<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
[ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended
--------------------------------------
OR
[X] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from July 1, 1994 to December 31, 1994
--------------- ------------------
COMMISSION FILE NUMBER 0-16079
-----------
AIR METHODS CORPORATION
- - - ----------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 84-0915893
- - - ----------------------------------------- -------------------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
7301 SOUTH PEORIA, ENGLEWOOD, COLORADO 80112
- - - ----------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (303) 792-7400
--------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Not Applicable
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $.06 PAR VALUE PER SHARE (the "Common Stock")
- - - -----------------------------------------------------------------
(Title of Class)
NASDAQ STOCK MARKET
- - - -----------------------------------------------------------------
(Name of each exchange on which registered)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by
non-affiliates of the Registrant as of June 15, 1995 was approximately
$15,106,680/1/. The number of outstanding shares of Common Stock as
of June 15, 1995, was 8,075,023.
DOCUMENTS INCORPORATED BY REFERENCE:
None.
- - - --------------------
/1/ Excludes 1,360,943 shares of Common Stock held by directors,
officers, and shareholders whose ownership exceeds five percent
of the shares outstanding at June 15, 1995. Exclusion of shares
held by any person should not be construed to indicate that such
person possesses the power, direct or indirect, to direct or
cause the direction of the management of policies of the
Registrant, or that such person is controlled by or under common
control with the Registrant.
<PAGE>
TABLE OF CONTENTS
-----------------
To Form 10-K
Page
----
PART I
ITEM 1. BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . 1
General. . . . . . . . . . . . . . . . . . . . . . . . . 1
Operations . . . . . . . . . . . . . . . . . . . . . . . 1
Engineering, Maintenance, Testing, Repair, Completion
Services and Backlog. . . . . . . . . . . . . . . . 4
Hazards and Insurance. . . . . . . . . . . . . . . . . . 4
Marketing and Sales Strategy . . . . . . . . . . . . . . 4
Competition. . . . . . . . . . . . . . . . . . . . . . . 5
Employees. . . . . . . . . . . . . . . . . . . . . . . . 5
Government Regulation. . . . . . . . . . . . . . . . . . 6
ITEM 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . 6
Facilities . . . . . . . . . . . . . . . . . . . . . . . 6
Equipment, Fuel and Parts. . . . . . . . . . . . . . . . 6
ITEM 3. LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . 7
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. . . . 7
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS. . . . . . . . . . . . . . . . . . . . 8
ITEM 6. SELECTED FINANCIAL DATA. . . . . . . . . . . . . . . . . . 8
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS. . . . . . . . . . . 10
Results of Operations. . . . . . . . . . . . . . . . . . 10
Liquidity and Capital Resources. . . . . . . . . . . . . 15
Outlook for 1995 . . . . . . . . . . . . . . . . . . . . 15
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. . . . . . . 16
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE. . . . . . . . . . . 16
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT . . . 16
ITEM 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . 18
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . 23
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . 25
i<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K. . . . . . . . . . . . . . . . . . . . . . .IV-1
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . .IV-4
ii
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
Air Methods Corporation, a Delaware corporation ("Air Methods" or
the "Company"), was established in Colorado in 1982 and now serves the
nation's hospitals as one of the largest providers of aeromedical
emergency services and systems throughout North America. As of
June 15, 1995, the Company operates a fleet of 31 aircraft consisting
of 26 helicopters and 5 airplanes. The Company provides its services
to 54 hospitals located in 14 states under 19 operating agreements
with terms ranging from 3 to 7 years.
The Company's larger competitors initiated their operations
serving the energy production and exploration industry, unlike Air
Methods which began and has remained exclusively in the aeromedical
field. In addition, the Company is the largest aeromedical carrier in
the United States which uses only pilots and equipment certified by
the Federal Aviation Administration (the "FAA") for flight under
instrument flight rules ("IFR") conditions. Air Methods has one of
the lowest operating interruption ratios in the aeromedical
transportation industry.
The Company's headquarters in metropolitan Denver, Colorado
includes a technologically advanced helicopter repair, maintenance,
and testing shop, as well as an aircraft interior completion facility.
In addition, the Company designs, installs and services proprietary
medical interiors for third parties which allow the aircraft to
operate as airborne intensive care units (ICU's). The Company has
provided medical interiors and equipment for helicopters in Germany,
the Middle East and Brazil and for airplanes in France, Canada and the
United Kingdom.
On November 12, 1991, the Company, then a research and
development company doing business as Cell Technology, completed the
acquisition of Air Methods Corporation, a Colorado corporation ("Air
Methods-Colorado") incorporated in 1980. Air Methods-Colorado was
merged into the Company, and the Company changed its name to "Air
Methods Corporation." From its inception in 1982 until the completion
of this transaction, the Company had been engaged in the development
of biologic response modifiers ("BRMs"), naturally occurring
substances designed to alter the body's immune system and its reaction
to cancer and other diseases. At the time of its notification by the
United States Food and Drug Administration in late 1990 of the
required construction of a full-scale commercial production plant
prior to initiating Phase III clinical trials, the Company had
completed various multicenter Phase II clinical trials of its BRMs in
primary adult brain cancer. Following this notification, the Company
discontinued the internal development of its BRMs and out-licensed
these development responsibilities to other pharmaceutical and
biotechnology companies.
References herein to Air Methods and the Company refer to Air
Methods Corporation, a Delaware corporation formerly known as Cell
Technology, Inc., including its predecessor corporation, Air Methods
Corporation, a Colorado corporation, unless otherwise indicated by the
context. Air Methods Corporation is located at 7301 South Peoria,
Englewood, Colorado 80112; the telephone number is 303-792-7400.
OPERATIONS
The Company has played a significant role in pioneering the use
of helicopters and airplanes equipped with patient life support
systems to transport persons requiring intensive medical care from
either the scene of an accident or general care hospitals to highly
skilled trauma centers, tertiary care centers or university teaching
hospitals. Since opening its first hospital-based aeromedical program
in 1980, the Company has grown to become one of the largest providers
of aeromedical emergency services and systems in the United States.
The Company provides its hospital clients with dedicated
helicopters and airplanes equipped with FAA-approved, sophisticated
medical aircraft interiors which serve as airborne intensive care
units for the patients being transported. The Company also supplies
similarly configured backup helicopters and airplanes to its client
hospitals for reserve operating purposes.
1<PAGE>
The Company conducts its operations exclusively using IFR-
certified equipment and IFR-rated pilots, permitting a higher degree
of operational flexibility, flight safety and navigational accuracy
than is customarily available using more limited Visual Flight Rules
("VFR")-certified equipment and pilots without instrument ratings,
which are used by many of the Company's competitors. In the past, the
Company has provided Bell 222 training for FAA pilots. The Company
also employs pilots and certified airframe and powerplant ("A&P")
mechanics who are based at the client hospitals where aircraft are
assigned. Client hospitals administer and manage their individual
aeromedical programs, provide all necessary medical personnel and
equipment and are responsible for all medically-related operations.
However, the Company in all instances retains the ultimate authority
regarding the operation and flight safety of its hospital-based and
backup aircraft.
The Company's aeromedical healthcare services are generally
furnished to the contracting hospital under three- to seven-year
contracts, which typically provide that the Company receives a fixed
monthly fee and an hourly flight fee from the hospital, regardless of
when, or if, the hospital is reimbursed for these services by its
patients, their insurers, or the federal government. The aeromedical
contracts generally provide for an annual adjustment of the monthly
service fee and hourly flight fee in accordance with fluctuations in
the cost of living index for all urban consumers and for the pass-
through of increases in the Company's hull and operator liability
insurance premiums to certain client hospitals. The majority of the
contracts require that client hospitals pay for fuel utilized by the
Company in providing aeromedical transport services to the hospital.
The contracts also typically provide that the client hospital may
terminate the contract if a material default by the Company occurs.
Aeromedical contracts are generally awarded following a
comprehensive Request for Proposal ("RFP") process initiated by the
prospective client hospital. Normally, hospitals evaluate various
features of the bidder including price, industry experience and
reputation, maintenance and support capabilities, quality of pilots,
and availability of specified aircraft equipment and medical interior
configurations.
The following table sets forth the name and location of each of
the Company's aeromedical programs and the respective hospitals served
thereby as of the date of this report:
<TABLE>
<CAPTION>
Operating Program City and State Hospitals Served
- - - --------------------------- ----------------- ----------------
<S> <C> <C>
Air Life Texarkana, AR St. Michael's Hospital
Wadley Hospital
Life Flight Stanford, CA Stanford University Hospital
Santa Clara Valley Medical Center
Lucille Salter Packard Children's Hospital at Stanford
P/SL AirLife, a division Aurora, CO P/SL Aurora Presbyterian Hospital
of HealthONE Presbyterian/St. Luke's Medical Center
Swedish Medical Center
St. Mary's Air Life Grand Junction, CO St. Mary's Hospital - The Regional Medical Center
Air Life of Greeley Greeley, CO North Colorado Medical Center
Lifeline Rockford, IL St. Anthony Medical Center
Mercy Air Life Des Moines, IA Mercy Hospital Medical Center
St. Luke's Life Link III Duluth, MN St. Luke's Hospital of Duluth
2<PAGE>
<CAPTION>
Operating Program City and State Hospitals Served
- - - --------------------------- ----------------- ----------------
<S> <C> <C>
Life Link II St. Paul, MN Abbot Northwestern Hospital
St. Paul - Ramsey Medical Center
University of Minnesota Hospital & Clinic
The Minneapolis Children's Medical Center
Deacare Advanced Life Billings, MT Deaconess Medical Center
Support Services
Air Care 1 Farmington, NM San Juan Regional Medical Center
MedCenter Air Charlotte, NC Carolinas Medical Center
Air Care Winston-Salem, NC North Carolina Baptist Hospitals, Inc.
Bowman Gray School of Medicine
Wake Forest University
Air Life of Oregon Bend, OR St. Charles Medical Center
Baptist Air Life San Antonio, TX Baptist Medical Center
Southeast Baptist Hospital
Northeast Baptist Hospital
North Central Baptist Hospital
University Hospital
Air Med Salt Lake City, UT University of Utah Hospital
Inova Medical AirCare Falls Church, VA Fairfax Hospital
Fair Oaks Hospital
Mt. Vernon Hospital
Jefferson Hospital
Life-Guard 10 Roanoke, VA Roanoke Memorial Hospital
Community Hospital
Bedford Memorial Hospital
Franklin Memorial Hospital
Giles Memorial Hospital
Gill Memorial Hospital
Lonesome Pine Hospital
Wythe Community Hospital
Radford Community Hospital
Southside Community Hospital
Tazewell Community Hospital
Spirit of Marshfield Marshfield, WI Saint Joseph's Hospital
Holy Family Hospital
Mercy Medical Center
Sacred Heart Hospital
Sacred Heart/Saint Mary's Hospital, Inc.
Saint Elizabeth's Hospital
Saint Jude Hospital
St. Michael's Hospital
Diversified Health Services
</TABLE>
3<PAGE>
ENGINEERING, MAINTENANCE, TESTING, REPAIR, COMPLETION SERVICES AND
BACKLOG
At the Company's headquarters in Denver, the Company is able to
perform non-destructive dynamic component testing, engine repair and
component overhaul, as well as the design and installation of custom
avionics and medical interior configurations. The Company maintains a
sophisticated avionics engineering department, which is licensed and
approved by the FAA, as well as a design engineering department with
computer-aided design capabilities, an upholstery shop, an equipment
fabrication department, a machine shop, a welding shop and an
equipment research and development department.
In addition to serving as one of the largest helicopter
completion and service centers in North America for Bell Helicopter,
the Company's principal airframe manufacturer, the Company operates a
Eurocopter BK-117 service center and a repair station for turbine-jet
engines manufactured by Allison, Pratt & Whitney, and Lycoming. The
Company is also an approved installation and service center for
Bendix-King, its primary avionics manufacturer. The Company is an
FAA-certified repair station with airframe, accessory, radio,
instrument and powerplant ratings, which give it the capacity to
provide specialized services on the significant brands of equipment
used in its operations or sent to the Company for servicing by third
parties.
The Company designs, produces and installs interior
configurations according to the requirements and specifications of its
hospital clients as well as other helicopter and airplane operators
and manufacturers. The Company employs an FAA Designated Engineering
Representative ("DER") who is authorized to approve various aircraft
modifications which the Company may choose to manufacture from time to
time as part of its ongoing business. The Company has the FAA
authorization and capability to engineer, design and install all of
the components necessary to transform an aircraft hull into an
airborne ICU. The Company is authorized to make these aircraft
modifications pursuant to various FAA-issued Supplemental Type
Certificates ("STCs") and Parts Manufacturer Approvals ("PMAs"). The
Company believes that its in-house repair, maintenance, testing and
completion capabilities provide cost savings and decrease aircraft
down time by avoiding the expense and operating risk of having
maintenance and repair work performed by nonaffiliated vendors. The
Company maintains a constant inventory of certain critical aircraft
parts at each of its hospital bases.
While most of the activities of the Company's headquarters are
devoted to the support and expansion of the Company's aeromedical
operations, the center also provides medical completion and specialty
configuration services directly to aviation equipment manufacturers,
as well as other helicopter operators in the United States and
overseas. In the six months ended December 31, 1994, the Company
recognized revenues of $684,000 from the sale of a medical interior to
one of its hospital clients and the manufacture of an interior for a
South American customer. As of December 31, 1994, the Company had
agreements to design and install passenger oxygen systems for a
regional airline and to refurbish a Bell 222 medical interior for one
of its client hospitals for expected revenues of $920,000. The
Company's backlog for medical interiors and other products as of
December 31, 1993 was $475,000.
HAZARDS AND INSURANCE
The operation of helicopters and airplanes involves a substantial
level of risk. Hazards, such as aircraft accidents, collisions and
fire, are inherent in the furnishing of aviation services and may
result in losses of life, equipment and revenues. The Company's
safety record compares favorably with other operators.
The Company maintains aircraft liability, aviation
spares/equipment, all risks, hull, product/completed operations,
hangar keeper's liability, property and casualty, and contractor's
equipment insurance coverage. The Company has not experienced
significant difficulty in obtaining insurance and has not incurred any
losses in excess of its property and liability coverage. While the
Company believes that its insurance coverage is adequate for its
operations, there can be no assurance that such insurance coverage is
now, or will be, adequate to cover any claims to which it may be
subject.
4<PAGE>
MARKETING AND SALES STRATEGY
For hospital providers, the demand for quality care continues
while the nature of reimbursement moves increasingly from
retrospective to prospective. The corresponding cost pressures are
leading to mergers and affiliations in the health care delivery
community and to increased consolidations of previously competing air
medical transport programs. Within this environment, the Company
intends to continue aggressively pursuing bid and contract negotiation
opportunities in air medical services for individual hospitals and
newly forming consortiums, competing primarily on the basis of safety,
service, reputation and to a lesser degree, price. The Company
believes that providing both helicopters and airplanes to hospital
consortiums will drive further market expansion. Air Methods
continues, on a world-wide basis, to actively pursue sales of its
highly regarded state-of-the-art medical interiors and avionics
packages. Lastly, efforts continue on the development of joint
venture partnerships in foreign countries for the provision of air
medical transport services. Subsequent to December 31, 1994, the
Company entered into a ten-year franchise agreement with a Brazilian
health care cooperative to provide expertise relating to the operation
of air medical programs as well as technical and consulting services.
The Company believes increased health care cost regulation will
continue to result in the closing of hospitals which are experiencing
declining in-patient revenues and decreasing profitability. As a
result, greater emphasis will be placed upon hospitals offering the
highest level of care, such as Level I trauma centers, tertiary care
centers and university teaching hospitals. The Company believes the
market for airborne emergency medical services ("EMS") is growing and
will continue to grow, as a result of a number of factors, including,
but not limited to: (1) the closing of urban and rural hospitals and
the subsequent concentration of various hospital specialization
centers (e.g., trauma, cardio-vascular, burn, neonatology, and organ
transplantation) into regional centers; (2) the further concentration
of major university teaching hospitals allowing for the possible
accelerated development of specialized medicine and health care
therapies in various regions throughout the country; and (3) the
vertical integration of airplane and helicopter provider services
designed to meet the increasingly sophisticated demands of those
hospitals desiring to operate an integrated aeromedical program.
There can be no assurance that these trends will continue or that a
positive effect will result for aeromedical emergency services or the
Company.
COMPETITION
The aeromedical services industry is competitive and is currently
served by a variety of operators. The Company believes that, of the
existing operators, there are only five companies which serve eight or
more aeromedical programs: Rocky Mountain Helicopters, Inc.;
OmniFlight, Inc.; Corporate Jets, Inc.; Petroleum Helicopters, Inc.;
and the Company. Some of the Company's competitors have somewhat
greater financial, technical and marketing resources than the Company.
Competition in the aeromedical service industry is focused primarily
on safety, pricing, quality of service and availability of aircraft
equipment. Although the Company is the third largest provider of
aeromedical transportation services in the United States, based on the
number of EMS programs served and the revenues generated by these
programs, it is the largest medically dedicated and exclusively IFR-
certified provider in this industry in the U.S.
EMPLOYEES
As of the date of this report, the Company retained 227 full time
and 13 part time employees, comprised of 120 pilots; 85 aviation
machinists, A&P engineers and other manufacturing/maintenance
positions; and 35 business and administrative personnel. All of the
Company's pilots are IFR-rated and have completed an extensive ground
school and flight training program at the commencement of their
employment with the Company, as well as local area orientation and
annual training provided by the Company. All of the Company's
operating aircraft mechanics must possess FAA airframe and powerplant
licenses.
The Company's employees are not covered by any collective
bargaining agreements and management believes that its relations with
employees are satisfactory. The Company believes that the
compensation arrangements offered to its employees are competitive
with those of other providers of aviation services based on the
individual qualifications of employees and are sufficient to attract
and keep qualified personnel.
5<PAGE>
GOVERNMENT REGULATION
The Company is subject to the Federal Aviation Act of 1958, as
amended. All flight and maintenance operations of the Company are
regulated and actively supervised by the U.S. Department of
Transportation through the FAA. The Company holds a Part 135 Air
Carrier Certificate from the FAA.
The Company cannot predict the impact of new or changed laws or
regulations on the demand for aeromedical services in the future or
the costs of complying with such laws and regulations.
ITEM 2. PROPERTIES
FACILITIES
The Company leases its headquarters, consisting of approximately
60,000 square feet of office and hangar space in metropolitan Denver,
Colorado at the Centennial Airport. The Company's lease for the
hangar space expires in December 1997 and in February 1998 for the
office space. The approximate annual rent is $355,000. The Company
has an option to extend these leases for an additional ten years upon
six months' advance written notice. The Company believes that these
facilities are in good condition and suitable for the Company's
requirements.
EQUIPMENT, FUEL AND PARTS
As of December 31, 1994, the Company managed a fleet of 34
aircraft, consisting of 27 helicopters and 7 airplanes. Of these
aircraft, the Company owns 19 helicopters and 2 airplanes and leases 4
helicopters and 2 airplanes. The Company operates 4 additional
helicopters and 3 airplanes owned by client hospitals and other third
parties in connection with existing aeromedical contracts. One
helicopter owned by the Company has not yet been placed in service
pending completion of its medical interior and avionics installations.
One helicopter and one airplane owned and 2 airplanes leased by the
Company are held for sale or sublease and are not currently used in
the Company's operations. The composition of the Company's helicopter
and airplane fleets as of December 31, 1994 is as follows:
COMPANY OWNED AIRCRAFT/1/
(Dollar Amounts in thousands)
-----------------------------
Net Book
Type Number Cost Value
---- ------ ------- --------
Helicopters:
Bell 206 L-1 1 $ 663 $ 551
Bell 206 L-3 5 4,347 3,745
Bell 222A 1 1,883 1,627
Bell 222UT 8 13,955 11,634
Bell 412 2 5,208 4,378
BK 117 1 5,906 5,648
--- ------- -------
18 $31,962 $27,583
Airplanes:
Cessna 421B 1 $ 251 $ 172
Held for Sale:
Bell 412 1 5,129 4,481
Beech 55 1 57 34
--- ------- -------
2 5,186 4,515
--- ------- -------
TOTALS: 21 $37,399 $32,270
=== ======= =======
6<PAGE>
COMPANY LEASED AIRCRAFT
(Dollar amounts in thousands)
-----------------------------
Remaining Total Remaining
Term Rents Over Lease
Type Number in Years Lease Life Payments
---- ------ --------- ---------- ---------
Helicopters:
Bell 206 L-3 1 3 $ 1,611 $ 209
Bell 412 2 7 9,759 7,185
Sikorsky S-76 1 4 2,100 770
-- ------ ------
4 13,470 8,164
Held for Sale or Sublease:
King Air 200 2 10 5,280 4,780
-- ------ ------
TOTALS 6 $18,750 $12,944
== ======= =======
____________________
/1/ Includes aircraft acquired under capital leases.
With respect to the Company's leased aircraft, the Company
generally pays all insurance, taxes, and maintenance expenses.
Helicopters are insured at replacement cost, which generally exceeds
book value. The Company believes that helicopter accidents
reimbursable by insurance will generally result in full reimbursement
of any damages sustained. In the ordinary course of business, the
Company may from time to time purchase and sell helicopters in order
to best match its specific needs with its fleet.
The Company has experienced no significant difficulties in
obtaining required parts for its helicopters. Repair and replacement
components are purchased primarily through Bell Helicopter, since Bell
aircraft make up the majority of the Company's fleet. Bell Helicopter
is a major helicopter manufacturer with extensive links to the defense
industry, and the Company does not anticipate any interruption in
Bell's manufacturing of replacement parts and components in the near
future. Any termination of production by Bell Helicopter would
require the Company to obtain spare parts from other suppliers, which
are not currently in place. Raw materials for aeromedical interiors
are widely available, and the same materials are routinely purchased
from more than one supplier.
ITEM 3. LEGAL PROCEEDINGS
In November 1992, a former employee brought a lawsuit against the
Company which is pending in the United States District Court for the
District of Minnesota. This suit alleges that the Company wrongfully
discharged the employee and seeks recovery of unspecified monetary
damages for lost compensation, emotional distress and other losses,
costs, attorneys' fees and related penalties. The Company intends to
vigorously defend this action and believes that it has strong
defenses.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during
the six months ended December 31, 1994.
7<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Since August 6, 1993, the Company's common stock has traded on
the NASDAQ Stock Market under the trading symbol "AIRM". From June 2,
1992 to August 5, 1993, the Company's common stock traded on the
American Stock Exchange Emerging Company Marketplace under the symbol
"ARF.EC". Prior to June 2, 1992, the Company's common stock was
traded on the NASDAQ over-the-counter system.
The following table shows, for the periods indicated, the high
and low sales prices for the Company's common stock. The quotations
for the common stock, except for July 1, 1992 through August 5, 1993,
represent prices between dealers and do not reflect adjustments for
retail mark-ups, mark-downs or commissions, and may not represent
actual transactions.
SIX MONTHS ENDED DECEMBER 31, 1994
----------------------------------
Common Stock High Low
------------ ---- ---
First Quarter. . . . . . . . . $ 3 7/8 $ 1 7/8
Second Quarter . . . . . . . . 3 1 3/8
FISCAL 1994 (YEAR ENDED JUNE 30, 1994)
--------------------------------------
Common Stock High Low
------------ ---- ---
First Quarter. . . . . . . . . $ 9 1/2 $ 5 3/8
Second Quarter . . . . . . . . 14 1/8 8 1/4
Third Quarter. . . . . . . . . 12 3/4 5 3/8
Fourth Quarter . . . . . . . . 6 1 7/8
FISCAL 1993 (YEAR ENDED JUNE 30, 1993)
--------------------------------------
Common Stock High Low
------------ ---- ---
First Quarter. . . . . . . . . $ 6 1/2 $ 2 3/4
Second Quarter . . . . . . . . 4 1/2 2 1/8
Third Quarter. . . . . . . . . 6 3 7/8
Fourth Quarter . . . . . . . . 6 1/8 3 5/8
As of June 15, 1995, there were approximately 577 holders of
record of the Company's common stock.
The Company has not paid any cash dividends since its inception
and intends to retain any future earnings to finance the growth of the
Company's business rather than to pay dividends. Neither the
declaration nor the payment of future cash dividends is restricted by
the Company's credit or financing arrangements.
ITEM 6. SELECTED FINANCIAL DATA
The following tables present selected financial information of
the Company which has been derived from the Company's audited
financial statements. Prior to June 30, 1992, the statements
reflected the Company's operations as a development stage
biotechnology company. This selected financial data should be read in
conjunction with the financial statements of the Company and notes
thereto appearing in Item 8 of this report.
8<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA OF THE COMPANY
(Amounts in thousands except share and per share amounts)
Two Months
Six Months Ended Year Ended
Ended Year Ended June 30, June 30, April 30,
December 31, -------------------------------- ----------- ------------------
1994 1994 1993 1992<F1> 1991 1991 1990
------------ ------- -------- -------- ----------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue . . . . . . . . . . . . . $13,973 27,898 25,340 12,747 -- -- --
Operating expenses:
Operating . . . . . . . . . . . 12,101 25,314 20,319 12,066 -- -- --
Research and development. . . . -- -- -- -- -- 2,315 3,605
General and administrative. . . 2,176 5,761 4,479 3,984 642 2,325 2,405
Restructuring and other
non-recurring . . . . . . . . -- 3,010 -- -- 338 1,915 --
Other income (expense), net . . . (872) (888) (976) 704 87 857 1,269
Extraordinary gain (loss) . . . . -- (182) 173 -- -- -- --
-------- -------- -------- -------- ------- -------- --------
Net loss. . . . . . . . . . . . . $(1,176) (7,257) (261) (2,599) (893) (5,698) (4,741)
======== ======== ======== ======== ======= ======== ========
Loss per common share . . . . . . $ (.15) (1.03) (.08) (1.42) (.63) (4.03) (3.36)
======== ======== ======== ======== ======= ======== ========
Weighted average number of shares
of Common Stock outstanding . . 8,023,225 7,056,445 3,453,111 1,829,456 1,420,148 1,413,775 1,409,504
========= ========= ========= ========= ========= ========= =========
<CAPTION>
As of As of June 30, As of April 30,
December 31, ------------------------------ ------------------
1994 1994 1993 1992 1991 1990
------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets. . . . . . . . . . $48,813 51,900 43,312 27,835 8,480 13,901
Long-term liabilities . . . . . 18,375 18,688 23,279 14,845 153 462
Stockholders' equity. . . . . . 18,710 19,818 14,181 5,893 6,605 12,840
____________________
<FN>
<F1> Includes results of the aeromedical operations for only the eight-month period from the completion of the
acquisition, i.e., November 1, 1991, through June 30, 1992.
