SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) July 31, 1997
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 Identification Number)
Incorporation or Organization)
7301 South Peoria, Englewood, Colorado 80112
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (303) 792-7400
Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report: N/A
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On July 31, 1997, Air Methods Corporation, a Delaware corporation ("the
Company"), acquired all of the common stock of Mercy Air Service, Inc., a
California corporation, and substantially all of the net assets of Helicopter
Services, Inc., a California corporation (together "Mercy"), for $6,211,000. The
purchase price was negotiated by the Company and the sellers and is subject to
working capital post-closing adjustments to be determined by independent audit
within 90 days of the closing date. The purchase will be accounted for using the
purchase method of accounting. Of the purchase price, $4,595,000 was paid in
cash at closing with the remaining balance financed by the selling shareholders
over five years at 9% interest. Most of the funding for the cash payment was
provided by the refinancing of six of Mercy's helicopters with Finova Capital
Corporation ("Finova"). The note from Finova provides for monthly principal and
interest payments at 9.52% interest with a 28% balloon at the end of ten years.
The shareholders of Mercy consisted of Homer L. Aerts, J. Steven Dickmeyer, Don
D. Reed, Terry L. Russ, and Richard J. Silva. In connection with the
acquisition, each of the shareholders entered into a consulting and
non-competition agreement with the Company in exchange for $10,000 and a monthly
consulting fee over five years. Each shareholder was also granted options to
purchase 100,000 shares of the Company's common stock at the closing price on
July 31, 1997, the effective date of the grant. The options vest over three
years and expire after five years.
Mercy has operated as an independent provider of air medical transportation
services throughout southern California since 1988. As an independent provider,
Mercy's operations include medical care, aircraft operation and maintenance,
communications and dispatch, and medical billing and collections. Mercy will
continue its operations as a wholly-owned subsidiary of the Company.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
The following financial statements, pro forma financial information, and
exhibits are filed as part of this report:
a. Financial statements of Mercy:
It is impracticable to provide the required financial statements at the
time of this report. The Company expects to file the required financial
statements of Mercy on Form 8-K no later than October 13, 1997.
b. Pro forma financial information:
It is impracticable to provide the required pro forma financial
information at the time of this report. The Company expects to file the
required pro forma financial information on Form 8-K no later than
October 13, 1997.
c. Exhibits
2.1 Stock Purchase Agreement, dated July 11, 1997, among the Company
and the shareholders of Mercy Air Service, Inc.
2.2 Asset Purchase Agreement, dated July 11, 1997, by and among the
Company, Helicopter Services, Inc., and the shareholders of Mercy
Air Service, Inc.
10.1 Letter Agreement, dated July 29, 1997, between the Company and
Finova Capital Corporation
10.2 Secured Promissory Note, dated July 31, 1997, issued by the
Company to Finova Capital Corporation
10.3 Stock Pledge Agreement, dated July 31, 1997, between the Company
and Finova Capital Corporation
10.4 Secured Loan Agreement, dated July 31, 1997, between Finova
Capital Corporation and Mercy Air Service, Inc.
10.5 Aircraft Chattel Mortgage and Security Agreement, dated July 31,
1997, between Finova Capital Corporation and Mercy Air Service,
Inc.
10.6 Secured Promissory Note, dated July 31, 1997, issued by Mercy Air
Service, Inc. to Finova Capital Corporation
10.7 Continuing Guaranty and Subordination Agreement, dated July 31,
1997, between Finova Capital Corporation and the Company
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SIGNATURES
Pursuant to the requirements 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: August 15, 1997 By \s\ Aaron D. Todd
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On behalf of the Company, and as
Principal Financial and Accounting
Officer
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STOCK PURCHASE AGREEMENT
SELLERS
Homer L. Aerts
J. Steven Dickmeyer
Don D. Reed
Terry L. Russ
Richard J. Silva
BUYER
Air Methods Corporation
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (the "Agreement") is made as of July 11,
1997, among HOMER L. AERTS, J. STEVEN DICKMEYER, DON D. REED, TERRY L. RUSS and
RICHARD J. SILVA (individually, a "Seller" and collectively the "Sellers"), and
AIR METHODS CORPORATION, a Delaware corporation (the "Buyer").
R E C I T A L S
A. The Sellers own, in the proportions set forth in SCHEDULE 2.1 hereto,
all of the issued and outstanding shares of common stock (the "Shares") of Mercy
Air Service, Inc., a California corporation ("Mercy" or the "Company"). Mercy
owns and operates a medical transportation business which provides air-based
transport, by helicopter, to individuals requiring advanced life support
services during transport, in the counties of Los Angeles, Orange, Riverside,
San Bernardino, Kern, Imperial, San Diego, Ventura and Santa Barbara in
California (the "Service Area").
B. Sellers also own, in the aggregate, all of issued and outstanding shares
of common stock of Helicopter Services, Inc., a California corporation ("HSI"),
which provides helicopter maintenance services primarily to Mercy and does
business under the name "Western Helicopter Inc."
C. Buyer desires to purchase from each Seller, and each Seller desires to
sell and transfer to Buyer, all of the Shares owned by each Seller, on the terms
and conditions hereinafter set forth.
D. Concurrently herewith, Buyer and HSI are entering into an Asset Purchase
Agreement of even date herewith (the "HSI Agreement"), which provides for the
sale by HSI of substantially all of its assets to Buyer concurrently with the
sale by Sellers of their respective Shares of Mercy hereunder.
NOW, THEREFORE, in consideration of the respective covenants and promises
of the Sellers and the Buyer hereinafter set forth, the parties hereto agree as
follows:
1. PURCHASE AND SALE OF SHARES. Subject to the terms and conditions of this
Agreement, on the Closing Date (as hereinafter defined), each Seller agrees
severally, and not jointly, to sell, convey, assign, transfer, set over and
deliver the Shares owned by him to Buyer, free and clear of pledges, options and
any other adverse interests whatsoever, and Buyer shall purchase and accept such
Shares from each of the Sellers.
2. PURCHASE PRICE AND TERMS OF PAYMENT.
2.1 PURCHASE PRICE. As consideration for the sale to Buyer of the Shares,
on the Closing Date Buyer shall pay to Sellers, in the manner hereinafter set
forth, a purchase price (the "Purchase Price") that shall consist of Four
Million Twenty-Six Thousand Three Hundred Thirty-Five Dollars ($4,026,235) and
(ii) the assumption by Buyer or the Company of certain obligations of the
Sellers set forth on SCHEDULE 2.2 hereto (the "Assumed Obligations"). The
Purchase Price shall be subject to adjustment, pursuant to Section 2.3 and
Section 8.6 hereof (and, as so adjusted, shall be referred to as the "Adjusted
Purchase Price").
2.2 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be paid by Buyer to
the Sellers on the Closing Date, as follows:
(a) CLOSING DATE CASH PAYMENT. A wire transfers of funds to each
Seller in an amount that constitutes each Seller's proportionate share, as
set forth in SCHEDULE 2.1 hereto (the "Proportionate Share"), of a cash
payment in an amount aggregating Two Million Five Hundred Twenty-Six
Thousand Two Hundred Thirty-Five Dollars ($2,526,235) (the "Closing Date
Cash Payment");
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(b) SECURED NOTES. Delivery to each Seller of a secured promissory
note of Buyer in a principal amount which represents each such Seller's
Proportionate Share, of a principal sum totaling One Million Five Hundred
Thousand Dollars ($1,500,000). Each of such secured promissory notes (a
"Note" or, collectively, the "Notes") shall be in the form attached hereto
as EXHIBIT A and shall be secured, in accordance with the terms and
provisions contained in a security agreement, in the form attached hereto
as EXHIBIT B (each, a "Security Agreement"), granting to Sellers a security
interest in all present and future accounts receivable of Mercy, more fully
described in Section 8 below; and
(c) ASSUMPTION AGREEMENT. The execution and delivery by Buyer of an
assumption agreement, (the "Assumption Agreement"), which shall provide for
the assumption by Buyer or the Company of each of the Assumed Obligations,
together with written consents of the creditors to which such obligations
are payable (the "Creditors") that shall contain a release, in form and
substance satisfactory to Sellers and their counsel, which releases and
discharges each of the Sellers from all of such Assumed Obligations.
2.3 ADJUSTMENTS TO PURCHASE PRICE. The Purchase Price shall be subject to
possible adjustments (the "Purchase Price Adjustments"), which are described in,
and the respective amounts of which shall be determined in accordance with the
terms and provisions of, SCHEDULE 2.3 hereof, which terms and provisions have
been agreed upon by the parties hereto, and by this reference, are incorporated
herein and made an integral part of this Agreement. Buyer shall arrange for KPMG
Peat Marwick LLP, independent certified public accountants ("Peat Marwick"), to
determine such Purchase Price Adjustments, to the extent necessary, as provided
in SCHEDULE 2.3 hereto. Any increase or reduction in the Purchase Price as a
result of any Purchase Price Adjustment shall be effectuated in the manner set
forth in SCHEDULE 2.3 and shall be allocated among the Sellers in accordance
with the respective Proportionate Share of each Seller as set forth on SCHEDULE
2.1. Notwithstanding the foregoing, immediately prior to Closing, the parties
shall prepare an estimate of Closing Date Indebtedness (as that term is defined
in SCHEDULE 2.3). If the estimate of the Closing Date Indebtedness is less than
$8,200,000, then, the Closing Date Cash Payment shall be increased by the
difference between $8,200,000 and such estimate. If, on the other hand, the
estimate of Closing Date Indebtedness exceeds $8,200,000, then, the Closing Date
Cash Payment shall be reduced by the amount of such excess. Any such adjustment
to the Closing Date Cash Payment (which also shall constitute an adjustment to
the Purchase Price) shall be documented in a written instrument executed and
delivered by the parties at Closing concurrently with the payment of the Closing
Date Cash Payment, as so adjusted, and shall be taken into account when Closing
Purchase Price Adjustments are determined and effectuated pursuant to SCHEDULE
2.3 so that the Purchase Price is not adjusted more than once for the same item.
3. NON-COMPETITION AGREEMENTS. At Closing, each Seller shall enter into an
agreement with Buyer, pursuant to which, among other things, such Seller shall
agree not to compete with the business of the Company following the Closing, in
consideration for Buyer's payment, by wire transfer, to such Seller at the
Closing of a cash sum of $10,000.
4. REPRESENTATIONS AND WARRANTIES OF EACH SELLER. Each Seller, severally, as to
himself and not jointly with any other of the Sellers, represents and warrants
to Buyer as follows:
4.1 AUTHORITY AND CAPACITY. Such Seller (i) has the full legal right and
capacity to execute and deliver, and to perform his respective obligations
under, this Agreement and his Non-Competition Agreement and (ii) has duly
executed and delivered this Agreement on the date hereof with the intent to be
legally bound hereby and to perform his obligations hereunder. This Agreement
constitutes a valid and legally binding obligation of such Seller and is
enforceable against such Seller in accordance with its terms, and such Seller's
Non-Competition Agreement, when executed and delivered by the Seller, shall be a
valid and legally binding obligation of such Seller enforceable against him in
accordance with its terms, except,
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in each case, as such enforceability may be limited by (i) bankruptcy,
insolvency, moratorium or other similar laws affecting creditors' rights and
(ii) general principles of equity relating to the availability of equitable
remedies (regardless of whether any such agreements are sought to be enforced in
a proceeding at law or in equity).
4.2 OWNERSHIP OF SHARES. Such Seller is the sole beneficial and record
owner of, and at the Closing Seller will sell and convey to Buyer, the number of
the Shares set forth opposite such Seller's name on SCHEDULE 2.1, free and clear
of any pledges, options and any adverse interests of any nature whatsoever,
other than restrictions imposed by federal and applicable state securities laws
which do not constitute an impediment to the transfer of such Shares to Buyer as
described in this Agreement. Such Seller has not, and as of the Closing he shall
not have, sold, or granted any options or rights to purchase, and he has not
entered, and as of the Closing he shall not have entered, into any agreement
obligating him to sell or grant options or rights to purchase, any of such
Shares, except to the Buyer.
4.3 NO CONFLICTS. Except as set forth on SCHEDULE 4.3 , neither the
execution and delivery nor the performance of this Agreement by such Seller, or
of any of the other agreements to be entered into by such Seller with Buyer in
connection with the transactions contemplated by this Agreement, will result in
any of the following: (i) a default or an event that, with notice or lapse of
time, or both, would be a default or breach of any lease, promissory note,
security or pledge or any other agreement to which such Seller is a party or is
subject and which is material to such Seller (a "Material Seller Contract");
(ii) the termination of any Material Seller Contract of such Seller or the
acceleration of the maturity of any material amount of indebtedness of such
Seller; (iii) the creation or imposition of any liens, charges or encumbrances
on any of the Shares of such Seller; or (iv) a violation or breach of any writ,
injunction or decree of any court or governmental instrumentality to which such
Seller is a party or is subject.
4.4 DISCLOSURE. To the knowledge of such Seller, his representations and
warranties contained in this Section 4, as modified by his Disclosure Schedules
attached hereto, do not contain any statement of a material fact that was untrue
when made or omits any material fact necessary to make the statements contained
in such representations and warranties (as modified by such Disclosure
Schedules) not misleading in light of the circumstances under which such
statements were made. For purposes of this Section 4, the phrases "knowledge" or
"best knowledge" of any Seller, means such Seller's actual knowledge.
5. JOINT REPRESENTATIONS AND WARRANTIES OF SELLERS. Subject to the disclosures
and exceptions set forth in the Sellers' Disclosure Schedules, the Sellers
hereby jointly make the following representations and warranties to Buyer with
respect to the Company:
5.1 ORGANIZATION AND STANDING. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of California,
and is authorized to do business in each jurisdiction in which the character of
the properties owned by it or the nature of its business makes such
authorization necessary and where the failure to be so qualified has had or is
expected to have a Material Adverse Effect (as defined hereinafter) on the
Company. The Company has the requisite corporate power and authority to conduct
its business as now conducted and to own or lease (as the case may be), and to
use, the properties and assets used therein. Complete and correct copies of (i)
the Company's Articles of Incorporation and all amendments thereto, certified by
the California Secretary of State; (ii) the Company's Bylaws, as amended to
date, certified by the Company's Secretary; (iii) the stock and minute books of
the Company; and (iv) any agreements restricting the transfer of or otherwise
pertaining to any of the Shares, have been furnished to Buyer.
The term "MATERIAL ADVERSE EFFECT," when used in connection with the
Company, means any change, effect or circumstance that is materially adverse to
the business, assets, financial condition or results of operations of the
Company, other than such changes, circumstances or effects that: (i) are set
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forth or described in or contemplated by the Disclosure Schedules attached
hereto, (ii) are set forth or described in the Financial Statements or the notes
thereto, or (iii) that affects the medical air transportation business
generally.
5.2 CAPITALIZATION. The Company's authorized capital stock consists solely
of 10,000 shares of common stock, without par value (the "Stock"), of which
83-1/3rd shares are issued and outstanding. All of the outstanding Shares are
validly issued, fully paid and nonassessable and, to the knowledge of the
Sellers, none of such Shares have been issued in violation of any preemptive
rights or any agreement to which the Company is or was a party. Except as set
forth on SCHEDULE 5.2 hereto, there are no outstanding warrants, options or
subscriptions or other rights to purchase (collectively, "Options") or any
outstanding convertible or exchangeable securities entitling the holders thereof
to convert or exchange such securities ("Convertible Securities") into, shares
of Company Stock, nor is the Company a party to any agreement obligating it to
sell, grant or issue any Options or Convertible Securities.
5.3 SUBSIDIARIES; INVESTMENTS. The Company does not own, directly or
indirectly, shares of capital stock of any other corporation or any equity
interest in any other entity or business.
5.4 NO CONFLICTS. Except as set forth in SCHEDULE 5.4, neither the
execution and delivery nor the performance of this Agreement by the Sellers, or
of any of the other agreements to be entered into by Sellers pursuant to or in
connection with the transactions contemplated by this Agreement, will result in
any of the following: (i) a default or an event that, with notice or lapse of
time, or both, would be a default, breach or violation of the Articles of
Incorporation or Bylaws of the Company, or any Material Company Contract (as
defined in Section 5.12 hereof); (ii) the termination of any Material Company
Contract or the acceleration of the maturity of any material indebtedness of the
Company; (iii) the creation or imposition of any liens or encumbrances on any of
the material assets of the Company which have had or are expected to have a
Material Adverse Effect on the Company; or (iv) a violation or breach of any
law, regulation, writ, injunction or decree of any court or governmental
instrumentality to which the Company is a party or by which any of its material
properties are bound, where such violation has had or is expected to have a
Material Adverse Effect on the Company.
5.5 FINANCIAL STATEMENTS. The Sellers have delivered to Buyer financial
statements of the Company consisting of unaudited balance sheets, and related
statements of operation, stockholders equity and cash flows, as of and for the
fiscal years ended December 31, 1994, 1995 and 1996 (the "Financial
Statements"). Except as otherwise set forth in the footnotes contained therein
or in SCHEDULE 5.5, the Financial Statements were prepared on an accrual basis
in accordance with generally accepted accounting principles consistently applied
("GAAP") and fairly present the financial condition of the Company as at the
relevant dates thereof and the results of its operations for the respective
periods covered thereby. Except as set forth in SCHEDULE 5.5, the Company has no
debts, obligations or liabilities, fixed or contingent, of a nature that would
be required, in accordance with GAAP, to be shown on a balance sheet and that
are not shown as of December 31, 1996 on the balance sheet (the "1996 Balance
Sheet") that is included in the Financial Statements for the fiscal year then
ended (the "1996 Financial Statements"), other than liabilities incurred after
December 31, 1996 in the ordinary course of the Company's business and
consistent with past practice (the "Post-1996 Liabilities").
5.6 ABSENCE OF CERTAIN CHANGES. Except as otherwise set forth on SCHEDULE
5.6, subsequent to December 31, 1996 there has not been:
(a) Any change in or amendment to the Articles of Incorporation or
Bylaws of the Company or any recapitalization of the Company's authorized
or outstanding capital stock;
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(b) Any sale or issuance of any shares of Company Stock, any grant,
sale or issuance of any Options or Convertible Securities of the Company,
any declaration, setting aside or payment of any dividends in respect of,
or any direct or indirect redemption, purchase, or other acquisition of,
any Company Stock or other securities of the Company, or any agreement to
do any of the foregoing;
(c) The execution of, or the commencement of performance under, any
Material Company Contract not in existence on December 31, 1996, or any
amendment, termination or revocation, of any Material Company Contract, to
which the Company is, or at December 31, 1996 was, a party and which has
had or is expected to have a Material Adverse Effect on the Company;
(d) Any termination or revocation of, or any amendment to, or, to
Sellers' knowledge, any threatened termination or revocation of or
amendment to, any license, permit or franchise held by the Company which
has had or is expected to have a Material Adverse Effect on the Company;
(e) Any sale or transfer of, or the imposition of any lien or
encumbrance on or affecting any of the assets of the Company with a book
value at or above $25,000 individually or $50,000 in the aggregate, except
sales or utilization of inventory or supplies and obsolete equipment in the
ordinary course of business and consistent with past practices of the
Company and liens for current taxes not yet due and payable;
(f) Any material increase in the compensation (other than cost of
living increases) paid or payable or in the fringe benefits provided to any
employees of the Company, or the adoption of any employee benefit plans not
in existence in the year ended December 31, 1996;
(g) Any damage, destruction or loss, whether or not covered by
insurance, of any of the assets of the Company in an amount which exceeds
$25,000, individually, or $50,000 in the aggregate and has had or is
expected to have a Material Adverse Effect on the Company;
(h) The incurrence by the Company of any indebtedness (other than
trade payables incurred in the ordinary course of business), either for
borrowed money or in connection with any purchase of assets, that is not
reflected in the 1996 Balance Sheet and individually or in the aggregate
involves more than $50,000, other than borrowings incurred in the ordinary
course of business and consistent with past practices under and within the
limits of the Company's revolving bank credit line;
(i) Any purchase or lease, or commitment to purchase or lease,
helicopters or other vehicles, equipment, machinery, leasehold improvements
or other capital items not disclosed in the 1996 Financial Statements
involving amounts exceeding $50,000 individually, or $100,000 in the
aggregate; and
(j) The occurrence of any other event or circumstance which has had or
is expected to have a Material Adverse Effect on the Company.
5.7 TANGIBLE ASSETS. SCHEDULE 5.7 contains a list of all helicopters and
other vehicles, machinery, equipment, computers, and substantially all of the
furniture, fixtures, tools, and other similar depreciable tangible personal
property with a book value in excess of $1,000, wherever located, that are owned
by the Company (the "Tangible Assets"). Except as set forth on SCHEDULE 5.7, all
helicopters and rotable equipment thereon are in an air-worthy and good flying
condition in accordance with the maintenance requirements of (i) the Federal
Aviation Administration (the "FAA") and (ii) the manufacturers of such
helicopters or such components or equipment (as the case may be), and are free
of rental parts. All other Tangible Assets are in good working order and
condition (ordinary wear and tear excepted). For purposes of this Agreement
"rotable equipment" means all engine and airframe components having a mandatory
retirement life or overhaul cycle as published by the manufacturers of the
helicopters to which such equipment relates.
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5.8 INTANGIBLE PERSONAL PROPERTY. SCHEDULE 5.8 is a true and correct list
of all proprietary information and know-how documented in writing, and any other
intellectual property or intangible assets, owned by the Company or in which the
Company has rights or licenses, and which are material to the business of the
Company, including any patents, copyrights, trademarks, service marks, trade
names and all applications therefor. Except as set forth on SCHEDULE 5.8, (i) to
the knowledge of the Sellers, the Company has not infringed, and is not now
infringing, any patent, trade name, trademark, service mark, copyright or trade
secret rights belonging to any other person, firm or corporation; and (ii) the
Company owns, or holds adequate licenses or other rights to use, all patents,
trademarks, service marks, trade names, copyrights, and trade secrets used in or
necessary for the operation of the Company's business as now conducted.
5.9 REAL PROPERTIES; LEASES. The Company does not own a fee interest in any
real property. Attached hereto as SCHEDULE 5.9 is a list setting forth all
leases under which the Company possesses or uses real property (the "Real
Property Leases") and all leases under which the Company possesses or uses items
of tangible personal property that are material to conduct of the Company's
business (the "Personal Property Leases"). True, correct and complete copies of
the Real Property Leases and Personal Property Leases (collectively, the
"Leases") have been delivered to Buyer, together with the names and addresses of
the lessors thereunder. The Leases are in full force and effect and the Company
is not in default. To the knowledge of Sellers, (i) the other parties to the
Leases are not in default thereunder and (ii) no facts or circumstances have
occurred which, with the passage of time or the giving of notice, or both, would
constitute a default by the Company or the other parties, under any of the Real
Property Leases or the Personal Property Leases. To the knowledge of the
Sellers, (i) all structures and facilities on the real properties listed on
SCHEDULE 5.9 are equipped in substantial conformity with laws and governmental
regulations applicable to the Company, (ii) the zoning of each parcel of real
property permits the presently existing improvements and continuation of the
business presently conducted thereon by the Company, and (iii) no zoning
changes, and no condemnation or similar proceedings, are pending or threatened
against any of the real properties listed on SCHEDULE 5.9.
5.10 INVENTORIES. All inventories of the Company, including, without
limitation, medical supplies and repair and replacement parts for helicopters
(the "Inventory") are of a quality and quantity usable in the ordinary course of
the Company's business, except for obsolete items, damaged items, and materials
at below standard quality, which, in the aggregate, are not material in amount
or have been written off or written down to net realizable value or for which
reserves have been established on the books of the Company.
5.11 TITLE TO AND ADEQUACY OF ASSETS.
(a) Except as disclosed on SCHEDULE 5.11 hereto, the Company has good
and marketable title to its material assets, free and clear of restrictions
or conditions on transfer or assignment, and free and clear of all
mortgages, liens, security interests, encumbrances, pledges, claims,
charges, and conditional sale contracts (collectively, "liens and
encumbrances"), except for liens for taxes not yet due and other liens and
encumbrances that do not materially detract from the value of or interfere
in any material way with the present use of the assets affected thereby or
which have not had and are not expected to have a Material Adverse Effect
on the Company.
(b) The assets of the Company as shown on the December 31, 1996
Balance Sheet constitute all the assets necessary for the conduct of the
Company's business in substantially the same manner as such business was
conducted during the fiscal year ended December 31, 1996.
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5.12 MATERIAL COMPANY CONTRACTS. Except for leases disclosed in SCHEDULE
5.9 and any agreements and employee benefit plans disclosed on SCHEDULE 5.14,
there is set forth on SCHEDULE 5.12 an accurate list of the contracts,
agreements, licenses and instruments to which the Company is a party or is
subject, the performance by the Company under which, or the termination of
which, would have a Material Adverse Effect on the Company (the "Material
Company Contracts"). Without limiting the generality of the foregoing, such list
includes each contract of the Company which (i) grants a security interest in
any material assets of the Company; (ii) requires the consent of any third party
to, or would be violated by, the consummation of the transactions contemplated
by this Agreement; or (iii) involves the borrowing of money by the Company; or
(iv) commits the Company to make or incur capital expenditures in the future, in
excess of $25,000 individually, or $50,000 in the aggregate, except for any such
commitments that were made in the ordinary course of business, consistent with
past practices. Correct and complete copies of all of the Material Company
Contracts so listed in SCHEDULE 5.12 have been furnished to Buyer. To the
knowledge of the Sellers, each of the Material Company Contracts is a valid and
binding obligation of the Company and is enforceable in accordance with its
terms, except as may be affected by bankruptcy, insolvency, moratorium or
similar laws affecting creditors' rights generally and general principles of
equity relating to the availability of equitable remedies. Except as otherwise
set forth in SCHEDULE 5.12, (i) there are no outstanding unresolved defaults by
the Company under, or to the knowledge of the Sellers any such defaults, or
claims of default, by the other party or parties to, any of the Material Company
Contracts which, individually or in the aggregate, have had or are expected to
have a Material Adverse Effect on the Company, and (ii) to the knowledge of the
Sellers there are no facts or conditions that have occurred which, with the
passage of time or the giving of notice, or both, would constitute a default by
the Company or the other party or parties to any such Contract under any of such
Contracts that is expected to have a Material Adverse Effect on the Company.
Except as set forth on SCHEDULE 5.4 or SCHEDULE 5.12, no consent or approval of
any party to any of the Material Company Contracts is necessary in order to
permit the Sellers to consummate the transactions contemplated hereby and to
allow Buyer to acquire the Shares, without thereby violating any such Material
Company Contracts.
5.13 COMPLIANCE WITH LAW/PERMITS. Except as set forth in SCHEDULE 5.13
hereto, to the knowledge of the Sellers (i) the Company is not in violation or
in default of any law, rule, regulation, order, judgment, writ or decree
applicable to the Company or by which it or any of its material properties is
bound or affected, except for any such violations or defaults which have not had
and are not expected to have a Material Adverse Effect on the Company, and (ii)
the Company holds all permits, licenses, easements, variances, exemptions,
consents, certificates, orders and approvals from governmental authorities which
are material to the operation of the business of the Company as it is now being
conducted (collectively, the "licenses and permits"). The Company is in
compliance with the terms of the licenses and permits, except where the failure
to so comply has not had and is not expected to have a Material Adverse Effect
on the Company.
5.14 EMPLOYEES; LABOR AND EMPLOYMENT AGREEMENTS; BENEFIT PLANS.
(a) SCHEDULE 5.14 sets forth the name of each director and officer of
the Company, and of each employee of and consultant to the Company whose
annual cash compensation exceeds $60,000 per year, sets forth the annual
compensation paid to each Seller which is reflected as an expense on the
financial statements whether or not such amount exceeds $60,000, and
identifies those officers or employees which the Company employs and any
independent contractor that the Company has retained under an employment or
similar agreement or with which it has any severance agreement. Copies of
any such agreements and a copy of its employee handbook have been furnished
to Buyer.
(b) Except as set forth in SCHEDULE 5.14, (i) the Company is not a
party to or otherwise bound by or subject to any collective bargaining or
other labor, employment, deferred compensation, bonus, retainer,
consulting, or incentive agreement, plan or contract, (ii) there has been
no
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strike or other work stoppage by, nor, to the knowledge of any of the Sellers,
has there been any union organizing activity among any of the employees of the
Company during the past three (3) years. Except as set forth in SCHEDULE 5.14,
to the knowledge of the Sellers, (i) the Company is in compliance with all
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, except where any noncompliance has
not had and is not expected to have a Material Adverse Effect on the Company,
and (ii) there is no unfair labor practice complaint pending or threatened
against the Company.
(c) SCHEDULE 5.14 hereto also contains a complete list of the Employee
Plans of the Company or any subsidiary thereof (correct copies of which
have been delivered to Buyer). For purposes of this Section 5.14, the term
"Employee Plan" means all plans and programs (including all amendments to
and components of the same, such as a trust with respect to a plan)
providing any remuneration or benefits, other than current cash
compensation, to any current or former employee of the Company or any
subsidiary thereof, or to any other person who provides, or during the past
three years provided, services to the Company, or any subsidiary thereof,
whether or not such plan or plans or programs are subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or are
qualified under the Internal Revenue Code of 1986, as amended (the "Code").
The term Employee Plan includes (i) any employee benefit plan as defined in
Section 3(3) of ERISA; (ii) any pension, retirement, profit sharing,
incentive compensation, stock option, stock bonus, and nonqualified
deferred compensation plan; (iii) any multiemployer plan as defined in
Section 3(37) of ERISA; and (iv) any disability, medical, dental, worker's
compensation, or health or life insurance plan or vacation program. Any and
all tax returns, reports, forms or other documents required to be filed by
the Company under applicable federal, state or local law with respect to
any of the Employee Plans listed on SCHEDULE 5.14 have been timely filed
and are correct and complete in all material respects; and any and all
amounts due by the Company to any governmental agency or entity with
respect to any of the Employee Plans have been timely and fully paid. To
the Seller's knowledge, there have been no filings with respect to any
Employee Plan with the Pension Benefit Guaranty Corporation ("PBGC") and,
to the knowledge of the Sellers, no liability to the PBGC has been incurred
or is expected with respect to any Employee Plan except for any accrued
insurance premiums which either have been or will be timely paid by the
Company.
(d) Except as set forth in SCHEDULE 5.14, all Employee Plans were
established and are being maintained and operated in compliance, in all
material respects, with applicable laws (including, but not limited to,
ERISA and the Code) and all regulations and interpretations thereunder and
in accordance with their plan documents, except for any noncompliance that
has not had and is not expected to have a Material Adverse Effect on the
Company. Each funded Employee Plan, if any, providing for payment of
deferred compensation has been and is qualified under Section 401 of the
Code and the Internal Revenue Service has issued one or more determination
letters with respect thereto stating that such funded Employee Plan has
been and is qualified under Section 401 of the Code and each trust
maintained in connection with each such funded Employee Plan has been and
is exempt under Section 501 of the Code. Except as set forth in SCHEDULE
5.14, there is no unfunded liability for vested or nonvested benefits under
any funded Employee Plan, and all contributions required to be made to each
such funded Employee Plan have been fully and timely paid. There has been
(i) no event or condition which would constitute a "reportable event"
within the meaning of Section 404(3) of ERISA and the regulations and
interpretations thereunder, (ii) no prohibited transaction as described in
Section 406 of ERISA and Section 4975 of the Code with respect to any
Employee Plan, and (iii) no written complaints to or by any government
entity have been filed or to the knowledge of the Sellers have been overtly
threatened with respect to any Employee Plan. Neither the Company nor any
Employee Plan has any material liability to any plan participant,
beneficiary or other person under any provision of ERISA, the Code or any
other applicable law other than the obligation to make contributions which
are not yet due and payable. To the knowledge of any of the Sellers, there
is no
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contract, agreement or benefit arrangement covering any employee of the Company
which individually or collectively would constitute an "excess parachute
payment" under Section 280G of the Code.
5.15 LITIGATION AND PROCEEDINGS. Except as set forth in SCHEDULE 5.15
hereto, there are no claims, actions, suits, proceedings or investigations
pending or, to the knowledge of the Sellers, overtly threatened against the
Company before any court, arbitrator or administrative, governmental or
regulatory authority or body, domestic or foreign, that, if adversely determined
against the Company, would be expected to have a Material Adverse Effect.
5.16 ENVIRONMENTAL AND SAFETY MATTERS. To the knowledge of the Sellers,
except as set forth on SCHEDULE 5.16, and, except for any instances of
noncompliance or any violations which have not had and are not expected to have
a Material Adverse Effect on the Company, (i) the Company is in compliance, in
all material respects, with all federal, state, local and regional statutes,
laws, ordinances, rules, regulations and orders relating to the protection of
human health and safety, natural resources or the environment, including, but
not limited to, air pollution, water pollution, noise control, on-site or
off-site hazardous substance discharge, disposal or recovery, toxic or hazardous
substances, training, information and warning provisions relating to toxic or
hazardous substances, and employee safety (collectively the "Environmental
Laws"), and (ii) no notice of violation of any Environmental Laws or of any
permit, license or other authorization relating thereto has been received, nor
is any such notice pending or threatened. To the knowledge of the Sellers, none
of the Company's real properties, whether owned or leased, is currently listed,
or threatened to be listed, on any state or federal "superfund" list. For the
purposes of this Section 5.16, "toxic or hazardous substances" shall include any
material, substance or waste that, because of its quantity, concentration or
physical or chemical characteristics, is deemed under any federal, state, local
or regional statute, law, ordinance, regulation or order, or by any governmental
agency pursuant thereto, to pose a present or potential hazard to human health
or safety or the environment, including, but not limited to, (i) any material,
waste or substance which is defined as a "hazardous substance" pursuant to the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980
(42 U.S.C. ss. 9601 ET SEQ.), as amended ("CERCLA"), and its related state and
local counterparts, (ii) asbestos and asbestos containing materials and
polychlorinated biphenyls, and (iii) any petroleum hydrocarbon including oil,
gasoline (refined and unrefined) and their respective constituents and any
wastes associated with the exploration, development or production of crude oil,
natural gas or geothermal energy.
5.17 ILLEGAL OR IMPROPER PAYMENTS. To the knowledge of the Sellers, during
the past three (3) years neither the Company, any subsidiary of the Company nor
any of the directors, officers or employees of the Company have, in connection
with the operation of the Company's business, (i) made any illegal political
contribution from Company assets, (ii) been involved in the disbursement or
receipt of corporate funds in violation of law, for the purpose of influencing
the decision of any governmental or private official in any illegal or improper
manner, (iii) made or received payments to or from government officials,
employees or agents for purposes other than the satisfaction of lawful
obligations, or (iv) been involved in the willful inaccurate recording of
payments and receipts on the books of the Company which would result in a
violation of law, except for any instance thereof that has not had and is not
expected to have a Material Adverse Effect on the Company.
5.18 RELATED PARTY TRANSACTIONS. Except as set forth in SCHEDULE 5.18,
there are no existing or pending transactions, nor are there any agreements or
understandings, between the Company and any of the Sellers, or between the
Company and any of its officers, directors, or employees, including any
transactions or agreement relating to (i) the purchase from or sale to the
Company of any goods or services, (ii) the sale, lease, licensing or use of any
of the assets of or by the Company, with or without adequate compensation, or
(iii) any borrowings from or loans to the Company, where the amounts involved in
any such transaction or under such agreement exceed $60,000, individually.
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5.19 TAXES AND TAX RETURNS.
(a) Except as set forth on SCHEDULE 5.19 and except where any of the
following has not had and is not expected to have a Material Adverse Effect
on the Company: (i) the Company has duly filed all Tax Returns (as
hereinafter defined) which are required by law to be filed by it and has
duly and properly paid, or withheld or accrued (on the Company's financial
statements) for payment, when due, all foreign, federal, state and local
Taxes (as hereinafter defined) due or claimed to be due from the Company as
reflected on such Tax Returns, (ii) there are no assessments or claims for
payment of such Taxes which have not been paid or accrued for on the
Company's books and records, (iii) there is no foreign, federal or state
tax audit of the Company now pending or threatened by any taxing authority,
(iv) the Company is not currently the beneficiary of any extension of time
within which to file any Tax Return, and (v) the Company has properly
withheld and paid, or accrued for payment, when due, to appropriate state
and/or federal authorities, all sales and use taxes, if any, and all
amounts required to be withheld from payments made to its employees, and
also has paid all employment taxes as required under applicable laws. A
correct and complete copy of all income tax returns filed by the Company
relating to any of the preceding three calendar years have been furnished
to Buyer.
(b) Except as set forth in SCHEDULE 5.19, the Company has not (i)
waived any statute of limitation in respect of any Taxes assessed by any
federal, state, or local taxing authority or agreed to any extension of
time with respect to an assessment of or deficiency in any Tax, (ii) filed
a consent under Section 341(f) of the Code, concerning collapsible
corporations, and (iii) been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(c) Except as set forth in SCHEDULE 5.19, the Company (i) is not
required to file a consolidated or combined state or federal income Tax
Return with any other person or entity and (ii) is not liable for the Taxes
of any person under Treasury Regulation ss. 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or successor,
by contract or otherwise, and (iii) the Company is not a party to any tax
allocation or tax sharing agreement.
(d) For purposes of this Agreement, (i) the term "Tax" or "Taxes"
means any federal, state or local income, gross receipts, license, payroll,
employment, excise, severance, stamp, occupation, premium, windfall
profits, environmental (including taxes under Code Section 59A), customs
duties, capital stock, franchise, profits, withholding, social security,
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not; and the term "Tax
Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule
or attachment thereto, and including any amendment thereof.
5.20 INSURANCE. SCHEDULE 5.20 contains a listing of all policies of fire,
general liability, worker's compensation, errors and omissions, malpractice and
other types of insurance maintained by or on behalf of the Company, to provide
insurance protection for the assets and business of the Company. Except as set
forth in SCHEDULE 5.20 hereto, all of such policies are now in full force and
effect and those policies or other policies covering the same risks and in
substantially the same amounts have been in full force and effect continuously
for the past three (3) years. The Company has not received any notice of
cancellation or material amendment of any such policies; and, to the knowledge
of the Sellers, all material claims thereunder have been filed in a timely
fashion.
5.21 BANK ACCOUNTS; POWERS OF ATTORNEY. SCHEDULE 5.21 sets forth a true and
complete listing, as of the date hereof, of the name and addresses of each bank
or other institution in which the Company has an account or safe deposit box,
the account numbers thereof, and the names of all persons
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authorized to draw thereon or to have access thereto, and the names of all
persons, if any, who hold any powers of attorney for or granted by the Company.
5.22 NO BROKER. Except as set forth in SCHEDULE 5.22, neither the Company
nor any of the Sellers has retained an agent, finder or broker in connection
with the transactions contemplated by this Agreement. The Sellers shall
indemnify, hold harmless and defend Buyer and the Company from all commissions,
finder's and other fees and expenses of any such persons.
5.23 DISCLOSURE. To the knowledge of the Sellers, their representations and
warranties contained in this Section 5, as modified by the Disclosure Schedules
attached hereto, do not contain any statement of a material fact that was untrue
when made or omit any material fact necessary to make the statements contained
therein not misleading in light of the circumstances under which such statements
were made. For purposes of this Section 5, the phrases "knowledge" or "best
knowledge" of any Seller or the Sellers, means such Seller's or the Sellers'
actual knowledge. Although each of the Sellers' Disclosure Schedules is intended
to qualify or modify the representations and warranties of the Sellers contained
in the Subsection of this Section 5 that corresponds, by number, to the number
used to designate such Disclosure Schedule, the disclosures therein shall also
qualify or modify any representation or warranty in any other Subsection of this
Section 5 to which it may also relate and, therefore, any information in any
such Disclosure Schedule need not be repeated in any other Disclosure Schedule,
in order to qualify any of the representations or warranties to which such other
Disclosure Schedule relates.
6. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer makes the following
representations and warranties as of the date of this Agreement and, again, as
of the Closing Date:
6.1 ORGANIZATION. Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware.
6.2 CORPORATE POWER. Buyer possesses the requisite corporate power and
authority to enter into and perform its obligations under this Agreement, the
Non-Competition Agreements, the Security Agreement and the Notes.
6.3 NECESSARY ACTIONS; BINDING EFFECT. Buyer has taken all corporate action
necessary to authorize the execution and delivery of, and the performance of its
obligations under, this Agreement, the Notes, the Security Agreements and the
Non-Competition Agreements. This Agreement constitutes, and upon their execution
and delivery by Buyer on the Closing Date, the Notes, the Security Agreements
and the Non-Competition Agreements, will each constitute, valid obligations of
Buyer that are legally binding on and enforceable against Buyer in accordance
with their respective terms, except as such enforceability may be limited by (i)
bankruptcy, insolvency, moratorium or other similar laws affecting creditors'
rights and (ii) general principles of equity relating to the availability of
equitable remedies (regardless of whether such Agreements or Notes are sought to
be enforced in a proceeding at law or in equity).
6.4 NO CONFLICTS. Neither the execution and delivery nor the performance of
this Agreement, the Notes, the Security Agreements or the Non-Competition
Agreements by Buyer will result in any of the following: (i) a default or an
event that, with notice or lapse of time, or both, would constitute a default,
breach or violation of the Certificate of Incorporation or Bylaws of Buyer, or
any contract, lease, license, franchise, promissory note, indenture, mortgage,
deed of trust, security or pledge agreement, or other agreement to which Buyer
is a party and which is material to Buyer (a "Material Buyer Contract"); (ii)
the termination of any Material Buyer Contract or the acceleration of the
maturity of any material indebtedness of Buyer; or (iii) a violation or breach
of any writ, injunction or decree of any court or governmental instrumentality
to which the Buyer is a party or by which any of its properties is bound or any
laws or regulations applicable to Buyer, where the violation would have a
material adverse effect on Buyer.
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6.5 INVESTMENT INTENT. Buyer is acquiring the Shares from the Sellers for
its own account for investment and not with a view to the sale or distribution
thereof.
6.6 BROKER. Buyer has not retained any broker, agent or finder in
connection with the transactions contemplated by this Agreement, and Buyer shall
hold harmless the Sellers from any commission, fee or expenses payable to any
such broker, finder or agent by reason of his or her retention by Buyer.
6.7 BUYER'S SECURITIES EXCHANGE ACT REPORTS AND FINANCIAL INFORMATION.
Buyer has furnished to the Sellers true and complete copies of its Annual Report
on Form 10K for its fiscal year ended December 31, 1996 (the "Annual Report")
and its quarterly report on Form 10Q for the quarter ended March 31, 1997 (the
"Quarterly Report"), as filed by Buyer with the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended (the "1934
Act"). The consolidated financial statements of Buyer contained in its Annual
Report and the consolidated financial statements of Buyer contained in its
Quarterly Report were prepared on an accrual basis in accordance with GAAP and
fairly present the consolidated financial condition of Buyer as of, and the
consolidated results of operations of Buyer for the year and three months ended,
December 31, 1996 and March 31, 1997, respectively; neither the Annual Report
nor the Quarterly Report of Buyer contains any statement of a material fact that
was untrue when made or omits any material fact necessary to make the statements
contained therein, in light of the circumstances under which such statements
were made not misleading; and nothing has occurred since March 31, 1997 that has
had or is reasonably expected to have a material adverse effect on the financial
condition or results of future operations of Buyer or has impaired or reasonably
could be expected to impair Buyer's ability to perform its obligations under
this Agreement, the Notes or the Security Agreements.
6.8 RESULTS OF DUE DILIGENCE REVIEW. Except as otherwise set forth in
writing delivered to Sellers prior to the execution hereof, nothing has come to
the attention of Buyer as a result of its due diligence investigation of the
Company, or otherwise, that has caused or causes it to believe that any of the
representations or warranties of the Sellers contained herein, or any of the
information contained in the Sellers' Disclosure Schedules attached hereto, is
not materially accurate or is not materially complete.
6.9 REPRESENTATIONS AND WARRANTIES. Each representation, warranty or
statement made, or information provided, by Buyer in this Agreement, or in the
Exhibits or Schedules hereto, or in any certificates to be delivered by Buyer at
the Closing is, or when made shall be, true, complete and correct in all
material respects.
7. CONDUCT OF BUSINESS PENDING THE CLOSING. Between the date hereof and the
Closing, and except as otherwise consented to by Buyer in writing, or permitted
pursuant to Section 8 below, the Sellers jointly covenant, as follows:
7.1 ACCESS. Subject to the provisions of Section 14 below, the Sellers
shall cause the Company to give to Buyer and its representatives, from and after
the date of execution of this Agreement, on prior request therefor from Buyer or
such representatives, such access to the premises, employees, agents and
consultants of the Company, and such copies of the Company's financial
statements, books and records, and contracts and leases and other documentation,
so as to enable Buyer to inspect and evaluate all aspects of the business and
operations, assets, operating results, financial condition, capitalization,
ownership, and legal affairs of the Company. Buyer agrees to conduct its review,
and to cause its representatives to conduct their review, in a manner designed
to minimize any disruption of the operations of the Company. In addition,
subject to the provisions of Section 14 below, Sellers shall (i) arrange for
Company to permit the Buyer's independent public accountants to obtain access to
the financial books and records of the Company, and to such other documentation
which such accountants may reasonably request and the Company can obtain without
unreasonable expense and effort, in connection with an audit, to be
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conducted by such accountants, of the Company's Financial Statements to enable
Buyer to satisfy its financial reporting obligations under the Securities
Exchange Act of 1934 that will arise upon consummation of the acquisition by
Buyer of the Shares pursuant hereto (the "Company Audit"), and (ii) use their
reasonable efforts to arrange for the Company's independent public accountants
to provide such assistance as Buyer's accountants may reasonably request in
connection with the Company Audit.
7.2 CONDUCT OF COMPANY'S BUSINESS. From the date of this Agreement and
until the Closing or termination of this Agreement, whichever first occurs, the
Sellers shall cause the Company to operate and conduct its business diligently
and only in the ordinary course, consistent with past practices. In furtherance
thereof, unless Buyer's prior consent to do otherwise is obtained (which consent
shall not be unreasonably withheld or delayed), Sellers shall cause the Company
to:
7.2.1 ORGANIZATION. Use its best efforts to preserve intact its
organization and use its reasonable efforts to retain all of its employees
and the services of all vendors, suppliers, agents and consultants to the
Company, commensurate with the requirements of the Company's business;
7.2.2 INSURANCE. Maintain insurance, including liability and errors
and omissions insurance, consistent with past practices and, unless
comparable insurance is substituted therefor or is not generally available
to businesses of the type conducted by the Company, not take any action to
terminate or modify, or permit the lapse or termination of, the present
insurance policies and coverages of the Company as set forth in SCHEDULE
5.20 hereto;
7.2.3 LAWSUITS, CLAIMS.
(a) Promptly notify Buyer of any lawsuit or other legal proceeding
that is commenced, or that is threatened in writing, against the Company
and that (i) relates to or arises out of the Company's business or
operations and, if adversely determined against the Company, would be
expected to have a Material Adverse Effect on the Company, or (ii) relates
to any of the Shares or any of the transactions contemplated by this
Agreement; and
(b) Not settle any action or proceeding on terms that are expected to
have a Material Adverse Effect on the Company, and not release, settle,
compromise or relinquish any claims, causes of action or rights involving
more than $25,000 individually or $50,000 in the aggregate which the
Company may have against any other persons, including, without limitation,
claims or rights to reimbursement or payment for services rendered by the
Company;
7.2.4 CERTAIN CHANGES. Not encumber or place any liens or security
interests on any of its material properties, other than (i) liens or
security interests in existence on the date hereof, (ii) statutory liens to
secure taxes that are not yet due and payable, and (iii) purchase money
security interests in connection with the acquisition of equipment that may
be acquired in the ordinary course of the Company's business and in
conformity with Paragraph 7.2.6(b) hereof;
7.2.5 CONDITION OF ASSETS. Maintain in good working order and
condition, ordinary wear and tear excepted, the tangible assets that are
used, leased or owned by it and maintain all helicopters and rotable
equipment thereon in an air-worthy and good flying condition, in accordance
with the maintenance requirements of (i) the FAA and (ii) the manufacturers
of such helicopters or such components or equipment (as the case may be)
and free of rental parts.
7.2.6 AGREEMENTS.
(a) Use its best efforts to observe and perform all of its obligations
in the Material Company Contracts, the violation of which would have a
Material Adverse Effect on the Company;
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(b) Except as required by any existing contracts or agreements, not
enter into any new agreement that would constitute a Material Company
Contract or amend any Material Company Contract, or incur any new monetary
obligation involving more than $25,000 individually or $50,000 in the
aggregate, other than monetary obligations that are incurred in the
ordinary course consistent with past practices;
(c) Promptly notify Buyer in writing of the occurrence of any breach
or default of any Material Company Contract; and
(d) Not enter into any transaction with any shareholder, director or
officer, or any person or entity related to or affiliated with any such
person, other than those transactions that are described on SCHEDULE 5.18
hereto;
7.2.7 CONSENTS; COMPLIANCE WITH LAWS.
(a) Use its best reasonable efforts to obtain and maintain all
consents, assignments or approvals of, and licenses, permits and franchises
and rights to operate granted by, governmental authorities, the absence or
loss of which is expected to have a Material Adverse Effect on the Company;
(b) Not take any action which would be expected to result in a
violation of or in noncompliance with any laws or regulations applicable to
the Company that would be expected to have a Material Adverse Effect on the
Company; and
(c) Cooperate with Buyer and render to Buyer such assistance as Buyer
may reasonably request, at Buyer's sole expense, in obtaining such
governmental approvals;
7.2.8 TAXES. Pay, when due, and prior to the imposition or assessment
of any interest, penalties or liens by reason of the nonpayment of, all
Taxes (as defined in Section 5.19 hereof) due or assessed against it,
except for any Taxes being contested in good faith and for which reserves
have been established by the Company.
7.2.9 DIVIDENDS, ETC. Not:
(a) Declare or pay any dividends or make any distributions with
respect to or, redeem any of the Shares, except for dividends permitted by
the provisions of SCHEDULE 7.2 hereto ("Permitted Dividends");
(b) Approve or effect any reclassification or recapitalization of the
Company or the Company's authorized or outstanding shares;
(c) Approve or commence any proceedings for the liquidation of the
Company; and
(d) Enter into any agreement to do any of the foregoing.
7.2.10 CORPORATE MATTERS. Not:
(a) Amend the Articles of Incorporation or Bylaws of the Company;
(b) Alter the composition or membership of the Company's Board of
Directors;
(c) Authorize the creation or any new class or series of shares of
capital stock or sell or issue any authorized, but unissued shares of stock
or any other equity securities of the Company to any one other than Buyer;
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(d) Sell, grant or issue any Options or Convertible Securities or any
other rights to acquire any authorized but unissued shares of Stock or
other equity securities of the Company; or
(e) Agree to do any of the above.
8. OBLIGATIONS PENDING AND FOLLOWING THE CLOSING.
8.1 CONSENTS. Each party to this Agreement shall use its reasonable best
efforts to obtain or cause to be obtained at the earliest practicable date, and
in any event prior to Closing, all consents, approvals, if any, or confirmation
satisfactory to such party that any such consent or approval will be issued
simultaneously with, or immediately after, the Closing, which such party
requires to permit it to consummate the transactions contemplated hereby without
violating any material agreement or contract or applicable law or regulation to
which it is a party or to which it is subject. The parties hereto shall
cooperate with each other in their efforts to obtain all such consents,
approvals and licenses.
8.2 FURTHER ASSURANCES. Each party hereto shall execute and deliver, both
before and after the Closing, such instruments and take such other actions as
the other party or parties, as the case may be, may reasonably request in order
to carry out the intent of this Agreement or to better evidence or effectuate
the transactions contemplated herein.
8.3 NOTICE OF BREACH OR OF FAILURE OF CONDITIONS. Each party to this
Agreement will immediately give notice to the other parties of the occurrence of
any event, or the failure of any event to occur, that results in a breach of any
representation or warranty of such party or a failure to comply with or fulfill
any covenant, condition or agreement contained herein.
8.4 EXPENSES. Sellers shall pay all costs and expenses incurred or to be
incurred by any of the Sellers in connection with the negotiation, preparation,
execution and delivery of, and the performance of their respective obligations
under, this Agreement and in closing and carrying out the transactions
contemplated by this Agreement, including the costs of preparing income tax
returns of the Company for the period from January 1, 1997 to the Closing Date
(the "Short-Period Returns"). Buyer shall pay all of the costs and expenses
incurred by it in connection with the negotiation, preparation, execution and
delivery of, and the performance of its obligations under, this Agreement and in
closing and carrying out the transactions contemplated by this Agreement,
including (i) the fees and disbursements of the Buyer's accountants incurred in
connection with the completion of the Company Audit or the determination of the
Purchase Price Adjustments, and (ii) the reasonable fees and disbursements of
the Company's accountants in providing any services or assistance requested of
them by the Buyer's accountants in connection with or for purposes of that Audit
or the determination of the Purchase Price Adjustments.
8.5 RELEASE OF SELLER OBLIGATIONS. At the time of Closing, Buyer shall
assume or discharge, without liability or cost to the Sellers, and shall obtain,
on terms and conditions approved by Sellers and their counsel, the release of
any obligations of Sellers with respect to and any guaranties by Sellers of any
of the Assumed Obligations, including the Textron Debt (as defined in SCHEDULE
8.5 hereto).
8.6 TRANSFER OF CASH TO SELLERS. As additional Purchase Price for the
Shares, at the Closing Buyer shall pay, by wire transfer of funds to each Seller
an amount equal to the Seller's Proportionate Share of all of the cash that the
Company has on hand or in banks on the Closing Date. For purposes hereof, cash
shall not include the short-term investments identified on SCHEDULE 8.6 hereto.
8.7 SETTLEMENT OF CERTAIN RELATED PARTY OBLIGATIONS.
(a) Except as otherwise provided in Section 8.7(b), effective as of
the Closing all accounts receivable or other items due to the Company from,
and all accounts payable or other items due by the Company to, the Sellers
or any entity controlled by the Sellers (other than HSI) shall be canceled
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and each of the Company, the Sellers and such other entities affiliated
with the Sellers shall be released from their respective obligations
thereunder.
(b) Notwithstanding Section 8.7(a), (i) on the Closing Date,
immediately following the Closing, Buyer shall pay to Sellers and, thereby
retire, the indebtedness owed by the Company to the Sellers for loans made
by Sellers to the Company as set forth in SCHEDULE 8.7 hereto (the "Seller
Loans") and (ii) the Real Property Lease listed in item 1(a) on SCHEDULE
5.9 hereto, and Mercy's present and future payment and other obligations
thereunder shall remain in full force and effect. On or before the Closing
Date, the Company shall pay any interest that has accrued and is unpaid on
the Shareholder Loans so that, as of the Closing Date the amounts owed in
respect of the Seller Loans shall not exceed the aggregate amount of such
Loans set forth in SCHEDULE 8.7 hereto. On the payment of such Seller
Loans, the right of Sellers to receive a prepayment penalty in connection
therewith, if any such right exists, shall be cancelled and no such payment
shall be required to be made either by Buyer or the Company.
8.8 EMPLOYMENT AND CONSULTING AGREEMENTS. At the Closing, Buyer shall enter
into (i) employment agreements, substantially in the forms of EXHIBIT C and
EXHIBIT D, respectively, (collectively, the "Management Employment Agreements")
with Mr. David L. Dolstein and Ms. Mary Davis, and (ii) consulting agreements,
each in substantially in the form of EXHIBIT E hereto, with each of the Sellers
other than Homer L. Aerts (the "Seller Consulting Agreements"), a consulting
agreement, substantially in the form of EXHIBIT F hereto, with Homer L. Aerts
(the "Aerts Agreement") and (iii) a stock option agreement, each substantially
in the form of EXHIBIT G hereto (the "Option Agreements"), with each of the
Sellers, evidencing the grant on the Closing Date, to the Sellers, by action of
the Buyer's Board of Directors or any Compensation or Stock Option Committee
thereof, of options entitling each Seller to purchase, in accordance with the
terms and conditions contained in such form of Option Agreement, the respective
number of shares of Buyer's common stock set forth opposite each Seller's name
on SCHEDULE 8.8 hereto.
8.9 ACCOUNTS RECEIVABLES. On the terms and conditions hereinafter set
forth, the Sellers shall guarantee Net Collections (as hereinafter defined),
during the three year period ending on the third (3rd) anniversary of the
Closing Date (the "Guarantee Period"), aggregating $3,100,000 of accounts
receivable of the Company, made up of Net Collections of:
(a) Accounts receivable outstanding on the Closing Date as set forth
in the Closing Date Balance Sheet of the Company, as defined in SCHEDULE
2.3 hereto (the "CLOSING DATE RECEIVABLES"), that are to be collected
during the two-year period from the Closing Date to the second (2nd)
anniversary thereof (the "RECEIVABLES COLLECTION PERIOD"), and
(b) Accounts receivable of the Company that were or will have been
written off by the Company prior to the Closing (the "WRITTEN-OFF
ACCOUNTS") to be collected at any time during the three-year Guarantee
Period.
For purposes hereof "NET COLLECTIONS" shall mean the gross amount of any
Closing Date Receivables or Written-Off Accounts that are collected, less any
commissions paid with the prior written approval of the Sellers to third-party
collection agencies whose services are employed in the collection of such
Closing Date Receivables or such Written-Off Accounts ("Collection Costs"). The
term "TOTAL GUARANTEE AMOUNT" means the sum of $3,100,000 and the term "ACCOUNTS
RECEIVABLE GUARANTEE" refers to the guarantee by the Sellers of the Total
Guarantee Amount on the terms and conditions contained in this Section 8.9.
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8.9.1 COLLECTION PERIOD GUARANTEE. Pursuant to the Accounts Receivable
Guarantee hereunder, during the two-year Receivables Collection Period,
each Seller shall severally guarantee, on the terms and conditions and in
the manner hereinafter set forth, that the Company will have Net
Collections either of Closing Date Receivables alone, or of a combination
of Closing Date Receivables and Written Off Accounts, aggregating
$2,700,000 (the "COLLECTION PERIOD GUARANTEE AMOUNT") out of the Total
Guarantee Amount of $3,100,000. Such guarantee of the Collection Period
Guarantee Amount is sometimes referred to herein as the "COLLECTION PERIOD
GUARANTEE."
(a) SATISFACTION OF COLLECTION PERIOD GUARANTEE BY COLLECTIONS. The
Collection Period Guarantee shall be satisfied, and the several obligation
of each Seller with respect thereto shall be deemed discharged if, at any
time during the Receivables Collection Period the Company has realized or
obtained Net Collections of any combination of Closing Date Receivables
and/or Written-Off Accounts in an aggregate amount equal to the Collection
Period Guarantee Amount.
(b) COLLECTION PERIOD SHORTFALL. In the event that, following the end
of the Receivables Collection Period, it is determined, in the manner set
forth in SCHEDULE 8.9 hereto, that the Collection Period Guarantee Amount
of $2,700,000 exceeds the aggregate amount of Net Collections of Closing
Date Receivables and Net Collections of Written-Off Accounts that were made
during the Receivables Collection Period, such excess shall constitute a
"COLLECTION PERIOD SHORTFALL." In that event each Seller's Collection
Period Guarantee shall be satisfied and discharged by reducing the then
remaining principal amount of such Seller's Note by his Proportionate Share
(as hereinabove defined) of the Collection Period Shortfall. Such reduction
in the principal amount of each Seller's Note shall be implemented in the
manner set forth in Subsection 8.9.3 hereof.
(c) ASSIGNMENT OF UNCOLLECTED CLOSING DATE RECEIVABLES. At, and
effective as of, the earlier of the following: (i) the second (2nd)
anniversary of the Closing Date or (ii) the earliest date as of which the
Accounts Receivable Guarantee is satisfied and discharged as provided in
Paragraph 8.9.2(a) or Paragraph 8.9.2(b), all of the then uncollected
Closing Date Receivables (the "Assigned Closing Date Receivables") shall be
assigned and transferred to Sellers, and Buyer shall cause the Company to
effectuate such assignment and transfer, effective as of such date pursuant
to Paragraph 8.9.3(b) hereof.
8.9.2 SATISFACTION OF THE ACCOUNTS RECEIVABLE GUARANTEE IN ITS
ENTIRETY.
(a) SATISFACTION OF ACCOUNTS RECEIVABLE GUARANTEE BY COLLECTIONS. If,
at any time during the Receivable Collections Period, the aggregate sum of
the Net Collections of Closing Date Receivables and Written-Off Accounts
reaches the Total Guarantee Amount of $3,100,000, the entire Accounts
Receivable Guarantee and the respective obligations of Sellers under this
Section 8.9 shall thereupon and thereby be fully satisfied and discharged
and the Sellers shall have no further obligations to Buyer under this
Section 8.9.
