshore Drive
Windermere, FL 34786
Tel.: 407-876-9307
Fax: 407-876-9307
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with a copy to:
Richard F. Taylor, Esq.
231 Walton Street, Suite 225
Syracuse, New York 13202
Tel.: 315-475-1421
Fax: 315-475-1431
If to Purchaser:
Kevin L. Burkhardt
Proflight Medical Response, Inc.
12420 East Control Tower Road
Englewood, Colorado 80112
Tel.: 800-949-5387
Fax: 303-799-1367
with a copy to:
Gerald A. Adler, Esq.
Loselle Greenawalt Kaplan Blair & Adler
Two Grand Central Tower
140 East 45th Street
New York, New York 10017
Tel.: 212-986-6850
Fax: 212-986-6852
The parties may change the persons, addresses and fax numbers to which the
notices or other communications are to be sent by giving written notice of any
such change in the manner provided herein for giving notice.
12.5 BINDING EFFECT AND ASSIGNMENT: This Agreement shall be binding upon
and inure to the benefit of the successors and assigns of the parties hereto;
provided, however, that no assignment of any rights or delegation of any
obligations provided for herein may be made by any party without the express
written consent of the other parties.
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12.6 ENTIRE AGREEMENT: This Agreement contains the entire agreement
between the parties with respect to the subject matter hereof.
12.7 SCHEDULES AND EXHIBITS: All schedules and exhibits annexed hereto
and the documents and instruments referred to herein or required to be delivered
simultaneously herewith or at the Closing are expressly made a part of this
Agreement as fully as though completely set forth herein, and all references to
this Agreement herein or in any of such schedules, exhibits, documents, or
instruments shall be deemed to refer to and include all such schedules,
exhibits, documents and instruments.
12.8 GOVERNING LAW: This Agreement shall be governed by, and construed
in accordance with the laws of the State of Colorado applicable to agreements
made and to be performed entirely within that State, excluding the choice of law
rules thereof.
12.9 COUNTERPARTS: This Agreement may be executed in counterparts, each
of which shall be deemed to be an original, but which together shall constitute
one and the same instrument.
12.10 SECTION HEADINGS: The section headings contained in this
Agreement are inserted for conveniences of reference only and shall
not affect the meaning or interpretation of this Agreement.
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IN WITNESS WHEREOF, each of the parties hereto has duly executed this
agreement as of the day and year first above written.
AIR RESPONSE SOUTH, INC.
By: /s/ Louis R. Capece, Jr.
-------------------------------
Louis R. Capece, Jr.,
President
/s/ Louis R. Capece, Jr.
-------------------------------
Louis R. Capece, Jr.
PROFLIGHT MEDICAL RESPONSE,INC.
By: /s/ Kevin L. Burkhardt
-------------------------------
Kevin L. Burkhardt, President
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<PAGE>
SCHEDULE 3.1
Valid Corporate Existence; Qualification
Florida
<PAGE>
<PAGE>
SCHEDULE 3.4
Consents
None except see Schedule 3.15(ii).
<PAGE>
<PAGE>
SCHEDULE 3.6
No Undisclosed Liabilities
None
<PAGE>
<PAGE>
SCHEDULE 3.7
Actions Since the Company Balance Sheet
3.7.9 The Company has made loans to Shareholder, some or all of which may have
been made subsequent to the date of the Company Balance Sheet.
<PAGE>
<PAGE>
SCHEDULE 3.8
No Adverse Developments
None, except the Company may have become a guarantor on certain agreements for
Air Response, Inc. Any such guarantees will be identified for Purchaser prior to
the Closing.
<PAGE>
<PAGE>
SCHEDULE 3.9
Taxes
The time for filing the Florida and Federal Rax Returns for the fiscal year
ended May 31, 1996 has been extended to February 15, 1996. It is expected that
the amount due, if any, will be minimal.
<PAGE>
<PAGE>
SCHEDULE 3.10
Ownership of Assets
See Section 3.17
<PAGE>
<PAGE>
SCHEDULE 3.12
Litigation
None
<PAGE>
<PAGE>
SCHEDULE 3.14
Inventory
To be supplied before the Closing.