</TABLE>
9<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Six months ended December 31, 1994 compared to 1993
In March, 1995, the Company announced a change in its fiscal year
end from June 30 to December 31. The following table presents
operating results for the six months ended December 31, 1993 to
facilitate Management's Discussion and Analysis. All references to
the six months ended December 31, 1993, in this section of
Management's Discussion and Analysis are to the balances shown in this
schedule.
(Amounts in thousands)
Revenue:
Flight revenue. . . . . . . . . . . . . . . . . $12,320
Sales of medical interiors and products . . . . 2,078
Gain on disposition of assets . . . . . . . . . 922
Operating Expenses:
Flight centers. . . . . . . . . . . . . . . . . 4,050
Aircraft operations . . . . . . . . . . . . . . 4,025
Aircraft rental . . . . . . . . . . . . . . . . 1,373
Cost of medical interiors and products sold . . 1,546
Depreciation and amortization . . . . . . . . . 982
General and administrative. . . . . . . . . . . 2,846
Other income (expense):
Interest expense. . . . . . . . . . . . . . . . (608)
Interest income . . . . . . . . . . . . . . . . 46
Other, net. . . . . . . . . . . . . . . . . . . 163
Net loss. . . . . . . . . . . . . . . . . . . . . (82)
The Company reported a net loss of $1,176,000 for the six months
ended December 31, 1994, compared to a net loss of $82,000 for the six
months ended December 31, 1993. The six months ended December 31,
1994 included a loss of $683,000 incurred by the Company's Product
Division, which manufactures and installs interiors and equipment for
medical aircraft, and merger termination expenses of $305,000 related
to the Company's proposed acquisition of Rocky Mountain Helicopters,
Inc. ("RMHI"), as discussed below.
Flight revenue increased $761,000 or 6.2% from $12,320,000 for
the six months ended December 31, 1993, to $13,081,000 for the six
months ended December 31, 1994. The increase was primarily
attributable to revenues of $1,246,000 from contracts added in
November 1993 and July 1994 and to annual increases in established
contracts based on changes in the consumer price index. Flight hours
were 6,500 and 6,800 for the six months ended December 31, 1994 and
1993, respectively. The decrease in flight hours is due mainly to the
discontinuation of the Company's air charter operations and three
fixed wing contracts during the six months ended December 31, 1994.
Flight revenue is generally lower in the quarter ended December 31
than in other quarters of the same year due to the lower number of
flight hours flown during the winter months because of weather
restrictions at many bases. Flight center costs also increased 9.3%
for the six months ended December 31, 1994 and were affected by the
same factors as flight revenue.
Sales of medical interiors decreased by $1,288,000 or 62.0% from
$2,078,000 for the six months ended December 31, 1993, to $790,000 for
the six months ended December 31, 1994. In 1994 the Company
recognized revenue of $234,000 from the manufacture of a medical
interior for a South American customer and $450,000 from the sale of a
medical interior to one of the Company's client hospitals. In the
comparable six-month period in 1993 the Company recognized revenue
from the manufacture of five emergency medical interiors for Bell
Helicopters, Inc. for use outside the United States. The cost of
medical interiors also decreased by 37.7% for the six months ended
December 31, 1994 as compared to the previous year because of the
decrease in the number of interiors sold.
10<PAGE>
Aircraft operating expenses increased by 10.4% for the six months
ended December 31, 1994, in comparison to the same period in 1993.
The increase is primarily attributable to an increase of approximately
17.3% in hull and liability insurance rates as well as the addition of
3 aircraft with insured hull values totaling $11.3 million to the
Company's fleet in May and June of 1994. This increase was partially
offset by the elimination of operating expenses for 4 airplanes which
were removed from the Company's fleet subsequent to December 31, 1993.
Aircraft operating expenses consist of fuel, insurance, and
maintenance costs and generally are a function of the size of the
fleet, the type of aircraft flown, and the number of hours flown.
Aircraft rental expense decreased by 27.6% for the six months
ended December 31, 1994, as compared to 1993. Subsequent to
December 31, 1993, the Company eliminated four leased aircraft from
its fleet, resulting in a decrease of $208,000 in lease costs.
Depreciation and amortization expense fluctuates with the size
and value of the Company's fleet, as reflected by an increase of 29.5%
for the six months ended December 31, 1994. The Company has increased
its depreciable asset base by $7.9 million since December 31, 1993, as
a result of the acquisition of additional aircraft and the manufacture
and installation of medical interiors to service hospital contracts.
The 23.5% decrease in general and administrative expenses for the
six-month period ended December 31, 1994, reflects the effects of the
Company's restructuring plan which was implemented in the quarters
ended March 31 and June 30, 1994. The restructuring plan included a
reduction in the administrative work force and a decreased reliance on
outside contractors and other professional services, resulting in a
decline in administrative expense of approximately $130,000 and
$160,000, respectively, in the six months ended December 31, 1994.
The Company also realized a reduction of $50,000 in telephone and
communications expense due to a change in long-distance carriers.
The increase of 17.9% in interest expense for the six months
ended December 31, 1994 is due to interest incurred on a note to
finance the acquisition of an aircraft which was placed into service
late in May 1994. This increase was partially offset by the
elimination of interest on notes which were retired when the two
airplanes which were financed under these notes were sold in September
and December 1994.
Revenues for the six months ended December 31, 1994 included a
gain of approximately $57,000 on the sale of one of the Company's
aircraft and a gain of $131,000 on the sale of Golden Eagle Charters,
Inc. ("Golden Eagle"), the Company's air charter subsidiary. These
gains were offset by losses on the disposition of various other
equipment. The Company completed the sale of all of the outstanding
shares of common stock of Golden Eagle to a company on September 21,
1994, in exchange for $10,000 and the assumption of certain
liabilities. The Company's decision to discontinue air charter
operations was part of the restructuring plan approved in 1994 and was
due to the significant losses incurred by this line of business. In
the six months ended December 31, 1993, the Company recognized a
$922,000 gain on the sale of two aircraft. The loss on early
extinguishment of debt in the six months ended December 31, 1993,
resulted from the retirement of a note secured by one of the aircraft
sold; no comparable prepayment penalties were incurred in the six
months ended December 31, 1994.
Interest and dividend income increased 254.3% in the six-month
period ended December 31, 1994 compared to the same period in the
prior year due to interest earned on two promissory notes received as
a portion of the proceeds from the sale of certain Company-owned
aircraft in December 1993.
Other income for the six months ended December 31, 1993, included
revenue recognized on the outlicensing of a biologic response
modifier, a naturally occurring substance designed to alter the body's
immune system and its reaction to cancer and other diseases, developed
by the Company when doing business as Cell Technology, Inc., a
research and development company. The Company recognized no
comparable revenue in 1994.
During the quarter ended September 30, 1994, the Company
discussed the feasibility of a business combination of the emergency
air medical transport business of the Company and RMHI. The Company
11<PAGE>
ultimately declined to submit a final bid for the assets of RMHI. The
expenses incurred as part of the due diligence process consist
primarily of legal and professional fees and comprise the balance of
the merger termination expense recognized in the six months ended
December 31, 1994.
1994 compared to 1993
The Company reported a loss of $7,257,000 for the year ended
June 30, 1994, as compared to a loss of $261,000 for the year ended
June 30, 1993. The operating results for fiscal 1994 included a loss
on the disposition of assets of $790,000, restructuring charges of
$3,010,000, and other non-recurring charges and a loss on the early
retirement of debt of $1,061,000. The net loss for the year,
excluding the effect of these transactions, was $2,396,000.
In the fourth quarter of 1994 the Company completed a
restructuring plan for the Company's continuing air medical flight and
manufacturing operations designed to reduce costs and improve
operating efficiencies. The restructuring plan included the
discontinuation of substantially all of the airplane charter
operations of Golden Eagle, an 18% overall reduction in personnel, a
reduction in officers' salaries, and the disposal of selected under-
utilized aircraft. In addition, the Company canceled a proposed debt
refinancing and public preferred stock offering. The reductions in
personnel were primarily in the manufacturing and administrative
functions and did not significantly affect the Company's maintenance
and air medical flight capabilities. Restructuring charges totaled
$3,010,000 for the year ended June 30, 1994 and, with the exception of
approximately $614,000 in severance pay and $149,000 for certain
placement fees for the proposed preferred stock offering, consisted of
the write-off of previously recorded assets and other non-cash
charges.
Flight revenue increased $3,878,000 or 18.1% from $21,468,000 for
the year ended June 30, 1993, to $25,346,000 for the year ended June
30, 1994, primarily as a result of the addition of three new hospital
contracts which contributed revenues of $1,517,000 in fiscal 1994. In
addition, revenue increased by $883,000 in fiscal 1994 under three
contracts which had been added during the year ended June 30, 1993.
Flight revenue under established hospital contracts was not
significantly affected by changes in either pricing or volume of
flight hours. The majority of the Company's contracts with its
hospital customers is also subject to an annual increase based on the
consumer price index. Flight center expenses, which include pilot and
mechanic salaries, benefits, and training, also increased by 22.9% in
1994, and were affected by the same factors as flight revenue. These
expenses generally vary with the number of customer bases and, to a
lesser degree, with the number of aircraft operated by the Company.
Aircraft operating expenses increased by 49.3% from 1993 to 1994
primarily because of the addition of 4 helicopters and 6 airplanes to
the Company's fleet since the end of fiscal 1993 and the operation of
2 airplanes in the executive air charter service from September 1993
to April 1994, as well as an approximately 30% increase in hull and
liability insurance rates. The increase in insurance rates is related
to overall increases experienced by the aviation industry as a whole.
Aircraft operating expenses consist of fuel, insurance, and
maintenance costs and generally are a function of the size of the
fleet, the type of aircraft flown, and the number of hours flown by
the fleet.
Depreciation and amortization expense also fluctuates with the
size of the Company's fleet, as reflected by the 52.7% increase in
1994. The Company placed aircraft and related medical interiors
totaling $10 million into service in the current fiscal year.
Historically, the Company's flight operations have been seasonal.
In the winter months the company's hospital customers have customarily
experienced reduced acute and trauma in-patient hospital populations
requiring emergency aeromedical transport. To a lesser extent, poorer
weather reduces the level of flight operations from the hospitals
served by the Company.
12<PAGE>
Sales of medical interiors decreased by $1,320,000 or 34.1% from
$3,872,000 in fiscal year 1993 to $2,552,000 in fiscal 1994. In 1994
the Company sold five medical interiors to Bell Helicopter Textron,
Inc. ("Bell") for aircraft for use outside the United States. In 1993
sales consisted of three medical interiors for Bell and one for the
U.S. Army. The decrease in the cost of medical interiors over the
same period mirrored the decrease in sales. The cost of medical
interiors for fiscal year 1994 also included $653,000 of payments for
work on a medical interior that the Company subcontracted to an
outside vendor. The medical interior was for the Company's internal
use, and therefore no corresponding revenue was recognized. The work
done by the subcontractor was subsequently determined to be
unsatisfactory and was reperformed by the Company.
Operating expenses in the year ended June 30, 1994, also included
net losses of $790,000 on the disposition of assets. Gains of
$1,851,000 recognized on the disposition of four of the Company's
aircraft were offset by valuation allowances of $2,641,000 established
for seven aircraft designated for disposal as part of the Company's
restructuring plan. There were no comparable gains or losses in
fiscal 1993.
The 28.6% increase in general and administrative expenses in 1994
reflected the additional support necessary for the Company's expanded
operations as well as increased legal and professional fees incurred
as the Company aggressively pursued new business opportunities
including the acquisition of Golden Eagle Aviation and the proposed
joint venture with Medica Movil, S.A. de C.V.
In the first quarter of 1993, the Company began negotiations with
Medica Movil, S.A. de C.V., the largest ground ambulance provider in
Mexico, to form a joint venture to provide air medical services in
Mexico under a membership capitation program. In the third quarter of
1994, concurrent with the previously mentioned restructuring plan, the
Company initiated discussions concerning alternative financing
arrangements for the joint venture. Though continued involvement in
the joint venture is not assured, the Company does not expect any
impact on its operations related to restructuring or termination of
the joint venture.
1993 compared to 1992
Prior to the acquisition of Air Methods-Colorado by the Company
in November 1991, the Company operated as a development-stage
biotechnology research and development company engaged primarily in
the development of anti-cancer products. Since the acquisition, the
Company's operations have consisted predominantly of providing
aeromedical emergency services and systems to hospitals throughout the
United States and the related manufacture and sale of aircraft medical
interiors and equipment to third parties. Due to this fundamental
change in the Company's business, the Company does not believe that
comparison of its operating results for the year ended June 30, 1993
with the year ended June 30, 1992, is meaningful. Accordingly, the
following discussion compares the Company's results of operations for
the year ended June 30, 1993 with the results of Air Methods -
Colorado for the four months ended October 31, 1991, plus the results
of the Company for the eight months ended June 30, 1992.
The following table combines the various revenue, operating
expenses and other income (expense) categories of the Company for the
8 months ended June 30, 1992 with that of Air Methods-Colorado for the
4 months ended October 31, 1991, which will facilitate management's
discussion and analysis. All references to the year ended June 30,
1992, in this section of Management's Discussion & Analysis are to the
combined balances shown on this schedule.
13<PAGE>
<TABLE>
<CAPTION>
Company Air Methods-Colorado
------------------ --------------------
Eight Months Ended Four Months Ended
June 30, 1992 October 31, 1991 Combined
------------------ -------------------- ------------
<S> <C> <C> <C>
Revenue $12,747 $6,446 $19,193
Operating Expenses:
Flight center. . . . . . . . . . . 3,819 1,958 5,777
Aircraft operations. . . . . . . . 4,520 1,520 6,040
Aircraft rental. . . . . . . . . . 1,978 797 2,775
Depreciation and amortization. . . 908 291 1,199
General and administrative . . . . 3,406 1,145 4,551
Cost of medical interiors and
products sold. . . . . . . . . . 841 643 1,484
Other income (expense):
Interest expense . . . . . . . . . (588) (378) (966)
Interest income. . . . . . . . . . 169 -- 169
Other, net . . . . . . . . . . . . 962 -- 962
</TABLE>
Operating revenues increased 32.0% for the year ended June 30,
1993 compared to the year ended June 30, 1992. The increase was
primarily attributable to revenues of $2,672,000 generated from the
initiation of three new hospital contracts correspondingly utilizing
three new aircraft which were added in fiscal 1993. In addition, the
Company realized an increase of $2,980,000 in revenues from the sale
of medical interiors in 1993, principally due to the sale of three
interiors to Bell Helicopter, Inc. and the sale of one interior to a
subsidiary of E-Systems, Inc. pursuant to a proof of principle
retrofit agreement on behalf of the U.S. Army regarding the UH-60Q
Blackhawk helicopter.
Flight center expenses increased 21.5% for the year ended
June 30, 1993, compared to the year ended June 30, 1992. The increase
was virtually the same as the revenue increase between the two years,
and was primarily due to start-up and on-going expenses related to the
initiation of the three new aeromedical programs discussed above.
Aircraft operating expenses decreased 9.2% from 1992 to 1993.
This decrease was primarily due to the comparatively high overhaul and
replacement parts costs in the prior 1992 twelve month period.
The cost of medical interiors and parts sold increased 117.5%
from 1992 to 1993. These increases were primarily due to an increase
in the number of airborne emergency medical interiors sold to third
parties and to the sale of a correspondingly greater amount of medical
interior parts and components to such parties.
General and administrative expenses decreased 1.6% in 1993 as
compared to 1992. The lack of increase even given the increase in
revenues and overall operations, was primarily attributable to
reductions in services and related costs resulting from utilization of
services provided by third parties as well as other administrative
cost cutting measures implemented by the Company during the fiscal
year.
Interest expense increased 12.0% in 1993 primarily because of new
debt incurred to finance additional aircraft. The increase was
mitigated substantially by the reduction in interest rates on the
Company's long term debt to Textron Financial Services, Inc., an
affiliate of the Company's principal aircraft supplier, Bell
Helicopter ("Textron"), for the remaining life of the notes.
14<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and cash equivalents of $696,000 and a
working capital deficit of $1,892,000 as of December 31, 1994, as
compared to cash and cash equivalents of $3,421,000 and a working
capital deficit of $1,753,000 at June 30, 1994. The decrease in cash
and cash equivalents in the six months ended December 31, 1994, is
primarily due to the funding of regularly scheduled debt and lease
payments as well as the retirement of two notes secured by the
Company's two aircraft which were sold in September and December of
1994. In addition, the Company invested approximately $400,000 during
the six months ended December 31, 1994, in the completion and
installation of a medical interior for a helicopter placed in service
in January 1995.
In the year ended June 30, 1993, the Company used cash of
$1,551,000 to fund its operations, while in fiscal year 1994,
operations generated a positive cash flow of $1,039,000. During the
six months ended December 31, 1994 the Company used $629,000 to fund
its operations, including $177,000 to pay placement fees and severance
pay accrued as part of the restructuring.
In addition to cash flow from operations, the Company realized
$6,825,000 from the issuance of common stock upon the exercise of
warrants and options and $5,730,000 from a private placement of stock
with institutions outside the United States during fiscal 1994.
The Company's usual arrangements with its hospital clients have
involved substantial capital commitments by the Company for the
aircraft and related equipment required to furnish the emergency air
medical transport services to the hospitals. The Company believes,
however, that it may be advantageous to both its client hospitals and
the Company from time to time for aircraft to be purchased by the
hospitals, thus permitting reduced capital and long-term borrowing
commitments by the Company. The Company has pursued and intends to
continue to pursue this type of contracting arrangement whenever it
appears beneficial to the parties to the arrangement.
As of December 31, 1994, the Company had a note payable of
$3,819,000 which was collateralized by a helicopter listed for sale
and for which the maturity date had been extended in the past. In
March 1995 the Company sold the underlying helicopter and paid off the
note balance in full.
In 1995 American Eurocopter Corporation cancelled purchase
commitments which had previously obligated the Company to acquire four
helicopters before December 1996.
As of December 31, 1994, the Company holds unencumbered notes
receivable of $2,521,000 and aircraft valued at $7.4 million. The
Company believes that it could utilize a portion of these unencumbered
assets as collateral for borrowing funds as an additional source of
working capital if necessary. The Company also expects continued
improvement in cash flows from operations in calendar 1995 as a result
of new Products Division contracts and improvements in the air medical
flight operations discussed below. The Company believes that these
borrowing resources coupled with the expected improvement in
operations will allow the Company to meet its obligations in the
coming year without additional external financing.
OUTLOOK FOR 1995
In December 1994, the Company was awarded the following
contracts: the manufacture and installation of a medical interior and
avionics system for a South American customer; the refurbishment of a
medical interior for an existing hospital client; and the development
and installation of a passenger oxygen system for a regional airline.
In addition, as of December 1994, the Company had executed a Letter of
Intent with a non-profit organization to manufacture and install a
medical interior for a jet transport aircraft. Revenue from these
four projects is expected to total approximately $3.2 million and to
be recognized throughout 1995 and 1996. The Company continues to
pursue an aggressive marketing strategy for its medical interiors and
other products.
When aeromedical contracts with certain hospitals have come due
for renewal, the Company has successfully negotiated improved
operating margins and expects to continue these efforts in 1995 as
additional
15<PAGE>
contracts are renewed. As a result of the negotiations conducted in
late 1994, the Company expects additional revenue of approximately
$271,000 in calendar 1995 from these specific aeromedical contracts.
With the new business announced for the Products Division, improved
margins on certain hospital contracts and continued minimization of
cost of administrative overhead, the Company expects increases in both
cash flow and operating income in 1995.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Consolidated Financial Statements attached hereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Summary information concerning the Company's current directors
and officers is set forth below:
<TABLE>
<CAPTION>
Name and Age of Director Director Term as Director
Director/Officer Since Class expires in Position
- - - -------------------------- -------- -------- ---------------- -------------------------------------------------
<S> <C> <C> <C> <C>
George W. Belsey, 55 1992 I 1997 Chairman of the Board, Chief Executive Officer,
Interim Chief Financial Officer
Roy L. Morgan, 59 1991 II 1995 Co-Founder and a Director
Marius Burke, Jr., 57 Vice President, Director of Operations
Maurice L. Martin, Jr., 47 Vice President, Air Medical Services
Michael G. Prieto, 41 Vice President, Products Division
Joseph E. Bernstein, 46 1994 III 1996 Director
Ralph J. Bernstein, 37 1994 III 1996 Director
Samuel H. Gray, 57 1991 II 1995 Director
Lowell D. Miller, Ph.D., 62 1990 III 1996 Director
Donald R. Segner, 69 1992 I 1997 Vice-Chairman of the Board
Morad Tahbaz, 39 1994 II 1995 Director
</TABLE>
MR. GEORGE W. BELSEY was elected Chief Executive Officer
effective June 1, 1994, and has served as Chairman of the Company's
Board of Directors since April 1994, having been appointed a director
of the Company in December 1992. From February 1992 to June 1994, Mr.
Belsey served as Executive Vice President, Professional Affairs, and
the Chief Operating Officer of the American Hospital Association, a
large national trade association and advocacy group for hospitals and
health care organizations, where he was responsible for the
Association's activities relating to hospital operations, including
medical staff affairs, nursing, health manpower, quality of care
programs and hospital governance. Prior to joining the American
Hospital Association, Mr. Belsey served as Chief Executive Officer and
Executive Director of the University of Utah Hospital and Clinics,
Salt Lake City, Utah (one of the Company's hospital customers) from
March 1989 to February 1992 and was Chief Operating Officer from
December 1983 to March 1989. He is a former Vice President of
Northwestern Memorial Hospital, Chicago, and has held administrative
positions at Rush-Presbyterian-St. Luke's Medical Center, Chicago, and
MacNeal Memorial Hospital, Berwyn, IL. He received his Bachelor's
Degree in Economics from DePauw University in Greencastle, Indiana,
and holds a Master's Degree in Business Administration from George
Washington University, Washington, D.C.
MR. ROY L. MORGAN is one of the three founders of Air Methods-
Colorado, and was the President, Chief Executive Officer and a
director from the inception of Air Methods-Colorado in July 1980 until
November 1991. In November 1991, he became President and a director
of the Company. In December 1994, Mr. Morgan retired as President of
the Company. Prior to his service with Air Methods-Colorado,
Mr. Morgan was employed as a helicopter pilot for Public Service
Company of Colorado (1969-80), as director of operations and chief
pilot for Key Aviation (1964-69), and as
16<PAGE>
quality control supervisor on the Atlas missile program for Convair
Astronautics (1960-64). Mr. Morgan began his career at Boeing
Airplane Company, involved in B-52 experimental development (1957-60).
Mr. Morgan holds a number of pilot certificates including Airline
Transport Pilot for Airplane Multi-Engine Land, Commercial
Helicopter - Instrument Rated, Commercial Airplane for Land and Sea,
and Glider, as well as Flight Instructor for all of the above. He has
more than 18,850 flight hours, 12,000 of them in helicopters.
Mr. Morgan has a Bachelor of Science Degree in Aviation Management
from Metropolitan State College in Denver, Colorado.
MR. MARIUS BURKE, JR. was elected Vice President and Director of
Operations of the Company in November 1989. Prior to that time he
served in various managerial positions with Air Methods-Colorado,
including Director of Operations (September 1988 through November
1991) and Area Manager (August 1985 through August 1988). He was
formerly a pilot for Key Airlines (1982-85), an area manager for the
Air Med program at the University of Utah (1985-88), President of
Estate Builders, Inc., a real estate investment and development
corporation (1975 to present), Manager of Flying and Chief Pilot for
Air America (1963-75), and a flight officer for the United States
Marine Corps in jets and helicopters (1958-63). Mr. Burke holds
Airline Transport Pilot certificates for both airplanes and
helicopters and is a Certified Flight Instructor for airplanes,
helicopters, and instruments. He has for many years been a designated
FAA Flight Examiner and has a total of 20,250 flight hours, 12,950 of
them in helicopters. Mr. Burke has an M.B.A. and a B.S. in
Engineering and Aeronautical Operations from San Jose State
University.
MR. MAURICE L. MARTIN, JR. currently serves the Company as Vice
President of the Air Medical Services Division. He served previously
in several executive positions with Air Methods-Colorado including
Director of Operations (August 1985 through August 1988), Area Manager
(June 1984 through August 1985) and pilot (June 1982 to June 1984).
Mr. Martin has 16 years of aviation management experience and eight
years' experience in medical aircraft transport management. Prior to
joining Air Methods-Colorado, Mr. Martin was a commercial helicopter
pilot (1979-82), an instructor pilot and standardization officer of
the 102nd Air Rescue and Recovery Squadron in New York (1975-79), and
an aircraft commander in the United States Air Force (1971-75).
Mr. Martin holds pilot certificates including Airline Transport Pilot
for Helicopters and Certified Flight Instructor for Helicopters. He
has served as a designated FAA Flight Examiner and has over 4,100
flight hours, mostly in helicopters. Mr. Martin has a Bachelor of
Science Degree in International Affairs from the United States Air
Force Academy (1970) and a Master's Degree in Theology from Covenant
Theological Seminary in St. Louis, Missouri (1982).
MR. MICHAEL G. PRIETO was named Vice President of Engineering &
Manufacturing of the Company in January 1994 and subsequently Vice
President of the Products Division in June 1994. From 1988 to 1994,
Mr. Prieto served in various roles with General Dynamics/Lockheed Corp
but primarily as Manager of Manufacturing Engineering for the F-16
Fighter program. From 1977 to 1988, he was employed by John Deere Co.
with management roles in Engineering, Manufacturing, and Marketing.