(b) SATISFACTION OF GUARANTEE DURING RECOVERIES PERIOD. In the event
that, at the end of the Receivables Collection Period, the Total Guarantee
Amount of $3,100,000 exceeds the aggregate amount of the Net Collections of
Closing Date Receivables and Written-off Accounts collected during the
Receivables Collection Period, plus any reduction in the principal amount
of the Notes pursuant to Paragraph 8.9.1(b) hereof, then, the amount of
such excess (the "GUARANTEE SHORTFALL") shall be reduced by the amount of
any Net Collections of Written-Off Accounts that are collected during the
year ending on the third (3rd) anniversary of the Closing Date (the
"RECOVERIES COLLECTION PERIOD"). If at any time during or by the end of the
Recoveries Collection Period, the amount of the Net Collections of
Written-Off Accounts equals the amount of the Guarantee Shortfall, then,
the Sellers Accounts Receivable Guarantee,
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in its entirety, and the Sellers' obligations under this Section 8.9, shall
thereupon and thereby be fully satisfied and discharged and Seller shall
have no further obligations to Buyer under this Section 8.9.
(c) RECOVERIES PERIOD SHORTFALL. If on the other hand, at the end of
the one-year Recoveries Collection Period, the Net Collections of
Written-Off Accounts during that one-year period were not sufficient to
offset fully the Guarantee Shortfall that existed at the beginning of the
Recoveries Collection Period, the Guarantee Shortfall then remaining, which
shall be equal to the amount by which the Guarantee Shortfall at the
beginning of the Recoveries Collection Period exceeds the aggregate amount
of Net Collections of Written-Off Accounts made during that Period (the
"REMAINING SHORTFALL"), shall be satisfied and discharged by reducing the
then remaining principal amount of each Seller's Note by his Proportionate
Share (as hereinabove defined) of such Remaining Shortfall.
(d) ASSIGNMENT OF ALL UNCOLLECTED RECEIVABLES. At, and effective as
of, the earliest date as of which the Accounts Receivable Guarantee is
satisfied and discharged as provided in Paragraph 8.9.2(a), Paragraph
8.9.2(b) or Paragraph 8.9.2(c), as the case may be, all of the then
uncollected (i) Closing Date Receivables (to the extent not previously
assigned to Sellers pursuant to Paragraph 8.9.1(c) above) and (ii)
Written-Off Accounts shall be assigned and transferred to Sellers, and
Buyer shall cause the Company to effectuate such assignment and transfer,
effective as of such date pursuant to Paragraph 8.9.3(b) hereof.
8.9.3 EFFECTUATION OF SATISFACTION OR DISCHARGE OF THE ACCOUNTS
RECEIVABLE GUARANTEE.
(a) EVIDENCE OF SATISFACTION AND DISCHARGE. If the Collection Period
Guarantee, or the Accounts Receivable Guarantee is satisfied and
discharged, in its entirety, as provided in Paragraphs 8.9.1(a) or 8.9.1(b)
or Paragraphs 8.9.2(a), 8.9.2(b) or 8.9.2(c) hereof, then, not later than
thirty (30) days thereafter or five (5) business days of any request
therefor made of Buyer by any of the Sellers, whichever is earlier, Buyer
shall execute and deliver to each Seller a document or instrument,
including a release, in form and substance satisfactory to such Seller and
his counsel, to evidence and confirm the satisfaction and discharge of the
Collection Period Guarantee or the Accounts Receivable Guarantee, as the
case may be; PROVIDED, HOWEVER that any such satisfaction and discharge
shall not be conditioned on the execution and delivery by Buyer of, and the
effectiveness thereof shall not be impaired by any failure of Buyer to
execute and deliver, any such instruments and documents.
(b) EFFECTUATION OF ASSIGNMENT OF UNCOLLECTED RECEIVABLES. At the
effective time of any such assignment by the Company of the Assigned
Closing Date Receivables or any of the uncollected Written-Off Accounts
(collectively, the "ASSIGNED RECEIVABLES") to Sellers, whether pursuant to
Paragraph 8.9.1(c) or Paragraph 8.9.2(d), Buyer shall transfer and convey
the Assigned Receivables, together with all records and other information
in the possession of Buyer or the Company relating thereto, to Sellers and
Sellers shall acquire and become the owner of the Assigned Receivables and
related records and other information, free and clear of all claims, liens
encumbrances, security interests and prior assignments and adverse
interests, other than such of the foregoing as were consented to by Sellers
in writing. Buyer also shall, and shall cause the Company to, provide such
cooperation as the Sellers may reasonably request to better evidence and
effectuate such assignment and transfer, including (i) obtaining the
termination of any claims, liens, encumbrances, security interests or other
adverse interests on or any prior assignments of any of the Assigned
Receivables, (ii) advising the account debtors, and joining with
Sellers in preparing, executing and sending written notices to such account
debtors instructing them to make payments on those Assigned Receivables to
the Sellers and arranging to send any payments that may be received by the
Company or Buyer in respect thereof, immediately after such receipt and
with proper endorsements thereon, to Sellers.
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(c) DISCHARGE OF SHORTFALL BY REDUCTION IN PRINCIPAL AMOUNT OF NOTES.
In the event any Receivables Collection Period or Guarantee Shortfall is to
be discharged by reductions in the respective principal amounts of the
Sellers' Notes pursuant to Paragraph 8.9.1(b) or Paragraph 8.9.2(c), such
reductions shall not be implemented until the existence and amount of any
such Shortfall are established, by agreement between the Sellers, on the
one hand, and the Buyer, on the other hand. At such time as a final
determination is reached with respect to the existence and amount of any
such Shortfall (the "DETERMINATION DATE"), each Seller shall deliver his
Note to Buyer in exchange for which the Buyer shall issue to such Seller a
new Note, of like form and tenor (a "Replacement Note"), except that such
Replacement Note shall give effect to the reduction, retroactive to the
last day of the Receivables Collection Period or the Recoveries Collection
Period, as the case may be, in the principal amount of each such Seller's
Note by the amount of his Proportionate Share of the Collection Period
Shortfall or the Guarantee Shortfall, as the case may be. Notwithstanding
any failure or refusal on the part of any Seller to deliver his Note for
exchange in this manner, however, such reduction in the principal amount of
his Note shall, nonetheless, be given effect automatically and without the
necessity of any action on the part of any Seller, at the Determination
Date (but then, retroactive to the last day of the Receivables Collection
Period or the Recoveries Collection Period, as the case may be).
(d) COLLECTION OF ASSIGNED RECEIVABLES. For a period of two (2) years
following the assignment by the Company of the Assigned Receivables to the
Sellers, the Company shall continue to collect the Assigned Receivables for
the benefit of the Sellers in accordance with the accounts receivable
collection procedures set forth in the Company's SOP and set forth in
Section 8.9.4 below. In consideration of the foregoing, the Sellers agree
to reimburse the Company for its reasonable out-of-pocket costs incurred in
connection with the collection by the Company of such Assigned Receivables,
including, without limitation, any out-of pocket expenses incurred in
connection with the use or employment of the services of any third-party
collection agencies; PROVIDED, HOWEVER, that the Sellers shall have sole
and absolute discretion as to whether the services of any third-party
collection agencies shall be employed, and the Company shall not use or
employ the services of any third-party collection agencies in connection
with the collection by the Company of any Assigned Receivables without the
prior written consent of the Sellers.
8.9.4 COLLECTION PROCEDURES AND REPORTS.
(a) COLLECTION EFFORTS AND PROCEDURES. Buyer shall cause the Company
to use its best efforts to collect the Closing Date Receivables during the
Receivables Collection Period and the Written Off Accounts during the
Guarantee Period in accordance with the accounts receivable collection
procedures set forth in the Company's Standard Operating Procedures Manual
(the "SOP"), a copy of which has been furnished to and reviewed by Buyer.
Buyer shall not authorize or permit the Company to make material changes to
or to fail, in any material respect to comply with the SOP during the
Guarantee Period with respect to the collection of the Closing Date
Receivables and Written Off Accounts and Buyer shall provide to the Company
such assistance as it may require in connection with such Receivables and
Accounts. Notwithstanding anything to the contrary contained in this
Agreement or in the SOP, Buyer agrees that without the prior written
consent of the Majority Holders (as defined below), which consent shall not
be unreasonably withheld, neither the Company nor the Buyer shall (i)
authorize or permit any collection agency or any other person or entity to
collect, or assign or otherwise transfer to any collection agency or any
other person or entity for purposes of collection, any of the Closing Date
Receivables or Written Off Accounts; (ii) initiate any legal, arbitration
or other proceeding to collect any Closing Date Receivables or Written Off
Accounts; (iii) return any sums in respect of any Closing Date Receivables
or Written Off Accounts collected from any insurers, third party
administrators or healthcare reimbursement programs (governmental or other)
("Third-Party Payors") in response to any claim or assertion that such sums
represent overpayments to or were not properly due the Company; (iv) accept
any partial or installment payments on or in respect of any Closing Date
Receivables or Written Off Accounts from any
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Third Party Payor or any other person or (v) compromise, settle or waive or
terminate the payment obligation of any person, entity or Third Party Payor
in respect of, or accept any consideration other than cash for the payment
of, any Closing Date Receivables or Written Off Accounts. For purposes of
this Section 8.9.4, "Majority Holders" shall mean Sellers holding more than
50% of the aggregate indebtedness then outstanding under the Notes.
Notwithstanding the foregoing, in the event that the Majority Holders have
not expressly refused or consented, in writing, to any request for consent
to take actions specified in subsections (iii) or (iv) above, within ten
(10) days from the date all Sellers received such request for consent, the
Sellers shall be deemed to have given their consent to take such actions.
(b) REPORTS. During the Receivables Collection Period, Buyer shall
deliver or cause to be delivered to each Seller a monthly report, by no
later than the 10th business day of each calendar month, identifying the
Closing Date Receivables and Written Off Accounts collected during the
prior calendar month; and during the final year of the Guarantee Period
Buyer shall deliver or cause to be delivered to each Seller a similar
monthly report, by the 10th business day of each calendar month,
identifying the Written Off Accounts collected during the immediately
preceding calendar month. Such reports shall also identify any Closing Date
Receivables which Buyer or the Company believes (i) would, under GAAP, be
required to be written down or written off, (ii) should be assigned or
transferred to a collection agency for collection or (iii) should be turned
over to an attorney for the initiation of legal action against the account
debtor. Sellers represent that information which is similar to the
information to be set forth in the foregoing reports, is currently
available from the Company. In addition, Buyer shall promptly notify the
Sellers in writing of any notice from any account debtor or Third Payor, or
any fiscal intermediary thereof, (i) asserting any counterclaim or defense
to its payment obligation to the Company, or (ii) denying any reimbursement
claim, or (iii) asserting that any overpayment was made or any refund is
due, in respect to any Closing Date Receivable or Written Off Account that
is due or was previously paid by such account debtor or Third Party Payor.
In no event shall Buyer or the Company be obligated hereunder to provide,
in any reports required to be delivered hereunder to the Sellers, any
information that is not currently available to the Sellers from the
Company, unless Buyer or the Company generates such information for either
of their respective businesses or such information can be obtained or
produced by Buyer or the Company without having to incur undue or
unreasonable burden or expense.
8.10 SECURITY FOR NOTES AND OTHER PAYMENT OBLIGATIONS. The Notes to be
issued to the Sellers as part of the Purchase Price pursuant to Section 2.2
hereof, and any other payment obligations of the Buyer to the Sellers
pursuant to the terms hereof (the "Secured Obligations") shall be secured
by a perfected security interest in the present and future accounts
receivable of the Company and all of the proceeds thereof (the
"Collateral"). Buyer agrees that, until the Secured Obligations have been
paid in full, there shall be no security interest, or other lien or
encumbrance, in the Collateral that is senior in priority to the Sellers'
security interest in the Collateral, except for a first security interest
now or hereafter held by a bank or other lender that secures up to, but not
to exceed, $700,000 of the indebtedness and other obligations under a
revolving line of credit for the Company (the "Credit Line"). Buyer further
agrees that, until the Secured Obligations, and any other indebtedness or
monetary obligations that the Company or Buyer may owe hereafter to any of
the Sellers are paid in full, (i) neither Buyer nor the Company shall place
or permit the existence of any other security interests or other liens or
encumbrances on any of the Collateral, unless the party being granted such
security interest or holding any such other lien or encumbrance (the
"Subsequent Lienholder") has agreed, in writing for the direct benefit of
the Sellers, that its security interest or other lien or encumbrance in the
Collateral is junior and subordinate to the security interest in the
Collateral granted to Sellers and the Subsequent Lienholder executes and
delivers such documents and instruments as any of the Sellers or their
counsel may reasonably request to evidence and effectuate such
subordination and (ii) Buyer shall not, and shall not permit the Company,
to alter or modify, in any material respect (except under circumstances
where such modifications or alterations are caused by events outside of the
control of the Company and Buyer), any business or operations of the
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Company in a manner that either would or does cause the amount of the
Company's outstanding accounts receivable at any time to decline by more
than twenty percent (20%) from the amounts that were outstanding during the
calendar year 1996 or materially adversely affect the collectibility of
such accounts receivable. Any breach of the foregoing provisions of this
Section 8.10 which is not cured within thirty (30) days from the date
Sellers notify the Buyer of such breach, shall constitute a breach of the
Notes and the Security Agreement and shall entitle the holders of the
Notes, or any of them, to accelerate the maturity date of the Notes and to
exercise the rights and remedies which they have, and each of them,
individually has, under the Note, the Security Agreement and applicable
Laws.
8.11 FINANCIAL INFORMATION. While any of the Notes remain outstanding,
Buyer shall deliver to the holders thereof all reports and proxy statements
filed by Buyer under the 1934 Act and all reports sent to security holders
of Buyer, at the same time as such reports are filed under the 1934 Act or
sent by Buyer to its security holders (as the case may be).
8.12 USE OF HELICOPTER IN HAWAII.
(a) An affiliate of Sellers (the "Hawaii Air Transport Affiliate") is
using a helicopter owned by the Company, Serial No. 47134 (the "Hawaii
helicopter"). In its place, the Company is using a helicopter that had been
used by the Hawaii Air Transport Affiliate, Serial No. 47135 (the "Leased
Helicopter") and is being leased from an unrelated third party under a
lease agreement listed as item 2(b) on Disclosure SCHEDULE 5.9 hereof (the
"Helicopter Lease"). Sellers agree that after the Closing Date they shall
comply, or cause to be complied with, at their expense, all terms of the
Helicopter Lease, and shall hold Buyer harmless from any expenses or
liability due or to become due under such Helicopter Lease and Buyer agrees
that it shall permit the Hawaii Air Transport Affiliate to continue
operating the Hawaii helicopter in such Affiliate's business in Hawaii,
under the Company's FAA License, for up to the remaining term of the
Helicopter Lease (which is scheduled to expire in December 1998). Buyer
agrees that the Sellers shall be entitled at any time prior to the
expiration of such Helicopter Lease, (i) to negotiate an early termination
of that Lease with the lessor, or (ii) in compliance with the Helicopter
Lease, to sublease that Helicopter or assign the Helicopter Lease to a
third party who is qualified under applicable law and agrees to operate it
under an FAA License other than the Company's, and in either such case, any
costs savings or other amounts received in respect or as a result of any
such early termination of or any sublease under or assignment of the
Helicopter Lease shall be for the sole account of the Sellers; PROVIDED,
HOWEVER, that Sellers agree that Buyer or the Company shall be furnished
with at least 60 days' prior written notice of the effective date of any
such early termination of, sublease under or assignment of such Helicopter
Lease. In the event of any such early termination of, sublease under, or
assignment of, the Helicopter Lease, or, if applicable, upon the expiration
of the Helicopter Lease, Sellers (at their expense) shall cause to be
returned to the Company, in Southern California, the Hawaii, in an air
worthy and good flying condition in accordance with Subsection 7.2.5
hereof.
(b) As of the Closing Date and again upon the termination of the
Helicopter Lease or the occurrence of such other event requiring return of
the Hawaii helicopter (the "Return Date"), the parties shall determine for
each of the Hawaii helicopter and the Leased Helicopter the cumulative
component dollar value of all engine and airframe components having a
mandatory retirement life or overhaul cycle as published by the respective
manufacturers of such helicopters. The cumulative component dollar value
shall be based on manufacturer cost of parts and estimated labor to comply
with mandatory retirements and overhauls for all parts and components in
the respective helicopters on the date of the determination. The cumulative
component dollar value of each helicopter as of the Return Date shall be
compared to the cumulative component dollar for the same helicopter as of
the Closing Date. If the cumulative component dollar value of the Hawaii
helicopter as of the Return Date is less than its cumulative component
dollar value as of the Closing Date, each Seller shall owe its
Proportionate Share of such difference to Buyer. If the cumulative
component dollar value of the Hawaii helicopter as the Return Date is
greater than its
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cumulative component dollar value as of the Closing Date, Buyer shall owe
such difference to Sellers. Similarly, if the cumulative component dollar
value of the Leased Helicopter as of the Return Date is less than its
cumulative component dollar value as of the Closing Date, Buyer shall owe
such difference to Sellers, and if the cumulative component dollar value of
the Leased Helicopter as of the Return Date is greater than its cumulative
component dollar value as of the Closing Date, Sellers shall owe such
difference to Buyer. The amount owed by the Sellers, on the one hand, and
the Buyer, on the other, pursuant to the foregoing provisions, shall be
netted against each other so that only the party owing the greater amount
actually needs to make a payment. All amounts due pursuant to this section
shall be paid within thirty (30) days of the Return Date. Failure of any
Seller to pay his Proportionate Share of any amounts due hereunder shall
entitle Air Methods to reduce the outstanding balance on such Seller's Note
in addition to any other remedies which may be available. If the Buyer
fails to pay any amounts due hereunder, the delinquent sum shall bear
interest, until it is paid, at a rate of 9% per annum.
8.13 ACCOUNTS RECEIVABLE BILLING AND COLLECTION SERVICES. The Company
currently provides customer billing and accounts receivable collection services
for the Sellers' Hawaii Air Transport Affiliate and another affiliate of Sellers
that operates a ground medical transportation business in Hawaii (collectively,
the "Hawaii Affiliates"). The Buyer agrees to cause the Company, for a term of
at least three (3) years following the Closing, to continue providing those same
services, utilizing substantially the same resources and procedures that are
currently being utilized, to provide substantially the same billing and accounts
receivable collection services to the Hawaii Affiliates. As consideration for
such services, Sellers agree to cause such Hawaii Affiliates to pay to the
Company, on a monthly basis, the incremental labor costs (including benefits and
taxes) and reasonable out-of-pocket costs incurred by the Company in providing
such services to the Hawaii Affiliates. Buyer agrees that (i) any collections of
accounts receivable of the Hawaii Affiliates received by the Company or Buyer
shall be immediately remitted to such entities and shall not be commingled with
any funds of the Company or Buyer and (ii) no accounts receivable of the Hawaii
Affiliates shall be turned over to any outside collection agency or service, nor
shall any legal proceedings to collect delinquent accounts of any of the Hawaii
Affiliates be initiated by the Company, without the prior written approval of
Sellers. The services to be provided pursuant hereto shall include the
preparation and furnishing to such Hawaii Affiliates of billing, accounts
receivable and collection reports comparable to those currently being furnished
by the Company to the Hawaii Affiliates. The Sellers may terminate this service
arrangement at any time prior to the end of its three (3) year term on thirty
(30) days prior written notice to Buyer or the Company.
9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER. The obligations of Buyer to
consummate the purchase of the Shares and to perform its other obligations under
this Agreement shall be subject to the fulfillment, or waiver by Buyer, at or
prior to the Closing Date of each of the following conditions:
9.1 REPRESENTATIONS AND WARRANTIES. The respective representations and
warranties made by each of the Sellers in this Agreement or in their Disclosure
Schedules hereto shall have been true and correct on the date hereof, and also
shall be true and correct at and as of the Closing Date with the same force and
effect as if made again at and as of that time, except for any breach of any
such representations or warranties that has not had and is not expected to have
a Material Adverse Effect on the Company.
9.2 ABSENCE OF MATERIAL LITIGATION. There shall be (i) no pending or
overtly threatened litigation (other than litigation which is determined by the
parties in good faith, after consulting their respective attorneys, to be
without legal or factual substance or merit), whether brought against the
Company, Buyer, or any of the Sellers, that seeks to enjoin the consummation of
any of the transactions contemplated by this Agreement, (ii) no order that has
been issued by any court or governmental agency having jurisdiction that
restrains or prohibits the consummation of the purchase and sale of the Shares
hereunder and no proceedings pending which are reasonably likely to result in
the issuance of such an
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order; and (iii) no pending or overtly threatened litigation, which has had or
is expected to have a Material Adverse Effect on the Company, other than as
disclosed in any of the Sellers' Disclosure Schedules.
9.3 PERFORMANCE OF OBLIGATIONS. The Sellers shall have performed and
complied, in all material respects, with all of their respective covenants
required by this Agreement to have been performed at or prior to the Closing,
except where any failure to have so performed or to have so complied has not had
and is not expected to have a Material Adverse Effect on the ability of the
parties to consummate the transactions contemplated hereby or on the Company.
9.4 NO MATERIAL ADVERSE CHANGES. Since December 31, 1996, there shall not
have been any change in or other event affecting the business or the condition
(financial or other) or operating results of the Company that has had or is
expected to have a Material Adverse Effect on the Company, other than any
disclosed in the Seller's Disclosure Schedules.
9.5 THIRD PARTY APPROVALS AND CONSENTS. Receipt of all approvals and
consents of third parties (governmental or other) needed to have been obtained
by the Closing Date to enable Buyer to consummate the transactions contemplated
in this Agreement and not thereby violate any contracts, writs, orders, laws or
regulations the violation of which would have a Material Adverse Effect on Buyer
or on the Company.
9.6 CONSUMMATION OF PURCHASE AND SALE OF HSI ASSETS. The transactions
contemplated by the HSI Purchase Agreement shall have been consummated
concurrently with the Closing of the transactions contemplated by this
Agreement.
9.7 CONFIRMATION FROM BUYER'S ACCOUNTANTS. Receipt by Buyer of confirmation
from its independent public accountants that such accountants believe that they
can complete the Company Audit in order to enable Buyer to meet its financial
reporting responsibilities with respect to the purchase hereunder of the Shares
pursuant to the Securities Exchange Act of 1934, provided that Buyer has made a
good faith and diligent effort to obtain such confirmation by the date hereof.
9.8 CERTIFICATES. Receipt of a certificate executed by each Seller, dated
as of the Closing Date and reasonably satisfactory in form and substance to
Buyer, certifying that (i) each of the representations and warranties of such
Seller contained herein was true and correct in all material respects when made
and is true and correct in all material respects on and as of the Closing Date
with the same force and effect as if such representations and warranties had
been made on the Closing Date, (ii) such Seller has performed and complied in
all material respects with all his respective covenants required to have been
performed or complied with by him pursuant hereto on or prior to the Closing
Date, except as may have been waived in writing by Buyer or where the failure to
have so complied has not had and is not expected to have a Material Adverse
Effect on the ability of the parties to consummate the purchase and sale of the
Shares or on the Company, and (iii) all of the conditions precedent to Buyer's
obligations the satisfaction of which was the responsibility of such Seller have
been satisfied, except to the extent waived by Buyer.
9.9 LEGAL OPINION AND ADDITIONAL INSTRUMENTS. Sellers shall have arranged
for and caused (i) the delivery of a legal opinion, substantially in the form of
EXHIBIT H hereto, of Stradling, Yocca, Carlson & Rauth, a Professional
Corporation, special counsel to Sellers, to Buyer and (ii) the Company to have
delivered to Buyer a good standing certificate, dated as of a date that is not
more than 10 days prior to the Closing Date, from the Secretary of State of
California and such other or additional instruments, consents, endorsements and
documents as Buyer reasonably deems to be necessary to enable the transactions
contemplated by this Agreement to be consummated as provided in this Agreement.
All other proceedings in connection with this Agreement and the transactions
contemplated hereby, and all documents and instruments incident to such
transactions, shall be reasonably satisfactory in form and substance to Buyer
and its counsel.
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10. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS. The respective
obligations of the Sellers to consummate the sale of the Shares to Buyer shall
be subject to the fulfillment, or the waiver by the Sellers, at or prior to the
Closing, of each of the following conditions precedent:
10.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
made by Buyer in this Agreement or in Buyer's Disclosure Schedules hereto shall
have been true and correct on the date hereof, and also at and as of the Closing
Date with the same force and effect, in all material respects, as if made again
at and as of that time.
10.2 ABSENCE OF MATERIAL LITIGATION. There shall be (i) no pending or
overtly threatened litigation (other than litigation which is determined by the
parties in good faith, after consulting their respective attorneys, to be
without legal or factual substance or merit), whether brought against the
Company, Buyer, or any of the Sellers, that seeks to enjoin the consummation of
any of the transactions contemplated by this Agreement, (ii) no order that has
been issued by any court or governmental agency having jurisdiction that
restrains or prohibits the consummation of the purchase and sale of the Shares
hereunder or any proceedings pending which are reasonably likely to result in
the issuance of such an order; and (iii) no other pending or overtly threatened
litigation, which has had or is expected to have a Material Adverse Effect on
the ability of the parties to consummate the transactions contemplated hereby.
10.3 PERFORMANCE OF OBLIGATIONS. Buyer shall have performed and complied,
in all material respects, with all of its covenants required by this Agreement
to have been performed by it at or prior to the Closing, except for any failure
of performance or non-compliance that does not and will not materially and
adversely affect the ability of the Sellers to consummate the transactions
contemplated hereby.
10.4 NO MATERIAL ADVERSE CHANGES. Since March 31, 1997, there shall not
have been any change in or other event affecting the business or the condition
(financial or other) or operating results of Buyer that has had or is expected
to have a material adverse effect on Buyer or its ability to meet its
obligations under the Notes or the Security Agreements.
10.5 THIRD PARTY APPROVALS AND CONSENTS. Receipt of all approvals and
consents of third parties (governmental or other) needed to have been obtained
by the Closing Date to enable each of the Sellers to consummate the transactions
contemplated in this Agreement and not thereby violate any contracts, writs,
orders, laws or regulations the violation of which would have a Material Adverse
Effect on any of the Sellers.
10.6 CONSUMMATION OF PURCHASE AND SALE OF HSI ASSETS. The transactions
contemplated by the HSI Purchase Agreement shall have been consummated
concurrently with the Closing of the transactions contemplated by this
Agreement;
10.7 CERTIFICATES. Receipt from Buyer of a certificate, dated as of the
date of Closing and signed by the President or the Chief Financial Officer of
Buyer, certifying that (i) each of its representations and warranties contained
herein was true and correct when made and is true and correct in all material
respects on and as of the Closing Date with the same force and effect as if such
representations and warranties had been made on the Closing Date, and (ii) it
has performed and complied in all material respects with all agreements,
obligations, covenants and conditions required to be performed or complied with
by it pursuant hereto on or prior to the Closing Date, except as may be waived
in writing by the Sellers.
10.8 OPINION OF COUNSEL. Receipt of an opinion dated as of the Closing Date
from Davis, Graham & Stubbs LLP substantially in the form of EXHIBIT I hereto.
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10.9 ADDITIONAL INSTRUMENTS. The Buyer shall have delivered to Sellers
certified copies of resolutions duly adopted by its Board of Directors approving
this Agreement and authorizing the Buyer to consummate the transactions
contemplated hereby, and such other or additional instruments, consents,
endorsements and documents as Sellers reasonably deem to be necessary to enable
the transactions contemplated by this Agreement to be consummated as provided in
this Agreement, including good standing certificates, dated not more than 10
days prior to the Closing Date, evidencing the good standing of Buyer in the
state of its incorporation and, as a foreign corporation qualified to do
business in California. All other proceedings in connection with this Agreement
and the transactions contemplated hereby, and all documents and instruments
incident to such transactions, shall be reasonably satisfactory in form and
substance to Sellers and their counsel.
11. CLOSING. Provided that all conditions precedent to the consummation of the
sale and purchase of the Shares set forth in Sections 9 and 10 have been
satisfied or waived, the consummation of the sale and purchase of the Shares
pursuant hereto (the "Closing") shall take place at the offices of Stradling,
Yocca, Carlson & Rauth, 660 Newport Center Drive, 16th Floor, Newport Beach,
California (or such other place as the parties may agree), at 10:00 A.M. on
Wednesday, July 30, 1997, or on such other date as may be mutually agreed upon
by the parties hereto ("Closing Date"). In connection with and at the time of
the Closing:
11.1 CLOSING DELIVERIES BY SELLERS. The Sellers shall deliver to Buyer the
following:
(a) The stock certificates evidencing all of the Shares, accompanied
by appropriate instruments of transfer, duly executed by the Sellers;
(b) Agreements referenced in Section 3 above, duly executed and
delivered by each of the Sellers;
(c) Management Employment Agreements, substantially in the forms of
EXHIBIT C and EXHIBIT D, duly executed by Mr. David L. Dolstein and by
Ms. Mary Davis, respectively;
(d) Evidence of the receipt of required third party consents and
approvals that are required to be obtained by Sellers hereunder to enable
Buyer to consummate the transactions contemplated hereby, as contemplated
by Section 9.5 above;
(e) The minute books, stock transfer books and records, the corporate
seal and other corporate records of the Company;
(f) Resignations of the officers and directors of the Company;
(g) All documents and instruments and records pertaining to bank
accounts and safety deposit boxes of the Company, together with such
instruments as the depository institutions where such accounts and safety
boxes are maintained may require to change the signatories on such accounts
and for such safety deposit boxes;
(h) A copy of the Company's Standard Operating Procedures Manual; and
(i) Each of the other certificates, documents, instruments and
evidences required to be delivered to Buyer pursuant to Section 8 or
Section 9 above.
11.2 CLOSING DELIVERIES BY BUYER. Buyer shall deliver:
(a) To each Seller wire transfers of funds payable to the order of
each Seller (i) in an amount equal to such Seller's Proportionate Share of
the Closing Date Payment, and (ii) the cash payment in the amount of
$10,000 constituting the consideration for such Seller's Non-Competition
Agreement and (iii) such Seller's Proportionate Share of the cash balances
of the Company as provided by Section 8.6 hereof;
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(b) To each Seller, a Note in the form of EXHIBIT A hereto in a
principal amount equal to his Proportionate Share of the aggregate
principal amount of the Notes issuable to Sellers by Buyer as part of the
Purchase Price pursuant to Section 2 hereof, duly executed by the Buyer;
(c) To each Seller, a Security Agreement in the form of EXHIBIT B
hereto, duly executed by Buyer;
(d) To the Sellers, an Assumption Agreement duly executed by Buyer and
accompanied by consents from the creditors under the Assumed Obligations,
including the Textron Debt, to the assumption thereof by Buyer and
releases, in form and substance satisfactory to the Sellers and their
counsel, from such creditors of the obligations of Sellers with respect to
and of any guaranties by the Sellers of, any of the Assumed Obligations, as
provided in Section 8.5 hereof;
(e) To each Seller, other than Homer L. Aerts, a Seller Consulting
Agreement in the form of EXHIBIT E hereto duly executed by the Buyer, to
Homer L. Aerts, the Aerts Agreement in the form of EXHIBIT F hereto and a
Stock Option Agreement in the form of EXHIBIT G hereto, evidencing the
grant of stock options to each Seller entitling him to purchase a number of
shares of Buyer's common stock set forth in SCHEDULE 8.8, at the price and
on the terms and conditions set forth in such Stock Option Agreement;
(f) To David L. Dolstein and Mary Davis, the Management Employment
Agreements, in the forms of EXHIBIT C and EXHIBIT D, respectively, duly
executed by Buyer;
(g) To the Sellers, evidence of the receipt of required third party
consents and approvals that are required to be obtained by Buyer hereunder
to enable the Sellers to consummate the transactions contemplated hereby,
as contemplated by Section 10.5 above; and
(h) To the Sellers, each of the other certificates, documents,
instruments and evidences required to be delivered by Buyer pursuant to
Section 8 or Section 10 above.
12. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the respective
representations and warranties of the Sellers set forth in this Agreement or in
any of their respective Disclosure Schedules or Closing Certificates delivered
pursuant hereto shall terminate on the first (1st) anniversary of the Closing
Date, except as follows: (i) the representations and warranties of the Sellers
contained in Sections 5.5, 5.10, 5.11(b) and 5.13 shall terminate on and shall
not survive the Closing Date, (ii) the respective severally made representations
and warranties of each Seller set forth in Section 4 and the representations and
warranties jointly made by the Sellers in Subsections 5.1, 5.2 and 5.3 shall
survive the Closing for the statutory limitations period under California law
that is applicable to written contracts and (iii) the respective representations
and warranties of the Sellers contained in Subsection 5.19 survive the Closing
for the statutory limitations period applicable to the filing of Tax Returns and
payment of income Taxes under the Internal Revenue Code of 1986, as amended and
in effect on the date of this Agreement. The representations and warranties of
the Buyer in Section 6 hereof shall survive the Closing for the statutory
limitations period under California law that is applicable to written contracts.
13. TERMINATION.
13.1 METHODS OF TERMINATION. This Agreement may be terminated and the
transactions herein contemplated may be abandoned at any time prior to the
Closing:
(a) By mutual written consent of Buyer and the Sellers; or
(b) By Buyer if any of the conditions precedent set forth in Section 9
has not been satisfied on or before the Closing Date; or
(c) By any of the Sellers if any of the conditions precedent set forth
in Section 10 has not been satisfied on or before the Closing Date; or
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(d) By the Buyer, if there has been a material breach by any Seller of
any of his material covenants or any of his material representations or
warranties contained in this Agreement (a Material Seller Default"); or
(e) By any of the Sellers, if there has been a material breach by
Buyer of any of its material covenants or its material representations or
warranties contained in this Agreement (a "Material Buyer Default").
Notwithstanding the foregoing, if Buyer or any Seller is in breach of any of its
respective material obligations under this Agreement; the Buyer or such Seller
(as the case may be) shall not be entitled to exercise its termination right
under Paragraph 13.1 (b), (c), (d) or (e) above during the continuance of such
breach.
13.2 PROCEDURE UPON TERMINATION. In the event of termination of this
Agreement by Buyer or the Sellers or by both Buyer and the Sellers pursuant to
Section 13.1 hereof, written notice thereof shall forthwith be given to the
other party or parties hereto and the transactions contemplated herein shall be
abandoned without further action by Buyer, the Company or the Sellers. In
addition, if this Agreement is terminated as provided herein:
(a) Each party will redeliver all documents, workpapers and other
material of any other party relating to the transactions contemplated
hereby, whether so obtained before or after the execution hereof, to the
party furnishing the same.
(b) All information of a confidential nature received by any party
hereto with respect to the business of any other party (other than
information which is a matter of public knowledge or which has heretofore
been or is hereafter published in any publication for public distribution
or filed as public information with any governmental authority) shall
continue to be subject to the provisions of Section 14 of this Agreement,
which provisions shall survive any such termination.
(c) Upon any termination of this Agreement pursuant to this Section
13, the respective obligations of the parties hereto under this Agreement
(other than under Paragraphs 13.2(a) and (b) above) shall terminate and no
party shall have any liability whatsoever to any other party hereto by
reason of such termination, irrespective of the cause of such termination,
PROVIDED, HOWEVER, that a termination of this Agreement by Buyer pursuant
to Paragraph 13.1(d) due to a Material Seller Default, or by any of the
Sellers pursuant to Paragraph 13.1(e) due to a Material Buyer Default,
shall not relieve the Sellers who committed such Material Seller Default
(each, a "Defaulting Seller") or the Buyer (as the case may be) of their
liability hereunder to the non-defaulting parties; and PROVIDED, FURTHER,
that (i) if such termination is by Buyer as a result of a Material Seller
Default, then, each Defaulting Seller shall be severally liable to Buyer
for that percentage of the direct damages incurred by Buyer by reason of
such Material Seller Default which is equal to the percentage that such
Defaulting Seller owns, on the date hereof, of the total number of the
Shares of common stock of the Company owned by all of the Defaulting
Sellers on the date hereof and any Seller who is not a Defaulting Seller
shall have no liability to Buyer by reason of such Material Seller Default
and the resulting termination of this Agreement by Buyer; (ii) if,
notwithstanding a Material Seller Default or a Material Buyer Default, the
Buyer (in the case of a Material Seller Default) closes, or the Sellers (in
the case of a Material Buyer Default) close, the transactions contemplated
hereby, such action by the non-defaulting party or parties shall constitute
a waiver of such Material Seller Default or Material Buyer Default, as the
case may be (PROVIDED, HOWEVER, that the closing by Buyer of the
transactions contemplated hereby shall not constitute a waiver of a
Material Seller Default of any Seller that arises out of a material breach
by that Seller of any of his Ownership, Capitalization or Tax
Representations as defined in Section 14.2); and (iii) notwithstanding
anything to the contrary contained herein, in no event shall any of the
Sellers be liable to Buyer by reason of a material breach of this Agreement
by any Seller,
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and in no event shall Buyer be liable to any or all of the Sellers by
reason of a material breach of this Agreement by Buyer, for any
consequential damages, special damages or lost profits or lost business
opportunities arising from such breach.
13.3 SPECIFIC PERFORMANCE. Sellers acknowledge that a breach of any of
their covenants under this Agreement that would constitute a Material Seller
Default would result in damages to Buyer that would be extremely impracticable
to measure. Accordingly, Sellers agree that, in lieu of termination of this
Agreement and (subject to clause (ii) of Paragraph 13.2(c) above) in addition to
any other remedies Buyer may have, Buyer may sue in equity for specific
performance of any such covenants in the event of a breach thereof and Sellers
expressly waive the defense that a remedy in damages will be available.
14. INDEMNIFICATION.
14.1 INDEMNIFICATION OBLIGATION OF SELLERS.
(a) Subject to the limitations hereinafter set forth in this Section
14, each Seller hereby agrees that he will, severally, and not jointly with
any of the other Sellers, indemnify and hold harmless Buyer and its
directors, officers, employees, agents and successors and assigns
(collectively, including Buyer, the "Buyer Group") from and against any and
all claims, actions, suits or other proceedings brought against and any
liabilities, damages, Taxes, costs and expenses (collectively, "Buyer
Liabilities"), including, without limitation, reasonable attorneys' fees,
incurred by any of the members of the Buyer Group that arise from:
(i) Any material breach of or material inaccuracy in any of the
representations or warranties of any of such Seller contained in
Section 4 hereof (as modified by such Seller's Disclosure Schedules
pertaining thereto);
(ii) Any material breach of or material inaccuracy in any of the
representations or warranties of any of Sellers contained in Section 5
hereof (as modified by the Sellers' Disclosure Schedules), except that
Sellers shall have no liability to Buyer or the Company after the
Closing for or arising out of any breach of or inaccuracy in the
representations and warranties contained in Subsections 5.5, 5.10,
5.11(b) and 5.13 hereof (the "Excluded Representations"), which shall
terminate at the conclusion of and shall not survive the Closing; and
(b) As an inducement to Buyer to enter into, and to consummate the
transactions contemplated by the Asset Purchase Agreement, which will
directly benefit the Sellers, each Seller further agrees that he will,
severally, and not jointly with any of the other Sellers, indemnify and
hold harmless Buyer and the other members of the Buyer Group from any Buyer
Liabilities (as hereinabove defined) arising from any material breach of or
material inaccuracy in any of the representations or warranties of HSI
contained in Section 4 of the Asset Purchase Agreement (as modified by its
Disclosure Schedules pertaining thereto), except that the Sellers shall
have no liability to Buyer after the consummation of the transactions
contemplated by that Agreement (the "Asset Sale Closing") for or arising
out of any breach of or inaccuracy in the representations and warranties
contained in Subsections 4.6, 4.12 and 4.14 of the Asset Purchase Agreement
(as modified by the disclosures and the "HSI Excluded Representations"),
which shall terminate at the conclusion of and shall not survive the Asset
Purchase Closing.
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14.2 CERTAIN LIMITATIONS ON INDEMNIFICATION OBLIGATIONS OF SELLERS.
The liability of each Seller to the members of the Buyer Group under
Subsection 14.1 shall be subject to the following limitations:
(a) DEDUCTIBLE. No Seller shall be liable for indemnity under this
Section 14 unless (i) the aggregate amount of Buyer Liabilities incurred by
members of the Buyer Group, either under this Agreement or under the Asset
Purchase Agreement, exceeds the sum of $200,000 (the "Deductible"), and
(ii) such Deductible is exceeded prior to the expiration of the Applicable
Limitations Period (as hereinafter defined).
(b) GENERAL LIABILITY CEILING. Except as otherwise provided in
Paragraph 14.2(c) hereof, if the aggregate amount of Buyer Liabilities
incurred by members of the Buyer Group has exceeded the $200,000 Deductible
prior to the expiration of the Applicable Limitations Period, each Seller
shall become and be severally liable to indemnify the members of the Buyer
Group for the Seller's Proportionate Share (as hereinabove defined in
Subsection 2.2) of all Buyer Liabilities incurred by the members of the
Buyer Group that exceed the Deductible, PROVIDED, HOWEVER, that, subject to
the exceptions and limitations set forth elsewhere in this Section 14, no
Seller shall be liable to any members of the Buyer Group for an amount in
excess of his Proportionate Share of a cumulative aggregate amount of Buyer
Liabilities equal to One Million Five Hundred Thousand Dollars ($1,500,000)
(the "Liability Ceiling"), whether such Buyer Liabilities have been
incurred under this Agreement or under the Asset Purchase Agreement. (For
example, subject to the exceptions set forth hereinafter, if a Seller's
Proportionate Share is 20%, then, his maximum aggregate liability hereunder
for all Buyer Liabilities, whether arising under this Agreement or under
the Asset Purchase Agreement, shall be Three Hundred Thousand Dollars
$300,000.)
(c) SPECIAL LIABILITY CEILINGS. Notwithstanding the limitation set
forth in Paragraph 14.2(b), provided that the Deductible has been exceeded
before the expiration of the Applicable Limitations Period and there has
been a breach of:
(i) Any Seller's representations and warranties contained in
Section 4 of this Agreement (the "Ownership Representations") as a
result of the existence of any liens, claims, pledges or other
encumbrances on any of the Shares sold by such Seller hereunder to
Buyer (the "Affected Shares"), then, subject to the limitation
hereinafter set forth in Paragraph 14.2(d), such Seller shall be
liable to Buyer for the lesser of (x) any amounts that Buyer incurs to
discharge or remove such liens, claims, pledges or other encumbrances
from such Affected Shares, or (y) the diminution in the value of the
Affected Shares as a result of the existence of such liens, claims,
pledges or encumbrances;
(ii) Any representations and warranties of any Seller contained
in Subsection 5.2 of this Agreement (the "Capitalization
Representations") as a result of the ownership prior to the Closing by
any person of any shares of common stock of the Company, or options or
rights or convertible or other securities that entitle any person to
acquire any shares of common stock of the Company, which have the
effect of reducing the Buyer's percentage ownership of the Company to
less than 100%, then, subject to the limitation hereinafter set forth
in Paragraph 14.2(d), each Seller shall be severally liable to pay to
Buyer an amount equal to such Seller's Proportionate Share of the
Buyer Liabilities incurred by any members of the Buyer Group by reason
thereof;
(iii) Any of the representations and warranties of any Seller
contained in Subsection 5.19 of this Agreement (the "Tax
Representations") as a result of the incurrence of any liabilities by
Buyer or the Company, after the Closing, for any Taxes that arose out
of
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the operations of the Company prior to the Closing and were neither
reserved for in the Company's Closing Date Balance Sheet nor otherwise
paid by the Sellers ("Excess Mercy Taxes"), then, subject to the
limitation hereinafter set forth in Paragraph 14.2(d), each Seller
shall be severally liable to reimburse Buyer or the Company, as the
case may be, for his Proportionate Share of such Excess Mercy Taxes;
and
(iv) Any of the representations and warranties of HSI contained
in Subsection 4.17 of the Asset Purchase Agreement (the "HSI Tax
Representations") as a result of the incurrence of any liabilities by
Buyer, after the Closing, for any Taxes that arose out of the
operations of HSI prior to the Closing and were neither reserved for
in HSI's Closing Date Balance Sheet nor otherwise paid by the HSI
("Excess HSI Taxes"), then, subject to the limitation hereinafter set
forth in Paragraph 14.2(d), each Seller shall be severally liable to
reimburse Buyer for his Proportionate Share of such Excess HSI Taxes;
(d) OVERALL LIABILITY CEILINGS. Notwithstanding anything to the
contrary contained above or elsewhere in this Agreement or in the Asset
Purchase Agreement, in no event shall:
(i) The aggregate sum of any Seller's liability to the Buyer
under Clauses (i), (ii) and (iii) of Paragraph 14.2(c) exceed an
amount which, when added to such Seller's Proportionate Share of Buyer
Liabilities incurred for breach of any of the representations and
warranties of the Sellers contained in this Agreement, other than the
Ownership, Capitalization or Tax Representations, would equal the
Purchase Price paid to Seller under this Agreement (after taking into
account any downward adjustments in such Purchase Price pursuant to
SCHEDULE 2.3 hereto); and
(ii) Any Seller's liability to the Buyer under Clause (iv) of
Paragraph 14.2(c) exceed an amount which, when added to such Seller's
Proportionate Share of Buyer Liabilities incurred for breach of any of
the representations and warranties of HSI contained in the Asset
Purchase Agreement, other than the HSI Tax Representations, would
equal the result obtained by multiplying the Purchase Price paid to
HSI under the Asset Purchase Agreement (after taking into account any
downward adjustments in such Purchase Price pursuant to Section 3.2 of
that Agreement) by such Seller's Proportionate Share (as set forth in
SCHEDULE 2.1 of this Agreement).
(e) SPECIAL LIABILITY PROVISIONS. None of the Sellers shall have any
liability to Buyer or the Company for breach of the provisions of Section
5.7 or Section 7.2.5 of this Agreement relating to the airworthiness of any
of the helicopters and rotable equipment of Mercy unless, on the Closing
Date, any of the Company's helicopters or rotable equipment either is not
in an airworthy condition (as defined in Section 5.7) or contains any
rented parts (other than parts owned by HSI). If, on the Closing Date, any
helicopter or rotable equipment is not in an airworthy condition or
contains any rented parts (excluding any such parts owned by HSI), then,
each Seller shall be liable for his Proportionate Share of the
out-of-pocket costs of repairs or of replacement parts required to bring
such helicopter or such rotable equipment back to an airworthy condition,
including the out-of-pocket costs to repair or replace any such parts or
equipment for which there has been substituted rented parts or equipment,
PROVIDED, HOWEVER, that the Sellers shall not be liable to pay or indemnify
Buyer or the Company for (i) such out-of-pocket costs included in trade
payables outstanding on the Closing Date Balance Sheet prepared pursuant to
SCHEDULE 2.3 or (ii) the rent payable for any such rented parts or
equipment.
(f) TIME LIMITATIONS.
(i) Except as otherwise provided in Clause (ii) of this Paragraph
14.2(f), the "Applicable Limitations Period" within which any claim
for indemnification may be brought by
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Buyer or any other members of the Buyer Group under this Section 14
shall be the one (1) year period ending on the first anniversary of
the Closing Date, after which no claims of material breach of any
representations or warranties of Sellers under this Agreement or of
HSI under the Asset Purchase Agreement or for indemnification for any
Buyer Liabilities that may have arisen therefrom may be brought by
Buyer or any other member of the Buyer Group against any of the
Sellers.
(ii) Notwithstanding Clause (i) of this Paragraph 14.2(f), the
"Applicable Limitations Period" for claims for indemnification arising
from a material breach of any of the Share Ownership, Capitalization
or Tax Representations or of the representations or warranties of the
Sellers contained in Paragraphs 5.14(c) and 5.14(d) hereof (the "ERISA
Representations"), or the HSI Tax Representations or the HSI ERISA
Representations contained in Paragraphs 4.18(c) and 4.18(d) of the HSI
Agreement, shall be a period of time equal to the statutory
limitations period that would apply to the facts or circumstance that
gave rise to such material breach of any such Representation; and no
claims of material breach of any such Representations or for
indemnification of Buyer Liabilities that may have arisen out of any
such material breach may be brought by Buyer or any other member of
the Buyer Group against any of the Sellers after the expiration of the
Applicable Limitations Period that would, under applicable statute,
apply to such breach. (For example, if the Tax Representations were to
be breached due to a failure of Mercy to have fully paid all of the
state franchise taxes due by it for any period prior to the Closing
and the statutory limitations period during which a claim might be
brought against Mercy for such failure by state taxing authorities
would expire on the second anniversary of the Closing Date, then, the
Applicable Limitations Period with respect to such breach also would
expire on that same date, rather than on the first anniversary of the
Closing Date.
To be effective, any claim for indemnification by any member of the Buyer Group
must be made by a written notice (a "Notice of Claim") to the Sellers, given in
accordance with the provisions of Section 16.1 hereof, accompanied by
documentation supporting the claim, by no later than the expiration of the
Applicable Limitation Period set forth above in this Paragraph 14.2(f). If the
member of the Buyer Group asserting any such claim for indemnification hereunder
has made such a claim prior to the expiration of the Applicable Limitations
Period, then, subject to the Deductible and the applicable Liability Ceiling in
this Subsection 14.2, such member of the Buyer Group shall be entitled to
recover the full amount of the Buyer Liabilities incurred by it even if that
amount is not finally determined until after such expiration.
14.3 THIRD PARTY CLAIMS. In the event of the assertion, in writing, of a
third-party claim or dispute which, if adversely determined would entitle any of
the members of the Buyer Group to indemnification hereunder, it shall be a
condition precedent to the liability of Sellers hereunder that Buyer promptly
notify the Sellers thereof in writing. Following receipt of such notice, the
Sellers, or any of them, may elect, by written notice to Buyer, to assume and
direct, at their sole expense, the defense of any such third-party claim or
dispute, and may, at their sole expense, retain counsel in connection therewith,
provided that such counsel is acceptable to Buyer (which acceptance shall not be
unreasonably withheld or delayed by Buyer). After such an assumption of the
defense of a third-party claim or dispute by any of the Sellers, Sellers shall
not be responsible for the payment of legal fees incurred thereafter in
connection with such third-party claim or dispute by the members of the Buyer
Group (who may, however, continue to participate in the defense thereof with
separate counsel). If, following the timely notice of any such third-party claim
or dispute from Buyer to Seller, Sellers fail to, and until Sellers do,
undertake the defense of any such third-party claim or dispute, any of the
members of the Buyer Group may undertake such defense and Sellers shall be
responsible for
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reimbursing such members of the Buyer Group for the reasonable legal fees and
expenses they incur in defense of such third-party claim or dispute. No party
hereto (including any members of the Buyer Group) may settle or compromise any
such third-party claim or dispute without the prior written consent of the other
parties hereto, which consent shall not be unreasonably withheld or delayed.
14.4 ESTABLISHMENT AND CONTESTING OF INDEMNIFICATION LIABILITY. Upon
receipt of a Notice of Claim, Sellers shall have thirty (30) business days to
contest their indemnification obligation with respect to such claim, or the
amount thereof, by written notice to Buyer (a "Contest Notice"). Such Contest
Notice shall specify the reasons or bases for the objection of Sellers to the
claim. If no such Contest Notice is given within such 30-business day period,
the obligation of Sellers to pay the amount of the Buyer Liability incurred by
the members of the Buyer Group in connection with the claim shall be deemed
established and accepted by Sellers. If, on the other hand, Sellers contest a
Notice of Claim within such 30-business day period, Buyer and the Sellers shall
thereafter attempt in good faith to resolve their dispute by agreement. If they
are unable to so resolve their dispute within the immediately succeeding thirty
(30) business days, such dispute shall be resolved by binding arbitration in San
Bernardino, California, as provided in Section 16.10 below. The award of the
arbitrator shall be final and binding on the parties and may be enforced in any
court of competent jurisdiction. Upon final determination of the amount of the
Buyer Liability that is the subject of an indemnification claim (whether such
determination is the result of Sellers' acceptance of, or failure to contest, a
Notice of Claim, or of a resolution of any dispute with respect thereto by
agreement of the parties or binding arbitration), each Seller's Proportionate
Share of such amount shall be applied as a reduction of the then remaining
unpaid principal balance of such Seller's Note; PROVIDED, HOWEVER, that if a
Seller's Proportionate Share of such established Buyer Liability exceeds the
then remaining unpaid principal sum of the Seller's Note, such excess shall be
payable by such Seller to Buyer within thirty (30) days of such final
determination of the amount of the Buyer Liability due by that Seller. If a
Seller fails to make any such payment within such thirty (30) day period, the
delinquent sum shall bear interest, until it is paid, at a rate of 9% per annum.
14.5 EXCLUSIVE REMEDY. Buyer hereby expressly agrees, as a material
inducement to Sellers to undertake the indemnification obligations contained in
this Section 14, and as consideration therefor, that (i) the rights and remedies
of Buyer and the other members of the Buyer Group contained in this Section 14
shall be the sole and exclusive rights and remedies that they shall have against
the Sellers, or any of them, for any breach of or inaccuracy in any of the
representations or warranties of Sellers, or any of them, contained in this
Agreement, in the Sellers' Disclosure Schedules and in the Sellers' Closing
Certificates, or in any of the representations or warranties of HSI under the
Asset Purchase Agreement or in its Disclosure Schedules or in any of its
Certificates delivered at the Asset Purchase Closing, (ii) Buyer, for itself and
the other members of the Buyer Group, including its and their respective
successors and assigns, hereby waives and agrees that it or they will not assert
or seek to enforce any other rights or remedies, whether available under statute
or at common law, that Buyer or any of the other members of the Buyer Group
would otherwise have against any of the Sellers or against HSI by reason of or
in respect of any such breach or inaccuracy in any of such representations or
warranties of the Sellers or HSI, or any of them (collectively, "Other
Remedies"), and (iii) except as provided in the next sentence, Buyer shall hold
harmless and indemnify the Sellers and their respective heirs, representatives,
successors and assigns from and against any claims, demands, actions, suits or
other proceedings brought against any of them, and any liabilities, damages,
costs and expenses, including, without limitation, reasonable attorneys' fees,
incurred by any of the Sellers or HSI, or any of their respective heirs,
representatives, successors or assigns, arising out of any attempt or any
efforts (successful or unsuccessful) by any members of the Buyer Group to assert
or exercise any of the Other Remedies. Notwithstanding the foregoing, the
provisions of this Subsection 14.5 with respect to the exclusive rights and
remedies of the Buyer and other members of the Buyer Group shall not apply to
any breach of representation or warranty of any Seller
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<PAGE>
contained in this Agreement (as the same has been modified by the Disclosure
Schedules attached hereto), or of any representation or warranty of HSI
contained in the Asset Purchase Agreement (as the same has been modified by the
Disclosure Schedules attached thereto), if a court or arbitrator having
jurisdiction has found that such Seller or HSI (as the case may be) committed
common law fraud or that such Seller committed a violation of the antifraud
provisions of the Federal Securities Laws in making such representation or
warranty and such finding has become final and is no longer appealable,
PROVIDED, HOWEVER, that limitations on and the exclusions from the amount of
each Seller's liability to Buyer and the other members of the Buyer Group
contained in this Section 14 (including the limitation contained in the last
sentence of Subsection 14.2(d) above) and the provisions establishing Applicable
Limitations Period on the rights of the Buyer and the other members of the Buyer
Group to assert indemnification claims shall nevertheless continue to apply
notwithstanding any such finding or findings.
15. CONFIDENTIALITY.
15.1 CONFIDENTIALITY COVENANTS. Each party acknowledges that it may have
access to various items of Confidential Information (as hereinafter defined) of
the other, or in the case of Buyer, Confidential Information of the Company, in
the course of investigations and negotiations prior to Closing. Each party who
receives any Confidential Information (a "Receiving Party") from any other party
hereto, (or in the case of Buyer from the Company) (the "Disclosing Party"), may
disclose any such Confidential Information to such party's employees, attorneys,
accountants, financial advisors or agents or representatives that have a need to
know such Information to facilitate or assist with the consummation of the
transactions contemplated hereby (collectively, "Representatives"). Subject to
the foregoing exception, and the exception hereinafter set forth in Subsection
15.2 below (i) a Receiving Party shall keep, and shall cause its Representatives
to keep, all Confidential Information received from a Disclosing Party hereunder
strictly confidential and shall not disclose, and shall cause its
Representatives not to disclose, any such Confidential Information to any third
party; and (ii) any Receiving Party and its Representatives shall not make any
uses of Confidential Information received from a Disclosing Party except to
facilitate or assist with the consummation of the transactions contemplated
hereby. Confidential information shall include any business, financial,
technical or other information, including, but not limited to, business plans,
forecasts, marketing plans or initiatives, customer, client and vendor lists,
training materials developed by the Disclosing Party, information regarding the
identities, qualifications and compensation being paid to key employees,
information received from customers, vendors or clients with the expectation,
whether explicit or implicit, that such information would be protected from
disclosure or dissemination to third parties, and other information the value of
which to the Disclosing Party is dependent on the non-disclosure of such
information. Confidential Information shall not include information that,
although disclosed or made available by a Disclosing Party or any of its
Representatives to a Receiving Party or any of its Representatives, (i) can be
obtained by persons not subject to confidentiality or use restrictions from
public sources, including periodicals, government and industry publications and
other media that is readily accessible to the public or competitors of the
Disclosing Party, (ii) has been disclosed by the Disclosing Party or any of its
Representatives to any unaffiliated third parties without the imposition of any
restrictions or prohibitions on disclosure or use thereof and has been, as a
result, disclosed by that third party to other third parties, or (iii)
information that the Receiving Party can demonstrate convincingly was in its
possession prior to its disclosure to the Receiving Party by the Disclosing
Party or any of its Representatives, PROVIDED that the Receiving Party had not
obtained possession of such Confidential information from any one that the
Receiving Party knew or should have known was subject to restrictions on its
right to disclose such information to the Receiving Party, either pursuant to an
agreement or by reason of his position or relationship with the Disclosing
Party.
15.2 DISCLOSURE PURSUANT TO LEGAL PROCESS. If a Receiving Party is required
by subpoena or other legal process, or by laws applicable to it, to disclose or
produce any Confidential Information
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belonging to a Disclosing Party, then, the Receiving Party shall (i) provide the
Disclosing Party prompt notice thereof and copies, if possible, and, if not, a
description, of the Confidential Information requested or required to be
produced so that Disclosing Party may seek an order to quash such subpoena or
other legal process or an appropriate protective order or may elect to waive
compliance with the provisions of this Section 14 as to any portion or all of
such Confidential Information (ii) consult with the Disclosing as to the
advisability of taking legally available steps to quash or narrow such request,
and (iii) provide such reasonable cooperation as the Disclosing Party may
request in connection with efforts by the Disclosing Party to quash the subpoena
or other legal process or to obtain a protective order with respect to the
Confidential Information being sought. If, in the absence of a protective order
or the receipt of a waiver hereunder, a Receiving Party is nonetheless, in the
opinion of his legal counsel, compelled to disclose or produce any such
Confidential Information of the Disclosing Party to any tribunal legally
authorized to request and entitled to receive such Confidential Information or
to any government agency with which the Receiving Party is required by law to
file any such Information or otherwise stand liable for contempt or suffer other
censure or penalty or liability, the Disclosing Party may disclose or produce
such Confidential Information to such tribunal or government agency,
notwithstanding the fact that such information may, as a result become available
to the public, without incurring liability hereunder to the Disclosing Party;
PROVIDED, HOWEVER, that the Receiving Party shall give the Disclosing Party
written notice of the Confidential Information to be so disclosed or produced as
far in advance of its disclosure or production as is practicable and shall use
his best efforts to obtain, to the greatest extent practicable, an order or
other reliable assurance that confidential treatment will be accorded to such
Confidential Information so required to be disclosed or produced.
Notwithstanding the foregoing, the parties agree that the Buyer may file a
report on Form 8-K with the Securities and Exchange Commission regarding the
transactions contemplated by this Agreement and file as exhibits thereto, this
Agreement, the Asset Purchase Agreement, and all schedules and exhibits thereto
without requesting confidential treatment for such documents.
15.3 TERMINATION OF CONFIDENTIALITY OBLIGATIONS. The obligations of Buyer
under this Section 15 shall terminate on the Closing of the transactions
contemplated hereby, but the obligations of each Seller hereunder, which shall
be several and not joint, shall survive the Closing for a period of five (5)
years thereafter with respect to Confidential Information belonging to Buyer or
the Company. In the event of a termination of this Agreement, the respective
obligations of each Seller with respect to Confidential Information of Buyer and
the obligations of Buyer with respect to Confidential Information of the Company
and the Sellers shall survive for a period of five (5) years from the date of
such termination. The Company is an intended third party beneficiary of the
respective covenants of Buyer, on the one hand, and Sellers, on the other, under
this Section 15 with respect to Confidential Information of the Company
furnished or made available to any of them.
15.4 NO SOLICITATION OF EMPLOYEES. Between the date hereof and the Closing
of this the transactions contemplated hereby, neither Buyer nor the Company
shall (i) offer or extend employment or any position to any officers or
employees of the other and (ii) solicit or attempt to entice any of such
officers or employees of the other entity to leave its employ. In the event this
Agreement is terminated and the transactions contemplated hereby or abandoned,
then, the respective covenants of Buyer and the Company hereunder shall survive
that termination and shall remain in full force and effect for a period of two
(2) years from the date thereof.