<PAGE>
<PAGE>
SCHEDULE 3.15(i)
List of Permits
State of Florida, Department of Revenue, Certificate of Registration
#58-12-144039-27 for Air Response South authorizing and empowering the
collection of sales and use taxes for the State of Florida, opening date 1/1/95.
State of Florida, Department of Health and Rehabilitative Services, Emergency
Medical Services, Air Ambulance Service License, dated June 30, 1994, expires
________________ .
Orange County Emergency Medical Services, Certificate of Public Convenience and
Necessity for Air AILS-Transport (Interfacility Only) service. Issued May 23,
1995, expires May 23, 1997. New York State Department of Health Certificate of
Ambulance Operating Authority to Response Medical Transport Service, Inc. for
Montgomery, Schoharie and Herkimer Countries, including a fixed wing variance.
Approval to transfer this permit is required.
<PAGE>
<PAGE>
SCHEDULE 3.15(ii)
Permits, Consent, etc.
Upon Closing, Company will not be entitled to all authority and benefits
conferred by State of Florida, Department of Health and Rehabilitative Services,
Emergency Medical Services, Air Ambulance Service License, dated
___________________, expires _____________________and Orange County Emergency
Medical Services Certificate of Public Convenience and Necessity for Air
ALA-Transport service. It will be necessary for Purchaser to apply for an Air
Ambulance Service License and an Orange County Certificate of Public Convenience
and Necessity.
Orange County Emergency Medical Services, Certificate of Public Convenience and
Necessity for Air AILS-Transport (Interfacility Only) service. Issued May 23,
1995, expires May 23, 1997. New York State Department of Health Certificate of
Ambulance Operating Authority to Response Medical Transport Service, Inc. for
Montgomery, Schoharie and Herkimer Counties, including a fixed wing variance.
Approval to transfer this permit is required.
<PAGE>
<PAGE>
SCHEDULE 3.16
Trade Names
None
<PAGE>
<PAGE>
SCHEDULE 3.17
Real Property
None.
Commercial Hanger sublease agreement entered into the 1st day of November, 1994
by and between Showalter Flying Service, Inc. and Air Response/Orlando Jets
covering the period November 1, 1994 through November 30, 1995 and thereafter on
a month to month basis for hangar space and offices. The premises are located
at the Orlando Executive Airport and are designated as Hangar #72 and 73 at 469B
Herndon Avenue.
There is an unwritten, month to month, lease for hangar space at Paducah,
Kentucky.
<PAGE>
<PAGE>
SCHEDULE 3.18
Interest in Competitor, Suppliers or Customers
From time to time, the Company receives services from Response Aviation, Inc.,
Response Medical Transport Services, Inc. and Air Response, Inc., all of which
are solely owned by Shareholder. In addition, from time to time, the Company
provides services to Response Aviation, Inc.
<PAGE>
<PAGE>
SCHEDULE 3.20
Accounts Receivable Aging
To be provided before Closing.
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SCHEDULE 3.21
Employees
To be provided prior to Closing.
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SCHEDULE 3.22
Agreements and Obligations; Performance
None
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SCHEDULE 4.1
Colorado
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SCHEDULE 6.1.4
Guarantees
The Company may have guaranteed obligations of Air Response, Inc. The Company
will identify to Purchaser any such guarantees within 30 days.
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PROFLIGHT, INC.
STOCK OPTION PLAN
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STOCK OPTION PLAN
ARTICLE I
DEFINITIONS
1.1 Affiliate means any "subsidiary corporation" or "parent corporation"
as such terms are defined in Section 424 of the Code.
1.2 Agreement means a written agreement (including any amendment or
supplement thereto) between the Corporation and a Participant specifying the
terms and conditions of an Option granted to such Participant.
1.3 Board means the Board of Directors of the Corporation.
1.4 Code means the Internal Revenue Code of 1986, and any amendments
thereto.
1.5 Committee means a committee of two or more members of the Board
appointed to administer the Plan, who either are not eligible to participate in
the Plan and have not been granted existing securities under the Plan or any
other plan of the Corporation during the one year period prior to becoming a
member of the Committee, or who are otherwise deemed to be "disinterested
persons" within the meaning of Section 16 of the Securities Exchange Act of 1934
as in effect from time to time and the rules promulgated thereunder.