Mr. Prieto attended the University of Missouri and received a Bachelor
of Science degree in 1977. Mr. Prieto is a member of the American
Society of Mechanical Engineers, the Society of Manufacturing
Engineers, the American Production and Inventory Control Society, the
American Management Association, and the National Management
Association.
MR. JOSEPH E. BERNSTEIN became a Director of the Company in
February, 1994. Mr. Bernstein is a co-founder and General Partner of
Americas Partners, an investment and venture capital firm, and a
Managing Director of Americas Tower Partners, the developer of
Americas Tower, a one million square foot, 50-story office tower in
New York City. Since 1981, he has been a principal of The New York
Land Company, working on real estate development and acquisitions.
Previously, he worked on corporate and international tax matters at
Cahill/Gordon & Reindel (1975-1978) and Rosenman & Colin (1978-1981).
He started his own international tax practice, Bernstein & Carter, in
1981 and has published a number of articles on corporate and
international tax law. Mr. Bernstein is the brother of Ralph
Bernstein, also a director of the Company. Mr. Bernstein holds a
Bachelor of Arts Degree in Economics and a Bachelor of Science Degree
in Agricultural Business Management from the University of California
at Davis, a Juris Doctor from the University of California at Davis
School of Law, a Master's Degree in Finance from the University of
California at Los Angeles Graduate School of Management, and a Master
of Laws' Degree in Taxation from the New York University Graduate
School of Law.
MR. RALPH J. BERNSTEIN became a Director of the Company in
February, 1994. Mr. Bernstein is a co-founder and General Partner of
Americas Partners, an investment and venture capital firm, and a
Managing Director of Americas Tower Partners, a real estate
development firm, where he was primarily responsible for the
development of Americas Tower, a one million square foot, 50-story
office tower in New York City. Mr. Bernstein is co-founder of The New
York Land Company and, since 1981, was responsible for the
acquisition, renovation, development and financing of several million
square feet of commercial space. From 1979 to 1982, Mr. Bernstein was
employed by Agricor, Inc. and Noga Realty, Inc., both subsidiaries of
Compagnie Noga S.A., a large multinational trading firm.
Mr. Bernstein is the brother of Joseph Bernstein, also a director of
the Company. Mr. Bernstein holds a Bachelor of Arts Degree in
Economics from the University of California at Davis.
17<PAGE>
MR. SAMUEL H. GRAY was appointed as a director of the Company in
March 1991. Since 1989, he has been Chief Executive Officer of The
Morris Consulting Group, Inc., a health care industry consulting firm.
From 1983 to 1989, Mr. Gray served as President and Chief Executive
Officer of Kalipharma, Inc., a multisource pharmaceutical company.
From 1975 to 1983, Mr. Gray served as Executive Vice President of
Sales and Marketing for G.D. Searle and Company, Inc. ("Searle") where
he was responsible for pharmaceutical marketing, the consumer products
division of Searle, and Searle-Canada, Ltd. In addition, his
responsibilities included distribution, customer service, clinical
research management, licensing and acquisitions, public relations and
worldwide strategic marketing planning. He has served on the boards
of directors of Searle; Searle Canada, Ltd.; Kalipharma; Kali-Duphar,
Inc.; and the National Association of Pharmaceutical Manufacturers.
He is a past member of the National Wholesale Druggist Association's
Industry Advisory Committee and has served on the Advisory Board of
Pharmaceutical Executive magazine. In 1959, Mr. Gray received a
Bachelor of Science Degree from the University of Florida.
DR. LOWELL D. MILLER was named a director of the Company in June
1990. Since 1989, Dr. Miller has been involved with various
scientific endeavors including a pharmaceutical consulting business.
From 1973 to 1989, Dr. Miller was employed by Marion Laboratories,
Inc. ("Marion"), serving as Senior Vice President - Research and
Development (1987 - 1989), Vice President - Research and Development
(1977-1987), and Director of Scientific Affairs (1973-1977). Until
his retirement in late 1989, Dr. Miller was responsible for all
research, development and process development functions, new product
opportunities and management of clinical trials and regulatory
affairs, and served as Marion's Chief Scientist. He also served as a
member of Marion's Board of Directors from November 1981 to November
1982 and as an Advisory Director from November 1982 to November 1983.
The University of Missouri has awarded Dr. Miller a Bachelor of
Science degree in 1957 as well as a Master's Degree in Biochemistry in
1958 and Biochemistry Doctorate Degree in 1960.
MR. DONALD R. SEGNER was appointed a director of the Company in
February, 1992. He was re-elected as a director in February 1995 and
has served the Board as Vice-Chairman since April, 1994. He currently
heads his own aviation advisory and consultant service company
specializing in all aspects of aviation including airports, airplanes,
aircraft certification and the Federal Aviation Administration. He has
served as a pilot in the U.S. Marine Corps, a test pilot for Lockheed
Aircraft, and a manager of several departments for Lockheed Aircraft.
From 1981 through 1986, he was a government appointee by President
Reagan in the FAA. Following the destruction of Korean Airlines
Flight 007, Mr. Segner was assigned by the White House to head the
investigation and acted as Chief Delegate for the United States at the
CIAO Council (United Nations) on this matter. He headed the U.S.
Delegation to negotiate an agreement to improve and implement safety
along the North Pacific air routes among the governments of the U.S.,
Japan and the U.S.S.R. He has received numerous awards for his
contributions to aviation, including the FAA Administrator's Award,
the FAA Superior Achievement Medal and the Distinguished Flying Cross
for valor in combat in the Korean war. Mr. Segner attended the
University of Pacific in Stockton, California and the U.S. Naval Test
Pilot School in Patuxent River, Maryland, as an undergraduate. His
graduate education includes attendance at the U.S. Naval Post Graduate
School, Monterey, California, as well as University of Southern
California's Graduate School of Business (Lockheed Management
Institute).
MR. MORAD TAHBAZ was elected to the Board of Directors in
February, 1994. He is a co-founder and General Partner of Americas
Partners, an investment and venture capital firm. Mr. Tahbaz serves
as a Managing Director of Americas Tower Partners, the developer of
Americas Tower, a one million square foot, 50-story office tower in
New York City. Since 1983, Mr. Tahbaz has also served as Senior Vice
President of The New York Land Company, a real estate acquisitions and
development firm. From 1980 to 1982, he was the Project Manager for
Colonial Seaboard, Inc., a residential development company in New
Jersey. Mr. Tahbaz received his Bachelor's Degree in Philosophy and
Fine Arts from Colgate University and attended the Institute for
Architecture and Urban Studies in New York City. He holds a Master's
Degree in Business Administration from Columbia University Graduate
School of Business. Mr. Tahbaz lectured on real estate development
and finance at the Columbia Graduate School of Business from 1984 to
1988.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
In March, 1995, the Company announced the change in its fiscal
year end from June 30 to December 31. As a result, the next Form 5
filing obligation for the Company's executive officers and directors
will arise with respect to fiscal 1995. However, based upon inquiries
of its executive officers and directors, the Company is aware of the
following Form 4 reports for the transition period which were not
timely filed: one late report covering one transaction for each of
Messrs. Burke and Martin.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the cash compensation paid by the
Company to the persons serving as Chief Executive Officer of the
Company during 1994 and the other executive officers of the Company
other than the
18<PAGE>
Chief Executive Officer whose annual salary and bonus exceeded
$100,000 during that period. In view of the Company's new December 31
fiscal year end and to facilitate comparability, the table reflects
compensation received during the calendar years ended December 31,
1992, 1993 and 1994.
<TABLE>
<CAPTION>
Long Term
Compensation Awards
Annual Compensation Other -------------------------
-------------------------- Annual Restricted<F2> Options/ All Other
Name and Principal Position Year Salary($) Bonus($) Compensation($)<F1> Stock SARs(#)<F3> Compensation($)<F4>
- - - --------------------------- ---- --------- -------- ------------------- ------------- ----------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
George W. Belsey 1994 96,250<F5> -- 8,050<F6> -- 250,000 --
Chairman and Chief 1993 -- -- -- -- -- --
Executive Officer 1992 -- -- -- -- -- --
Marius Burke, Jr. 1994 100,594 -- -- -- -- 2,236
Vice President 1993 73,491 -- -- 24,473 89,266<F12> 1,638
Director of Operations 1992 89,396 -- -- -- -- 1,970
Roy L. Morgan 1994 155,880 -- -- -- 200,000<F13> 3,441
Director and Co-Founder 1993 133,376 -- -- 48,122 251,666 3,095
1992 167,043 -- -- -- -- 3,973
Maurice L. Martin, Jr. 1994 131,909 -- -- -- -- 2,277
Vice-President 1993 113,153 -- -- 25,781 172,916<F7> 1,785
Air Medical Services 1992 124,526 -- -- -- -- 2,767
Michael G. Prieto 1994 116,545 -- -- -- 25,000 22,417<F11>
Vice-President 1993 -- -- -- -- -- --
Products Division 1992 -- -- -- -- -- --
W. Terrance Schreier 1994 66,116 -- -- -- -- 288,918<F8>
Prior Chairman and Chief 1993 139,997 -- -- 48,122 331,666 2,431
Executive Officer 1992 166,868 --<F9> 38,750<F10> -- -- 1,604
____________________
<FN>
<F1> Personal automobile or other transportation benefits provided to each of the named executive officers during
the reporting periods do not exceed the disclosure thresholds established by the SEC and are thus not
reported.
<F2> Reflects shares of restricted Common Stock issued to the named executive officers under the Company's
Restricted Stock Plan, except as otherwise noted, valued at the closing market price of such shares on the
date they were issued. The Company issued a total of 102,907 shares of Common Stock under the Restricted
Stock Plan, all of which vested or were forfeited on the one year anniversary of the January 9, 1993 grant
date. No dividends were paid on these restricted shares. The restrictions on all shares issued under the
Restricted Stock Plan have been lifted.
<F3> Consists only of options to purchase the common stock of the Company.
<F4> Consists of employer matching contributions for the named executive officers under the Company's 401(k)
Plan, except as otherwise noted.
<F5> Mr. Belsey was a nonemployee director of the Company until June 1, 1994 when he was elected Chief Executive
Officer of the Company. Mr. Belsey's annual salary as Chief Executive Officer is $165,000.
<F6> Stock compensation to Mr. Belsey as a nonemployee director of the Company pursuant to the Company's
Nonemployee Director Equity Compensation Plan.
<F7> Includes 16,666 options which are deemed to have been regranted by virtue of the Stock Option Committee's
action on July 29, 1993 to reprice these, and other out-of-the-money options previously issued to employees
and officers of the Company under the Employee Option Plan, to $5.50 per share, the fair market value of the
Company's Common Stock on July 29, 1993.
<F8> Includes severance payments, pursuant to contractual obligations of the Company, upon the resignation of
Mr. Schreier ($287,500) in 1994.
<F9> See footnote 11 and accompanying figures.
<F10>Reflects compensation consisting of salary restoration payments for salary compensation foregone in earlier
years and bonus payments by Cell Technology, Inc. for the completion of the merger with Air Methods -
Colorado.
19<PAGE>
<F11>Reflects various relocation expenses borne by the Company in connection with the commencement of Mr.
Prieto's employment with the Company.
<F12>Includes 8,333 options repriced in 1993 as discussed at footnote 8.
<F13>Issued upon the cancellation of 240,000 options issued in 1993.
</TABLE>
STOCK OPTIONS
The following tables present for calendar year 1994 certain
information regarding stock options granted to or held by the named
executive officers.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST YEAR
----------------------------------
Individual Grants
-------------------------- Potential Realized Value at
% of Total Assumed Annual Rates of
Options/SARs Stock Price Appreciation for
Granted to Exercise or Market Price Option Term<F1>
Options/SARs Employees in Base Price on Grant Expiration -----------------------------
Name Granted (#) 1994 ($/Sh) Date ($/Sh) Date 5% ($) 10% ($)
- - - -------------------- ------------ ------------ ----------- ------------ ---------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
George W. Belsey 250,000<F2> 50.1% 3.00 3.00 6/1/99 207,211 457,883
Roy L. Morgan 200,000<F3> 40.1 1.75 1.75 12/31/99 96,699 167,094
Michael G. Prieto<F4> 25,000<F4> 5.0 11.375 11.375 1/4/99 78,568 135,763
____________________
<FN>
<F1> Calculated based upon the closing market price of the Common Stock on the Option grant date.
<F2> Exercisable as to 1/5 of the option shares on the 6/1/94 grant date, and an additional 1/5 on each subsequent
anniversary of the grant date until fully vested.
<F3> Exercisable in full as of the 12/31/94 grant date.
<F4> Exercisable as to 1/3 of the option shares on each anniversary of the 1/4/94 grant date.
</TABLE>
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST YEAR AND YEAR END OPTIONS/SAR VALUES
----------------------------------------------------------------------------
Value of Unexercised In-
Number of Unexercised the-Money Options/SARs at
Shares Acquired Options/SARs at Year End (#) Year End ($) Exercisable/
Name on Exercise (#) Value Realized ($) Exercisable/Unexercisable<F1> Unexercisable<F1>
- - - ------------------------ --------------- ------------------ ----------------------------- --------------------------
<S> <C> <C> <C> <C>
George Belsey 2,222 7,499 52,222/202,222 -0-/-0-
Marius Burke, Jr. -- -- 83,310/ 23,955 -0-/-0-
Roy L. Morgan -- -- 200,000/-0- -0-/-0-
Maurice L. Martin, Jr. -- -- 118,749/ 54,167 -0-/-0-
Michael G. Prieto -- -- -0-/ 25,000 -0-/-0-
W. Terrance Schreier<F2> 15,453 74,138 -0-/-0- -0-/-0-
____________________
<FN>
<F1> Consists of options only.
<F2> Reported option exercises include options for 2,645 shares exercised by Mr. Schreier's wife as to which options
and shares Mr. Schreier disclaims beneficial ownership.
</TABLE>
EMPLOYMENT AGREEMENTS
In June 1994, the Company entered into an Employment Agreement
with Mr. Belsey for an initial term of five years, subject to
successive one-year extensions by written agreement of both parties.
The Agreement may be terminated by either party without cause upon 30
days' written notice and provides for a severance
20<PAGE>
payment equal to one year's base salary in the event of termination by
the Company without cause. For a period of one year following the
termination of employment with the Company, Mr. Belsey may not engage
in any business which competes with the Company anywhere in the United
States.
In November 1993, the Company entered into an Employment
Agreement with Mr. Prieto for an initial term of one year to be
effective December 1, 1993 and renewable each December 1. The
Agreement may be terminated by either party without cause upon 90 days
written notice and is terminable by the Company with no notice for
cause. Mr. Prieto would continue to receive compensation and benefits
for the duration of his then-current term of employment in the event
of disability; otherwise, there is no provision for severance beyond
the initial one-year term.
In November 1991, the Company entered into individual Employment
Agreements with Messrs. Martin and Burke for initial terms of two
years. Because the Agreements are subject to a continuous renewal
clause, the remaining term on any date for the Agreements is two
years. The Agreements may be terminated by either party without cause
upon 90 days' written notice and provide for a severance payment equal
to two years' base salary in the event of termination by the Company
without cause. For a period of two years following the termination of
employment with the Company, neither Mr. Martin nor Mr. Burke may
engage in any business which competes with the Company anywhere in the
United States.
The Employment Agreement between the Company and Mr. Schreier
terminated on May 12, 1994 upon the resignation of Mr. Schreier from
his position at the Company.
DIRECTOR COMPENSATION
It is the Company's policy to pay its nonemployee directors an
annual retainer of $8,000, plus $800 per Board meeting attended, $500
per teleconference Board meeting and $500 per Board committee meeting
attended ($750, if Chairman of the committee). Effective July 1,
1993, each nonemployee director may elect to receive shares of Common
Stock in lieu of cash payments pursuant to the Company's Equity
Compensation Plan for Nonemployee Directors, discussed below. The
Company also reimburses its nonemployee directors for their reasonable
expenses incurred in attending Board and committee meetings.
Messrs. Joseph Bernstein, Ralph Bernstein and Morad Tahbaz have
voluntarily waived all director fees to date and have received no
compensation for their services as directors apart from customary
reimbursement of out-of-pocket expenses.
Nonemployee Director Stock Option Plan. The Company has adopted
--------------------------------------
compensation and incentive benefit plans to enhance its ability to
continue to attract, retain and motivate qualified persons to serve as
nonemployee directors of the Company. The Nonemployee Director Stock
Option Plan ("Director Option Plan") provides for the issuance of up
to 300,000 shares of the Company's Common Stock, under options which
are exercisable in full upon issuance and do not terminate prematurely
after an option recipient ceases to be a director of the Company.
Pursuant to the Director Option Plan, on the last day of each fiscal
year each nonemployee director in office on such date who has served
on the Board for the entire preceding fiscal year will receive a five-
year option to purchase 5,000 shares of Common Stock, exercisable at
the then-current fair market value of the Company's Common Stock.
Equity Compensation Plan for Nonemployee Directors. In
--------------------------------------------------
February and March 1993, respectively, the Company's Board of
Directors and stockholders approved the Air Methods Corporation Equity
Compensation Plan for Nonemployee Directors (the "Director Equity
Plan"). The Director Equity Plan authorizes the issuance of up to
150,000 shares of Common Stock to nonemployee directors of the
Company. The Director Equity Plan enables the Company to conserve
cash with respect to nonemployee directors who have elected to
participate.
The Director Equity Plan is administered by the Board of
Directors, and provides that each nonemployee director may elect to
receive his annual retainer for a particular fiscal year of the
Company in
21<PAGE>
Common Stock rather than cash. The number of shares of Common Stock
issued to a Nonemployee Director making such election is equal to the
then-current annual director retainer paid by the Company (currently
$8,000) divided by 95% of the fair market value of the Company's
Common Stock on the first day of the fiscal year. The Common Stock
will be forfeited and returned to the Company, however, if the
Nonemployee Director does not remain a director of the Company through
the end of the fiscal year or fails to attend at least 75% of all
Board meetings and applicable Board committee meetings held during
such year. Common Stock issued under the Director Equity Plan in lieu
of the annual retainer is not transferable until after the forfeiture
provisions lapse, other than by will or the laws of descent and
distribution in the event of the director's death or pursuant to a
qualified domestic relations order as defined by the Code, Title I of
ERISA or the rules thereunder.
In addition, Nonemployee Directors also may elect to receive
their meeting fees in Common Stock rather than cash. The number of
shares issued to a Nonemployee Director making such an election is
equal to the then-current meeting fee -- currently $800 per Board
meeting attended, $500 per teleconference Board meeting and $500 per
Board committee meeting attended ($750 if Chairman of the committee)
- - - -- divided by 95% of the fair market value of the Company's Common
Stock on the date of the meeting in question. Common Stock issued in
lieu of meeting fees is not forfeitable.
Board members who are also officers do not receive any separate
compensation or fees for attending Board or committee meetings,
although they may receive option grants under the Company's Employee
Stock Option Plan.
On November 30, 1994 the Company entered into a Consulting and
Non-Competition Agreement with Roy L. Morgan ("Agreement"). The
Employment Agreement between the Company and Mr. Morgan previously in
effect terminated on December 31, 1994, at which time his resignation
as President of the Company became effective. Mr. Morgan continues as
a director of the Company. Under the terms of the Agreement,
Mr. Morgan will remain a consultant to the Company through July 1,
1999, and is subject to a global non-competition restriction for the
term of the Agreement. In consideration of Mr. Morgan's consulting
services and non-compete agreement, Mr. Morgan received $7,500 on
January 1, 1995, and will receive a semi-annual payment of $37,263
commencing July 1, 1995 for the term of the Agreement. In addition,
and in connection with the cancellation of his previously issued
employee options, Mr. Morgan was granted replacement options for
200,000 shares exercisable at $1.75 per share, the fair market value
of the Common Stock on the option grant date.
During fiscal year 1994, the Company paid approximately $27,000
to Donald R. Segner in consideration of aviation consulting services
provided by Mr. Segner to the Company during the fiscal year,
independent of his service to the Company as a director. Mr. Segner
initially provided these consulting services on retainer, pursuant to
a Consulting Agreement entered into with the Company in October 1993.
Effective October 1994, and in connection with the Company's recent
restructuring, Mr. Segner and the Company have terminated the
Consulting Agreement.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors of the
Company during early calendar year 1994 consisted of Messrs. Miller
(Chairman), Gray, Schreier (then Chief Executive Officer of the
Company) and Belsey. Following Mr. Schreier's resignation from the
Company and Mr. Belsey's appointment as Chief Executive Officer, the
membership of the Compensation Committee was revised so that it now
consists of Messrs. Miller (Chairman), Gray and J. Bernstein
In December 1993, Americas Partners, a New York general
partnership composed of Joseph Bernstein, Ralph Bernstein and Morad
Tahbaz, each currently a director of the Company, co-guaranteed a
$2,500,000 short-term credit extended to the Company by Swiss Bank
Corporation, New York branch. In consideration of this co-guaranty,
the Company granted Americas Partners warrants to purchase 50,000
shares of Common Stock at an exercise price of $10.625 per share
(later reduced to $6.00 per share), exercisable for a term of five
years
22<PAGE>
from the warrant issuance date. The warrant was reissued in May 1995
to reduce the exercise price to $3.00 per share in consideration of
the events discussed below.
In February 1994, Americas Partners agreed to make a bridge loan
of $250,000 to Air Medica Movil, S.A. de C.V. ("AMM"), an air medical
transportation joint venture in Mexico City, Mexico to which the
Company is a party. The loan was convertible at any time into ten
percent of the post-conversion outstanding shares of AMM and was non-
recourse as to the Company. Americas Partners had an option to
provide or arrange for the balance of up to $2,000,000 of third party
financing for the venture on terms satisfactory to the venture and to
the partnership. In consideration of this loan, the Company granted
Americas Partners five-year warrants to purchase 150,000 shares of
Common Stock at an exercise price of $6.00 per share. In May, 1995,
the warrant was reissued to reduce the exercise price to $3.00 per
share in consideration of the assignment by Americas Partners of the
note and all other rights relating to AMM to the Company.
Ralph Bernstein and Morad Tahbaz were elected directors of the Company
in connection with the establishment of a Finance Committee and a
Marketing and New Business Committee of the Company's Board of
Directors, and the approval of the original financing commitment for
AMM. Mr. Tahbaz has also been designated to serve as director of AMM.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth, as of June 15, 1995, the
beneficial ownership of the Company's issued and outstanding Common
Stock: (i) by each person who owns of record (or is known by the
Company to own beneficially) more than 5% of the Common Stock or as to
which he has the right to acquire within 60 days of June 15, 1995,
(ii) by each director of the Company and certain executive officers of
the Company; and (iii) by all directors and officers as a group
(thirteen persons).
23<PAGE>
Percentage of
Name and Address No. of Shares Common Stock/1/
- - - ------------------------ ---------------- ---------------
Americas Tower Partners 1,155,000/2/ 14.4
520 Madison Avenue
New York, NY 10022
George W. Belsey 112,203/3/ 1.4
7301 South Peoria
Englewood, CO 80112
Joseph E. Bernstein 1,385,000/4/ 17.2
520 Madison Avenue
New York, NY 10022
Ralph J. Bernstein 1,355,000/5/ 16.8
520 Madison Avenue
New York, NY 10022
Marius Burke, Jr. 85,775/6/ 1.0
7301 South Peoria
Englewood, CO 80112
Samuel H. Gray 41,839/7/ /*/
95 Madison Avenue
Morristown, NJ 07960
Maurice L. Martin, Jr. 163,433/8/ 2.0
7301 South Peoria
Englewood, CO 80112
Lowell D. Miller, Ph.D. 54,488/9/ /*/
16940 Stonehaven
Belton, MO 64012
Roy L. Morgan 397,220/10/ 4.9
7301 South Peoria
Englewood, CO 80112
Michael G. Prieto 12,333/11/ /*/
7301 South Peoria
Englewood, CO 80112
W. Terrance Schreier 175 /*/
c/o 7301 South Peoria
Englewood, CO 80112
Donald R. Segner 16,916/12/ /*/
290 Arch Street
Laguna Beach, CA 92651
Morad Tahbaz 200,000/13/ 2.5
520 Madison Avenue
New York, NY 10022
All Directors and Officers 2,202,672/14/ 24.7
as a group (thirteen persons)
____________________
/*/ Less than one percent (1%) of the 8,075,023 shares of Common
Stock outstanding on June 15, 1995.
/1/ Does not give effect to the potential exercise of outstanding
options and warrants except as described in the notes below.
24<PAGE>
/2/ These shares are beneficially owned by Americas Tower Partners,
Joseph Bernstein, Ralph Bernstein and a number of corporations
and partnerships controlled by Joseph and Ralph Bernstein.
/3/ Includes 104,444 shares which may be purchased within 60 days
upon the exercise of stock options at $3.00 and $3.50 per share.
/4/ Includes 1,155,000 shares held by Americas Tower Partners, a
partnership controlled by Mr. J. Bernstein, 200,000 shares
issuable upon the exercise of warrants at an exercise price of
$3.00 per share, owned by Americas Partners, of which Mr. J.
Bernstein is a general partner, and 30,000 shares owned of record
by the J.B. Trust of which J. Bernstein's children are sole
beneficiaries, as to which shares Mr. J. Bernstein holds shared
voting and investment power.
/5/ Includes 1,155,000 shares held by Americas Tower Partners, a
partnership controlled by Mr. R. Bernstein, and 200,000 shares
issuable upon the exercise of warrants at an exercise price of
$3.00 per share, owned by Americas Partners, of which Mr. R.
Bernstein is a general partner.
/6/ Includes 341 shares held by Mr. Burke's wife, as to which shares
Mr. Burke disclaims beneficial ownership, and 77,288 shares which
may be purchased within 60 days upon the exercise of stock
options at various prices ranging from $3.00 to $12.125 per
share.
/7/ Includes 3,229 shares and options exercisable within 60 days to
purchase 6,667 shares at $6.25 per share owned by The Morris
Consulting Group, Inc., of which Mr. Gray is Chief Executive
Officer and a 50% stockholder, and options to purchase 21,666
shares at prices ranging from $3.00 to $9.375 per share.
/8/ Includes 160,833 shares which may be purchased within 60 days
upon the exercise of stock options at prices ranging from $3.00
to $7.00 per share.