16. MISCELLANEOUS.
16.1 NOTICES. All notices, requests, demands or other communications
hereunder to any of the parties hereto shall be in writing and shall be deemed
to have been duly given, if delivered in person or mailed, certified,
return-receipt requested, postage prepaid to the respective addresses of such
parties set forth in SCHEDULE 16.1 hereto. Any party hereto may from time to
time, by written notice to the other parties, designate a different address,
which shall be substituted for the one specified above for such party.
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If any notice or other document is sent by certified or registered mail, return
receipt requested, postage prepaid, properly addressed as aforementioned, the
same shall be deemed served or delivered seventy-two (72) hours after mailing
thereof. If any notice is sent by facsimile machine ("fax") to a party, it will
be deemed to have been delivered on the date the fax thereof is actually
received, provided the original thereof is sent by mail, in the manner set forth
above, within twenty-four (24) hours after the fax is sent.
16.2 ASSIGNMENT. None of the Sellers nor the Buyer may assign this
Agreement, or assign their respective rights or delegate their respective duties
hereunder, without the prior written consent of the other parties hereto.
16.3 SEVERABILITY. Any provision of this Agreement which is illegal,
invalid or unenforceable shall be ineffective to the extent of such illegality,
invalidity or unenforceability, without affecting in any way the remaining
provisions hereof.
16.4 JOINT PRESS RELEASE. The parties agree to consult with each other and
to cooperate prior to issuing any press release or other public announcement
with respect to the transactions contemplated by this Agreement. No such press
release shall be issued by any party without the prior written consent of the
other party or in the case of Sellers, the written consent of a as
representative of the Sellers who shall be identified in a writing delivered by
the Sellers to the Buyer, from time to time, after the Closing Date; PROVIDED,
HOWEVER, that a party may proceed with publication of such a release or other
public disclosure even if another party hereto has refused to give its consent
thereto, if (i) the release or public disclosure is, in the reasonable judgment
of the releasing party, required for it to meet, on a timely basis, its
obligations under laws or regulations applicable to it, including under the
Federal Securities Laws and (ii) the releasing party furnishes a copy of such
release or public disclosure to the other party at least twenty-four (24) hours
in advance of the release or public disclosure and provides a reasonable
opportunity for the other party to comment thereon. Notwithstanding the
foregoing, the parties agree that the Buyer may, immediately after the execution
and delivery of this Agreement by the parties issue a press release, in
substantially the form previously delivered to the Sellers and file a report on
Form 8-K with the Securities and Exchange Commission regarding the transactions
contemplated by this Agreement and file as exhibits thereto, such this
Agreement, the Asset Purchase Agreement, the exhibits thereto and such press
release without requesting confidential treatment for such documents.
16.5 GOVERNING LAW. This Agreement is deemed to have been made in the State
of California, and its interpretation, its construction and the remedies for its
enforcement or breach are to be applied pursuant to, and in accordance with, the
laws of California for contracts made and to be performed in that state.
16.6 INCORPORATION AND AMENDMENT. This Agreement, the Schedules and
Exhibits hereto and each additional agreement and document referred to herein
constitute the entire Agreement of the parties, and supersede and extinguish all
prior agreements and understandings, representations and warranties of the
parties relating to the subject matter hereof. This Agreement may not be
modified, amended or terminated except by written agreement specifically
referring to this Agreement signed by the parties hereto.
16.7 WAIVER. No waiver of a breach or default hereunder shall be considered
valid unless in writing and signed by the party giving such waiver, and no such
waiver shall be deemed a waiver of any subsequent breach or default of the same
or similar nature or of any breach or default of any other provisions of this
Agreement.
16.8 INTERPRETATION; HEADINGS. This Agreement, and the other agreements
being entered into by any of the Sellers and the Buyer pursuant hereto, are the
result of arms'-length negotiations between the parties hereto and no provision
hereof or thereof, because of any ambiguity found to be contained herein,
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therein or otherwise, shall be construed against a party by reason of the fact
that such party or its legal counsel was the draftsman of that provision. Unless
otherwise indicated elsewhere in this Agreement, (i) the term "or" shall not be
exclusive; (ii) the term "including" shall mean "including, but not limited to,"
and (iii) the terms "herein," "hereof," "hereto," "hereunder" and other terms
similar to such terms shall refer to this Agreement as a whole and not merely to
the specific section, subsection, Paragraph or clause where such terms may
appear. The section, subsection and any Paragraph headings contained herein are
for purposes of convenience only and are not intended to define or limit or
affect, and shall not be considered in connection with, the interpretation of
any of the terms or provisions of this Agreement.
16.9 COUNTERPARTS. This Agreement may be executed in separate counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
16.10 ARBITRATION. All disputes between the parties hereto relating to this
Agreement shall be determined solely and exclusively by arbitration in
accordance with the rules then in effect of the American Arbitration Association
pertaining to commercial arbitrations, or any successors hereto ("AAA"), in San
Bernardino, California, unless the parties otherwise agree in writing. The
parties shall jointly select an arbitrator. In the event the parties fail to
agree upon an arbitrator within ten (10) days, then each party shall select an
arbitrator and such arbitrators shall then select a third arbitrator to serve as
the sole arbitrator; provided, that if either party, in such event, fails to
select an arbitrator within seven (7) days, such arbitrator shall be selected by
the AAA upon application of either party. Judgment upon the award of the agreed
upon arbitrator or the so chosen third arbitrator, as the case may be, shall be
binding on the parties and shall be entered by any court of competent
jurisdiction.
IN WITNESS WHEREOF, the undersigned have executed this Stock Purchase
Agreement, on the date first above stated.
BUYER: SELLERS:
AIR METHODS CORPORATION
/s/ Homer L. Aerts
By: /s/ George W. Belsey --------------------------------
----------------------------- HOMER L. AERTS
/s/ J. Steven Dickmeyer
--------------------------------
J. STEVEN DICKMEYER
/s/ Don D. Reed
--------------------------------
DON D. REED
/s/ Terry L. Russ
--------------------------------
TERRY L. RUSS
/s/ Richard J. Silva
--------------------------------
RICHARD J. SILVA
36
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LIST OF EXHIBITS
EXHIBIT A Form of Promissory Note
EXHIBIT B Form of Security Agreement
EXHIBIT C Form of Dolstein Employment Agreement
EXHIBIT D Form of Davis Employment Agreement
EXHIBIT E Form of Seller Consulting Agreement
EXHIBIT F Form of Aerts Consulting Agreement
EXHIBIT G Form of Stock Option Agreement
EXHIBIT H Form of Opinion of Special Counsel to Sellers
EXHIBIT I Form of Opinion of Counsel to Buyer
LIST OF SCHEDULES
Schedule 2.1 Ownership of the Shares/Allocation of Closing Date Cash
Payment and Notes
Schedule 2.2 Assumed Obligations
Schedule 2.3 Adjustments to Purchase Price
Schedule 4.3 Seller Conflicts
Schedule 5.2 Securities
Schedule 5.4 Conflicts
Schedule 5.5 Financial Statement Exceptions
Schedule 5.6 Certain Changes
Schedule 5.7 Tangible Assets
Schedule 5.8 Intangible Personal Property
Schedule 5.9 Leases
Schedule 5.11 Title Exceptions
Schedule 5.12 Material Company Contracts
Schedule 5.13 Compliance with Laws
Schedule 5.14 Labor and Employment Agreements; Benefit Plans
Schedule 5.15 Litigation
Schedule 5.16 Environmental Matters
Schedule 5.18 Related Party Transactions
Schedule 5.19 Taxes and Tax Returns
Schedule 5.20 Insurance
Schedule 5.21 Bank Accounts
Schedule 5.22 Brokers
Schedule 7.2 Permitted Dividends
Schedule 8.5 Textron Debt
Schedule 8.6 Short-Term Investments
Schedule 8.7 Indebtedness of Mercy to Sellers
Schedule 8.8 Buyer Stock Options
Schedule 16.1 Mailing Addresses of the Parties
<PAGE>
EXHIBIT A
FORM OF SECURED PROMISSORY NOTE
U.S. $ Fontana, California
----------- July , 1997
---
FOR VALUE RECEIVED, Air Methods Corporation, a Delaware corporation (hereinafter
referred to as "Obligor"), promises to pay to (hereinafter referred
-----------
to as "Holder"), the principal sum of U.S. Dollars
----------------------------
($ ), together with interest, which shall accrue at a rate of nine
----------
percent (9%) per annum from the date hereof, in sixty (60) equal monthly
installments of principal and interest, each in the amount of $ , on
----------
the first day of each calendar month commencing on August 1, 1997, and
continuing to and including July 1, 2002, on which date all accrued and unpaid
interest and the remaining balance of the principal then outstanding shall be
due and payable.
This Note is issued pursuant to the terms and provisions of Section 2.2 of that
certain Stock Purchase Agreement dated July , 1997 (the "Purchase
---
Agreement") by and among Obligor, Holder and the Sellers named therein, and
evidences purchase money indebtedness of Obligor to the Holder, as part of the
consideration for the purchase of all of the outstanding shares of capital stock
(the "Shares") of Mercy Air Service, Inc., a California corporation (the
"Company").
The principal amount of this Note is subject to certain adjustments in the
manner and to the extent provided in Section 2.3 and Section 8.9 of the Purchase
Agreement and Schedule 2.3 and Schedule 8.9 thereto. In the event of any such
adjustment, this Note shall be surrendered to the Obligor in exchange for the
issuance by Obligor to the Holder of a replacement promissory note, of like
tenor to this Note, which gives effect to such adjustment.
All payments on this Note shall be made in lawful money of the United States of
America, and all notices by Obligor to the Holder shall be sent by first class
mail and if so sent shall be deemed received by Holder 72 hours after being
deposited in the U.S. mails if addressed to Holder, at ,
------------------------
California or at such other place as the Holder shall have designated hereafter
to Obligor in writing.
1. SECURED OBLIGATION. The Obligor's obligations under this Note are
secured by that certain Security Agreement dated as of the date hereof (the
"Security Agreement"), among the Obligor, the Holder and the Company.
2. PARI PASSU STATUS. The payment of principal of and interest on this Note
shall rank pari passu with any indebtedness or other monetary obligations
incurred by Obligor or for which Obligor is or becomes liable to any Seller
named in the Purchase Agreement in connection with the acquisition by Obligor of
Shares from such Seller pursuant to the terms of the Purchase Agreement,
including the notes of like tenor issued to such other Sellers (the "Other
Seller Notes").
<PAGE>
3. NATURE OF NOTE; USURY. The Obligor acknowledges that this Note evidences
purchase money indebtedness arising out of a business transaction. In no event
and upon no contingency shall Obligor be required to pay interest on this Note
in excess of the maximum rate allowed by law. It is the intention of the parties
hereto to conform strictly to the usury laws now in force that would apply to
this Note. Accordingly, notwithstanding anything to the contrary in this Note or
any other agreement entered into in connection herewith, it is agreed that all
charges that constitute interest that are contracted for, chargeable or
receivable under this Note or otherwise in connection with this transaction
shall, under no circumstances, exceed the maximum amount of interest permitted
by law, and any excess shall be deemed a mistake in calculation and cancelled
automatically and, if theretofore paid, shall be, at the Holder's election,
either refunded to Obligor or credited on the unpaid principal of this Note.
4. EVENTS OF DEFAULT. Upon the occurrence and during the continuance of an
Event of Default (as hereinafter defined), but subject to any restrictions or
limitations agreed upon by the Holder of this Note with the other Sellers named
in the Purchase Agreement, the Holder of this Note shall be entitled, by written
notice to the Obligor, to declare this Note to be, and upon such declaration
this Note shall be and become immediately due and payable, in addition to any
other rights or remedies they may have under the laws of the State of
California. The occurrence of any of the following events shall constitute an
"Event of Default":
(a) PAYMENT OF NOTE. Obligor shall fail to pay any principal of or interest
owing on this Note or the Other Seller Notes within fifteen (15) days after the
due date of such payment.
(b) BREACH OF COVENANTS. Obligor shall fail or neglect to perform, keep or
observe any covenant or obligation of Obligor contained in the Purchase
Agreement or in this Note (other than failure to pay principal of or interest on
this Note which is dealt with specifically in Paragraph 4(a) above) and the
breach of any such covenant or obligation is not cured within thirty (30) days
after Obligor's receipt of notice of such breach from Holder.
(c) INSOLVENCY, ETC. Obligor or the Company shall suffer the appointment of
a receiver, trustee, custodian or similar fiduciary for all or substantially all
of their respective assets, or any petition for an order for relief shall be
filed by or against Obligor or the Company under any applicable bankruptcy law,
and such appointment or proceeding, as the case may be, is not controverted
within thirty (30) days, or is not dismissed within ninety (90) days, after such
appointment or the commencement of such proceeding (as the case may be).
(d) EVENT OF DEFAULT UNDER SECURITY AGREEMENT. An "Event of Default" (as
defined in the Security Agreement) shall have occurred.
5. PREPAYMENTS. This Note may be prepaid in whole or in part without
notice, premium or penalty. Unless otherwise agreed by the Holder, in the event
Obligor prepays any Other Seller Note, it shall prepay the same percentage of
the remaining balance outstanding on this Note as paid on such Other Seller
Note. Partial prepayments shall be applied to the installment payments of
principal and interest hereunder in the chronological order in which they come
due until the Note is paid in full.
6. COSTS AND EXPENSES OF COLLECTION. If this Note is collected by or
through an attorney at law, Obligor shall pay all of the Holder's incurred costs
of collection, including, without limitation, Holder's attorneys' fees.
-2-
<PAGE>
7. APPLICATION OF PAYMENTS. All installments and prepayments paid hereunder
shall be credited first to accrued and unpaid interest payable on the principal
balance of this Note from time to time outstanding and then to reduction of
principal.
8. WAIVERS BY OBLIGOR. Except as otherwise provided elsewhere in this Note,
Obligor waives presentment for payment, protest, notice of dishonor and protest
and consents to any extensions of time with respect to any payment due under
this Note, and to the addition or release of any party. No waiver of any payment
under this Note shall operate as a waiver of any other payment.
9. EFFECT OF DELAY OR WAIVER BY HOLDER. No delay or failure of the Holder
of this Note in the exercise of any rights or remedy provided for hereunder
shall be deemed a waiver of any other right or remedy which the Holder may have.
10. NOTICES TO OBLIGOR. Any notice or demand to the Obligor shall be by
First Class Mail, addressed to Obligor, c/o Air Methods Corporation, 7301 South
Peoria, Englewood, Colorado 80112, Attention: Chief Financial Officer, or such
other address as may be designated in writing by Obligor to the Holder and shall
be deemed to have been received seventy-two (72) hours after its deposit,
postage-prepaid, with the United States Postal Service.
11. GOVERNING LAW. This Note is made in and shall be governed by and
construed according to the laws of California.
12. ARBITRATION. All disputes between the parties hereto shall be
determined solely and exclusively by arbitration in accordance with the rules
then in effect of the American Arbitration Association, or any successors hereto
("AAA"), in San Bernardino, California, unless the parties otherwise agree in
writing. The parties shall jointly select an arbitrator. In the event the
parties fail to agree upon an arbitrator within ten (10) days, then each party
shall select an arbitrator and such arbitrators shall then select a third
arbitrator to serve as the sole arbitrator; provided, that if either party, in
such event, fails to select an arbitrator within seven (7) days, such arbitrator
shall be selected by the AAA upon application of either party. Judgment upon the
award of the agreed upon arbitrator or the so chosen third arbitrator, as the
case may be, shall be binding and shall be entered into by a court of competent
jurisdiction.
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13. HEADINGS. The Paragraph headings in this Note are for convenience of
reference only and shall not be considered in, nor shall they affect, the
interpretation or application of any of the provisions of this Note.
Obligor:
AIR METHODS CORPORATION,
a Delaware corporation
By:
---------------------------------
ACCEPTED and AGREED to this
day of July, 1997:
- ----
- ----------------------------------
Holder
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EXHIBIT B
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement"), dated as of July 31, 1997, is
made in favor of and for the benefit of those parties whose names are set forth
on Schedule I hereto (individually, a "Secured Party" and, collectively, the
"Secured Parties"), by Air Methods Corporation, a Delaware corporation (the
"Debtor"), and Mercy Air Service, Inc., a California corporation (the "Company")
and J. Steven Dickmeyer as collateral agent (the "Collateral Agent").
RECITALS
A. Debtor and the Secured Parties are parties to that certain Stock
Purchase Agreement dated July 11, 1997 (the "Purchase Agreement"), pursuant to
which the Secured Parties have agreed to sell to the Debtor, and the Debtor has
agreed to purchase from the Secured Parties, all of the outstanding capital
stock of the Company (the "Shares").
B. As partial consideration for the shares of common stock of the Company
to be sold by the Secured Parties to the Debtor , the Debtor shall deliver to
the Secured Parties promissory notes in the aggregate principal amount of One
Million Five Hundred Thousand Dollars ($1,500,000) (the "Notes") the principal
amounts of which are subject to adjustment pursuant to the terms of the Purchase
Agreement.
C. The Company will derive substantial direct and indirect benefit from the
Secured Parties' sale of the Shares to the Debtor and acceptance of the Notes,
and Secured Parties are willing to sell the Shares to the Debtor and accept the
Notes, but only on the condition, among others, that Debtor agree to grant, and
the Company consent to the grant, to the Secured Parties of a security interest
in the Collateral as provided herein to secure the performance of Debtor's
obligations under the Notes.
D. In addition to the substantial benefit derived by the Company from the
sale of the Shares by the Secured Parties, the Company will derive substantial
direct and indirect benefit from the fact that the Secured Parties are
guaranteeing the collection of certain accounts receivable of the Company
pursuant to the terms of the Purchase Agreement and the Buyer is paying the
Sellers, on behalf of the Company, amounts owed to the Sellers by the Company,
which will reduce the Company's indebtedness.
AGREEMENT
In consideration of the promises and of the mutual covenants herein
contained and for other good and valuable consideration, the parties, intending
to be legally bound, agree as follows:
1. DEFINITIONS. Unless otherwise defined herein, (a) capitalized terms or
matters of construction defined or established in the Purchase Agreement shall
be applied herein as defined or established therein, and (b) the following terms
shall have the respective meanings set forth below:
"ACCOUNT DEBTOR" shall mean any "account debtor" as such term is defined in
the UCC.
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"ACCOUNTS" shall mean all "accounts" as such term is defined in the UCC,
now owned or hereafter acquired by the Company and other forms of obligations in
respect of the payment of money (other than forms of obligations evidenced by
Chattel Paper, Documents or Instruments) now owned or hereafter received or
acquired by or belonging or owing to the Company, in any event, including, but
not limited to, (a) all accounts and other receivable and book debts, whether
arising out of goods sold or services rendered by the Company or from any other
transaction (including, but not limited to, any such obligation which may be
characterized as an account under the UCC), (b) all of each Company's right in,
to and under all purchase orders or receipts now owned or hereafter acquired by
it for goods or services, (c) all monies due or to become due to the Company
under all contracts for the performance of services, other than the Hospital
Contracts, by the Company or in connection with any other provision of services
(whether or not yet earned by performance on the part of the Company) now in
existence or hereafter occurring, including, but not limited to, the right to
receive the proceeds of said contracts, and (d) all collateral security and
guaranties of any kind, now or hereafter in existence, given by any Person with
respect to any of the foregoing.
"AGREEMENTS" shall mean all contracts, undertakings or agreements (other
than rights evidenced by Chattel Paper, Documents or Instruments) in or under
which the Company may now or hereafter have any right, title or interest,
including, but not limited to, any or any other agreements relating to the terms
of payment or the terms of performance of any Account.
"CHARGE" shall mean any federal, state, county, city, municipal, local,
foreign or other governmental tax at the time due and payable, levy, assessment,
charge, lien, claim or encumbrance upon or relating to: (i) the Collateral; (ii)
the Secured Obligations; (iii) the employees, payroll, income or gross receipts
of the Company; (iv) the ownership or use of any of the assets of the Debtor; or
(v) any other aspect of the business of the Debtor.
"CHATTEL PAPER" shall mean all "chattel paper," as such term is defined in
the UCC, now owned or hereafter acquired by the Debtor, wherever located.
"COLLATERAL" shall have the meaning specified in SECTION 2.1.
"CONTRACT" shall mean all of the Company's right, title, and interest in
and to each presently existing and hereafter arising loan account, account,
contract right, Instrument, note, document, chattel paper, general intangible,
and all other forms of obligations owing to the Company, all rights of the
Company to receive payment thereof, together with all other rights of the
Company obtained in connection therewith, and any collateral therefor.
"CONTRACT DEBTOR" shall mean each person who is obligated to the Company to
perform any duty under or to make any payment pursuant to the terms of a
Contract.
"DEFAULT" means any event which is, or after notice or lapse of time or
both would be, an Event of Default.
"DOCUMENTS" shall mean all "documents," as such term is defined in the UCC,
now owned or hereafter acquired by the Company, wherever located.
"EVENT OF DEFAULT" shall have the meaning set forth in SECTION 8 of this
Agreement.
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"GOVERNMENTAL AUTHORITY" shall mean any nation or government, any state or
other political subdivision thereof, and any agency, department or other entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"HOSPITAL CONTRACTS" shall mean all contracts between the Company and
hospitals pursuant to which aircraft of the Company pledged to FINOVA Capital
Corporation are employed to provide emergency medical transportation services.
"INSTRUMENTS" shall mean all "instruments," as such term is defined in the
UCC, now owned or hereafter acquired by the Company, wherever located,
including, but not limited to, all certificate securities, all certificates of
deposit, and all notes and other evidences of indebtedness, other than
instruments that constitute, or are a part of a group or writings that
constitute, Chattel Paper.
"LIEN" and "LIENS" shall mean any mortgage, pledge, hypothecation,
assignment, deposit arrangement, lien (including, but not limited to, judgment
liens, liens of suppliers and other Persons for the provision of goods or
services, and all other liens arising under statute, common law or judicial
interpretation), liens securing any Charge, claim, security interest,
preference, priority or other security agreement or other preferential
arrangement of any kind or nature whatsoever intended or having the effect of
providing security for an obligation (including, but not limited to, any lease
or title retention agreement, any financing lease having substantially the same
economic effect as any of the foregoing, and the filing of, or agreement to
give, any financing statement perfecting a security interest under the UCC or
comparable law of any jurisdiction).
"PERMITTED LIENS" shall mean (i) the security interest granted to
California State Bank or any subsequent lender (the "Senior Lender"), to secure
indebtedness up to $700,000 of the Company to the Senior Lender; (ii) any
purchase money security interest and (iii) any tax liens for taxes of the
Company not yet due and payable or which are being contested in good faith.
"PROCEEDS" shall mean "proceeds," as such term is defined in the UCC and,
in any event, shall include, but not be limited to, (a) any and all proceeds of
any insurance, indemnity, warranty or guaranty payable to the Company from time
to time with respect to any Collateral, (b) any and all payments (in any form
whatsoever) made or due and payable to the Company from time to time in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any Governmental Authority
(or any person acting under color of Governmental Authority), (c) any recoveries
by the Company against third parties with respect to any litigation or dispute
concerning any of the Collateral, and (d) any and all other amounts from time to
time paid or payable under or in connection with any Collateral, upon
disposition, sale, transfer or otherwise.
"SECURED OBLIGATIONS" shall mean all debts, liabilities, and obligations,
for monetary amounts (whether or not such amounts are liquidated or
determinable), or otherwise, owing by the Debtor to Secured Party, and all
covenants and duties regarding such amounts, of any kind or nature, present or
future, contingent or liquidated, whether or not evidenced by any note,
agreement or other instrument, the payment or performance of which is provided
for or arises now or hereafter under the Notes or the Purchase Agreement
including, but not limited to, all interest, fees, charges, expenses, attorneys'
fees and any other sum chargeable to the Debtor thereunder.
"UCC" shall mean the Uniform Commercial Code as the same may, from time to
time, be in effect in the State of California; PROVIDED, that in the event that,
by reason of mandatory provisions of
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law, any or all of the attachment, perfection or priority of, or the remedies
with respect to, Secured Party's security interest in any Collateral is governed
by the Uniform Commercial Code as in effect in a jurisdiction other than the
State of California, the term "UCC" shall mean the Uniform Commercial Code as in
effect in such other jurisdiction for purposes of the provisions of this
Agreement relating to such attachment, perfection, priority or remedies and for
purposes of the definitions related to such provisions.
2. GRANT OF SECURITY INTEREST
2.1 GRANT; DESCRIPTION OF COLLATERAL. To secure the prompt and complete
payment, performance and observance of all of the Secured Obligations, and to
induce Secured Party to enter into the Purchase Agreement and to consummate the
transactions contemplated thereby, the Debtor hereby pledges and grants to
Secured Party, and the Company hereby consents to the grant by Debtor to Secured
Party of, a security interest in all of the Company's right, title and interest
in, to and under the following property, whether now owned or owing, or
hereafter acquired or arising, and regardless of where located (all of which
being hereinafter collectively referred to as the "Collateral"):
(a) all Accounts;
(b) all books and records pertaining to any of the foregoing; and
(c) to the extent not otherwise included, all Proceeds of the items
set forth in Sections 2.1(a) and (b), inclusive, and all accessions to,
substitutions and replacements for, profits and products of, each of the
items set forth in Sections 2.1(a) and (b).
2.2 INTERESTS OF SECURED PARTIES. Each Secured Party's interest in the
Collateral shall be on a parity with the interests of all other Secured Parties,
and the interest of each Secured Party in the Collateral shall be ratable in the
proportion that the aggregate indebtedness then outstanding and unpaid under the
Notes held by such Secured Party bears to the aggregate indebtedness then
outstanding and unpaid under the Notes held by all Secured parties, regardless
of when such Notes were issued.
2.3 SECURITY INTEREST ABSOLUTE. Subject to the Permitted Liens, all rights
and security interests of each Secured Party in the Collateral shall be absolute
and unconditional, irrespective of: (i) any lack of validity or enforceability
of any of the Secured Obligations or any other agreement or instrument relating
thereto; (ii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations, or any other amendment or
waiver of or any consent to any departure from terms of the Note; (iii) any
exchange or non-perfection of any Collateral for all or any of the Secured
Obligations; or (iv) any other circumstance which might otherwise constitute a
defense available to the Debtor, or a discharge of the Debtor's obligations,
with respect to the validity or enforceability of a security interest to the
Collateral.
3. SECURED PARTY'S RIGHTS; LIMITATIONS ON SECURED PARTY'S OBLIGATIONS.
3.1 CONTRACTUAL LIABILITIES. It is expressly agreed by the Debtor and the
Company that, notwithstanding anything herein to the contrary, the Company shall
remain liable under each Contract to observe and perform all the conditions and
obligations to be observed and performed by it
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thereunder, and Secured Party shall have no obligation or liability under any
Contract by reason of or arising out of this Agreement or the receipt by Secured
Party of any payment relating to any Contract pursuant hereto, and Secured Party
shall not be required or obligated in any manner to perform or fulfill any of
the obligations of the Company under or pursuant to any Contract, or to make any
payment, or to make any inquiry as to the nature or the sufficiency of any
payment received by it or the sufficiency of any performance by any party under
any Contract, or to present or file any claim, or to take any action to collect
or enforce any performance or the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or times.
3.2 ACCOUNT VERIFICATION. Subject to the following sentence, upon prior
notice to the Debtor and the Company (unless a Default or an Event of Default
has occurred and is continuing in which case no notice is necessary), the
Collateral Agent, on behalf of the Secured Parties, shall have the right, at the
Secured Parties' expense, to make test verifications of the Accounts and
physical verifications and appraisals of any other Collateral in any reasonable
manner and through any medium that the Collateral Agent, on behalf of the
Secured Parties, considers advisable, and the Debtor and the Company each agree
to furnish all such assistance and information as the Collateral Agent may
reasonably require in connection therewith. Upon the occurrence of a Default or
an Event of Default, the Debtor, on behalf of the Company, promptly upon the
Collateral Agent's request, at the Debtor's own expense, shall prepare and
deliver to the Collateral Agent the following reports: (a) a reconciliation of
all Accounts; (b) an aging of all Accounts; and (c) an aged receivable trial
balance.
4. REPRESENTATIONS AND WARRANTIES. The Debtor and the Company each hereby
represent and warrant to each Secured Party that:
4.1 Debtor is corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware.
4.2 Debtor has all the necessary corporate power and authority to enter
into this Security Agreement and to perform the obligations to be performed by
it hereunder and to consummate the transactions contemplated hereby. This
Security Agreement has been duly authorized and approved by all necessary action
on the part of the Board of Directors and stockholders of Debtor. This Security
Agreement has been duly executed and delivered by Debtor and constitutes the
valid and binding obligation of Debtor, enforceable against Debtor in accordance
with its terms, subject as to enforceability to any applicable bankruptcy,
insolvency, moratorium or other laws affecting creditor's rights generally or
such principles of equity as a court of competent jurisdiction might apply.
4.3 Except for the Permitted Liens, so long as any of the Secured
Obligations are outstanding, the Collateral will continue to be owned solely by
the Company. Except for the Permitted Liens, the Collateral is, and from time to
time hereafter will be, free from any lien or other rights, title or interest of
any person. Except for the Permitted Liens, Debtor shall cause the Company to,
and the Company shall, defend the Collateral against any claims and demands of
all persons at any time claiming the same or any interest therein adverse to the
Secured Parties.
4.4 Assuming the filing of the UCC-1 Financing Statement in the appropriate
California state or county governmental office, the payment of all requisite
fees in connection with such filing and the satisfaction of all other filing
requirements imposed by statute or otherwise, all filings, registrations and
recordings necessary or appropriate to create, preserve, protect and perfect the
security interest granted by Debtor to Secured Parties hereby in respect of the
Collateral will have been accomplished
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and the security interest granted to Secured Parties pursuant to this Security
Agreement in and to the Collateral will constitute a valid and enforceable
perfected security interest therein.
4.5 Except for the Permitted Liens, so long as any of the Secured
Obligations remain unpaid, neither Debtor nor the Company will execute or
authorize to be filed at any public office any other financing statement (or
similar statement or instrument of registration under the law of any
jurisdiction) or statements relating to the Collateral, except financing
statements filed or to be filed in respect of and covering the security interest
granted hereby by Debtor or upon obtaining the prior written consent of the
Secured Parties.
4.6 On the date hereof, the Company (i) is solvent, after giving effect to
the payments and transactions contemplated by the Purchase Agreement and this
Agreement, (ii) is able to pay its debts as they become due and has capital
sufficient to carry on its business and all businesses in which it is about to
engage and (iii) now owns property having a value both at fair valuation and at
present fair saleable value greater than the amount required to pay its debts
and contingent obligations, including without limitation, the Secured
Obligations. The Company will not be rendered insolvent by the execution and
delivery of the Purchase Agreement, the Notes or this Agreement or any of the
other documents or instruments relating thereto or hereto or by the transactions
contemplated thereunder or hereunder.
4.7 No representations or warranties of Debtor or the Company contained in
this Agreement or in any document, statement or certificate furnished or to be
furnished pursuant to this Agreement, contain any untrue statement of material
fact, or omit to state a material fact necessary to make the statements of fact
not misleading.
4.8 The representations and warranties set forth in this SECTION 4 shall
survive the execution and delivery of this Agreement.
5. COVENANTS. The Debtor and the Company each covenant and agree with the
Secured Parties that, from and after the date of this Agreement and until the
date on which all Secured Obligations shall have been indefeasibly paid in full:
5.1 FURTHER ASSURANCES. At any time and from time to time, upon the request
of the Collateral Agent and at the sole expense of the Debtor, the Debtor shall,
and shall cause the Company to, promptly and duly execute and deliver any and
all such further instruments and documents and take such further action as the
Collateral Agent may reasonably deem necessary to obtain the full benefits of
this Agreement and of the rights and powers herein granted, including, but not
limited to: (a) filing any financing or continuation statements under the UCC
with respect to the Lien granted hereunder; and (b) obtaining waivers, in form
and substance satisfactory to Secured Parties. The Debtor and the Company also
hereby authorize Secured Parties to file any such financing or continuation
statement without the signature of the Debtor or the Company to the extent
permitted by applicable law. Secured Parties shall, provide the Debtor with
photocopies of all such filings at the Debtor's expense.
5.2 BOOKS AND RECORDS. The Debtor shall, and shall cause the Company to,
keep and maintain, at its own cost and expense, satisfactory and complete
records of the Collateral, including, but not limited to, a record of any and
all payments received and any and all credits granted with respect to the
Collateral and all other dealings with the Collateral. The Debtor shall, and
shall cause the Company to, mark its books and records pertaining to the
Collateral to evidence this Agreement and
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the Lien granted hereby. Upon the occurrence and during the continuation of an
Event of Default, the Debtor shall, and shall cause the Company to, deliver and
turn over all of its books and records pertaining to the Collateral to the
Collateral Agent at any time on demand of the Collateral Agent. Prior to the
occurrence of an Event of Default, upon prior notice from the Collateral Agent,
the Debtor shall, and shall cause the Company to, permit the Collateral Agent to
inspect such books and records and shall provide photocopies thereof to the
Collateral Agent at the Secured Parties' expense; PROVIDED, HOWEVER, that the
Collateral Agent shall not be entitled to exercise such right more than four (4)
times in any calendar year.
5.3 IDENTITY. The Debtor shall not, and shall cause the Company to not
change its name, identity or structure in any manner that might make any
financing or continuation statement filed in connection herewith misleading
within the meaning of the UCC unless Debtor shall have given Secured Party at
least 30 days' prior written notice thereof and shall have taken all action (or
made arrangements satisfactory to the Collateral Agent, at the Debtor's expense,
to take such action substantially simultaneously with such change if it is
impossible to take such action in advance) necessary or reasonably requested by
the Collateral Agent to amend such financing statement or continuation statement
so that it is not misleading.
5.4 COLLATERAL TRANSFER, REMOVAL OR SALE. The Debtor shall not, and shall
cause the Company to not, without the prior written consent of the Secured
Parties, sell, assign, transfer or otherwise dispose of any Collateral, other
than sales in the ordinary course, consistent with past practices and in a
manner consistent with the best interests of the Debtor, the Company and its
shareholders.
6. COLLATERAL AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT.
6.1 APPOINTMENT; POWERS. Upon the occurrence and during the continuation of
an Event of Default (except as otherwise provided below), the Debtor and the
Company hereby irrevocably constitutes and appoints the Collateral Agent and any
officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place
and stead of the Debtor and the Company and in the name of the Debtor and the
Company or in its own name, from time to time in the Collateral Agent's
discretion, for the purpose of carrying out the terms of this Agreement, to take
any and all appropriate action and to execute and deliver any and all documents
and instruments which may be necessary to accomplish the purposes of this
Agreement and, without limiting the generality of the foregoing, hereby grants
to the Collateral Agent the power and right, on behalf of the Debtor and the
Company, without notice to or assent by the Debtor or the Company, to do the
following, all at the Debtor's expense:
(a) in the name of the Debtor or the Company, or in its own name or
otherwise, take possession of, endorse and receive payment of any checks,
drafts, notes, acceptances, or other Instruments for the payment of monies
due under any Collateral;
(b) receive payment of any and all monies, claims and other amounts
due or to become due at any time arising out of or in respect of any
Collateral;
(c) ask, demand, collect, receive and give acquaintances and receipts
for any and all money due or to become due under any Collateral;
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(d) pay or discharge any charges or Liens levied or placed on or
threatened against the Collateral;
(e) direct any party liable for any payment under or in respect of any
of the Collateral to make payment of any and all monies due or to become
due thereunder, directly to the Collateral Agent or as the Collateral Agent
shall direct;
(f) settle, compromise or adjust any suit, action or proceeding
described in this Section 6.1 and, in connection therewith, give such
discharges or releases as the Collateral Agent may deem appropriate;
(g) file any claim or take or commence any other action or proceeding
in any court of law or equity or otherwise deemed appropriate by the
Collateral Agent for the purpose of collecting any and all such monies due
under any Collateral whenever payable;
(h) commence and prosecute any suits, actions or proceedings at law or
in equity in any court to collect the Collateral or any part thereof and to
enforce any other right in respect of any Collateral;
(i) defend any suit, action or proceeding brought against the Debtor
or the Company with respect to any Collateral if the Debtor or the Company
does not defend such suit, action or proceeding or if the Collateral Agent
believes that the Debtor or the Company is not pursuing such defense in a
manner that will minimize the loss with respect to such Collateral and the
Secured Parties' security interest therein; and
(j) sell, transfer, pledge, make any agreement with respect to, or
otherwise deal with any of the Collateral as fully and completely as though
the Collateral Agent were the absolute owner thereof for all purposes, and
to do, at the Collateral Agent's option, at any time or from time to time,
all acts and other things that the Collateral Agent deems necessary to
perfect, preserve or realize upon the Collateral and the Secured Parties'
Lien therein in order to effect the intent of this Agreement, all as fully
and effectively as the Debtor and the Company might do.
6.2 RATIFICATION. The Debtor and the Company hereby ratify, to the extent
permitted by law, all that said attorneys shall lawfully do or cause to be done
by virtue hereof. The power of attorney granted pursuant to this SECTION 6 is a
power coupled with an interest and shall be irrevocable until all Secured
Obligations shall have been indefeasibly paid in full.
6.3 DUTIES AND LIABILITIES. The powers conferred on the Collateral Agent
hereunder are solely to protect Secured Parties' interests in the Collateral and
shall not impose any duty upon it to exercise any such powers. The Collateral
Agent shall be accountable only for amounts that it actually receives as a
result of the exercise of such powers and neither the Collateral Agent nor any
Secured Party of its officers, directors, partners, employees, agents or
representatives shall be responsible or liable to the Debtor or the Company for
any act or failure to act.
6.4 COMMUNICATION WITH THIRD PARTIES; SALE OF COLLATERAL. Upon the
occurrence and during the continuation of an Event of Default, the Debtor and
the Company also authorize the Collateral Agent, at any time and from time to
time, (a) to communicate in the Collateral Agent's own name with any account
debtor with regard to the assignment of the right, title and interest of the
Company in and
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under the Accounts and other matters relating thereto, and (b) to execute, in
connection with the sale provided for in SECTION 9 hereof, any endorsements,
assignments or other instruments of conveyance or transfer with respect to the
Collateral.
7. PERFORMANCE BY SECURED PARTY OF THE DEBTOR'S OBLIGATIONS. If either the
Debtor or the Company fails to perform or comply with any of its agreements
contained herein or under the Note, and the Collateral Agent shall, on behalf of
the Secured Parties, itself perform or comply, or otherwise cause performance of
or compliance with such agreement, then the expenses (including, but not limited
to, attorneys' fees) of the Collateral Agent incurred in connection with such
performance or compliance, together with applicable interest thereon at the rate
then in effect in accordance with the terms of the Note, shall be payable by the
Debtor to the Collateral Agent, on behalf of the Collateral Agent, on demand and
shall constitute Secured Obligations secured hereby.
8. EVENTS OF DEFAULT. The occurrence of any one or more the following events
shall constitute an "Event of Default" hereunder:
8.1 FAILURE TO MEET SECURED OBLIGATIONS. There shall occur an Event of
Default if the Debtor shall fail to meet its Secured Obligations upon the terms
set forth in the Note or the Purchase Agreement or if an "Event of Default" (as
defined in the Note) shall have occurred.
8.2 MISREPRESENTATION. Any warranty or representation of Debtor or the
Company to Secured Party in this Security Agreement proves to have been false or
misleading in any material respect when made.
8.3 BREACH OF COVENANTS. Debtor or the Company shall fail or neglect to
perform, keep or observe any covenant or obligation of Debtor or the Company
contained in this Security Agreement and the breach of any such covenant or
obligation is not cured within thirty (30) days after Debtor's or the Company's
(as appropriate) receipt of notice of such breach from Secured Party.
8.4 INSOLVENCY, ETC. Debtor or the Company shall suffer the appointment of
a receiver, trustee, custodian or similar fiduciary for all or substantially all
of their respective assets, or shall make an assignment for the benefit of
creditors, or any petition for an order for relief shall be filed by or against
Debtor or the Company under any applicable bankruptcy law and such appointment
or proceeding, as the case may be, is not controverted within thirty (30) days,
or is not dismissed within ninety (90) days, after such appointment or
commencement of such proceeding (as the case may be).
9. REMEDIES; RIGHTS UPON AN EVENT OF DEFAULT.
9.1 RIGHTS UPON COLLATERAL. If any Event of Default shall occur and be
continuing, the Collateral Agent, on behalf of the Secured Parties, and with the
written consent of Secured Parties which together hold more than 50% of the
aggregate indebtedness then outstanding under the Notes (the "Majority
Holders"), may exercise, in addition to all other rights and remedies granted to
it under the Note, this Agreement, or any other instrument or agreement
securing, evidencing or relating to the Secured Obligations, all rights and
remedies of a secured party under the UCC. Without limiting the generality of
the foregoing, the Debtor and the Company expressly agree that in any such event
the Collateral Agent may, with the written consent of the Majority Holders,
without demand of performance or other demand, advertisement or notice of any
kind (except the notice specified below of time and place of public or private
sale) to or upon the Debtor, the Company or any other Person (all
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and each of which demands, advertisements and notices are hereby expressly
waived to the maximum extent permitted by the UCC and other applicable law),
forthwith enter upon the premises of the Debtor or the Company where any
Collateral is located through self-help, without judicial process, without first
obtaining a final judgment or giving the Debtor or the Company notice and
opportunity for a hearing on the Collateral Agent's claim or action, and without
paying rent to the Debtor or the Company, and collect, receive, assemble,
process, appropriate and realize upon the Collateral, or any part thereof, and
may forthwith sell, lease, assign, give an option or options to purchase, or
sell or otherwise dispose of and deliver said Collateral (or contract to do so),
or any part thereof, in one or more parcels at public or private sale or sales
or at any exchange, at such prices as it may deem best, for cash or on credit or
for future delivery without assumption of any credit risk. The Collateral Agent
shall have the right upon any such public sale or sales and, to the extent
permitted by law, upon any such private sale or sales, to purchase for the
benefit of the Secured Parties the whole or any part of said Collateral so sold,
free of any right or equity of redemption, which equity of redemption the Debtor
and the Company hereby release. Such sales may be adjourned or continued from
time to time with or without notice. The Collateral Agent shall have the right
to conduct such sales on the Debtor's or the Company's premises or elsewhere and
shall have the right to use the Debtor's or the Company's premises without
charge for such sales for such time or times as the Collateral Agent deems
necessary or advisable.
The Debtor and the Company further agree, if an Event of Default has
occurred and is continuing, at the Collateral Agent's request, to assemble the
Collateral and make it available to the Collateral Agent at places which the
Collateral Agent shall select, whether at the Debtor's premises, the Company's
premises or elsewhere. Until the Collateral Agent is able to effect a sale,
lease, or other disposition of any Collateral, the Collateral Agent shall have
the right to use or operate the Collateral, or any part thereof, to the extent
that it deems appropriate for the purpose of preserving the Collateral or its
value or for any other purpose deemed appropriate by the Collateral Agent. The
Collateral Agent shall have no obligation to the Debtor or the Company to take
any action to maintain or preserve the rights of the Debtor or the Company as
against third parties with respect to any Collateral while such Collateral is in
the possession of the Collateral Agent. The Collateral Agent may, with the
written consent of the Majority Holders, seek the appointment of a receiver or
keeper to take possession of Collateral and to enforce any of the Secured
Parties' remedies with respect to such appointment without prior notice or
hearing. The Collateral Agent shall apply the net proceeds of any such
collection, recovery, receipt, appropriation, realization or sale, as provided
in SECTION 10 hereof. The Debtor shall remain liable for any deficiency
remaining unpaid after such application, and only after so paying over such net
proceeds and after the payment by the Collateral Agent of any other amount
required by any provision of law. To the maximum extent permitted by applicable
law, the Debtor and the Company waive all claims, damages, and demands against
the Collateral Agent and any Secured Party arising out of the repossession,
retention or sale of the Collateral. The Debtor and the Company agree that ten
(10) days' prior notice by the Collateral Agent to it of the time and place of
any public sale or of the time after which a private sale may take place is
reasonable notification of such matters. The Debtor shall remain liable for (a)
any deficiency if the proceeds of any sale or disposition of the Collateral are
insufficient to pay all amounts to which the Secured Parties are entitled, and
(b) any and all costs and expenses incurred by the Collateral Agent and any
Secured Party, including, but not limited to, attorneys' fees, to collect such
deficiency.
9.2 FEES. The Debtor agrees to pay any and all expenses of the Collateral
Agent (including, but not limited to, attorneys' fees and appraisal costs)
reasonably incurred in connection
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with the enforcement of any of its rights and remedies hereunder in connection
with a Default or Event of Default.
9.3 WAIVER. Except as otherwise specifically provided herein, (to the
maximum extent permitted by applicable law), the Debtor and the Company each
hereby waives presentment, demand, protest or any notice of any kind in
connection with this Agreement or any Collateral.
10. APPLICATION OF PROCEEDS. The Proceeds of any sale, disposition or other
realization upon all or any part of the Collateral shall be distributed by the
Collateral Agent on behalf of the Secured Parties, upon receipt, in the
following order of priorities, subject to the rights of the Senior Lender:
FIRST, to the Secured Parties, on a pro rata basis, in accordance with
the then outstanding unpaid principal balances of the Notes held by
such Secured Parties in an amount sufficient to pay in full the
expenses of the Secured Parties in connection with such sale,
disposition or other realization, including, but not limited to, all
expenses, liabilities and advances incurred or made by Secured Parties
in connection therewith, including, but not limited to, attorneys'
fees;
SECOND, to Secured Parties, on a pro rata basis, in accordance with
the then outstanding unpaid principal balances of the Notes held by
such Secured Parties to be applied, first, to all accrued but unpaid
interest on, and, second, to all principal of, the Note, on a pro rata
basis, in accordance with the then outstanding unpaid principal
balances of the Notes held by such Secured Parties;
THIRD, to all other Secured Obligations; and
FINALLY, upon payment in full of all of the Secured Obligations, to
the Debtor or whomsoever may be lawfully entitled to receive the same,
or as a court of competent jurisdiction may direct.
11. POWERS AND DUTIES OF COLLATERAL AGENT.
(a) Each of the Secured Parties irrevocably authorizes the Collateral
Agent, who has been designated in the manner described in SCHEDULE 11(A)
attached hereto, to take such action and to exercise such powers hereunder
as provided herein or as requested in writing by the Majority Holders,
which may include the Collateral Agent in its capacity as a Secured Party,
in accordance with the terms hereof, together with such powers as are
reasonably incidental thereto. No Secured Party may take any such action or
exercise such powers except through and by way of an authorized action of
the Collateral Agent. The Collateral Agent may execute any of its duties
hereunder by or through agents or employees and shall be entitled to
request and to act in reliance upon the advice of counsel concerning all
matters pertaining to its duties hereunder.
(b) Neither the Collateral Agent nor any of its partners, officers or
employees shall be liable or responsible to any of the Secured Parties, to
Debtor or to the Company for any action taken or omitted to be taken by it
or any of them hereunder or under any related agreement, instrument or
document, except in the case of gross negligence or willful misconduct on
the part of the Collateral
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<PAGE>
Agent, nor shall the Collateral Agent or any of its partners, officers or
employees be liable or responsible for (i) the validity, effectiveness,
sufficiency, enforceability or enforcement of this Security Agreement or
any instrument or document delivered hereunder or relating hereto; (ii) the
title of the Company to any of the Collateral or the freedom of any of the
Collateral from any prior or other liens or security interests; (iii) the
determination or verification of the value of the Collateral; (iv) the
determination, verification or enforcement of Debtor's or the Company's
compliance with any of the terms and conditions of this Agreement; (v) the
failure by Debtor or the Company to deliver any instrument or document
required to be delivered pursuant to the terms thereof; or (vi) the
receipt, disbursement, waiver, extension or other handling of payments or
proceeds made or received with respect to the Collateral, the servicing of
the Collateral or the enforcement or collection of any amounts owing with
respect to the Collateral.
(c) The Collateral Agent shall be entitled to rely on any
communication, instrument or document believed by it to be genuine or
correct and to have been signed or sent by a person or persons believed by
it to be the proper person or persons, and it shall be entitled to rely as
to all legal matters on opinions of counsel selected by it. In the case of
this Security Agreement and the transactions contemplated hereby and any
related agreement and each document relating to any of the Collateral, each
of the Secured Parties agrees to pay to the Collateral Agent, on demand,
pro rata in accordance with the then outstanding unpaid principal balances
of the Note held by it or him, all fees and all expenses incurred in
connection with the operation and enforcement of this Security Agreement
which were approved in advance by the Majority Holders, any related
agreement or such other documents, as the case may be, to the extent that
such fees or expenses have not been paid by Debtor. In the case of this
Security Agreement and each instrument and document relating to any of the
Collateral, each of the Secured Parties hereby agrees to hold the
Collateral Agent harmless, and to indemnify the Collateral Agent from and
against any and all loss, damage, expense or liability which may be
incurred by the Collateral Agent in its capacity as Collateral Agent under
this Security Agreement and the transactions contemplated hereby and any
related agreement or such other instrument or document, as the case may be,
unless such liability shall be caused by the willful misconduct or gross
negligence of the Collateral Agent.
(d) The Collateral Agent hereby is authorized to record, file or
otherwise perfect in its name all of the Collateral which is mortgaged,
pledged, assigned, transferred or granted to the Secured Parties hereunder
in the appropriate jurisdiction with respect to all such Collateral;
PROVIDED, HOWEVER, that the Collateral Agent shall not be required to take
any such action in any jurisdiction wherein the taking of such action and
other actions contemplated by this Security Agreement would, in the opinion
of the Collateral Agent or local counsel, require the Collateral Agent to
qualify, register or be licensed to do business under the laws of the
jurisdiction in question by reason of the taking of such action.
(e) If, at any time, the Collateral Agent shall deem it advisable, in
its sole discretion, it may submit to each of the Secured Parties a written
notification of its resignation as Collateral Agent under this Agreement,
such resignation to be effective as of the 61st day after the date of such
notice, whereupon the Majority Holders shall appoint a successor Collateral
Agent in the manner described in SCHEDULE 11(A) attached hereto, which may
but need not be a Secured Party. The Collateral Agent may be removed at any
time by the Majority Holders upon at least 10 days' prior written notice;
PROVIDED, HOWEVER, that a substitute satisfactory to such Majority Holders
shall have agreed in writing to assume the duties of the Collateral Agent
hereunder.
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12. REINSTATEMENT. This Agreement shall remain in full force and effect and
continue to be effective should any petition be filed by or against the Debtor
or the Company for liquidation or reorganization, should the Debtor or the
Company become insolvent or make an assignment for the benefit of creditors, or
should a receiver or trustee be appointed for all or any significant part of the
Debtor's or the Company's assets, and shall continue to be effective or be
reinstated, as the case may be, if at any time payment and performance of the
Obligations, or any part thereof, is, pursuant to applicable law, rescinded or
reduced in amount, or must otherwise be restored or returned by any obligee of
the Secured Obligations, whether as a "voidable preference," "fraudulent
transfer" or otherwise, all as though such payment or performance had not been
made. In the event that any payment, or any part thereof, is rescinded, reduced,
restored or returned, the Secured Obligations shall be reinstated and deemed
reduced only by such amount paid and not so rescinded, reduced, restored or
returned.
13. SUBORDINATION. The Secured Parties agree that the payment of the Secured
Obligations is subordinated to payment in full of all indebtedness up to
$700,000 of the Debtor to the Senior Lender and the security interest in the
Collateral is subordinate to the security interest in such Collateral granted to
the Senior Lender. The Secured Parties agree to execute such documents as the
Senior Lender may reasonably require from time to time to evidence such
subordination and to enable the Senior Lender to enforce and perfect its first
priority security interest in the Collateral.
14. NOTICES. Any written notice, consent or other communication provided for in
this Security Agreement shall be deemed given if delivered by hand, by courier
against receipt, by certified or registered mail, return receipt requested, or
by overnight delivery service providing evidence of receipt, at the following
addresses, or to such other address with respect to any party as such party
shall notify the other in writing:
Secured Parties: To the addresses set forth opposite their
respective names on Schedule 1 hereto.
Collateral Agent: J. Steven Dickmeyer
3180 Los Verdes Drive
Fallbrook, California 92028
Debtor: Air Methods Corporation
7301 South Peoria
Englewood, CO 80112
Attn: President
Company: Mercy Air Service, Inc.
8190 Mango Avenue
Fontana, CA 92334
Attn: President
15. SEVERABILITY. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or
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unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. This Agreement is to be
read, construed and applied together with the Purchase Agreement and the Notes
which, taken together, set forth the complete understanding and agreement of
Secured Parties, the Debtor and the Company with respect to the matters referred
to herein and therein.
16. NO WAIVER; CUMULATIVE REMEDIES. The Secured Parties shall not, by any act,
delay, omission or otherwise, be deemed to have waived any of their respective
rights or remedies hereunder, and no waiver shall be valid against any Secured
Party unless in writing, signed by such Secured Party and then only to the
extent therein set forth. A waiver by a Secured Party of any right or remedy
hereunder on any one occasion shall not be construed as a bar to any right or
remedy which such Secured Party would otherwise have on any future occasion and
shall not be construed as a waiver of any right or remedy of any other Secured
Party. Neither any Secured Party's failure to exercise, nor any delay in
exercising, any right, power or privilege hereunder, shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or future exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies
hereunder provided are cumulative and may be exercised singly or concurrently,
and are not exclusive of any rights and remedies provided by law. None of the
terms or provisions of this Agreement may be waived, altered, modified or
amended except by a written instrument duly executed by the Secured Parties, the
Collateral Agent, the Debtor and the Company.
17. LIMITATION BY LAW. All rights, remedies and powers provided in this
Agreement may be exercised only to the extent that the exercise thereof does not
violate any applicable provision of law, and all the provisions of this
Agreement are intended to be (i) subject to all applicable mandatory provisions
of law that may be controlling and (ii) limited to the extent necessary so that
they do not render this Agreement invalid or unenforceable, in whole or in part,
or not entitled to be recorded, registered, or filed under the provisions of any
applicable law.
18. TERMINATION OF THIS AGREEMENT. Subject to SECTION 12 hereof, this Agreement
shall terminate upon the date on which all Secured Obligations have been paid in
full. For purposes of this SECTION 18, all Secured Obligations shall be deemed
to have been paid in full at such time as (i) the Debtor shall have fully
satisfied its obligations with respect to the payment of all principal, premium,
interest and other amounts which are or may become due and payable under the
Notes and the Purchase Agreement; and (ii) the Debtor shall have fully satisfied
its obligations with respect to the payment of all accrued and unpaid expenses
(including expense reimbursements) and fees then payable by the Debtor to
Secured Parties, the Collateral Agent or their respective affiliates under this
Agreement. Once the Secured Parties are satisfied that all Secured Obligations
have been paid in full and the Secured Parties do not believe that reinstatement
of the Secured Obligations pursuant to SECTION 12 is possible, the Secured
Parties shall prepare, execute and deliver UCC-3 Financing Statement(s) to the
Debtor to be filed with the Secretary of State of the State of California.
19. SUCCESSORS AND ASSIGNS. This Agreement and all obligations of the Debtor and
the Company hereunder shall be binding upon the successors and assigns of the
Debtor and the Company and, together with the rights and remedies of the Secured
Parties hereunder, shall inure to the benefit of the Secured Parties, all future
holders of any instrument evidencing any of the Secured Obligations, and their
respective successors and assigns. No sales of participations, other sales,
assignments, transfers or other dispositions of any agreement governing or
instrument evidencing any of the Secured
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Obligations or any portion thereof or interest therein shall in any manner
affect the Lien granted to any Secured Party hereunder.
20. ENFORCEMENT. In the event that the Debtor or the Company fail to observe or
perform any covenant or agreement to be observed or performed under this
Agreement, the Secured Parties may proceed to protect and enforce their rights
by suit in equity or action at law, whether for specific performance of any term
contained in this Agreement or for an injunction against the breach of any such
term or in aid of the exercise of any power granted in this Agreement or to
enforce any other legal or equitable right of the Secured Parties, or to take
any one or more of such actions. The Debtor agrees to pay all fees, costs, and
expenses, including without limitation, fees and expenses of attorneys,
accountants and other experts retained by the Secured Parties, and all fees,
costs and expenses of appeals incurred or expended by the Secured Parties in
connection with the enforcement of this Agreement or the collection of any sums
due hereunder, whether or not suit is commenced. None of the rights, powers or
remedies conferred under this Agreement shall be mutually exclusive, and each
such right, power or remedy shall be cumulative and in addition to any other
right, power or remedy whether conferred by this Agreement or now or hereafter
available at law, in equity, by statute or otherwise.
21. DESCRIPTIVE HEADINGS. The descriptive headings of the several paragraphs of
this Agreement are for convenience of reference only and do not constitute a
part of this Agreement and are not to be considered in construing or
interpreting this Agreement.
22. GOVERNING LAW. In all respects, including all matters of construction,
validity and performance, this Agreement and the rights and obligations arising
hereunder shall be governed by, and construed and enforced in accordance with,
the laws of the State of California applicable to contracts made and performed
in such state, without regard to principles thereof regarding conflicts of laws.
23. WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX
FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN
EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL
LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR
DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO
ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, AND UNDERSTANDING THEY ARE WAIVING A CONSTITUTIONAL RIGHT, THE
PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR
PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER IN CONTRACT, TORT, OR
OTHERWISE, ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO, THIS
AGREEMENT, AND/OR THE TRANSACTIONS COMPLETED HEREBY OR THEREBY.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Security
Agreement to be executed and delivered by its duly authorized officer on the
date first set forth above.
"DEBTOR"
Air Methods Corporation,
a Delaware corporation
By:
------------------------------------
Its:
-----------------------------------
"COMPANY'"
Mercy Air Service, Inc.,
a California corporation
By:
------------------------------------
Its:
-----------------------------------
"COLLATERAL AGENT"
---------------------------------------
J. Steven Dickmeyer
"SECURED PARTIES"
---------------------------------------
Richard J. Silva, an individual
---------------------------------------
Homer L. Aerts, an individual
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---------------------------------------
Donald D. Reed
---------------------------------------
Terry L. Russ
---------------------------------------
J. Steven Dickmeyer
<PAGE>
EXHIBIT C
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made and entered into as of July
31, 1997, between Air Methods Corporation, a Delaware corporation (the
"Company"), and David L. Dolstein, an individual person (the "Executive").
RECITAL
A. The Company desires to employ the Executive as President of its
wholly-owned subsidiary Mercy Air Services, Inc., a California corporation
("Mercy"), and the Executive desires to be employed by the Company in such
position upon the terms and conditions set forth in this Agreement.
B. The Executive acknowledges that during the course of the Executive's
employment the Executive will receive or be exposed to certain confidential
information and trade secrets (collectively referred to as "Confidential
Information") of the Company and Mercy. The Executive also acknowledges that
this Confidential Information is among the Company's and Mercy's most important
assets and that the value of this Confidential Information would be diminished
or extinguished by disclosure.
AGREEMENT
In consideration of the mutual promises contained herein, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Employment; Position; Term. The Company hereby employs the Executive and
the Executive hereby accepts employment with the Company in the capacity of
President of Mercy. Subject to Section 4, the term of Executive's employment
under this Agreement (the "Term") shall be for one year, beginning July 31,
1997. The Term shall be extended for successive one-year periods on July 31 of
each year beginning July 31, 1998, unless on or before May 31 prior to any such
renewal date the Company or the Executive provides written notice to the other
of its or his intention not to renew this Agreement.
2. Duties, Responsibilities and Authority. In his capacity as President of
Mercy, the Executive shall have primary responsibility for the overall
management and operation of Mercy, including directing and planning long and
short range strategies for air medical activities, service pricing, operations
coordination, budgetary planning, contract negotiations, aircraft control,
maintenance coordination and fleet distribution, all of which shall be conducted
in accordance with policies established by the Company's board of directors (the
"Board"). In his capacity as President, the Executive shall report to and be
subject to the direction and control of the Board. The Executive shall devote
his full professional and managerial time and effort to the performance of his
duties as President and he shall not engage in any other business activity or
activities which, in the mutual judgment of the Executive and the Board,
conflict with the performance of his duties under this Agreement.
<PAGE>
3. Compensation.
(a) SALARY. For services rendered under this Agreement, the Company shall
pay the Executive a salary at the rate of $125,000 per annum, payable in equal
bi-weekly installments.
(b) ANNUAL REVIEW. The Executive's salary shall be reviewed annually
beginning July 31, 1998 and may be adjusted as the Board deems appropriate.