1.6 Common Stock means the common stock par value $.001 per share, of
the Corporation.
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1.7 Corporation means Proflight, Inc., a Colorado corporation.
1.8 Date of Exercise means, with respect to an Option, the date that the
Option price is received by the Corporation.
1.9 Employment Agreement means a written agreement (including any
amendment or supplement thereto) between the Corporation and a Participant
specifying the terms and conditions of employment with the Corporation.
1.10 Fair Market Value means, on any given date, the closing price of
the Common Stock on the principal securities exchange on which such Common Stock
is traded on the day immediately preceding the date as of which Fair Market
Value is being determined, or on the next preceding date on which such Common
Stock is traded if no Common Stock was traded on such immediately preceding day.
If the Common Stock is not traded on a securities exchange, but is reported by
the National Association of Securities Dealers Automated Quotation System and
market information is published on a regular basis in The New York Times or The
Wall Street Journal, then Fair Market Value shall be deemed to be the average of
the published high and low sales price or the published daily bid and asked
prices of the Common Stock, as so published, on the day immediately preceding
the date as of which Fair Market Value is being determined or, if not so
published, on the next preceding date on which such prices were published. If
market information is not so published on a regular basis, then Fair Market
Value shall be deemed to be the
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average of the high bid and low asked prices of the Common Stock in the
over-the-counter market on the date immediately preceding the date as of which
Fair Market Value is being determined or on the next preceding date on which
such high bid and low asked prices were recorded as reported by the National
Association of Securities Dealers Automated Quotation System, or, if not so
reported, by a generally accepted reporting service. If the Common Stock is not
publicly traded, Fair Market Value shall be determined by the Committee or the
Board. In no case shall Fair Market Value be less than the par value of a share
of Common Stock.
1.11 Option means a stock option that entitles the holder to purchase
from the Corporation a stated number of shares of Common Stock at the price set
forth in an Agreement.
1.12 Participant means an employee of the Corporation or of an
Affiliate, including an employee who is a member of the Board, or any consultant
or other service provider to the Corporation or an Affiliate who is not an
employee of the Corporation or an Affiliate, who in each instance satisfies the
requirements of Article IV and is selected by the Committee to receive an
Option.
1.13 Plan means the Proflight, Inc. Stock Option Plan.
1.14 Ten Percent Stockholder means any individual owning more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Corporation or of an Affiliate at the time any Option is granted to such
individual. An individual shall be considered to own any voting stock owned
(directly or
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indirectly) by or for his brothers, sisters, spouse, ancestors or lineal
descendants and shall be considered to own proportionately any voting stock
owned (directly or indirectly) by or for a corporation, partnership, estate or
trust of which such individual is a shareholder, partner or beneficiary.
ARTICLE II
PURPOSES
The Plan is intended primarily to assist the Corporation and its
Affiliates in recruiting and retaining employees with ability and initiative by
enabling them to participate in the future success of the Corporation and its
Affiliates and to associate the interests of such employees with those of the
Corporation or its Affiliates and their stockholders. The Plan is intended to
permit the grant of both Options qualifying under Section 422 of the Code
("Incentive Stock Options" or "ISOs") and Options not so qualifying
("Non-Incentive Stock Options" or "NSOs"). No Option that is intended to be an
Incentive Stock Option shall be invalid for failure to qualify as an Incentive
Stock Option and if such Option so fails to qualify as an Incentive Stock
Option, such Option will be deemed to be a Non-Incentive Stock Option. The
proceeds received by the Corporation from the sale of Common Stock pursuant to
this Plan shall be used for general corporate purposes.
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ARTICLE III
ADMINISTRATION
Except as provided herein, the Plan shall be administered by the
Committee. In the event the Board does not appoint a Committee, the Board shall
administer this Plan and, unless the context otherwise requires, any references
in this Plan to the "Committee" shall mean the "Board". The Committee shall have
authority to grant Options upon such terms (not inconsistent with the provisions
of this Plan) as the Committee may consider appropriate. Such terms may include
conditions (in addition to those contained in this Plan) on the exercisability
of all or any part of an Option. The Committee may, in its discretion,
accelerate the time at which any Option may be exercised. In addition, the
Committee shall have complete authority to interpret all provisions of this
Plan; to prescribe the form of any Agreement; to adopt, amend, and rescind rules
and regulations pertaining to the administration of the Plan; and to make all
other determinations necessary or advisable for the administration of this Plan.