/9/ Includes 500 shares owned by Mr. Miller's wife, as to which he
disclaims beneficial ownership, and 45,832 shares which may be
purchased within 60 days upon the exercise of stock options at
various prices ranging from $3.00 to $13.50 per share.
/10/ Includes 95,548 shares owned by Mr. Morgan's wife, as to which he
disclaims beneficial ownership, and 200,000 shares which may be
purchased within 60 days upon the exercise of stock options at
$1.75 per share.
/11/ Includes 8,333 shares which may be purchased within 60 days upon
the exercise of stock options at $11.375 per share.
/12/ Includes 16,666 shares which may be purchased within 60 days upon
the exercise of stock options at prices ranging from $3.00 to
$9.00 per share, and 250 shares held in trust as to which
Mr. Segner holds shared voting and investment power.
/13/ Consists of warrants to purchase 200,000 shares at an exercise
price of $3.00 per share, owned by Americas Partners, of which
Mr. Tahbaz is a general partner.
/14/ Includes 841,729 shares which may be purchased within 60 days
upon the exercise of outstanding stock options or warrants.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See discussion at Item 11, "Compensation Committee Interlocks and
Insider Participation."
25<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) Documents filed as part of the report:
1. Financial Statements included in Item 8 of this report:
Independent Auditors' Report.
Consolidated Balance Sheets, December 31, 1994 and June 30,
1994.
Consolidated Statements of Operations for the six months
ended December 31, 1994 and years ended June 30, 1994,
1993 and 1992.
Consolidated Statements of Stockholders' Equity for the six
months ended December 31, 1994 and years ended June 30,
1994, 1993 and 1992.
Consolidated Statements of Cash Flows for the six months
ended December 31, 1994 and years ended June 30, 1994,
1993 and 1992.
Notes to Financial Statements.
2. Financial Statement Schedules included in Item 8 of this
report:
All supporting schedules have been omitted because the
information required is included in the financial statements
or notes thereto or have been omitted as not applicable or
not required.
3. Exhibits:
Exhibit
Number Description of Exhibits
- - - ------- -----------------------
3.1 Certificate of Incorporation/1/
3.2 Amendments to Certificate of Incorporation/2/
3.3 By-Laws as Amended/12/
4.1 Specimen Stock Certificate/2/
4.2 Warrant Agreement, and First and Second Amendment to Warrant
Agreement, and form of Warrant Certificate/3/
4.3 Third Amendment to Warrant Agreement/10/
4.4 Warrant Agreement, dated February 2, 1993, between the
Company and Sands Brothers & Co., Ltd. ("Sands Brothers")
covering Warrants issued to Sands Brothers/3/
4.5 Form of Sands Brothers Warrant/3/
4.6 Warrant Agreement, dated April 6, 1993, between the Company
and C.C.R.I. Corporation/10/
4.7 Warrant Agreement dated February 14, 1994, between the
Company and CCRI Corporation/11/
4.8 Form of Reissued Warrant Agreement, dated May 3, 1995
between the Company and Americas Partners, concerning
warrants originally issued December 28, 1993
IV-1<PAGE>
4.9 Form of Reissued Warrant Agreement, dated May 3, 1995
between the Company and Americas Partners, concerning
warrants originally issued February 21, 1994
10.1 Air Methods Corporation Employee Stock Option Plan, as
amended/13/
10.2 Nonemployee Director Stock Option Plan, as amended/10/
10.3 Restricted Stock Bonus Plan, as amended/10/
10.4 Equity Compensation Plan for Nonemployee Directors, adopted
March 12, 1993/4/
10.5 Amended and Restated Warrant Agreement, dated as of
October 10, 1990, by and between the Company and Fritzsche
Pambianchi & Associates, Inc./7/
10.6 Option Agreement, dated June 12, 1990, between the Company
and Lowell D. Miller/8/
10.7 Option Agreement, dated December 28, 1990, between the
Company and Lowell D. Miller/8/
10.8 Option Agreement, dated July 18, 1991, between the Company
and Lowell D. Miller/10/
10.9 Form of Option Agreement between the Company and Alfred
Bjorseth10
10.10 Form of Option Agreement between the Company and Marlis E.
Smith/10/
10.11 Warrant Agreements, dated April 29, 1993, between the
Company and Bart Gutekunst/10/
10.12 Warrant Agreement, dated April 28, 1993, between the Company
and Gerald Grayson/10/
10.13 Exchange Agreement and Plan of Reorganization, dated
November 12, 1991, by and among the Company and the
shareholders of Air Methods-Colorado (excluding
schedules)/9/
10.14 Form of Consulting Agreement, dated November 30, 1994,
between the Company and Roy L. Morgan
10.15 Employment Agreement, dated November 12, 1991, between the
Company and Maurice L. Martin, Jr./2/
10.16 Employment Agreement, dated June 1, 1994, between the
Company and George Belsey/12/
10.17 Employment Agreement, dated November 30, 1993, between the
Company and Michael Prieto/12/
10.18 Employment Agreement, dated November 12, 1991, between the
Company and Marius Burke, Jr./2/
10.19 Research, Clinical Development and Option Agreement, dated
February 12, 1992, between the Company and Oncotech, Inc./2/
10.20 Research and Licensing Agreement, dated December 6, 1993,
between the Company and Phylomed/12/
10.21 Equipment Leases, and Warrant Agreements, dated July 25,
1992, between the Company and Ventana Leasing, Inc. or
Praktikerfinans AB/2/
IV-2<PAGE>
10.22 Exchange Agreement, dated September 10, 1993 by and among
the Company and the shareholders of Golden Eagle Aviation,
Inc./5/
10.23 Stock Purchase Agreement, dated September 21, 1994 by and
between the Company and Centennial Express Airlines, Inc.
23 Consent of KPMG Peat Marwick, LLP
27 Financial Data Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Company during the six-
month transition period ended December 31, 1994.
____________________
/1/ Filed as an exhibit to the Company's Registration Statement on
Form S-1 (Registration No. 33-15007), as declared effective on
August 27, 1987, and incorporated herein by reference.
/2/ Filed as an exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1992, and incorporated herein
by reference.
/3/ Filed as an exhibit to the Company's Registration Statement on
Form S-3 (Registration No. 33-59690), as declared effective on
April 23, 1993, and incorporated herein by reference.
/4/ Filed as an exhibit to the Company's Registration Statement on
Form S-8 (Registration No. 33-65370), filed with the Commission
on July 1, 1993, and incorporated herein by reference.
/5/ Filed as an exhibit to the Company's current Report on Form 8-K
dated September 10, 1993, and incorporated herein by reference.
/6/ Filed as an exhibit to the Company's Registration Statement on
Form S-1 (Registration No. 33-27883), as declared effective on
June 13, 1989, and incorporated herein by reference.
/7/ Filed as an exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended April 30, 1991, and incorporated herein
by reference.
/8/ Filed as an exhibit to Post-Effective Amendment No. 4 to the
Company's Registration Statement on Form S-1 (Registration
No. 33-27883) filed with the Commission on August 12, 1991, and
incorporated herein by reference.
/9/ Filed as an exhibit to the Company's Current Report on Form 8-K
dated November 12, 1991, and incorporated herein by reference.
/10/ Filed as an exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1993, and incorporated herein
by reference.
/11/ Filed as an exhibit to the Company's Registration Statement on
Form S-3 (Registration No. 33-75744) filed with the Commission on
February 25, 1994 and incorporated herein by reference.
/12/ Filed as an exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1994, and incorporated herein
by reference.
/13/ Filed as an exhibit to the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1995, and incorporated
herein by reference.
IV-3<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
AIR METHODS CORPORATION
Date: June 26, 1995 By: /s/ George W. Belsey
--------------------------------
George W. Belsey
Chairman of the Board
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant in the capacities and on the date indicated.
George W. Belsey Chairman of the Board June 26, 1995
- - - ----------------------- Chief Executive Officer
George W. Belsey Interim Principal Financial
and Accounting Officer
Director June 26, 1995
- - - -----------------------
Roy L. Morgan
Joseph E. Bernstein Director June 26, 1995
- - - -----------------------
Joseph E. Bernstein
Ralph J. Bernstein Director June 26, 1995
- - - -----------------------
Ralph J. Bernstein
Samuel H. Gray Director June 26, 1995
- - - -----------------------
Samuel H. Gray
Lowell D. Miller, Ph.D. Director June 26, 1995
- - - -----------------------
Lowell D. Miller, Ph.D.
Donald R. Segner Vice-Chairman of the Board June 26, 1995
- - - -----------------------
Donald R. Segner
Morad Tahbaz Director June 26, 1995
- - - -----------------------
Morad Tahbaz
IV-4<PAGE>
AIR METHODS CORPORATION
AND SUBSIDIARY
TABLE OF CONTENTS
- - - -----------------------------------------------------------------
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . F-1
CONSOLIDATED FINANCIAL STATEMENTS
- - - ---------------------------------
CONSOLIDATED BALANCE SHEETS,
December 31, 1994 and June 30, 1994 . . . . . . . . . . . . . F-2
CONSOLIDATED STATEMENTS OF OPERATIONS,
Six Months Ended December 31, 1994 and Years Ended
June 30, 1994, 1993, and 1992 . . . . . . . . . . . . . F-4
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY,
Six Months Ended December 31, 1994 and Years Ended
June 30, 1994, 1993, and 1992 . . . . . . . . . . . . . F-5
CONSOLIDATED STATEMENTS OF CASH FLOWS,
Six Months Ended December 31, 1994 and Years Ended
June 30, 1994, 1993, and 1992 . . . . . . . . . . . . . F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS,
December 31, 1994 and June 30, 1994 . . . . . . . . . . . . . F-8
All supporting schedules are omitted because they are inapplicable,
not required, or the information is presented in the consolidated
financial statements or notes thereto.
<PAGE>
Independent Auditors' Report
----------------------------
BOARD OF DIRECTORS AND STOCKHOLDERS
AIR METHODS CORPORATION
We have audited the accompanying consolidated financial statements of
Air Methods Corporation and subsidiary as listed in the accompanying
table of contents. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position
of Air Methods Corporation and subsidiary as of December 31, 1994 and
June 30, 1994, and the results of their operations and their cash
flows for the six months ended December 31, 1994 and each of the years
in the three-year period ended June 30, 1994, in conformity with
generally accepted accounting principles.
KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Denver, Colorado
June 8, 1995
F-1<PAGE>
AIR METHODS CORPORATION
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND JUNE 30, 1994
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
- - - ----------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31, June 30,
Assets 1994 1994
- - - ------ ------------ -------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 696 3,421
Short-term investments -- 20
Current installments of notes receivable 324 309
Receivables (note 5):
Trade 900 978
Insurance proceeds 49 --
Employees and other 65 72
------ ------
1,014 1,050
Inventories (note 5) 1,522 1,329
Work-in-process on medical interior contracts 240 174
Assets held for sale (notes 4 and 5) 4,529 5,065
Prepaid insurance 1,221 --
Other prepaid expenses 290 273
------ ------
Total current assets 9,836 11,641
------ ------
Equipment and leasehold improvements (notes 2, 5, and 6):
Flight and ground support equipment 36,900 36,232
Furniture and office equipment 1,161 1,145
------ ------
38,061 37,377
Less accumulated depreciation and amortization (4,667) (3,484)
------ ------
Net property and equipment 33,394 33,893
------ ------
Excess of cost over the fair value of net assets acquired, net of
accumulated amortization of $308 and $259 at December 31,
1994 and June 30, 1994, respectively (notes 2, 3, and 4) 2,119 2,168
Notes receivable, less current installments 2,197 2,361
Patent application costs and other assets, net of accumulated
amortization of $424 and $383 at December 31, 1994 and June 30,
1994, respectively (note 5) 1,267 1,837
------ ------
Total assets $48,813 $51,900
====== ======
(Continued)
</TABLE>
F-2<PAGE>
AIR METHODS CORPORATION
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS, CONTINUED
(AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
- - - ----------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31, June 30,
Liabilities and Stockholders' Equity 1994 1994
- - - ------------------------------------ ------------ -------
<S> <C> <C>
Current liabilities:
Notes payable (note 5) $ 2,278 1,054
Current installments of long-term debt (note 5) 4,870 5,921
Current installments of obligations under capital leases (note 6) 722 706
Accounts payable 746 915
Accrued overhaul and parts replacement costs 804 809
Deferred revenue 10 1,011
Accrued restructuring expenses (note 4) 114 291
Other accrued liabilities 2,184 2,687
-------- --------
Total current liabilities 11,728 13,394
-------- --------
Long-term debt, less current installments (note 5) 7,569 8,110
Obligations under capital leases, less current installments (note 6) 5,302 5,672
Accrued overhaul and parts replacement costs 4,559 3,961
Other liabilities 945 945
-------- --------
Total liabilities 30,103 32,082
-------- --------
Stockholders' equity (notes 2, 3, and 7):
Preferred stock, $1 par value. Authorized 5,000,000 shares,
none issued and outstanding -- --
Common stock, $.06 par value. Authorized 16,000,000 shares;
issued 8,051,765 and 8,041,518 shares at December 31, 1994
and June 30, 1994, respectively 482 482
Additional paid-in capital 49,572 49,504
Accumulated deficit (31,343) (30,167)
-------- --------
18,711 19,819
Treasury stock, 25,606 shares at December 31, 1994 and
June 30, 1994 (1) (1)
-------- --------
Total stockholders' equity 18,710 19,818
-------- --------
Commitments and contingencies (notes 6 and 13)
Total liabilities and stockholders' equity $48,813 $51,900
======= =======
See accompanying notes to consolidated financial statements.
</TABLE>
F-3<PAGE>
AIR METHODS CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
- - - ----------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended Year Ended June 30,
December 31, ---------------------------------------------
1994 1994 1993 1992
------------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenue:
Flight revenue (note 8) $13,081 $25,346 21,468 11,855
Sales of medical interiors and products 709 2,552 3,872 892
Gain on disposition of assets (note 3) 102 -- -- --
-------- ------- ------- -------
13,973 27,898 25,340 12,747
Operating expenses:
Flight centers 4,427 8,626 7,017 3,819
Aircraft operations 4,445 8,188 5,483 4,520
Aircraft rental (note 6) 994 2,915 3,153 1,978
Cost of medical interiors and products sold 963 2,599 3,228 841
Depreciation and amortization 1,272 2,196 1,438 908
General and administrative 2,176 5,761 4,479 3,984
Loss on disposition of assets -- 790 -- --
Restructuring and other non-recurring expenses
(note 4) -- 3,010 -- --
-------- ------- ------- -------
14,277 34,085 24,798 16,050
-------- ------- ------- -------
Operating income (loss) (304) (6,187) 542 (3,303)
Other income (expense):
Interest expense (717) (1,246) (1,082) (613)
Interest and dividend income 163 188 121 355
Merger termination expense (note 11) (305) -- (272) --
Other, net (note 11) (13) 170 257 962
-------- -------- -------- --------
Loss before extraordinary item (1,176) (7,075) (434) (2,599)
Extraordinary item -- gain (loss) on early
extinguishment of debt (notes 5 and 6) -- (182) 173 --
-------- -------- -------- --------
Net loss $(1,176) (7,257) (261) (2,599)
======== ======== ======== ========
Loss per common share before extraordinary item $(.15) (1.00) (.13) (1.42)
Gain (loss) on early extinguishment of debt per
common share -- (.03) .05 --
-------- -------- -------- --------
Loss per common share $(.15) (1.03) (.08) (1.42)
====== ====== ====== ======
Weighted average number of common shares outstanding 8,023,225 7,056,445 3,453,111 1,829,456
========== ========== ========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
F-4<PAGE>
AIR METHODS CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
SIX MONTHS ENDED DECEMBER 31, 1994 AND YEARS ENDED JUNE 30, 1994, 1993
AND 1992
(AMOUNTS IN THOUSANDS EXCEPT SHARE AMOUNTS)
- - - ----------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock Treasury Stock Additional Total stock-
----------------- ----------------- paid-in Accumulated holders'
Shares Amount Shares Amount capital deficit equity
------ ------ ------ ------ ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES AT JULY 1, 1991 1,420,149 $ 85 -- $ -- 26,570 (20,050) 6,605
Issuance of common shares for options
exercised and services rendered 20,937 1 -- -- 124 -- 125
Amortization of deferred compensation
expense (note 7) -- -- -- -- 26 -- 26
Payment for fractional shares resulting
from reverse stock split (840) -- -- -- (2) -- (2)
Issuance of common shares in business
combination (note 2) 692,730 42 93,843 (6) 1,702 -- 1,738
Net loss -- -- -- -- -- (2,599) (2,599)
---------- ----- ------- ----- ------- -------- -------
BALANCES AT JUNE 30, 1992 2,132,976 128 93,843 (6) 28,420 (22,649) 5,893
Issuance of common shares for options
exercised and services rendered 5,030 -- -- -- 53 -- 53
Issuance of common shares in private
offering, net of syndication costs of
$1,470 (note 7) 2,386,839 144 -- -- 5,547 -- 5,691
Issuance of common shares under the
Restricted Stock Plan (note 7) 102,907 6 -- -- (6) -- --
Amortization of deferred compensation
expense (note 7) -- -- -- -- 191 -- 191
Retirement of unvested shares and
options forfeited under the Restricted
Stock Plan (note 7) (1,770) -- -- -- (1) -- (1)
Issuance of common shares for
warrants exercised, net of solicitation
costs of $250 (note 7) 636,148 38 -- -- 2,577 -- 2,615
Net loss -- -- -- -- -- (261) (261)
---------- ----- -------- ----- ------- -------- -------
BALANCES AT JUNE 30, 1993 5,262,130 316 93,843 (6) 36,781 (22,910) 14,181
Issuance of common shares for options
exercised and services rendered 533,798 18 -- -- 1,306 -- 1,324
Issuance of common shares for
warrants exercised, net of solicitation
costs of $429 (note 7) 1,272,626 90 -- -- 5,411 -- 5,501
Issuance of common shares in private
offering (note 7) 1,011,190 61 -- -- 5,669 -- 5,730
Issuance of common shares in
acquisition (note 3) 55,617 3 -- -- 437 -- 440
Amortization of deferred compensation
expense (note 7) -- -- -- -- 218 -- 218
Retirement of unvested shares and
options forfeited under the Restricted
Stock Plan (note 7) -- -- -- -- (8) -- (8)
In-kind tax withholding elected by
employees under the Restricted Stock
Plan (note 7) -- -- 25,606 (1) (310) -- (311)
Cancellation of treasury shares (93,843) (6) (93,843) 6 -- -- --
Net loss -- -- -- -- -- (7,257) (7,257)
---------- ----- -------- ----- ------- -------- -------
BALANCES AT JUNE 30, 1994 8,041,518 482 25,606 (1) 49,504 (30,167) 19,818
Issuance of common shares for options
exercised and services rendered 10,247 -- -- -- 60 -- 60
Amortization of deferred compensation
expense (note 7) -- -- -- -- 10 -- 10
Retirement of unvested shares and
options forfeited under the Restricted
Stock Plan (note 7) -- -- -- -- (2) -- (2)
Net loss -- -- -- -- -- (1,176) (1,176)
---------- ----- -------- ----- ------- -------- -------
BALANCES AT DECEMBER 31, 1994 8,051,765 $482 25,606 $ (1) 49,572 (31,343) 18,710
========== ===== ======== ===== ======= ======== =======
See accompanying notes to consolidated financial statements.
</TABLE>
F-5<PAGE>
AIR METHODS CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
- - - ----------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended Year Ended June 30,
December 31, -------------------------------
1994 1994 1993 1992
------------- ------ ------ ------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $(1,176) (7,257) (261) (2,599)
Adjustments to reconcile net loss to net cash provided
(used) by operating activities:
Provision for restructuring and other non-recurring
expenses -- 2,218 -- --
Depreciation and amortization expense 1,272 2,196 1,438 908
Common stock and options issued for services and
in connection with employee stock compensation
agreements, net of forfeitures 69 (94) 243 149
Loss (gain) on retirement and sale of equipment (102) 790 (12) (321)
Loss (gain) on early extinguishment of debt -- 182 (173) --
Changes in operating assets and liabilities, net of
acquisitions:
Decrease (increase) in receivables 36 2,043 (1,121) (678)
Increase in inventories (193) (53) (1,166) (182)
Decrease (increase) in prepaid expenses and other
current assets 844 (180) 295 (360)
Increase in work-in-process on medical interior
contracts (66) (153) (81) (87)
Decrease in accounts payable, other accrued
liabilities, and accrued restructuring expenses (716) (189) (376) (2,069)
Increase (decrease) in accrued overhaul and parts
replacement costs 404 860 (432) 237
Increase (decrease) in deferred revenue and other
liabilities (1,001) 676 95 414
-------- -------- ------- -------
Net cash provided (used) by operating activities (629) 1,039 (1,551) (4,588)
-------- -------- ------- -------
Cash flows from investing activities:
Net cash used in acquisition of Golden Eagle
Aviation, Inc. -- (451) -- --
Acquisition of equipment and leasehold improvements (981) (16,101) (6,561) (3,104)
Proceeds from retirement and sale of equipment 790 618 2,093 725
Decrease (increase) in notes receivable, patent
application costs, and other assets 425 (307) (654) (190)
Proceeds from sale or maturity of short-term
investments 21 504 1,378 4,129
Purchase of short-term investments -- -- (472) (3,991)
Payments for acquisition costs -- -- -- (482)
-------- -------- ------- -------
Net cash provided (used) by investing activities 255 (15,737) (4,216) (2,913)
-------- -------- ------- -------
Cash flows from financing activities:
Proceeds from issuance of common stock -- 12,898 10,026 591
Payments for syndication and solicitation costs -- (1,252) (1,720) --
Net borrowings (repayments) under short-term notes
payable (856) (117) (268) 486
Proceeds from long-term debt -- 7,851 4,049 1,876
Payments of long-term debt (1,141) (4,007) (2,318) (357)
Payments of capital lease obligations (354) (1,882) (473) (488)
-------- -------- ------- -------
Net cash provided (used) by financing activities (2,351) 13,491 9,296 2,108
-------- -------- ------- -------
Increase (decrease) in cash and cash equivalents (2,725) (1,207) 3,529 (5,393)
Cash and cash equivalents at beginning of period $ 3,421 4,628 1,099 6,492
-------- -------- ------- -------
Cash and cash equivalents at end of period $ 696 3,421 4,628 1,099
======== ======== ======= =======
Interest paid in cash during the period $ 718 1,243 1,158 645
======== ======== ======= =======
(Continued)
</TABLE>
F-6<PAGE>
AIR METHODS CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
- - - ----------------------------------------------------------------------
Noncash investing and financing transactions:
On November 12, 1991, the Company issued 598,887 restricted shares of
its common stock for all the outstanding common shares of Air Methods
Corporation, a Colorado corporation. The transaction consisted of the
following:
Year ended
June 30, 1992
-------------
(Amounts in
thousands)
Issuance of stock in exchange for net assets of
Air Methods $ 2,220
========
Net assets acquired:
Equipment and leasehold improvements $15,762
Receivables 648
Inventories 446
Goodwill 2,422
Accounts payable and accrued liabilities (3,173)
Accrued overhaul and parts replacement costs (4,459)
Debt (9,600)
Other, net 174
--------
Net assets acquired $ 2,220
========
On September 10, 1993, the Company issued 25,908 restricted shares of
its common stock for all the outstanding common shares of Golden Eagle
Charters, Inc. ("Golden Eagle"). On the same date, in a related
transaction, the Company issued 29,709 restricted shares of its common
stock for the transfer to the Company of an interest in a jet
airplane. The transaction consisted of the following:
Year ended
June 30, 1994
-------------
(Amounts in
thousands)
Issuance of stock in exchange for net assets of
Golden Eagle $ 440
=======
Net assets acquired:
Equipment and leasehold improvements $1,923
Receivables 105
Goodwill 1,193
Accounts payable and other liabilities (2,781)
-------
Net assets acquired $ 440
=======
Capital lease obligations of $19,000, $7,085,000, and $1,479,000 were
assumed to acquire equipment during the years ended June 30, 1994,
1993 and 1992, respectively.
Notes receivable of $2,790,000 were received as partial consideration
for the sale of two aircraft during the year ended June 30, 1994.
Short-term notes payable of $2,347,000 were assumed to finance the
Company's annual hull and liability, workers' compensation, and
directors' and officers' insurance policies during the six months
ended December 31, 1994.
See accompanying notes to consolidated financial statements.
F-7<PAGE>
AIR METHODS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND JUNE 30, 1994
- - - ----------------------------------------------------------------------
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Financial Statement Presentation
The accompanying consolidated financial statements consist of the
accounts of Air Methods Corporation, a Delaware corporation ("Air
Methods" or "the Company"). As discussed more fully in note 3,
in September 1994 the Company sold all of the outstanding shares
of common stock of Golden Eagle Charters, Inc. ("Golden Eagle"),
formerly a wholly owned subsidiary of the Company. During fiscal
year 1993, Cell Technology Biosciences, Inc., another wholly
owned subsidiary, was dissolved. All significant intercompany
balances and transactions have been eliminated in consolidation.
As discussed more fully in note 2, on November 12, 1991, Cell
Technology, Inc. acquired all of the outstanding common shares of
Air Methods Corporation, a Colorado corporation (AMC). On
November 13, 1991, AMC was merged into the Company and the
Company changed its name to Air Methods Corporation.
Cash and Cash Equivalents
For purposes of the consolidated statements of cash flows, the
Company considers all highly liquid instruments with original
maturities of three months or less to be cash equivalents. Cash
equivalents of $565,000 and $2,427,000 at December 31, 1994 and
June 30, 1994, respectively, consist of short-term money market
funds.
Short-Term Investments
Short-term investments, which consisted of certificates of
deposit, had maturities of greater than 90 days but less than one
year and were recorded at cost, which approximated market value.
Inventories
Inventories are comprised primarily of expendable aircraft parts
which are recorded at the lower of cost (average cost) or market.
Work-in-Process on Medical Interior Contracts
Work-in-process on medical interior contracts represents costs of
the installation of medical equipment and modification of
aircraft for third parties. Revenue relating to fixed fee
contracts is recognized using the completed contract method of
accounting.