(c) STOCK OPTIONS. Concurrently with the effectiveness of this Agreement,
and pursuant to action of the Board, the Executive shall be granted an option
under the Company's Stock Option Plan to purchase up to 50,000 shares of the
Company's Common Stock at an exercise price equal to the fair market value on
the date hereof. Such stock options shall be evidenced by a Stock Option
Agreement, a form of which is attached hereto as EXHIBIT A, which sets forth all
applicable terms of the option grants. In addition, the Executive may
participate in stock option programs of the Company upon such terms as the
administrators of such programs in their discretion determine.
(d) BENEFITS AND VACATION. The Executive shall be eligible to participate
in such insurance programs (health, disability or life) or such other health,
dental, retirement or similar employee benefits programs as the Board may
approve, on a basis comparable to that available to other officers and executive
employees of the Company. The Executive shall be entitled to four (4) weeks of
paid vacation. Vacation time may be accumulated for up to one year beyond the
year for which it is accrued and may be used any time during such year. Any
vacation time not used during such additional year shall be forfeited. The value
of any accrued but unused and unforfeited vacation time shall be paid in cash to
the Executive upon termination of his employment for any reason.
(e) REIMBURSEMENT OF EXPENSES. The Company shall reimburse the Executive
for all reasonable out-of-pocket expenses incurred by the Executive in
connection with the performance of his duties under this Agreement; provided
that the Executive presents to the Company an itemized accounting of such
expenses including reasonable supporting data.
4. Termination.
(a) TERMINATION BY THE COMPANY WITHOUT CAUSE. Notwithstanding anything to
the contrary contained herein but subject to Section 7 hereof, the Company may,
by delivering thirty (30) days' prior written notice to the Executive, terminate
the Executive's employment at any time without Cause (as hereinafter defined).
(b) TERMINATION BY THE EXECUTIVE WITHOUT CAUSE. Notwithstanding anything to
the contrary contained herein but subject to Section 7 hereof, the Executive
may, by
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delivering thirty (30) days' prior written notice to the Company, terminate the
Executive's employment hereunder.
(c) TERMINATION BY THE COMPANY FOR CAUSE. The Company may terminate the
Executive's employment for Cause immediately upon written notice stating the
basis for such termination. "Cause" for termination of the Executive's
employment shall only be deemed to exist if the Executive has (i) breached this
Agreement and if such breach continues or recurs more than thirty (30) days
after notice from the Company specifying the action which constitutes the breach
and demanding its discontinuance, (ii) exhibited willful disobedience of
directions of the Board, or (iii) committed gross malfeasance in performance of
his duties hereunder or acts resulting in an indictment charging the Executive
with the commission of a felony; provided that the commission of acts resulting
in such an indictment shall constitute Cause only if a majority of the directors
who are not also subject to any such indictment determine that the Executive's
conduct has substantially adversely affected the Company or its reputation. A
material failure to perform his duties hereunder that results from the
disability of the Executive shall not be considered Cause for his termination.
5. Disability. In the event of disability of the Executive during the term
hereof, the Company shall, during the continuance of his disability but only for
a maximum of 90 days, pay the Executive his then current salary, as provided for
in Section 3(a), and adjusted pursuant to Section 3(b), and continue to provide
the Executive all other benefits provided hereunder. As used herein, the term
"disability" shall mean the complete and total inability of the Executive, due
to illness, physical or comprehensive mental impairment, to substantially
perform all of his duties as described herein for a consecutive period of thirty
(30) days or more.
6. Death. In the event of the death of the Executive, except with respect
to any benefits which have accrued and have not been paid to the Executive
hereunder, the provisions of this Agreement shall terminate immediately. The
Executive's estate shall have the right to receive compensation due to the
Executive as of and to the date of his death and shall have the right to receive
an additional amount equal to one-twelfth (1/12th) of the Executive's annual
compensation then in effect.
7. Severance. In the event that the Executive's employment is terminated by
the Company other than for Cause or death of the Executive, the Executive shall
be entitled to receive his then current salary, as provided for in Section 3(a),
and adjusted pursuant to Section 3(b), payable on bi-weekly installments, for
twelve (12) months following the date of the Executive's termination by the
Company; PROVIDED, HOWEVER, that if any of such payments would (i) constitute a
"parachute payment" within the meaning of Section 280G of the Internal Revenue
Code of 1986 (the "Code") and (ii) but for this provision, be subject to the
excise tax imposed by Section 4999 of the Code (the "Excise Tax"); the amount
payable hereunder shall be reduced to the largest amount which the Executive
determines would not result in any portion of the payments hereunder being
subject to the Excise Tax. If the Executive voluntarily resigns his employment
hereunder or if his employment is terminated for Cause, the Executive shall not
be entitled to any severance pay or other compensation beyond the date of
termination of his employment.
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8. Covenant Not to Compete.
(a) During the continuance of the Executive's employment hereunder and for
a period of twelve (12) months after termination of the Executive's employment
hereunder, the Executive shall not engage in any business which competes
directly or indirectly with the Company or its affiliates within a fifty (50)
mile radius of any location in the United States where the Company or its
affiliates are conducting operations during the Executive's employment hereunder
or at the time of termination. As of the date hereof, Mercy conducts operations
in the following counties of California: Imperial, Kern, Los Angeles, Orange,
Riverside, San Bernardino, San Diego, Santa Barbara and Ventura; and the Company
conducts operations in the following locations: Bend, Oregon; Charlotte and
Winston-Salem, North Carolina; Fairfax and Roanoke, Virginia; Duluth and St.
Paul, Minnesota; Evansville, Indiana; Grand Junction, Greeley, and Aurora,
Colorado; San Antonio and Texarkana, Texas; Billings, Montana; Des Moines, Iowa;
Farmington, New Mexico; Marshfield, Wisconsin; Rockford, Illinois; Stanford,
California; and Salt Lake City, Utah.
(b) The Executive shall not, for a period of twelve (12) months after
termination of the Executive's employment hereunder, employ, engage or seek to
employ or engage, directly or indirectly, any individual or entity who is or was
employed or engaged by the Company or any of its affiliates until the expiration
of six (6) months following the termination of such person's or entity's
employment or engagement with the Company or any of its affiliates..
9. Trade Secrets and Confidential Information. During his employment by the
Company and for a period of five (5) years thereafter, the Executive shall not,
directly or indirectly, use, disseminate, or disclose for any purpose other than
for the purposes of the Company's business, any Confidential Information of the
Company or its affiliates, unless such disclosure is compelled in a judicial
proceeding. Upon termination of his employment, all documents, records,
notebooks, and similar repositories of records containing information relating
to any Confidential Information then in the Executive's possession or control,
whether prepared by him or by others, shall be left with the Company or, if
requested, returned to the Company.
10. Severability. It is the desire and intent of the undersigned parties
that the provisions of Sections 8 and 9 shall be enforced to the fullest extent
permissible under the laws in each jurisdiction in which enforcement is sought.
Accordingly, if any particular sentence or portion of either Section 8 or 9
shall be adjudicated to be invalid or unenforceable, the remaining portions of
such section nevertheless shall continue to be valid and enforceable as though
the invalid portions were not a part thereof. In the event that any of the
provisions of Section 8 relating to the geographic areas of restriction or the
provisions of Sections 8 or 9 relating to the duration of such Sections shall be
deemed to exceed the maximum area or period of time which a court of competent
jurisdiction would deem enforceable, the geographic areas and times shall, for
the purposes of this Agreement, be deemed to be the maximum areas or time
periods which a court of competent jurisdiction would deem valid and enforceable
in any state in which such court of competent jurisdiction shall be convened.
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<PAGE>
11. Injunctive Relief. The Executive agrees that any violation by him of
the provisions contained in Sections 8 and 9 are likely to cause irreparable
damage to the Company, and therefore he agrees that if there is a breach or
threatened breach by the Executive of the provisions of said sections, the
Company shall be entitled to an injunction restraining the Executive from such
breach. Nothing herein shall be construed as prohibiting the Company from
pursuing any other available remedies for such breach or threatened breach.
12. Miscellaneous.
(a) NOTICES. Any notice required or permitted to be given under this
Agreement shall be directed to the appropriate party in writing and mailed or
delivered, if to the Company, to Air Methods Corporation, to the attention of
the Chairman of the Board, at 7301 South Peoria, Englewood, Colorado 80155, or
to Air Methods then-principal office, if different, and if to the Executive, to
40516 ViaDiamante, Murrieta, California 92562.
(b) BINDING EFFECT. This Agreement is a personal service agreement and may
not be assigned by the Company or the Executive, except that the Company may
assign this Agreement to a successor of the Company by merger, consolidation,
sale of substantially all of the Company's assets or other reorganization.
Subject to the foregoing, this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors, assigns, and
legal representatives.
(c) AMENDMENT. This Agreement may not be amended except by an instrument in
writing executed by each of the undersigned parties.
(d) APPLICABLE LAW. This Agreement is entered into in the State of
California and for all purposes shall be governed by the laws of the State of
California.
(e) COUNTERPARTS. This instrument may be executed in one or more
counterparts, each of which shall be deemed an original.
(f) ENTIRE AGREEMENT. This Agreement supersedes and replaces all prior
agreements between the parties related to the employment of the Executive by the
Company or Mercy, including the Employment, Non-Competition and Profit
Participation Agreement, dated December 30, 1994, between the Executive and
Mercy.
[Remainder of Page Intentionally Left Blank]
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<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
first date mentioned above.
THE COMPANY:
AIR METHODS CORPORATION
By:
-----------------------------------------------
George W. Belsey, Chairman of the Board and
Chief Executive Officer
THE EXECUTIVE:
--------------------------------------------------
David L. Dolstein
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<PAGE>
EXHIBIT A
OPTION AGREEMENT
(NON-INCENTIVE STOCK OPTION UNDER STOCK OPTION PLAN)
THIS AGREEMENT is made and entered into this 31st day of July, 1997, by and
between AIR METHODS CORPORATION (the "Company") and David L. Dolstein (the
"Optionee") (together, the "Parties").
RECITALS:
1. On June 1, 1987, the Board of Directors of the Company adopted a Stock
Option Plan (the "Plan") and as amended effective August 15, 1995, provides that
Employees, Non-Employee Directors and Consultants of the Company and its
subsidiaries may receive options to purchase Common Stock of the Company.
2. The Plan permits the granting of incentive stock options, which conform
to the requirements of Section 422 of the United States Internal Revenue Code of
1986, as amended (the "Code"), and non-incentive stock options, which do not
qualify as incentive stock options under that Section.
3. The Optionee has been selected to receive a non-incentive stock option
pursuant to the Plan.
4. The Optionee is desirous of obtaining the non-incentive stock option on
the terms and conditions herein contained.
AGREEMENT:
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:
A. The Company hereby confirms and acknowledges that it has granted to the
Optionee, on July 31, 1997, an option to purchase 50,000 shares of Common Stock
of the Company (the "Option") upon the terms and conditions herein set forth and
subject to the terms and conditions of the Plan. The Option is granted as a
matter of separate agreement, and not in lieu of salary or any other regular or
special compensation for services.
B. The purchase price of the shares which may be purchased pursuant to the
Option is $ per share, which is, in the opinion of the Company, not less
-------
than the fair market value of the shares on the date the Option was granted as
specified in paragraph A.
<PAGE>
C. Unless sooner terminated or modified under the provisions of this
Agreement, the Option shall continue and shall automatically expire at midnight
July 31, 2002, the fifth anniversary date of the original option grant.
D. The Option may be exercised by the Optionee to purchase the total number
of shares specified in paragraph A as follows:
One-third (1/3rd) of the total number of shares shall be exercisable
on the first anniversary of the date of grant,
An additional one-third (1/3rd) of the total number of shares shall
become exercisable on the second anniversary of the date of
grant, and
The remaining one-third (1/3rd) of the total number of shares shall
become exercisable on the third anniversary of the date of grant.
The Optionee need not exercise any part of the Option when it becomes
exercisable, but may accrue the fractional increments described above and
exercise them in any later period, prior to expiration of the Option.
E. If the Optionee's employment with the Company or a participating
subsidiary of the Company shall terminate for any reason other than the
Optionee's disability, the Option, to the extent then exercisable as provided in
paragraph D, shall remain exercisable after the termination of his employment
for a period of three months. If the Optionee's employment is terminated because
the Optionee is disabled within the meaning of Section 22(e)(3) of the Code, the
Option, to the extent then exercisable as provided in paragraph D, shall remain
exercisable after the termination of his employment for a period of twelve
months. If the Option is not exercised during the applicable period, it shall be
deemed to have been forfeited and of no further force or effect.
F. The Option may not be exercised by anyone other than the Optionee during
his lifetime. In the event of the Optionee's death, the Option may be exercised
by the personal representative of the Optionee's estate or, if no personal
representative has been appointed, by the successor or successors in interest
determined under the Optionee's will or under the applicable laws of descent and
distribution. The Option may not be transferred, assigned, encumbered or
alienated in any way by the Optionee, and any attempt to do so shall render the
Option and any unexercised portion thereof, at the discretion of the Company,
null and void and unenforceable by the Optionee.
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<PAGE>
G. The Option may be exercised in whole or in part by delivering to the
Company written notice of exercise together with payment in full for the shares
being purchased upon such exercise.
H. The Company will, upon receipt of said notice and payment, issue or
cause to be issued to the Optionee (or to his personal representative or other
person entitled thereto) a stock certificate for the number of shares purchased
thereby. The Optionee may designate a member of the Optionee's immediate family
as a co-owner of the said shares.
I. The Company may, in its discretion, file and maintain effective with the
Securities and Exchange Commission a Registration Statement on Form S-8 under
the Securities Act of 1933, as amended (the "Act"), covering the sale of the
optioned shares to Optionee upon exercise of the Option. If, at the time of
exercise, the Company does not have an effective Registration Statement on file
covering the sale of the optioned shares, the Optionee represents and agrees
that: (i) the Option shall not be exercisable unless the purchase of optioned
shares upon the exercise of the Option is pursuant to an applicable effective
registration statement under the Act, or unless in the opinion of counsel for
the Company, the proposed purchase of such optioned shares would be exempt from
the registration requirements of the Act, and from the qualification
requirements of any state securities law; (ii) upon exercise of the Option, he
will acquire the optioned shares for his own account for investment and not with
any intent or view to any distribution, resale or other disposition of the
optioned shares; (iii) he will not sell or transfer the optioned shares, unless
they are registered under the Act, except in a transaction that is exempt from
registration under the Act, and each certificate issued to represent any of the
optioned shares shall bear a legend calling attention to the foregoing
restrictions and agreements. The Company may require, as a condition of the
exercise of the Option, that the Optionee 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.
J. If the Company or its stockholders enter into an agreement to dispose of
all, or substantially all, of the assets or outstanding capital stock of the
Company by means of a sale or liquidation, or a merger or reorganization in
which the Company is not the surviving corporation, any unexercised portion of
the Option as of the day before the consummation of such sale, liquidation,
merger or reorganization shall for all purposes under this Agreement become
exercisable in full as of such date even though the anniversary dates, as
provided in paragraph D, have not yet occurred.
K. In consideration of the granting by the Company of the Option, the
Optionee hereby affirms that he has a present intention to remain in the employ
and service of the Company or a participating subsidiary for the period that
this Option continues. This affirmation, however, shall confer no right on the
Optionee to continue in the employ of the Company or a participating subsidiary,
nor interfere in any way with the right of the Company or
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<PAGE>
a participating subsidiary to discharge the Optionee at any time for any reason
whatsoever, with or without cause.
L. The Optionee shall have no rights as a stockholder with respect to the
shares of Common Stock which may be purchased pursuant to the Option until such
shares are issued to the Optionee.
M. This Agreement is entered into and shall be governed by, construed and
enforced in accordance with the laws of the State of Colorado.
N. The terms and conditions contained in the Plan, as it may be amended
from time to time hereafter, are incorporated into and made a part of this
Agreement by reference, as if the same were set forth herein in full, and all
provisions of the Option are made subject to any and all terms of the Plan.
IN WITNESS WHEREOF, the parties have hereunto affixed their signatures in
acknowledgment and acceptance of the above terms and conditions on the date
first above mentioned.
AIR METHODS CORPORATION
By:
--------------------------------------
Title:
-----------------------------------
OPTIONEE
-----------------------------------------
David L. Dolstein
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<PAGE>
EXHIBIT D
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made and entered into as of July
31, 1997, between Mercy Air Service, Inc., a California corporation, with its
principal place of business at 8190 Mango, Fontana, California 92334 (the
"Company"), and Mary J. Davis, an individual person (the "Executive").
RECITAL
A. The Company desires to employ the Executive as Clinical Director and the
Executive desires to be employed by the Company in such position upon the terms
and conditions set forth in this Agreement.
B. The Executive acknowledges that throughout the term of this Agreement,
the Executive will receive or be exposed to certain confidential information and
trade secrets (collectively referred to as "Confidential Information") of the
Company. The Executive also acknowledges that this Confidential Information is
among the Company's most important business assets and that the value of this
Confidential Information would be diminished or extinguished by disclosure.
AGREEMENT
In consideration of the mutual promises contained herein, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Employment; Position; Term. The Company hereby employs the Executive and
the Executive hereby accepts employment with the Company in the capacity of Vice
President of Patient Services. Subject to Section 4, the term of Executive's
employment under this Agreement (the "Term") shall be for one year, beginning
July 31, 1997. The Term shall be extended for successive one-year periods on
July 31 of each year beginning July 31, 1998 unless on or before May 31 prior to
any such renewal date the Company or the Executive provides written notice to
the other of its or her intention not to renew this Agreement.
2. Duties, Responsibilities and Authority. In her capacity as Vice
President of Patient Services, the Executive shall have primary responsibility
for clinical and program operations. In her capacity as Vice President of
Patient Services, the Executive shall report to and be subject to the direction
and control of the President of the Company. The Executive shall devote her full
professional and managerial time and effort to the performance of her duties as
Vice President of Patient Services and she shall not engage in any other
business activity or
<PAGE>
activities which, in the mutual judgment of the President and the Board of
Directors of the Company, conflict with the performance of her duties under this
Agreement.
3. Compensation.
(a) SALARY. For services rendered under this Agreement, the Company shall
pay the Executive a salary at the rate of $80,000 per annum, payable in equal
bi-weekly installments.
(b) ANNUAL REVIEW. The Executive's salary shall be reviewed annually
beginning July 31, 1998 and may be adjusted as the Board deems appropriate.
(c) BENEFITS AND VACATION. The Executive shall be eligible to participate
in such insurance programs (health, disability or life) or such other health,
dental, retirement or similar employee benefits programs as the Board of
Directors of the Company (the "Board") may approve, on a basis comparable to
that available to other officers and executive employees of the Company. The
Executive shall be entitled to four (4) weeks of paid vacation. Vacation time
may be accumulated for up to one year beyond the year for which it is accrued
and may be used any time during such year. Any vacation time not used during
such additional year shall be forfeited. The value of any accrued but unused and
unforfeited vacation time shall be paid in cash to the Executive upon
termination of her employment for any reason.
(d) REIMBURSEMENT OF EXPENSES. The Company shall reimburse the Executive
for all reasonable out-of-pocket expenses incurred by the Executive in
connection with the performance of her duties under this Agreement; provided
that the Executive presents to the Company an itemized accounting of such
expenses including reasonable supporting data.
4. Termination.
(a) TERMINATION BY THE COMPANY WITHOUT CAUSE. Notwithstanding anything to
the contrary contained herein but subject to Section 7 hereof, the Company may,
by delivering thirty (30) days' prior written notice to the Executive, terminate
the Executive's employment at any time without Cause (as hereinafter defined).
(b) TERMINATION BY THE EXECUTIVE WITHOUT CAUSE. Notwithstanding anything to
the contrary contained herein but subject to Section 7 hereof, the Executive
may, by delivering thirty (30) days' prior written notice to the Company,
terminate the Executive's employment hereunder.
(c) TERMINATION BY THE COMPANY FOR CAUSE. The Company may terminate the
Executive's employment for Cause immediately upon written notice stating the
basis for such termination. "Cause" for termination of the Executive's
employment shall only be deemed to exist if the Executive has (i) breached this
Agreement and if such breach continues or recurs more than thirty (30) days
after notice from the Company specifying the action which
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<PAGE>
constitutes the breach and demanding its discontinuance, (ii) exhibited willful
disobedience of directions of the President, or (iii) committed gross
malfeasance in performance of her duties hereunder or acts resulting in an
indictment charging the Executive with the commission of a felony; provided that
the commission of acts resulting in such an indictment shall constitute Cause
only if a majority of the directors who are not also subject to any such
indictment determine that the Executive's conduct has substantially adversely
affected the Company or its reputation. A material failure to perform her duties
hereunder that results from the disability of the Executive shall not be
considered Cause for her termination.
5. Disability. In the event of disability of the Executive during the term
hereof, the Company shall, during the continuance of her disability but only for
a maximum of ninety (90) days, pay the Executive her then current salary, as
provided for in Section 3(a), and adjusted pursuant to Section 3(b), and
continue to provide the Executive all other benefits provided hereunder. As used
herein, the term "disability" shall mean the complete and total inability of the
Executive, due to illness, physical or comprehensive mental impairment, to
substantially perform all of her duties as described herein for a consecutive
period of thirty (30) days or more.
6. Death. In the event of the death of the Executive, except with respect
to any benefits which have accrued and have not been paid to the Executive
hereunder, the provisions of this Agreement shall terminate immediately. The
Executive's estate shall have the right to receive compensation due to the
Executive as of and to the date of her death and shall have the right to receive
an additional amount equal to one-twelfth (1/12) of the Executive's annual
compensation then in effect.
7. Severance. In the event that the Executive's employment is terminated by
the Company other than for Cause or death of the Executive, the Executive shall
be entitled to receive her then current salary, as provided for in Section 3(a),
and adjusted pursuant to Section 3(b), payable on bi-weekly installments, for
twelve (12) months following the date of the Executive's termination by the
Company; PROVIDED, HOWEVER, that if any of such payments would (i) constitute a
"parachute payment" within the meaning of Section 280G of the Internal Revenue
Code of 1986 (the "Code") and (ii) but for this provision, be subject to the
excise tax imposed by Section 4999 of the Code (the "Excise Tax"); the amount
payable hereunder shall be reduced to the largest amount which the Executive
determines would not result in any portion of the payments hereunder being
subject to the Excise Tax. If the Executive voluntarily resigns her employment
hereunder or if her employment is terminated for Cause, the Executive shall not
be entitled to any severance pay or other compensation beyond the date of
termination of her employment.
8. Covenant Not to Compete.
(a) During the continuance of the Executive's employment hereunder and for
a period of twelve (12) months after termination of the Executive's employment
hereunder, the Executive shall not engage in any business which competes
directly or indirectly
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<PAGE>
with the Company or its affiliates within a fifty (50) mile radius of any
location in the United States where the Company or its affiliates are conducting
operations during the Executive's employment hereunder or at the time of
termination. As of the date hereof, the Company conducts operations in the
following counties of California: Imperial, Kern, Los Angeles, Orange,
Riverside, San Bernardino, San Diego, Santa Barbara and Ventura; and the
Company's parent, Air Methods Corporation, conducts operations in the following
locations: Bend, Oregon, Charlotte and Winston-Salem, North Carolina; Fairfax
and Roanoke, Virginia, Duluth and St. Paul, Minnesota; Evansville, Indiana,
Grand Junction, Greeley, and Aurora, Colorado; San Antonio and Texarkana, Texas;
Billings, Montana; Des Moines, Iowa; Farmington, New Mexico; Marshfield,
Wisconsin; Rockford, Illinois; Stanford, California; and Salt Lake City, Utah.
(b) The Executive shall not, for a period of twelve (12) months after
termination of the Executive's employment hereunder, employ, engage or seek to
employ or engage, directly or indirectly, any individual or entity who is or was
employed or engaged by the Company or any of its affiliates until the expiration
of six (6) months following the termination of such person's or entity's
employment or engagement with the Company or any of its affiliates.
9. Trade Secrets and Confidential Information. During her employment by the
Company and for a period of five (5) years thereafter, the Executive shall not,
directly or indirectly, use, disseminate, or disclose for any purpose other than
for the purposes of the Company's business, any of the Company's Confidential
Information, unless such disclosure is compelled in a judicial proceeding. Upon
termination of her employment, all documents, records, notebooks, and similar
repositories of records containing information relating to any Confidential
Information then in the Executive's possession or control, whether prepared by
her or by others, shall be left with the Company or, if requested, returned to
the Company.
10. Severability. It is the desire and intent of the undersigned parties
that the provisions of Sections 8 and 9 shall be enforced to the fullest extent
permissible under the laws in each jurisdiction in which enforcement is sought.
Accordingly, if any particular sentence or portion of either Section 8 or 9
shall be adjudicated to be invalid or unenforceable, the remaining portions of
such section nevertheless shall continue to be valid and enforceable as though
the invalid portions were not a part thereof. In the event that any of the
provisions of Section 8 relating to the geographic areas of restriction or the
provisions of Sections 8 or 9 relating to the duration of such Sections shall be
deemed to exceed the maximum area or period of time which a court of competent
jurisdiction would deem enforceable, the geographic areas and times shall, for
the purposes of this Agreement, be deemed to be the maximum areas or time
periods which a court of competent jurisdiction would deem valid and enforceable
in any state in which such court of competent jurisdiction shall be convened.
11. Injunctive Relief. The Executive agrees that any violation by her of
the provisions contained in Sections 8 and 9 are likely to cause irreparable
damage to the Company, and therefore she agrees that if there is a breach or
threatened breach by the Executive of the
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<PAGE>
provisions of said sections, the Company shall be entitled to an injunction
restraining the Executive from such breach. Nothing herein shall be construed as
prohibiting the Company from pursuing any other available remedies for such
breach or threatened breach.
12. Miscellaneous.
(a) NOTICES. Any notice required or permitted to be given under this
Agreement shall be directed to the appropriate party in writing and mailed or
delivered, if to the Company, to the attention of the President at 8190 Mango,
Fontana, California 92334, or to the Company's then-principal office, if
different, with a copy to Air Methods Corporation, to the attention of the
Chairman of the Board, at 7301 South Peoria, Englewood, Colorado 80155, and if
to the Executive, to 12482 Tulip Court, Rancho Cucamanga, California 91793.
(b) BINDING EFFECT. This Agreement is a personal service agreement and may
not be assigned by the Company or the Executive, except that the Company may
assign this Agreement to a successor by merger, consolidation, sale of
substantially all of the Company's assets or other reorganization. Subject to
the foregoing, this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors, assigns, and legal
representatives.
(c) AMENDMENT. This Agreement may not be amended except by an instrument in
writing executed by each of the undersigned parties.
(d) APPLICABLE LAW. This Agreement is entered into in the State of
California and for all purposes shall be governed by the laws of the State of
California.
(e) COUNTERPARTS. This instrument may be executed in one or more
counterparts, each of which shall be deemed an original.
(f) ENTIRE AGREEMENT. This Agreement supersedes and replaces all prior
agreements between the parties related to the employment of the Executive by the
Company.
[Remainder of Page Intentionally Left Blank]
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<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
first date mentioned above.
THE COMPANY:
MERCY AIR SERVICE, INC.
By:
-------------------------------------------
David L. Dolstein, President
THE EXECUTIVE:
----------------------------------------------
Mary J. Davis
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<PAGE>
EXHIBIT E
CONSULTING AND NON-COMPETITION AGREEMENT
This Consulting and Non-Competition Agreement ("Agreement") is entered into
this day of July, 1997 between Mercy Air Services, Inc., a California
---
corporation, with its principal place of business at 8190 Mango, Fontana,
California 92334 (the "Company"), and , an individual person (the
-------------
"Consultant").
RECITALS
A. The Consultant was a major shareholder in the Company, engaged in the
business of transportation services for individuals requiring advanced life
support services during transport to an emergency medical care facility.
B. Pursuant to that certain Stock Purchase Agreement dated July o, 1997
between Air Methods Corporation ("Air Methods"), the Consultant and the
remaining Sellers (as defined in the Purchase Agreement), Air Methods purchased
all of the outstanding shares of common stock of the Company such that the
Company became a wholly-owned subsidiary of Air Methods.
C. The Company desires to continue to consult with and receive advice from
the Consultant and to have the Consultant agree 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 also agreed not to compete with the Company during the term of this
Agreement.
D. The Consultant acknowledges that throughout the term of this Agreement
the Consultant will receive or be exposed to certain confidential information
and trade secrets (collectively referred to as "Confidential Information") of
the Company. The Consultant also acknowledges that this Confidential Information
is among the Company's most important business assets and that the value of this
Confidential Information would be diminished or extinguished by disclosure.
AGREEMENT
In consideration of the mutual promises contained herein, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Effective Date. The Consultant hereby resigns all positions which he
holds as an officer, director, and/or employee of the Company and terminates his
employment with the Company effective at the end of business on the first date
mentioned above (the "Effective Date"). On the Effective Date, this Agreement
shall become effective and shall supersede any other agreements between the
Consultant and the Company relating to the employment of the Consultant by the
Company, which shall thereafter be deemed terminated for all purposes.
<PAGE>
2. Consultation by the Consultant.
(a) The Consultant shall be reasonably available during the period
beginning on the Effective Date and ending on July o, 2002 (the "Consulting
Period") to perform such assignments as may be reasonably requested by the
Company from time to time, which assignments may include, but shall not be
limited to, advising the Company and/or its affiliates on issues related to the
air medical services business, assisting the Company and/or its affiliates in
its sales and marketing efforts, including preparing and presenting responses to
requests for proposals, and assisting the Company and/or its affiliates with
customer services, collections, and other aspects of their businesses. The
Consultant agrees to provide up to five hundred (500) hours of consultation
services per year under this Agreement. Consultation services hereunder may be
provided in person, by telephone or in writing, depending on the circumstances
of the specific assignment, as mutually agreed upon by the Company and the
Consultant. Subject to specific requirements identified by the Company, the
Consultant shall determine the time and manner of providing such services. The
Consultant shall not be required under this Agreement to provide his services
exclusively to the Company and may provide his services to others, provided the
Consultant does not perform services for any third party which conflict with his
obligations under this Agreement.
(b) Consultants services hereunder shall principally be provided at the
Company's facilities in Fontana, California. In no event shall the Consultant be
required to relocate more than fifty (50) miles from the Company's executive
officers in Fontana, California without the prior written consent of the
Consultant other than a reasonable amount of travel related to the services to
be provided hereunder.
(c) The Consultant will be providing professional services as an
independent contractor and shall not be, or be deemed to be, an employee, agent
or partner of, or joint venturer with the Company. Neither party may represent
nor refer to the Consultant as an employee of the Company to any entity or third
party. Neither party shall have the power to bind nor obligate the other party,
nor shall either party hold itself out as having such authority. THE CONSULTANT
IS NOT ENTITLED TO WORKERS' COMPENSATION BENEFITS OR UNEMPLOY MENT INSURANCE
BENEFITS HEREUNDER AND SHALL NOT RECEIVE SUCH BENEFITS UNLESS SUCH BENEFITS ARE
PROVIDED BY THE CONSULTANT OR SOME PERSON OR ENTITY OTHER THAN THE COMPANY. THE
CONSULTANT AGREES TO PAY AND FILE ALL REPORTS WITH RESPECT TO LOCAL, STATE AND
FEDERAL TAXES, INCLUDING WITHHOLDING AND FICA TAXES, AND UNEMPLOYMENT AND
WORKERS' COMPENSATION INSURANCE, ON ANY MONEYS EARNED PURSUANT TO THIS
AGREEMENT.
3. Consulting Fee.
(a) The Consultant shall be paid the sum of $180,000 (the "Consulting 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. The Consulting Fee shall be payable in monthly installments of $3,000,
beginning the day of August, 1997. The Consulting Fee shall be paid to
---
Consultant irrespective of the number of hours actually
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<PAGE>
spent by the Consultant in providing services hereunder; PROVIDED, HOWEVER, that
the Company's obligation to pay the Consulting Fee shall terminate upon
termination of the Consultant's services hereunder pursuant to Section 11,
except to the extent otherwise provided in Section 11.
(b) The Company shall reimburse the Consultant, in accordance with the
Company's expense reimbursement policies, for reasonable out-of-pocket expenses
incurred in connection with the services provided pursuant to this Agreement;
provided that the Consultant presents to the Company an itemized accounting of
such expenses including reasonable supporting data.
4. Stock Options. The Consultant shall be granted an option to purchase
100,000 shares of the Common Stock of Air Methods at the closing price on the
NASDAQ National Market on the Effective Date. The terms of the option will be
set forth in an option agreement in the form attached hereto as EXHIBIT A.
5. Health Benefits. The Consultant may, at his election, continue to cover
himself under the group health insurance provided for Company employees (the
"Group Plan"), and continue to cover his family members under the Group Plan on
the same basis as employees of the Company, for such period as (i) the
Consultant's services hereunder have not been terminated under Section 11(a)
(expiration of the Consulting Period), 11(c) (by the Consultant) or 11(d) (by
the Company for Cause) and such coverage is permitted under the Company's health
insurance policies or (ii) the Consultant is entitled to continue coverage under
federal or state law following termination of his employment with Company,
whichever is longer. 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. Coverage shall be
provided at the Company's expense unless and until such time as the Company's
employees are provided group health insurance through an Air Method's plan, at
which point, coverage for family members shall be paid for by the Company only
to the same extent as such coverage is paid for on behalf of family members of
senior management employees of the Company. During any period that the
Consultant is entitled to health benefits hereunder but for the fact that such
coverage is not permitted under the Group Plan, the Company shall pay the
Consultant on a monthly basis the amount the Company would have paid to cover
the Consultant and, if applicable, his family members, under the preceding
provisions had such coverage been permitted unless the Consultant is already
covered under a comparable plan at the expense of a third party.
6. Covenant Not to Compete.
(a) In further consideration of the payments by the Company provided for
herein, the Consultant shall not, during the term of this Agreement and for a
period of twelve (12) months following the termination of Consultant's services
hereunder (but in no event less than five (5) years from the date hereof),
engage in any activity directly or indirectly related to the air medical
services business at any location in the United States where the Company or its
affiliates are conducting operations during the term of this Agreement or at the
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time of termination; except that the Consultant may continue to participate in
the air medical services operation that has been conducted by the Company in the
State of Hawaii in the same manner that the Consultant has participated in such
operation prior hereto. As of the date hereof, the Company conducts operations
in the following counties of California: Imperial, Kern, Los Angeles, Orange,
Riverside, San Bernardino, San Diego, Santa Barbara and Ventura; and the
Company's parent, Air Methods Corporation, conducts operations in the following
locations: .
(b) The Consultant shall not, for a period of twelve (12) months after
termination of the Consultant's services hereunder (but in no event less than
five (5) years from the date hereof), employ, engage or seek to employ or
engage, directly or indirectly, any individual or entity who is or was employed
or engaged by the Company or any of its affiliates until the expiration of six
(6) months following the termination of such person's or entity's employment or
engagement with the Company or any of its affiliates.
(c) In consideration of Consultant's agreement not to compete as provided
in this Section 6, the Company shall pay to Consultant the sum of $10,000,
payable as of the date first written above.
(d) Notwithstanding the foregoing, the provisions of this Section 6 shall
terminate and shall be of no further force or effect, if during the Consulting
Period, an Event of Default occurs as that term is defined in either or both of
(i) the Promissory Note of even date herewith delivered by Air Methods to the
Consultant or (ii) the Security Agreement of even date herewith among Air
Methods, the Company and as collateral agent.
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7. Trade Secrets and Confidential Information. During the term of this
Agreement and for a period of five (5) years following the termination of
Consultant's services hereunder, 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, unless such disclosure is compelled in a judicial or governmental
proceeding or is required by law; provided, however, that the Consultant shall
give the Company written notice of the Confidential Information to be so
disclosed or produced as far in advance of its disclosure or production as is
practicable and shall use his best efforts to obtain, to the greatest extent
practicable, an order or other reliable assurance that confidential treatment
will be accorded to such Confidential Information so required to be disclosed or
produced. All documents, records, notebooks, and similar repositories of records
containing information relating to any 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 the Consultant 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
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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 undersigned 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, 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 the Consultant's prior employment
by the Company. 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. 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 herein 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;
(c) He has had at least o days to consider all of the material terms of
this Agreement, including the mutual releases.
(d) He has been informed and understands that (i) 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. ss. 621 ET SEQ., he may rescind his
waiver and release within seven (7) calendar days of the execution of this
Agreement and (ii) any such rescission must be in
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writing, and delivered to the Company or, if sent by mail, post marked within
the seven (7) day period, sent by certified mail, return receipt requested 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 against the Company arising from matters contemplated in this
Agreement.
11. Termination.
(a) TERMINATION UPON EXPIRATION OF CONSULTING PERIOD. The Consultant's
services hereunder shall terminate at the end of the Consulting Period unless
sooner terminated as provided below.
(b) TERMINATION BY THE COMPANY WITHOUT CAUSE. Notwithstanding anything to
the contrary contained herein, the Company may, by delivering thirty (30) days'
prior written notice to the Consultant, terminate the Consultant's services
hereunder at any time without Cause (as hereinafter defined).
(c) TERMINATION BY THE CONSULTANT WITHOUT CAUSE. Notwithstanding anything
to the contrary contained herein, the Consultant may, by delivering prior
written notice to the Company, terminate the Consultant's services hereunder.
(d) TERMINATION BY THE COMPANY FOR CAUSE. The Company may terminate the
Consultant's services hereunder for Cause immediately upon written notice
stating the basis for such termination. "Cause" for termination of the
Consultant's services shall only be deemed to exist if the Consultant has (i)
materially breached this Agreement and if such breach continues or recurs more
than thirty (30) days after notice from the Company specifying the action which
constitutes the breach and demanding its discontinuance, (ii) exhibited willful
disobedience to the Board of Directors, or (iii) committed gross malfeasance in
performance of his duties hereunder or acts resulting in an indictment charging
the Consultant with the commission of a felony; provided that the commission of
acts resulting in such an indictment shall constitute Cause only if a majority
of the directors who are not also subject to any such indictment determine that
the Consultant's conduct has substantially adversely affected the Company or its
reputation.
(e) DISABILITY. In the event of disability of the Consultant during the
term hereof, the Company shall, during the continuance of his disability but
only for a maximum
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of ninety (90) days, pay to the Consultant his monthly installments under the
provision of Section 3 and continue to provide the Consultant all other benefits
provided hereunder. In addition, health benefits shall be continued until the
end of the Consulting Period for the Consultant and his family on the same
basis, and at the same party's expense, as such benefits were being provided
pursuant to Section 5 immediately prior to such disability. As used herein, the
term "disability" shall mean the complete and total inability of the Consultant,
due to illness, physical or comprehensive mental impairment, to substantially
perform all of his duties as described herein for a consecutive period of ninety
(90) days or more.
(f) DEATH. In the event of the death of the Consultant, except with respect
to any benefits which have accrued and have not been paid to the Consultant
hereunder, the provisions of this Agreement shall terminate immediately. The
Consultant's estate shall have the right to receive compensation due to the
Consultant as of and to the date of his death and shall have the right to
receive an additional amount equal to $3,000. In addition, the Consultant's
family members may continue any health insurance coverage being provided
pursuant to Section 5 on the same basis as and to the same extent that family
members of deceased employees of the Company are entitled to continue such
coverage.
(g) SEVERANCE. In the event that the Consultant's services are terminated
by the Company other than for Cause or death of the Consultant, the Consultant
shall be entitled to continue to receive the Consulting Fee in monthly
installments of $3,000 until the Consulting Fee has been paid in full and health
benefits in accordance with Section 5 until the end of the Consulting Period.
12. Irrevocability and Amendment. The obligations of the Company and the
Consultant hereunder are irrevocable. This Agreement may be terminated only
pursuant to Section 11 hereof and amended only pursuant to a written agreement
signed and 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, interests 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.
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16. Severability. If any provision of this Agreement is held to be illegal,
invalid or unenforceable, such 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. In particular, it is the desire and intent of the parties that the
provisions of Sections 6 and 7 shall be enforced to the fullest extent
permissible under the laws of each jurisdiction in which enforcement is sought.
Accordingly, in the event that any of the provisions of Section 6 relating to
the geographic areas of restriction or the provisions of Section 6 or 7 relating
to the duration of such sections shall be deemed to exceed the maximum area or
period of time which a court of competent jurisdiction would deem enforceable,
the geographic areas and times shall, for the purposes of this Agreement, be
deemed to be the maximum areas or time periods which a court of competent
jurisdiction would deem valid and enforceable in any state in which such court
of competent jurisdiction shall be convened.
17. Applicable Law. This Agreement shall be interpreted and construed in
accordance with the laws of the State of California.
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.
[Remainder of Page Intentionally Left Blank]
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SIGNATURES
IN WITNESS WHEREOF, the Consultant and the Company have caused this
Agreement to be executed and delivered as of the first date mentioned above.
THE COMPANY:
MERCY AIR SERVICES, INC.
By:
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THE CONSULTANT:
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EXHIBIT F
CONSULTING AND NON-COMPETITION AGREEMENT
This Consulting and Non-Competition Agreement ("Agreement") is entered into
this 31st day of July, 1997 between Mercy Air Service, Inc., a California
corporation, with its principal place of business at 8190 Mango, Fontana,
California 92334 (the "Company"), and Homer L. Aerts, an individual person (the
"Consultant").
RECITALS
A. The Consultant was a major shareholder in the Company, engaged in the
business of transportation services for individuals requiring advanced life
support services during transport to an emergency medical care facility.
B. Pursuant to that certain Stock Purchase Agreement dated July 11, 1997
between Air Methods Corporation ("Air Methods"), the Consultant and the
remaining Sellers (as defined in the Purchase Agreement), Air Methods purchased
all of the outstanding shares of common stock of the Company such that the
Company became a wholly-owned subsidiary of Air Methods.
C. The Company desires to continue to consult with and receive advice from
the Consultant and to have the Consultant agree 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 also agreed not to compete with the Company during the term of this
Agreement.
D. The Consultant acknowledges that throughout the term of this Agreement
the Consultant will receive or be exposed to certain confidential information
and trade secrets (collectively referred to as "Confidential Information") of
the Company. The Consultant also acknowledges that this Confidential Information
is among the Company's most important business assets and that the value of this
Confidential Information would be diminished or extinguished by disclosure.
AGREEMENT
In consideration of the mutual promises contained herein, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. EFFECTIVE DATE. The Consultant hereby resigns all positions which he
holds as an officer, director, and/or employee of the Company and terminates his
employment with the Company effective at the end of business on the first date
mentioned above (the "Effective Date"). On the Effective Date, this Agreement
shall become effective and shall supersede any other agreements between the
Consultant and the Company relating to the employment of the Consultant by the
Company, which shall thereafter be deemed terminated for all purposes.
<PAGE>
2. CONSULTATION BY THE CONSULTANT.
(a) The Consultant shall be reasonably available, upon request, during the
period beginning on the Effective Date and ending on July 31, 2002 (the
"Consulting Period") to perform consultation services for the Company or its
affiliates from time to time on issues related to the air medical services
business. The scope of each assignment hereunder shall be subject to negotiation
between the parties at the time services are requested. Consultation services
hereunder may be provided in person, by telephone or in writing, depending on
the circumstances of the specific assignment, as mutually agreed upon by the
Company and the Consultant. Subject to specific requirements identified by the
Company, the Consultant shall determine the time and manner of providing such
services. The Consultant shall not be required under this Agreement to provide
his services exclusively to the Company and may provide his services to others,
provided the Consultant does not perform services for any third party which
conflict with his obligations under this Agreement.
(b) Consultant's services hereunder shall principally be provided at the
Company's facilities in Fontana, California. In no event shall Consultant be
required to relocate more than fifty (50) miles from the Company's executive
offices in Fontana, California without the prior written consent of the
Consultant other than a reasonable amount of travel related to the services to
be provided hereunder.
(c) The Consultant will be providing professional services as an
independent contractor and shall not be, or be deemed to be, an employee, agent
or partner of, or joint venturer with the Company. Neither party may represent
nor refer to the Consultant as an employee of the Company to any entity or third
party. Neither party shall have the power to bind nor obligate the other party,
nor shall either party hold itself out as having such authority. THE CONSULTANT
IS NOT ENTITLED TO WORKERS' COMPENSATION BENEFITS OR UNEMPLOY MENT INSURANCE
BENEFITS HEREUNDER AND SHALL NOT RECEIVE SUCH BENEFITS UNLESS SUCH BENEFITS ARE
PROVIDED BY THE CONSULTANT OR SOME PERSON OR ENTITY OTHER THAN THE COMPANY. THE
CONSULTANT AGREES TO PAY AND FILE ALL REPORTS WITH RESPECT TO LOCAL, STATE AND
FEDERAL TAXES, INCLUDING WITHHOLDING AND FICA TAXES, AND UNEMPLOYMENT AND
WORKERS' COMPENSATION INSURANCE, ON ANY MONEYS EARNED PURSUANT TO THIS
AGREEMENT.
3. CONSULTING FEE.
(a) The Consultant shall be paid the sum of $12,600 (the "Consulting 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. The Consulting Fee shall be payable in monthly installments of $210,
beginning the 31st day of August, 1997. The Consulting Fee shall be paid to
Consultant 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 Consulting Fee shall terminate upon termination of the
Consultant's services hereunder pursuant to Section 11, except to the extent
otherwise provided in Section 11.
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(b) In addition to the Consulting Fee, the Consultant shall be paid a fee
of $100 for each hour of services provided hereunder. The Consultant shall
submit an invoice at the end of each month during which services are rendered
hereunder which shall be payable within thirty (30) days of submission.
(c) The Company shall reimburse the Consultant, in accordance with the
Company's expense reimbursement policies, for reasonable out-of-pocket expenses
incurred in connection with the services provided pursuant to this Agreement;
provided that the Consultant presents to the Company an itemized accounting of
such expenses including reasonable supporting data.
4. STOCK OPTIONS. The Consultant shall be granted an option to purchase
100,000 shares of the Common Stock of Air Methods at the closing price on the
NASDAQ National Market on the Effective Date. The terms of the option will be
set forth in an option agreement in the form attached hereto as EXHIBIT A.
5. HEALTH BENEFITS. The Consultant may, at his election, continue to cover
himself and any eligible family members under the group health insurance
provided for Company employees (the "Group Plan"), at his expense, for such
period as the Consultant is entitled to continue coverage under the Consolidated
Omnibus Budget Reconciliation Act of 1985 or other applicable federal or state
law following termination of his employment with the Company. If the Consultant
and the Company agree upon consulting assignments hereunder which both parties
agree are likely to result in the Consultant providing five hundred (500) or
more hours of consulting services during a twelve (12) month period, then
Consultant may elect to be covered by the Group Plan, and may elect coverage for
his family members on the same basis as Company employees are permitted to cover
family members, in each case at the Company's expense, for such twelve (12)
month period if such coverage is permitted under the Group Plan; provided,
however, that coverage for family members shall be paid for by the Company only
to the same extent as such coverage is paid for family members of senior
management employees of the Company if such election is in effect at a point in
time when the Company's employees are provided group health insurance through an
Air Method's plan. During any period that the Consultant is eligible to be
covered at the Company's expense hereunder but for the fact that such coverage
is not permitted under the Group Plan, the Company shall pay the Consultant on a
monthly basis the amount the Company would have paid to cover the Consultant
and, if applicable, his family members, under the preceding provisions had such
coverage been permitted unless the Consultant is already covered under a
comparable plan at the expense of a third party.
6. COVENANT NOT TO COMPETE.
(a) In further consideration of the payments by the Company provided for
herein, the Consultant shall not, during the term of this Agreement and for a
period of twelve (12) months following the termination of Consultant's services
hereunder (but in no event less than five (5) years from the date hereof),
engage in any activity directly or indirectly related
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to the air medical services business at any location in the United States where
the Company or its affiliates are conducting operations during the term of this
Agreement or at the time of termination; except that the Consultant may continue
to participate in the air medical services operation that has been conducted by
the Company in the State of Hawaii in the same manner that the Consultant has
participated in such operation prior hereto. As of the date hereof, the Company
conducts operations in the following counties of California: Imperial, Kern, Los
Angeles, Orange, Riverside, San Bernardino, San Diego, Santa Barbara and
Ventura; and the Company's parent, Air Methods Corporation, conducts operations
in the following locations: Bend, Oregon; Charlotte and Winston-Salem, North
Carolina; Fairfax and Roanoke, Virginia; Duluth and St. Paul, Minnesota;
Evansville, Indiana; Grand Junction, Greeley, and Aurora, Colorado; San Antonio
and Texarkana, Texas; Billings, Montana; Des Moines, Iowa; Farmington, New
Mexico; Marshfield, Wisconsin; Rockford, Illinois; Stanford, California; and
Salt Lake City, Utah.
(b) The Consultant shall not, for a period of twelve (12) months after
termination of the Consultant's services hereunder (but in no event less than
five (5) years from the date hereof), employ, engage or seek to employ or
engage, directly or indirectly, any individual or entity who is or was employed
or engaged by the Company or any of its affiliates until the expiration of six
(6) months following the termination of such person's or entity's employment or
engagement with the Company or any of its affiliates.
(c) In consideration of Consultant's agreement not to compete as provided
in this Section 6, the Company shall pay to Consultant the sum of $10,000,
payable as of the date first written above.
(d) Notwithstanding the foregoing, the provisions of this Section 6 shall
terminate and shall be of no further force or effect, if during the Consulting
Period, an Event of Default occurs as that term is defined in either or both of
(i) the Promissory Note of even date herewith delivered by Air Methods to the
Consultant or (ii) the Security Agreement of even date herewith among Air
Methods, the Company, and J. Steven Dickmeyer, as collateral agent.
7. TRADE SECRETS AND CONFIDENTIAL INFORMATION. During the term of this
Agreement and for a period of five (5) years following the termination of
Consultant's services hereunder, 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, unless such disclosure is compelled in a judicial or governmental
proceeding or is required by law; provided, however, that the Consultant shall
give the Company written notice of the Confidential Information to be so
disclosed or produced as far in advance of its disclosure or production as is
practicable and shall use his best efforts to obtain, to the greatest extent
practicable, an order or other reliable assurance that confidential treatment
will be accorded to such Confidential Information so required to be disclosed or
produced. All documents, records, notebooks, and similar repositories of records
containing information relating to any Confidential Information now in the
Consultant's possession or control, whether
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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 the Consultant 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 undersigned 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, 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 the Consultant's prior employment
by the Company. 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. 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 herein 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;
(c) He has had at least twenty (20) days to consider all of the material
terms of this Agreement, including the mutual releases.
(d) He has been informed and understands that (i) to the extent that this
Agreement waives or releases any claim he might have under the Age
Discrimination in
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Employment Act, 29 U.S.C. ss. 621 ET SEQ., he may rescind his waiver and release
within seven (7) calendar days of the execution of this Agreement and (ii) any
such rescission must be in writing, and delivered to the Company or, if sent by
mail, post marked within the seven (7) day period, sent by certified mail,
return receipt requested 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 against the Company arising from matters contemplated in this
Agreement.
11. TERMINATION.
(a) TERMINATION UPON EXPIRATION OF CONSULTING PERIOD. The Consultant's
services hereunder shall terminate at the end of the Consulting Period unless
sooner terminated as provided below.
(b) TERMINATION BY THE COMPANY WITHOUT CAUSE. Notwithstanding anything to
the contrary contained herein, the Company may, by delivering thirty (30) days'
prior written notice to the Consultant, terminate the Consultant's services
hereunder at any time without Cause (as hereinafter defined).
(c) TERMINATION BY THE CONSULTANT WITHOUT CAUSE. Notwithstanding anything
to the contrary contained herein, the Consultant may, by delivering prior
written notice to the Company, terminate the Consultant's services hereunder.
(d) TERMINATION BY THE COMPANY FOR CAUSE. The Company may terminate the
Consultant's services hereunder for Cause immediately upon written notice
stating the basis for such termination. "Cause" for termination of the
Consultant's services shall only be deemed to exist if the Consultant has (i)
materially breached this Agreement and if such breach continues or recurs more
than thirty (30) days after notice from the Company specifying the action which
constitutes the breach and demanding its discontinuance, (ii) exhibited willful
disobedience to the Board of Directors, or (iii) committed gross malfeasance in
performance of his duties hereunder or acts resulting in an indictment charging
the Consultant with the commission of a felony; provided that the commission of
acts resulting in such an indictment shall constitute Cause only if a majority
of the directors who are not also subject to any such indictment determine that
the Consultant's conduct has substantially adversely affected the Company or its
reputation.
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(e) DISABILITY. In the event of disability of the Consultant during the
term hereof, the Company shall, during the continuance of his disability but
only for a maximum of ninety (90) days, pay to the Consultant his monthly
installments under the provision of Section 3. In addition, health benefits
shall be continued for the Consultant and his family on the same basis, and at
the same party's expense, as such benefits were being provided pursuant to
Section 5 immediately prior to such disability. As used herein, the term
"disability" shall mean the complete and total inability of the Consultant, due
to illness, physical or comprehensive mental impairment, to substantially
perform all of his duties as described herein for a consecutive period of ninety
(90) days or more.
(f) DEATH. In the event of the death of the Consultant, except with respect
to any benefits which have accrued and have not been paid to the Consultant
hereunder, the provisions of this Agreement shall terminate immediately. The
Consultant's estate shall have the right to receive compensation due to the
Consultant as of and to the date of his death and shall have the right to
receive an additional amount equal to $210. In addition, the Consultant's family
members may continue any health insurance coverage being provided pursuant to
Section 5 on the same basis as and to the same extent that family members of
deceased employees of the Company are entitled to continue such coverage.
(g) SEVERANCE. In the event that the Consultant's services are terminated
by the Company other than for Cause or death of the Consultant, the Consultant
shall be entitled to continue to receive the Consulting Fee in monthly
installments of $210 until the Consulting Fee has been paid in full, and, if the
Consultant was receiving health benefits under Section 5 at the Company's
expense at the time of such termination, the Consultant shall be entitled to
continue to receive benefits in accordance with Section 5 until the end of the
Consulting Period.
12. IRREVOCABILITY AND AMENDMENT. The obligations of the Company and the
Consultant hereunder are irrevocable. This Agreement may be terminated only
pursuant to Section 11 hereof and amended only pursuant to a written agreement
signed and 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, interests and
obligations thereunder may not be assigned or delegated by the parties.
-7-
<PAGE>
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 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. In particular, it is the desire and intent of the parties that the
provisions of Sections 6 and 7 shall be enforced to the fullest extent
permissible under the laws of each jurisdiction in which enforcement is sought.
Accordingly, in the event that any of the provisions of Section 6 relating to
the geographic areas of restriction or the provisions of Section 6 or 7 relating
to the duration of such sections shall be deemed to exceed the maximum area or
period of time which a court of competent jurisdiction would deem enforceable,
the geographic areas and times shall, for the purposes of this Agreement, be
deemed to be the maximum areas or time periods which a court of competent
jurisdiction would deem valid and enforceable in any state in which such court
of competent jurisdiction shall be convened.
17. APPLICABLE LAW. This Agreement shall be interpreted and construed in
accordance with the laws of the State of California.
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.
[Remainder of Page Intentionally Left Blank]
-8-
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the Consultant and the Company have caused this
Agreement to be executed and delivered as of the first date mentioned above.
THE COMPANY:
MERCY AIR SERVICE, INC.
By:
-------------------------------------------
David L. Dolstein, President
THE CONSULTANT:
----------------------------------------------
Homer L. Aerts
-9-
<PAGE>
EXHIBIT G
OPTION AGREEMENT
(NON-INCENTIVE STOCK OPTION UNDER STOCK OPTION PLAN)
THIS AGREEMENT is made and entered into this day of July, 1997, by and
----
between AIR METHODS CORPORATION (the "Company") and (the
------------------
"Optionee") (together, the "Parties").
RECITALS:
I. On June 1, 1987, the Board of Directors of the Company adopted a Stock
Option Plan (the "Plan") and effective August 15, 1995, provides that Employees,
Non-Employee Directors and Consultants of the Company and its subsidiaries may
receive options to purchase Common Stock of the Company.
II. The Plan permits the granting of incentive stock options, which conform
to the requirements of Section 422 of the United States Internal Revenue Code of
1986, as amended (the "Code"), and non-incentive stock options, which do not
qualify as incentive stock options under that Section.
III. The Optionee has been selected to receive a non-incentive stock option
pursuant to the Plan.
IV. The Optionee is desirous of obtaining the non-incentive stock option on
the terms and conditions herein contained.
AGREEMENT:
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:
A. The Company hereby confirms and acknowledges that it has granted to the
Optionee, on July , 1997, an option to purchase 100,000 shares of Common
---
Stock of the Company (the "Option") upon the terms and conditions herein set
forth and subject to the terms and conditions of the Plan. The Option is granted
as a matter of separate agreement, and not in lieu of salary or any other
regular or special compensation for services.
B. The purchase price of the shares which may be purchased pursuant to the
Option is $ per share, which is, in the opinion of the Company, not less
-------
than the fair market value of the shares on the date the Option was granted as
specified in paragraph A.
<PAGE>
C. Unless sooner terminated or modified under the provisions of this
Agreement, the Option shall continue and shall automatically expire at midnight
July , 2002, the fifth anniversary date of the original option grant.
----
D. The Option may be exercised by the Optionee to purchase the total number
of shares specified in paragraph A as follows:
One-third (1/3rd) of the total number of shares shall be
exercisable on the first anniversary of the date of
grant,
An additional one-third (1/3rd) of the total
number of shares shall become exercisable on
the second anniversary of the date of grant,
and
The remaining one-third (1/3rd) of the total
number of shares shall become exercisable
the third anniversary of the date of grant.
The Optionee need not exercise any part of the Option when it becomes
exercisable, but may accrue the fractional increments described above and
exercise them in any later period, prior to expiration of the Option.
E. If the Optionee's consulting services with the Company or a
participating subsidiary of the Company shall be terminated by the Company or a
participating subsidiary with "Cause" (as defined in the Consulting and
Non-Competition Agreement between Mercy Air Services, Inc. and Optionee dated
the date hereof), or by the Optionee, the Option, to the extent then exercisable
as provided in paragraph D, shall remain exercisable after the termination of
his consulting services for a period of three months. If the Optionee's
consulting services are terminated due to the Optionee's death or because the
Optionee is disabled within the meaning of Section 22(e)(3) of the Code, the
Option, to the extent then exercisable as provided in paragraph D, shall remain
exercisable after the termination of his consulting services for a period of
twelve months. If the Optionee's consulting services with the Company or a
participating subsidiary are terminated by the Company or a participating
subsidiary without Cause, the Option shall continue to vest in accordance with
paragraph D and shall remain exercisable until the expiration date set forth in
paragraph C. If the Option is not exercised during the applicable period, it
shall be deemed to have been forfeited and of no further force or effect.
F. The Option may not be exercised by anyone other than the Optionee during
his lifetime. In the event of the Optionee's death, the Option may be exercised
by the personal representative of the Optionee's estate or, if no personal
representative has been appointed, by the successor or successors in interest
determined under the Optionee's will or under the applicable laws of descent and
distribution. The Option may not be transferred, assigned, encumbered or
alienated in any way by the Optionee, and any attempt to do so shall render the
Option and any unexercised portion thereof, at the discretion of the Company,
null and void and unenforceable by the Optionee.
-2-
<PAGE>
G. The Option may be exercised in whole or in part by delivering to the
Company written notice of exercise together with payment in full for the shares
being purchased upon such exercise.
H. The Company will, upon receipt of said notice and payment, issue or
cause to be issued to the Optionee (or to his personal representative or other
person entitled thereto) a stock certificate for the number of shares purchased
thereby. The Optionee may designate a member of the Optionee's immediate family
as a co-owner of the said shares.
I. The Company may, in its discretion, file and maintain effective with the
Securities and Exchange Commission a Registration Statement on Form S-8 under
the Securities Act of 1933, as amended (the "Act"), covering the sale of the
optioned shares to Optionee upon exercise of the Option. If, at the time of
exercise, the Company does not have an effective Registration Statement on file
covering the sale of the optioned shares, the Optionee represents and agrees
that: (i) the Option shall not be exercisable unless the purchase of optioned
shares upon the exercise of the Option is pursuant to an applicable effective
registration statement under the Act, or unless in the opinion of counsel for
the Company, the proposed purchase of such optioned shares would be exempt from
the registration requirements of the Act, and from the qualification
requirements of any state securities law; (ii) upon exercise of the Option, he
will acquire the optioned shares for his own account for investment and not with
any intent or view to any distribution, resale or other disposition of the
optioned shares; (iii) he will not sell or transfer the optioned shares, unless
they are registered under the Act, except in a transaction that is exempt from
registration under the Act, and each certificate issued to represent any of the
optioned shares shall bear a legend calling attention to the foregoing
restrictions and agreements. The Company may require, as a condition of the
exercise of the Option, that the Optionee 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.
J. If the Company or its stockholders enter into an agreement to dispose of
all, or substantially all, of the assets or outstanding capital stock of the
Company by means of a sale or liquidation, or a merger or reorganization in
which the Company is not the surviving corporation, any unexercised portion of
the Option as of the day before the consummation of such sale, liquidation,
merger or reorganization shall for all purposes under this Agreement become
exercisable in full as of such date even though the anniversary dates, as
provided in paragraph D, have not yet occurred.