The express grant in the Plan of any specific power to the Committee shall not
be construed as limiting any power or authority of the Committee. Any decision
made, or action taken, by the Committee or in connection with the administration
of this Plan shall be final and conclusive. No member of the Committee shall be
liable for any act done in good faith with respect to this Plan or any Agreement
or Option. All expenses of administering this Plan shall be borne by the
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Corporation.
ARTICLE IV
ELIGIBILITY
4.1 General Any employee of the Corporation or of any Affiliate
(including any corporation that becomes an Affiliate after the adoption of the
Plan) is eligible to participate in this Plan if the Committee, in its sole
discretion, determines that such person has contributed or can be expected to
contribute to the profits or growth of the Corporation or an Affiliate. Any such
employee may be granted one or more Options. A director of the Corporation who
is an employee of the Corporation or an Affiliate may be granted Options under
this Plan, including ISOs. A member of the Committee may not participate in this
Plan during the time that his participation would prevent the Committee from
being "disinterested" for purposes of Section 16 of the Securities Exchange Act
of 1934 as in effect from time to time and the rules promulgated thereunder. Any
consultant or other service provider to the Corporation (including a Director
who is not an employee of the Corporation or an Affiliate or a member of the
Committee) is also eligible to participate in this Plan on the same conditions
as employees, but may be granted only Options that are Non-Incentive Stock
Options.
4.2 Grants The Committee will designate individuals to whom Options are
to be granted and will specify the number of shares of Common Stock subject to
each grant, provided, however,
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that Incentive Stock Options shall be granted only to employees of the
Corporation or any Affiliate. All Options granted under this Plan shall be
evidenced by Agreements which shall be subject to applicable provisions of this
Plan and to such other provisions as the Committee may adopt. No Participant may
be granted Incentive Stock Options (under all incentive stock option plans of
the Corporation and its Affiliates) which are first exercisable in any calendar
year for Common Stock having an aggregate Fair Market Value (determined as of
the date an option is granted) exceeding $100,000. The preceding annual
limitation shall not apply with respect to Options that are Non-Incentive Stock
Options.
ARTICLE V
STOCK SUBJECT TO PLAN
5.1 Sources of Shares Upon the exercise of any Option, the Corporation
may deliver to the Participant authorized but unissued Common Stock.
5.2 Maximum Number of Shares The maximum aggregate number of shares of
Common Stock that may be issued pursuant to the exercise of Options is 500,000,
subject to increases and adjustments as provided in Section 5.3 and Article IX
hereof.
5.3 Forfeitures, Etc. If an Option is terminated, in whole or in part,
or expires without being exercised, the number of shares of Common Stock
allocated to the Option or portion thereof may be reallocated to other Options
to be granted under
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this Plan.
ARTICLE VI
OPTION PRICE
The price per share for Common Stock purchased on the exercise of an
Option shall be determined by the Committee on the date of grant. The price per
share for Common Stock purchased on the exercise of any Option that is an
Incentive Stock Option shall not be less than the Fair Market Value on the date
the Option is granted; provided, however, that the price per share shall not be
less than 110% of the Fair Market Value in the case of an Incentive Stock Option
that is granted to a Ten Percent Stockholder.
ARTICLE VII
EXERCISE OF OPTIONS
7.1 Ability to Exercise An Option shall be exercisable commencing on the
date of grant or on any date thereafter established by the Committee prior to
the expiration period, subject to such limitations as are set forth in this Plan
or in the Agreement; provided, however, that with respect to an Option that is
an Incentive Stock Option such Option shall not be exercisable for a longer
period of time than provided under Section 422 of the Code.
7.2 Maximum Exercise Period The maximum period in which an Option may be
exercised shall be determined by the Committee on
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the date of grant, except that no Option that is an Incentive Stock Option shall
be exercisable after the expiration of ten years from the date such Option was
granted, or after the expiration of five years from the date such Option was
granted to a Ten Percent Stockholder. The terms of any Option may provide that
it is exercisable for a period less than such maximum period. All Options which
are Incentive Stock Options shall terminate on the date the Participant's
employment with the Corporation terminates, except as provided in the Agreement
with respect to death, disability, termination of employment by the Corporation
without cause or by the Participant with cause or a "change in ownership" (as
described in any Agreement, Employment Agreement or the Code).