F-8
<PAGE>
AIR METHODS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
- - - ----------------------------------------------------------------------
A contract is considered complete when all costs except
insignificant items have been incurred and the installation is
operating according to specification. If the modified aircraft
is leased by the Company in its operations, the revenue is
deferred and recognized over the term of the lease.
Certain medical interior contracts provide for reimbursement of
all costs plus an incremental amount. Revenue on these contracts
is recorded as costs are incurred. In addition, when the total
cost to complete a medical interior under a fixed fee contract
can be reasonably estimated, revenue is recorded as costs are
incurred.
Assets Held for Sale
Assets held for sale consist primarily of aircraft designated for
disposal within one year and are valued at the lower of cost or
estimated net realizable value. Net realizable value is
determined primarily by individual market studies; estimated
carrying costs of the assets prior to disposal are included in
the calculation of net realizable value. Depreciation is
discontinued when an asset is designated for disposal. Debt
collateralized by assets held for sale is classified in the
financial statements as current.
Equipment and Leasehold Improvements
Hangar, equipment, and leasehold improvements are recorded at
cost. Maintenance and repairs are expensed when incurred. Major
modifications and costs incurred to place aircraft in service are
capitalized. Improvements to helicopters and airplanes leased
under operating leases are included in flight and ground support
equipment in the accompanying financial statements. Depreciation
is computed using the straight-line method over the following
useful lives:
Residual
Description Lives value
---------------------------------------- ----------- --------
Hangar 40 years 10%
Helicopters, including medical equipment 8-25 years 25%
Airplanes, including medical equipment 8-20 years 0-10%
Ground support equipment 5-10 years 0-10%
Furniture and office equipment 3-10 years --
Leasehold improvements to hangar and office space are amortized
using the straight-line method over the terms of the leases.
F-9<PAGE>
AIR METHODS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
- - - ----------------------------------------------------------------------
Excess of Costs Over the Fair Value of Net Assets Acquired
Excess of cost over the fair value of net assets acquired, or
goodwill, is being amortized using the straight-line method over
25 years. Periodically the Company evaluates the recoverability
of goodwill based upon undiscounted earnings projections. Events
that may indicate a need to assess recoverability include
significant changes in business conditions, continuing losses, or
a forecasted inability to achieve at least break-even results
over an extended period. Should an impairment in value be
indicated, the carrying value of goodwill will be adjusted
accordingly.
Fleet Integration Costs
Costs related to the integration of new types of aircraft into
the Company's fleet are deferred and amortized over a period of
five years. Such costs are included in other assets in the
accompanying financial statements.
Patent Application Costs
The Company capitalizes legal costs associated with patent
applications. At such time as patents are granted, these costs
will be amortized over the estimated useful economic life of the
patents. Costs relating to unsuccessful patent applications are
charged to operations.
Engine and Airframe Overhaul Costs
The Company uses the accrual method of accounting for major
engine and airframe overhauls whereby the cost of the next
overhaul is estimated and accrued based on usage of the aircraft
over the period between overhauls.
Revenue Recognition and Uncollectible Receivables
Fixed fee revenue under the Company's operating agreements with
hospitals is recognized monthly over the term of the agreements.
Revenue relating to emergency flights is recognized upon
completion of the services.
Uncollectible trade receivables are charged to operations using
the allowance method. The allowance for uncollectible
receivables was not significant at December 31, 1994 and June 30,
1994.
F-10
<PAGE>
AIR METHODS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
- - - ----------------------------------------------------------------------
Income Taxes
The Company accounts for income taxes using the asset and
liability method of Statement of Financial Accounting Standard
No. 109, Accounting for Income Taxes (Statement 109). Deferred
tax assets and liabilities are recognized for the future income
tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect
on deferred income tax assets and liabilities of a change in
rates is recognized in income in the period that includes the
enactment date.
Loss Per Share
Loss per common share is calculated using the weighted average
number of common shares outstanding for each period. Outstanding
common stock options and common stock purchase warrants have not
been included in the calculations since the effect would be
antidilutive. Share and per share amounts for all periods
presented reflect a one-for-six reverse stock split completed in
fiscal 1992.
(2) BUSINESS COMBINATION
On November 12, 1991, the Company issued 598,887 restricted
shares of its common stock in exchange for all of the outstanding
common shares of AMC. The combination was accounted for using
the purchase method of accounting. The restricted shares of the
Company's common stock were valued at $2,220,000 by the Company's
Board of Directors, and such amount was allocated to the assets
acquired net of liabilities assumed based on their respective
estimated fair values. Such amount was based on the market value
of the shares, as determined by an independent appraisal, which
was discounted to reflect the restricted nature of the stock.
The application of the purchase price was as follows (amounts in
thousands):
Composition of purchase price:
Stockholders' deficit of AMC at date of
acquisition $(5,492)
Adjustments to record the net assets of AMC
at fair value:
Flight equipment 5,290
Excess of cost over the fair value of net
assets acquired 2,422
-------
7,712
-------
Total purchase price $ 2,220
=======
F-11<PAGE>
AIR METHODS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
- - - ----------------------------------------------------------------------
(3) ACQUISITION AND SALE OF SUBSIDIARY
On September 10, 1993, the Company entered into an Exchange
Agreement (the "Agreement") with Golden Eagle and Golden Eagle's
shareholders (the "Shareholders") whereby the Company issued an
aggregate of 25,908 shares of its Common Stock valued at
approximately $188,000 to the Shareholders in exchange for all of
the issued and outstanding shares of Golden Eagle. On the same
date, in a related transaction contemplated by the Agreement, the
Company issued an aggregate of 29,709 shares of its restricted
common stock, valued at approximately $252,000 to shareholders
and related parties of Golden Eagle, in exchange for the transfer
to the Company of an interest in a jet airplane. In connection
with the agreement, the Company assumed approximately $2,781,000
in debt and other liabilities of Golden Eagle and the
Shareholders for an aggregate consideration of $3,221,000.
The application of the purchase price was as follows (amounts in
thousands):
Composition of purchase price:
Stockholders' deficit of Golden Eagle at
date of acquisition $ (753)
Excess of cost over the fair value of
net assets acquired 1,193
-------
Total purchase price $ 440
=======
The transaction was accounted for using the purchase method of
accounting. Accordingly, the results of operations of Golden
Eagle have been included with those of the Company since the
effective date of the Agreement.
As discussed more fully in note 4, in the third quarter of fiscal
1994, the Company discontinued substantially all of the
unprofitable airplane charter operations of Golden Eagle and
wrote off the balance of goodwill related to the purchase of
Golden Eagle as part of the restructuring. Losses from Golden
Eagle's charter operations from the date of acquisition through
June 30, 1994 totaled $677,000. On September 21, 1994, the
Company sold all of the outstanding shares of common stock of
Golden Eagle to a company in exchange for $10,000 and the
assumption of certain liabilities of Golden Eagle. The Company
recorded a gain of $126,000 on the sale.
(4) BUSINESS RESTRUCTURING
During the third and fourth quarters of fiscal 1994, the Company
implemented a restructuring plan for the Company's continuing air
medical flight and manufacturing operations designed to reduce
costs and improve operating efficiencies. The restructuring plan
included the discontinuation of substantially all of the airplane
charter operations of Golden Eagle, a reduction in the Company's
work force, and the disposal of selected assets. Also included
in the restructuring was the cancellation of
F-12<PAGE>
AIR METHODS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
- - - ----------------------------------------------------------------------
a proposed debt refinancing and public preferred stock offering
in the third quarter of 1994. With the exception of severance
pay related to the reduction in the work force and certain
placement fees for the proposed preferred stock offering, the
restructuring expenses consisted of non-cash charges including
the write-off of previously recorded assets. Valuation
allowances established for assets designated for disposal are
classified with other gains and losses on the disposition of
assets in the accompanying financial statements.
The restructuring and other non-recurring charges for the year
ended June 30, 1994, consist of the following (amounts in
thousands):
Write-off of costs associated with proposed debt
refinancing $ 335
Write-off of costs associated with proposed public
preferred stock offering 571
Write-off of goodwill related to the acquisition of
Golden Eagle 1,459
Severance pay 614
Other 31
------
$3,010
======
Accrued restructuring expenses as of December 31, 1994, consist
of severance pay.
(5) NOTES PAYABLE AND LONG-TERM DEBT
Notes payable consist of the following at December 31, 1994 and
June 30, 1994 (amounts in thousands):
<TABLE>
<CAPTION>
December 30, June 30,
1994 1994
------------ --------
<S> <C> <C>
Borrowings under a note with a company with interest
at prime rate (6% at December 31, 1994), due upon
delivery of two helicopters. Subsequent to
December 31, 1994, the note was cancelled. See
further discussion in Note 13. $ 267 534
Borrowings under a $2 million line of credit with
interest at prime rate (8.5% at December 31, 1994),
collateralized by certain receivables and inventories 500 505
Borrowings under an unsecured note with a company
with interest at 5.73%, due in monthly installments
of principal and interest through June 1, 1995 1,249 --
Borrowings under an unsecured note with a company
with interest at 7.25%, due in monthly installments
of principal and interest through July 1, 1995 128 --
Other 134 15
----- -----
$2,278 1,054
===== =====
</TABLE>
F-13<PAGE>
AIR METHODS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
- - - ----------------------------------------------------------------------
Long-term debt consists of the following at December 31, 1994 and
June 30, 1994 (amounts in thousands):
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Notes payable to one lender with interest at 9.94%,
due in monthly payments of principal and interest
through August 2001, collateralized by equipment,
receivables, inventories, and other intangible assets $ 4,893 5,145
Notes payable to one lender with interest at 8.5%, due
in monthly payments of principal and interest through
September 2000, collateralized by flight equipment 2,505 3,770
Note payable to a company with interest at 9.25%, due
in monthly payments of principal and interest through
December 2001, collateralized by a hangar 253 266
Note payable to a company with monthly interest
payments at prime rate plus 1% (9.5% at December 31,
1994). Paid in full on March 16, 1995 3,819 3,819
Note payable to a company with interest at 11%, due in
monthly payments of principal and interest through
February 29, 2002, collateralized by equipment,
receivables and inventories 594 620
Note payable to a company with interest at 10%, due in
monthly payments of principal and interest through
May 2000, collateralized by flight equipment 334 357
Unsecured 13% note payable to a stockholder, due in
monthly payments of principal and interest through
December 1996 15 17
Other 26 37
-------- -------
12,439 14,031
Less current installments (4,870) (5,921)
-------- -------
$ 7,569 $ 8,110
======= =======
</TABLE>
All debt collateralized by assets held for sale is classified as
current.
F-14<PAGE>
AIR METHODS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
- - - ----------------------------------------------------------------------
Aggregate maturities of long-term debt are as follows (amounts in
thousands):
Year ending December 31:
1995 $ 4,870
1996 1,154
1997 1,292
1998 1,389
1999 1,528
Thereafter 2,206
$12,439
In the six months ended December 31, 1994 and the year ended June
30, 1994, the Company retired debt totaling $1,048,000 and
$2,056,000 respectively, prior to the scheduled maturities. In
1993, the Company retired debt totaling $642,000 prior to the
scheduled maturities and recognized gains of $173,000 on the
early extinguishment of the debt.
Total interest expense incurred by the Company on notes, long-
term debt, and capital leases during the six months ended
December 31, 1994 was $930,000, of which $213,000 was
capitalized.
(6) LEASES
The Company leases hangar and office space under noncancelable
operating leases and leases certain equipment and aircraft under
operating and capital leases. As of December 31, 1994, future
minimum lease payments under capital and operating leases are as
follows (amounts in thousands):
Capital Operating
leases leases
------- ---------
Year ending December 31:
1995 $ 1,154 2,387
1996 1,119 2,203
1997 1,119 2,201
1998 1,119 1,775
1999 714 1,517
Thereafter 2,628 4,382
------- -------
Total minimum lease payments 7,853 $14,465
=======
Less amounts representing interest (1,829)
-------
Present value of minimum capital
lease payments 6,024
-------
Less current installments (722)
-------
$5,302
=======
F-15<PAGE>
AIR METHODS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
- - - ----------------------------------------------------------------------
Rent expense relating to operating leases totaled $1,234,000,
$3,434,000, $3,462,000, and $2,195,000 for the six months ended
December 31, 1994 and years ended June 30, 1994, 1993 and 1992,
respectively.
On July 25, 1992, the Company entered into two equipment leases
with Ventana Leasing, Inc. ("Ventana") for the lease of two
helicopters. A former director of the Company is a 50% owner of
Ventana. In December 1993 the Company retired one of the Ventana
capital lease obligations for a total of $1,167,000 and recorded
a loss of $182,000 on the early extinguishment of this
obligation.
The remaining capital lease with Ventana is for a term of seven
years at an annual cost to the Company of approximately $301,000.
Lease payments are fixed for the first five years of the lease
term, after which Ventana may increase the lease payments within
certain limits to account for any increases in Ventana's debt
servicing costs on the leased aircraft. The lease provides that
the Company will pay Ventana $337,500 upon termination of the
lease to purchase the aircraft. In September 1992, the Company
entered into an additional equipment lease with Ventana covering
certain telephone and computer equipment. The lease has a three-
year term at an annual cost to the Company of approximately
$50,000, and provides that the Company will purchase the leased
equipment at the end of the lease term.
At December 31, 1994 and June 30, 1994, leased property held
under capital leases included in equipment, net of accumulated
depreciation, totaled $10,359,000 and $10,598,000, respectively.
(7) STOCKHOLDERS' EQUITY
(a) Warrants
In connection with various offerings of common stock and
other transactions by the Company, the following warrants to
purchase the Company's common stock were issued and are
outstanding as of December 31, 1994:
F-16<PAGE>
AIR METHODS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
- - - ----------------------------------------------------------------------
Number of Exercise price
warrants per share Expiration Date
--------- -------------- -------------------
6,250 $ 10.50 March 13, 1995
30,000 4.00 March 12, 1996
67,938 5.10 Various, 1997
4,000 3.00 February 2, 1998
126,592 4.00 February 2, 1998
20,000 4.13 March 12, 1998
75,000 4.50 April 6, 1998
50,000 6.00 December 29, 1998
150,000 6.88 February 14, 1999
150,000 6.00 February 21, 1999
-------
679,780
=======
In June 1993, 840,368 warrants were exercised at $3.41 per
warrant to purchase 636,148 common shares for total proceeds
of $2,865,000.
(b) Stock Option Plans
The Company has a Stock Option Plan (the Plan) which, as
amended in October 1993 and February 1995, provides for the
granting of incentive stock options (ISOs) and nonincentive
stock options (non-ISOs), stock appreciation rights, and
supplemental stock bonuses. Under the Plan, 1,500,000
shares of common stock are reserved for options. The
Company also grants non-ISOs outside of the Plan.
Generally, the options granted under the Plan have an
exercise price equal to the fair market value on the date of
grant, become exercisable in three equal installments
beginning one year from the date of grant, and expire five
years from the date of grant.
The Nonemployee Director Stock Option Plan was adopted by
the Board of Directors in May 1991 and approved by the
shareholders in October 1991. The Plan authorizes the grant
of nonstatutory stock options to purchase an aggregate of
300,000 shares of common stock to nonemployee directors of
the Company. Each nonemployee director completing one
fiscal year of service will receive a five-year option to
purchase 5,000 shares, exercisable at the then current fair
market value of the Company's common stock.
At December 31, 1994, options issued to a consulting group
to purchase 6,667 shares of common stock at an exercise
price of $6.25 per share were
F-17<PAGE>
AIR METHODS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
- - - ----------------------------------------------------------------------
outstanding. A director of the Company is the chief
executive officer and a 50% owner of the consulting group.
The following is a summary of option activity, including
options granted and outstanding outside of the Plan, during
the six months ended December 31, 1994 and the years ended
June 30, 1994, 1993 and 1992:
<TABLE>
<CAPTION>
ISOs Non-ISOs Total
-------- ---------- ---------
<S> <C> <C> <C>
Outstanding at June 30, 1991 120,885 153,751 274,636
Granted 118,613 93,333 211,946
Canceled (35,864) -- (35,864)
Exercised (4,708) -- (4,708)
--------- --------- ---------
Outstanding at June 30, 1992 198,926 247,084 446,010
Granted 113,474 90,864 204,338
Canceled (11,702) (2,916) (14,618)
--------- --------- ---------
Outstanding at June 30, 1993 300,698 335,032 635,730
Granted 854,349 87,666 942,015
Canceled (445,064) (72,496) (517,560)
Exercised (62,141) (2,222) (64,363)
--------- --------- ---------
Outstanding at June 30, 1994 647,842 347,980 995,822
Granted 65,773 142,857 208,630
Canceled (275,691) -- (275,691)
Exercised (41) (4,348) (4,389)
--------- --------- ---------
Outstanding at December 31, 1994 437,883 486,489 924,372
========= ========= =========
Exercise prices $1.75 to 12.13 1.75 to 13.50
============= =============
</TABLE>
(c) Restricted Stock Plan
Effective December 3, 1992, the Company established a
restricted stock plan authorizing the issuance of up to
300,000 shares of common stock to employees. Under this
plan, participating employees elected to reduce their
compensation by 2% to 20% for the period from January 9,
1993 to
F-18<PAGE>
AIR METHODS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
- - - ----------------------------------------------------------------------
January 8, 1994. For each $3 by which employees reduced
their compensation, the Company issued one share of stock
and one option to purchase one share of stock for $3. The
Company issued 101,137 shares under this plan to employees
and recorded deferred compensation for the value of the
options issued and for the excess of the market value of the
shares issued on the effective date over the face value of
$3 per share. The shares issued under the plan vested over
one year; the associated options vest over three years. The
Company recorded $10,000, $218,000 and $191,000 of
compensation expense under the plan for the six months ended
December 31, 1994 and the years ended June 30, 1994 and
1993, respectively. Remaining unamortized deferred
compensation was $8,000 and $21,000 as of December 31, 1994
and June 30, 1994, respectively.
In January 1994 employees who received shares under this
compensation plan were allowed to elect to have the Company
retain sufficient shares to provide for the payment of their
withholding taxes. The Company withheld a number of shares
equivalent in value to the taxes owed from the shares issued
to employees and placed these shares in treasury stock.
(d) Nonemployee Compensation Plan
In February 1993, the Board of Directors adopted the Air
Methods Corporation Equity Compensation Plan for Nonemployee
Directors which was subsequently approved by the Company's
stockholders on March 12, 1993. Under this compensation
plan, 150,000 shares of common stock are reserved for
issuance to non-employee directors.
(e) Private Placement
In February 1993, the Company completed a private placement
of 2,386,839 shares of common stock at $3 per share. In the
year ended June 30, 1994, 1,176,086 of the warrants issued
in tandem with the shares of common stock in this private
offering were exercised to purchase 1,272,626 shares of
common stock.
In February 1994, the Company completed a private placement
of 1,011,190 shares of common stock at $5.66 per share with
institutions outside of the United States.
F-19<PAGE>
AIR METHODS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
- - - ----------------------------------------------------------------------
(f) Stock Repurchase Plan
On August 5, 1994, the Board of Directors approved a stock
repurchase plan authorizing the repurchase of up to 10% of
the outstanding shares of the Company's common stock to be
used to meet the Company's common stock requirements for its
employee benefit plans and other purposes. Repurchases may
be made from time to time in the open market or in privately
negotiated transactions. The plan authorizes, but does not
require, the Company to repurchase shares. Actual
repurchases in any period are subject to approval by the
Finance Committee of the Board of Directors and will depend
on market conditions and other factors. As of December 31,
1994, no shares had been repurchased under this plan.
(8) REVENUE
The Company has operating agreements and leases with various
hospitals and hospital systems to provide services and aircraft
for periods ranging from 1 to 7 years. The agreements provide
for revenue from monthly fixed fees and flight fees based upon
the utilization of aircraft in providing emergency medical
services. The fixed-fee portion of the agreements and leases
provide for the following revenue for years subsequent to
December 31, 1994 (amounts in thousands):
Year ending December 31:
1995 $16,970
1996 12,689
1997 10,036
1998 6,854
1999 4,976
Thereafter 2,045
-------
$53,570
=======
(9) INCOME TAXES
For income tax purposes, the Company has net operating loss
carryforwards at December 31, 1994 of approximately $31,600,000
which will expire in varying amounts through the year 2008.
Alternative minimum tax (AMT) loss carryforwards available to
offset future AMT taxable income approximate net operating loss
carryforwards for regular federal income tax purposes.
F-20<PAGE>
AIR METHODS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
- - - ----------------------------------------------------------------------
As a result of the acquisition of AMC and other issuances of
stock, the utilization of a portion the aforementioned net
operating loss carryforwards will be limited annually by the
provisions of Section 382 of the Internal Revenue Code. Any
future tax benefits recognized through utilization of AMC's net
operating loss carryforwards as of the acquisition date will be
applied to reduce the excess of cost over the fair value of net
assets acquired.
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax
liabilities at December 31, 1994 are as follows (amounts in
thousands):
Deferred tax assets:
Overhaul and parts replacement cost,
principally due to the accrual method $ 1,877
Assets held for sale, principally due to
differences in bases 235
Accrued restructuring expenses and
valuation allowances 433
Net operating loss carryforwards 11,062
Other 246
-------
Total gross deferred tax assets 13,853
Less valuation allowance (9,656)
-------
Net deferred tax assets 4,197
-------
Deferred tax liabilities:
Equipment and leasehold improvements,
principally due to differences in
bases and depreciation methods (4,090)
Other (107)
-------
Total deferred tax liabilities (4,197)
-------
Net deferred tax liability $ --
=======
(10) RETIREMENT PLAN
The Company has a defined contribution retirement plan whereby
qualified employees may contribute up to 12% of their annual
salaries. The Company contributes an amount equal to 1% of the
employees' annual salary and will match 20% of the employees'
contributions up to 6% of their annual salaries. Company
contributions totaled approximately $70,000, $156,000, $126,000,
and $41,000 for the six months ended December 31, 1994 and for
each of the years in the three-year period ended June 30, 1994,
respectively.
F-21<PAGE>
AIR METHODS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
- - - ----------------------------------------------------------------------
(11) PROPOSED BUSINESS COMBINATIONS
In January 1991, the Company entered into a definitive agreement
to purchase all of the outstanding stock of Pioneer
Pharmaceuticals, Inc. ("PPI") from Essex Chemical Corporation
("Essex"), a subsidiary of Dow Chemical. On July 1, 1991, the
Company notified Essex of its termination of the agreement to
purchase PPI. During the year ended June 30, 1992, the Company
received $576,000 from Essex as a settlement of certain disputes
arising out of the purchase agreement; this amount is included in
other income in the accompanying consolidated financial
statements.
In April 1992, the Company agreed in principle to acquire
American Air Ambulance, Inc. (AAA). In October 1992, the
agreement was allowed to expire. Costs totaling $272,000
relating to the proposed acquisition were charged to merger
termination expense in the third quarter of fiscal 1993.
During the six months ended December 31, 1994, the Company
discussed the feasibility of a business combination of the
emergency air medical transport business of the Company with
Rocky Mountain Helicopters, Inc. ("RMHI"), which was then
operating as a debtor-in-possession under Chapter 11 of the U.S.
Bankruptcy Code. In November 1994, the cash portion of the
Company's bid for the aeromedical assets of RMHI was exceeded in
a bid placed by another party and the Company declined to submit
a final bid. The expenses incurred as part of the due diligence
process consist primarily of legal and professional fees and
comprise the balance of the $305,000 merger termination expense
recognized in the six months ended December 31, 1994.
(12) RELATED PARTY TRANSACTIONS
During the year ended June 30, 1993, the Company contracted with
a placement agent, which is partially owned by one of the
Company's former directors, to provide services relating to the
solicitation for the exercise of public warrants. Fees paid to
this agent were $917,000 for the fiscal year ended June 30, 1993.
During the year ended June 30, 1994, the Company issued five-year
warrants to purchase 50,000 shares of common stock to Americas
Partners in connection with the guarantee of a $2,500,000 note.
The general partners of Americas Partners are directors of the
company. The note was paid in full in the third quarter of 1994.
In February 1994 warrants to purchase an additional 150,000
shares were issued to Americas Partners in connection with a
commitment from Americas Partners to contribute funds to cover
start-up costs for a Joint Venture in Mexico. The commitment was
paid to the Company in full subsequent to June 30, 1994. The
exercise price of all of the Americas Partners warrants is $3 per
share.
F-22<PAGE>
AIR METHODS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
- - - ----------------------------------------------------------------------
(13) COMMITMENTS AND CONTINGENCIES
In November 1992, a former employee brought a lawsuit against the
Company which is pending in the U.S. District Court for the
District of Minnesota. This suit alleges that the Company
wrongfully discharged the employee and seeks recovery of
unspecified monetary damages for lost compensation, emotional
distress and other losses, costs, attorneys' fees and related
penalties. The Company intends to vigorously defend this action
and believes that it has strong defenses. Management of the
Company believes the ultimate outcome of this action will not
have a material adverse impact on the Company's financial
position or results of operations.
Subsequent to December 31, 1994, one of the Company's suppliers
cancelled contracts which had required the Company to acquire
four helicopters prior to December 1996.
(14) PRIOR YEAR TRANSITION PERIOD (UNAUDITED)
In March, 1995 the Company announced a change in its fiscal year
end from June 30 to December 31. Unaudited operating results for
the six months ended December 31, 1993 are presented for
comparative purposes and are as follows (amounts in thousands
except share and per share amounts):
Revenue $15,320
Operating expenses 14,822
-------
Operating income 498
Other expense, net (399)
-------
Income before extraordinary item 99
Extraordinary item - loss on early
extinguishment of debt (181)
-------
Net loss $ (82)
=======
Income per common share before
extraordinary item $ .02
Loss on early extinguishment of debt
per common share (.03)
-------
Loss per common share $ (.01)
=======
Weighted average number of
common shares outstanding 6,116,271
=========
F-23
AIR METHODS CORPORATION
REISSUED WARRANT AGREEMENT
THIS REISSUED WARRANT AGREEMENT is made and entered into
this 3rd day of May, 1995, by and between AIR METHODS CORPORATION (the
"Company") and AMERICAS PARTNERS ("AP") (together, the "Parties").