K. In consideration of the granting by the Company of the Option, the
Optionee hereby affirms that he has a present intention to remain in the service
of the Company or a participating subsidiary for the period that this Option
continues. This affirmation, however, shall confer no right on the Optionee to
continue as a consultant to the Company or a participating subsidiary, nor
interfere in any way with the right of the Company or a participating subsidiary
to discharge the Optionee at any time for any reason whatsoever, with or without
Cause.
-3-
<PAGE>
L. The Optionee shall have no rights as a stockholder with respect to the
shares of Common Stock which may be purchased pursuant to the Option until such
shares are issued to the Optionee.
M. This Agreement is entered into and shall be governed by, construed and
enforced in accordance with the laws of the State of Colorado.
N. The terms and conditions contained in the Plan, as it may be amended
from time to time hereafter, are incorporated into and made a part of this
Agreement by reference, as if the same were set forth herein in full, and all
provisions of the Option are made subject to any and all terms of the Plan.
IN WITNESS WHEREOF, the parties have hereunto affixed their signatures in
acknowledgment and acceptance of the above terms and conditions on the date
first above mentioned.
AIR METHODS CORPORATION
By
------------------------------------------
OPTIONEE
--------------------------------------------
-4-
<PAGE>
EXHIBIT H
July 31, 1997
Air Methods Corporation
7301 South Peoria
Englewood, Colorado 80112
Ladies and Gentlemen:
We have acted as counsel to Homer L. Aerts, J. Steven Dickmeyer, Don D.
Reed, Terry L. Russ and Richard J. Silva (collectively, the "Shareholders"), in
connection with the execution and delivery by the Shareholders of that certain
Stock Purchase Agreement dated as of July 11, 1996 (the "Agreement") among the
Shareholders and Air Methods Corporation, a Delaware corporation (the "Buyer").
As you know, that Agreement provides for the sale by the Shareholders to Buyer
and Buyer's purchase from the Shareholders of all of their respective shares of
common stock of Mercy Air Service, Inc., a California corporation (the "Company"
or "Mercy"). This opinion is being delivered pursuant to Section 9.9 of the
Agreement. Unless specifically defined herein or the context requires otherwise,
capitalized terms used herein shall have the meanings ascribed to them in the
Agreement.
In connection with the preparation of this opinion, we have examined such
documents and considered such questions of law as we have deemed necessary or
appropriate. We have assumed that there are no other documents or agreements
among the Shareholders and the Buyer which would expand or otherwise modify the
respective rights and obligations of the Shareholders and the Buyer as set forth
in the Agreement and the documents required or contemplated thereby, including a
Letter Agreement dated as of July 31, 1997 between the Shareholders and the
Buyer.
We have assumed the authenticity of all documents submitted to us as
originals, the conformity with originals of all documents submitted to us as
copies, and the genuineness of all signatures (other than signatures of the
Shareholders). We have also assumed the legal capacity of all natural persons
and that, with respect to all parties to agreements or instruments relevant
hereto (other than the Shareholders), such parties had the requisite power and
authority to execute, deliver and perform such agreements or instruments, that
such agreements or instruments have been duly authorized by all requisite
action, executed and delivered by such parties, and that such agreements or
instruments are the valid, binding and enforceable obligations of such parties.
As to questions of fact material to our opinions, we have relied upon the
representations of each party made in the Agreement and the other documents and
certificates delivered in connection therewith, certificates of the Shareholders
and certificates and advices of public officials.
<PAGE>
Air Methods Corporation
July 31, 1997
Page Two
Whenever a statement herein is qualified by "known to us," "to our current
actual knowledge," or similar phrase, it is intended to indicate that, during
the course of our representation of the Shareholders, no information that would
give us current actual knowledge of the inaccuracy of such statement has come to
the attention of those attorneys in this firm who have rendered legal services
in connection with the transaction described in the introductory paragraph
hereof. However, except as otherwise expressly indicated, we have not undertaken
any independent investigation to determine the accuracy of such statement, and
any limited inquiry undertaken by us during the preparation of this opinion
letter should not be regarded as such an investigation; no inference as to our
knowledge of any matters bearing on the accuracy of any such statement should be
drawn from the fact of our representation of the Shareholders.
Based upon the foregoing, and subject to the additional assumptions,
exceptions, qualifications and limitations set forth below, we are of the
opinion that:
1. The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of California. The Company is duly
qualified to do business as a foreign corporation and is in good standing in
each other state in which the nature of its activities or of its properties
owned or leased makes such qualification necessary, except to the extent that
failure to so qualify would not have a material adverse effect on the Company.
2. The Company has the corporate power and authority to own its properties
and assets, to carry on its business as presently conducted, and to enter into
the Agreement and the other documents required or contemplated thereby and
perform its respective obligations thereunder.
3. The authorized capital stock of the Company consists of 10,000 shares of
common stock of the Company, without par value, and, to our actual knowledge,
based solely on the representations and warranties of the Shareholders contained
in the Agreement and factual certificates which they have delivered to us in
connection with our preparation of this opinion, as of the date hereof a total
of 83-2/3rds shares of common stock of the Company were issued and outstanding.
4. The Agreement, the Consulting and Non-Competition Agreements and the
Security Agreement have been duly executed and delivered by the Shareholders, to
the extent that they are parties thereto.
5. The Agreement and the Security Agreement are each a legal, valid and
binding obligation of the Shareholders enforceable against them in accordance
with their respective terms, except as the enforceability thereof may be subject
to or limited by (a) bankruptcy, insolvency, reorganization, arrangement,
moratorium, or other similar laws relating to or affecting the rights of
creditors, and (b) general equitable principles, regardless of whether the issue
of enforceability is considered in a proceeding in equity or at law.
6. To our knowledge, the execution and delivery by the Shareholders of the
Agreement, the Non-Competition and Consulting Agreements and the Security
Agreement, to the extent that they are parties thereto, and the other documents
required or contemplated thereby and the performance by the Shareholders of
their respective terms will not constitute a material breach of or constitute a
material default under any of the Material Contracts (as defined in the
Agreement).
<PAGE>
7. To our actual knowledge, except as set forth on Schedule 5.15 to the
Purchase Agreement, there are no pending legal actions or proceedings in which
the Company is a named defendant and the outcome thereof is expected to be
materially adverse to the Company.
The foregoing opinions are subject to the following:
(a) Except as otherwise provided herein, we expressly do not comment
upon or render any opinion with respect to any documents referenced in the
Agreement;
(b) The opinions hereinabove set forth are further subject to the
following additional qualifications:
(i) The effect of provisions releasing or indemnifying a party
against liability for its own wrongful or negligent acts, or where
indemnification is contrary to public policy.
(ii) The effect of Section 1698 of the California Civil Code
which provides in part that provisions of any instrument or agreement
may only be waived in writing will not be enforced to the extent that
an oral agreement has been executed modifying provisions of such
instrument or agreement.
(iii) We express no opinion regarding the enforceability of the
choice of law provisions of Section 16.5, or of the arbitration
provisions of Section 16.10, of the Agreement.
(iv) The unenforceability in certain circumstances of provisions
waiving broadly or vaguely stated rights, statutory or other rights
representing public policy, or unknown future rights and of provisions
that rights or remedies are not exclusive.
(v) The unenforceability under certain circumstances of
provisions to the effect that failure to exercise or delay in
exercising any right or remedy will not operate as a waiver of that
right or remedy.
(vi) Limitations on the exercise of certain contractual rights
and remedies if the defaults are not material or the penalties bear no
reasonable relation to the damages suffered by the aggrieved party as
a result of the delinquencies or defaults.
We are members of the Bar of the State of California and, accordingly, do
not purport to be experts on or to be qualified to express any opinion herein
concerning, nor do we express any opinion herein concerning, any laws other than
the laws of the State of California and federal law.
The foregoing opinions are being furnished to you solely for your benefit
and may not be relied upon by any other person without our prior written
consent.
Very truly yours,
DRAFT-SUBJECT TO FINALIZATION
<PAGE>
EXHIBIT I
July 31, 1997
Homer L. Aerts
J. Steven Dickmeyer
Don D. Reed
Terry L. Russ
Richard J. Silva
c/o Mercy Air Service, Inc.
8190 Mango Avenue
Fontana, CA 92334
Gentlemen:
We have acted as counsel to Air Methods Corporation, a Delaware corporation
("Air Methods"), in connection with its purchase of the stock of Mercy Air
Service, Inc., a California corporation ("Mercy"), pursuant to the Stock
Purchase Agreement, dated as of July 11, 1997 (the "Agreement"), by and among
Air Methods and Homer L. Aerts, J. Steven Dickmeyer, Don D. Reed, Terry L. Russ
and Richard J. Silva (collectively referred to as the "Sellers"). This opinion
is rendered pursuant to Section 10.8 of the Agreement and pursuant to Section
10.7 of the Asset Purchase agreement (as defined below). Unless otherwise
indicated, the capitalized terms used but not defined herein shall have the
meanings given to such terms in the Agreement.
In rendering the opinions set forth herein, we have examined the following
documents:
(a) The Agreement together with the exhibits and schedules thereto;
(b) The Asset Purchase Agreement between Helicopter Services, Inc., a
California corporation ("HSI"), and Air Methods, dated as of July 11,
1997 (the "Asset Purchase Agreement");
(c) The Bill of Sale and Assumption Agreement, dated the date hereof,
among HSI, Sellers and Air Methods (the "Bill of Sale");
<PAGE>
c/o Mercy Air Service, Inc.
July 31, 1997
Page 2
(d) The Employment Agreement, dated the date hereof, between Mary J. Davis
and Mercy (the "Davis Employment Agreement");
(e) The Employment Agreement between David L. Dolstein and Air Methods and
the Stock Option Agreement between David L. Dolstein and Air Methods
(collectively referred to as the "Dolstein Employment Agreement");
(f) The Consulting and Non-Competition Agreements, dated the date hereof,
between each individual Seller and Mercy (the "Consulting
Agreements");
(g) The Stock Option Agreements, dated the date hereof, between each
individual Seller and Air Methods (the "Stock Option Agreements");
(h) The Notes; and
(i) The Security Agreement.
The Agreement, the Asset Purchase Agreement, the Bill of Sale, the Stock Option
Agreements, the Dolstein Employment Agreement, the Notes and the Security
Agreement shall hereinafter be referred to collectively as the "Air Methods
Documents." The Davis Employment Agreement, the Consulting Agreements, and the
Security Agreement shall hereinafter be referred to collectively as the "Mercy
Documents."
In addition, we have examined originals or copies, certified or otherwise
identified to our satisfaction, of the certificate of incorporation and the
bylaws of Air Methods, such certificates of public officials, officers and
representatives of Air Methods and such other persons, and such other documents,
and we have made such examinations of law, as we have deemed necessary or
appropriate to enable us to render the opinions expressed below. In all such
examinations, we have assumed the genuineness of all signatures on original or
certified documents and the conformity to the original or certified documents of
all documents submitted to us as conformed or photostatic copies.
As to certain matters of fact relating to the opinions expressed herein, we
have relied upon a certificate of an officer of Air Methods, a copy of which is
attached as EXHIBIT A hereto, and a certificate of an officer of Mercy, a copy
of which is attached as EXHIBIT B hereto
<PAGE>
c/o Mercy Air Service, Inc.
July 31, 1997
Page 3
(the "Certificates"). We have assumed the accuracy of all information furnished
to us in the Certificates and have not independently verified the accuracy of
such information.
For purposes of these opinions, we have assumed that: (i) Mercy is and will
be, after giving effect to the transactions which are the subject of these
opinions, solvent; (ii) there is adequate consideration for the execution and
delivery of the Security Agreement; (iii) Mercy owns the Collateral (as defined
in the Security Agreement), and the value has been given within the meaning of
Section 9-203 of the Uniform Commercial Code ("UCC"); and (iv) Mercy main tains
its records concerning the Collateral and its chief executive office in the
State of California.
The following opinions are limited solely to applicable federal laws of the
United States of America, the laws of the State of Colorado, and the General
Corporation Law of the State of Delaware. While we are not licensed to practice
law in the State of Delaware, we have reviewed applicable provisions of the
General Corporation Law of the State of Delaware as we have deemed appropriate
in connection with the opinions expressed in paragraphs 1 and 2 below. Except as
described, we have neither examined nor do we express any opinion with respect
to Delaware law. With your consent, our opinions regarding the Documents are
given based on the application of the laws of the State of Colorado thereto even
though such Documents state that they are to be governed by the laws of
California. Specifically, with respect to the opinions in paragraphs 4 and 5, we
have assumed, with your consent and without investigation, that the California
UCC is identical to the Colorado UCC.
Based upon the foregoing and subject to the further assumptions,
exceptions, qualifications and limitations set forth herein, we are of the
opinion that:
1. Air Methods is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware and has the corporate
power and authority to own its property and carry on its business as now
conducted.
2. Air Methods has the corporate power and authority to execute, deliver
and perform its obligations under the Documents. The execution and delivery of
the Documents and the consummation by Air Methods of the transactions
contemplated thereby have been duly authorized by all necessary corporate action
on the part of Air Methods. Each of the Air Methods Documents has been duly
executed and delivered by Air Methods. Each of the Mercy Documents has been duly
executed and delivered by Mercy.
3. The Air Methods Documents constitute the legal, valid and binding
obligation of Air Methods, enforceable against it in accordance with their
terms. The Mercy
<PAGE>
c/o Mercy Air Service, Inc.
July 31, 1997
Page 4
Documents constitute the legal, valid and binding obligation of Mercy,
enforceable against it in accordance with their terms.
4. The provisions of the Security Agreement are sufficient to create a
security interest on behalf of Sellers which has attached to the right, title
and interest of Mercy in those items and types of Collateral in which a security
interest may be created pursuant to Article 9 of the UCC.
5. The UCC-1 Financing Statement relating to the Collateral and listing Air
Methods and Mercy as the debtors and the Collateral Agent (as defined in the
Security Agreement), as agent for the Sellers, as the secured party (the
"Financing Statement"), is in adequate and legally sufficient form for filing
with the Secretary of State of California and sufficiently describes the
Collateral; provided, however, that we render no opinion with respect to such
description to the extent the Financing Statement includes terms which are not
defined in the UCC. Assuming that the Financing Statement is duly filed with the
Secretary of the State of California in accordance with the provisions of
Section 9-403(1) of the UCC, a security interest will be perfected in those
items and types of Collateral in which a security interest can be perfected and
maintained solely by filing financing statements in the Secretary of State's
office in California.
These opinions do not address any event which may occur subsequent to the
date hereof to the extent such event affects the validity or perfection of the
Sellers' security interest in the Collateral. We call your attention to the
necessity of filing continuation statements from time to time under the
applicable provisions of the UCC and to the fact that additional filings may be
required, among other things, upon the change of location of Mercy as provided
in Section 9-103(e) of the UCC or the change of the name or corporate structure
of Mercy as provided in Section 9-402(7) thereof.
The opinions expressed herein as to the validity, binding effect and
enforceability of the Documents and as to perfection of the security interest in
the Collateral are subject to the following limitations: (a) general principles
of equity (regardless of whether such enforceability is considered in a
proceeding at law or in equity); (b) the effect of applicable bankruptcy,
reorganization, insolvency, moratorium and similar laws and court decisions
relating to or affecting creditors' rights generally; (c) we have made no
investigation and express no opinion as to the applicability of any fraudulent
conveyance or similar law; (d) the remedies of specific performance and
injunctive and other forms of equitable relief are subject to certain equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought; (e) the UCC requires that a secured party exercise its rights in
good faith and in a commercially reasonable manner and a court may not strictly
enforce certain covenants therein if it concludes
<PAGE>
c/o Mercy Air Service, Inc.
July 31, 1997
Page 5
that such enforcement would be unreasonable under the then existing
circumstances; (f) certain liabilities and duties imposed by Colorado law with
respect to foreclosure of a security interest, including the duty to exercise
reasonable care in the custody and preservation of collateral in a secured
party's possession or control and certain notice requirements, cannot be waived,
disclaimed or varied; (g) public policy considerations may limit the rights to
obtain indemnification or to limit a party's liability for its own negligence or
wrongful acts; (h) we express no opinion as to the enforceability of the choice
of law, severability, waiver or set off provisions contained in the Documents;
(i) to the extent that the Security Agreement purports to authorize the Secured
Parties to purchase any Collateral at a private sale thereof, such provision
would not be enforceable; (j) to the extent that the Security Agreement might be
deemed to provide that the Secured Parties may enter upon and take possession of
the Collateral by force amounting to a breach of the peace or public disturbance
without liability by reason of the manner of such entry and possession, such
provision would not be enforceable, and (k) we express no opinion as to the
enforceability of the provisions of the Security Agreement which purport to
authorize the Collateral Agent to sign and file documents in the name or on
behalf of Mercy without the signatures of the appropriate officers of Mercy.
To the extent the obligations of Air Methods may be dependent upon such
matters, we assume for purposes of these opinions that the Air Methods Documents
are within the capacity and power of, and have been duly authorized, executed
and delivered by the parties thereto other than Air Methods (and with respect to
the Security Agreement, other than Mercy) and constitute the legal, valid and
binding obligation of such parties enforceable against them in accordance with
their terms. To the extent the obligations of Mercy may be dependent upon such
matters, we assume for purposes of these opinions that the Mercy Documents are
within the capacity and power of, and have been duly authorized, executed and
delivered by the parties thereto other than Mercy (and with respect to the
Security Agreement, other than Air Methods) and constitute the legal, valid and
binding obligation of such parties enforceable against them in accordance with
their terms.
The opinions set forth herein are as of the date hereof and we disclaim any
under taking or obligation to advise you of any changes which may hereafter be
brought to our attention. These opinions are rendered only to the persons to
whom this letter is addressed and are solely for their benefit in connection
with the transactions contemplated by the Documents. These opinions may not be
relied upon by the addressees, or any of them, for any other purpose or relied
upon by any person other than such persons for any purpose without our prior
written consent.
Very truly yours,
DAVIS, GRAHAM & STUBBS LLP
<PAGE>
SCHEDULE 2.1
Ownership of the Shares/Allocation of Closing Date Cash Payment and Notes
<TABLE>
<CAPTION>
SHAREHOLDER # OF SHARES HELD/1/ % OF SHARES HELD CASH PAYMENT DUE/2/ NOTE AMOUNT DUE/2/
----------- ----------------- ---------------- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
Homer L. Aerts 16 2/3 20% $930,000.00 $300,000.00
J. Steven Dickmeyer 16 2/3 20% $930,000.00 $300,000.00
Don D. Reed 16 2/3 20% $930,000.00 $300,000.00
Terry L. Russ 16 2/3 20% $930,000.00 $300,000.00
Richard J. Silva 16 2/3 20% $930,000.00 $300,000.00
</TABLE>
- --------
1 Under California law, consent from the spouses and ex-spouses of certain of
the Shareholders may be required prior to the transfer of the Shares.
2 Represents the sum of the respective cash payments and Note amounts due
under the Stock Purchase Agreement and the Western Helicopter Asset
Purchase Agreement. This Schedule will be revised to include only the cash
payments and Note Amounts due as consideration for the sale of the Mercy
Shares, when the allocation of purchase price is determined.
<PAGE>
SCHEDULE 2.2
Assumed Obligations
The Textron Debt and the guaranty thereunder (as defined in SCHEDULE 8.5 to
the Stock Purchase Agreement).
<PAGE>
SCHEDULE 2.3
DETERMINATION OF PURCHASE PRICE ADJUSTMENTS
Reference is hereby made to (i) that certain Stock Purchase Agreement dated
as of July 11, 1997 (the "Stock Purchase Agreement"), by and among Air Methods
Corporation, a Delaware corporation ("Buyer"), and Homer L. Aerts, J. Steven
Dickmeyer, Don D. Reed, Terry L. Russ and Richard J. Silva (each, a "Seller" and
collectively, the "Sellers"), who own all of the outstanding shares of common
stock Mercy Air Service, Inc., a California, corporation (the "Company"), and
(ii) that certain Asset Purchase Agreement dated as of July 11, 1997 (the "Asset
Purchase Agreement"), by and among Buyer, and Helicopter Services, Inc., a
California corporation ("HSI"), and the Sellers, who also are the owners of the
outstanding shares of common stock of HSI. The Company provides emergency
medical transportation services by helicopter and HSI provides helicopter
maintenance and repair services primarily to the Company.
The Stock Purchase Agreement provides for Sellers to sell to Buyer and for
Buyer to purchase from the Sellers, the outstanding shares of the Company (the
"Shares") and the Asset Purchase Agreement provides for HSI to sell to Buyer and
Buyer to purchase from HSI substantially all of the assets of HSI (the
"Purchased Assets"). This SCHEDULE 2.3, which has been incorporated into and
made an integral part of the Stock Purchase Agreement, sets forth the
provisions, agreed upon by the parties to that Agreement, for determining the
nature and amount of the adjustments, if any, that will be made to the Purchase
Price to be paid for the Shares (the "Share Purchase Price"). In addition, as a
matter of convenience and to avoid unnecessary duplication, the parties to the
Asset Purchase Agreement have agreed to include the purchase price adjustment
provisions applicable to the Purchase Price to be paid for the Purchased Assets
(the "Asset Purchase Price") into this SCHEDULE 2.3 and to incorporate the
provisions hereof applicable to the determination of such Adjustments.
Terms with initial capital letters contained in this SCHEDULE 2.3 shall
have the meanings given to them in the Stock Purchase Agreement or the Asset
Purchase Agreement, as applicable, unless such terms are otherwise defined
herein or the context indicates that a different meaning is intended by the
Parties.
A. DEFINITIONS.
For purposes of determining the Share Price Adjustments and the Asset Price
Adjustments pursuant to this SCHEDULE 2.3, the terms set forth below shall have
the following meanings:
"APPLICABLE BALANCE SHEETS" shall mean (i) the respective balance
sheets for the Company and HSI as of December 31, 1996 (the "1996 Balance
Sheets"), which shall be prepared from the financial books and records of
the Company and HSI, respectively, by KMPG Peat Marwick, independent public
accountants ("Peat Marwick") in connection with its preparation of an
audited combined balance sheet of the Company and HSI as of December 31,
1996, as contemplated by the Purchase Agreement, and (ii) balance sheets
for the Company and HSI, respectively, as of the Closing Date (the "Closing
Date Balance Sheets"). Except as otherwise provided below, neither the 1996
Balance Sheets nor the Closing Date Balance Sheets shall give effect to the
respective stock purchase and asset purchase transactions between the
parties that are contemplated by the Stock Purchase Agreement and the Asset
Purchase Agreement, respectively. Each of the 1996 Balance Sheets and the
Closing Date Balance Sheets shall be prepared in accordance with GAAP,
consistently applied on an accrual basis.
"ADJUSTED NET WORKING CAPITAL" with respect to either the Company or
HSI shall mean the amount by which the current assets of the Company or
HSI, as the
<PAGE>
case may be, exceeds the current liabilities of the Company or HSI, as the
case may be, as of December 31, 1996 and as of the Closing Date, determined
from the 1996 Balance Sheets and the Closing Date Balance Sheets,
respectively, after making the following adjustments thereto:
(1) Eliminating the cash balances from each of the respective
Applicable Balance Sheets of the Company and HSI and the short-term
investment in the amount of $230,625 from HSI's 1996 Balance Sheet;
(2) Eliminating the accounts receivable balance on the Company's
1996 Balance Sheet and the Company's Closing Balance Sheet (so that
there shall be no adjustment made for changes in the Company's
accounts receivables between December 31, 1996 and the Closing Date);
(3) Excluding the current portion of long term debt of the
Company and HSI, respectively, from each of their respective
Applicable Balance Sheets;
(4) Deducting any "accrued overhead and parts replacement costs"
from the respective 1996 and Closing Balance Sheets of the Company and
HSI, respectively;
(5) Deducting, from the current liabilities on each of the
respective 1996 and Closing Date Balance Sheets of the Company and
HSI, all accounts payable and indebtedness of the Company and all
accounts payable and all indebtedness of HSI owed to their respective
shareholders or to affiliates of such shareholders;
(6) Deducting, from the assets on each of the respective 1996 and
Closing Date Balance Sheets of the Company and HSI, all accounts
receivable and other amounts due from any of the respective
shareholders of the Company or HSI or from any of their affiliates;
(7) Deducting, from the liabilities of HSI on each of its 1996
and Closing Date Balance Sheets, all liabilities of HSI that Buyer is
not assuming and HSI is retaining pursuant to the provisions of the
Asset Purchase Agreement;
(8) Deducting, from the assets of HSI on each of on each of its
1996 and Closing Date Balance Sheets, all Excluded Assets (as such
term is defined in the Asset Purchase Agreement);
(9) Adding to the assets of HSI on its Closing Date Balance
Sheet, as inventory, the helicopter engine described on SCHEDULE 1.7
to the Asset Purchase Agreement; and
(10) Adding to the respective assets of the Company or HSI, on
their respective Closing Date Balance Sheets, as receivables or as
offsets to accounts payable or other current liabilities, any credits
or discounts received or receivable from vendors, suppliers or service
providers that arose out of the operations of the Company or HSI,
respectively, conducted prior to the Closing.
"CLOSING DATE INDEBTEDNESS" shall mean the long-term indebtedness,
including the current portion thereof, if any, of the Company or HSI, as
the case may be, that is
<PAGE>
outstanding as of the Closing Date, as reflected on its Closing Date
Balance Sheet, and shall include (i) any borrowings of the Company or of
HSI, if any, under any of the any of their respective revolving lines of
credit or revolving credit facilities outstanding as of the Closing Date,
even if such indebtedness would otherwise be required to be classified as
current debt or short-term debt under GAAP, and (ii) the outstanding
balance of the Textron Debt, as defined in SCHEDULE 8.5 of the Stock
Purchase Agreement, outstanding as of the Closing Date. "Closing Date
Indebtedness" shall not include any indebtedness due by the Company or HSI
to any of their respective shareholders or their affiliates.
"WRITTEN-OFF ACCOUNTS" shall mean the accounts receivable of the
Company or HSI that were uncollected and had been "written-off" by the
Company or HSI, as the case may be, as of or at any time prior to the
Closing Date.
B. CLOSING PURCHASE PRICE ADJUSTMENTS.
1. PREPARATION OF CLOSING DATE BALANCE SHEETS. Buyer shall arrange for Peat
Marwick to prepare, and issue review reports with respect to, the Closing Date
Balance Sheets for the Company and HSI. Such Balance Sheets and review reports
shall be issued to both Buyer and the Sellers by no later than ninety (90) days
after the Closing Date.
2. DETERMINATION OF ADJUSTED NET WORKING CAPITAL. Based on the respective
1996 Balance Sheets and the respective Closing Date Balance Sheets of the
Company and HSI, within the aforesaid ninety (90) days period immediately
following the Closing Date, Peat Marwick shall determine (i) the Adjusted Net
Working Capital of each of Company and of HSI as of December 31, 1996, and (ii)
the Adjusted Net Working Capital of each of Company and of HSI as of the Closing
Date.
3. DETERMINATION OF CLOSING DATE INDEBTEDNESS. Peat Marwick shall determine
the amount of the Closing Date Indebtedness From the Closing Date Balance Sheet
of the Company.
4. DETERMINATION OF CLOSING ADJUSTMENTS TO PURCHASE PRICE.
(a) NET WORKING CAPITAL ADJUSTMENT: Immediately following the
determination of the Adjusted Net Working Capital of the Company and HSI,
respectively, as of December 31, 1996 and the Adjusted Net Working Capital
of the Company and HSI, respectively, as of the Closing Date, the Share
Purchase Price and the Asset Purchase Price shall be adjusted as follows
(the "Net Working Capital Adjustments"):
(i) In the event that the Company's or HSI's Adjusted Net Working
Capital as of December 31, 1996 exceeds its respective Adjusted Net
Working Capital as of the Closing Date, then, the Share Purchase Price
(in the case of the Company), or the Asset Purchase Price (in the case
of HSI) shall be reduced by the amount of such excess, in the manner
described below (a "Downward Share Price Adjustment" and a "Downward
Share Price Adjustment," respectively).
(ii) If, on the other hand, the Company's or HSI's Adjusted Net
Working Capital as of the Closing Date exceeds its respective Adjusted
Net Working Capital as of December 31, 1996, then, the Share Purchase
Price (in the case of the Company), or the Asset Purchase Price (in
the case of HSI), shall be increased by the amount of such excess, in
the manner described below (an "Upward Share Price Adjustment" and an
"Upward Asset Price Adjustment," respectively).
(b) CLOSING DATE INDEBTEDNESS ADJUSTMENT. Immediately following the
determination of the Closing Date Indebtedness, the Share Purchase Price
shall be adjusted as follows (the "Closing Date Indebtedness Adjustment"):
<PAGE>
(i) Subject to the any further adjustment required pursuant to
Subparagraph 4(b)(iii) below, if the Closing Date Indebtedness exceeds
$8,200,000, then, the Share Purchase Price shall be reduced by the
amount of such excess, in the manner described below (a "Downward
Share Price Adjustment").
(ii) Subject to the any further adjustment required pursuant to
Subparagraph 4(b)(iii) below, if, on the other hand, the sum of
$8,200,000 is determined to have exceeded the Closing Date
Indebtedness, then, the Share Purchase Price shall be increased by the
amount of such excess, in the manner described below (an "Upward Share
Price Adjustment").
(iii) If a Downward Share Price Adjustment is determined to be
required pursuant to Subparagraph 4(b)(i), that Adjustment shall be
(A) reduced to the extent that the Share Purchase Price was reduced at
Closing, or (B) increased to the extent that the Share Purchase Price
was increased at Closing, as the case may be, on the basis of the
estimate of Closing Date Indebtedness made pursuant to Subsection 2.3
of the Stock Purchase Agreement. If, on the other hand, an Upward
Share Price Adjustment is determined to be required pursuant to
Subparagraph 4(b)(ii), that Adjustment shall be (A) increased to the
extent that the Share Purchase Price was reduced at Closing, or (B)
decreased to the extent that the Share Purchase Price was increased at
Closing, as the case may be, on the basis of the estimate of Closing
Date Indebtedness made pursuant to Subsection 2.3 of the Stock
Purchase Agreement.
5. EFFECTUATION OF CLOSING PURCHASE PRICE ADJUSTMENTS. If any Upward or
Downward Share Price or Asset Price Adjustment (any of the foregoing, a "Closing
Price Adjustment") is required to be made to the Share Purchase Price or Asset
Purchase Price, either pursuant to Subsection 4(a) or Subsection pursuant to
Subsection 4(b) of this Section B, such Closing Price Adjustment or Adjustments
(as the case may be) shall be given effect as follows:
(a) If any Closing Price Adjustment is required pursuant to either
Paragraph 4(a) or Paragraph 4(b), but not pursuant to both of those
Subsections, then:
(i) UPWARD SHARE PRICE ADJUSTMENT. If such Closing Price
Adjustment is an Upward Share Price Adjustment pursuant to Subsection
4(a) or Subsection 4(b), the amount thereof shall be applied to
increase the respective principal amounts due under the notes issued
to the Sellers pursuant to the Stock Purchase Agreement (the "Seller
Notes"), with the amount of such Closing Price Adjustment to be
allocated among the Seller Notes in the same proportions as the then
outstanding principal amount of each such Note bears to the aggregate
sum of the respective then outstanding principal amounts of all of
such Notes, PROVIDED, HOWEVER, that the amount of any such Closing
Price Adjustment shall become due and payable (together with interest
thereon at the interest rate specified in such Notes) on the first
anniversary of the Closing Date together with the installments of
principal and interest already scheduled to be paid on such date under
such Notes.
(ii) UPWARD ASSET PRICE ADJUSTMENT. If such Closing Price
Adjustment is an Upward Asset Price Adjustment pursuant to Subsection
4(a), the amount thereof shall be paid in cash by Buyer to HSI or, if
the amount thereof exceeds $50,000, then, at Buyer's option, by
issuing to HSI a secured promissory note of Buyer (the "Buyer Note")
that shall be (A) substantially similar in form to the notes issued to
the Sellers pursuant to the Stock Purchase Agreement (the "Seller
Notes"), (B) payable by Buyer in twelve (12) equal consecutive monthly
installments of principal and interest (which shall accrue on such
principal sum at the same rate at which interest accrues under the
Shareholder Notes issued pursuant to Stock Purchase Agreement) and (C)
secured by a security interest, that Buyer shall cause to be granted
by the Company in its accounts receivable to HSI pursuant to a
security agreement in a form substantially similar to the
<PAGE>
Security Agreement entered into by the Company pursuant to the Stock
Purchase Agreement, or in such other assets as Buyer and HSI may
agree, that shall be junior in priority only to the the security
interest in such accounts receivable that secures the Seller Notes and
up to $700,000 of indebtednes owed to the Company's revolving credit
lender.
(iii) DOWNWARD SHARE PRICE ADJUSTMENT. If such Closing Price
Adjustment is, instead, a Downward Share Price Adjustment pursuant to
Subsection 4(a) or Subsection 4(b), the amount thereof shall be
allocated among the Seller Notes in the same proportions as the then
principal amount of each such Note bears to the aggregate sum of the
respective principal amounts of all of the Notes and the amount
allocated to each such Note shall be credited against and to that
extent shall decrease the respective amounts of the installments of
principal that will come due thereafter under such Notes in the order
in which such installments would otherwise become due and payable.
(iv) DOWNWARD ASSET PRICE ADJUSTMENT. If such Closing Purchase
Price Adjustment is, instead, a Downward Asset Price Ajustment
pursuant to Subsection 4(a), the amount thereof shall be payable by
HSI to Buyer either in cash or, at HSI's option, by the issuance of an
HSI promissory note (the "HSI Note") that shall be (i) payable in
twelve (12) consecutive equal monthly payments of principal and
interest (which shall accrue at the same rate as the rate set forth in
the Seller Notes) and (ii) shall be secured by a written agreement of
each of HSI's shareholders that shall extend to Buyer the right to
set-off up to an amount equal to 20% of any unpaid principal balance
of the HSI Note, together with accured and unpaid interest thereon, in
the event of a payment default under such note by HSI, against amounts
that Buyer would otherwise be obligated to pay to such shareholder
under his Seller Note.
(b) If there are Share Price Adjustments required pursuant to both
Paragraphs 4(a) and 4(b) of this SECTION B, then:
(i) If those Adjustments are both Upward Share Price Adjustments
or both Downward Share Price Adjustments, they shall be added to each
other to determine the aggregate amount of the Share Price Adjustment
(either upward or downward) and such Adjustment shall be given effect
and paid:
(A) in the manner set forth in Paragraph 5(a)(i), if the
Adjustments are both Upward Share Price Adjustments; or
(B) in the manner set forth in Paragraph 5(a)(iii), if the
adjustments are both Downward Share Price Adjustments.
(ii) If those Share Price Adjustments include both an Upward and
a Downward Adjustment, those Share Price Adjustments shall be netted
against each other as follows:
(A) if the amount of a Downward Share Price Adjustment
exceeds the amount of the Upward Share Price Adjustment, then,
the amount of such excess shall be applied to decrease the
respective principal amounts of the Seller Notes in the
proportions and in the manner set forth in Paragraph 5(a)(iii)
above; or
(B) if the amount of the Upward Share Price Adjustment
exceeds the amount of the Downward Share Price Adjustment, then,
the amount of such excess shall be applied to increase the
respective principal amounts of the Seller Notes in the
proportions, and such increase shall be paid in the manner, set
forth in Paragraph 5(a)(i) hereof.
<PAGE>
All such adjustments to the Seller Notes shall be deemed made on the date of
original issuance thereof, with the effect that interest shall accrue on the
adjusted amount from the date of original issuance. Any Noteholder may submit,
and on the request of Buyer each Noteholder shall submit, his originally-signed
Seller Note to the Buyer, in exchange for which Buyer shall issue to such
Noteholder a new Seller Note of like tenor, except that the new Seller Note
shall give effect to the Share Price Adjustment provided for herein as if such
adjustment had occurred on the Closing Date; PROVIDED, HOWEVER, that the failure
of any Noteholder to submit, or the failure or refusal of the Buyer to accept,
the original Seller Note of any Noteholder for exchange in the manner
hereinabove provided shall not affect the Share Price Adjustment, which shall
nevertheless become effective retroactively to the Closing Date and, in such
event, the original Seller Note shall thereafter represent the right to receive
the principal amount stated thereon plus any Upward Share Price Adjustment or
minus any Downward Share Price Adjustment, as the case may be, on the terms set
forth herein.
6. ISSUANCE OF REPORT. Promptly following the determination of the Share
Price Adjustments and the Asset Price Adjustments, Peat Marwick shall issue
written reports to Buyer, Sellers and HSI (the "Share Price Adjustment Report"
and the "Asset Price Adjustment Report"), setting forth its determinations of
(i) the Adjusted Net Working Capital of the Company and the Adjusted Net Working
Capital of HSI, respectively, as of December 31, 1996, (ii) the Adjusted Net
Working Capital of the Company and the Adjusted Net Working Capital of HSI,
respectively, as of the Closing Date, (iii) the Closing Date Indebtedness, (iv)
the Net Working Capital Adjustments for each of the Company and HSI, and (v) the
Closing Date Indebtedness Adjustment. Such Report shall contain detail
sufficient to enable the parties to determine the nature and amount of each of
the adjustments made by Peat Marwick in determining the Share Price and the
Asset Price Adjustments and such Price Adjustment Reports shall be accompanied
by copies of the 1996 Balance Sheets and the Closing Date Balance Sheets for
each of the Company and HSI, together with Peat Marwick's review reports with
respect to such Closing Date Balance Sheets. The fees and reasonable
out-of-pocket expenses of Peat Marwick in connection with the preparation of the
Closing Date Balance Sheet and each of the foregoing determinations shall be
paid by Buyer.
7. RESOLUTION OF DISPUTES. Buyer, Sellers and HSI shall each have thirty
(30) days following delivery of the Price Adjustment Reports (the "Objection
Period") to deliver a written statement to the other parties of any objections
that such party has to either of the 1996 Balance Sheets or either of the
Closing Date Balance Sheets or any of the determinations contained in the Price
Adjustment Reports (an "Objection Statement"). The failure of any party to
deliver to the other parties hereto, prior to the expiration of the Objection
Period, such a written Objection Statement which identifies, with reasonable
particularity, the items in the 1996 Balance Sheets or in the Closing Date
Balance Sheets or in such Reports to which such party objects and the changes or
adjustments that such party proposes be made thereto, shall constitute such
party's acceptance of the 1996 Balance Sheets, the Closing Date Balance Sheets
and each of the determinations contained in the Price Adjustment Reports. If a
party has delivered such an Objection Statement to the other parties within the
Objection Period, then, the parties shall attempt to resolve their difference by
mutual agreement within the succeeding twenty (20) days. If the parties are
unable to do so, the matters that remain in dispute (which shall consist solely
of the items as to which any party objected in such party's Objection Statement
and were not resolved by agreement of the parties) shall be submitted, for
binding resolution, to a firm of independent certified public accountants (the
"Review Accountants"), that shall be selected by agreement of the parties, or
(ii) if such agreement cannot be reached within a period of ten (10) business
days, then, by lot from among the five "Big Six" accounting firms other than
Peat Marwick. The determination of the Review Accountant with respect to the
matters in dispute shall be final and binding on, and non-appealable by, the
parties hereto. The fees and expenses of the Review Accountants and the
reasonable accountants and attorneys fees and disbursement and other reasonably
<PAGE>
incurred out-of-pocket expenses of the prevailing party shall be paid or
reimbursed, as the case may be, by the non-prevailing party with respect to such
dispute.
C. POST-CLOSING ADJUSTMENTS TO PURCHASE PRICE.
As an inducement to Sellers to enter into the Stock Purchase Agreement and
to sell the Shares to Buyer, the Buyer and Sellers have agreed that the Share
Purchase Price (as the same may have been theretofore adjusted pursuant to the
provisions of Section 2.3 of the Stock Purchase Agreement or Section B of this
SCHEDULE 2.3), shall be subject to the following possible additional adjustment
(the "Post Closing Adjustment"):
1. EXCLUSIVE LICENSE ADJUSTMENT. The County of San Diego has issued a
Request For Proposals (an "RFP") pursuant to which the County intends to award a
contract for the provision of helicopter medical transport services in that
County beginning in 1998 and the Company is in the process of preparing such a
proposal in response to the RFP. If, within eighteen (18) months following the
Closing Date, the Company is awarded that contract by the County of San Diego
(the "San Diego County Contract"), the Share Purchase Price shall be increased
by $500,000 (the "Post Closing Share Price Adjustment") by increasing the then
remaining principal amount of each of the Seller Notes by an amount that bears
the same ratio to $500,000 as the original principal amount of each such Note
bears to the aggregate sum of the respective original principal amounts of all
of the Notes.
2. EFFECTUATION OF POST-CLOSING ADJUSTMENT. If a Post-Closing Share Price
Adjustment is required to be made pursuant to Subsection 1 of this Section C,
each Noteholder may submit his originally-signed Seller Note to the Buyer in
exchange for which Buyer shall issue to such Noteholder a new Seller Note of
like tenor, except that such new Seller Note shall give effect the Post Closing
Share Price Adjustment provided for in this SECTION C as if such adjustment had
become effective on the date the San Diego County Contract was awarded to the
Company; PROVIDED, HOWEVER, that the failure or refusal of the Buyer to accept
the Seller Note of any Noteholder for exchange in the manner hereinabove
provided shall not affect the Post-Closing Share Price Adjustment, which shall
nevertheless become effective retroactively to the date the San Diego County
Contract was granted to the Company and, in such event, the originally-signed
Seller Note shall thereafter represent the right to receive the principal amount
stated thereon plus the amount of the increase in the principal amount thereof
arising from such Post-Closing Share Price Adjustment.
<PAGE>
SCHEDULE 4.3
Seller Conflicts
Under California law, consent from the spouses and ex-spouses of certain of the
Shareholders may be required prior to the transfer of the Shares.
<PAGE>
SCHEDULE 5.2
Securities
Pursuant to the terms of the Company's Articles of Incorporation, each
Shareholder has a preemptive right to purchase such Shareholder's pro rata share
(based on such Shareholder's percentage ownership of all of the outstanding
shares) of any shares of capital stock that may be issued by Mercy Air Service,
Inc.
<PAGE>
SCHEDULE 5.4
Company Conflicts
1. Consent will be required from the Federal Aviation Administration for the
sale of the Shares to Air Methods Corporation.
2. Consent will be required from the County of Orange, California for the
transfer of the License issued by the County to the Company on January 1,
1997.
3. Consent will be required from the County of San Diego Department of Health
Services for the transfer of the Ambulance/Transport Permit # A-96-033
issued by the County to the Company.
4. Consent will be required from the County of Kern, California for the
transfer of the Kern County Ambulance Service Operation Permit issued by
the County to the Company on October 1, 1994 and renewed on February 29,
1996.
5. Consent will be required from the Riverside County Health Services Agency,
Department of Public Health, for the transfer of the Ambulance Operator
Permit issued by the County to the Company on July 1, 1996
6. Consent will be required from the San Bernardino County Department of
Public Health for the transfer of the EMS Aircraft Service Permit issued by
the County to the Company and effective July 1, 1996. (This Permit expired
on June 30, 1997. See SCHEDULE 5.13.)
7. Consent will be required from California State Bank pursuant to the
Company's line of credit with such bank.
8. Consent will be required from First Security Bank of Utah, N.A. (as
assignee of Mitsui & Co.) pursuant to Section 21 of that certain helicopter
lease dated January 30, 1994.
9. Consent will be required from Sky Harbor Hangars pursuant to Section 11 of
that certain Aviation Sublease Agreement dated August 1, 1996.
<PAGE>
SCHEDULE 5.5
Financial Statement Exceptions
None.
<PAGE>
SCHEDULE 5.6
Certain Changes
(c) The Company has entered into the following contracts since December 31,
1996:
1. Lease Agreement, between the Company and the City of Banning,
dated March 1, 1997.
2. Patient Transport Agreement, between the Company and California
Speedway Corporation, dated May 24, 1997.
(d) The Company is currently one of two providers of emergency air ambulance
services to San Diego County. Effective January 1, 1998, the provider(s) of
such services will be determined by a bidding process.
<PAGE>
SCHEDULE 5.7
Tangible Assets
See attached list.
<PAGE>
DESCRIPTION DATE ACQUIRED NET BOOK VALUE
Morrow Mav Radio 04/19/89 0
Motorola 8SE Statn 09/16/89 0
Motorola 800 MNZ RDO 12/05/90 0
ACS-PA100F Siren. Sys 01/15/91 57
Motorola DSP Base 06/05/91 333
II Morrow Apollo MDL 12/18/91 239
Sperry RT220 Radio 08/31/92 637
Aircraft Base Station 04/21/92 446
Telephone Coupler 06/03/92 724
VHS AM Base Station 05/27/92 1,554
Telephone System 06/01/92 407
Lanier Messenger 03/25/92 92
Spectra Radio 02/28/94 1,342
800 MZ Radio-C-GUIN 01/31/96 4,942
Dispatch Console 01/16/96 54,928
- --------------------------------------- ------------ -------------
65,701
1982 Bell 412 Copter 04/21/89 776,513
Bell 412 Helicopter 12/31/91 2,327,733
Bell 222-415MA 12/30/93 1,330,100
Bell 222-416MA 12/30/93 1,143,790
Bell 222-403MA 04/13/94 1,199,612
Bell 222-408MA 06/05/94 1,060,490
416MA Heli Modificat 05/11/94 375,237
415MA Heli Modificat 03/31/94 9,443
Med Tadio-415MA 02/21/95 36,470
Lock Box-415MA 04/30/95 12,834
Patient Handler-416M 12/27/95 23,362
- --------------------------------------- ------------ -------------
8,295,584
Anaheim Concrete 06/28/94 7,571
Anaheim Electrical 07/26/94 1,340
STA 4 Helipad Anaheim 09/08/94 16,598
- --------------------------------------- ------------ -------------
25,509
STA 3 03/01/97 13,521.32
(not included in total)
1990 Ford Tempo 09/17/91 0
1990 Ford Van 09/17/91 0
'93 Mercury 03/26/96 5,816
<PAGE>
DESCRIPTION DATE ACQUIRED NET BOOK VALUE
'94 Dutchman RV 03/07/96 8,295
- --------------------------------------- ------------ -------------
14,111
1988 Skyline MBL HME 01/27/89 24,630
Utility and Phone Line (Disposed of 3/31/97) 02/14/89 5,103
- --------------------------------------- ------------ -------------
29,733
Tandy 1000 Computer 06/30/89 0
80286 Comptr W/40MB 02/01/90 0
25MMZ Computer 11/18/91 0
HP Laser Printer 09/17/91 0
A/R Billing Software 03/18/92 0
RISL System 6000 03/18/92 0
Alpha Micro 1200 07/07/93 300
486DX PC 04/29/93 236
MT932BA Modem 04/29/93 109
ML393 Printer 04/29/93 157
Accounting Software 04/29/93 234
486DX Computer 01/27/94 928
486 Colorbook 01/05/94 877
PC Notebook 03/15/94 748
COMPAQ 02/08/94 483
486 Colorbook (MD) 03/30/94 1,087
Notebook (SD) 04/12/94 1,793
Alpha Micro 1500 08/25/94 450
Unitex 484 Computer 12/15/94 436
(5) Toshiba Laptop 05/26/95 5,693
(3) Optogust Monitor 05/31/95 1,980
402 CDW Computer 12/31/95 1,122
Starion Computer 04/19/96 1,237
Compaq Computer 05/31/96 1,431
RISC 6000 Disk Drive 06/11/96 1,149
(2) Pentium Computer 03/19/96 2,640
HP Laserjet 5 Printer 09/18/96 957
- --------------------------------------- ------------ -------------
24,047
2-Lifepak 5 Monitors 01/18/89 0
2-Lifepak 5 Defibtrs 01/18/89 0
2-Lifestat 100BP 01/18/89 0
2
<PAGE>
DESCRIPTION DATE ACQUIRED NET BOOK VALUE
Uni-Vent MOL 706 02/07/89 0
2-Med Tech Trans PMP 04/25/89 0
Hellcor Oximeter 05/23/89 0
LSP Autovent 3000 04/24/91 64
40MIN Pulse Oximeter 04/29/91 44
MINIMED Infusion System 04/22/91 161
Defib W/Monitor 04/23/91 307
Defib W/Monitor 04/23/91 307
2-Blood Pressure EQP 04/23/91 162
Battery Charger 04/23/91 50
Helio Med Package 05/01/91 215,285
Battery Charger 09/18/91 85
Minimed Infusion System 01/21/92 628
LSP Autovent 3000 03/19/92 354
Infusion System 09/16/93 1,022
LSP Autovent 3000 08/16/93 564
LSP Autovent 03/30/94 840
IVAC Infus Pump 04/01/94 1,514
Defib W/ Monitor 04/25/94 3,511
Propaq 106 EL 09/16/94 4,503
Propaq 106 EL 09/20/94 4,503
(2) ASIC Infus Pump 09/16/94 2,896
Aspirator/Oximeter 06/09/94 540
(2) Propaq CO2 Sensor 03/29/95 12,076
(2) ASIC Infus PMP 03/31/95 4,249
Patient Simulator 06/15/95 798
S/D Life PAC N30249 12/11/95 4,274
(2) Autovent Ventil 01/01/96 2,276
(2) Monitors W/Defib 01/01/96 7,979
(2) Port Infus Pumps 01/01/96 3,926
Upgrade Propaq Monit 03/18/96 3,446
LOX Converter 02/21/96 1,689
Monitor W/Defib 08/29/96 4,174
- --------------------------------------- ------------ -------------
282,227
CVA UPS 06/22/92 300
Damon 3050 Copier 06/02/93 1,075
HP Fax-200 02/08/93 118
- --------------------------------------- ------------ -------------
1,493
3
<PAGE>
DESCRIPTION DATE ACQUIRED NET BOOK VALUE
A/C Unit 08/25/93 401
(2) Press Transducer 06/28/94 686
Mango Air Condition 08/28/95 741
- --------------------------------------- ------------ -------------
1,828
=============
TOTALS 8,740,233
4
<PAGE>
SCHEDULE 5.8
Intangible Personal Property
The Company's trade name, "Mercy Air Service, Inc." is not registered with the
United States Patent and Trademark Office.
The Company holds licenses to use the following computer software:
a. AeroMed Software Dispatch Module v2.2, Network Version, Flight
Management Module v2.2, Network Version, Continuing Education Module v2.2,
Network Version, and sample data relating to the foregoing.
b. The following modules and programs from RECORDATA WEST, Inc.: Basic
Billing Level 4, Basic Analysis Module, Graphic Analysis Module, Electronic
Claims Submission-- Medicare, Async Modem, Multi-Company Module, and Auto Bill
Processor Feature.
c. Certain accounting and payroll software from Data Management Technigies,
Inc.
d. EasyLoan
e. Haines Directory
f. Pro CD Phone Books
g. Perfect Works
h. Word Perfect
i. Quattro Pro for Windows
j. Quicken
k. Microsoft Office
l. Microsoft Office 95
m. Microsoft Works for Windows
n. Microsoft Windows 95
o. Rand McNally TripMaker
p. EZ Page
q. Message Flash
r. Norton AntiVirus
<PAGE>
SCHEDULE 5.9
Leases
1. REAL PROPERTY LEASED BY THE COMPANY:
(a) Lease dated August 28, 1996 by and between H.S.T.D.-I Partnership and
the Company for premises located at 8190 Mango Avenue, Fontana,
California 92335.
(b) Heliport Lease dated December 20, 1996 by and between the City of
Adelanto and the Company for a heliport located on the grounds of Fire
Station #322, at 10370 Rancho Road, Adelanto, California 92301.
(c) Heliport Lease dated March 1, 1997 by and between the City of Banning
and the Company for a heliport located on the grounds of Banning
Municipal Airport, at 200 S. Hathaway, Banning, California.
(d) Helicopter Base Station Lease dated June 16, 1996 by and between North
Net Fire Training Center and the Company for a helicopter base station
at 2400 E. Orangewood Ave., Anaheim, California 92806.
(e) Office and Helicopter Parking Space Rental Agreement dated October 3,
1996 by and between Western Flight, Inc. and the Company for office
space at 2210 Palomar Airport Rd., Carlsbad, California 92008 and
helicopter parking space adjacent thereto.
(f) Agreement dated January 1, 1996 by and between Palomar Pomerado Health
System and the Company for a helicopter station at 555 East Valley
Parkway, Escondido, California.
(g) Sublease Agreement dated March 11, 1996 by and between Cruiseair
Aviation, Inc. and the Company for premises at Ramona Airport, Ramona,
California.
(h) Aviation Sublease Agreement dated August 1, 1996 by and between Sky
Harbor Hangars and the Company for rental of Hangar 1 at 545 Kenney
Street, Bldg. G, Gillespie Field, El Cajon, California.
(i) Sublease Agreement dated April 20, 1994 by and between the City of
Rancho Cucamonga and the Company for an ambulance base station at Fire
Station Number 174, 11297 Jersey Boulevard, Rancho Cucamonga,
California.
<PAGE>
2. PERSONAL PROPERTY LEASED BY THE COMPANY:
(a) Helicopter lease (s/n 47523) dated 1/30/94 from First Security Bank of
Utah, N.A. (as assignee of Mitsui & Co.).
(b) Helicopter lease (Bell Model 222B Aircraft, s/n 47134) dated March 7,
1994 from H.A.S. Corporation dba Western Pennsylvania Helicopter.
(c) Postage machine (Model E500, S/N 0064564) lease from Pitney Bowes
dated August, 1996.
<PAGE>
SCHEDULE 5.11
Title Exceptions
1. All of the Company's inventory, equipment, documents, books and records are
covered by, and subject to a lien under, a UCC-1 Financing Statement filed by
California State Bank as Secured Party. The UCC-1 Financing Statement was filed
on 3/11/96 and expires on 3/11/2001.
In addition, the following Company assets and leased personal property are
subject to a UCC-1 Financing Statement in favor of the secured parties named
below:
2. Bell Helicopter Model 222UT (S/N 47526), together with engines and
equipment
Secured Party: Air Methods Corporation
Filing Date: 1/14/94
Expiration Date: 1/14/99
3. Bell Helicopter Model 222U (S/N 47568), together with engines and equipment
Secured Party: Air Methods Corporation
Filing Date: 1/14/94
Expiration Date: 1/14/99
4. Bell Helicopter Model 222UT (S/N 47523), together with equipment and
avionics
Secured Party: Mitsui & Co. (Canada) Ltd.
Filing Date: 4/13/94
Expiration Date: 4/13/99
5. Bell Helicopter Model 412SP (S/N 36009), together with engines and
equipment
Secured Party: Textron Financial Corporation
Filing Date: 3/4/96
Expiration Date: 3/5/2001
6. Bell Helicopter Model 222UT (S/N 47514), together with all equipment and
avionics
Secured Party: Mitsui & Co. (Canada), Ltd.
Filing Date: 3/22/96
Expiration Date: 3/22/2001
7. 1st Source Bank has a security interest in the three helicopters with S/N
33060, S/N 47135 and S/N 47156.
<PAGE>
SCHEDULE 5.12
Material Company Contracts
1. Agreement with the Department of the Youth Authority, Heman G. Stark Youth
Training School (a division of the State of California), dated July 1, 1996.
2. Agreement with the Department of Corrections, Ironwood State Prison and
Chuckawalla Valley State Prison (a division of the State of California), dated
February 28, 1996.
3. Agreement with the County of Kern, a political subdivision of the State of
California, dated July 9, 1996. This Agreement expires on June 30, 1997, and
will be replaced by a new Agreement dated July 1, 1997, a copy of which has been
provided.
4. Agreement with the County of San Diego, a political subdivision of the State
of California, dated December 12, 1995.
5. Agreement for Provision of Medical Director with the Regents of the
University of California, on behalf of the University of California at San Diego
Medical Center, dated January 1, 1996.
6. Agreement for Postgraduate Training in Emergency Medical with the Regents of
the University of California, on behalf of the University of California at San
Diego Medical Center, dated January 1, 1996.
7. Agreement with the Regents of the University of California, on behalf of the
University of California at San Diego Medical Center, dated January 1, 1996.
Under this Agreement, the Company shall respond to requests for air medical
transportation within San Diego and Imperial Counties. The Regents shall provide
the Company with, among other things, access to its telecommunications equipment
and with certain medical equipment.
8. Line of Credit Agreement with California State Bank, dated March 1, 1996.
9. Promissory Note in the principal amount of $3,565,153.80 issued by the
Company to Bell Helicopter Textron Inc., dated November 26, 1990.
10. Security Agreement between the Company and Bell Helicopter Textron Inc.,
dated November 26, 1990.
11. Financing Agreement with Premium Financing Specialists.
12. Exclusive Supply Agreement between the Company and Air Liquide America
Corporation dated January 1, 1996.
<PAGE>
SCHEDULE 5.13
Compliance with Laws
The Department of Public Health of San Bernardino County, which exercises local
regulatory authority over medical transportation providers that operate within
that county, has requested additional information regarding the Company's
compliance with that agency's liability insurance requirements. The Company
believes it is in compliance with those requirements and that the County's
questions stem from a misreading of the certificates of insurance furnished to
that Department. The Company has arranged for its insurance brokerage firm to
issue a new certificate that sets out, in greater detail, the liability
insurance coverage that it has and expects this matter to be resolved within the
next two weeks.
<PAGE>
SCHEDULE 5.14
Labor and Employment Agreements; Benefit Plans
DIRECTORS AND OFFICERS OF THE COMPANY:
Directors: Homer L. Aerts, J. Steven Dickmeyer, Don D. Reed, Terry L. Russ
and Richard J. Silva
Officers: Chief Executive Officer: David Dolstein
President: Richard J. Silva
Vice-President: Homer L. Aerts
Secretary: Don D. Reed
EMPLOYEES AND CONSULTANTS OF THE COMPANY WHOSE ANNUAL CASH COMPENSATION EXCEEDS
$60,000:
David Dolstein
Mary Davis
Richard J. Silva
Roy Cox
Dennis Donovan
Stephen Grace
Donna Kovacs
Dan Miller
Michele Neff
Danny Nicholson
Marie Podboy
Homer L. Aerts, J. Steven Dickmeyer, Don D. Reed and Terry L. Russ each
received $36,000 in W-2 income from the Company.
EMPLOYMENT CONTRACTS
David Dolstein is employed by the Company pursuant to that certain
Employment, Non-Competition and Profit Participation Agreement, dated
December 30, 1994, between David Dolstein and the Company.
NO VIOLATION OF EMPLOYMENT LAWS; NO STRIKES
None.
EMPLOYEE PLANS
<PAGE>
1. Medical Insurance: The Company provides all full time regular employees
the option of enrolling in one of two health insurance plans: Blue Shields'
Access+ HMO and Blue Shields' Preferred Plan (90/70). The Administrator of both
plans is Blue Shield of California, Two North Point, San Francisco, California
94133.
2. Dental Insurance: The Company provides all full time regular employees
the option of enrolling in the 490 Monterey Dental Plan. The Administrator of
the plan is California Dental Health Plan, 14471 Chambers Road, Tustin,
California 92680.
3. Life Insurance: The Company provides all full time employees life
insurance with a death benefit of $35,000. Certain medically qualified employees
are eligible for an additional $15,000 death benefit. The Administrator is
California Physician's Insurance Corp., P.O. Box 7725, San Francisco, California
94120.
4. Pension/Retirement: The Company provides a 401(k) plan (the Company does
not match employee contributions). The Administrator is The Senex Group, 21021
Ventura Blvd., Suite 310, Woodland Hills, California 91364.
5. Other Benefits: The Company provides holiday pay, vacation pay, and pay
for "well days."
<PAGE>
SCHEDULE 5.15
Litigation
None.
<PAGE>
SCHEDULE 5.16
Environmental Matters
None.
<PAGE>
SCHEDULE 5.18
Related Party Transactions
The Company leases premises at 8190 Mango Ave., Fontana, California pursuant to
a Lease dated August 28, 1996 by and between H.S.T.D.-I Partnership and the
Company. H.S.T.D.-I Partnership is owned by the Shareholders.
David Dolstein is employed by the Company pursuant to that certain Employment,
Non-Competition and Profit Participation Agreement, dated December 30,
1994, between David Dolstein and the Company.
The Company has made loans to, and received loans from, its Shareholders and
certain affiliates of the Shareholders. These loans will be paid or canceled as
set forth in the Stock Purchase Agreement.
<PAGE>
SCHEDULE 5.19
Taxes and Tax Returns
(a) None.
(b) None.
(c) None.
<PAGE>
SCHEDULE 5.20
Insurance
1. Worker's compensation insurance policy with Liberty Mutual, through U.S.
Aviation Underwriters, Inc. (Policy No. WC7-A21-968143-016), a copy of
which is attached.