7.3 Nontransferability Any Option granted under this Plan shall be
nontransferable by the optionee, either voluntarily or otherwise, except by will
or by the laws of descent and distribution. During the lifetime of the
Participant to whom the Option is granted, the Option may be exercised only by
the Participant, except with respect to a Participant who has become "disabled"
within the meaning of Section 22(e) of the Code. Any Option granted herein shall
be exercised only by the Participant or by his conservator or legal
representative in the event of death or disability. No right or interest of a
Participant in any Option shall be liable for, or subject to, any lien,
obligation or liability of such Participant.
7.4 Employee Status For purposes of determining the
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applicability of Section 422 of the Code (relating to the Incentive Stock
Options), or in the event that the terms of any Option provide that it may be
exercised only during employment or within a specified period of time after
termination of employment, the Committee, in its discretion, may determine
"employee status".
ARTICLE VIII
METHOD OF EXERCISE
8.1 Exercise An Option granted under this Plan shall be deemed to have
been exercised on the Date of Exercise. Subject to the provisions of Articles
VII and X, an Option may be exercised in whole at any time or in part from time
to time at such times and in compliance with such requirements as the Committee
shall determine. An Option granted under this Plan may be exercised with respect
to any number of whole shares less than the full number of whole shares for
which the Option could be exercised. A partial exercise of an Option shall not
affect the right to exercise the Option from time to time in accordance with
this Plan and the applicable Agreement with respect to remaining shares subject
to the Option.
8.2 Payment Unless otherwise provided by the Agreement, payment of the
Option Price shall be made in cash, a cash equivalent, Common Stock or any other
consideration acceptable to the Committee. If the Agreement provides, payment of
all or part of the Option price may be made by surrendering shares of Common
11
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Stock to the Corporation, provided, however, that shares of Common Stock may be
surrendered by a Participant who is subject to the reporting and other
provisions of Section 16 of the Securities Exchange Act of 1934 as in effect
from time to time in payment of all or part of the Option price only if the
surrendered shares have been held by the Participant for at least six months
prior to the Date of Exercise. If Common Stock is used to pay all or part of the
Option price, the shares surrendered must have a Fair Market Value (determined
as of the day preceding the Date of Exercise) that is not less than such price
or part thereof.
8.3 Loans The Corporation, in accordance with the requirements of
Regulation G of the Federal Reserve Board regulations ("Regulation G"), may lend
the Participant all or part of the Option price as determined in accordance with
Article VI hereof, provided that the maximum loan amount shall not exceed the
Fair Market Value at the time of purchase by the Participant of the shares of
Common Stock acquired with the loan proceeds. The principal amount of the loan
shall be repayable in not more than five annual installments provided, however,
that all principal and accrued interest on such loan amounts shall become
immediately due and payable upon the Participant's termination of employment
with the Corporation or any sale of the shares of Common Stock underlying the
Option. The Participant shall pay interest on the unpaid principal balance at
such rate as the Committee shall determine, which shall be no less than the
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minimum rate necessary to avoid imputed interest or original issue discount
under the Code. All shares of Common Stock acquired with cash borrowed from the
Corporation shall be pledged to the Corporation as security for the repayment
thereof. In the discretion of the Board, shares of Common Stock may be released
from such pledge proportionately as payments of the note (together with
interest) are made, provided, however, that the Corporation, in accordance with
the requirements of Regulation G, shall not release any shares of Common Stock
which would cause the amount outstanding under a loan to exceed the "maximum
loan value" of the remaining shares pledged by the Participant, determined at
the time of such release. While such shares are so pledged, and so long as there
has been no default in the installment payments, such shares shall remain
registered in the name of the Participant, and he shall have the right to vote
such shares and to receive all dividends thereon.
8.4 Stockholder Rights No participant shall have any rights as a
stockholder with respect to shares subject to his Option until the Date of
Exercise of such Option.