RECITALS
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A. The Company executed a promissory note on December 28,
1993 in favor of Swiss Bank Corporation, New York Branch (the "Bank"),
in the principal amount of $2,500,000, with interest on the
outstanding principal balance at the Eurodollar rate (as defined in
the promissory note) plus one and one-half percent per annum, such
principal and interest due and payable in full on March 28, 1994 (the
"Note").
B. To induce the Bank to loan to the Company the funds
represented by the Note, AP and its affiliate, Americas Tower Partners
("ATP"), executed a guaranty and security agreement as of December 28,
1993 in favor of the Bank, guaranteeing the payment of all of the
Company's obligations to the Bank under the Note (the "Guaranty").
C. To induce AP and ATP to execute the Guaranty, the
Company granted AP warrants to purchase 50,000 shares of common stock
of the Company, par value $.06 per share ("Common Stock"), at an
exercise price of $10.625 per share, the closing price of the Common
Stock on December 28, 1993, as quoted on the Nasdaq National Market
(the "Original Warrant").
D. In partial consideration of the agreement of AP on
February 18, 1994 to grant a bridge loan of up to $250,000, and
conditionally an additional $250,000, to Air Medica Movil, S.A. de
C.V., the Company's air medical transportation joint venture in Mexico
City, Mexico, the Company's Board of Directors on February 21, 1994
voted to reduce the exercise price of the original warrants from
$10.625 per share to $6.00 per share, the average of the high and low
quoted prices of the Common Stock on the Nasdaq National Market on
February 18, 1994, subject to AP's surrender and the subsequent
cancellation of the Original Warrant.
E. In partial consideration of the assignment by AP to the
Company of the $250,000 promissory note issued by Air Medica Movil,
S.A. de C.V. to AP in consideration of the aforesaid bridge loan, the
Company's Board of Directors, on May 3, 1995, voted to reduce the
exercise price of the original warrants from $6.00 per share to $3.00
per share, the closing
<PAGE>
price of the Common Stock on the Nasdaq National Market on May 3,
1995.
F. AP is desirous of obtaining the warrants on the terms
and conditions herein contained.
IT IS THEREFORE agreed by and between the parties, for and
in consideration of the premises and the mutual covenants herein
contained and for other good and valuable consideration, as follows:
Section 1. Grant of the Warrants. The Company hereby
---------------------
confirms and acknowledges that it has granted to AP, on December 28,
1993, warrants to purchase 50,000 shares of Common Stock (the
"Warrant") upon the terms and conditions herein set forth (the shares
of Common Stock issuable upon exercise of the Warrant being
hereinafter referred to as the "Warrant Shares").
1.1 Warrant Price. The purchase price of the shares of
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Common Stock which may be purchased pursuant to the Warrant is $3.00
per share, subject to adjustment pursuant to Section 7 hereof (the
"Warrant Price").
1.2 Exercise Period. The Warrant shall be exercisable in
---------------
full as of December 28, 1993 and shall continue to be exercisable for
five years from such date. The Warrant shall automatically expire at
midnight Mountain Time on December 28, 1998. If the Warrant is not
exercised prior to its expiration, it shall be deemed to have been
forfeited and of no further force or effect.
Section 2. Form of Warrant.
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2.1 Warrant Certificate. The text of the Warrant shall be
-------------------
substantially as set forth in Exhibit A, attached hereto. The Warrant
Price and the number of Warrant Shares issuable upon exercise of the
Warrant are subject to adjustment upon the occurrence of certain
events, all as hereinafter provided. The Warrant shall be executed on
behalf of the Company by its Chairman and Chief Executive Officer, its
President, or one of its Executive Vice Presidents, under its
corporate seal reproduced thereon, attested by its Secretary or an
Assistant Secretary.
2.2 Signatories. Warrants bearing the manual or facsimile
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signatures of individuals who were at any time the proper officers of
the Company shall bind the Company, notwithstanding that such
individuals or any one of them shall have ceased to hold such offices
prior to the delivery of such Warrants or did not hold such offices on
the date of this Agreement.
2.3 Securities Law Legend. The Warrants and, upon exercise
---------------------
of the Warrants, in part or in whole, certificates
-2-<PAGE>
representing the Warrant Shares (unless such shares have been
previously registered under the Act), shall bear a legend
substantially similar to the following:
The securities represented by this certificate
have not been registered under the Securities Act
of 1933, as amended (the "Act"), and may not be
offered or sold except (i) pursuant to an
effective registration statement under the Act,
(ii) to the extent applicable, pursuant to
Rule 144 under the Act (or any similar rule under
such Act relating to the disposition of
securities), or (iii) upon the delivery by the
holder to the Company of an opinion of counsel,
reasonably satisfactory to counsel to the Company,
stating that an exemption from registration under
such Act is available.
Section 3. Exercise of the Warrant.
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3.1 Surrender and Payment. A Warrant may be exercised upon
---------------------
surrender to the Company at its office in Englewood, Colorado of the
certificate or certificates evidencing the Warrants to be exercised,
together with the form of election to purchase included therein duly
filled in and signed, and upon payment to the Company of the
applicable Warrant Price (as defined in and determined in accordance
with the provisions of Sections 1.1 and 7 hereof), for the number of
Warrant Shares in respect of which such Warrants are then exercised.
Payment of the applicable aggregate Warrant Price shall be made in
cash or by certified or cashier's check.
3.2 Issuance of Warrant Shares. Subject to Section 6
--------------------------
hereof, upon surrender of Warrants and payment of the applicable
Warrant Price as aforesaid, the Company shall issue and cause to be
delivered with all reasonable dispatch to or upon the written order of
a holder of a Warrant ("Holder") in such name or names as the Holder
may designate, a certificate or certificates for the number of full
Warrant Shares so purchased upon the exercise of such Warrants. Such
certificate or certificates shall be deemed to have been issued and
any person so designated to be named therein shall be deemed to have
become a holder of record of such Warrant Shares as of the date of the
surrender of such Warrants and payment of the applicable Warrant
Price, as aforesaid; provided, however, that if, at the date of the
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surrender of such Warrants and payment of the applicable Warrant
Price, the transfer books for the Warrant Shares or other class of
stock purchasable upon the exercise of such Warrants shall be closed,
the certificates for the Warrant Shares or for the shares of such
other class of stock in respect of which such Warrants are then
exercised shall be issuable as of the date on which such books shall
next be opened (whether before or after the fifth anniversary of the
date hereof) and until such date the Company shall be
-3-<PAGE>
under no duty to deliver any certificate for such Warrant Shares or
for shares of such other class of stock; provided, further, that the
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transfer books of record, unless otherwise required by law, shall not
be closed at any one time for a period longer than 20 days. The
rights of purchase represented by the Warrants shall be exercisable,
at the election of the Holders thereof, either in whole or from time
to time in part and, in the event that a certificate evidencing
Warrants is exercised in respect of less than all of the Warrant
Shares purchasable on such exercise at any time prior to the date of
expiration of the Warrants, a new certificate evidencing the remaining
Warrant or Warrants will be issued.
3.3 Payment of Taxes. The Company will pay all documentary
----------------
stamp taxes, if any, attributable to the initial issuance of Warrant
Shares upon the exercise of Warrants; provided, however, that the
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Company shall not be required to pay any tax or taxes which may be
payable in respect of any transfer involved in the issue or delivery
of any Warrants or certificates for Warrant Shares in a name other
than that of the Holder of Warrants in respect of which such Warrant
Shares are issued, and in such case the Company shall not be required
to issue or deliver any certificate for shares of Common Stock until
the person requesting the same has paid to the Company the amount of
such tax or has established to the Company's satisfaction that such
tax has been paid.
3.4 Fractional Interests. The Company shall not be
--------------------
required to issue fractional Warrant Shares on the exercise of
Warrants. If any fraction of a Warrant Share would, except for the
provisions of this Section 3.4, be issuable on the exercise of any
Warrant (or specified portion thereof), the Company shall calculate
and pay an amount in cash equal to the then current market price per
share of Common Stock multiplied by such fraction.
Section 4. Transfer of Warrant. Subject to the terms of
-------------------
Section 6 hereof, the Warrant shall be transferable upon surrender of
the Warrant certificate, with the form of assignment attached thereto
duly executed by the Holder, to the Company at its office in the State
of Colorado. Upon such surrender, the Company shall cause a Warrant
certificate containing terms identical to those of the surrendered
Warrant certificate to be issued in the name of the transferee or
transferees. If any Warrant certificate is assigned in respect of
less than all the shares covered thereby, the Holder shall be entitled
to receive a new Warrant Certificate covering the number of shares not
so assigned.
Section 5. Representations of the Company. The Company
------------------------------
represents and warrants to AP that:
5.1 Authority. The Company has, and at all times that this
---------
Agreement is in force will have, all requisite right,
-4-<PAGE>
power and authority to enter into, execute, deliver and perform this
Agreement and the Warrant, and the officers of the Company executing
and delivering this Agreement and the Warrant are duly authorized to
do so. This Agreement and the Warrant have been duly and validly
executed, issued and delivered and constitute the legal, valid and
binding obligations of Company, enforceable against the Company in
accordance with their respective terms.
5.2 No Violation. The execution, delivery and performance
------------
by the Company of this Agreement and the Warrant do not and will not,
after the lapse of time, the giving of notice or otherwise, constitute
a violation of any applicable provision contained in the charter,
bylaws or organizational documents of the Company or contained in any
material agreement, instrument or document to which the Company is a
party or by which it is bound.
5.3 Reservation of Shares. The issuance and sale of the
---------------------
shares of Common Stock initially to be reserved for issuance on
exercise of the Warrants have been duly and validly authorized. There
have been reserved, and the Company shall at all times keep reserved,
out of its authorized Common Stock, a number of shares of Common Stock
sufficient to provide for the exercise of the right of purchase
represented by the outstanding Warrants. The transfer agent for the
Common Stock and every subsequent transfer agent for any shares of the
Company's capital stock issuable upon the exercise of the Warrants
will be irrevocably authorized and directed at all times to reserve
such number of authorized shares as shall be requisite to provide for
the exercise of the rights of purchase represented by the outstanding
Warrants. Such shares, when so issued upon such exercise in
accordance with the terms of the Warrant, will be validly issued,
fully paid and nonassessable.
Section 6. Representations of AP. AP represents and agrees
---------------------
that:
6.1 It is acquiring the Warrants and the Warrant Shares for
its own account, for investment and not with an intent or view to or
for sale in connection with any "distribution" thereof within the
meaning of the Securities Act of 1933, as amended (the "Act"), and its
general partners have such knowledge, skill, sophistication and
experience in business and financial matters, based on actual
participation, that they are capable of evaluating the merits and
risks of an investment in the Warrants and the Warrant Shares and the
suitability thereof as an investment.
6.2 The Warrant Shares may not be offered, sold or
otherwise transferred by AP except (a) pursuant to an effective
registration statement under the Act, (b) to the extent applicable,
pursuant to Rule 144 under the Act (or any similar rule under the Act
relating to the disposition of securities), or (c) unless in the
opinion of counsel for the Company, or in the opinion of counsel,
reasonably satisfactory to counsel to the
-5-<PAGE>
Company, the proposed offer, sale or other transfer of such Warrant
Shares would be exempt from the registration requirements of the Act,
and from the qualification requirements of any applicable state
securities law.
6.3 Absent such registration under the Act, each
certificate issued to represent any of the Warrant Shares shall bear
the legend provided for in Section 2.3.
The Company may require, as a condition of the exercise of the
Warrant, that AP sign such further representations and agreements as
it reasonably determines to be necessary or appropriate to assure and
to evidence compliance with the requirements of the Act.
Section 7. Adjustment of Warrant Price and Number of
-----------------------------------------
Warrant Shares. The number and kind of securities purchasable upon
- - - --------------
the exercise of the Warrant and the Warrant Price shall be subject to
adjustment from time to time upon the happening of certain events, as
hereinafter defined.
7.1 Mechanical Adjustments. The Warrant Price and the
----------------------
number and kind of securities purchasable upon the exercise of the
Warrant shall be subject to adjustment from time to time as follows:
a. Dividends, Subdivision and Combination. In case
--------------------------------------
the Company shall (i) declare a dividend or make a distribution on its
outstanding shares of Common Stock in shares of Common Stock,
(ii) subdivide or reclassify its outstanding shares of Common Stock
into a greater number of shares, or (iii) combine or reclassify its
outstanding shares of Common Stock into a smaller number of shares,
the Warrant Price in effect at the time of the record date for such
dividend or distribution or of the effective date of such subdivision,
combination or reclassification shall be proportionately adjusted so
that the Holder of each Warrant exercised after such date shall be
entitled to receive the aggregate number and kind of Warrant Shares
which, if the Warrants had been exercised by such Holder immediately
prior to such date, he would have owned upon such exercise and been
entitled to receive upon such dividend, subdivision, combination or
reclassification.
b. Reclassification, Consolidation, Merger, etc. In
---------------------------------------------
case of any reclassification or change of the outstanding shares of
Common Stock (other than a change in par value to no par value, or
from no par value to par value, or as a result of a subdivision or
combination), or in the case of any consolidation of the Company with,
or merger of the Company into, another corporation (other than a
consolidation or merger in which the Company is the surviving
corporation and which does not result in any reclassification or
change of the outstanding shares of Common Stock, except a change as a
result of a subdivision or combination of such shares or a change in
par
-6-<PAGE>
value, as aforesaid), or in the case of a sale or conveyance to
another corporation of the property of the Company as an entirety, the
Holder of each Warrant shall thereafter have the right to purchase (at
a price equal to the product of (x) the number of shares of Common
Stock issuable upon exercise of his Warrants and (y) the Warrant Price
in effect immediately prior to the record date for such
reclassification, change, consolidation, merger, sale or conveyance)
the kind and number of shares of stock and other securities and
property receivable upon such reclassification, change, consolidation,
merger, sale or conveyance which, if the Warrants had been exercised
by such Holder immediately prior to the record date for such event,
such Holder would have owned upon such exercise and been entitled to
receive in such reclassification, change, consolidation, merger, sale
or conveyance.
c. Subscription rights for Shares of Common Stock or
-------------------------------------------------
Other Securities. In the case the Company or an affiliate of the
- - - ----------------
Company shall at any time after the date hereof and prior to the
exercise of the Warrant, issue any rights to subscribe for shares of
Common Stock or any other securities of the Company or of such
affiliate to all the shareholders of the Company, the Holders of the
unexercised Warrants shall be entitled, upon the exercise of such
Warrants, in addition to the shares of Common Stock or other
securities receivable upon the exercise of the Warrants, to receive
such rights, at the time such rights are distributed to the other
shareholders of the Company, and to exercise such rights prior to the
same expiration date applicable to the other shareholders of the
Company.
d. Anything in this Section 7 to the contrary
notwithstanding, the Company shall not be required, except as
hereinafter provided, to make any adjustment of the Warrant Price in
any case in which the amount by which such Warrant Price would be
reduced in accordance with the foregoing provisions would be less than
$0.10, but in such case any adjustment that would otherwise be
required then to be made will be carried forward and made at the time
and together with the next subsequent adjustment which, together with
any and all such adjustments so carried forward, shall amount to not
less than $0.10. In the event of any subdivision or combination of
shares of Common Stock said amount (as theretofore decreased or
increased) shall be proportionately decreased or increased.
7.2 Related Adjustment Matters.
--------------------------
a. Upon each adjustment of the Warrant Price pursuant
to Section 7.1a hereof, the number of applicable Warrant Shares
thereafter purchasable upon the exercise of each Warrant shall be
determined by multiplying such Warrant Price in effect immediately
prior to such adjustment by the number of such Warrant Shares
purchasable immediately prior to such adjustment upon exercise of each
Warrant and dividing the product so obtained by such Warrant Price in
effect after such adjustment.
-7-<PAGE>
b. Irrespective of any adjustments of the Warrant
Price or the number or kind of securities issuable upon exercise of
Warrants, Warrant certificates theretofore or thereafter issued may
continue to express the same Warrant Price and number of Warrant
Shares as are stated in similar Warrants previously issued.
c. The Company may retain the independent public
accounting firm regularly retained by the Company, or another firm of
independent public accountants selected by the Company's Board of
Directors, to make any computation required under this Section 7.
d. Whenever there is an adjustment in the Warrant
Price or in the number or kind of securities issuable upon exercise of
each Warrant, or both, as provided in this Section 7, the Company
shall promptly cause a certificate (the "Certificate") signed by the
Chairman and Chief Executive Officer, the President, or an Executive
Vice President of the Company and by the Treasurer or an Assistant
Treasurer or the Secretary or an Assistant Secretary of the Company,
stating that the Warrant Price and the number of Warrant Shares
issuable upon exercise of each Warrant have been adjusted, setting
forth the appropriate adjusted Warrant Price and the adjusted number
of Warrant Shares issuable upon exercise of each Warrant, and showing
in reasonable detail the computation and the facts upon which such
adjustments are based to be sent to each registered Holder of
Warrants.
If the foregoing adjustments shall result in a fractional
share, the fraction shall be disregarded, and the Company shall have
no obligation to make any cash or other payment with respect to such a
fractional share.
Section 8. Registration of the Warrant Shares.
----------------------------------
8.1 S-3 Registration. The Company has registered the
----------------
shares issuable upon exercise of this Warrant with the Securities and
Exchange Commission (the "Commission") by their inclusion in a
Registration Statement on Form S-3 (the "S-3"), to permit AP's public
resale of any shares obtained upon exercise of the Warrant. The
Company shall use its best efforts to maintain the effectiveness of
the S-3, and to register or qualify the Warrant Shares under such
state securities laws as AP may reasonably request and maintain such
registrations or qualifications, until all of the Warrants have been
exercised or until they expire pursuant to Section 1.2 hereof and to
list the Warrant Shares on any securities exchange on which the Common
Stock is then listed.
8.2 Removal of Legends. The legend relating to the
------------------
Securities Act and state securities laws endorsed on the certificates
evidencing the Warrants and Warrant Shares pursuant to Section 2.3
hereof shall be removed, and the Company shall issue a certificate or
instrument without such legend to the
-8-<PAGE>
Holder of such security, if such security is registered under the Act
and qualified under applicable state securities laws or if such Holder
provides the Company with an opinion of counsel for such Holder (which
opinion shall be reasonably satisfactory to counsel to the Company) to
the effect that a public sale, transfer or assignment of such security
may be made without registration under the Act and under applicable
state securities laws.
Section 9. No Stockholder Rights. Subject to the
---------------------
provisions of Section 3.2 hereof, AP shall have no rights as a
stockholder with respect to the shares of Common Stock which may be
purchased pursuant to the Warrant until such shares are deemed to have
been issued to AP under Section 3.2.
Section 10. Applicable Law. THIS AGREEMENT IS ENTERED INTO
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AND SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF DELAWARE.
Section 11. Notices. Any notice to be given to the Company
-------
under the terms of this Agreement shall be addressed to the Company in
care of its Secretary at its office in Englewood, Colorado and any
notice to be given to Holder shall be sent to the address given
beneath Holder's signature hereto, or at such other address as either
party may hereafter designate, in writing, to the other. Any such
notice shall have been deemed duly given when properly deposited in
the United States mail.
Section 12. Entire Agreement. This Agreement constitutes
----------------
the entire agreement between the Parties regarding the Warrant and
supersedes all prior agreements and understandings, oral and written,
relating thereto. No modification of this Agreement shall be valid
unless made in writing and signed by the party against which
enforcement of the modification is sought.
Section 13. Successors; Merger of the Company. This
---------------------------------
Agreement shall be binding upon and inure to the benefit of the
Parties and their respective successors and permitted assigns. The
Company will not merge or consolidate with or into any other
corporation unless the corporation resulting from such merger or
consolidation (if not the Company) shall expressly assume, by
supplemental agreement reasonably satisfactory in form and substance
to and delivered to the Holders, the due and punctual performance and
observance of each and every covenant and condition of this Agreement
to be performed and observed by the Company.
Section 14. Survival. All representations, warranties and
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covenants made by the Parties shall survive the execution and delivery
of this Agreement.
-9-<PAGE>
Section 15. Captions. The captions of the Sections and
--------
subsections of this Agreement have been inserted for convenience of
reference only and shall have no substantive effect.
Section 16. Fees. Except as otherwise provided in this
----
Agreement, any and all fees, costs and expenses, of whatever kind and
nature, including attorney's fees and expenses, incurred by the
Holders in connection with the defense or prosecution of any actions
or proceedings arising out of or in connection with this Agreement
shall be borne and paid by the Company.
Section 17. Cancellation. AP acknowledges and agrees
------------
that the Original Warrant has been cancelled and that the rights of AP
hereunder are granted in substitution and replacement of all rights of
AP under the Original Warrant.
Section 18. Counterparts. This Agreement may be executed
------------
in any number of counterparts, which shall collectively constitute one
agreement.
IN WITNESS WHEREOF, the parties have hereunto affixed their
signatures in acknowledgment and acceptance of the above terms and
conditions on May 3, 1995.
AIR METHODS CORPORATION
By:
------------------------------------
George W. Belsey, Chairman and Chief
Executive Officer
AMERICAS PARTNERS
By:
-------------------------------------
Joseph E. Bernstein
General Partner
520 Madison Avenue
New York, New York 10022
-10-
AIR METHODS CORPORATION
REISSUED WARRANT AGREEMENT
THIS REISSUED WARRANT AGREEMENT is made and entered into
this 3rd day of May, 1995, by and between AIR METHODS CORPORATION (the
"Company") and AMERICAS PARTNERS ("AP") (together, the "Parties").
RECITALS
--------
A. In February 1994, the Company has requested that AP
extend a bridge loan credit of up to $500,000 to Air Medica Movil,
S.A. de C.V. ("AMM"), the Company's air medical transportation joint
venture in Mexico City, Mexico.
B. To induce AP to loan to AMM these funds, the Company
and its Board of Directors have voted to grant to AP warrants to
purchase up to 150,000 shares of common stock of the Company, par
value $.06 per share ("Common Stock"), on terms identical to the
warrant for 50,000 shares issued by the Company to AP on December 28,
1993.
C. In partial consideration of the assignment by AP to the
Company of a $250,000 promissory note issued by AMM to AP to evidence
a $250,000 bridge loan from AP to AMM pursuant to the aforeissued loan
credit, the Board of Directors of the Company, on May 3, 1995, voted
to reduce the exercise price of the original warrants from $6.00 per
share to $3.00 per share, the closing price of the Common Stock on the
Nasdaq National Market on May 3, 1995.
D. AP is desirous of obtaining the warrants on these terms
and conditions, as herein contained.
IT IS THEREFORE agreed by and between the parties, for and
in consideration of the premises and the mutual covenants herein
contained and for other good and valuable consideration, as follows:
Section 1. Grant of the Warrants. The Company hereby
---------------------
confirms and acknowledges that it granted to AP, on February 21, 1994,
warrants to purchase 150,000 shares of Common Stock (the "Warrant")
upon the terms and conditions herein set forth (the shares of Common
Stock issuable upon exercise of the Warrant being hereinafter referred
to as the "Warrant Shares").
1.1 Warrant Price. The purchase price of the shares of
-------------
Common Stock which may be purchased pursuant to the Warrant is $3.00
per share, subject to adjustment pursuant to Section 7 hereof (the
"Warrant Price").
<PAGE>
1.2 Exercise Period. The Warrant shall be exercisable in
---------------
full as of the date hereof and shall be exercisable for a period of
five years from February 21, 1994. The Warrant shall automatically
expire at midnight Mountain Time on February 21, 1999. If the Warrant
is not exercised prior to its expiration, it shall be deemed to have
been forfeited and of no further force or effect.
Section 2. Form of Warrant.
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2.1 Warrant Certificate. The text of the Warrant shall be
-------------------
substantially as set forth in Exhibit A, attached hereto. The Warrant
Price and the number of Warrant Shares issuable upon exercise of the
Warrant are subject to adjustment upon the occurrence of certain
events, all as hereinafter provided. The Warrant shall be executed on
behalf of the Company by its Chairman and Chief Executive Officer, its
President, or one of its Executive Vice Presidents, under its
corporate seal reproduced thereon, attested by its Secretary or an
Assistant Secretary.
2.2 Signatories. Warrants bearing the manual or facsimile
-----------
signatures of individuals who were at any time the proper officers of
the Company shall bind the Company, notwithstanding that such
individuals or any one of them shall have ceased to hold such offices
prior to the delivery of such Warrants or did not hold such offices on
the date of this Agreement.
2.3 Securities Law Legend. The Warrants and, upon exercise
---------------------
of the Warrants, in part or in whole, certificates representing the
Warrant Shares (unless such shares have been previously registered
under the Act), shall bear a legend substantially similar to the
following:
The securities represented by this certificate
have not been registered under the Securities Act
of 1933, as amended (the "Act"), and may not be
offered or sold except (i) pursuant to an
effective registration statement under the Act,
(ii) to the extent applicable, pursuant to
Rule 144 under the Act (or any similar rule under
such Act relating to the disposition of
securities), or (iii) upon the delivery by the
holder to the Company of an opinion of counsel,
reasonably satisfactory to counsel to the Company,
stating that an exemption from registration under
such Act is available.
Section 3. Exercise of the Warrant.
-----------------------
3.1 Surrender and Payment. A Warrant may be exercised upon
---------------------
surrender to the Company at its office in Englewood, Colorado of the
certificate or certificates evidencing
-2-<PAGE>
the Warrants to be exercised, together with the form of election to
purchase included therein duly filled in and signed, and upon payment
to the Company of the applicable Warrant Price (as defined in and
determined in accordance with the provisions of Sections 1.1 and 7
hereof), for the number of Warrant Shares in respect of which such
Warrants are then exercised. Payment of the applicable aggregate
Warrant Price shall be made in cash or by certified or cashier's
check.