2. "Combination Aircraft Liability and Physical Damage and Airport Commercial
General Liability Policy" with U.S. Aviation Underwriters, Inc. (Policy
Number SIHL 1-7986).
3. Professional Liability Insurance with Admiral Insurance Company.
4. Commercial Property Insurance with Commercial Union Insurance Company
(Policy No. CTK311497).
5. Auto Insurance with Commercial Union Insurance Company (Policy No.
CTK311506).
<PAGE>
SCHEDULE 5.21
Bank Accounts
1. California State Bank, West Covina, California
o Money Market Account #892 520275
o General/Payroll Account #892 520208
Each of the Sellers and David Dolstein are authorized to draw on
the account.
<PAGE>
SCHEDULE 5.22
Brokers
None.
<PAGE>
SCHEDULE 7.2
Permitted Dividends
The Company shall be permitted to pay dividends to the Sellers in a manner and
amount sufficient to allow the Sellers to timely pay the monthly payments under
the Textron Debt. The amount of each such monthly payment is approximately
$31,227.33.
<PAGE>
SCHEDULE 8.5
Textron Debt
The Textron Debt is the debt evidenced by that certain Promissory Note in the
principal amount of $2,415,207.00, made, jointly and severally, by Homer L.
Aerts, Don D. Reed, Richard J. Silva, J. Steven Dickmeyer and Terry L. Russ, on
March 8, 1996, and held by Textron Financial Corporation, a Delaware
corporation. The Promissory Note is secured by a Guaranty made on March 8, 1996
by Mercy Air Service, Inc., in favor of Textron Financial Corporation, and by a
Pledge and Security Agreement executed by Mercy Air Service, Inc. in favor of
Textron Financial Corporation. The collateral under the Security Agreement is a
Bell Model 412SP Helicopter, S/N 36009, and all parts and engines thereto. The
remaining unpaid balance of the Promissory Note, as of June 3, 1997, was
approximately $2,221,022.44.
<PAGE>
SCHEDULE 8.6
Short-Term Investments
Cash in a business money-market account at California State Bank, account number
892521328.
<PAGE>
SCHEDULE 8.7
Indebtedness of Company to Shareholders
As of July 31, 1997, the Company owes the Shareholders the following amounts
under loans made by the Shareholders to the Company:
SHAREHOLDER AMOUNT DUE TO SHAREHOLDER FROM COMPANY
Homer L. Aerts $284,120.98
J. Steven Dickmeyer $284,120.98
Don D. Reed $ 84,299.75
Terry L. Russ $284,120.98
Richard J. Silva $ 0.00
-----------
Total $936,662.69
<PAGE>
SCHEDULE 8.8
Stock Options
Homer L. Aerts 100,000 shares
J. Steven Dickmeyer 100,000 shares
Don D. Reed 100,000 shares
Terry L. Russ 100,000 shares
Richard J. Silva 100,000 shares
<PAGE>
SCHEDULE 16.1
Mailing Addresses of the Parties
Notices to Sellers shall be mailed to:
With a copy to:
Ben Frydman
Stradling Yocca Carlson & Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, California 92660
Notice to Buyer shall be mailed to:
Air Methods Corporation
7301 South Peoria
Englewood, Colorado 80112
Attn.: Chairman of the Board
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
HELICOPTER SERVICES, INC.
AS THE SELLER,
AND
AIR METHODS CORPORATION,
AS THE BUYER
DATED JULY 11, 1997
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made as of July ,
--
1997, by and among HELICOPTER SERVICES, INC., a California corporation ("HSI" or
the "Seller"), Homer L. Aerts, J. Steven Dickmeyer, Don D. Reed, Terry L. Russ
and Richard J. Silva, the owners of the outstanding shares of HSI (collectively,
the "Shareholders"), and AIR METHODS CORPORATION, a Delaware corporation (the
"Buyer").
R E C I T A L S
A. Seller owns and operates a helicopter maintenance service (the
"Business") and does business under the name "Western Helicopter Service, Inc."
B. Buyer desires to purchase from Seller, and Seller desires to sell to
Buyer, on the terms and conditions hereinafter set forth, substantially all the
assets and the Business, as a going concern.
C. Concurrently herewith, the Shareholders are entering into a Stock
Purchase Agreement of even date herewith (the "Stock Purchase Agreement"), which
provides for the sale by the Shareholders of all of the issued and outstanding
shares of common stock of Mercy Air Services, Inc., a California corporation
("Mercy") to Buyer concurrently with the sale by Seller of substantially all the
assets and the Business of Seller hereunder.
D. Buyer intends to transfer the assets purchased hereunder to Mercy and to
have Mercy operate its business and the business of Seller on a combined basis.
A G R E E M E N T
NOW, THEREFORE, in consideration of the terms, covenants, and
conditions hereinafter set forth, the parties hereto agree as follows:
1. SALE OF ASSETS. On the Closing Date (as hereinafter defined), Buyer
shall purchase from Seller, and Seller shall sell, transfer and assign to Buyer,
free and clear of any and all Liens and Encumbrances (as hereinafter defined),
all of Seller's right, title and interest in and to all of the assets of Seller,
including but not limited to those assets described below (collectively referred
to herein as the "Purchased Assets"); PROVIDED, HOWEVER, that the Purchased
Assets shall not include, and Seller shall retain, the Excluded Assets (as
hereinafter defined in this Section 1).
1.1 EQUIPMENT AND FURNITURE. All of the equipment, furniture,
fixtures and other tangible personal property listed on the fixed asset
depreciation schedule attached hereto as SCHEDULE 1.1, which has been delivered
concurrently herewith by Seller to Buyer (the "FF&E");
1.2 ASSIGNED CONTRACTS. All of the agreements, contracts,
leases, licenses, instruments, commitments and understandings, written or oral,
that are listed (or, in the case of oral agreements or understandings, that are
described) on SCHEDULE 1.2 attached hereto (the "Assigned Contracts"),
including, without limitation, the leases listed on SCHEDULE 1.2 under which
Seller owns or holds any leasehold interest in real property or personal
property, whether tangible or intangible, that is used in or in connection with
the Business (respectively, the "Real Property Leases" and the "Personal
Property Leases");
1.3 INTANGIBLE ASSETS. All of Seller's rights, title and
interests in and to (i) any client or vendor lists, promotion lists and
marketing data and other compilations of names and requirements; (ii) the
telephone numbers and internet addresses and websites used in or for the
Business; (iii) all
<PAGE>
processes, formulations, methods, software (including documentation and source
code listings), technology, know-how, formulae, trade secrets and inventions;
and (iv) all patents, copyrights, trade names, trademarks and service marks
(including, but not limited to, the name "Western Helicopter, Inc."), and all
applications therefor, (collectively, the "Intangible Property Rights"), which
are more fully described in SCHEDULE 1.3 and which shall include, without
limitation, all goodwill associated with the foregoing;
1.4 RECEIVABLES. All accounts and notes receivable and other
rights to payment or reimbursement of Seller that have arisen out of the
operations of the Business (the "Receivables") and all schedules, records and
other documentation related thereto, including, without limitation, all notes,
chattel paper, contracts or other documents or instruments evidencing the
payment obligations of the account or note debtors; and
1.5 MONETARY OR OTHER CLAIMS. Any cause of action, claim, suit,
proceeding, judgment or demand, of whatever nature, of or held by Seller against
any third parties arising out of the conduct of its Business prior to the date
hereof, such as, but not limited to, warranty claims on equipment included in
the FF&E, claims against service providers that provided services to the
Business, pending insurance claims and claims against note and account debtors,
but excluding those claims against third parties set forth in SCHEDULE 1.5
hereto ("Excluded Claims");
1.6 LICENSES AND PERMITS. All licenses, permits, certificates of
need, franchises and other governmental permits or licenses needed for or in
connection with the operations of the Business (collectively "Licenses and
Permits"), but only to the extent such Licenses and Permits are transferable
under applicable laws or regulations;
1.7 INVENTORY. All inventories of the Seller, including, without
limitation, repair and replacement parts for helicopters and the helicopter
engine described on SCHEDULE 1.7 hereto (the "Inventory");
1.8 PREPAID ITEMS. Certain prepaid expenses and deposits of
Seller that are shown on the 1996 HSI Balance Sheet.
Seller is retaining and is not selling to Buyer, and Buyer is not
purchasing from Seller, any cash of the Seller, whether on hand or in banks as
shown on the HSI Financial Statements (which amount as of the date of the 1996
HSI Balance Sheet was $41,561), any Receivables owed to the Company by the
Shareholders, Mercy or any other affiliate of the Shareholders, or any of the
other assets listed on SCHEDULE 1.9 hereto (the "Excluded Assets").
2. OBLIGATIONS BEING ASSUMED; LIABILITIES NOT BEING ASSUMED.
2.1 ASSUMED OBLIGATIONS. Buyer hereby agrees to assume only: (i)
accounts payable of the Business other than Retained Liabilities; (ii)
liabilities of Seller that have accrued in the ordinary course of the Business
and consistent with past practices as reflected in the Seller's 1996 Financial
Statements (as hereinafter defined), including any compensation or benefits
payable to employees and independent contractors for services performed for
Seller in the conduct of the Business, including salaries and wages and
vacation, holiday and sick pay accrued to the Closing Date (the "Accrued
Liabilities"); (iii) those liabilities and obligations of the Business
specifically set forth in SCHEDULE 2.1 (the "Scheduled Liabilities"); and (iv)
those executory obligations arising after the Closing Date under the Assigned
Contracts (the "Contractual Obligations"). (The Scheduled Liabilities and
Contractual Obligations shall be referred to herein, collectively, as the
"Assumed Obligations.") The Seller represents and warrants that Seller is not in
default of any of the Assumed Obligations and the Seller agrees that Buyer shall
not be obligated to assume, and Buyer shall not have any liability for or in
connection with, any Assumed Obligation that is in default as of the Closing
Date.
-2-
<PAGE>
2.2 LIABILITIES NOT BEING ASSUMED. Except for the Assumed
Obligations, the Seller agrees that Buyer shall not be obligated to assume or
perform and that Buyer is not assuming or performing, and that the Seller shall
be responsible for performing and satisfying, or otherwise discharging, at its
sole expense, and without liability, cost, loss or expense of Buyer, all
liabilities and obligations of Seller, whether known or unknown, fixed or
contingent, certain or uncertain, and whether such liabilities or obligations
have arisen prior hereto or may arise hereafter (the "Retained Liabilities").
The Retained Liabilities shall include, but shall not be limited to, any and all
of the following obligations and liabilities of Seller:
(a) TAXES. All Taxes (as defined in Section 4.18
hereof) that (i) have arisen prior to the Closing or may arise thereafter out
of any business or other operations conducted by Seller, either prior to or
after the Closing Date, in excess of amounts accrued on the Seller's Financial
Statements or disclosed on SCHEDULE 14.7.
(b) LIENS AND ENCUMBRANCES. Any Liens or Encumbrances
on any of the Purchased Assets.
(c) INDEBTEDNESS AND BALANCE SHEET LIABILITIES. Any
(i) obligation of Seller, secured or unsecured, that is for borrowed money,
and (ii) other liabilities of Seller which, in accordance with generally
accepted accounting principles, consistently applied ("GAAP"), would be
required to be reflected on, or set forth in a footnote to, a balance sheet
prepared on an accrual basis, and that are not included in the HSI Financial
Statements or in the Scheduled Liabilities set forth on SCHEDULE 2.1 hereto.
(d) CERTAIN CONTRACTUAL OBLIGATIONS. Any obligations or
liabilities under any employment, consulting, confidentiality or non-competition
agreement, whether written or oral, to which Seller is a party or is subject and
which is not listed on SCHEDULE 2.1, including, without limitation, any
obligations or liabilities that have arisen or may arise under, or by reason of
the termination by Seller of the employment of any of its employees or
independent contractors in anticipation or as a consequence of, or following,
consummation of the transactions contemplated hereby.
(e) RETAINED PAYABLES. Any accounts or notes payable of
Seller to the Shareholders, Mercy or any other affiliate of the Shareholders and
any accounts or notes payable of Seller which are set forth in SCHEDULE 2.2
("Excluded Payables") hereto.
(f) CLAIMS AND LEGAL PROCEEDINGS. Any claims, demands,
actions, suits or legal proceedings that have been asserted or threatened prior
to the Closing against Seller, the Business or the Purchased Assets or which may
be threatened or asserted hereafter against the Purchased Assets, the Business,
or Buyer (hereinafter a "Plaintiff's Action") that arises in any way from or in
connection with (i) the conduct or operation of the Business prior hereto, or
(ii) any other business or non-business activities of Seller conducted prior
hereto or hereafter (collectively "Plaintiffs' Actions"), including, without
limitation the legal actions and proceedings set forth in SCHEDULE 4.15 hereto.
For purposes of this Agreement, Plaintiffs' Actions shall include, without
limitation, any counter or cross-claims asserted against Seller, the Business
or the Purchased Assets, or Buyer, in any legal action or other proceeding
initiated by Seller.
(g) CONTINGENT LIABILITIES. Any liability, deficiency,
cost or expense arising out of the provision of services by any of Seller's
employees or any undischarged obligations or liabilities imposed on Seller
that is not disclosed in the HSI Financial Statements or in the Disclosure
Schedules hereto (other than SCHEDULE 4.15), under, or any failure to have
complied with, any laws, rules or regulations applicable to Seller.
-3-
<PAGE>
3. PURCHASE PRICE AND ALLOCATION OF PURCHASE PRICE.
3.1 PURCHASE PRICE. The purchase price for the Purchased Assets
shall consist of a cash payment by Buyer to Seller at the Closing by a wire
transfer of funds to the Seller, in an amount equal to Nine Hundred Fifty-Four
Thousand Three Hundred Seventy-Five Dollars ($954,375).
3.2 PURCHASE PRICE ADJUSTMENT. The Purchase Price shall be
subject to adjustment in the manner and to the extent set forth in SCHEDULE 2.3
of the Stock Purchase Agreement and, by this reference, the provisions of that
Schedule that are applicable to the Purchase Price hereunder are incorporated
herein and made an integral part hereof.
3.3 ALLOCATION OF PURCHASE PRICE. The Purchase Price for the
Purchased Assets shall be allocated among the Purchased Assets as set forth in
EXHIBIT A attached hereto (the "Purchase Price Allocation"). Each of the
parties, when reporting the transactions consummated hereunder in their
respective Tax Returns (as hereinafter defined), shall allocate the Purchase
Price paid or received, as the case may be, in a manner that is consistent with
the Purchase Price Allocation set forth in EXHIBIT A hereto. Additionally, each
of the parties will comply with, and furnish the information required by,
Section 1060 of the Internal Revenue Code of 1986, as amended (the "Code"), and
any regulations thereunder.
4. REPRESENTATIONS AND WARRANTIES OF SELLER. Subject to the
disclosures and exceptions set forth in the disclosure schedules delivered by
the Seller to the Buyer concurrently herewith (the "Disclosure Schedules"), the
Seller hereby makes the following representations and warranties to Buyer:
4.1 AUTHORITY, NECESSARY ACTIONS; BINDING EFFECT. Seller (i) has
the requisite corporate power and authority to execute and deliver, and to
perform its obligations under, this Agreement and (ii) has taken all corporate
action necessary to authorize the execution and delivery of this Agreement. This
Agreement constitutes a valid and legally binding obligation of Seller and is
enforceable against Seller in accordance with its terms, except, as such
enforceability may be limited by (i) bankruptcy, insolvency, moratorium or other
similar laws affecting creditors' rights and (ii) general principles of equity
relating to the availability of equitable remedies (regardless of whether such
Agreement is sought to be enforced in a proceeding at law or in equity).
4.2 TITLE TO AND ADEQUACY OF PURCHASED ASSETS.
(a) Except as disclosed on SCHEDULE 4.2 hereto, Seller
has, and on the Closing Date will convey and transfer to Buyer, good, complete
and marketable title to all of the Purchased Assets, free and clear of all
mortgages, security interests, liens, options, pledges, equities, claims,
charges, restrictions, conditions, conditional sale contracts and any other
encumbrances or adverse interests of any kind or nature whatsoever
(collectively, "Liens and Encumbrances"). Except as set forth on SCHEDULE 4.2,
all of the Purchased Assets are in the exclusive possession and control of
Seller and Seller has the unencumbered right to use, and to sell to Buyer in
accordance with the terms and provisions of this Agreement, all of the Purchased
Assets without interference from and free of the rights and claims of others.
(b) The Purchased Assets constitute all the assets,
properties, rights, privileges and interests that are necessary for the Buyer to
operate the Business substantially in the same manner as it has been operated
by Seller since January 1, 1996.
4.3 ORGANIZATION AND STANDING. The Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California, and is authorized to do business in each jurisdiction in which the
character of the properties owned by it or the nature of its business makes such
authorization necessary and where the failure to be so qualified has had or is
expected to have a
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Material Adverse Effect on Seller (as defined hereinafter). The Seller has the
requisite corporate power and authority to conduct its business as now conducted
and to own or lease (as the case may be), and to use, the properties and assets
used therein.
4.4 SUBSIDIARIES; INVESTMENTS. The Seller does not own,
directly or indirectly, shares of capital stock of any other corporation or any
equity interest in any other entity or business.
4.5 NO CONFLICTS. Except as set forth in SCHEDULE 4.5, neither
the execution and delivery nor the performance of this Agreement by the Seller,
or of any of the other agreements to be entered into by Seller pursuant to or in
connection with the transactions contemplated by this Agreement, will result in
any of the following: (i) a default or an event that, with notice or lapse of
time, or both, would be a default, breach or violation of the Articles of
Incorporation or Bylaws of the Seller, or any Material Seller Contract (as
defined in Section 4.14 hereof); (ii) the termination of any Material Seller
Contract or the acceleration of the maturity of any material indebtedness of the
Seller; (iii) the creation or imposition of any liens or encumbrances on any of
the material assets of the Seller which have had or are expected to have a
Material Adverse Effect on the Seller; or (iv) a violation or breach of any law,
regulation, writ, injunction or decree of any court or governmental
instrumentality to which the Seller is a party or by which any of its material
properties are bound, where such violation has had or is expected to have a
Material Adverse Effect on Seller.
4.6 FINANCIAL STATEMENTS. The Seller has delivered to Buyer
financial statements of the Seller consisting of unaudited balance sheets, and
related statements of operation, stockholders equity and cash flows, as of and
for the fiscal years ended December 31, 1994, 1995 and 1996 (the "HSI Financial
Statements"). Except as otherwise set forth in the footnotes contained therein
or in SCHEDULE 4.6, Financial Statements were prepared on an accrual basis in
accordance with generally accepted accounting principles consistently applied
("GAAP") and fairly present the financial condition of the Seller as at the
relevant dates thereof and the results of its operations for the respective
periods covered thereby. Except as set forth in SCHEDULE 4.6, the Seller has no
debts, obligations or liabilities, fixed or contingent, of a nature that would
be required, in accordance with GAAP, to be shown on a balance sheet and that
are not shown on the balance sheet as of December 31, 1996 (the "1996 HSI
Balance Sheet") that is included in the Financial Statements for the fiscal year
then ended (the "1996 HSI Financial Statements"), other than liabilities
incurred after December 31, 1996 in the ordinary course of the Seller's business
and consistent with past practice (the "Post-1996 HSI Liabilities").
4.7 UNDISCLOSED LIABILITIES. Except as otherwise set forth in
SCHEDULE 4.7, Seller does not have any debts, obligations, liabilities or
commitments of any nature, whether due or to become due, absolute, fixed or
contingent, or certain or uncertain, that, in accordance with GAAP, should be
disclosed on a balance sheet or the footnotes thereto, but are neither shown on
the 1996 HSI Balance Sheet nor expressly and unambiguously set forth in the
footnotes thereto (the "Undisclosed Liabilities"); PROVIDED, HOWEVER, that the
term "Undisclosed Liabilities" shall not include and SCHEDULE 4.7 need not
disclose liabilities incurred by Seller after December 31, 1996, in the ordinary
course of the Business and consistent with past practice that are not material
in amount and have not had and are not expected to have, individually or in the
aggregate, a Material Adverse Effect on Seller. As to each Undisclosed Liability
set forth on SCHEDULE 4.7, the Seller has provided the following information in
or as an attachment to such SCHEDULE 4.7: (i) a summary description of such
Undisclosed Liability, together with copies of all relevant documentation
relating thereto, the amounts claimed and any other action or relief sought and,
the identity of the claimant and of any other involved party and, if the
Undisclosed Liability is one that may arise from a suit, action or other
proceeding, the court or agency in which such suit, action or other proceeding
is being prosecuted, and (ii) the best estimate of the Seller of the maximum
amount, if any, which could reasonably be expected
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to become payable with respect to any such contingent Undisclosed Liability. For
purposes hereof, if no written estimate is provided, such best estimate shall be
deemed to be zero.
4.8 ABSENCE OF CERTAIN CHANGES. Except as otherwise set forth
on SCHEDULE 4.8, subsequent to December 31, 1996 there has not been:
(a) Any default or breach, or anticipated default or breach
under, or any amendment, termination or revocation or, to the knowledge of the
Seller, any threatened termination or revocation of, any of the Assigned
Contracts;
(b) To the Seller's knowledge, any actual or overtly
threatened amendment, termination or revocation of any license, permit or
franchise held by the Seller which has had or is expected to have a Material
Adverse Effect on Seller;
(c) Any sale or transfer of, or the imposition of any Lien
or Encumbrance on or affecting any of the Purchased Assets reflected on the 1996
HSI Balance Sheet or acquired thereafter, except sales or utilization of
inventory or supplies and obsolete equipment in the ordinary course of business
and consistent with past practices of the Seller and liens for current taxes not
yet due and payable;
(d) Any damage, destruction or loss, whether or not covered
by insurance, of any of the Purchased Assets reflected on the 1996 HSI Balance
Sheet or acquired thereafter in an amount which exceeds $10,000, individually or
in the aggregate and has had or is expected to have a Material Adverse Effect on
Seller; and
(e) The occurrence of any other event or circumstance which
has had or is expected to have a Material Adverse Effect on Seller.
4.9 TANGIBLE ASSETS. SCHEDULE 1.1 contains a list of all
equipment, furniture, fixtures, tools, and other similar tangible personal
property, wherever located, that are owned by the Seller and are used in the
conduct of the Business (the "Tangible Assets"). Except as set forth on SCHEDULE
4.9, the Tangible Assets are in good working order and condition (ordinary wear
and tear excepted).
4.10 INTANGIBLE PERSONAL PROPERTY. SCHEDULE 1.3 is a true and
correct list of all proprietary information and know-how documented in writing,
and any other intellectual property or intangible assets, owned by the Seller or
in which the Seller has rights or licenses, and which are material to the
business of the Seller, including any patents, copyrights, trademarks, service
marks, trade names and all applications therefor. To the knowledge of the
Seller, the Seller has not infringed, and is not now infringing, any patent,
trade name, trademark, service mark, copyright or trade secret rights belonging
to any other person, firm or corporation. Except as set forth on SCHEDULE 4.10,
the Seller owns, or holds adequate licenses or other rights to use, all patents,
trademarks, service marks, trade names, copyrights, and trade secrets used in or
necessary for the operation of the Seller's business as now conducted.
4.11 REAL PROPERTIES; LEASES. Except as set forth on SCHEDULE
4.11, the Seller does not own a fee interest in any real property. SCHEDULE 1.2
contains a list of the Real Property Leases and the Personal Property Leases.
True, correct and complete copies of the Real Property Leases and Personal
Property Leases have been delivered to Buyer, together with the names and
addresses of the lessors thereunder. All such Leases are valid and enforceable,
the Seller is not in default thereunder, and to the knowledge of Seller, no
facts or circumstances have occurred which, with the passage of time or the
giving of notice, or both, would constitute a default, under any of the Real
Property Leases or the Personal Property Leases. To the knowledge of the Seller,
(i) all structures and facilities on the real properties listed on SCHEDULE 4.11
are equipped in substantial conformity with laws and governmental regulations
applicable to the Seller, (ii) the zoning of each parcel of real property
permits the presently existing improvements and continuation of the business
presently conducted thereon by the Seller, and (iii) no zoning changes, and no
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condemnation or similar proceedings, are pending or threatened against any of
the real properties listed on SCHEDULE 4.11.
4.12 INVENTORIES. All Inventory are of a quality and quantity
usable in the ordinary course of the Seller's business, except for obsolete
items, damaged items, and materials at below standard quality, which, in the
aggregate, are not material in amount and have been written off or written down
to net realizable value on the books of the Seller.
4.13 MATERIAL SELLER CONTRACTS. SCHEDULE 4.13 hereto contains an
accurate and complete list of each contract, agreement, license or instrument to
which the Seller is a party or is subject and which are Assigned Contracts, the
performance or termination of which would have a Material Adverse Effect on
Seller (the "Material Seller Contracts"). Without limiting the generality of the
foregoing, such list includes all such contracts of the Seller which (i) grant a
security interest in any of the Purchased Assets; or (ii) requires the Seller to
obtain the consent of any third party to, or would be violated by, the
consummation of the transactions contemplated by this Agreement. Correct and
complete copies of all items of the Material Seller Contracts so listed in
SCHEDULE 4.13 have been furnished to Buyer. To the knowledge of the Seller, each
of the Material Seller Contracts is a valid and binding obligation of the Seller
and is enforceable in accordance with its terms. Except as otherwise set forth
in SCHEDULE 4.13, there are (i) no outstanding unresolved defaults by the
Seller, under, or, to the knowledge of the Seller, any such defaults, or claims
of default, by the other party or parties to, any of the Material Seller
Contracts which, individually or in the aggregate, have had or are expected to
have a Material Adverse Effect on Seller, and (ii) no facts or conditions that
have occurred which, with the passage of time or the giving of notice, or both,
would constitute a default by the Seller under any of such Material Seller
Contracts that is expected to have a Material Adverse Effect on Seller. Except
as set forth on SCHEDULE 4.5 or SCHEDULE 4.13, no consent or approval of any
party to any of the Material Seller Contracts is necessary in order to permit
the Seller to consummate the transactions contemplated hereby and to allow Buyer
to acquire the Purchased Assets, without thereby violating any such Material
Seller Contracts.
4.14 COMPLIANCE WITH LAW/PERMITS. Except as set forth in
SCHEDULE 4.14 hereto, to the knowledge of the Seller (i) the Seller is not in
violation or in default of any law, rule, regulation, order, judgment, writ or
decree applicable to the Seller or by which it or any of its properties is bound
or affected, except for any such violations or defaults which have not had and
are not expected to have a Material Adverse Effect on Seller, and (ii) the
Licenses and Permits constitute all permits, licenses, easements, variances,
exemptions, consents, certificates, orders and approvals from governmental
authorities which are material to the operation of the business of the Seller as
it is now being conducted. The Seller is in compliance with the terms of the
Licenses and Permits, except where the failure to so comply has not had and is
not expected to have a Material Adverse Effect on Seller.
4.15 LITIGATION AND PROCEEDINGS. Except as set forth in SCHEDULE
4.15 hereto, there are no claims, actions, suits, proceedings or investigations
pending or, to the knowledge of the Seller, overtly threatened against the
Seller before any court, arbitrator or administrative, governmental or
regulatory authority or body, domestic or foreign, that, if adversely determined
against the Seller, would be expected to have a Material Adverse Effect on
Seller.
4.16 ENVIRONMENTAL AND SAFETY MATTERS. To the knowledge of the
Seller, except as set forth on SCHEDULE 4.16, and, except for any instances of
noncompliance or any violations which have not had and are not expected to have
a Material Adverse Effect on Seller, (i) the Seller is in compliance, in all
material respects, with all federal, state, local and regional statutes, laws,
ordinances, rules, regulations and orders relating to the protection of human
health and safety, natural resources or the environment, including, but not
limited to, air pollution, water pollution, noise control, on-site or off-site
hazardous substance discharge, disposal or recovery, toxic or hazardous
substances, training, information and
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warning provisions relating to toxic or hazardous substances, and employee
safety (collectively, the "Environmental Laws"), and (ii) no notice of violation
of any Environmental Laws or of any permit, license or other authorization
relating thereto has been received, nor is any such notice pending or
threatened. To the knowledge of the Seller, none of the Seller's real
properties, whether owned or leased, is currently listed, or threatened to be
listed, on any state or federal "superfund" list. For the purposes of this
Section 4.16, "toxic or hazardous substances" shall include any material,
substance or waste that, because of its quantity, concentration or physical or
chemical characteristics, is deemed under any federal, state, local or regional
statute, law, ordinance, regulation or order, or by any governmental agency
pursuant thereto, to pose a present or potential hazard to human health or
safety or the environment, including, but not limited to, (i) any material,
waste or substance which is defined as a "hazardous substance" pursuant to the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980
(42 U.S.C. ss. 9601 ET SEQ.), as amended ("CERCLA"), and its related state and
local counterparts, (ii) asbestos and asbestos containing materials and
polychlorinated biphenyls, and (iii) any petroleum hydrocarbon including oil,
gasoline (refined and unrefined) and their respective constituents and any
wastes associated with the exploration, development or production of crude oil,
natural gas or geothermal energy.
4.17 TAXES AND TAX RETURNS.
(a) Except as set forth on SCHEDULE 4.17 (i) the Seller has
duly filed all Tax Returns (as hereinafter defined) which are required by law to
be filed by it and has duly and properly paid, or withheld for payment, when
due, all foreign, federal, state and local Taxes (as hereinafter defined) due or
claimed to be due from the Seller as reflected on any such Tax Return, (ii)
there are no assessments or claims for payment of such Taxes which have not been
paid or accrued for, (iii) there is no foreign, federal or state tax audit of
the Seller now pending or threatened by any taxing authority, (iv) the Seller is
not currently the beneficiary of any extension of time within which to file any
Tax Return, and (v) the Seller has properly withheld and paid, or accrued for
payment, when due, to appropriate state and/or federal authorities, all sales
and use taxes, if any, and all amounts required to be withheld from payments
made to its employees, and also has paid all employment taxes as required under
applicable laws.
(b) Except as set forth in SCHEDULE 4.17, the Seller has not
(i) waived any statute of limitation in respect of any Taxes assessed by any
federal, state, or local taxing authority or agreed to any extension of time
with respect to an assessment of or deficiency in any Tax, (ii) filed a consent
under Section 341(f) of the Code, concerning collapsible corporations, and (iii)
been a United States real property holding corporation within the meaning of
Section 897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code.
(c) Except as set forth in SCHEDULE 4.17, the Seller (i) is
not required to file a consolidated or combined state or federal income Tax
Return with any other person or entity and (ii) is not liable for the Taxes of
any person under Treasury Regulation ss. 1.1502-6 (or any similar provision of
state, local, or foreign law), as a transferee or successor, by contract or
otherwise, and (iii) the Seller is not a party to any tax allocation or tax
sharing agreement.
(d) For purposes of this Agreement, (i) the term "Tax" or
"Taxes" means any federal, state or local income, gross receipts, license,
payroll, employment, excise, severance, stamp, occupation, premium, windfall
profits, environmental (including taxes under Code Section 59A), customs duties,
capital stock, franchise, profits, withholding, social security, unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or other
tax of any kind whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not; and the term "Tax Return" means any return,
declaration, report, claim for refund, or information return or statement
relating to Taxes, including any schedule or attachment thereto, and including
any amendment thereof.
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4.18 EMPLOYEES; LABOR AND EMPLOYMENT AGREEMENTS; BENEFIT PLANS.
(a) SCHEDULE 4.18 sets forth the name of each director and
officer of the Company, and of each employee of and consultant to the Company
whose annual cash compensation exceeds $60,000 per year, identifies those
officers or employees which the Company employs and any independent contractor
that the Company has retained under an employment or similar agreement or with
which it has any severance agreement. Copies of any such agreements and a copy
of its employee handbook have been furnished to Buyer.
(b) Except as set forth in SCHEDULE 4.18, (i) the Company is
not a party to or otherwise bound by or subject to any collective bargaining or
other labor, employment, deferred compensation, bonus, retainer, consulting, or
incentive agreement, plan or contract, (ii) there has been no strike or other
work stoppage by, nor, to the knowledge of any of the Sellers, has there been
any union organizing activity among any of the employees of the Company during
the past three (3) years. Except as set forth in SCHEDULE 4.18, to the knowledge
of the Sellers, (i) the Company is in compliance with all applicable laws
respecting employment and employment practices, terms and conditions of
employment and wages and hours, except where any noncompliance has not had and
is not expected to have a Material Adverse Effect on the Company, and (ii) there
is no unfair labor practice complaint pending or threatened against the Company.
(c) SCHEDULE 4.18 hereto also contains a complete list of
the Employee Plans of the Company or any subsidiary thereof (correct copies of
which have been delivered to Buyer). For purposes of this Section 4.18, the term
"Employee Plan" means all plans and programs (including all amendments to and
components of the same, such as a trust with respect to a plan) providing any
remuneration or benefits, other than current cash compensation, to any current
or former employee of the Company or any subsidiary thereof, or to any other
person who provides, or during the past three years provided, services to the
Company, or any subsidiary thereof, whether or not such plan or plans or
programs are subject to the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or are qualified under the Internal Revenue Code of 1986, as
amended (the "Code"). The term Employee Plan includes (i) any employee benefit
plan as defined in Section 3(3) of ERISA; (ii) any pension, retirement, profit
sharing, incentive compensation, stock option, stock bonus, and nonqualified
deferred compensation plan; (iii) any multiemployer plan as defined in Section
3(37) of ERISA; and (iv) any disability, medical, dental, worker's compensation,
or health or life insurance plan or vacation program. Any and all tax returns,
reports, forms or other documents required to be filed by the Company under
applicable federal, state or local law with respect to any of the Employee Plans
listed on SCHEDULE 4.18 have been timely filed and are correct and complete in
all material respects; and any and all amounts due by the Company to any
governmental agency or entity with respect to any of the Employee Plans have
been timely and fully paid. To the Seller's knowledge, there have been no
filings with respect to any Employee Plan with the Pension Benefit Guaranty
Corporation ("PBGC") and, to the knowledge of the Sellers, no liability to the
PBGC has been incurred or is expected with respect to any Employee Plan except
for any accrued insurance premiums which either have been or will be timely paid
by the Company.
(d) Except as set forth in SCHEDULE 4.18, all Employee Plans
were established and are being maintained and operated in compliance, in all
material respects, with applicable laws (including, but not limited to, ERISA
and the Code) and all regulations and interpretations thereunder and in
accordance with their plan documents, except for any noncompliance that has not
had and is not expected to have a Material Adverse Effect on the Company. Each
funded Employee Plan, if any, providing for payment of deferred compensation has
been and is qualified under Section 401 of the Code and the Internal Revenue
Service has issued one or more determination letters with respect thereto
stating that such funded Employee Plan has been and is qualified under Section
401 of the Code and each trust maintained in connection with each such funded
Employee Plan has been and is exempt under Section 501
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of the Code. Except as set forth in SCHEDULE 4.18, there is no unfunded
liability for vested or nonvested benefits under any funded Employee Plan, and
all contributions required to be made to each such funded Employee Plan have
been fully and timely paid. There has been (i) no event or condition which would
constitute a "reportable event" within the meaning of Section 404(3) of ERISA
and the regulations and interpretations thereunder, (ii) no prohibited
transaction as described in Section 406 of ERISA and Section 4975 of the Code
with respect to any Employee Plan, and (iii) no written complaints to or by any
government entity have been filed or to the knowledge of the Sellers have been
overtly threatened with respect to any Employee Plan. Neither the Company nor
any Employee Plan has any material liability to any plan participant,
beneficiary or other person under any provision of ERISA, the Code or any other
applicable law other than the obligation to make contributions which are not yet
due and payable. To the knowledge of any of the Sellers, there is no contract,
agreement or benefit arrangement covering any employee of the Company which
individually or collectively would constitute an "excess parachute payment"
under Section 280G of the Code.
4.19 INSURANCE. SCHEDULE 4.19 contains a listing of all policies
of fire, general liability, worker's compensation, errors and omissions,
malpractice and other types of insurance maintained by or on behalf of the
Seller, to provide insurance protection for the assets and business of the
Seller. Except as set forth in SCHEDULE 4.19 hereto, all of such policies are
now in full force and effect and those policies or other policies covering the
same risks and in substantially the same amounts have been in full force and
effect continuously for the past three (3) years. The Seller has not received
any notice of cancellation or material amendment of any such policies; and, to
the knowledge of the Seller, all material claims thereunder have been filed in a
timely fashion.
4.20 NO BROKER. Except as set forth in SCHEDULE 4.20, the Seller
has not retained an agent, finder or broker in connection with the transactions
contemplated by this Agreement. The Seller shall indemnify, hold harmless and
defend Buyer from all commissions, finder's and other fees and expenses of any
such persons.
4.21 DISCLOSURE. To the knowledge of the Seller, the
representations and warranties of the Seller contained in this Section 4, as
modified by the Disclosure Schedules, are true, complete and correct in all
material respects, and do not contain any statement of a material fact that was
untrue when made or omit any material fact necessary to make the statements
contained therein not misleading in light of the circumstances under which such
statements were made. For purposes of Section 4, the phrases "knowledge" or
"best knowledge" of the Seller, means the actual knowledge of officers or
directors of Seller or actual knowledge of the Shareholders. Although Disclosure
Schedules are intended to qualify or modify the representations and warranties
of the Seller contained in the Subsection of this Section 4 that corresponds, by
number, to the number used to designate such Disclosure Schedule, the
disclosures therein shall also qualify or modify any representation or warranty
in any other Subsection of this Section 4 to which it may also relate and,
therefore, any information in any such Disclosure Schedule need not be repeated
in any other Disclosure Schedule, in order to qualify any of the representations
or warranties to which such other Disclosure Schedule relates.
4.22 MATERIAL ADVERSE EFFECT. The term "Material Adverse
Effect," when used in connection with the Seller in this Section 4, or in
Sections 6, 9 or 10 hereof, means any change, effect or circumstance with
respect to Seller or Seller's Business that is materially adverse to Seller and
Mercy, considered as if they were a single combined entity, other than such
changes, circumstances or effects that: (i) are set forth or described in or
contemplated by the Disclosure Schedules attached hereto, (ii) are set forth or
described in the Financial Statements or the notes thereto, or (iii) that affect
the helicopter maintenance business generally.
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5. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer makes the
following representations and warranties as of the date of this Agreement and,
again, as of the Closing Date:
5.1 ORGANIZATION. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
5.2 CORPORATE POWER; NECESSARY ACTIONS; BINDING EFFECT. Buyer
possesses the requisite corporate power and authority to enter into and perform
its obligations under this Agreement. Buyer has taken all corporate action
necessary to authorize the execution and delivery of, and the performance of its
obligations under, this Agreement. This Agreement constitutes a valid obligation
of Buyer that is legally binding on and enforceable against Buyer in accordance
with its terms, except as such enforceability may be limited by (i) bankruptcy,
insolvency, moratorium or other similar laws affecting creditors' rights and
(ii) general principles of equity relating to the availability of equitable
remedies (regardless of whether such Agreement is sought to be enforced in a
proceeding at law or in equity).
5.3 NO CONFLICTS. Neither the execution and delivery nor the
performance of this Agreement will result in any of the following: (i) a default
or an event that, with notice or lapse of time, or both, would constitute a
default, breach or violation of the Certificate of Incorporation or Bylaws of
Buyer, or any contract, lease, license, franchise, promissory note, indenture,
mortgage, deed of trust, security or pledge agreement, or other agreement to
which Buyer is a party and which is material to Buyer (a "Material Buyer
Contract"); (ii) the termination of any Material Buyer Contract or the
acceleration of the maturity of any material indebtedness of Buyer; or (iii) a
violation or breach of any writ, injunction or decree of any court or
governmental instrumentality to which the Buyer is a party or by which any of
its properties is bound or any laws or regulations applicable to Buyer, where
the violation would have a material adverse effect on Buyer.
5.4 BROKER. Buyer has not retained any broker, agent or finder
in connection with the transactions contemplated by this Agreement, and Buyer
shall hold harmless the Seller from any commission, fee or expenses payable to
any such broker, finder or agent by reason of his or her retention by Buyer.
5.5 REPRESENTATIONS AND WARRANTIES. Each representation,
warranty or statement made, or information provided, by Buyer in this Agreement,
or in the Exhibits or Schedules hereto, or in any certificates to be delivered
by Buyer at the Closing is, or when made shall be, true, complete and correct in
all material respects.
6. CONDUCT OF BUSINESS PENDING THE CLOSING. Between the date
hereof and the Closing, and except as otherwise consented to by Buyer in
writing, the Seller covenants, as follows:
6.1 ACCESS. The Seller shall give to Buyer and its
representatives, from and after the date of execution of this Agreement, on
prior request therefor from Buyer or such representatives, such access to the
premises, employees, agents and consultants of the Seller, and such copies of
the HSI Financial statements, books and records, and contracts and leases and
other documentation, so as to enable Buyer to inspect and evaluate all aspects
of the business and operations, assets, operating results, financial condition,
capitalization, ownership, and legal affairs of the Seller. Buyer agrees to
conduct its review, and to cause its representatives to conduct their review, in
a manner designed to minimize any disruption of the operations of the Seller. In
addition, Seller shall (i) permit the Buyer's independent public accountants to
obtain access to the financial books and records of the Seller, and to such
other documentation which such accountants may reasonably request and the Seller
can obtain without unreasonable expense and effort, in connection with an audit,
to be conducted by such accountants, of the HSI Financial Statements to enable
Buyer to satisfy its financial reporting obligations under the Securities
Exchange Act of 1934 that will arise upon consummation of the acquisition by
Buyer of the Purchased Assets pursuant hereto (the "Seller
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Audit"), and (ii) arrange for the Seller's independent public accountants to
provide such assistance as Buyer's accountants may reasonably request in
connection with the Seller Audit.
6.2 CONDUCT OF SELLER'S BUSINESS. From the date of this
Agreement and until the Closing or termination of this Agreement, whichever
first occurs, the Seller shall operate and conduct its business diligently and
only in the ordinary course, consistent with past practices. In furtherance
thereof, unless Buyer's prior consent to do otherwise is obtained (which consent
shall not be unreasonably withheld or delayed), Seller shall:
(a) ORGANIZATION. Use its best efforts to preserve intact
its organization and use its reasonable efforts to retain all of its employees
and the services of all vendors, suppliers, agents and consultants to the
Seller, commensurate with the requirements of the Seller's business;
(b) INSURANCE. Maintain insurance, including liability and
errors and omissions insurance, consistent with past practices and, unless
comparable insurance is substituted therefor or is not generally available to
businesses of the type conducted by the Seller, not take any action to terminate
or modify, or permit the lapse or termination of, the present insurance policies
and coverages of the Seller as set forth in SCHEDULE 4.19 hereto;
(c) LAWSUITS, CLAIMS.
(i) Promptly notify Buyer of any lawsuit or other
legal proceeding that is commenced, or that is threatened, in writing,
against the Seller and that (a) relates to or arises out of the
Seller's business or operations and, if adversely determined against
the Seller, would be expected to have a Material Adverse Effect on
Seller, or (b) relates to any of the Purchased Assets or any of the
transactions contemplated by this Agreement; and
(ii) Not settle any action or proceeding on terms
that are expected to have a Material Adverse Effect on Seller, not
release, settle, compromise or relinquish any claims, causes of action
or rights involving more than $25,000 individually or $50,000 in the
aggregate which the Seller may have against any other persons,
including, without limitation, claims or rights to reimbursement or
payment for services rendered by the Seller;
(d) CERTAIN CHANGES. Not encumber or place any liens or
security interests on any of the Purchased Assets, other than (i) liens or
security interests in existence on the date hereof, (ii) statutory liens to
secure taxes that are not yet due and payable, and (iii) purchase money security
interests in connection with the acquisition of equipment in the ordinary course
of the Seller's business;
(e) CONDITION OF ASSETS. Maintain in good working order and
condition, ordinary wear and tear excepted, all of the Purchased Assets;
(f) AGREEMENTS.
(i) Use its best efforts to observe and perform all
of its obligations in the Material Seller Contracts, the violation of
which would have a Material Adverse Effect on Seller;
(ii) Except as required by any existing contracts
or agreements, not enter into any new agreement that would constitute a
Material Seller Contract or amend any Material Seller Contract, or
incur any new monetary obligation involving more than $25,000
individually or $50,000 in the aggregate, other than monetary
obligations that are incurred in the ordinary course consistent with
past practices;
(iii) Promptly notify Buyer in writing of the
occurrence of any breach or default of any Material Seller Contract;
and
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(iv) Not enter into any transaction with any
shareholder, director or officer, or any person or entity related to or
affiliated with any such person;
(g) CONSENTS; COMPLIANCE WITH LAWS.
(i) Use its best reasonable efforts to obtain and
maintain all consents, assignments or approvals of, and licenses,
permits and franchises and rights to operate granted by, governmental
authorities, the absence or loss of which is expected to have a
Material Adverse Effect on Seller;
(ii) Not take any action which would be expected to
result in a violation of or in the noncompliance with any laws or
regulations applicable to the Seller that would be expected to have a
Material Adverse Effect on Seller; and
(iii) Cooperate with Buyer and render to Buyer such
assistance as Buyer may reasonably request, at Buyer's sole expense, in
obtaining such governmental approvals;
(h) TAXES. Pay, when due, and prior to the imposition or
assessment of any interest, penalties or liens by reason of the nonpayment of,
all Taxes (as defined in Section 4.18 hereof), due or assessed against it,
except for any Taxes being contested in good faith and for which reserves have
been established by the Seller;
(i) DIVIDENDS, ETC. Not:
(i) Except for the dividends listed on SCHEDULE
6.2(I) hereto ("Permitted Dividends"), declare or pay any dividends or
make any distributions with respect to or, redeem any of the shares of
its capital stock;
(ii) Approve or effect any reclassification or
recapitalization of the Seller or the Seller's authorized or
outstanding shares;
(iii) Approve or commence any proceedings for the
liquidation of the Seller; and
(iv) Enter into any agreement to do any of the
foregoing.
7. OBLIGATIONS SURVIVING THE DATE OF THIS AGREEMENT AND THE CLOSING.
7.1 FURTHER ASSURANCES. Each party hereto shall execute and
deliver after the date hereof such instruments and take such other actions as
the other party may reasonably request in order to carry out the intent of this
Agreement or to better evidence or effectuate the transactions contemplated
herein.
7.2 EXPENSES. The Seller and the Buyer shall each pay all of
their respective costs and expenses incurred or to be incurred by them in
negotiating and preparing this Agreement and in carrying out and closing the
transactions contemplated by this Agreement. In addition, Buyer shall pay all of
the fees and disbursements of the Buyer's accountants incurred in connection
with the completion of the Seller's Audit or the determination of the purchase
price adjustments described in Section 3.2, and (ii) the reasonable fees and
disbursements of the Company's accountants in providing any services or
assistance requested of them by the Buyer's accountants in connection with or
for purposes of the Seller Audit or the determination of such purchase price
adjustments.
7.3 TAXES.
(a) The Seller shall pay all Taxes of any kind or nature
arising from the operations of the Business up to the Closing Date. If any Taxes
required under this Section 7.3 to be borne by Seller are assessed against Buyer
or any of the Purchased Assets, Buyer shall notify Seller in writing
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promptly thereafter and Seller shall be entitled to contest, in good faith, such
assessment or charge so long as such assessment does not adversely affect Buyer,
the Business or the Purchased Assets. Notwithstanding the foregoing, Buyer may
(but shall not be obligated to) pay any such Taxes assessed against it or any of
the Purchased Assets, but which are payable by the Seller pursuant hereto, if
the failure to do so, in the judgment of Buyer could result in the imposition of
a Lien or Encumbrance on any of the Purchased Assets or any other assets of
Buyer or would constitute a violation of any agreement to which Buyer is
subject, or if Seller fails to contest such assessment or charge promptly,
diligently and in good faith. If Buyer pays any Taxes which pursuant hereto are
required to be borne by any of the Seller, then, Buyer (as the case may be)
shall be entitled to reimbursement thereof from the Seller on demand, together
with interest thereon, at the maximum rate permitted by law, from the date such
Taxes were paid by Buyer and until fully reimbursed by the Seller.
(b) Sales, use or similar Taxes arising out of the
consummation of the transactions contemplated hereby shall be paid by the Buyer.
7.4 ACCOUNTS AND NOTES RECEIVABLE COLLECTIONS. In the event
Seller receives any payment after the date hereof in respect of any Receivables
included in the Purchased Assets, Seller shall promptly deliver such payment, or
the instrument of payment, with proper endorsements or assignments, to Buyer.
The Seller further agrees to cooperate with Buyer in notifying account and any
note obligors of the transfer of such accounts and notes receivable and
instructing them to make all payments in respect thereof following the date
hereof to Buyer.
8. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
respective representations and warranties of the Seller and the Buyer set forth
in this Agreement or in any of their respective Disclosure Schedules or Closing
Certificates delivered pursuant hereto shall survive the Closing for a period of
one (1) year from the Closing Date, except that the representations and
warranties made by the Seller in Section 4.18, shall survive until the
expiration of the respective statutes of limitation on claims for Taxes due on
or before the Closing Date.
9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE BUYER. The
obligations of Buyer to consummate the purchase of the Purchased Assets and to
perform its other obligations under this Agreement shall be subject to the
fulfillment, or waiver by Buyer, at or prior to the Closing Date of each of the
following conditions:
9.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties made the Seller in this Agreement or in its Disclosure Schedules
hereto shall have been true and correct on the date hereof, and also shall be
true and correct at and as of the Closing Date with the same force and effect as
if made again at and as of that time, except for any breach of any such
representations or warranties that has not had and is not expected to have a
Material Adverse Effect on Seller.
9.2 ABSENCE OF MATERIAL LITIGATION. There shall be (i) no
pending or overtly threatened litigation, whether brought against the Seller,
any of the Shareholders or the Buyer, that seeks to enjoin the consummation of
any of the transactions contemplated by this Agreement, (ii) no order that has
been issued by any court or governmental agency having jurisdiction that
restrains or prohibits the consummation of the purchase and sale of the
Purchased Assets hereunder and no proceedings pending which are reasonably
likely to result in the issuance of such an order; and (iii) no pending or
overtly threatened litigation, which has had or is expected to have a Material
Adverse Effect on Seller.
9.3 PERFORMANCE OF OBLIGATIONS. The Seller shall have performed
and complied, in all material respects, with all of its covenants required by
this Agreement to have been performed at or prior to the Closing, except where
any failure to have so performed or to have so complied has not had and
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is not expected to have a Material Adverse Effect on Seller or materially or
adversely affect the ability of the Buyer to consummate the transactions
contemplated hereby.
9.4 NO MATERIAL ADVERSE CHANGES. Since December 31, 1996, there
shall not have been any change in or other event affecting the business or the
condition (financial or other) or operating results of the Seller that has had
or is expected to have a Material Adverse Effect on the Seller.
9.5 THIRD PARTY APPROVALS AND CONSENTS. Receipt of all approvals
and consents of third parties (governmental or other) needed to have been
obtained by the Closing Date to enable Buyer to consummate the transactions
contemplated in this Agreement and not thereby violate any contracts, writs,
orders, laws or regulations the violation of which would have a Material Adverse
Effect on the Seller.
9.6 CONSUMMATION OF PURCHASE AND SALE OF MERCY COMMON STOCK. The
transactions contemplated by the Stock Purchase Agreement shall have been
consummated concurrently with the Closing of the transactions contemplated by
this Agreement.
9.7 CONFIRMATION FROM BUYER'S ACCOUNTANTS. Receipt by Buyer of
confirmation from its independent public accountants that such accountants
believe that they can complete the Seller Audit in order to enable Buyer to meet
its financial reporting responsibilities with respect to the purchase hereunder
of the Purchased Assets pursuant to the Securities Exchange Act of 1934,
provided that Buyer has made a good faith and diligent effort to obtain such
confirmation by the date hereof.
9.8 CERTIFICATES. Receipt of a certificate executed by the
Seller, dated as of the Closing Date and reasonably satisfactory in form and
substance to Buyer, certifying that (i) each of the representations and
warranties of Seller contained herein was true and correct when made and is true
and correct in all material respects on and as of the Closing Date with the same
force and effect as if such representations and warranties had been made on the
Closing Date, (ii) Seller has performed and complied in all material respects
with all of its covenants required to have been performed or complied with by it
pursuant hereto on or prior to the Closing Date, except as may have been waived
in writing by Buyer or where the failure to have so complied has not had and is
not expected to have a Material Adverse Effect on the Seller or to materially
and adversely affect the ability of the parties to consummate the purchase and
sale of the Purchased Assets, and (iii) all of the conditions precedent to
Buyer's obligations the satisfaction of which was the responsibility of Seller
have been satisfied, except to the extent waived by Buyer.
9.9 LEGAL OPINION AND ADDITIONAL INSTRUMENTS. Sellers shall have
arranged for and caused (i) the delivery of a legal opinion, substantially in
the form of EXHIBIT B hereto, of Stradling, Yocca, Carlson & Rauth, a
Professional Corporation, special counsel to Seller, to Buyer and (ii) the
Company to have delivered to Buyer a good standing certificate, dated as of a
date that is not more than 10 days prior to the Closing Date, from the Secretary
of State of California and such other or additional instruments, consents,
endorsements and documents as Buyer reasonably deems to be necessary to enable
the transactions contemplated by this Agreement to be consummated as provided in
this Agreement. All other proceedings in connection with this Agreement and the
transactions contemplated hereby, and all documents and instruments incident to
such transactions, shall be reasonably satisfactory in form and substance to
Buyer and its counsel.
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLER. The obligation
of the Seller to consummate the sale of the Purchased Assets to Buyer shall be
subject to the fulfillment, or the waiver by the Seller, at or prior to the
Closing, of each of the following conditions precedent:
10.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by Buyer in this Agreement or in Buyer's Disclosure Schedules
hereto shall have been true and correct on the date hereof, and also at and as
of the Closing Date with the same force and effect, in all material respects, as
if made again at and as of that time.
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10.2 ABSENCE OF MATERIAL LITIGATION. There shall be (i) no
pending or overtly threatened litigation, whether brought against the Seller,
any of the Shareholders or the Buyer that seeks to enjoin the consummation of
any of the transactions contemplated by this Agreement, (ii) no order that has
been issued by any court or governmental agency having jurisdiction that
restrains or prohibits the consummation of the purchase and sale of the
Purchased Assets hereunder or any proceedings pending which are reasonably
likely to result in the issuance of such an order; and (iii) no other pending or
overtly threatened litigation, which has had or is expected to materially and
adversely affect the ability of the parties to consummate the transactions
contemplated hereby.
10.3 PERFORMANCE OF OBLIGATIONS. Buyer shall have performed and
complied, in all material respects, with all of its covenants required by this
Agreement to have been performed by it at or prior to the Closing, except for
any failure of performance or non-compliance that does not and will not
materially and adversely affect the ability of the Seller to consummate the
transactions contemplated hereby.
10.4 THIRD PARTY APPROVALS AND CONSENTS. Receipt of all
approvals and consents of third parties (governmental or other) needed to have
been obtained by the Closing Date to enable the Seller to consummate the
transactions contemplated in this Agreement and not thereby violate any
contracts, writs, orders, laws or regulations the violation of which would have
a Material Adverse Effect on the Seller.
10.5 CONSUMMATION OF PURCHASE AND SALE OF MERCY COMMON STOCK.
The transactions contemplated by the Stock Purchase Agreement shall have been
consummated concurrently with the Closing of the transactions contemplated by
this Agreement.
10.6 CERTIFICATES. Receipt from Buyer of a certificate, dated as
of the date of Closing and signed by the President or the Chief Financial
Officer of Buyer, certifying that (i) each of its representations and warranties
contained herein was true and correct when made and is true and correct in all
material respects on and as of the Closing Date with the same force and effect
as if such representations and warranties had been made on the Closing Date, and
(ii) it has performed and complied in all material respects with all agreements,
obligations, covenants and conditions required to be performed or complied with
by it pursuant hereto on or prior to the Closing Date, except as may be waived
in writing by the Seller or where the failure to have so complied has not had
and is not expected to materially and adversely affect the ability of the
parties to consummate the purchase and sale of the Purchased Assets.
10.7 OPINION OF COUNSEL. Receipt of an opinion dated as of the
Closing Date from Davis, Graham & Stubbs LLP substantially in the form of
EXHIBIT C hereto.
10.8 ADDITIONAL INSTRUMENTS. The Buyer shall have delivered to
Seller certified copies of resolutions duly adopted by its Board of Directors
approving this Agreement and authorizing the Buyer to consummate the
transactions contemplated hereby, and such other or additional instruments,
consents, endorsements and documents as Sellers reasonably deem to be necessary
to enable the transactions contemplated by this Agreement to be consummated as
provided in this Agreement, including good standing certificates, dated not more
than 10 days prior to the Closing Date, evidencing the good standing of Buyer in
the state of its incorporation and, as a foreign corporation qualified to do
business in California. All other proceedings in connection with this Agreement
and the transactions contemplated hereby, and all documents and instruments
incident to such transactions, shall be reasonably satisfactory in form and
substance to Seller and its counsel.
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11. THE CLOSING.
The consummation of the transactions contemplated hereby (the
"Closing") shall take place concurrently with the consummation of the
transactions contemplated by the Mercy Agreement, at the offices of Seller's
counsel at 660 Newport Center Drive, Suite 1600, Newport Beach, California. The
term "Closing Date," as used in this Agreement, shall mean the date on which
such Closing takes place.
11.1 CLOSING DELIVERIES OF THE SELLER. At the Closing, the
Seller shall deliver, or cause to be delivered to Buyer, the documents and
instruments set forth on SCHEDULE 11.1 hereof ("Seller's Closing Deliveries"),
in form and substance reasonably satisfactory to Buyer and its counsel,
including, but not limited to, the Bill of Sale and Assumption Agreement in the
Form of EXHIBIT D.
11.2 CLOSING DELIVERIES OF BUYER. At the Closing, Buyer shall
deliver, or cause to be delivered, the cash portion of the Purchase Price to
Seller, and to the appropriate Selling Party, the documents and instruments set
forth on SCHEDULE 11.2 hereof ("Buyer's Closing Deliveries"), in form and
substance reasonably satisfactory to such Seller and their counsel.
12. TERMINATION.
12.1 METHODS OF TERMINATION. This Agreement may be terminated
and the transactions herein contemplated may be abandoned at any time prior to
the Closing.
(a) By mutual written consent of Buyer and the Seller; or
(b) By the Buyer, if there has been a material breach by the
Seller of any of its representations, warranties, agreements or covenants set
forth herein, or a failure of any condition to which the obligations of the
Buyer are subject (a "Material Seller Default").
(c) By the Seller, if there has been a material breach by
the Buyer of any of its representations, warranties, agreements or covenants set
forth herein, or a failure of any condition to which the obligations of the
Seller are subject (a "Material Buyer Default").
12.2 PROCEDURE UPON TERMINATION. In the event of termination of
this Agreement by Buyer or Seller or by both Buyer and Seller pursuant to
Section 12.1 hereof, written notice thereof shall forthwith be given to the
other party or parties hereto and the transactions contemplated herein shall be
abandoned without further action by Buyer or the Seller. In addition, if this
Agreement is terminated as provided herein:
(a) Each party will redeliver all documents, workpapers and
other material of any other party relating to the transactions contemplated
hereby, whether so obtained before or after the execution hereof, to the party
furnishing the same.
(b) All information of a confidential nature received by any
party hereto with respect to the business of any other party (other than
information which is a matter of public knowledge or which has heretofore been
or is hereafter published in any publication for public distribution or filed as
public information with any governmental authority) shall continue to be subject
to the provisions of Section 15 of this Agreement, which provisions shall
survive any such termination.
(c) Upon any termination of this Agreement pursuant to this
Section 12, the respective obligations of the parties hereto under this
Agreement (other than under Paragraphs 12.2(a) and (b) above) shall terminate
and no party shall have any liability whatsoever to any other party hereto by
reason of such termination, irrespective of the cause of such termination,
PROVIDED, HOWEVER, that a termination of this Agreement by Buyer pursuant to
Paragraph 12.1(b) due to a Material Seller Default, or by any of the Seller
pursuant to Paragraph 12.1(c) due to a Material Buyer Default, shall not relieve
the Seller or the Buyer (as the case may be) of their liability hereunder to the
non-defaulting parties; and
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PROVIDED, FURTHER, that (i) if such termination is by Buyer as a result of a
Material Seller Default, then, the Seller shall be liable to Buyer for the
direct damages incurred by Buyer by reason of such Material Seller Default; (ii)
if, notwithstanding a Material Seller Default or a Material Buyer Default, the
Buyer (in the case of a Material Seller Default) or the Seller (in the case of a
Material Buyer Default) closes the transactions contemplated hereby, such action
by the non-defaulting party or parties shall constitute a waiver of such
Material Seller Default or Material Buyer Default (as the case may be); and
(iii) notwithstanding anything to the contrary contained herein, in no event
shall the Seller be liable to Buyer by reason of a material breach of this
Agreement by Seller, and in no event shall Buyer be liable to the Seller by
reason of a material breach of this Agreement by Buyer, for any consequential
damages, special damages or lost profits or lost business opportunities arising
from such breach.