ARTICLE IX
ADJUSTMENT UPON CHANGE IN COMMON STOCK
The maximum number and kind of shares as to which Options may be granted
under this Plan shall be proportionately adjusted, and the terms of outstanding
Options shall be adjusted by way of increase or decrease as the Committee in the
exercise of its reasonable judgment shall determine to be equitable required, in
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the event that (a) the Corporation (i) effects one or more stock dividends,
stock splits, reverse stock splits, subdivisions, consolidations or other
similar events or (ii) engages in a transaction to which Section 424 of the Code
applies or (b) there occurs any other event which in the judgment of the
Committee necessitates such action. Any determination made under this Article IX
by the Committee shall be final and conclusive. The issuance by the Corporation
of shares of stock of any class, or securities convertible into shares of stock
of any class, for cash or property, or for labor or services rendered, either
upon direct sale or upon the exercise of rights or warrants to subscribe
therefor, or upon conversion of shares or obligations of the Corporation
convertible into such shares or other securities, shall not affect, and no
adjustment by reason thereof shall be made with respect to, outstanding Options.
ARTICLE X
COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES
No Option shall be exercisable, no Common Stock shall be issued, no
certificates for shares of Common Stock shall be delivered, and no payment shall
be made under this Plan except in compliance with all federal and state laws and
regulations (including, without limitation, withholding tax requirements),
federal and state securities laws and regulations and the rule of all national
securities exchanges or self-regulatory organizations on which the Corporation's
shares may be listed. The Corporation shall have the right to rely upon an
opinion of
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its counsel as to such compliance. Any certificate issued to evidence shares of
Common Stock for which an Option is exercised may bear such legends and
statements as the Committee upon advice of counsel may deem advisable to assure
compliance with federal and state laws and regulations. No Option shall be
exercisable, no Common Stock shall be issued, no certificate for shares shall be
delivered and no payment shall be made under this Plan until the Corporation has
obtained such consent or approval as the Committee may deem advisable from any
regulatory bodies having jurisdiction over such matter.
ARTICLE 21
GENERAL PROVISIONS
10.1 Effect on Employment Neither the adoption of this Plan, its
operation, nor any documents describing or referring to this Plan (or any part
thereof) shall confer upon any employee any right to continue in the employ of
the Corporation or an Affiliate or in any way affect any right and power of the
Corporation or an Affiliate to terminate the employment of any employee at any
time with or without assigning a reason therefor.
10.2 Unfunded Plan The Plan, insofar as it provides for grants, shall be
unfunded, and the Corporation shall not be required to segregate any assets that
may at any time be represented by grants under this Plan. Any liability of the
Corporation to any person with respect to any grant under this Plan shall be
based solely upon any contractual obligations that
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may be created pursuant to this Plan. No such obligation of the Corporation
shall be deemed to be secured by any pledge of, or other encumbrance on, any
property of the Corporation.
10.3 Rules of Construction Headings are given to the articles and
sections of this Plan solely as a convenience to facilitate reference. The
reference to any statute, regulation or other provision of law shall be
construed to refer to any amendment to or successor of such provision of law.
ARTICLE XII
AMENDMENT
The Board may amend or terminate this Plan from time to time; provided,
however, that no amendment may become effective until stockholder approval is
obtained if (i) the amendment materially increases the benefits accruing to
Participants under the Plan, (ii) the amendment materially increases the
aggregate number of shares of Common Stock that may be issued under the Plan, or
(iii) the amendment materially changes the requirements as to eligibility for
participation in the Plan. No amendment shall, without a Participant's consent,
adversely affect any rights of such Participant under any Option outstanding at
the time such amendment is made.
ARTICLE XIII
DURATION OF PLAN
No option may be granted under this Plan more than ten years after the
earlier of the date that the Plan is adopted by the
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Board or the date that the Plan is approved by stockholders of the Corporation
as provided in Article XIV. Options granted before that date shall remain valid
in accordance with their terms.
ARTICLE XIV
EFFECTIVE DATE OF PLAN
Options may be granted under this Plan upon its adoption by the Board,
provided that no Option will be effective unless this Plan is approved by
stockholders holding a majority by the Corporation's outstanding total combined
voting power of all classes of stock of the Corporation, voting in person or by
proxy at a duly held stockholders' meeting or by written consent, within twelve
months of the adoption of this Plan by the Board.