3.2 Issuance of Warrant Shares. Subject to Section 6
--------------------------
hereof, upon surrender of Warrants and payment of the applicable
Warrant Price as aforesaid, the Company shall issue and cause to be
delivered with all reasonable dispatch to or upon the written order of
a holder of a Warrant ("Holder") in such name or names as the Holder
may designate, a certificate or certificates for the number of full
Warrant Shares so purchased upon the exercise of such Warrants. Such
certificate or certificates shall be deemed to have been issued and
any person so designated to be named therein shall be deemed to have
become a holder of record of such Warrant Shares as of the date of the
surrender of such Warrants and payment of the applicable Warrant
Price, as aforesaid; provided, however, that if, at the date of the
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surrender of such Warrants and payment of the applicable Warrant
Price, the transfer books for the Warrant Shares or other class of
stock purchasable upon the exercise of such Warrants shall be closed,
the certificates for the Warrant Shares or for the shares of such
other class of stock in respect of which such Warrants are then
exercised shall be issuable as of the date on which such books shall
next be opened (whether before or after the fifth anniversary of the
date hereof) and until such date the Company shall be under no duty to
deliver any certificate for such Warrant Shares or for shares of such
other class of stock; provided, further, that the transfer books of
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record, unless otherwise required by law, shall not be closed at any
one time for a period longer than 20 days. The rights of purchase
represented by the Warrants shall be exercisable, at the election of
the Holders thereof, either in whole or from time to time in part and,
in the event that a certificate evidencing Warrants is exercised in
respect of less than all of the Warrant Shares purchasable on such
exercise at any time prior to the date of expiration of the Warrants,
a new certificate evidencing the remaining Warrant or Warrants will be
issued.
3.3 Payment of Taxes. The Company will pay all documentary
----------------
stamp taxes, if any, attributable to the initial issuance of Warrant
Shares upon the exercise of Warrants; provided, however, that the
-------- -------
Company shall not be required to pay any tax or taxes which may be
payable in respect of any transfer involved in the issue or delivery
of any Warrants or certificates for Warrant Shares in a name other
than that of the Holder of Warrants in respect of which such Warrant
Shares are issued, and in such case the Company shall not be required
to issue or deliver any certificate for shares of Common Stock until
the person requesting the same has paid to the Company the amount of
-3-<PAGE>
such tax or has established to the Company's satisfaction that such
tax has been paid.
3.4 Fractional Interests. The Company shall not be
--------------------
required to issue fractional Warrant Shares on the exercise of
Warrants. If any fraction of a Warrant Share would, except for the
provisions of this Section 3.4, be issuable on the exercise of any
Warrant (or specified portion thereof), the Company shall calculate
and pay an amount in cash equal to the then current market price per
share of Common Stock multiplied by such fraction.
Section 4. Transfer of Warrant. Subject to the terms of
-------------------
Section 6 hereof, the Warrant shall be transferable upon surrender of
the Warrant certificate, with the form of assignment attached thereto
duly executed by the Holder, to the Company at its office in the State
of Colorado. Upon such surrender, the Company shall cause a Warrant
certificate containing terms identical to those of the surrendered
Warrant certificate to be issued in the name of the transferee or
transferees. If any Warrant certificate is assigned in respect of
less than all the shares covered thereby, the Holder shall be entitled
to receive a new Warrant Certificate covering the number of shares not
so assigned.
Section 5. Representations of the Company. The Company
------------------------------
represents and warrants to AP that:
5.1 Authority. The Company has, and at all times that this
---------
Agreement is in force will have, all requisite right, power and
authority to enter into, execute, deliver and perform this Agreement
and the Warrant, and the officers of the Company executing and
delivering this Agreement and the Warrant are duly authorized to do
so. This Agreement and the Warrant have been duly and validly
executed, issued and delivered and constitute the legal, valid and
binding obligations of Company, enforceable against the Company in
accordance with their respective terms.
5.2 No Violation. The execution, delivery and performance
------------
by the Company of this Agreement and the Warrant do not and will not,
after the lapse of time, the giving of notice or otherwise, constitute
a violation of any applicable provision contained in the charter,
bylaws or organizational documents of the Company or contained in any
material agreement, instrument or document to which the Company is a
party or by which it is bound.
5.3 Reservation of Shares. The issuance and sale of the
---------------------
shares of Common Stock initially to be reserved for issuance on
exercise of the Warrants have been duly and validly authorized. There
have been reserved, and the Company shall at all times keep reserved,
out of its authorized Common Stock, a number of shares of Common Stock
sufficient to provide for the exercise of the right of purchase
represented by the outstanding Warrants. The transfer agent for the
Common Stock and every
-4-<PAGE>
subsequent transfer agent for any shares of the Company's capital
stock issuable upon the exercise of the Warrants will be irrevocably
authorized and directed at all times to reserve such number of
authorized shares as shall be requisite to provide for the exercise of
the rights of purchase represented by the outstanding Warrants. Such
shares, when so issued upon such exercise in accordance with the terms
of the Warrant, will be validly issued, fully paid and nonassessable.
Section 6. Representations of AP. AP represents and agrees
---------------------
that:
6.1 It is acquiring the Warrants and the Warrant Shares for
its own account, for investment and not with an intent or view to or
for sale in connection with any "distribution" thereof within the
meaning of the Securities Act of 1933, as amended (the "Act"), and its
general partners have such knowledge, skill, sophistication and
experience in business and financial matters, based on actual
participation, that they are capable of evaluating the merits and
risks of an investment in the Warrants and the Warrant Shares and the
suitability thereof as an investment.
6.2 The Warrant Shares may not be offered, sold or
otherwise transferred by AP except (a) pursuant to an effective
registration statement under the Act, (b) to the extent applicable,
pursuant to Rule 144 under the Act (or any similar rule under the Act
relating to the disposition of securities), or (c) unless in the
opinion of counsel for the Company, or in the opinion of counsel,
reasonably satisfactory to counsel to the Company, the proposed offer,
sale or other transfer of such Warrant Shares would be exempt from the
registration requirements of the Act, and from the qualification
requirements of any applicable state securities law.
6.3 Absent such registration under the Act, each
certificate issued to represent any of the Warrant Shares shall bear
the legend provided for in Section 2.3.
The Company may require, as a condition of the exercise of the
Warrant, that AP sign such further representations and agreements as
it reasonably determines to be necessary or appropriate to assure and
to evidence compliance with the requirements of the Act.
Section 7. Adjustment of Warrant Price and Number of
-----------------------------------------
Warrant Shares. The number and kind of securities purchasable upon
- - - --------------
the exercise of the Warrant and the Warrant Price shall be subject to
adjustment from time to time upon the happening of certain events, as
hereinafter defined.
7.1 Mechanical Adjustments. The Warrant Price and the
----------------------
number and kind of securities purchasable upon the exercise
-5-<PAGE>
of the Warrant shall be subject to adjustment from time to time as
follows:
a. Dividends, Subdivision and Combination. In case
--------------------------------------
the Company shall (i) declare a dividend or make a distribution on its
outstanding shares of Common Stock in shares of Common Stock,
(ii) subdivide or reclassify its outstanding shares of Common Stock
into a greater number of shares, or (iii) combine or reclassify its
outstanding shares of Common Stock into a smaller number of shares,
the Warrant Price in effect at the time of the record date for such
dividend or distribution or of the effective date of such subdivision,
combination or reclassification shall be proportionately adjusted so
that the Holder of each Warrant exercised after such date shall be
entitled to receive the aggregate number and kind of Warrant Shares
which, if the Warrants had been exercised by such Holder immediately
prior to such date, he would have owned upon such exercise and been
entitled to receive upon such dividend, subdivision, combination or
reclassification.
b. Reclassification, Consolidation, Merger, etc. In
---------------------------------------------
case of any reclassification or change of the outstanding shares of
Common Stock (other than a change in par value to no par value, or
from no par value to par value, or as a result of a subdivision or
combination), or in the case of any consolidation of the Company with,
or merger of the Company into, another corporation (other than a
consolidation or merger in which the Company is the surviving
corporation and which does not result in any reclassification or
change of the outstanding shares of Common Stock, except a change as a
result of a subdivision or combination of such shares or a change in
par value, as aforesaid), or in the case of a sale or conveyance to
another corporation of the property of the Company as an entirety, the
Holder of each Warrant shall thereafter have the right to purchase (at
a price equal to the product of (x) the number of shares of Common
Stock issuable upon exercise of his Warrants and (y) the Warrant Price
in effect immediately prior to the record date for such
reclassification, change, consolidation, merger, sale or conveyance)
the kind and number of shares of stock and other securities and
property receivable upon such reclassification, change, consolidation,
merger, sale or conveyance which, if the Warrants had been exercised
by such Holder immediately prior to the record date for such event,
such Holder would have owned upon such exercise and been entitled to
receive in such reclassification, change, consolidation, merger, sale
or conveyance.
c. Subscription rights for Shares of Common Stock or
-------------------------------------------------
Other Securities. In the case the Company or an affiliate of the
- - - ----------------
Company shall at any time after the date hereof and prior to the
exercise of the Warrant, issue any rights to subscribe for shares of
Common Stock or any other securities of the Company or of such
affiliate to all the shareholders of the Company, the Holders of the
unexercised Warrants shall be
-6-<PAGE>
entitled, upon the exercise of such Warrants, in addition to the
shares of Common Stock or other securities receivable upon the
exercise of the Warrants, to receive such rights, at the time such
rights are distributed to the other shareholders of the Company, and
to exercise such rights prior to the same expiration date applicable
to the other shareholders of the Company.
d. Anything in this Section 7 to the contrary
notwithstanding, the Company shall not be required, except as
hereinafter provided, to make any adjustment of the Warrant Price in
any case in which the amount by which such Warrant Price would be
reduced in accordance with the foregoing provisions would be less than
$0.10, but in such case any adjustment that would otherwise be
required then to be made will be carried forward and made at the time
and together with the next subsequent adjustment which, together with
any and all such adjustments so carried forward, shall amount to not
less than $0.10. In the event of any subdivision or combination of
shares of Common Stock said amount (as theretofore decreased or
increased) shall be proportionately decreased or increased.
7.2 Related Adjustment Matters.
--------------------------
a. Upon each adjustment of the Warrant Price pursuant
to Section 7.1a hereof, the number of applicable Warrant Shares
thereafter purchasable upon the exercise of each Warrant shall be
determined by multiplying such Warrant Price in effect immediately
prior to such adjustment by the number of such Warrant Shares
purchasable immediately prior to such adjustment upon exercise of each
Warrant and dividing the product so obtained by such Warrant Price in
effect after such adjustment.
b. Irrespective of any adjustments of the Warrant
Price or the number or kind of securities issuable upon exercise of
Warrants, Warrant certificates theretofore or thereafter issued may
continue to express the same Warrant Price and number of Warrant
Shares as are stated in similar Warrants previously issued.
c. The Company may retain the independent public
accounting firm regularly retained by the Company, or another firm of
independent public accountants selected by the Company's Board of
Directors, to make any computation required under this Section 7.
d. Whenever there is an adjustment in the Warrant
Price or in the number or kind of securities issuable upon exercise of
each Warrant, or both, as provided in this Section 7, the Company
shall promptly cause a certificate (the "Certificate") signed by the
Chairman and Chief Executive Officer, the President, or an Executive
Vice President of the Company and by the Treasurer or an Assistant
Treasurer or the Secretary or an Assistant Secretary of the Company,
stating that the Warrant Price and the number of Warrant Shares
issuable upon
-7-<PAGE>
exercise of each Warrant have been adjusted, setting forth the
appropriate adjusted Warrant Price and the adjusted number of Warrant
Shares issuable upon exercise of each Warrant, and showing in
reasonable detail the computation and the facts upon which such
adjustments are based to be sent to each registered Holder of
Warrants.
If the foregoing adjustments shall result in a fractional
share, the fraction shall be disregarded, and the Company shall have
no obligation to make any cash or other payment with respect to such a
fractional share.
Section 8. Registration of the Warrant Shares.
----------------------------------
8.1 S-3 Registration. The Company has registered the
----------------
shares issuable upon exercise of this Warrant with the Securities and
Exchange Commission (the "Commission") by their inclusion in a
Registration Statement on Form S-3 (the "S-3"), to permit AP's public
resale of any shares obtained upon exercise of the Warrant. The
Company shall use its best efforts to maintain the effectiveness of
the S-3, and to register or qualify the Warrant Shares under such
state securities laws as AP may reasonably request and maintain such
registrations or qualifications, until all of the Warrants have been
exercised or until they expire pursuant to Section 1.2 hereof and to
list the Warrant Shares on any securities exchange on which the Common
Stock is then listed.
8.2 Removal of Legends. The legend relating to the
------------------
Securities Act and state securities laws endorsed on the certificates
evidencing the Warrants and Warrant Shares pursuant to Section 2.3
hereof shall be removed, and the Company shall issue a certificate or
instrument without such legend to the Holder of such security, if such
security is registered under the Act and qualified under applicable
state securities laws or if such Holder provides the Company with an
opinion of counsel for such Holder (which opinion shall be reasonably
satisfactory to counsel to the Company) to the effect that a public
sale, transfer or assignment of such security may be made without
registration under the Act and under applicable state securities laws.
Section 9. No Stockholder Rights. Subject to the
---------------------
provisions of Section 3.2 hereof, AP shall have no rights as a
stockholder with respect to the shares of Common Stock which may be
purchased pursuant to the Warrant until such shares are deemed to have
been issued to AP under Section 3.2.
Section 10. Applicable Law. THIS AGREEMENT IS ENTERED INTO
--------------
AND SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF DELAWARE.
Section 11. Notices. Any notice to be given to the Company
-------
under the terms of this Agreement shall be addressed to the Company in
care of its Secretary at its office in Englewood,
-8-<PAGE>
Colorado and any notice to be given to Holder shall be sent to the
address given beneath Holder's signature hereto, or at such other
address as either party may hereafter designate, in writing, to the
other. Any such notice shall have been deemed duly given when
properly deposited in the United States mail.
Section 12. Entire Agreement. This Agreement constitutes
----------------
the entire agreement between the Parties regarding the Warrant and
supersedes all prior agreements and understandings, oral and written,
relating thereto. No modification of this Agreement shall be valid
unless made in writing and signed by the party against which
enforcement of the modification is sought.
Section 13. Successors; Merger of the Company. This
---------------------------------
Agreement shall be binding upon and inure to the benefit of the
Parties and their respective successors and permitted assigns. The
Company will not merge or consolidate with or into any other
corporation unless the corporation resulting from such merger or
consolidation (if not the Company) shall expressly assume, by
supplemental agreement reasonably satisfactory in form and substance
to and delivered to the Holders, the due and punctual performance and
observance of each and every covenant and condition of this Agreement
to be performed and observed by the Company.
Section 14. Survival. All representations, warranties and
--------
covenants made by the Parties shall survive the execution and delivery
of this Agreement.
Section 15. Captions. The captions of the Sections and
--------
subsections of this Agreement have been inserted for convenience of
reference only and shall have no substantive effect.
Section 16. Fees. Except as otherwise provided in this
----
Agreement, any and all fees, costs and expenses, of whatever kind and
nature, including attorney's fees and expenses, incurred by the
Holders in connection with the defense or prosecution of any actions
or proceedings arising out of or in connection with this Agreement
shall be borne and paid by the Company.
Section 17. Counterparts. This Agreement may be executed
------------
in any number of counterparts, which shall collectively constitute one
agreement.
-9-<PAGE>
IN WITNESS WHEREOF, the parties have hereunto affixed their
signatures in acknowledgment and acceptance of the above terms and
conditions as of May 3, 1995.
AIR METHODS CORPORATION
By:
-------------------------------------
George W. Belsey, Chairman and Chief
Executive Officer
AMERICAS PARTNERS
By:
-------------------------------------
Joseph E. Bernstein
General Partner
520 Madison Avenue
New York, New York 10022
-10-
CONSULTING AND NON-COMPETITION AGREEMENT
This Consulting and Non-Competition Agreement (this
"Agreement") is entered into this 30th day of November, 1994 between
Air Methods Corporation, a Delaware corporation, with its principal
place of business at 7301 South Peoria, Englewood, Colorado 80112 (the
"Company") and Roy L. Morgan (the "Consultant").
RECITALS
A. The Consultant has been employed by the Company since
1991 as its President. The Consultant was the founder of the
Company's predecessor, Air Methods Corporation, a Colorado
corporation, and he was employed as its President and Chief Executive
Officer from July 1, 1980 through 1991. The Consultant also serves as
a director of the Company.
B. The Consultant has proposed to resign as an officer and
employee of the Company and the Board of Directors of the Company has
authorized the acceptance of such resignation.
C. The Company desires to continue to consult with and
receive advice from the Consultant and to have the Consultant's
agreement not to compete with the Company. The Consultant has agreed
to provide such consulting services to the Company, subject to and
upon the terms and conditions set forth in this Agreement, and has
agreed not to compte with the Company during the term of this
Agreement. The Company and the Consultant have also agreed that this
Agreement shall supersede and replace the Employment Agreement dated
November 12, 1991 (the "Employment Agreement") under which the
Consultant is currently employed by the Company.
D. The Consultant currently holds options to purchase up
to 251,666 shares of the Common Stock of the Company and, as of the
date hereof, such options are exercisable as to 163,889 of such
shares.
It is therefore agreed as follows:
1. Effective Date. The Consultant hereby resigns all
--------------
positions which he holds as an officer and employee of the Company and
terminates his employment by the Company effective at the end of
business December 31, 1994 (the "Effective Date"). On the Effective
Date, this Agreement shall become effective and shall supersede the
Employment Agreement, which shall thereafter be deemed terminated for
all purposes.
2. Consultation by the Consultant. The Consultant shall
------------------------------
not be obligated to provide services to the Company as an
<PAGE>
employee after the Effective Date, except that he shall be reasonably
available during the period beginning on the Effective Date and ending
on July 1, 1999 (the "Consulting Period") for general consultation on
matters of Company business and policy. The Consultant agrees to
provide up to 10 hours of consultation per month under this Agreement,
subject to his other commitments, including vacations and travel. In
addition, the Consultant shall be reasonably available from time to
time during the Consulting Period to perform specific consultation
assignments. Such specific assignments, including the scope thereof
and appropriate additional compensation therefor, shall be subject to
negotiation in each instance with the Chairman of the Board or other
appropriate officer of the Company. Consultation services hereunder
may be provided in person or by telephone or in writing, shall be
provided by the Consultant at times and under circumstances which will
not unreasonably conflict with other activities of the Consultant, and
shall not require substantial time commitments by the Consultant in
excess of 10 hours per month except upon his agreement.
3. Base Consulting Fee. The Consultant shall be paid the
-------------------
sum of up to $342,867 (the "Base Fee") in consideration of the
services to be provided by the Consultant hereunder and the agreements
of the Consultant set forth herein not to compete with the Company, in
accordance with the following schedule of installments:
January 1, 1995 $ 7,500
July 1, 1995 37,263
January 1, 1996 37,263
July 1, 1996 37,263
January 1, 1997 37,263
July 1, 1997 37,263
January 1, 1998 37,263
July 1, 1998 37,263
January 1, 1999 37,263
July 1, 1999 37,263
--------------- --------
TOTAL $342,867
The Base Fee shall be paid, irrespective of the number of hours
actually spent by the Consultant in providing services hereunder,
provided however, that the Company's obligation to pay the Base Fee
shall terminate upon the death of the Consultant or the payment of the
last installment hereunder, whichever first occurs.
4. Stock Options. The Consultant shall be granted an
-------------
option to purchase Two Hundred Thousand (200,000) shares of the
Common Stock of the Company at the closing price on the Nasdaq
National Market on December 30, 1994. The terms of the option will be
set forth in an option agreement in the form attached hereto as
Exhibit A. Concurrently with such option grant, the Consultant shall
- - - ---------
surrender all outstanding options to purchase shares of the Company's
Common Stock granted to him prior to the
-2-<PAGE>
date hereof, whether granted under the Company's Employee Stock Option
Plan, or outside of said Plan, and whether such options are presently
exercisable or not. The Consultant shall surrender to the Company all
agreements evidencing such options, and the parties hereby agree that
all such options shall be null and void after December 31, 1994.
5. Health Benefits. The Consultant may, at his election,
---------------
continue to be covered by the group health insurance provided for
Company employees (the "Group Plan"), at the Consultant's expense, so
long as such coverage is permitted under the Company's health
insurance policies, including any coverage to which he is entitled
under federal or state law following termination of his employment.
The time period that the Consultant continues to participate in the
Group Plan after the Effective Date will be applied against the
Consultant's eligibility period for continuation coverage under the
Consolidated Omnibus Budget Reconciliation Act of 1985.
6. Covenant Not to Compete. In further consideration of
-----------------------
the payment by the Company provided for herein, the Consultant shall
not, anywhere in the world, engage in any activity directly related to
the air medical services business during the Consulting Period.
7. Trade Secrets and Confidential Information. During the
------------------------------------------
Consulting Period, the Consultant shall not, directly or indirectly,
use, disseminate, or disclose for any purpose other than at the
specific written request of the Company, any of the Company's
confidential information or trade secrets, unless such disclosure is
compelled in a judicial proceeding. All documents, records,
notebooks, and similar repositories of records containing information
relating to any trade secret or confidential information now in the
Consultant's possession or control, whether prepared by him or by
others, shall be left with the Company or returned to the Company upon
its request.
8. Injunctive Relief. Consultant agrees that any
-----------------
violation by him of the agreements contained in Sections 6 and 7 are
likely to cause irreparable damage to the Company, and therefore
agrees that if there is a breach or threatened breach by Consultant of
the provisions of said sections, the Company shall be entitled to an
injunction restraining Consultant from such breach. Nothing herein
shall be construed as prohibiting the Company from pursuing any other
remedies for such breach or threatened breach.
9. General Release. Except as otherwise expressly stated
---------------
in this Agreement, including this Section 9, the parties, for
themselves and their heirs, successors, subrogees, executors, agents,
officers, employees, directors, administrators and assigns, do hereby
voluntarily and knowingly release and discharge each other, and their
respective heirs, successors, subrogees, assigns, agents, employees,
stockholders, officers,
-3-<PAGE>
and directors from any and all claims, liabilities, demands, rights,
damages, costs, attorneys' fees (including, without limitation, any
claim of entitlement for attorneys' fees under any contract, statute
or rule of law allowing the prevailing party or plaintiff to recover
attorneys' fees), expenses, and controversies of every kind and
description, without limitation, which either party has or may have
under the common law and/or any federal, state or local laws,
regulations or requirements, by reason of or arising out of
Consultant's employment by the Company and all other matters which now
or in the future could be raised between them. It is understood and
agreed by the parties that these releases apply to claims of every
nature and kind, known or unknown, suspected or unsuspected. The
parties acknowledge that they may discover facts different from or in
addition to those which they now know to be or believe to be true with
respect to the Agreement and the facts which underlie it, and agree
that this Agreement and the Releases contained in it shall be and
remain effective in all respects, notwithstanding such different or
additional facts or their discovery. This general release includes,
by way of example and not limitation, all claims under the Civil
Rights Act of 1964 as amended, The Employee Retirement Income Security
Act of 1974 as amended, the Age Discrimination in Employment Act as
amended, The Older Workers' Benefit Protection Act as amended, The
Americans with Disabilities Act as amended, and all other state and
federal statutes and regulations.
10. Officer Indemnification. The Company agrees that the
-----------------------
Consultant shall continue to be entitled to indemnification by the
Company against liabilities arising out of claims based upon action
taken or omitted by the Consultant in his capacity as an officer of
the Company or while serving as such or by reason of the fact that he
was an officer of the Company, to the full extent permitted under
Section 145 of the Delaware General Corporation Law or under the
Certificate of Incorporation or Bylaws of the Company, or resolutions
adopted by its Board of Directors.
11. Representations of the Consultant. The Consultant
---------------------------------
represents and warrants as follows:
(a) He has read this Agreement and agrees to the
conditions and obligations set forth in it and has been advised by the
Company to consult with legal counsel regarding this Agreement;
(b) He has voluntarily executed this Agreement after
having had full opportunity to consult with counsel and without being
pressured or influenced by any statement or representation of any
person acting on behalf of the Company, including the attorneys,
officers, directors and employees of the Company;
-4-<PAGE>
(c) He has had at least twenty-one days to consider
all the material terms of this Agreement, including the mutual
releases.
(d) He has been informed and understands that (1) to
the extent that this Agreement waives or releases any claim he might
have under the Age Discrimination in Employment Act, 29 U.S.C.
Section 621 et seq., he may rescind his waiver and release within
-- ----
seven calendar days of the execution of this Agreement and (2) any
such rescission must be in writing, and delivered to the Company or,
if sent by mail, post marked within the seventh (7) day period sent by
certified mail, return receipt request and addressed as follows:
Chairman of the Board
Air Methods Corporation
7301 South Peoria
Englewood, Colorado 80112
(e) He has full and complete legal capacity to enter
into this Agreement.
(f) He is not aware of any legal proceedings currently
pending or threatened in writing (except for writings known to
directors of the Company) against the Company arising from matters
herein released.
12. Irrevocability and Amendment. The obligations of the
----------------------------
Company and the Consultant hereunder are irrevocable. This Agreement
may be amended or terminated only pursuant to a written agreement
executed by both the Consultant and the Company.
13. Successors and Assigns. This Agreement and all rights
----------------------
and obligations of the parties hereunder, and the releases contained
herein, shall bind and inure to the benefit of the heirs, agents,
employees, stockholders, partners, officers, directors, parents,
subsidiaries, subrogees, affiliates, representatives, successors
(including, in the case of the Company, any successor to the business
of the Company, whether by merger, consolidation, acquisition of
assets or any other transaction) and assigns of the Parties.
14. Nonassignability. This Agreement and the rights,
----------------
interest and obligations thereunder may not be assigned or delegated
by the Parties.
15. Entire Agreement. This Agreement is the entire
----------------
agreement between the Parties and no representations, warranties or
other statements or promises have been made by either party to the
other in connection with this Agreement.
16. Severability. If any provision of this Agreement is
------------
held to be illegal, invalid or unenforceable, such
-5-<PAGE>
provision(s) shall be fully severable. In lieu thereof, there shall
be added a provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible, and be legal, valid and
enforceable.
17. Applicable Law. This Agreement shall be interpreted
--------------
and construed in accordance with the laws of the state of Colorado.
18. Enforcement Expenses. In any action for breach or
--------------------
enforcement of the terms of this Agreement, the prevailing party shall
be entitled to all costs of enforcement including, without limitation,
his/its attorneys' fees and costs.