12.3 REMEDIES AND SPECIFIC PERFORMANCE. Seller acknowledges that
a breach of any of its covenants under this Agreement that would constitute a
Material Seller Default would result in damages to Buyer that would be extremely
impracticable to measure. Accordingly, Seller agrees that, in lieu of
termination of this Agreement and (subject to clause (ii) of Paragraph
12.2(c)above) in addition to any other remedies Buyer may have, Buyer may sue in
equity for specific performance of any such covenants in the event of a breach
thereof and Seller expressly waives the defense that a remedy in damages will be
available.
13. INDEMNIFICATION BY SELLERS. Shareholders acknowledge that following
the Closing, substantially all of the proceeds from the payment of the Purchase
Price to Seller will be used to pay obligations and expenses of Seller and to
make distributions to the Shareholders and that, as a result, Seller will not
have any substantial assets after giving effect to the transactions contemplated
hereby. As a result, to induce Buyer to enter into and to consummate the
transactions contemplated by this Agreement, each Shareholder has agreed that he
will, severally, and not jointly with any of the other Shareholders, indemnify
and hold harmless Buyer and the other members of the Buyer Group (as defined in
Subsection 14.1 of the Stock Purchase Agreement), in the manner, on the terms
and subject to the limitations contained in Section 14 of the Stock Purchase
Agreement, from and against any and all Buyer Liabilities (also as defined in
Subsection 14.1 of the Stock Purchase Agreement) which they or any of them may
incur as a result of any material breach of any of Seller's representations or
warranties contained in this Agreement or in its Disclosure Schedules or any
Closing Certificate it may deliver pursuant to this Agreement. In consideration
therefor, Buyer, on its own behalf and on behalf of the other members of the
Buyer Group, covenants that Seller shall not have any liability to Buyer or any
of the other members of the Buyer Group for any breach of any of its
representations or warranties contained in this Agreement, in its Disclosure
Schedules or any Closing Certificate it may deliver pursuant to this Agreement.
14. SHAREHOLDERS' OBLIGATION. Subject to the satisfaction of the
conditions precedent to the obligations of Seller hereunder, which shall also
constitute conditions precedent to the obligations of the Shareholders
hereunder, the Shareholders shall cause Seller to perform all of its covenants
required by this Agreement to have been performed by Seller at or prior to the
Closing, except for any of such covenants the non-performance of which will not
materially and adversely affect the ability of the Seller to consummate the
transactions contemplated hereby.
15. CONFIDENTIALITY.
15.1 CONFIDENTIALITY COVENANTS. Each party acknowledges that it
may have access to various items of Confidential Information (as hereinafter
defined) of the other, or in the case of Buyer, Confidential Information of the
Seller, in the course of investigations and negotiations prior to Closing. Each
party who receives any Confidential Information (a "Receiving Party") from any
other party hereto, (or in the case of Buyer from the Seller) (the "Disclosing
Party"), may disclose any such Confidential
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Information to such party's employees, attorneys, accountants, financial
advisors or agents or representatives that have a need to know such Information
to facilitate or assist with the consummation of the transactions contemplated
hereby (collectively, "Representatives"). Subject to the foregoing exception,
and the exception hereinafter set forth in Subsection 15.2 below, (i) a
Receiving Party shall keep, and shall cause its Representatives to keep, all
Confidential Information received from a Disclosing Party hereunder strictly
confidential and shall not disclose, and shall cause its Representatives not to
disclose, any such Confidential Information to any third party; and (ii) any
Receiving Party and its Representatives shall not make any uses of Confidential
Information received from a Disclosing Party except to facilitate or assist with
the consummation of the transactions contemplated hereby. Confidential
Information shall include any business, financial, technical or other
information, including, but not limited to, business plans, forecasts, marketing
plans or initiatives, customer, client and vendor lists, training materials
developed by the Disclosing Party, information regarding the identities,
qualifications and compensation being paid to key employees, information
received from customers, vendors or clients with the expectation, whether
explicit or implicit, that such information would be protected from disclosure
or dissemination to third parties, and other information the value of which to
the Disclosing Party is dependent on the non-disclosure of such information.
Confidential Information shall not include information that, although disclosed
or made available by a Disclosing Party or any of its Representatives to a
Receiving Party or any of its Representatives, (i) can be obtained by persons
not subject to confidentiality or use restrictions from public sources,
including periodicals, government and industry publications and other media that
is readily accessible to the public or competitors of the Disclosing Party, (ii)
has been disclosed by the Disclosing Party or any of its Representatives to any
unaffiliated third parties without the imposition of any restrictions or
prohibitions on disclosure or use thereof and has been, as a result, disclosed
by that third party to other third parties, or (iii) information that the
Receiving Party can demonstrate convincingly was in its possession prior to its
disclosure to the Receiving Party by the Disclosing Party or any of its
Representatives, PROVIDED that the Receiving Party had not obtained possession
of such Confidential information from any one that the Receiving Party knew or
should have known was subject to restrictions on its right to disclose such
information to the Receiving Party, either pursuant to an agreement or by reason
of his position or relationship with the Disclosing Party.
15.2 DISCLOSURE PURSUANT TO LEGAL PROCESS. If a Receiving Party
is required by subpoena or other legal process, or by laws applicable to it, to
disclose or produce any Confidential Information belonging to a Disclosing
Party, then, the Receiving Party shall (i) provide the Disclosing Party prompt
notice thereof and copies, if possible, and, if not, a description, of the
Confidential Information requested or required to be produced so that Disclosing
Party may seek an order to quash such subpoena or other legal process or an
appropriate protective order or may elect to waive compliance with the
provisions of this Section 15 as to any portion or all of such Confidential
Information (ii) consult with the Disclosing Party as to the advisability of
taking legally available steps to quash or narrow such request, and (iii)
provide such reasonable cooperation as the Disclosing Party may request in
connection with efforts by the Disclosing Party to quash the subpoena or other
legal process or to obtain a protective order with respect to the Confidential
Information being sought. If, in the absence of a protective order or the
receipt of a waiver hereunder, a Receiving Party is nonetheless, in the opinion
of his legal counsel, compelled to disclose or produce any such Confidential
Information of the Disclosing Party to any tribunal legally authorized to
request and entitled to receive such Confidential Information or to any
government agency with which the Receiving Party is required by law to file any
such Information or otherwise stand liable for contempt or suffer other censure
or penalty or liability, the Disclosing Party may disclose or produce such
Confidential Information to such tribunal or government agency, notwithstanding
the fact that such information may, as a result become available to the public,
without incurring liability hereunder to the Disclosing Party; PROVIDED,
HOWEVER, that the Receiving Party shall give the Disclosing Party written notice
of the Confidential Information to be so disclosed or produced as far in advance
of its disclosure or
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<PAGE>
production as is practicable and shall use his best efforts to obtain, to the
greatest extent practicable, an order or other reliable assurance that
confidential treatment will be accorded to such Confidential Information so
required to be disclosed or produced. Notwithstanding the foregoing, the parties
agree that the Buyer may file a report on Form 8-K with the Securities and
Exchange Commission regarding the transactions contemplated by this Agreement
and file as exhibits thereto, the Agreement, the Stock Purchase Agreement and
all schedules and exhibits thereto without requesting confidential treatment for
such documents.
15.3 TERMINATION OF CONFIDENTIALITY OBLIGATIONS. The obligations
of Buyer under this Section 15 shall terminate on the Closing of the
transactions contemplated hereby, but the obligations of the Seller hereunder
shall survive the Closing for a period of five (5) years thereafter with respect
to Confidential Information belonging to Buyer or the Seller. In the event of a
termination of this Agreement, the respective obligations of the Seller with
respect to Confidential Information of Buyer and the obligations of Buyer with
respect to Confidential Information of the Seller shall survive for a period of
five (5) years from the date of such termination.
16. MISCELLANEOUS.
16.1 NOTICES. All notices, requests, demands or other
communications hereunder to any of the parties hereto shall be in writing and
shall be deemed to have been duly given, if delivered in person or mailed,
certified, return-receipt requested, postage prepaid to the respective addresses
of such parties set forth in EXHIBIT E hereto. Any party hereto may from time to
time, by written notice to the other parties, designate a different address,
which shall be substituted for the one specified above for such party. If any
notice or other document is sent by certified or registered mail, return receipt
requested, postage prepaid, properly addressed as aforementioned, the same shall
be deemed served or delivered seventy-two (72) hours after mailing thereof. If
any notice is sent by facsimile machine ("fax") to a party, it will be deemed to
have been delivered on the date the fax thereof is actually received, provided
the original thereof is sent by mail, in the manner set forth above, within
twenty-four (24) hours after the fax is sent.
16.2 WAIVER OF BULK SALE COMPLIANCE. Each party to this
Agreement hereby irrevocably waives compliance with any and all applicable Bulk
Sales laws, in connection with the transactions contemplated by this Agreement.
16.3 ASSIGNMENT. Seller may not assign this Agreement, or assign
its respective rights or delegate its duties hereunder, without the prior
written consent of Buyer. Prior to the Closing, Buyer may not assign this
Agreement, or assign its rights or delegate its duties hereunder, without the
prior written consent of Seller.
16.4 SEVERABILITY. Any provision of this Agreement which is
illegal, invalid or unenforceable shall be ineffective to the extent of such
illegality, invalidity or unenforceability, without affecting in any way the
remaining provisions hereof.
16.5 JOINT PRESS RELEASE. The parties agree to consult with each
other and to cooperate prior to issuing any press release or other public
announcement with respect to the transactions contemplated by this Agreement. No
such press release shall be issued by any party without the prior written
consent of the other party; provided, however, that a party may proceed with
publication of such a release or other public disclosure even if another party
hereto has refused to give its consent thereto, if (i) the release or public
disclosure is, in the reasonable judgment of the releasing party, required for
it to meet, on a timely basis, its obligations under laws or regulations
applicable to it, including under the Federal Securities Laws and (ii) the
releasing party furnishes a copy of such release or public disclosure to the
other party at least twenty-four (24) hours in advance of the release or public
disclosure and provides a reasonable opportunity for the other party to comment
thereon. Notwithstanding the foregoing, the parties
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<PAGE>
agree that the Buyer may, immediately upon execution of this Agreement, issue a
press release, in substantially the form that has been delivered to the
Shareholders prior to the date hereof, and file a report on Form 8-K with the
Securities and Exchange Commission regarding the transactions contemplated by
this Agreement and file as exhibits thereto, the press release, the Agreement,
the Stock Purchase Agreement and all schedules and exhibits thereto without
requesting confidential treatment for such documents.
16.6 GOVERNING LAW. This Agreement is deemed to have been made
in the State of California, and its interpretation, its construction and the
remedies for its enforcement or breach are to be applied pursuant to, and in
accordance with, the laws thereof.
16.7 INCORPORATION AND AMENDMENT. This Agreement, the Schedules
and Exhibits hereto and each additional agreement and document referred to
herein constitute the entire Agreement of the parties, superseding and
extinguishing all prior agreements and understandings, representations and
warranties, relating to the subject matter hereof. This Agreement may not be
modified, amended or terminated except by written agreement specifically
referring to this Agreement signed by the parties hereto.
16.8 WAIVER. No waiver of a breach or default hereunder shall be
considered valid unless in writing and signed by the party giving such waiver,
and no such waiver shall be deemed a waiver of any subsequent breach or default
of the same or similar nature.
16.9 INTERPRETATION; HEADINGS. This Agreement, and the other
agreements being entered into by any of the Sellers and the Buyer pursuant
hereto, are the result of arms'-length negotiations between the parties hereto
and no provision hereof or thereof, because of any ambiguity found to be
contained herein, therein or otherwise, shall be construed against a party by
reason of the fact that such party or its legal counsel was the draftsman of
that provision. Unless otherwise indicated elsewhere in this Agreement, (i) the
term "or" shall not be exclusive; (ii) the term "including" shall mean
"including, but not limited to," and (iii) the terms "herein," "hereof,"
"hereto," "hereunder" and other terms similar to such terms shall refer to this
Agreement as a whole and not merely to the specific section, subsection,
paragraph or clause where such terms may appear. The section, subsection and any
paragraph headings contained herein are for purposes of convenience only and are
not intended to define or limit or affect, and shall not be considered in
connection with, the interpretation of any of the terms or provisions of this
Agreement.
16.10 COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
16.11 ARBITRATION. All disputes between the parties hereto shall
be determined solely and exclusively by arbitration in accordance with the rules
then in effect of the American Arbitration Association pertaining to commercial
arbitrations, or any successors hereto ("AAA"), in San Bernardino, California,
unless the parties otherwise agree in writing. The parties shall jointly select
an arbitrator. In the event the parties fail to agree upon an arbitrator within
ten (10) days, then each party shall select an arbitrator and such arbitrators
shall then select a third arbitrator to serve as the sole arbitrator; provided,
that if either party, in such event, fails to select an arbitrator within seven
(7) days, such arbitrator shall be selected by the AAA upon application of
either party. Judgment upon the award of the agreed upon
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<PAGE>
arbitrator or the so chosen third arbitrator, as the case may be, shall be
binding and shall be entered into by a court of competent jurisdiction.
IN WITNESS WHEREOF, the undersigned corporations have caused this Asset
Purchase Agreement to be executed by officers thereunto duly authorized on the
date first above stated.
BUYER: SELLER:
AIR METHODS CORPORATION HELICOPTER SERVICES, INC.
By: /s/ George W. Belsey By: /s/ Richard J. Silva
-------------------------------- ---------------------------------------
Title: CEO & Chairman Title: President
----------------------------- ------------------------------------
SHAREHOLDERS:
/s/ Homer L. Aerts
------------------------------------------
HOMER L. AERTS
/s/ J. Steven Dickmeyer
------------------------------------------
J. STEVEN DICKMEYER
/s/ Don D. Reed
------------------------------------------
DON D. REED
/s/ Terry L. Russ
------------------------------------------
TERRY L. RUSS
/s/ Richard J. Silva
------------------------------------------
RICHARD J. SILVA
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<PAGE>
EXHIBITS
EXHIBIT A Allocation of Purchase Price
EXHIBIT B Form of SYC&R Legal Opinion
EXHIBIT C Form of DG & S Legal Opinion
EXHIBIT D Form of Bill of Sale and Assumption Agreement
EXHIBIT E Addresses of the Parties for Notice Purposes
SCHEDULES
SCHEDULE 1.1 Equipment, Furniture and Fixtures
SCHEDULE 1.2 Assigned Contracts
SCHEDULE 1.3 Intangible Property Rights
SCHEDULE 1.5 Excluded Claims
SCHEDULE 1.7 Inventory
SCHEDULE 1.9 Excluded Assets
SCHEDULE 2.1 Scheduled Liabilities
SCHEDULE 2.2 Excluded Liabilities
SCHEDULE 4.2 Exceptions to Title
SCHEDULE 4.5 No Conflicts
SCHEDULE 4.6 Financial Statements
SCHEDULE 4.7 Undisclosed Liabilities
SCHEDULE 4.8 Absence of Certain Changes
SCHEDULE 4.9 Condition of Tangible Assets
SCHEDULE 4.10 Intangible Property Rights
SCHEDULE 4.11 Real Property
SCHEDULE 4.13 Material Seller Contracts
SCHEDULE 4.14 Compliance with Laws; Licenses and Permits
SCHEDULE 4.15 Litigation
SCHEDULE 4.16 Environmental Non-Compliance
SCHEDULE 4.17 Taxes
SCHEDULE 4.18 Employment and ERISA Matters
SCHEDULE 4.19 Insurance Policies
SCHEDULE 6.2 Permitted Dividends
SCHEDULE 11.1 Closing Deliveries of Seller
SCHEDULE 11.2 Closing Deliveries of Buyer
-23-
<PAGE>
EXHIBIT A
TO
ASSET PURCHASE AGREEMENT
The cash portion of the Purchase Price shall be the net book value of
the assets of the Company based upon the 1996 HSI Balance Sheet subject to the
adjustments set forth below and the adjustments provided for in Section 3.2 of
the agreement.
1. Add the following items on the 1996 HSI Balance Sheet.
Third party receivables $ 96,134*
Inventory 489,980*
Prepaid expenses 17,975*
Contract receivables 10,000*
Deposits 12,030
Notes receivable 76,846*
Equipment and other tangible assets 100,000
Building (Rialto) 383,000
Intangible assets 34,047
Goodwill 139,766
------------
Total $1,359,778
*The Purchase Price will be adjusted for changes in these assets that
will have occurred between December 31, 1996 and the Closing Date and these
amounts will be adjusted correspondingly.
2. Subtract the following items on the 1996 HSI Balance Sheet
from the total determined pursuant to paragraph 1 above:
Allowance for doubtful receivables $45,536
Accounts payable 301,857**
Accrued payroll 22,536
Accrued payroll taxes 21,969
Accrued insurance 9,427
Deposits payable 1,975
-----------
Total $403,300
**Accounts payable shall be adjusted to eliminate any accounts payable
to the Shareholders, Mercy, or any other affiliate of the Shareholders, other
than any lease payables arising under the Rialto, California lease.
<PAGE>
EXHIBIT B
July 31, 1997
Air Methods Corporation
7301 South Peoria
Englewood, Colorado 80112
Ladies and Gentlemen:
We have acted as counsel to Helicopter Services, Inc., a California
corporation (the "Company") and Homer L. Aerts, J. Steven Dickmeyer, Don D.
Reed, Terry L. Russ and Richard J. Silva (collectively, the "Shareholders"), in
connection with the execution and delivery by the Company and the Shareholders
of that certain Asset Purchase Agreement dated as of July 11, 1997 (the
"Agreement") among the Company, the Shareholders and Air Methods Corporation, a
Delaware corporation (the "Buyer"). This opinion is being delivered pursuant to
Section 9.9 of the Agreement. Unless specifically defined herein or the context
requires otherwise, capitalized terms used herein shall have the meanings
ascribed to them in the Agreement.
In connection with the preparation of this opinion, we have examined
such documents and considered such questions of law as we have deemed necessary
or appropriate. We have assumed that there are no other documents or agreements
among the Company, the Shareholders and the Buyer which would expand or
otherwise modify the respective rights and obligations of the Company, the
Shareholders and the Buyer as set forth in the Agreement and the documents
required or contemplated thereby.
We have assumed the authenticity of all documents submitted to us as
originals, the conformity with originals of all documents submitted to us as
copies, and the genuineness of all signatures (other than signatures of the
Shareholders and officers of the Company). We have also assumed the legal
capacity of all natural persons and that, with respect to all parties to
agreements or instruments relevant hereto (other than the Company and the
Shareholders), such parties had the requisite power and authority to execute,
deliver and perform such agreements or instruments, that such agreements or
instruments have been duly authorized by all requisite action, executed and
delivered by such parties, and that such agreements or instruments are the
valid, binding and enforceable obligations of such parties.
As to questions of fact material to our opinions, we have relied upon
the representations of each party made in the Agreement and the other documents
and certificates delivered in connection therewith, certificates of the
Shareholders, certificates of officers of the Company, and certificates and
advices of public officials.
Whenever a statement herein is qualified by "known to us," "to our
current actual knowledge," or similar phrase, it is intended to indicate that,
during the course of our representation of the Company and the Shareholders, no
information that would give us current actual knowledge of the inaccuracy of
such statement has come to the attention of those
<PAGE>
attorneys in this firm who have rendered legal services in connection with the
transaction described in the introductory paragraph hereof. However, except as
otherwise expressly indicated, we have not undertaken any independent
investigation to determine the accuracy of such statement, and any
limited inquiry undertaken by us during the preparation of this
opinion letter should not be regarded as such an investigation; no
inference as to our knowledge of any matters bearing on the accuracy of any
such statement should be drawn from the fact of our representation of
the Company and the Shareholders.
Based upon the foregoing, and subject to the additional assumptions,
exceptions, qualifications and limitations set forth below, we are of the
opinion that:
1. The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of California. The Company is duly
qualified to do business as a foreign corporation and is in good standing in
each other state in which the nature of its activities or of its properties
owned or leased makes such qualification necessary, except to the extent that
failure to so qualify would not have a material adverse effect on the Company.
2. The Company has the corporate power and authority to own its
properties and assets, to carry on its business as presently conducted, and to
enter into the Agreement and the other documents required or contemplated
thereby and perform its respective obligations thereunder.
3. The execution and delivery of the Agreement and the Bill of Sale and
Assignment and Assumption Agreement (the Bill of Sale"), and the performance by
the Company of its obligations thereunder have been duly authorized by all
necessary corporate action on the part of the Company and the Agreement and Bill
of Sale have been duly executed and delivered by the Company and the
Shareholders and by the Company, respectively.
4. The Agreement is a legal, valid and binding obligation of the
Company and the Shareholders enforceable against them in accordance with its
terms, and the Bill of Sale is a valid and binding agreement of the Company
enforceable against it in accordance with its terms, except in each case as the
enforceability thereof may be subject to or limited by (a) bankruptcy,
insolvency, reorganization, arrangement, moratorium, or other similar laws
relating to or affecting the rights of creditors, and (b) general equitable
principles, regardless of whether the issue of enforceability is considered in a
proceeding in equity or at law.
5. The execution and delivery of the Agreement and the performance by
the Company and the Shareholders of their respective obligations thereunder and
the execution and delivery of and the performance by the Company of its
obligations under the Bill of Sale (a) will not breach or result in a violation
of the Company's Articles of Incorporation or Bylaws, or any judgment, order or
decree of any court or arbitrator, known to us, to which the Company is a party
or is subject, and (b) will not, to our knowledge, constitute a material breach
of or
<PAGE>
constitute a material default under, any Material Contract of the Company
listed in Schedule 4.13 of the Agreement.
The foregoing opinions are subject to the following:
(a) We expressly do not comment upon or render any opinion with respect
to any documents referenced in the Agreement, except for the Bill of Sale.
(b) The opinions hereinabove set forth are further subject to the
following additional qualifications:
(i) The effect of provisions releasing or indemnifying a party against
liability for its own wrongful or negligent acts, or where indemnification is
contrary to public policy.
(ii) The effect of Section 1698 of the California Civil Code which
provides in part that provisions of any instrument or agreement may only be
waived in writing will not be enforced to the extent that an oral agreement has
been executed modifying provisions of such instrument or agreement.
(iii) We express no opinion regarding the enforceability of the choice
of law provisions of Section 16.5 or of the arbitration provisions of Section
16.10 of the Agreement.
(iv) The unenforceability in certain circumstances of provisions
waiving broadly or vaguely stated rights, statutory or other rights representing
public policy, or unknown future rights and of provisions that rights or
remedies are not exclusive.
(v) The unenforceability under certain circumstances of provisions to
the effect that failure to exercise or delay in exercising any right or remedy
will not operate as a waiver of that right or remedy.
(vi) Limitations on the exercise of certain contractual rights and
remedies if the defaults are not material or the penalties bear no reasonable
relation to the damages suffered by the aggrieved party as a result of the
delinquencies or defaults.
We are members of the Bar of the State of California and, accordingly,
do not purport to be experts on or to be qualified to express any opinion herein
concerning, nor do we express any opinion herein concerning, any laws other than
the laws of the State of California and federal law.
<PAGE>
The foregoing opinions are being furnished to you solely for your
benefit and may not be relied upon by any other person without our prior written
consent.
Very truly yours,
<PAGE>
EXHIBIT C
July 31, 1997
Homer L. Aerts
J. Steven Dickmeyer
Don D. Reed
Terry L. Russ
Richard J. Silva
c/o Mercy Air Service, Inc.
8190 Mango Avenue
Fontana, CA 92334
Gentlemen:
We have acted as counsel to Air Methods Corporation, a Delaware corporation
("Air Methods"), in connection with its purchase of the stock of Mercy Air
Service, Inc., a California corporation ("Mercy"), pursuant to the Stock
Purchase Agreement, dated as of July 11, 1997 (the "Agreement"), by and among
Air Methods and Homer L. Aerts, J. Steven Dickmeyer, Don D. Reed, Terry L. Russ
and Richard J. Silva (collectively referred to as the "Sellers"). This opinion
is rendered pursuant to Section 10.8 of the Agreement and pursuant to Section
10.7 of the Asset Purchase agreement (as defined below). Unless otherwise
indicated, the capitalized terms used but not defined herein shall have the
meanings given to such terms in the Agreement.
In rendering the opinions set forth herein, we have examined the following
documents:
(a) The Agreement together with the exhibits and schedules thereto;
(b) The Asset Purchase Agreement between Helicopter Services, Inc., a
California corporation ("HSI"), and Air Methods, dated as of July 11,
1997 (the "Asset Purchase Agreement");
(c) The Bill of Sale and Assumption Agreement, dated the date hereof,
among HSI, Sellers and Air Methods (the "Bill of Sale");
<PAGE>
c/o Mercy Air Service, Inc.
July 31, 1997
Page 2
(d) The Employment Agreement, dated the date hereof, between Mary J. Davis
and Mercy (the "Davis Employment Agreement");
(e) The Employment Agreement between David L. Dolstein and Air Methods and
the Stock Option Agreement between David L. Dolstein and Air Methods
(collectively referred to as the "Dolstein Employment Agreement");
(f) The Consulting and Non-Competition Agreements, dated the date hereof,
between each individual Seller and Mercy (the "Consulting
Agreements");
(g) The Stock Option Agreements, dated the date hereof, between each
individual Seller and Air Methods (the "Stock Option Agreements");
(h) The Notes; and
(i) The Security Agreement.
The Agreement, the Asset Purchase Agreement, the Bill of Sale, the Stock Option
Agreements, the Dolstein Employment Agreement, the Notes and the Security
Agreement shall hereinafter be referred to collectively as the "Air Methods
Documents." The Davis Employment Agreement, the Consulting Agreements, and the
Security Agreement shall hereinafter be referred to collectively as the "Mercy
Documents."
In addition, we have examined originals or copies, certified or otherwise
identified to our satisfaction, of the certificate of incorporation and the
bylaws of Air Methods, such certificates of public officials, officers and
representatives of Air Methods and such other persons, and such other documents,
and we have made such examinations of law, as we have deemed necessary or
appropriate to enable us to render the opinions expressed below. In all such
examinations, we have assumed the genuineness of all signatures on original or
certified documents and the conformity to the original or certified documents of
all documents submitted to us as conformed or photostatic copies.
As to certain matters of fact relating to the opinions expressed herein, we
have relied upon a certificate of an officer of Air Methods, a copy of which is
attached as EXHIBIT A hereto, and a certificate of an officer of Mercy, a copy
of which is attached as EXHIBIT B hereto
<PAGE>
c/o Mercy Air Service, Inc.
July 31, 1997
Page 3
(the "Certificates"). We have assumed the accuracy of all information furnished
to us in the Certificates and have not independently verified the accuracy of
such information.
For purposes of these opinions, we have assumed that: (i) Mercy is and will
be, after giving effect to the transactions which are the subject of these
opinions, solvent; (ii) there is adequate consideration for the execution and
delivery of the Security Agreement; (iii) Mercy owns the Collateral (as defined
in the Security Agreement), and the value has been given within the meaning of
Section 9-203 of the Uniform Commercial Code ("UCC"); and (iv) Mercy main tains
its records concerning the Collateral and its chief executive office in the
State of California.
The following opinions are limited solely to applicable federal laws of the
United States of America, the laws of the State of Colorado, and the General
Corporation Law of the State of Delaware. While we are not licensed to practice
law in the State of Delaware, we have reviewed applicable provisions of the
General Corporation Law of the State of Delaware as we have deemed appropriate
in connection with the opinions expressed in paragraphs 1 and 2 below. Except as
described, we have neither examined nor do we express any opinion with respect
to Delaware law. With your consent, our opinions regarding the Documents are
given based on the application of the laws of the State of Colorado thereto even
though such Documents state that they are to be governed by the laws of
California. Specifically, with respect to the opinions in paragraphs 4 and 5, we
have assumed, with your consent and without investigation, that the California
UCC is identical to the Colorado UCC.
Based upon the foregoing and subject to the further assumptions,
exceptions, qualifications and limitations set forth herein, we are of the
opinion that:
1. Air Methods is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware and has the corporate
power and authority to own its property and carry on its business as now
conducted.
2. Air Methods has the corporate power and authority to execute, deliver
and perform its obligations under the Documents. The execution and delivery of
the Documents and the consummation by Air Methods of the transactions
contemplated thereby have been duly authorized by all necessary corporate action
on the part of Air Methods. Each of the Air Methods Documents has been duly
executed and delivered by Air Methods. Each of the Mercy Documents has been duly
executed and delivered by Mercy.
3. The Air Methods Documents constitute the legal, valid and binding
obligation of Air Methods, enforceable against it in accordance with their
terms. The Mercy
<PAGE>
c/o Mercy Air Service, Inc.
July 31, 1997
Page 4
Documents constitute the legal, valid and binding obligation of Mercy,
enforceable against it in accordance with their terms.
4. The provisions of the Security Agreement are sufficient to create a
security interest on behalf of Sellers which has attached to the right, title
and interest of Mercy in those items and types of Collateral in which a security
interest may be created pursuant to Article 9 of the UCC.
5. The UCC-1 Financing Statement relating to the Collateral and listing Air
Methods and Mercy as the debtors and the Collateral Agent (as defined in the
Security Agreement), as agent for the Sellers, as the secured party (the
"Financing Statement"), is in adequate and legally sufficient form for filing
with the Secretary of State of California and sufficiently describes the
Collateral; provided, however, that we render no opinion with respect to such
description to the extent the Financing Statement includes terms which are not
defined in the UCC. Assuming that the Financing Statement is duly filed with the
Secretary of the State of California in accordance with the provisions of
Section 9-403(1) of the UCC, a security interest will be perfected in those
items and types of Collateral in which a security interest can be perfected and
maintained solely by filing financing statements in the Secretary of State's
office in California.
These opinions do not address any event which may occur subsequent to the
date hereof to the extent such event affects the validity or perfection of the
Sellers' security interest in the Collateral. We call your attention to the
necessity of filing continuation statements from time to time under the
applicable provisions of the UCC and to the fact that additional filings may be
required, among other things, upon the change of location of Mercy as provided
in Section 9-103(e) of the UCC or the change of the name or corporate structure
of Mercy as provided in Section 9-402(7) thereof.
The opinions expressed herein as to the validity, binding effect and
enforceability of the Documents and as to perfection of the security interest in
the Collateral are subject to the following limitations: (a) general principles
of equity (regardless of whether such enforceability is considered in a
proceeding at law or in equity); (b) the effect of applicable bankruptcy,
reorganization, insolvency, moratorium and similar laws and court decisions
relating to or affecting creditors' rights generally; (c) we have made no
investigation and express no opinion as to the applicability of any fraudulent
conveyance or similar law; (d) the remedies of specific performance and
injunctive and other forms of equitable relief are subject to certain equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought; (e) the UCC requires that a secured party exercise its rights in
good faith and in a commercially reasonable manner and a court may not strictly
enforce certain covenants therein if it concludes
<PAGE>
c/o Mercy Air Service, Inc.
July 31, 1997
Page 5
that such enforcement would be unreasonable under the then existing
circumstances; (f) certain liabilities and duties imposed by Colorado law with
respect to foreclosure of a security interest, including the duty to exercise
reasonable care in the custody and preservation of collateral in a secured
party's possession or control and certain notice requirements, cannot be waived,
disclaimed or varied; (g) public policy considerations may limit the rights to
obtain indemnification or to limit a party's liability for its own negligence or
wrongful acts; (h) we express no opinion as to the enforceability of the choice
of law, severability, waiver or set off provisions contained in the Documents;
(i) to the extent that the Security Agreement purports to authorize the Secured
Parties to purchase any Collateral at a private sale thereof, such provision
would not be enforceable; (j) to the extent that the Security Agreement might be
deemed to provide that the Secured Parties may enter upon and take possession of
the Collateral by force amounting to a breach of the peace or public disturbance
without liability by reason of the manner of such entry and possession, such
provision would not be enforceable, and (k) we express no opinion as to the
enforceability of the provisions of the Security Agreement which purport to
authorize the Collateral Agent to sign and file documents in the name or on
behalf of Mercy without the signatures of the appropriate officers of Mercy.
To the extent the obligations of Air Methods may be dependent upon such
matters, we assume for purposes of these opinions that the Air Methods Documents
are within the capacity and power of, and have been duly authorized, executed
and delivered by the parties thereto other than Air Methods (and with respect to
the Security Agreement, other than Mercy) and constitute the legal, valid and
binding obligation of such parties enforceable against them in accordance with
their terms. To the extent the obligations of Mercy may be dependent upon such
matters, we assume for purposes of these opinions that the Mercy Documents are
within the capacity and power of, and have been duly authorized, executed and
delivered by the parties thereto other than Mercy (and with respect to the
Security Agreement, other than Air Methods) and constitute the legal, valid and
binding obligation of such parties enforceable against them in accordance with
their terms.
The opinions set forth herein are as of the date hereof and we disclaim any
under taking or obligation to advise you of any changes which may hereafter be
brought to our attention. These opinions are rendered only to the persons to
whom this letter is addressed and are solely for their benefit in connection
with the transactions contemplated by the Documents. These opinions may not be
relied upon by the addressees, or any of them, for any other purpose or relied
upon by any person other than such persons for any purpose without our prior
written consent.
Very truly yours,
DAVIS, GRAHAM & STUBBS LLP
<PAGE>
EXHIBIT D
BILL OF SALE AND ASSUMPTION AGREEMENT
This BILL OF SALE AND ASSUMPTION AGREEMENT (this "Bill of Sale") is
made as of the 31st day of July, by HELICOPTER SERVICES, INC., a California
corporation ("Seller"), Homer L. Aerts, J. Steven Dickmeyer, Don D. Reed, Terry
L. Russ and Richard J. Silva, the owners of the outstanding shares of Seller
(collectively, the "Shareholders"), and AIR METHODS CORPORATION, a Delaware
corporation ("Buyer").
R E C I T A L S:
WHEREAS, Seller, the Shareholders and Buyer are parties to that certain
Asset Purchase Agreement dated July 11, 1997 (the "Asset Purchase Agreement"),
pursuant to which Seller has agreed to sell, transfer and convey substantially
all of the Purchased Assets used in its Business to Buyer and Buyer has agreed
to assume the Assumed Obligations (as defined in Section 1 and Section 2.1,
respectively, of the Asset Purchase Agreement); and
WHEREAS, Seller and Buyer desire to evidence the consummation of the
sale of the Purchased Assets, and the assignment of the Assigned Contracts (as
defined in Section 1.2 of the Asset Purchase Agreement) and Buyer's assumption
of the Assumed Obligations.
NOW, THEREFORE, BE IT KNOWN THAT:
1. For the consideration set forth in Section 3 of the Asset Purchase
Agreement, receipt of which is hereby acknowledged by Seller, Seller does hereby
sell, transfer and assign to Buyer, free and clear of any and all Liens and
Encumbrances (as defined in Section 4.2(a) of the Asset Purchase Agreement), all
of Seller's right, title and interest in and to the Purchased Assets. The
Seller's representations and warranties regarding the Purchased Assets,
contained in Section 4 of the Asset Purchase Agreement, are incorporated herein
by this reference.
2. Seller hereby assigns and transfers to Buyer each of the Assigned
Contracts and, subject to the accuracy of the Seller's representations and
warranties pertaining to the Assumed Obligations and the Shareholders'
indemnification obligations under Section 13 of the Asset Purchase Agreement,
Buyer hereby agrees to assume and perform all of the Assumed Obligations,
including the obligations arising on and after the date hereof under the
Assigned Contracts. The Seller's representations and warranties with respect to
the Assumed Obligations contained in the Asset Purchase Agreement are
incorporated herein by this reference and made a part of this Bill of Sale.
3. Seller and Buyer hereby agree to execute and deliver such other
instruments and documents as the other party may from time to time hereafter
reasonably request to further evidence the sale, transfer and conveyance to
Buyer of the Purchased Assets and the assignment of Assigned Contracts, or the
assumption by Buyer of the Assumed Obligations, respectively, as provided for in
the Asset Purchase Agreement.
<PAGE>
4. Unless otherwise indicated herein, capitalized terms used in this
Bill of Sale shall have the meanings ascribed to them in the Asset Purchase
Agreement.
IN WITNESS WHEREOF, each of the parties hereto have caused this Bill of
Sale to be executed by its duly authorized representative as of the day and year
set forth above.
BUYER: SELLER:
AIR METHODS CORPORATION HELICOPTER SERVICES, INC.
By: By:
------------------------------- -------------------------------------
Title:---------------------------- Title:----------------------------------
SHAREHOLDERS:
------------------------------------------
HOMER L. AERTS
------------------------------------------
J. STEVEN DICKMEYER
------------------------------------------
DON D. REED
------------------------------------------
TERRY L. RUSS
------------------------------------------
RICHARD J. SILVA
-2-
<PAGE>
EXHIBIT E
Mailing Addresses of the Parties
Notices to Sellers shall be mailed to:
With a copy to:
Ben Frydman
Stradling Yocca Carlson & Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, California 92660
Notice to Buyer shall be mailed to:
Air Methods Corporation
7301 South Peoria
Englewood, Colorado 80112
Attn: Chairman of the Board
<PAGE>
SCHEDULE 1.1
Equipment, Furniture and Fixtures
See attached list.
<PAGE>
WESTERN HELICOPTER, INC.
TANGIBLE ASSETS
Depreciable Assets - See attached list
Additional assets $48,541 Above Ground 6000 gal Storage Tank
2,411 Engine & Clutch Vehicle #616
4,090 Main Rotor Static Balance Kit
795 Gauge #430
Other Small tools and equipment
<PAGE>
HELICOPTER SERVICES, INC., D/B/A WESTERN
<TABLE>
<CAPTION>
DESCRIPTION DATE ACQUIRED NET BOOK VALUE
<S> <C> <C>
Aircraft Accessories 08/12/94 $ 4,799
- ----------------------------------------------------------- ---------------------- ------------------------
TOTAL AIRCRAFT ACCESSORIES 4,799
72 Chevy Truck 08/12/94 660
20 ft. Trailer 08/12/94 165
'76 Fuel Truck 08/12/94 330
'75 Chevy Fuel Truck 08/12/94 660
'54 International Fuel Truck 08/12/94 10,027
Helicopter Trailer 08/12/94 165
1988 GMC - #609A 02/07/95 6,156
1967 Fuel Truck - #607 02/24/95 6,414
1967 Ford Fuel Truck 03/03/95 7,858
Unit #616 Piping 10/25/95 1,147
- ----------------------------------------------------------- ---------------------- ------------------------
TOTAL VEHICLES $33,582
Repeller Fuel Tanks 08/12/94 $14,994
Buildings/Improve 08/12/94 341,436
Skylight 10/13/94 3,260
Building Sign 10/12/94 396
Building Paint 10/03/94 10,988
Lunchroom Improve 10/19/94 703
Hangar Improvement 09/15/94 1,712
Sliding Door 03/17/95 2,960
Parts Room A/C 07/17/95 2,012
Hangar Insulation 09/29/95 3,677
Roof Insulation 09/08/95 11,378
- ----------------------------------------------------------- ---------------------- ------------------------
TOTAL BUILDING 393,516
Radios 2,399
- ----------------------------------------------------------- ---------------------- ------------------------
TOTAL RADIOS 2,399
-2-
<PAGE>
DESCRIPTION DATE ACQUIRED NET BOOK VALUE
IBM System 36 08/12/94 $4,296
Printers 08/12/94 53
Xerox Copier 08/12/94 271
Aviation Software 09/16/94 2,904
Mint Computer Upgrade 10/14/94 1,369
4-Presario 850 486DX 08/12/94 1,814
Calm Maintenance PRS 06/11/96 4,305
PC Starion 930 06/18/96 1,646
PC Starion 919 06/18/96 1,430
- ----------------------------------------------------------- ---------------------- ------------------------
TOTAL DATA PROCESSING $18,088
Shop Equipment 08/12/94 $26,391
Purse Kit 08/12/94 535
Sleeve Holder 08/12/94 320
Heli Tie Wrench 08/12/94 867
Mock Engine 08/12/94 301
Clutch BRG T/3 10/07/94 333
Turnback Asst 10/07/94 535
Turnback Asst 10/12/94 392
Barfield Test Kit 10/26/94 1,047
TS/V Wrench 12/24/95 831
Probe Photocell #2359 12/13/95 329
3 H.P. Indus Motor 10/10/95 444
Split PL S/V 10/16/95 493
Parabolic Flow ADPT 07/27/95 336
Biotek DPWII Pre Mtr 07/27/95 532
Bell 222 Bracket 06/05/95 321
Bell 412 Bracket 06/05/95 414
Retainer #3039 06/04/95 436
Back Las #3117 06/04/95 268
Wrench #3105 06/04/95 334
B/L and #3106 06/04/95 444
Adapter #3003 06/04/95 632
Tool Set #3125-113 06/04/95 783
BRG Supp #3125 06/04/95 267
Plate #3309-101 05/24/95 281
Tool Set #3125-109 05/24/95 620
Wrench #3011 05/24/95 354
B/L Tool #3206-101 05/24/95 559
-3-
<PAGE>
DESCRIPTION DATE ACQUIRED NET BOOK VALUE
Restrain #3258-101 05/24/95 614
BRG REN #3366-101 05/24/95 314
Storage Cabinet 05/25/95 356
101 Tool #3008 04/25/95 528
Tool - #3012 04/25/95 396
Tool - #3-24 04/25/95 517
Tool - #3026 04/25/95 656
Tool - #3038-101 04/25/95 1,580
Tool #5202-101 04/25/95 396
Tool #5203 - 101 04/25/95 996
Tool #5252-101 04/25/95 960
Tool #1103033 04/10/95 475
Tool Set 412-006 04/10/95 7,259
Backlash Tool #412-24 04/10/95 3,405
Clamp Assy 412-240 04/10/95 2,111
Thrust Plate #412-24 04/10/95 367
Filler Hose Crt Refl 01/08/96 482
29313100 RADS - AT 04/08/96 1,693
29328201 DAV 04/08/96 1,693
29314102 CADV 04/08/96 1,693
Hydraulic Jack 12/17/96 1,134
Hydraulic Jack 12/17/96 1,134
Hydraulic Jack 6 Ton 12/19/96 1,052
- ----------------------------------------------------------- ---------------------- ------------------------
TOTAL SHOP EQUIPMENT $ 69,210
Office Furniture 08/12/96 $ 3,359
- ----------------------------------------------------------- ---------------------- ------------------------
TOTAL OFFICE FURNITURE $ 3,359
Spare Meter 03/04/96 $ 937
- ----------------------------------------------------------- ---------------------- ------------------------
TOTAL SPARE METER $ 937
NET TOTALS: $525,890
</TABLE>
-4-
<PAGE>
SCHEDULE 1.2
Assigned Contracts
1. Service Center Agreement with Schweizer Aircraft Corp., dated
April 14, 1997.
2. Domestic Service Center Agreement with McDonnell Douglas Helicopter
Systems, dated March 20, 1995.
3. Data Base Services Agreement with Inventory Locator Service, Inc., dated
February 17, 1995.
4. Service Rental Agreement with Prudential Overall Supply, dated
September 26, 1996.
5. Advertising Contract with Pacific Bell, dated November 21, 1996.
6. Fehlman Assignment of Prime Lease with Willis L. Fehlman, dated April 17,
1995.
7. Lease Agreement with the County of San Bernardino, dated March 10, 1997.
8. Postage Meter Lease with Pitney Bowes.
9. Mail Machine Lease with Pitney Bowes.
10. Oral lease agreement with California Tool & Welding for rental of gas
tanks.
11. Chevron Airport Dealer Supply Contract with Chevron U.S.A. Products
Company, dated October 22, 1994.
12. Customer Service Facility Agreement with Bell Helicopter Textron, Inc.,
dated January 1, 1994.
13. Lease Agreement with the City of Rialto, dated April 7, 1970 (of which the
lessee's interest has been assigned to the Company).
14. Temporary Engine Lease Agreement with UNC Airwork Corporation, dated
April 18, 1997.
<PAGE>
SCHEDULE 1.3
Intangible Assets
The Company's trade name, "Western Helicopter Services" is not registered with
the United States Patent and Trademark Office.
See attached list.
<PAGE>
Intangible Personal Property
Accounting Manager's PC S/N KA545FHBME
MS Windows 95 17395-OEM-000 1956-50688
Works for Windows Pre-loaded
MS Encarta Pre-loaded
MS Bookshelf Pre-loaded
MS Golf Pre-loaded
MS Home CD Sampler Pre-loaded
MS Explorapedia Pre-loaded
Quicken Special Edition Pre-loaded
Fax Talk Pre-loaded
Prodigy Pre-loaded
AOL Pre-loaded
Compuserve Pre-loaded
MS Publisher Pre-loaded
PrintMaster Gold Pre-loaded
BosaNova System 36 Emulation B601861
** MS Office 95 Standard
** Calendar Works
Director of Maintenance's PC
MS Windows 95 16395-OEM-001596-43090
Works for Windows Pre-loaded
MS Encarta Pre-loaded
MS Bookshelf Pre-loaded
MS Golf Pre-loaded
MS Home CD Sampler Pre-loaded
MS Explorapedia Pre-loaded
Quicken Special Edition Pre-loaded
Bosa Nova - System 36 Emulation B044961
Fax Talk (Telecommander 2500XL)
Prodigy Pre-loaded
AOL Pre-loaded
Compuserve Pre-loaded
** ImaginNation Network
C.A.L.M. Contract
Avantext A.D.s Subscription
Form Tool Gold T421764 (PERSONAL)
** MS Office 95 Standard
PC Anywhere 32.7.5 See License Agree
MMIR See License Agree
Norton Anti virus See License Agree
(PERSONAL)
** Address Book
** Calendar Works
Print Shop Deluxe Pre-loaded
Bell CO-OP Supplier Provided
PC Mail Box Bell Supplier Provided
** RADS Com
** Performance Now
** Message Flash
Parts Manager PC S/N A420HHE35130
MS Windows 3.1 DOS 6.2
MS Word 2.0 Pre-loaded
MS Money 2.0 Pre-loaded
MS Publisher Pre-loaded
** QuickLink II Fax
** WinFax Pro 3
Airnet (Aviail Supplier Provided)
** WordPerfect 5.1
** Excel
ILS Contract dated 02/17/95 BosaNova System 36 Emulation B044959 BosaNova
PC File Transfer
Receptionist's PC S/N A420HHE30320
MS Windows 3.1 DOS 6.2 512971966
Tabworks Pre-loaded
AOL Pre-loaded
MS Money 2.0 Pre-loaded
WINFAX Lite Pre-loaded
MS Works 3.0 Pre-loaded
MS Publisher 2.0 Pre-loaded
Compuserve Pre-loaded
** Message Glash ** MS Office Pro 4.3 ** Form Tool Gold ** WINFAX Pro 3.0
Chief Pilot's PC S/N A420HHE35173
Windows 3.1 DOS 6.2 509941088
Tabworks Pre-loaded
AOL Pre-loaded
MS Money 2.0 Pre-loaded
WINFAX Lite Pre-loaded
MS Works 3.0 Pre-loaded
MS Publisher 2.0 Pre-loaded
Compuserve Pre-loaded
** Delorme Street Atlas
** Form Tool Gold
MS Word 2.0 Pre-loaded
** GTE Duats
** Excel 5.0
Flight Operations PC S/N A420HHE30335
Windows 3.1 DOS 6.2 509904324
Tabworks Pre-loaded
AOL Pre-loaded
MS Money 2.0 Pre-loaded
WINFAX Lite Pre-loaded
MS Works 3.0 Pre-loaded
MS Publisher Pre-loaded
Compuserve Pre-loaded
** Delorme Street Atlas
** Formtool Gold
** MS Office
** Quatro Pro 6.0
<PAGE>
WESTERN HELICOPTER, INC.
Intangible Personal Property
President's PC LapTop
**Tabworks
**MS Powerpoint
**MS Excel
**MS Word
**MS Works
**Descriptions Now
**Policies Now
**Performance Now
**Formtool - DOS
**Calendar Works
**Data Plus
**PC Anywhere
**Procomm - DOS
**Snap Page
**Address Book
**Print Shop Deluxe
**Way Point Manager
**PC Mail
IBM System 36
Aviation Systems and Programs (ASAP) See Contract
IBM is no longer pursuing the copyright of their System 36
**Cannot locate license information at this time
<PAGE>
SCHEDULE 1.5
Excluded Claims
An unrecorded claim for overpaid sales tax was filed with the California State
Board of Equalization on April 17, 1997 in the amount of $29,999.
<PAGE>
SCHEDULE 1.7
Inventory
Helicopter engine S/N LE47002AE, Model LTS 101-750-C-1 (this engine is not
reflected in the financial statements of the Company as of December 31, 1996
because it was categorized as an "item-in-transit" on such date).
<PAGE>
SCHEDULE 1.9
Excluded Assets
See attached.
<PAGE>
Don Reed's personal items in his office at 8190 Mango Ave., Fontana, CA (Mercy
Air's administrative office)
1. photographs
2. personal paper
3. calculator
4. clock radio
Terry Russ's personal items in his office at 8190 Mango Ave., Fontana, CA (Mercy
Air's administrative office)
1. sofa
2. desk and contents
3. credenza and contents
4. 4 drawer file cabinet and its contents
5. 2 drawer file cabinet and its contents
6. calculator
7. chair
8. radio
9. 13 file boxes and contents
10. power strip
11. pictures
12. clock
Steve Dickmeyer's personal items in his office at 8190 Mango Ave., Fontana, CA
(Mercy Air's administrative office)
1. pictures and plaques
2. folding computer table
3. Borland's Quattro Pro program in the Gateway Colorbook that Steve uses
4. various binders and paperwork
5. picture of two (2) Bell 222 helicopters flying over Hawaii, and it is
located in the billing office
1
<PAGE>
DICK SILVA'S PERSONAL INVENTORY
AT
WESTERN HELICOPTERS AND MERCY AIR
1. Pictures and Plaque
2. Tools and Tool Box
3. 35mm Camera, Case & Lens
4. Miscellaneous Files
5. Miscellaneous Office Decorations, Small Equipment, Calculator, Spell
Checker, etc.
2
<PAGE>
SCHEDULE 2.1
Scheduled Liabilities
None.
<PAGE>
SCHEDULE 2.2
Excluded Payables
None.
<PAGE>
SCHEDULE 4.2
Exceptions to Title
None.
<PAGE>
SCHEDULE 4.5
Conflicts
1. Consent will be required from Chevron U.S.A. Products Company pursuant
to Section 9 of that certain Chevron Airport Dealer Supply Contract,
dated October 22, 1994.
2. Consent will be required from Bell Helicopter Textron, Inc. pursuant to
Section 6 of that certain Customer Service Facility Agreement, dated
January 1, 1994.
3. Pursuant to Section 8 of the Lease Agreement with the City of Rialto,
dated April 7, 1970 (of which the lessee's interest has been assigned
to the Company), Air Methods must expressly assume the Company's
obligations thereunder, and the Company must remain primarily liable on
the lease.
Also, consent will be required from the Rialto City Council for
extension of the Lease (see Item 11 of SCHEDULE 4.13 and footnote
thereto).
4. Consent will be required from Schweizer Aircraft Corp. pursuant to
Section 6 of that certain Service Center Agreement, dated April 14,
1997.
5. Consent will be required from McDonnell Douglas Helicopter Systems
pursuant to Article 16 of that certain Domestic Service Center
Agreement, dated March 20, 1995.
6. Consent will be required from the Federal Aviation Administration for
the transfer of the Company's Repair Station to Air Methods.
7. Consent will be required from Aviation Systems and Programs (ASAP) for
the transfer of the Software License and Support Agreement between ASAP
and the Company dated September 14, 1994.
<PAGE>
SCHEDULE 4.6
Financial Statements
None.
<PAGE>
SCHEDULE 4.7
Undisclosed Liabilities
None.
<PAGE>
SCHEDULE 4.8
Absence of Certain Changes
None.
<PAGE>
SCHEDULE 4.9
Condition of Tangible Assets
None.
<PAGE>
SCHEDULE 4.10
Intangible Property Rights
The Company is unable to verify whether licenses are in place for certain of its
intangible property, as indicated on SCHEDULE 1.3 and the attachment thereto.
<PAGE>
SCHEDULE 4.11
Real Property
The Company owns several buildings at 1640, 1650 and 1670 Miro Way, Rialto,
California. The Company uses some of the buildings for its administrative and
maintenance operations. The space not being used by the Company is being leased
out to various tenants.
<PAGE>
SCHEDULE 4.13
Material Seller Contracts
1. Fehlman Assignment of Prime Lease dated April 17, 1995.
2. Chevron Airport Dealer Supply Contract, dated October 22, 1994.
3. Customer Service Facility Agreement with Bell Helicopter Textron, Inc,
dated January 1, 1994.
4. Lease Agreement with the County of San Bernardino, dated March 10,
1997.
5. Oral lease agreement with California Tool & Welding for lease of gas
tanks.
6. Service Center Agreement with Schweizer Aircraft Corp., dated
April 14, 1997.
7. Data Base Services Agreement with Inventory Locator Service, Inc.,
dated February 17, 1995.
8. Service Rental Agreement with Prudential Overall Supply, dated
September 26, 1996.
9. Domestic Service Center Agreement with McDonnell Douglas Helicopter
Systems, dated March 20, 1995.
10. Advertising Contract with Pacific Bell, dated November 21, 1996.
11. Lease Agreement with the City of Rialto, dated April 7, 1970 (of which
the lessee's interest has been assigned to the Company)./1/
See attached list of Government licenses, franchises and permits.
- --------
1 The Company has notified the Airport Manager of the City of Rialto of
its intent to exercise the third 5-yr. renewal option under the Lease
Agreement. Extension of the Lease Agreement will require approval of
the Rialto City Council. The Airport Manager will submit the request to
the City Council at its next scheduled meeting, in approximately two
weeks.
<PAGE>
<TABLE>
<CAPTION>
Government licenses, franchises and permits Exp. Date
<S> <C> <C> <C>
Federal Government
IRS EIN #33.0624247
FAA Repair Station Certificate #W6HR554Y
State of California
Environmental Protection Agency ID #CAL 000125594 Franchise Tax Board EIN
#407-7153-7 SCAQMD (South Coast Air Quality ManagemenSet A tanks & nozzles
ID #102595 District)
Spray Booth ID #D 85117 07-16-97
Board of Equalization Sales Tax #SREH 99-546780
Board of Equalization Fuel Tax #MJHQ 33-000563
Board of Equalization Underground Tanks #TK HQ 44-036394
Dept. of Motor Vehicles Camer #CA 7104 License #115024 04-30-98
Cal OSHA Air Pressure Tank #A10192SF 07-06-97
County of San Bernardino
Dept. of Weights & Measures Fuel Meter Certifications #04389 07-01-97
Fire Department Underground Storage Tank #8602260445 05-31-01
8602250094 05-31-98
Haz Mat Handler 8701070418 05-31-98
Haz Waste Generator 8611250315 05-31-98
City of Rialto
Business License 113119 12-31-97
Fire Department Haz Mat #UFC ART 24 A.B.Q. 07-06-97
</TABLE>
<PAGE>
SCHEDULE 4.14
Compliance with Laws; Licenses and Permits
None.
<PAGE>
SCHEDULE 4.15
Litigation
The Company is a defendant in RIDGWAY V. GILLIES, ET. AL., a personal injury and
property damage case filed June 20, 1996 in San Bernardino Superior Court, Case
# SCV 30436.
<PAGE>
SCHEDULE 4.16
Environmental Non-Compliance
(i) None.
(ii) The State of California has notified the Company that new underground
fuel tanks will be required by December 31, 1998.
<PAGE>
SCHEDULE 4.17
Taxes and Tax Returns
An unrecorded claim for overpaid sales tax was filed with the California State
Board of Equalization on April 17, 1997 in the amount of $29,999.
<PAGE>
SCHEDULE 4.18
Employment and ERISA Matters
(a) None.
(b) None.
(c) The Company's employees are covered under Mercy Air Service, Inc.'s
employment plans.
(d) None.
<PAGE>
SCHEDULE 4.19
Insurance Policies
The Company is a named insured under the appropriate insurance policies of Mercy
Air Service, Inc.
<PAGE>
SCHEDULE 6.2
Permitted Dividends.
None.
<PAGE>
SCHEDULE 11.1
Closing Deliveries of Seller
1. Bill of Sale and Assumption Agreement
2. Certificate of Good Standing
3. Legal Opinion
4. Third-Party Consents
5. "Bring-Down" Certificate required by Section 9.8 of the Asset Purchase
Agreement
<PAGE>
SCHEDULE 11.2
Closing Deliveries of Buyer
1. Purchase Price
2. Bill of Sale and Assumption Agreement
3. Good Standing Certificate (Delaware)
4. Good Standing Certificate (California)
5. Legal Opinion
6. "Bring-Down" Certificate required by Section 10.6 of the Asset
Purchase Agreement
<PAGE>
SCHEDULE 13.2
Proportionate Share of Each Shareholder
SHAREHOLDER PROPORTIONATE SHARE
Homer L. Aerts 20%
J. Steven Dickmeyer 20%
Don D. Reed 20%
Terry L. Russ 20%
Richard J. Silva 20%
FINOVA CAPITAL CORPORATION
115 WEST CENTURY ROAD
PARAMUS, NEW JERSEY 07652
July 29, 1997
Air Methods Corporation
7301 South Peoria Street
Englewood, Colorado 80112
Re: Air Methods Corporation/FINOVA Capital Corporation
Dear Sirs:
Air Methods Corporation (the "Borrower") has requested that FINOVA Capital
Corporation ("Lender") make a loan to the Borrower in the amount of
$4,464,611.02 (the "Loan") for the purposes of financing a portion of the
purchase price in connection with the acquisition of 100% of the outstanding
capital stock of Mercy Air Service, Inc. ("MASI") and substantially all of the
assets of Helicopter Service, Inc.
The Lender will not advance the proceeds of the Loan to the Borrower unless
the conditions precedent set forth in Section 5 of the Secured Loan Agreement
dated as of July 31, 1997 between MASI and the Lender have been (or
simultaneously with the funding contemplated hereunder will be) either fulfilled
by MASI and the Borrower or explicitly waived by the Lender (the "Conditions
Precedent").
The Borrower shall deliver a written request to the Lender (the "Drawdown
Notice") at least two (2) business days prior to the date on which the Borrower
desires the Lender to advance the proceeds of the Loan to Borrower. The request
shall contain:
(a) the date on which the Loan is to be advanced to the Borrower by the
Lender (the "Closing Date") (which day shall be a day on which banks
and financial institutions in New Jersey and New York are open for
business);
(b) the amount of the Loan; and
<PAGE>
July 29, 1997
Page 2
(c) the accounts to which the proceeds of the Loan are to be made
available.
If the Borrower delivers the Drawdown Notice to the Lender and the Lender
does not advance the proceeds of the Loan to the Borrower due to the failure of
the Borrower to satisfy the Conditions Precedent, the Borrower shall indemnify
and hold harmless the Lender against any and all costs, losses, expenses,
damages, penalties or fees incurred by the Lender as a result of the Loan not
being advanced to the Borrower.
Please execute this letter if you are in agreement with the terms set forth
herein.
FINOVA CAPITAL CORPORATION
By: /s/ Pamela Marchant
--------------------------------
Name: Pamela Marchant
Title: Vice President
AGREED AND ACCEPTED:
AIR METHODS CORPORATION
By: /s/ Aaron D. Todd
---------------------------------
Name: Aaron D. Todd
Title: CFO
SECURED PROMISSORY NOTE
U.S. $4,464,611.02 Phoenix, Arizona
No. 1 July 31, 1997
FOR VALUE RECEIVED, the undersigned (hereinafter the "Maker") promises to
pay to the order of FINOVA CAPITAL CORPORATION (the "Lender"), or its registered
assigns, on demand the principal sum of FOUR MILLION FOUR HUNDRED SIXTY FOUR
THOUSAND SIX HUNDRED ELEVEN and 02/100 DOLLARS ($4,464,611.02) (the "Loan"),
together with interest thereon calculated at the Interest Rate (defined below).
Interest shall accrue on the Loan from the date hereof until payment in full of
the Loan at a rate per annum equal to 9.52 % (the "Interest Rate").
The Maker shall repay the Loan together with accrued interest calculated at
the Interest Rate via wire transfer of immediately available funds, delivered
prior to 12:00 noon, New York time on the date due, to:
Citibank
New York, New York
ABA No.: 021000089
In Favor of: FINOVA Capital Corporation
Account No.: 4072-7239
Reference: CEF/ Air Methods Corporation
Attention: P. Marchant
or to such other account as the holder hereof may designate by written notice
delivered to the Maker by the Lender.
Notwithstanding any provisions to the contrary herein contained, the Lender
shall not collect a rate of interest on any obligation owing by the Maker to the
Lender in excess of the maximum rate of interest permitted by applicable law.