17
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<PAGE>
ESCROW AGREEMENT
Agreement dated this 4th day of November, 1996 by and between Proflight,
Inc., a Colorado corporation (the "Company"), Air Response, Inc., a New York
corporation ("Air Response") and Loselle Greenawalt Kaplan Blair & Adler
("Escrow Agent").
1. GENERAL
(a) In order to demonstrate good faith in its interest, subject to its
due diligence investigation, to acquire Air Response, and its subsidiaries, the
Company agrees to deposit, in escrow, with the Escrow Agent, the sum of $200,000
(the "Escrow Deposit"). Air Response agrees that the Company shall have the
absolute control over the Escrow Deposit which shall be paid to Air Response at
such time as a letter of intent (the "Letter of Intent") is entered into between
the parties. In the event the Company, in its sole discretion, determines not to
enter into the Letter of Intent with Air Response, it shall notify Air Response,
in writing and the Escrow Agent shall return the Escrow Deposit to the Company.
(b) Anything to the contrary herein notwithstanding, Air Response
agrees, until 5:00 p.m., November 15, 1996, Eastern Standard Time, not to offer
to any third party the business and/or assets of Air Response.
2. APPOINTMENT OF ESCROW AGENT
The Company and Air Response hereby appoint the Escrow Agent and the
Escrow Agent hereby accepts its appointment as Escrow Agent pursuant to the
terms and conditions hereinafter set forth:
(a) The Company shall cause to be delivered to Escrow Agent the Escrow
Deposit. Escrow Agent shall hold the Escrow Deposit until the earlier of (i) its
receipt of written instructions from the Company to return the Escrow Deposit to
it or (ii) the signing of the Letter of Intent.
(b) It is understood and agreed by the parties to this Agreement as
follows:
(i) The Escrow Agent is not and shall not be deemed to be a
trustee for any party for any purpose and is merely acting as a depository and
in a ministerial capacity hereunder with the limited duties herein prescribed.
(ii) The Escrow Agent does not have and shall not be deemed to
have any responsibility in respect of any instruction certificate or notice
delivered to it other than faithfully to
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carry out the obligations undertaken in this Agreement and to follow the
directions in such instruction or notice provided in accordance with the terms
hereof.
(iii) The Escrow Agent is not and shall not be deemed to be
liable for any action taken or omitted by it in good faith and may rely upon,
and act in accordance with, the advice of its counsel without liability on its
part for any action taken or omitted in accordance with such advice. In any
event, its liability hereunder shall be limited to liability for gross
negligence, willful misconduct or bad faith on its part.
(iv) The Escrow Agent may conclusively rely upon and act in
accordance with any certificate, instruction notice, letter, telegram, cablegram
or other written instrument believed by it to be genuine and signed by the
Company and Air Response. Anything to the contrary herein notwithstanding, the
Escrow Agent can rely on the written instructions of the Company, without
instructions from Air Response, as set forth in l(b) above, to return the Escrow
Deposit at any time the Company has decided, in its sole discretion, not to
enter into a Letter of Intent with Air Response.
(v) The Company and Air Response agree to save harmless,
indemnify and defend the Escrow Agent for, from and against any loss, damage,
liability, judgment, cost and expense whatsoever, including attorney's fees,
suffered or incurred by it by reason of, or on account of, any misrepresentation
made to it or as to its status or activities as Escrow Agent under this
Agreement except for any loss, damage, liability, judgment, cost or expense
resulting from gross negligence, willful misconduct or bad faith on the part of
the Escrow Agent.
(vi) The Escrow Agent shall not be required to defend any legal
proceeding which may be instituted against it in respect of the subject matter
of this Agreement. If any such legal proceeding is instituted against it, the
Escrow Agent agrees promptly to give notice of such proceeding to the Company
and Air Response. The Escrow Agent shall not be required to institute legal
proceedings of any kind.
(vii) The Escrow Agent shall not, by act, delay, omission or
otherwise, be deemed to have waived any right or remedy it may have either under
this Agreement or generally, unless such waiver be in writing, and no waiver
shall be valid unless it is in writing, signed by the Escrow Agent, and only to
the extent expressly therein set forth. A waiver by the Escrow Agent under the
terms of this Agreement shall not be construed as a bar to, or waiver of, the
same or any other such right or remedy which it would otherwise have on any
other occasion.