IN WITNESS WHEREOF, the Consultant and the Company have
caused this Consulting and Non-Competition Agreement to be executed
and delivered this 30th day of November, 1994.
__________________________________
Roy L. Morgan
AIR METHODS CORPORATION
By:_______________________________
Chairman of the Board
-6-
______________________________________________________________________
STOCK PURCHASE AGREEMENT
DATED AS OF
September ___, 1994
BETWEEN
AIR METHODS CORPORATION
("SELLER")
AND
CENTENNIAL EXPRESS AIRLINES, INC.
("PURCHASER")
______________________________________________________________________
<PAGE>
Table of Contents
-----------------
Page
----
1. SALE OF THE SHARES. . . . . . . . . . . . . . . . . . . . . . 1
1.1 Sale of Shares . . . . . . . . . . . . . . . . . . . . 1
1.2 Consideration for the Shares . . . . . . . . . . . . . 1
2. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 Closing Date . . . . . . . . . . . . . . . . . . . . . 1
2.2 Seller's Deliveries at Closing . . . . . . . . . . . . 2
2.3 Certificate of Seller and Purchaser. . . . . . . . . . 2
3. REPRESENTATIONS AND WARRANTIES OF SELLER. . . . . . . . . . . 2
3.1 Authority. . . . . . . . . . . . . . . . . . . . . . . 2
3.2 Title to Shares. . . . . . . . . . . . . . . . . . . . 2
3.3 No Brokers . . . . . . . . . . . . . . . . . . . . . . 3
4. DISCLAIMER OF REPRESENTATIONS AND WARRANTIES ABOUT GOLDEN
EAGLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.1 Organization, Good Standing and Qualification. . . . . 3
4.2 Books and Records. . . . . . . . . . . . . . . . . . . 3
4.3 Liabilities. . . . . . . . . . . . . . . . . . . . . . 3
4.4 FAA Certificate. . . . . . . . . . . . . . . . . . . . 4
5. REPRESENTATIONS AND WARRANTIES OF PURCHASER . . . . . . . . . 4
5.1 Organization, Good Standing and Corporate Authority. . 4
5.2 No Brokers . . . . . . . . . . . . . . . . . . . . . . 4
6. REPRESENTATIONS AND WARRANTIES - GENERAL. . . . . . . . . . . 4
6.1 Survival of Representations and Warranties . . . . . . 4
7. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . 5
7.1 Pre-Closing Covenants. . . . . . . . . . . . . . . . . 5
7.2 Payment of Expenses. . . . . . . . . . . . . . . . . . 5
8. CONDITIONS PRECEDENT TO CLOSING . . . . . . . . . . . . . . . 5
8.1 Conditions Precedent to Purchaser's Obligation to
Close. . . . . . . . . . . . . . . . . . . . . . . . . 5
8.2 Conditions Precedent to Seller's Obligation to Close . 7
9. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 7
9.1 Termination of Agreement . . . . . . . . . . . . . . . 7
9.2 Waivers. . . . . . . . . . . . . . . . . . . . . . . . 8
9.3 Notices. . . . . . . . . . . . . . . . . . . . . . . . 9
9.4 Entire Agreement; Modification . . . . . . . . . . . . 9
9.5 Non-Assignability; Third Party Beneficiaries . . . . . 9
9.6 Binding Effect . . . . . . . . . . . . . . . . . . . . 9
9.7 Section Headings . . . . . . . . . . . . . . . . . . . 9
9.8 Governing Law. . . . . . . . . . . . . . . . . . . . . 9
9.9 Further Assurances . . . . . . . . . . . . . . . . . . 10
9.10 Severability . . . . . . . . . . . . . . . . . . . . . 10
9.11 Counterparts . . . . . . . . . . . . . . . . . . . . . 10
-i-<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is entered
into as of the ______ day of September 1994, by and between Air
Methods Corporation, a Delaware corporation ("Seller"), and Centennial
Express Airlines, Inc. ("Purchaser").
RECITALS
A. Seller owns all the shares of issued and outstanding
common stock (the "Shares") of Golden Eagle Charters, Inc., a Colorado
corporation, doing business as Golden Eagle Aviation, Inc. ("Golden
Eagle").
B. Seller desires to sell, and Purchaser desires to
purchase, the Shares on the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements herein set forth, the parties hereto,
intending legally to be bound hereby, agree as follows:
1. SALE OF THE SHARES
1.1 Sale of Shares. On the terms and subject to the
--------------
conditions set forth in this Agreement, on the Closing Date (as
defined below) Seller shall sell the Shares to Purchaser and shall
deliver to Purchaser all certificates representing the Shares endorsed
in blank or accompanied by stock powers executed in blank.
1.2 Consideration for the Shares. On the terms and
----------------------------
subject to the conditions of this Agreement, on the Closing Date
Purchaser shall pay to Seller in cash, certified check, bank check or
by wire transfer, as the aggregate consideration for the Shares,
$10,000 (the "Purchase Price") .
2. CLOSING
2.1 Closing Date. Consummation of the sale and purchase
------------
of the Shares (the "Closing") shall take place at the offices of
Davis, Graham& Stubbs, 370 17th Street, Suite 4700, Denver, Colorado
80202, at 10:00 a.m., Mountain Time, on September ___, 1994, or on
such other date as the parties may mutually agree in writing. The
actual date and time of the Closing is herein called the "Closing
Date."
<PAGE>
2.2 Seller's Deliveries at Closing. Seller shall deliver
------------------------------
to Purchaser at Closing, the following documents: Seller's contract
for sale; all books, records, corporate documents, trade name
certificates, check books, and accounting records; all documents
relating to Golden Eagle's Part 135 Air Carrier Certificate from the
Federal Aviation Administration ("FAA"); all applicable FAA approved
operation specifications; all applicable FAA approved operations and
training manuals; all applicable FAA approved maintenance manuals; all
reference material and library material referenced in any FAA approved
manual; all records as required by FAR Part 135.63 regarding pilot
training and experience, passenger manifests, etc.; international
airman's information manuals; all international operations
certificates and certificates of authorization; a list of all current
employees of Golden Eagle; insurance policies; stock certificates;
asset lists; accounting records; customer lists; and, all documents
relating to Golden Eagle's ownership of the airplane described in
paragraph 4.4, including but not limited to logbooks, maintenance
records, and operations manuals.
2.3 Certificate of Seller and Purchaser. At the closing
-----------------------------------
Seller and Purchaser shall execute certificates in conformance with
the certificate attached hereto as Exhibit 2.3 that the
representations contained in this agreement are true.
3. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser as
follows:
3.1 Authority. (i) Seller is a corporation duly
---------
organized, validly existing and in good standing under the laws of the
State of Delaware; (ii) Seller has full authority to execute and
deliver this Agreement and to perform its obligations hereunder; and
(iii) this Agreement constitutes a valid and binding obligation of
Seller, enforceable in accordance with its terms.
3.2 Title to Shares. (i) Seller is the lawful owner and
---------------
the holder of record of the Shares; (ii) delivery to Purchaser of
certificates representing the Shares pursuant to the provisions of
this Agreement will transfer to Purchaser valid title thereto;
(iii) the Shares to be delivered to Purchaser on the Closing Date
pursuant to the terms and conditions hereof have not been pledged as
collateral security for any obligations of Seller, and are free and
clear of all liens, restrictions, charges, encumbrances, mortgages,
security interests and claims of any kind securing obligations of
Seller; and (iv) Seller has no legal obligation, absolute or
contingent, to any other person or firm to sell the Shares, to effect
any merger, consolidation or other reorganization of Golden Eagle or
to enter into any agreement which would affect Seller's title or right
to deliver the Shares on the Closing Date.
-2-<PAGE>
3.3 No Brokers. Seller has not entered into any
----------
agreement, arrangement or understanding with any person or firm which
will result in any obligation of Purchaser or Golden Eagle to pay any
finder's fee, brokerage commission or similar payment in connection
with the transactions contemplated hereby.
4. DISCLAIMER OF REPRESENTATIONS AND WARRANTIES ABOUT GOLDEN
EAGLE
Seller acquired the Shares from the previous owners of the
Shares on September 10, 1993 and the Seller therefore has limited
knowledge of events occurring prior to that date and is unwilling to
represent or warrant to the Purchaser the status of Golden Eagle
except in limited respects. The Seller disclaims any representations
or warranties about Golden Eagle except as specifically set forth in
Section 3 and in this Section 4. Seller represents and warrants to
the Purchaser as follows:
4.1 Organization, Good Standing and Qualification.
---------------------------------------------
Golden Eagle is a corporation duly organized, validly existing and in
good standing under the laws of the State of Colorado, has all
requisite power to own, lease and operate all of its properties and
assets and to carry on its business as it is now being conducted. The
copies of the Articles of Incorporation and the Bylaws of Golden
Eagle, both as amended to date, which have been delivered to Purchaser
prior to the date hereof, are true, complete and correct.
4.2 Books and Records. To the knowledge of Seller,
-----------------
except as disclosed on Schedule 4.2, all books of account, minute
books, stock certificate books, stock transfer ledgers and other
corporate records of, and records maintained pursuant to the
requirements of governmental authorities by, Golden Eagle are complete
and correctly and accurately present and reflect in all material
respects all assets of Golden Eagle, all the transactions entered into
by Golden Eagle or to which Golden Eagle is a party or any other
matter which should be set forth in such books and records.
4.3 Liabilities. To the knowledge of Seller, there are
-----------
no outstanding liabilities, claims, potential claims, unliened claims,
lawsuits, settlement agreements, tax deficiencies, unpaid fees, or
other obligations of Golden Eagle ("liabilities") that have arisen
since September 10, 1993 that do not appear in the books and records
of Golden Eagle as disclosed to Purchaser. Seller further confirms
representations and warranties made to Seller by Marlis E. Smith,
Inc., Smith Aviation, Inc., and Marlis E. Smith (the "Prior
Shareholders") in that certain Stock Purchase Agreement dated
September 10, 1993, under which Seller acquired the Shares from the
Prior Shareholders. However, Seller shall have no liability
respecting representations concerning any events occurring prior to
September 10, 1993, including any liability arising out of a Notice of
Deficiency dated March 16, 1994 (the "Tax Notice")
-3-<PAGE>
issued by the Colorado Department of Revenue asserting certain tax
deficiencies against Golden Eagle, all arising out of events occurring
prior to September 10, 1993. Purchaser and Seller agree that Seller
will, at Purchaser's request and legal expense, undertake any and all
actions, including but not limited to making demands for payment from
or filing suit against the Prior Shareholders to recover damages for
breaches of representations and warranties made by the Prior
Shareholders for matters arising prior to September 10, 1993.
Purchaser shall have the right to choose legal counsel for any
collection efforts made against the Prior Shareholders pursuant to
this provision. Seller agrees to cooperate fully with any collection
efforts made pursuant to this provision. Seller shall have the right
to review, at its expense, any demand letters, complaints, or other
pleadings prepared on Seller's behalf pursuant to this provision.
4.4 FAA Certificate. As of the Closing Date Golden Eagle
---------------
shall have a valid Part 135 Certificate of Operation from the Federal
Aviation Administration. As of the Closing Date Seller shall have no
knowledge of any reason why the Part 135 Certificate of Operation may
not or will not remain in full force and effect.
5. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as
follows:
5.1 Organization, Good Standing and Corporate Authority.
---------------------------------------------------
Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Colorado. Purchaser has
the full corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder; the execution,
delivery and performance of this Agreement by Purchaser and the
consummation of the transactions contemplated hereby have been duly
authorized by all requisite corporate action of Purchaser; and this
Agreement constitutes a valid and binding obligation of Purchaser,
enforceable in accordance with its terms.
5.2 No Brokers. Purchaser has not entered into any
----------
agreement, arrangement or understanding with any person or firm which
will result in any obligation of Seller to pay any finder's fee,
brokerage commission or similar payment in connection with the
transactions contemplated hereby.
6. REPRESENTATIONS AND WARRANTIES - GENERAL
6.1 Survival of Representations and Warranties. All
------------------------------------------
statements contained in any certificate or instrument delivered by or
on behalf of any party at the Closing pursuant to this Agreement or in
connection with the transactions contemplated hereby shall be deemed
to be representations and warranties of that party hereunder. All
representations and warranties of any
-4-<PAGE>
party contained in this Agreement (or deemed to have been made
hereunder) shall survive the Closing Date notwithstanding any
investigation at any time made by or on behalf of the other party.
Notwithstanding the foregoing, the parties' representations and
warranties contained in this Agreement shall terminate twelve (12)
months after the Closing Date.
7. COVENANTS
7.1 Pre-Closing Covenants.
---------------------
(a) Access to and Information Concerning Properties
-----------------------------------------------
and Records, Etc. Seller shall give Purchaser and Purchaser's
- - - -----------------
counsel, accountants, engineers and other advisors, agents,
consultants and representatives, full access, during normal business
hours throughout the period prior to the Closing Date, to all of the
properties, books, contracts, commitments, records and responsible
employees of Golden Eagle, and will promptly furnish to Purchaser
during such period all such information concerning Golden Eagle as
Purchaser reasonably may request.
(b) No-Shop Clause. From the date hereof until the
--------------
Closing Date, Seller will not enter into or conduct negotiations with
parties other than Purchaser with respect to the sale of the Shares or
the assets of Golden Eagle, or any other form of business combination
transaction involving Golden Eagle or the Shares.
7.2 Payment of Expenses. Each of the parties shall pay
-------------------
its own fees and expenses incident to the negotiation and execution of
this Agreement and the consummation of the transactions contemplated
hereby including, but not limited to, counsel and accountant's fees.
8. CONDITIONS PRECEDENT TO CLOSING
8.1 Conditions Precedent to Purchaser's Obligation to
-------------------------------------------------
Close. The obligation of Purchaser under this Agreement to proceed
- - - -----
with the Closing on the Closing Date shall at all times be subject to
the following conditions precedent, any of which may be waived by
Purchaser in writing:
(a) Accuracy of Representations and Warranties. The
------------------------------------------
representations and warranties of Seller contained herein shall be
true and correct in all material respects on and as of the Closing
Date with the same effect as if made on and as of such date.
(b) Performance of Agreements. Seller shall have
-------------------------
performed all obligations and agreements and complied with all
covenants and conditions contained in this Agreement to be performed
or complied with by it at or prior to the Closing Date,
-5-<PAGE>
including the delivery of certificates evidencing the Shares, properly
endorsed with signatures guaranteed.
(c) Seller's Certificate. Seller shall have
--------------------
furnished Purchaser with a certificate, dated the Closing Date, signed
by the chief executive officer of Seller, stating that the
representations and warranties contained in Section 3 are true and
correct on the Closing Date in all material respects as if then made,
and that Seller has fulfilled the conditions specified in
Sections 8.1(a) and (b) above.
(d) No Litigation. No litigation shall have been
-------------
instituted before any court or governmental body, or instituted by any
governmental agency, to restrain or prevent the carrying out of the
transactions contemplated by this Agreement or which might affect
Purchaser's right to own, operate and control the assets, properties
and business of Golden Eagle on or after the Closing Date.
(e) Regulatory Approvals; Other Approvals and
-----------------------------------------
Consents. All regulatory approvals of any governmental agency
- - - --------
required for the transactions contemplated hereby shall have been
obtained. Golden Eagle also shall have obtained all other requisite
approvals and consents pursuant to contracts or permits relative to
the transactions contemplated by this Agreement, including, but not
limited to, obtaining all necessary approvals from the FAA and DOT.
(f) Payment and Satisfaction of Intercompany Debt.
---------------------------------------------
The 1977 Beechcraft King Air E90 aircraft, serial number LW235,
registration number N776DC (the "King Air"), owned by Golden Eagle,
shall have been transferred to Seller in partial satisfaction of
Golden Eagle's intercompany debt to the Seller and Seller shall have
contributed to Golden Eagle an amount equal to the intercompany debt
attributable to the King Air to discharge such debt.
(g) Agreement to Convey Hangar. Golden Eagle and
--------------------------
Seller shall have executed an agreement (the "Agreement to Convey"),
substantially in the form of Exhibit __ hereto, pursuant to which
Golden Eagle shall convey to Seller the hangar at Centennial Airport
that is owned by Golden Eagle (the "Hangar"), and Purchaser, as the
owner of Golden Eagle from and after the date hereof agrees to cause
Golden Eagle to take such further actions and execute and deliver such
other documents as may be necessary to effectuate the transactions
contemplated in the Agreement to Convey. The conveyance of the Hangar
to Seller is in partial satisfaction of Golden Eagle's intercompany
debt to the Seller and Seller shall have contributed to Golden Eagle
an amount equal to the intercompany debt attributable to the Hangar to
discharge such debt. Seller shall make a capital contribution to
Golden Eagle equal to the amount of intercompany debt, if any,
remaining after the transfer of the King Air and the Hangar to Seller.
Seller shall indemnify and hold harmless Purchaser and
-6-<PAGE>
Golden Eagle from any costs or expenses, including taxes, incurred by
Purchaser or Golden Eagle as a result of the conveyance of the Hangar
to Seller.
(h) Agreement for Purchase of Aircraft. Purchaser
----------------------------------
and Seller shall have entered into an Agreement, substantially in the
form of Exhibit __ hereto providing for the sale by Seller to
Purchaser of the Beechcraft King Air E90 aircraft, serial number
LW235, registration number N776DC, and Purchaser shall have paid to
Seller the deposit provided for in said Agreement.
8.2 Conditions Precedent to Seller's Obligation to Close.
----------------------------------------------------
The obligation of Seller under this Agreement to proceed with the
Closing on the Closing Date shall at all times be subject to the
following conditions precedent, any of which may be waived by Seller
in writing:
(a) Accuracy of Representations and Warranties. The
------------------------------------------
representations and warranties of Purchaser contained herein shall be
true and correct in all material respects on and as of the Closing
Date with the same effect as if made on and as of such date.
(b) Performance of Agreements. Purchaser shall have
-------------------------
performed all obligations and agreements and complied with all
covenants and conditions contained in this Agreement to be performed
or complied with by it at or prior to the Closing Date.
(c) Purchaser's Certificate. Purchaser shall have
-----------------------
furnished Seller with a certificate, dated the Closing Date, stating
that the representations and warranties contained in Section 5 are
true and correct on the Closing Date in all material respects as if
then made, and that Purchaser has fulfilled the conditions specified
in Sections 8.2(a) and (b) above.
(d) Agreement for Sale of Aircraft. Purchaser and
------------------------------
Seller shall have entered into an Agreement, substantially in the form
of Exhibit __ hereto providing for the sale by Seller to Purchaser of
the Beechcraft King Air E90 aircraft, serial number LW235,
registration number N776DC, and Purchaser shall have paid to Seller
the deposit provided for in said Agreement.
9. MISCELLANEOUS
9.1 Termination of Agreement. This Agreement may be
------------------------
terminated at any time on or prior to the Closing Date:
(a) by mutual written consent of Purchaser and Seller;
-7-<PAGE>
(b) by Purchaser, if there has been a material breach
by Seller of any of its representations, warranties or covenants set
forth herein, or a failure of any condition to which the obligations
of Purchaser are subject;
(c) by Seller, if there has been a material breach by
Purchaser of any of its representations, warranties or covenants set
forth herein, or a failure of any condition to which the obligations
of Seller are subject; or
(d) at midnight on September 15, 1994 if the Closing
shall not have occurred on or before that date, unless the parties
otherwise agree.
(e) Upon notice by Purchaser to Seller that any one or
more of the representations of Seller in Section 4 are not true or
that any of the various inspections by Purchaser as allowed by this
agreement have revealed a condition which is unsatisfactory to
Purchaser. However, Seller shall have 7 days to cure the subject of
the notice to the satisfaction of Purchaser. Should the 7 day cure
period terminate at a date beyond the Closing Date or the contract
termination date of September 15, 1994, the Closing Date and/or
contract termination date shall be extended to and including the 7th
day of the cure period, or the first business day after the cure
period if the end of the cure period falls on a weekend or holiday.
In the event of the termination of this Agreement pursuant to
Section 9.1(a), this Agreement shall terminate without any liability
or further obligation of either party to the other. Any termination
pursuant to Section 9.1(b), (c) or (d) shall not relieve either party
of any liability for any misrepresentation or breach of a
representation, warranty or covenant. In the event of the termination
of this Agreement, all documents, records, notebooks and similar
repositories of records containing information relating to any trade
secrets or confidential information of any party which are then in the
possession or control of another party, whether prepared by such other
party or by others, shall be returned to the party which owns such
trade secrets or confidential information, and no such information or
trade secrets shall be used, disseminated or disclosed by such other
party for any purpose whatsoever.
9.2 Waivers. Any party may by written notice to the
-------
other (a) extend the time for the performance of any of the
obligations or other actions of the other; (b) waive any inaccuracies
in the representations and warranties of the other contained in this
Agreement or in any document delivered pursuant to this Agreement; (c)
waive compliance with any of the covenants of the other contained in
this Agreement; or (d) waive performance of any of the obligations of
the other. No action taken pursuant to this Agreement, including,
without limitation, any investigation by or on behalf of any party,
shall be deemed to constitute a waiver by the party taking such action
of
-8-<PAGE>
compliance with any representations, warranties, covenants or
agreements contained herein. The waiver by any party hereto of the
breach of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach.
9.3 Notices. Any notice, request or other communication
-------
required or allowed under this Agreement shall be in writing and shall
be deemed given (a) upon personal delivery, (b) on report of
successful transmission by facsimile machine, (c) on the first
business day after delivery to a courier service which guarantees next
business-day delivery, under circumstances in which such guaranty is
applicable, or (d) on the earlier of delivery or three business days
after mailing by United States certified mail, postage and fees
prepaid, to the appropriate party at the address set forth below or to
such other address as the party so notifies the other in writing.
(a) If to Seller: 7301 South Peoria, Englewood,
Colorado 80112, Attn: George Belsey (Phone: 303-790-0587, Fax:
303-790-4780); with a copy to Lester R. Woodward, Esq., Davis,
Graham & Stubbs, 370 Seventeenth Street, Suite 4700, Denver, Colorado
80202 (Phone: 303-892-7392, Fax: 303-892-7400).
(b) If to Purchaser: Centennial Express Airlines,
Inc., ____________________________________; with a copy to Mark A.
Pottinger, Esq., Bench, Pottinger & Van Nest, 1433 Seventeenth Street,
Suite 7, Denver, Colorado 80202 (Phone: 303-293-8507, Fax: 303-293-
8244)
9.4 Entire Agreement; Modification. This Agreement
------------------------------
constitutes the entire agreement between the parties and supersedes
all prior agreements and understandings, oral and written, between the
parties hereto with respect to the subject matter hereof. No
modification of this Agreement shall be valid unless made in writing
and signed by the parties hereto.
9.5 Non-Assignability; Third Party Beneficiaries. This
--------------------------------------------
Agreement shall be assignable by any party hereto only with the prior
written consent of the other party. This Agreement shall not benefit
or create any right or cause of action in or on behalf of any person
other than the parties.
9.6 Binding Effect. This Agreement shall inure to the
--------------
benefit of and be binding upon the parties hereto and their respective
successors, heirs, legal representatives and permitted assigns.
9.7 Section Headings. The Section headings contained in
----------------
this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
9.8 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
-------------
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
-9-<PAGE>
STATE OF COLORADO WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF
LAWS THAT WOULD OTHERWISE PROVIDE FOR THE APPLICATION OF THE
SUBSTANTIVE LAWS OF ANOTHER JURISDICTION.
9.9 Further Assurances. Both before and after the
------------------
Closing, the parties agree to cooperate with each other in
effectuating this Agreement and to execute and deliver such further
documents or instruments and take such further actions as shall
reasonably be requested in connection therewith.
9.10 Severability. If any provision in this Agreement
------------
shall for any reason be determined to be invalid or unenforceable, the
remaining provisions of this Agreement shall nevertheless continue to
be valid and enforceable as though the invalid or unenforceable
provision had not been a part hereof.
9.11 Counterparts. This Agreement may be executed in any
------------
number of counterparts, each of which shall be deemed to be an
original and all of which together shall be deemed to be one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
PURCHASER:
CENTENNIAL EXPRESS AIRLINES, INC.
By:
-------------------------------------
Name and Title:
SELLER:
AIR METHODS CORPORATION
By:
-------------------------------------
George Belsey, Chairman of the
the Board and Chief Executive
Officer
-10-
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
-------------------------------
The Board of Directors
Air Methods Corporation:
We consent to incorporation by reference in the registration
statements on Form S-8 (No. 33-24980, No. 33-46691, No. 33-55750,
No. 33-65370 and No. 33-75742) and Form S-3 (No. 33-59690 and
No. 33-75744) of Air Methods Corporations of our report dated
August 12, 1994 relating to the consolidated balance sheets of Air
Methods Corporation and subsidiary as of June 30, 1994 and 1993, and
the related consolidated statements of operations, stockholders'
equity, and cash flows and related schedules for each of the years in
the three-year period ended June 30, 1994, which report appears in the
June 30, 1994 annual report on Form 10-K of Air Methods Corporation.
KPMG PEAT MARWICK LLP
KPMG PEAT MARWICK LLP
Denver, Colorado
June 26, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE COMPANY'S AUDITED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDING
DECEMBER 31, 1994, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 696
<SECURITIES> 0
<RECEIVABLES> 1375
<ALLOWANCES> (37)
<INVENTORY> 1762
<CURRENT-ASSETS> 9836
<PP&E> 38061
<DEPRECIATION> (4667)
<TOTAL-ASSETS> 48813
<CURRENT-LIABILITIES> 11728
<BONDS> 0
<COMMON> 481
0
0
<OTHER-SE> 49572
<TOTAL-LIABILITY-AND-EQUITY> 48813
<SALES> 790
<TOTAL-REVENUES> 13973
<CGS> 963
<TOTAL-COSTS> 14277
<OTHER-EXPENSES> (318)<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 554<F2>
<INCOME-PRETAX> 1176
<INCOME-TAX> 0
<INCOME-CONTINUING> (1176)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1176)
<EPS-PRIMARY> (.15)
<EPS-DILUTED> 0
<FN>
<F1> Net non-operating income and merger termination expense
<F2> Net of interest income of 163
</FN>
</TABLE>