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(viii) The Escrow Agent may refrain from taking any action other
than keeping all property held by it in escrow if it is uncertain concerning its
duties or rights under this Escrow Agreement or receives claims or demands from
any person or entity or receives a final judgment by a court of competent
jurisdiction if it deems that necessary or advisable.
3. MISCELLANEOUS
(a) Except as specifically referred herein, this agreement constitutes
the entire contract between the parties hereto concerning the subject matter
hereof and no party shall be liable or bound to the other in any manner by any
warranties, representations or covenants except as specifically set forth
herein. The terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the parties hereto.
Nothing in this Agreement, express or implied is intended to confer upon any
party, other than the parties hereto, and their respective successors and
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as expressly provided herein.
(b) Any notice under the provisions of this Agreement shall be given in
writing and delivered by hand, overnight courier or messenger service, against
signed receipt or acknowledgment of receipt, or by registered or certified mail,
return receipt requested, or telecopier or similar means of communication if
receipt is confirmed or if transmission is confirmed by mail at the addresses
provided on the signature page hereof or the telecopier numbers set forth on the
signature pages hereof. Any party may by like notice, change the address to
which notice should be given.
(c) This Agreement shall be governed by and construed in accordance with
the laws of the state of New York.
(d) This Agreement may be executed in two counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
(e) Except as herein provided, any provision of this Agreement may be
amended or waived by a written instrument signed by the parties hereto.
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In Witness Whereof, the parties have executed this Agreement as
of the day and year first above written.
Proflight, Inc.
By: /s/ Kevin L. Burkhardt
-------------------------
Kevin L. Burkhardt
12420 E. Control Drive
Englewood, CO 80112
Fax: (303) 799-1367
Agreed and Accepted:
Air Response, Inc.
By:
--------------------------
Louis R. Capece, Jr.
Orlando Executive Airport, 469B
Herndon Avenue
Hangar 72
Orlando, FL 32803
Fax: (407) 898-0520
Loselle Greenwalt Kaplan
Blair & Adler
By: /s/ Gerald A. Adler
--------------------------
Gerald A. Adler
140 East 45th Street
New York, NY 10017
Fax: (212) 986-6850
4
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In Witness Whereof, the parties have executed this Agreement as
of the day and year first above written.
Proflight, Inc.
By: /s/ Kevin L. Burkhardt
-------------------------
Kevin L. Burkhardt
12420 E. Control Drive
Englewood, CO 80112
Fax: (303) 799-1367
Agreed and Accepted:
Air Response, Inc.
By: /s/ Louis R. Capece, Jr.
--------------------------
Louis R. Capece, Jr.
Orlando Executive Airport, 469B
Herndon Avenue
Hanger 72
Orlando, FL 32803
Fax: (407) 898-0520
Loselle Greenwalt Kaplan
Blair & Adler
By: /s/ Gerald A. Adler
--------------------------
Gerald A. Adler
140 East 45th Street
New York, NY 10017
Fax: (212) 986-6850
4
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[LETTERHEAD OF GRANT THORNTON]
We have issued our reports dated January 16, 1997 (except for note K. Subsequent
Events, as to which the date is February 17, 1997, and note F. Commitments and
Contingencies - Litigation, as to which the date is April 24, 1997) accompanying
the financial statements of Proflight Medical Response, Inc. contained in the
Registration Statement and Prospectus. We consent to the use of the
aforementioned reports in Amendment No. 1 to the Registration Statement and
Prospectus, and to the use of our name as it appears under the caption
"Experts"; "Summary Historical and Pro Forma Financial Data" and "Selected
Financial Data."
GRANT THORNTON LLP
Denver, Colorado
December 9, 1997
<PAGE>
<PAGE>
[LETTERHEAD OF STAFF MAIKELS & CIAMPINO, P.C.]
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form SB-2 of our
report dated June 13, 1997, on our audit of the combined financial statements
of Air Response, Inc. and Air Response South, Inc. We also consent to the
reference to our firm under the caption "Experts."
December 8, 1997 /s/ Staff Maikels & Ciampino, P.C.
<PAGE>