The Maker understands and believes that the obligations evidenced by this Note
comply with all applicable usury laws; however, if any interest or other charges
in connection with the obligations evidenced by this Note are ever determined to
exceed the maximum amount permitted by law, then the Maker agrees that (a) the
amount of interest or charges payable pursuant to this Note shall be reduced to
the maximum amount permitted by law and (b) any excess
<PAGE>
amount previously collected from the Maker in connection with this Note that
exceeded the maximum amount permitted by law, shall be credited against the
principal balance of this Note then outstanding. If the outstanding principal
balance hereunder has been paid in full, the excess amount shall be refunded to
the Maker.
The contracted for rate of interest with respect to the obligations
evidenced by this Note shall include, without limitation, the following:
(i) the Interest Rate calculated and applied to the principal balance of
this Note in accordance with the provisions hereof; and
(ii) all fees, charges, goods, things in action or any sum or things of
value ("Additional Sums") paid or payable by the Maker in accordance with the
provisions of this Note or the Stock Pledge Agreement dated as of the date
hereof (the "Stock Pledge Agreement") between the Maker and the Lender,
howsoever described. If any such Additional Sums may, under applicable law, be
deemed to be interest with respect to the lending transaction which is the
subject of this Note, then, for the purpose of any applicable law that may limit
the maximum amount of interest to be charged with respect to the lending
transaction which is the subject of this Note, such Additional Sums shall be
payable by Maker as, and shall be deemed to be, Additional Interest, and, for
such purposes only, the agreed upon and "contracted for rate of interest" of
this transaction shall be deemed to be increased by the rate of interest
resulting from the Additional Sums.
The books and records of the Lender reflecting all amounts payable from
time to time pursuant to this Note shall be conclusive and binding upon the
Maker except in the case of manifest error in calculation. The Lender shall, at
the request of Maker, deliver to Maker a statement reflecting how the Lender
calculated the amount owed under this Note.
The Maker hereby waives all defenses arising from the Lender's failure to
diligently enforce its rights hereunder, presentment, demand, protest and notice
of any kind.
THE MAKER HEREBY WAIVES TRIAL BY JURY IN CONNECTION WITH ANY ACTION ARISING
DIRECTLY OR INDIRECTLY OUT OF THIS NOTE AND THE ENFORCEMENT THEREOF.
- 2 -
<PAGE>
The Lender may release any collateral, or grant any other indulgences
whatsoever, without affecting or diminishing the Lender's right of recourse
against the Maker, as provided herein and in the Loan Agreement and in the other
Loan Documents, which right is hereby expressly reserved. The failure to assert
any right by the Lender shall not be deemed a waiver thereof.
This Note may not be changed or modified orally, nor may any of the
provisions hereof be waived orally, and any such change, modification or waiver
shall be effective only if set forth in a writing duly executed by the party to
be charged therewith.
In the event that this Note is placed in the hands of an attorney for
collection, for protection, preservation or enforcement of the rights of the
holder, for suit or to compromise or to take any other action with regard
thereto or concerning any collateral provided pursuant to the Stock Pledge
Agreement or, the Maker agrees to pay the reasonable fees and disbursements of
said attorney.
THIS NOTE SHALL BE DEEMED TO HAVE BEEN MADE IN AND SHALL BE GOVERNED AND
INTERPRETED BY THE LAWS OF THE STATE OF ARIZONA AND THE RIGHTS AND REMEDIES OF
THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS, EXCEPT
TO THE EXTENT THAT THE LAW OF SOME OTHER JURISDICTION MAY BE MANDATORILY
APPLICABLE TO PROCEEDINGS TAKEN FOR THE ENFORCEMENT OF THE RIGHTS HEREUNDER OF
THE REGISTERED HOLDER HEREOF; PROVIDED, HOWEVER, THAT ANY REMEDIES HEREIN
PROVIDED WHICH SHALL BE VALID UNDER THE LAWS OF THE JURISDICTION WHERE
PROCEEDINGS FOR THE ENFORCEMENT THEREOF SHALL BE TAKEN SHALL NOT BE AFFECTED BY
THE INVALIDITY OF SUCH RIGHTS AND REMEDIES UNDER THE LAWS OF THE STATE OF
ARIZONA.
The Maker hereby agrees that all actions or proceedings initiated by the
Maker and arising directly or indirectly out of this Note shall be litigated
exclusively in the Superior Court of Arizona, Maricopa County, or the United
States District Court for the District of Arizona (the "Arizona Courts") and
that all actions initiated by the Lender and arising directly or indirectly out
of this Note may be litigated in any jurisdiction, at the Lender's discretion.
The Maker and the Lender hereby: (a) expressly submit and consent in advance to
the jurisdiction and venue of the Arizona Courts in any action or proceeding
commenced by the Maker or the Lender in any of the Arizona Courts, and (b)
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<PAGE>
agree that jurisdiction and venue is proper in such courts. The Maker waives any
claim that Phoenix, Arizona or the District of Arizona is an inconvenient forum
or an improper forum based on lack of venue. Should either of the Maker or the
Lender, as the case may be, after being properly served, fail to appear or
answer any summons, complaint, process or paper properly served within 30 days
after service thereof, the Maker and the Lender acknowledge that as a result
thereof, an order and/or judgment may be entered by the Lender or the Maker
against the other as demanded or pleaded for in such summons, complaint, process
or papers. The choice of forum set forth herein shall not be deemed to preclude
the enforcement by the Lender or the Maker, as the case may be, of any judgment
in any other appropriate jurisdiction.
If any provision of this Note shall be held invalid or inapplicable to any
circumstance or in any jurisdiction, such invalidity or inapplicability shall
not affect any other provision hereof which can be given effect without regard
to the invalid provision, nor to the same provision to the extent valid or
enforceable in any other applicable jurisdiction, nor shall any such
inapplicability to any circumstance affect the applicability of such terms to
any other or different or subsequent circumstances, all of such terms,
conditions or provisions are deemed severable.
This Note will be binding upon the respective successors and permitted
assigns of the Maker.
[signatures on following page]
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<PAGE>
MAKER:
AIR METHODS CORPORATION
By: /s/ Aaron D. Todd
Name: Aaron D. Todd
------------------------------
Title: CFO
WITNESS:
/s/ Kay D. Kelly
- -----------------------------
- 5 -
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT, made as of July 31, 1997, between AIR METHODS
CORPORATION, a corporation organized and existing under the laws of the State of
Delaware having its chief executive office and principal place of business at
7301 South Peoria Street, Englewood, Colorado 80112 ("Pledgor") and FINOVA
CAPITAL CORPORATION, a corporation organized and existing under the laws of the
State of California, having an office at 115 West Century Road, Paramus, New
Jersey 07652 ("Lender").
W I T N E S S E T H:
WHEREAS, simultaneously herewith: (a) the Lender is making a loan in the
principal amount of $4,464,611.02 (the "Loan") to the Pledgor for the purpose of
financing a portion of the purchase price of (i) the acquisition of the
outstanding capital stock of Mercy Air Service, Inc., a corporation organized
and existing under the laws of the State of California ("MASI") and (ii)
substantially all of the assets of Helicopter Services, Inc., a corporation
organized and existing under the laws of the State of California; and (b) the
Pledgor is issuing a Secured Promissory Note dated the date hereof to the Lender
in the principal amount of the Loan;
WHEREAS, Lender is unwilling to make the Loan to the Pledgor unless unless
the Pledgor pledges and grants to Lender a security interest in all of the
outstanding shares of capital stock of MASI (the "Pledged Stock") and all
"Rights" related thereto. As used herein, the term "Rights" shall mean and
include all dividends, cash, instruments and other property from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any and all of the Pledged Stock and the books and records of MASI evidencing
record ownership and registration of the Pledged Stock ("Books and Records").
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound, it is agreed as follows:
1. PLEDGE. To secure the full, prompt, complete and faithful payment by
Pledgor of any and all sums that may become due and owing from Pledgor under the
Note (the "Liabilities"), Pledgor hereby pledges, transfer and assigns and
delivers to Lender,
<PAGE>
and grants to Lender a first priority security interest in: (a) the Pledged
Stock; (b) all Rights; (c) all additional shares of stock of MASI from time to
time acquired by the Pledgor in any manner and (d) all proceeds of the foregoing
(items (a), (b), (c) and (d) being hereinafter collectively referred to as the
"Pledged Collateral").
2. DELIVERY OF PLEDGED STOCK. Upon the written request of the Lender,
Pledgor shall deliver to Lender the certificates representing the Pledged Stock
together with a stock power or powers with respect thereto endorsed in blank.
3. VOTING RIGHTS; DIVIDENDS; ETC.
(a) At all times during which the Loan is outstanding, all dividends and
interest payments paid in respect of the Pledged Stock, including, without
limitation:
(i) dividends and interest paid or payable, other than in cash, in
respect of, and instruments and other property received, receivable or
otherwise distributed in respect of, or in exchange for, any Pledged Stock;
(ii) dividends and other distributions paid or payable in cash in
respect of any Pledged Stock in connection with a partial or total
liquidation or dissolution or in connection with a reduction of capital,
capital surplus or paid-in surplus; and
(iii) cash paid, payable or otherwise distributed in respect of
principal of, or in redemption of, or in exchange for, any Pledged Stock;
shall forthwith be delivered to Lender to hold as Pledged Stock and shall, if
received by the Pledgor, be received solely in trust for the benefit of Lender,
be segregated from the other property or funds of the Pledgor, and forthwith be
delivered or paid over to Lender as part of the Pledged Stock, in the same form
as so received (with any necessary endorsement); provided, however, that
notwithstanding the foregoing, the Pledgor shall be entitled to receive cash
dividends from MASI in an aggregate amount which does not exceed the amount of
the Loan (the "Permitted Dividends"), and such Permitted Dividends shall not be
deemed to be part of the Pledged Stock and Lender shall not have a security
interest therein.
(b) Notwithstanding the pledge and security interest set forth in Section
1 above, the Pledgor shall be entitled to exercise any and all voting and other
consensual rights pertaining to the Pledged Stock, or any part thereof, for any
purpose not inconsistent with the terms of this Agreement or the Note; PROVIDED,
HOWEVER, (A) that the
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<PAGE>
Pledgor shall not exercise any voting or consensual rights with respect to the
commencement of a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to MASI or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
consent to the entry of an order for relief in an involuntary case under any
such law or seeking the appointment of a trustee, receiver, liquidator,
sequestrator, assignee, custodian or other similar official of MASI or any
substantial part of its property without obtaining the prior written consent of
the Lender; (B) that the Pledgor shall not amend or approve any amendment to or
modification, alteration or repeal of the Articles of Incorporation of MASI
without obtaining the prior written consent of the Lender which consent shall
not be unreasonably withheld; (C) the Pledgor shall not approve an increase in
the authorized number of shares of stock or stated capital of MASI or the
issuance of any additional shares of stock or the granting of any options or
warrants of MASI without the prior written consent of Lender, which consent
shall not be unreasonably withheld, provided, that Lender is granted a first
priority security interest in all such shares; and (D) that the Pledgor shall
not exercise or refrain from exercising any other such voting and/or consensual
right if, in Lender's judgment, such action would have a material adverse effect
on the value of the Pledged Stock, or any part thereof, or impair the position
of the Lender in respect of the Pledged Collateral, and the Pledgor shall give
Lender at least five (5) days' written notice of the manner in which it intends
to exercise, or the reasons for refraining from exercising, any such right; and
(c) If the Pledgor fails to pay any amounts under the Note when due, all
rights of the Pledgor to exercise the voting and other consensual rights which
it would otherwise be entitled to exercise pursuant to Section 3(b) shall cease
and all such rights shall thereupon become vested in Lender, who shall thereupon
have the sole right to exercise such voting and other consensual rights.
(d) Pledgor covenants that, as the sole stockholder of MASI, Pledgor will
not take any action to allow any additional shares of common stock, preferred
stock or any other equity securities, or options or other rights to acquire any
thereof, of MASI to be issued.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS. The Pledgor represents,
warrants and covenants as follows:
(a) Upon completion of the acquisition of the Pledged Stock, which shall
simultaneously occur with the execution of this Agreement, the Pledgor shall own
100% of the outstanding capital stock of MASI, free and clear of any lien,
security
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<PAGE>
interest, option or other charge, encumbrance, or right of any party except for
the pledge and security interest created by this Agreement.
(b) The assignment and pledge of the Pledged Collateral pursuant to this
Agreement creates a valid security interest in the Pledged Collateral, securing
the payment of the Liabilities.
(c) No authorization, approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required either
(i) for the assignment and pledge by the Pledgor of the Pledged Collateral
pursuant to this Agreement, or (ii) for the exercise by Lender of the voting or
other rights provided for in this Agreement or the remedies in respect of the
Pledged Collateral pursuant to this Agreement (except as may be required in
connection with such disposition by laws affecting the offering and sale of
securities generally).
(d) The Pledged Stock constitutes 100% of the issued and outstanding shares
of the capital stock of MASI;
(e) The Books and Records constitute all the books and records of MASI
which evidence record ownership and registration of the Pledged Stock.
(f) Except with the prior written consent of Lender, Pledgor shall cause
MASI:
(i) to maintain, or cause to be maintained, in full force and effect,
all of its franchises, licenses and approvals necessary to operate its
businesses and not to consolidate with or merge into any other entity or
permit any other entity to consolidate with or merge into MASI or to engage
in any transaction, other than in the ordinary and normal course of its
business;
(ii) not to sell, lease, abandon or otherwise dispose of all or
substantially all of its assets;
(iii) other than Permitted Dividends, not to make, declare or pay any
dividend or make any distribution with respect to its capital stock, or
directly or indirectly redeem, purchase or otherwise to acquire any of its
capital stock, or issue, sell or in any way dispose of any shares of its
capital stock or any rights therein or thereto, including options and
warrants, or to
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<PAGE>
make any transfer with respect thereto;
(iv) not to amend or modify its Articles of Incorporation;
(g) The Pledgor has not taken any actions that might prevent the Lender
from enforcing any of the terms and conditions of this Agreement or that would
limit the Lender in such enforcement.
(h) The Pledgor is a corporation duly organized and validly existing in
good standing under the laws of Delaware and has the corporate power and
authority to own or hold under lease its properties and to enter into and
perform its obligations under this Agreement. The Pledgor is duly qualified to
do business as a foreign corporation in each jurisdiction in which failure to so
qualify would have a material adverse effect on its financial condition or on
its ability to perform its obligations under this Agreement.
(i) The execution and delivery by the Pledgor of this Agreement:
(i) has been duly authorized by all necessary corporate action and
does not require any shareholder approval or the approval or consent of or
notice to any trustee or holders of any indebtedness or obligations of the
Pledgor, except those actions, approvals or consents that have already been
obtained;
(ii) does not conflict with or result in any violation of the
Certificate of Incorporation or any other charter documents of the Pledgor
or any agreement or instrument or any applicable law, by which the Pledgor
or the properties or assets of Pledgor are bound; and
(iii) does not require the authorization, consent or approval of, the
giving of notice to, the registration with or the taking of any other
action by or in respect of any governmental authority, agency or judicial
body, or the taking of any other action under any applicable law except for
those that have been duly made, given or accomplished.
(j) This Pledge Agreement has been duly executed and delivered by Pledgor
and constitutes a legal, valid and binding obligation of the Pledgor enforceable
against it in accordance with its terms except as such enforcement may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws affecting
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<PAGE>
the rights of creditors generally and by general principles of equity.
(k) There are no pending or, to the knowledge of the Pledgor, threatened
actions or proceedings before any court or administrative agency or arbitrator
that could, if adversely determined, materially adversely affect the financial
condition of the Pledgor or the ability of the Pledgor to perform its
obligations under this Agreement.
(l) The Pledgor has filed or caused to be filed all material tax returns
which are required to be filed by it and has paid or caused to be paid all taxes
that have been shown to be due and payable by such returns (except to the extent
such taxes are being contested in good faith or for which adequate reserves have
been provided by the Pledgor) or tax assessments received by the Pledgor to the
extent that such taxes have become due and payable.
5. FURTHER ASSURANCES.
(a) Upon the written request of Lender, Pledgor shall notify the corporate
secretary of MASI (the "Stock Pledge Notice") that the Pledged Stock and the
Rights have been pledged to the Lender pursuant to the provisions of this
Agreement, and in which notice Pledgor shall instruct the secretary of MASI to
make appropriate notations on the stock transfer records of MASI, in accordance
with the notice and instructions attached hereto as Exhibit "A." Pledgor shall
cause the secretary of MASI to confirm receipt of said notice and his or her
compliance with said instructions by signing and delivering to Lender promptly
after delivery to MASI of the Stock Pledge Notice a copy of Exhibit "A" hereto.
(b) The Pledgor agrees that at any time and from time to time, at the
expense of the Pledgor, the Pledgor will promptly execute and deliver all
further instruments and documents and take all further action that may be
reasonably necessary or desirable in order to perfect and protect any security
interest granted hereby or to enable Lender to exercise or enforce its rights
and remedies hereunder with respect to the Pledged Collateral, including without
limitation, the Pledged Stock.
6. TRANSFERS AND OTHER LIENS. The Pledgor agrees that it will not (a) sell
or otherwise dispose of, or grant any option with respect to, any of the Pledged
Collateral; or (b) create or permit to exist any lien, security interest or
other charge or encumbrance upon or with respect to any of the Pledged
Collateral, except for the security interest under this Agreement.
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<PAGE>
7. LENDER APPOINTED ATTORNEY-IN-FACT. The Pledgor hereby appoints Lender as
the Pledgor's attorney-in-fact and agent (said power of attorney being coupled
with an interest), with full authority in the place and stead of the Pledgor and
in the name of the Pledgor or otherwise with full power of substitution, from
time to time in Lender's discretion, to take any action and to execute any
instrument which Lender may deem necessary or advisable to accomplish the
purposes of this Agreement. Upon the request of the Lender, Pledgor will provide
documentation evidencing such power of attorney and such further powers of
attorney on the same terms set forth above.
8. REASONABLE CARE. If Pledgor delivers possession of the Pledged Stock to
Lender, Lender shall be deemed to have exercised reasonable care in the custody
and preservation of the Pledged Stock in its possession if the Pledged Stock is
accorded treatment substantially equal to that which Lender accords its own
property, it being understood that Lender shall not have any responsibility for
(a) ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relative to any Pledged Stock, whether or
not Lender has or is deemed to have knowledge of such matters; or (b) taking any
necessary steps to preserve rights against any parties with respect to any
Pledged Stock.
9. REMEDIES UPON DEFAULT. If Pledgor fails to pay any amounts when due to
Lender under the Note then:
(a) Lender may exercise in respect of the Pledged Collateral, in addition
to other rights and remedies provided for herein or otherwise available to it,
all the rights and remedies of a secured party on default under the Uniform
Commercial Code (the "Code") in effect in the State of Arizona at that time, and
Lender may also, without notice except as specified below, sell the Pledged
Collateral or any part thereof, in one or more parcels, at public or private
sale, at any exchange, broker's board or at any of Lender's offices or
elsewhere, for cash, on credit or for future delivery, and upon such other terms
as Lender may deem commercially reasonable. In case any sale of all or any part
of the Pledged Collateral is made on credit or for future delivery, the Pledged
Collateral so sold may be retained by the Lender until the sale price is paid by
the purchaser or purchasers thereof, but the Lender shall not incur any
liability in case any such purchaser or purchasers shall fail to take up and pay
for the Pledged Collateral so sold and, in case of any such failure, such
Pledged Collateral may be sold again upon like notice. Pledgor agrees that, to
the extent notice of sale shall be required by law, ten days' notice to Pledgor
of the time and place of any public sale, or the time after which any private
sale is to be made, shall constitute reasonable notification. Lender shall not
be obligated to make any sale of Pledged Stock, regardless of whether notice of
sale shall
7
<PAGE>
have been given. At any public sale made pursuant to this Paragraph, the Lender
may bid for or purchase, free (to the extent permitted by law) from any right of
redemption, stay or appraisal on the part of the Pledgor (all said rights being
also hereby waived and released to the extent permitted by law), the Pledged
Collateral or any part thereof offered for sale and may make payment on account
thereof by using any claim then due and payable to the Lender pursuant to the
Note, including without limitation, the Liabilities, as a credit against the
purchase price therefor; and the Lender may, upon compliance with the terms of
sale, hold, retain and dispose of such property without further accountability
to the Pledgor therefor (provided, however, that nothing contained in this
sentence shall limit the Pledgor's right to bid for the Pledged Collateral in
any public sale). For purposes hereof, a written agreement to purchase the
Pledged Collateral or any portion thereof shall be treated as a sale thereof;
the Lender shall be free to carry out such sale pursuant to such written
agreement, and the Pledgor shall not be entitled to the return of the Pledged
Collateral or any portion thereof subject thereto, notwithstanding the fact
that, after the Lender shall have entered into such a written agreement for the
purchase of the Pledged Collateral, the Liabilities shall have been paid in
full. As an alternative to exercising the power of sale herein conferred upon
it, the Lender may proceed by a suit or suits at law or in equity to foreclose
upon the Pledged Collateral pursuant to this Agreement and to sell the Pledged
Collateral or any portion thereof pursuant to a judgment or decree of a court or
courts having competent jurisdiction or pursuant to a proceeding by a
court-appointed receiver.
(b) Lender may hold the Pledged Stock and cause the same to be registered
in the Books and Records in its name or in the name of its nominee, whereupon
Lender or such nominee shall enjoy all the rights and benefits attributable to
the ownership thereof.
(c) Lender may vote all or any of the Pledged Stock, act by consent in lieu
of a meeting, and give all consents, waivers and ratifications with respect
thereto and otherwise act as though it were the outright owner thereof and
Pledgor hereby irrevocably constitutes and appoints Lender (or its successor and
assign) its proxy and attorney-in-fact, with full power of substitution to do
so.
(d) Any cash held by Lender as Pledged Collateral and all cash proceeds
received by Lender in respect of any sale of, collection from, or other
realization upon, all or any part of the Pledged Collateral shall be applied by
Lender against all or any part of the Liabilities, after payment of any amounts
payable to Lender pursuant paragraph 10 of this Agreement.
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<PAGE>
10. EXPENSES. The Pledgor will, upon demand, pay to Lender the amount of
any and all out-of-pocket expenses, including the reasonable fees and expenses
of its counsel and of any accountants, investment bankers, appraisers,
consultants or other professionals or experts and agents, which Lender may incur
in connection with (a) the sale of, collection from, or other realization upon,
any of the Pledged Stock upon the failure of Pledgor to pay when due any amounts
under the Note, (b) the exercise or enforcement of any of the rights of Lender
hereunder, or (c) the failure by the Pledgor to perform or observe any of the
provisions hereof.
11. SECURITY INTEREST ABSOLUTE. All rights of Lender and all security
interests and obligations of the Pledgor hereunder, shall be absolute and
unconditional irrespective of:
(a) any lack of validity or enforceability of the Note or any agreement or
instrument relating thereto;
(b) any exchange, release or non-perfection of any other collateral, or any
release or amendment or waiver of, or consent to, or departure from any
provision of the Note;
(c) any other circumstance which might otherwise constitute a defense
available to, or a discharge of, the Pledgor or a third party pledgor.
12. AMENDMENTS, ETC. No amendment or waiver of any provision of this
Agreement, nor consent to any departure by the Pledgor herefrom, shall, in any
event, be effective unless the same shall be in writing and signed by Pledgor
and Lender, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
13. NOTICES Except as otherwise specifically provided to the contrary
herein:
(a) Every notice or demand under this Agreement required or permitted to be
given by the Lender or the Pledgor shall be in writing and may be given or made
by recognized overnight international courier.
(b) Every notice or demand shall be sent, in the case of a notice sent by
recognized overnight international courier, to the Lender or to the Pledgor at
their respective addresses set out in the preamble hereof.
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<PAGE>
(c) Every notice or demand shall, except so far as otherwise expressly
provided by this Agreement, be deemed to have been received, in the case of a
notice sent by recognized overnight international courier letter, when actually
delivered to Pledgor or Lender at their respective addresses referred to in the
preamble of this Agreement, or as of the date on which receipt of such notice is
refused or the courier advises that such notice is not deliverable at such
address with respect to the Pledgor or the Lender, as the case may be.
(d) Subject to the terms hereof, each of Pledgor and the Lender may change
its address by giving notice in accordance with this Section 13.
14. CONTINUING SECURITY INTEREST. This Agreement shall create a continuing
security interest in the Pledged Stock and Rights and shall (a) remain in full
force and effect until payment in full of the Liabilities, (b) be binding upon
the Pledgor and its successors and assigns, and (c) inure to the benefit of
Lender and its successors and permitted transferees and assigns.
15. GOVERNING LAW; JURISDICTION; WAIVERS. THIS AGREEMENT SHALL BE DEEMED TO
HAVE BEEN MADE IN AND SHALL BE GOVERNED AND INTERPRETED BY THE LAWS OF THE STATE
OF ARIZONA WITH RESPECT TO AGREEMENTS MADE BY RESIDENTS OF THE STATE OF ARIZONA
AND TO BE WHOLLY PERFORMED WITHIN SAID STATE AND THE RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS, EXCEPT TO
THE EXTENT THAT THE LAW OF SOME OTHER JURISDICTION MAY BE MANDATORILY APPLICABLE
TO PROCEEDINGS TAKEN FOR THE ENFORCEMENT OF THE RIGHTS OF THE MORTGAGEE
HEREUNDER; PROVIDED, HOWEVER, THAT ANY REMEDIES HEREIN PROVIDED WHICH SHALL BE
VALID UNDER THE LAWS OF THE JURISDICTION WHERE PROCEEDINGS FOR THE ENFORCEMENT
HEREOF SHALL BE TAKEN SHALL NOT BE AFFECTED BY ANY INVALIDITY THEREOF UNDER THE
LAWS OF THE STATE OF ARIZONA. If any provision of this Agreement or of any other
agreement between the parties hereto shall be held invalid or inapplicable to
any circumstance or in any jurisdiction, such invalidity or inapplicability
shall not affect any other provision hereof or of any other agreement between
the parties hereto which can be given effect without regard to the invalid
provision, nor to the same provision to the extent valid or enforceable in any
other applicable jurisdiction, nor shall any such inapplicability to any
circumstance affect the applicability of such terms to any
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<PAGE>
other or different or subsequent circumstance, all of such terms, conditions or
provisions are deemed severable. Each party hereby agrees that all actions or
proceedings initiated by the Pledgor and arising directly or indirectly out of
this Agreement shall be litigated exclusively in the Superior Court of Arizona,
Maricopa County, or the United States District Court for the District of Arizona
(the "Arizona Courts") and that any action or proceeding initiated by the Lender
and arising directly or indirectly out of this Agreement shall be litigated in
the courts in any jurisdiction chosen by the Lender in its sole discretion. Each
party hereby expressly submits and consents in advance to such jurisdiction and
venue in any action or proceeding commenced by either party in any of such
courts, and hereby waives personal service of the summons and complaint, or
other process of papers issued therein, and agrees that such service of the
summons and complaint may be made by registered mail, return receipt requested,
addressed to either party, at the respective addresses set forth in the preamble
of this Agreement. Each party waives any claim that Phoenix, Arizona or the
District of Arizona or any such other jurisdiction is an inconvenient forum or
an improper forum based on lack of venue. Should either party, after being so
served, fail to appear or answer any summons, complaint, process or paper so
served within 30 days after the mailing thereof, each party acknowledges that as
a result thereof, an order and/or judgment may be entered by either party
against the other as demanded or pleaded for in such summons, complaint, process
or papers. The choice of forum set forth herein shall not be deemed to preclude
the enforcement by either party of any judgment in any other appropriate
jurisdiction.
16. CONSTRUCTION. Captions and paragraph headings used herein are for
convenience only and are not part of this Agreement and shall not be used in
construing it. In construing any provision of this Agreement, no account shall
be taken of the party who prepared this Agreement and no presumption shall arise
as a result thereof. In the event that any one or more of the provisions of this
Agreement shall be invalid, illegal or unenforceable in any respect or in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions contained herein or of the same provision in any other jurisdiction
where the same shall be valid, legal or enforceable, shall not in any way be
affected or impaired thereby and each of such provisions shall be severable to
the maximum extent permitted by law.
17. ENTIRE AGREEMENT. This Agreement is the entire agreement among the
parties with respect to the subject matter hereof.
18. COUNTERPARTS. This Agreement may be executed in multiple counterparts,
each of which shall be an original document and all of which together shall
constitute but one and the same agreement.
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19. REMEDIES CUMULATIVE. Each right, power and remedy of the Lender as
provided for in this Agreement or now or hereafter existing at law or in equity
or by statute or otherwise shall be cumulative and concurrent and shall be in
addition to every other right, power, or remedy provided for in this Agreement
or now or hereafter existing at law or in equity or by statute or otherwise, and
the exercise or beginning of the exercise by the Lender of any one or more of
such rights, powers, or remedies shall not preclude the simultaneous or later
exercise by the Lender of any or all such other rights, powers, or remedies.
20. WAIVER. No failure or delay by the Lender to insist upon the strict
performance of any term, condition, covenant, or agreement of this Agreement, or
to exercise any right, power, or remedy consequent upon a breach thereof, shall
constitute a waiver of any such term, condition, covenant, or agreement or of
any such breach, or preclude the Lender from exercising any such right, power,
or remedy at any later time or times.
21. WAIVER OF JURY TRIAL. PLEDGOR AND LENDER HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVE THE RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION BASED HEREON OR ARISING OUT OF OR IN CONNECTION WITH
THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE ACTIONS OF ANY OF THE
PARTIES HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDER ENTERING INTO
THIS AGREEMENT AND MAKING ANY LOAN OR OTHER EXTENSION OF CREDIT OR FINANCING TO
PLEDGOR.
22. WAIVER OF NOTICE. Pledgor hereby waives notice of acceptance of this
Agreement, and also presentment, demand, protest and notice of dishonor of any
and all of the Liabilities, and promptness in commencing suit against any party
hereto or liable hereon, and in giving any notice to or of making any claim or
demand hereunder upon the Pledgor. No act or omission of any kind on Lender's
part shall in any event affect or impair this Agreement.
23. REINSTATEMENT. This Agreement shall remain in full force and effect and
continue to be effective should any petition be filed by or against the Pledgor
for liquidation or reorganization, should the Pledgor become insolvent or make
an assignment for the benefit of creditors or should a receiver or trustee be
appointed for all or any significant part of the Pledgor's assets, and shall
continue to be effective or be reinstated, as the case may be, if at any time
payment and performance of the Liabilities,
12
<PAGE>
or any part thereof, is, pursuant to applicable law, rescinded or reduced in
amount, or must otherwise be restored or returned by any obligee of the
Liabilities, whether as a "voidable preference", "fraudulent conveyance", or
otherwise, all as though such payment or performance had not been made. In the
event that any payment, or any part thereof, is rescinded, reduced, restored or
returned, the Liabilities shall be reinstated and deemed reduced only by such
amount paid and not so rescinded, reduced, restored or returned.
24. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All
representations, warranties and covenants made by the Pledgor to the Lender in
connection with this Agreement shall survive the execution and delivery of this
Agreement. All statements contained in any certificate or other instrument
signed by an officer of the Pledgor and delivered to the Lender hereto pursuant
to this Agreement shall be deemed representations, warranties and covenants
hereunder of the Pledgor.
25. TERMINATION. Upon the satisfaction of all of the Liabilities and upon
the satisfaction of Pledgor's obligations to Lender under this Agreement, all of
the powers, rights and interests granted hereunder and created hereby shall
forthwith terminate, and Lender shall, at Pledgor's sole cost and expense,
execute and deliver all such documentations and instruments reasonably necessary
to accomplish the same, within a reasonable time thereafter.
13
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Stock Pledge
Agreement as of the date first hereinabove written.
LENDER: PLEDGOR:
FINOVA CAPITAL CORPORATION AIR METHODS CORPORATION
By: /s/ Pamela Marchant By: /s/ Aaron D. Todd
--------------------------------- ----------------------------------
Name: Pamela Marchant Name: Aaron D. Todd
------------------------------- --------------------------------
Title: Vice President Title: CFO
------------------------------ -------------------------------
14
<PAGE>
EXHIBIT "A"
AIR METHODS CORPORATION
7301 South Peoria Street
Englewood, Colorado 80112
July , 1997
Mercy Air Service, Inc.
8190 Mango
Fontana, California 92334
Attention: CORPORATE SECRETARY
Re: Stock Pledge Agreement, dated as of July , 1997 (the "Pledge
Agreement"), between Air Methods Corporation and FINOVA CAPITAL
CORPORATION
Dear :
Air Methods Corporation ("AMC") has pledged and granted a first priority
security interest in all of the outstanding capital stock of Mercy Air Service,
Inc. ("MASI") to FINOVA Capital Corporation ("FINOVA"), having an office at 115
West Century Road, Paramus, New Jersey 07652, pursuant to the terms of the
Pledge Agreement (a copy of which is delivered to you herewith). Capitalized
terms used herein and not otherwise defined shall have the meaning given such
terms under the Pledge Agreement.
Please: (a) annotate the stock record book of MASI with the following
legend to reflect the existence of the above pledges and security interests with
respect to the Pledged Stock, and (b) maintain such legend thereon until you
receive written notice from FINOVA of the termination of the rights of FINOVA
under the Pledge Agreement:
"Sale, transfer, assignment or other disposition of the shares of Mercy Air
Service, Inc. (the "Company"), and the interest represented thereby,
15
<PAGE>
held of record or beneficially by AIR METHODS CORPORATION ("Pledgor") are
restricted by and subject to all of the terms, conditions and provisions of
) a certain Stock Pledge Agreement, dated as of July 31, 1997, between the
Pledgor and FINOVA Capital Corporation, a copy of which may be obtained
from the Secretary of the Company."
Please confirm receipt of this letter, the Pledge Agreement and your
compliance with the requests contained above by signing a copy of this letter in
the space noted below and returning said copy to us.
Sincerely,
AIR METHODS CORPORATION
By:
------------------------------------
RECEIPT OF THE STOCK PLEDGE AGREEMENT,
AND COMPLIANCE WITH THE FOREGOING
ARE HEREBY ACKNOWLEDGED AND
CONFIRMED:
MERCY AIR SERVICE, INC.
By:
-------------------------------
Corporate Secretary
Attest:
16
SECURED LOAN AGREEMENT
-between-
FINOVA CAPITAL CORPORATION,
Lender,
-and-
MERCY AIR SERVICE, INC.
Borrower.
<PAGE>
SECURED LOAN AGREEMENT
THIS SECURED LOAN AGREEMENT is made as of July 31, 1997 between FINOVA
CAPITAL CORPORATION, a corporation organized and existing under the laws of the
State of Delaware, and MERCY AIR SERVICE, INC., a corporation organized and
existing under the laws of the State of California.
1. PURPOSE; DEFINITIONS AND CONSTRUCTION.
1.1 This Agreement sets out the terms and conditions upon which the Lender
will lend to the Borrower the amount of the Commitment. The Lender agrees to
make the Loan to the Borrower: (i) to enable Borrower to pay in full all of the
Borrower's outstanding indebtedness other than Permitted Indebtedness and (ii)
to enable Borrower to declare and pay to the Guarantor a dividend in an amount
equal to the Guarantor's indebtedness to the Lender on the Closing Date.
1.2 In this Agreement the following words and expressions, except where the
context otherwise requires, shall have the following meanings:
WORDS MEANINGS
"Accepted Appraiser" as defined in Section 7.2(b).
"Advance" the advance in the amount of the
Commitment which will be made
available to the Borrower by the
Lender on the Closing Date, subject
to the terms hereof.
"Agreement" this Secured Loan Agreement.
"Aircraft" collectively, Aircraft 47135,
Aircraft 47516, Aircraft 47526,
Aircraft 47568, Aircraft 33060 and
Aircraft 36009.
"Aircraft 47135" collectively, (a) one Bell
model 222B helicopter bearing
manufacturer's serial number 47135
and U.S. registration number N408MA
(the "47135 Airframe"), (b) two Avco
Lycoming Model LTS101-750C-1 aircraft
engines bearing manufacturer's serial
numbers
<PAGE>
LE-47155AE and LE-47158AE, and any
replacement or substitute for any
such engines, whether or not from
time to time installed on the
Airframe (the "47135 Engines") and
(c) any and all Parts so long as the
same shall be incorporated in the
47135 Airframe or the 47135 Engines,
and any and all Parts removed from
the 47135 Airframe or the 47135
Engines, so long as title to such
Parts shall remain vested in the
Borrower, and any and all Parts
installed on the 47135 Airframe or
the 47135 Engines where title to such
installed Parts vests in the
Borrower.
"Aircraft 47516" collectively, (a) one Bell
model 222U helicopter bearing
manufacturer's serial number 47516
and U.S. registration number N403MA
(the "47516 Airframe"), (b) two Avco
Lycoming Model LTS101-750C-1
aircraft engines bearing
manufacturer's serial numbers
LE-47008AE and LE-47041AE, and any
replacement or substitute for any
such engines, whether or not from
time to time installed on the
Airframe (the "47516 Engines") and
(c) any and all Parts so long as the
same shall be incorporated in the
47516 Airframe or the 47516 Engines,
and any and all Parts removed from
the 47516 Airframe or the 47516
Engines, so long as title to such
Parts shall remain vested in the
Borrower, and any and all Parts
installed on the 47516 Airframe or
the 47516 Engines where title to
such installed Parts vests in the
Borrower.
"Aircraft 47526" collectively, (a) one Bell model
222U helicopter bearing
manufacturer's serial number 47526
and U.S. registration number N416MA
(the "47526 Airframe"), (b) two Avco
Lycoming Model LTS101-750C-1
aircraft engines bearing
manufacturer's serial numbers
LE-47075AE and LE-47061AE, and any
replacement or substitute for any
such engines, whether or not from
time to time installed on the
Airframe (the "47526 Engines") and
(c) any and all Parts so long as the
same shall be incorporated in the
47526 Airframe or the
-2-
<PAGE>
47526 Engines, and any and all Parts
removed from the 47526 Airframe or
the 47526 Engines, so long as title
to such Parts shall remain vested in
the Borrower, and any and all Parts
installed on the 47526 Airframe or
the 47526 Engines where title to such
installed Parts vests in the
Borrower.
"Aircraft 47568" collectively, (a) one Bell model
222U helicopter bearing
manufacturer's serial number 47568
and U.S. registration number N415MA
(the "47568 Airframe"), (b) two Avco
Lycoming Model LTS101-750C-1
aircraft engines bearing
manufacturer's serial numbers
LE-47063AE and LE-47140AE, and any
replacement or substitute for any
such engines, whether or not from
time to time installed on the
Airframe (the "47568 Engines") and
(c) any and all Parts so long as the
same shall be incorporated in the
47568 Airframe or the 47568 Engines,
and any and all Parts removed from
the 47568 Airframe or the 47568
Engines, so long as title to such
Parts shall remain vested in the
Borrower, and any and all Parts
installed on the 47568 Airframe or
the 47568 Engines where title to
such installed Parts vests in the
Borrower.
"Aircraft 33060" collectively, (a) one Bell model 412
helicopter bearing manufacturer's
serial number 33060 and U.S.
registration number N401MA (the
"33060 Airframe"), (b) two Pratt &
Whitney Canada Model PT6T-3B
aircraft engines bearing
manufacturer's serial numbers 61584
and 61585, and any replacement or
substitute for any such engines,
whether or not from time to time
installed on the Airframe (the
"33060 Engines") and (c) any and all
Parts so long as the same shall be
incorporated in the 33060 Airframe
or the 33060 Engines, and any and
all Parts removed from the 33060
Airframe or the 33060 Engines, so
long as title to such Parts shall
remain vested in the Borrower, and
any and all Parts installed on the
33060 Airframe or the 33060
-3-
<PAGE>
Engines where title to such installed
Parts vests in the Borrower.
"Aircraft 36009" collectively, (a) one Bell model
412SP helicopter bearing
manufacturer's serial number 36009
and U.S. registration number N586AC
(the "36009 Airframe"), (b) two
Pratt & Whitney Canada Model PT6T-3B
aircraft engines bearing
manufacturer's serial numbers 63209
and 63210, and any replacement or
substitute for any such engines,
whether or not from time to time
installed on the Airframe (the
"36009 Engines") and (c) any and all
Parts so long as the same shall be
incorporated in the 36009 Airframe
or the 36009 Engines, and any and
all Parts removed from the 36009
Airframe or the 36009 Engines, so
long as title to such Parts shall
remain vested in the Borrower, and
any and all Parts installed on the
36009 Airframe or the 36009 Engines
where title to such installed Parts
vests in the Borrower.
"AMC" Air Methods Corporation, a
corporation organized and existing
under the laws of the State of
Delaware.
"Asset Purchase Agreement" the Asset Purchase Agreement dated
as of July 11, 1997 between
Helicopter Services, Inc. and AMC.
"Assignments" the assignment(s), in form and
substance reasonably acceptable to
the Lender, to be entered into
between the Borrower and the Lender
with respect to any lease or any
Service Contract entered into by the
Borrower with respect to any of the
Aircraft together with a consent
executed by the other party to such
lease or Service Contract.
"Banking Day" in the context of any date on
which a payment of interest or
principal is due hereunder, a day on
which federally chartered banking
institutions in New York City, New
York, Phoenix, Arizona and the State
of New Jersey are
-4-
<PAGE>
open for the transaction of business
of the nature required by this
Agreement.
"Borrower" Mercy Air Service, Inc., a
corporation organized and existing
under the laws of the laws of the
State of California and having its
principal place of business at 8190
Mango, Fontana, California 92334;
Telephone No. (909) 357-9006;
Telefax No. (909) 428-2142.
"Closing Appraisal" the appraisal issued by Aviation
Management in June, 1997 relating to
the Aircraft.
"Closing Date" July 31, 1997, or such other
date mutually agreed to between the
Borrower and the Lender.
"Commitment" the obligation of the Lender to make
a loan in an amount of $10,152,950,
to be made available to the Borrower
on the Closing Date for the Loan Term
under this Agreement and subject to
the terms herein contained.
"Default" an event which, with the passage of
time, or giving of notice, or both,
would constitute an Event of Default.
"Dollars" or "($)" the legal currency, at any relevant
time hereunder, of the United States
of America.
"Engine" each engine referred to in the
definition of Aircraft.
"ERISA" the Employment Retirement Income
Security Act of 1974, as amended, and
the regulations thereunder.
"GAAP" means generally accepted accounting
principles in the United States of
America and Canada (as such
principles may change from time to
time) applied on a consistent basis
(except for changes in application
in which Borrower's independent
certified public accountants
concur), applied both to
classification of items and amounts.
-5-
<PAGE>
"Guarantor" AMC.
"Guaranty" shall mean the Continuing Guaranty
and Subordination Agreement, dated as
of the Closing Date, between the
Guarantor and the Lender.
"Insurance Side
Letter" the Letter Agreement dated on or
before the Closing Date between the
Borrower and the Lender with respect
to the insurance requirements in
connection with the Aircraft.
"Interest Rate" as defined in Section 6.1 hereof.
"Law" means any law (including common law),
constitution, statute, treaty,
regulation, rule, ordinance, order,
injunction, writ, decree or award of
any government, or any administrative
agency thereof or any court in any
jurisdiction.
"Lender" FINOVA Capital Corporation, a
corporation organized and existing
under the laws of the State of
Delaware and having an office at 115
West Century Road, Paramus, New
Jersey 07652; Telephone No. (201)
634-3397; Telefax No. (201) 634-3325.
"Lien" any mortgage, pledge, lien, charge,
encumbrance, option, security
interest or lease (including any
conditional sale agreement, equipment
trust agreement, or other title
retention agreement) or right or
claim of any person, whether
voluntary or involuntary in nature.
"Loan" the aggregate principal amount of the
loan made by the Lender pursuant to
this Agreement outstanding from time
to time and due the Lender under this
Agreement and the Note.
"Loan Documents" collectively, this Agreement, the
Note, the Security Agreement, the
Assignments, the Guaranty, the
-6-
<PAGE>
Insurance Side Letter and all other
documents executed in connection with
each of the foregoing agreements or
contemplated thereby or the
transactions related thereto.
"Loan Term" the period commencing on the Closing
Date through and including that date
which shall be the earlier of: (i)
the date on which the Loan together
with all fees and sums which may
become payable hereunder and under
the other Loan Documents becomes
repayable, or (ii) the date on which
the Loan becomes payable in full
under the provisions of Section 7 or
8.
"Maturity Date" the last scheduled Repayment
Date on the Repayment Schedule, which
shall be the date on which all
remaining amounts of principal,
accrued interest thereon and all
other amounts hereunder are due and
payable by the Borrower to the
Lender.
"Multiemployer Plan" means a "multiemployer plan" as
defined in ERISA Sections 3(37) or
4001(a)(3) or Internal Revenue Code
Section 414(f) which covers employees
of Borrower or the Guarantor.
"Note" the Promissory Note dated the Closing
Date in the principal amount of the
Commitment issued by the Borrower to
the Lender.
"Overdue Interest
Rate" the rate equal to the Interest Rate
plus two (2%) percent.
"Parts" shall mean all appliances, rotor
blades, rotors, parts, instruments,
avionics, appurtenances,
accessories, furnishings and other
equipment or components, of whatever
nature (other an complete Engines),
which are, from time to time,
incorporated on an airframe or an
engine, or so long as title to such
Parts shall remain vested in the
owner of such airframe, after
removal from such airframe or
engine.
-7-
<PAGE>
"Permitted
Indebtedness" shall mean collectively: (a) ordinary
course of business trade payables;
(b) the indebtedness of the Borrower
described on Schedule I attached
hereto; (c) secured non-recourse debt
of the Borrower; and (d) any other
indebtedness consented to by the
Lender.
"Person" means an individual, corporation,
national banking association,
partnership, trust, unincorporated
association, joint venture,
joint-stock company, government
(including political subdivisions),
governmental authority or agency,
Indian tribe, or any other entity.
"Plan" means any plan described in ERISA
Section 3(2) maintained for employees
of the Borrower or the Guarantor
other than a Multiemployer Plan.
"Prepayment Aircraft" as defined in Section 7.2(b).
"Prepayment Appraisal" in connection with: (a) a prepayment
of the Loan pursuant to 7.2, the
appraisal rendered by the Accepted
Appraiser of all of the remaining
Aircraft (including the Prepayment
Aircraft) that the Borrower has
requested or (b) a prepayment of the
Loan pursuant to Section 8.1, the
appraisal rendered by an appraiser
selected by the Lender of all of the
remaining Aircraft and the Aircraft
that has suffered the Event of Loss
which caused the prepayment.
"Repayment Date" each of the dates noted on the
Repayment Schedule on which a payment
of interest or a payment of principal
and interest is due hereunder to be
paid by the Borrower.
"Repayment Schedule" the schedule attached
hereto as APPENDIX I setting forth
the amounts and dates of payments of
principal required to be made by the
Borrower in repayment of the Loan.
-8-
<PAGE>
"Reportable Event" a reportable event described
in Section 4043 of ERISA or the
regulations thereunder, a withdrawal
from a Plan described in Section 4063
of ERISA, or a cessation of
operations described in Section
4068(f) of ERISA.
"Security Agreement" the First Priority
Aircraft Chattel Mortgage and
Security Agreement, dated the Closing
Date, to be entered into between the
Borrower and the Lender pursuant to
which the Borrower grants to the
Lender a first priority purchase
money security interest in and to the
Aircraft.
"Sellers" collectively, Homer L. Aerts, J.
Steven Dickmeyer, Don D. Reed, Terry
L. Russ and Richard J. Silva.
"Service Contract" any service contract or wet lease for
the charter of any of the Aircraft.
"Stock Purchase Agreement" the Stock Purchase Agreement dated as
of July 11, 1997 among the Sellers
and the Guarantor relating to the
sale of all of the outstanding
capital stock of the Borrower.
"Subsequent Agreement" any credit facility, loan
agreement, lease or other financing
document entered into between the
Borrower or the Guarantor and the
Lender after the date hereof in
connection with a financing or lease.
"Taxes" as defined in Section 11.3 hereof.
"Transaction Documents" collectively, the Loan Documents, the
Stock Purchase Agreement and the
Asset Purchase Agreement.
"Wells Fargo Loan Agreement" collectively, (a) the Letter
Agreement dated October 21, 1996
between Wells Fargo Bank (Colorado)
("Wells Fargo") and the Guarantor
and the Promissory Note executed and
delivered by the Guarantor to Wells
Fargo in connection therewith
(collectively, the "Original Wells
Fargo Facility") and (b) any
subsequent working capital facility
entered into by the Guarantor which
replaces: (i) the Original Wells
Fargo Facility or (ii) any
-9-
<PAGE>
working capital facility that is
subsequent to the Original Wells
Fargo Facility.
Terms defined in the Security Agreement, unless otherwise defined herein, shall
be used herein as therein defined.
1.3 CONSTRUCTION. (a) Unless the context of this Agreement otherwise
clearly requires, references to the plural include the singular, the singular
the plural, the part the whole, and "or" has the inclusive meaning frequently
identified by the phrase "and/or." References to "determination" by Lender
include a good-faith estimate by Lender (in the case of a quantitative
determination) and a good faith belief by Lender (in the case of a qualitative
determination). References to the terms "acting reasonably" or "reasonably
satisfactory to Lender, acting reasonably" or terms of similar import mean
satisfactory or acceptable to the Lender acting in a reasonable manner but in
accordance with the Lender's regular business practices. The words "herein,"
"hereunder" and "hereof" and similar terms in this Agreement refer to this
Agreement as a whole and not to any particular provision of this Agreement. The
Section and other headings contained in this Agreement are for reference
purposes only and shall not control or affect the construction of this Agreement
or the interpretation thereof in any respect.
(b) Any defined term in Section 1.2 or in any of the Loan Documents
which refers to a document, instrument, agreement or mortgage shall include any
amendments, supplements or modifications entered into from time to time with
respect to such document, instrument, agreement or mortgage.
2. COMMITMENT.
2.1 Subject always to the terms and conditions of this Agreement, Lender
hereby agrees with the Borrower that on the Closing Date, Lender will make the
Commitment available to the Borrower and Borrower will borrow the Commitment
from the Lender.
2.2 The obligation of the Lender to make the Commitment available to the
Borrower under this Agreement shall be expressly subject to the terms of this
Agreement in general and in particular to the fulfillment by the Borrower of all
of the conditions set forth in Section 5 hereof not later than at the time or
times therein specified. Lender shall have no obligation in respect of its
Commitment except as expressly set forth in this Agreement.
-10-
<PAGE>
3. LOAN.
3.1 The Commitment shall be made available to the Borrower on the Closing
Date, in U.S. Dollars via wire transfer (and the Borrower shall borrow the
same), subject to the terms of this Agreement.
3.2 The Borrower shall deliver a drawdown notice (the "Drawdown Notice") to
the Lender at least two (2) Banking Days prior to the Closing Date. The notice
may not be rescinded once received. The notice shall contain:
(a) the date requested for the Closing Date;
(b) the amount of the Advance;
(c) a representation from the Borrower that the Borrower will use the
Advance for the purposes set forth in Section 1.1 of this
Agreement; and
(d) information specifying the account(s) to which the Advance is to
be made available (subject to Lender's agreement).
3.3 If the Borrower shall have sent the Drawdown Notice and the Lender does
not advance the amount to the Borrower because the Borrower has failed to
satisfy the conditions precedent set forth in Section 5 hereof, the Borrower
shall, upon the Lender's demand, indemnify the Lender against all or any costs,
losses, expenses, damages, charges, premiums, penalties or fees (collectively,
the "Costs") incurred by the Lender as a result (direct or indirect) of such
amount not being advanced following the delivery of the Drawdown Notice,
including without limitation, in connection with funds borrowed by the Lender to
fund such amount or any portion thereof, the difference, if any, between the
amount of interest accrued upon such amount less the interest earned upon any
funds deposited by the Lender pursuant to this Section.
4. DESCRIPTION OF SECURITY.
As collateral security for the prompt and complete payment of Borrowers'
obligations hereunder and under the Note and other Loan Documents and the
payment of any sum advanced or subsequently advanced or obligation incurred
pursuant to any provision hereof or thereof the Borrower shall grant to the
Lender a first priority
-11-
<PAGE>
purchase money Lien upon and security interest in the Aircraft pursuant to the
Security Agreement.
5. CONDITIONS PRECEDENT.
5.1 The Lender's obligation to make the Loan is conditional upon the
following, all of which shall take place, occur or be delivered to the Lender
not later than the Closing Date:
(a) The Borrower shall have performed all of its agreements and paid
all sums hereunder to be performed or paid (including sums payable under
Section 14.1 hereof) on or prior to the Closing Date and the
representations and warranties of the Borrower and the Guarantor contained
in each Loan Document to which each is respectively a party shall be true
and correct as of the Closing Date as if made on and as of the Closing Date
and the Borrower shall have so certified to Lender;
(b) The Borrower shall have duly executed and delivered to Lender and
Lender shall have approved and accepted the Note, the Security Agreement,
the UCC-1 financing statements, any other assignments or other similar
documents deemed reasonably necessary by Lender to perfect, maintain and
preserve the Liens in and to, and the security interest in, the Aircraft
and such documents as Lender may reasonably require in connection with the
termination of any and all liens, claims or encumbrances affecting the
Aircraft (other than Permitted Liens) ;
All such security agreements, mortgages, financing statements,
assignments, releases or other similar documents shall be suitable for
filing in all public offices deemed necessary by the Lender to perfect the
security interests granted to the Lender under the Security Agreement.
Further, the Borrower shall have furnished satisfactory proof to the Lender
that the Borrower has delivered an executed copy of the Security Agreement
and related documents to special FAA counsel, William C. Boston &
Associates, who shall have approved the same as being in appropriate form
for recordation with the Federal Aviation Administration Aircraft Registry
in accordance with Title 14, Part 49 of the Code of Federal Regulations.
(c) There shall not have occurred and not be continuing an Event of
Default under this Agreement or any other Loan Document, or an event which,
with notice or lapse of time or both, would constitute an Event of Default
(or the equivalent thereof);
-12-
<PAGE>
(d) All documents, instruments and certificates relating to the making
of the Loan and delivery of the Note, and all proceedings in connection
with the transactions contemplated by this Agreement or any other Loan
Document shall be satisfactory in form and substance to the Lender, acting
reasonably, and the Lender shall have received copies of all such
instruments, certificates, and other evidence as Lender may reasonably
request with respect to such transactions in form reasonably satisfactory
to the Lender and its counsel including, but not limited to, the following:
(i) a copy of the FAA Form 8050-2 Bill of Sale for each of the
Aircraft listing the Borrower as purchaser of each such Aircraft
certified as being a true, accurate and complete copies by an officer
of the Borrower;
(ii) a copy of the warranty bill of sale for each of the Aircraft
pursuant to which good title to the Aircraft was conveyed to the
Borrower certified as being a true accurate and complete copies by an
officer of the Borrower;
(iii) a copy of the FAA Registration Certificate for each of the
Aircraft evidencing the registration of each of the Aircraft in the
name of the Borrower certified as being a true, accurate and complete
copies by an officer of the Borrower;
(iv) a copy of the FAA Certificate of Airworthiness relating to
each of the Aircraft certified as being a true, accurate and complete
copies by an officer of the Borrower;
(v) a certificate(s) of insurance evidencing that insurance
conforming to all of the requirements of the Security Agreement is in
full force and effect with respect to the Aircraft and containing, or
together with, a report of the broker issuing such certificate that
such insurance complies with the provisions of the Security Agreement;
(vi) a favorable opinion dated the Closing Date, in form and
substance reasonably satisfactory to the Lender, of William C. Boston
and Associates, special FAA counsel;
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(vii) a favorable opinion dated the Closing Date, in form and
substance reasonably satisfactory to the Lender, of Davis, Graham &
Stubbs LLP, counsel to the Borrower and the Guarantor;
(viii) the Guaranty executed by the Guarantor;
(ix) the Stock Purchase Agreement and the Asset Purchase
Agreement certified as being a true, accurate and complete copies by
an officer of the Guarantor;
(e) The Lender shall have received a copy of the Articles of
Incorporation and the By-laws of the Borrower, certified as being true,
complete and accurate by the corporate secretary of the Borrower together
with a good standing certificate issued by the Secretary of State of the
State of California;
(f) The Lender shall have received a copy of a resolution adopted by
the board of directors of the Borrower, certified by an officer of the
Borrower as being true, accurate and complete, authorizing the entering
into, and the performing of the Borrower's obligations under, this
Agreement, and each other Loan Document to which the Borrower is a party,
and all transactions contemplated herein and therein;
(g) The Lender shall have received a certificate of an officer of the
Borrower certifying as to the officers of the Borrower and a specimen
signature of each of the officers of the Borrower;
(h) The Lender shall have received a certificate from an officer of
the Borrower certifying that no Event of Default or, to the knowledge of
such officer, Default has occurred and is continuing;
(i) The Lender shall have received a copy of the Articles of
Incorporation and By-Laws of the Guarantor certified as being true,
complete and accurate by the corporate Secretary of the Guarantor, together
with a good standing certificate issued by the Secretary of State of the
State of Delaware;
(j) The Lender shall have received a copy of a resolution passed by
the Board of Directors of the Guarantor, certified by the corporate
Secretary of the Guarantor as being true, accurate and complete,
authorizing the entering into, and the performing of the Guarantor's
obligations under, the Guaranty and each other Loan
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Document to which the Guarantor is a party, and all transactions
contemplated herein and therein;
(k) The Lender shall have received a certificate of the corporate
Secretary of the Guarantor certifying as to the signing authority of the
officers of the Guarantor to sign this Agreement and each Loan Document to
which the Guarantor is a party and all documents and instruments executed
in connection herewith or therewith;
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(l) All of the conditions precedent set forth in Section 9 of the
Stock Purchase Agreement shall have been satisfied or waived and AMC shall
have acquired all of the Mercy Air Stock and all of the conditions
precedent set forth in Section 9 of the Asset Purchase Agreement shall have
been satisfied or waived;
(m) No material adverse change shall have occurred in the values of
the Aircraft as compared to the values set forth in the Closing Appraisal;
(n) No Event of Loss shall have occurred with respect to any of the
Aircraft;
(o) The Lender shall have received audited financial statements of the
Borrower for the year ending December 31, 1996; and
(p) The Borrower shall have delivered any other item reasonably
requested by Lender, provided that the Lender shall have given the Borrower
reasonable notice prior to the Closing Date of the requirement therefor.
6. INTEREST.
Interest payable on the Loan:
(a) shall accrue from the Closing Date at a rate of 9.52% per annum
(the "Interest Rate");
(b) shall be paid by the Borrower, in arrears, on each Repayment Date
and whenever else a payment of principal is due and payable; and
(c) shall be calculated on the basis of a year of 360 days consisting
of twelve 30-day months.
7. REPAYMENT AND VOLUNTARY PREPAYMENT.
7.1 Until the Loan shall be repaid, prepaid or discharged under the
provisions of this Agreement, in addition to any other sums which may become
payable hereunder or under any other Loan Document, the Borrower shall repay the
Loan in the amounts, and on the dates, set forth on the Repayment Schedule;
provided, however, that the final payment hereunder shall be in an amount
necessary to pay in full all outstanding principal, accrued interest and all
other amounts due hereunder. Each payment shall be
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applied first to fees, costs or expenses due Lender under the Loan Documents,
second, against accrued interest on the Loan, and third, the balance against
principal of the Loan, as more fully set forth in the Repayment Schedule.
7.2 (a) Provided no Event of Default has occurred and is continuing, the
Borrower shall be entitled to prepay the entire amount of the Loan on any
Repayment Date occurring after the three year anniversary of the Closing Date on
not less than ninety (90) days' prior written notice specifying such Repayment
Date and the amount of such prepayment, which notice shall become irrevocable
upon delivery to the Lender. Such prepayment shall be made together with (i)
accrued interest on the amount of such prepayment through the date of such
prepayment; (ii) a prepayment fee equal to the Rate Prepayment Amount (defined
in Section 7.2(d)) and (iii) any other amounts due and owing by the Borrower
and/or the Guarantor under any of the Loan Documents.
(b) Provided no Event of Default has occurred and is continuing, the
Borrower shall be entitled to prepay a portion of the Loan applicable to a
particular Aircraft on any Repayment Date occurring after the three year
anniversary of the Closing Date on not less than ninety (90) days' prior written
notice to the Lender (the "Prepayment Notice") specifying: (i) the Aircraft
which the Borrower desires the Lender to release from the Lien of the Security
Agreement (the "Prepayment Aircraft"); (ii) the Borrower's commitment to pay
that portion of the Applicable Amount (defined below) with respect to such
Aircraft; and (iii) the internationally recognized appraiser the Borrower
proposes to retain for purposes of performing the Prepayment Appraisal (the
"Proposed Appraiser"). Within fourteen Banking Days of receipt of the Prepayment
Notice, the Lender, by written notice to the Borrower, shall either accept or
reject the Proposed Appraiser; provided, however, that the Lender shall not
unreasonably reject the Proposed Appraiser set forth in the Prepayment Notice.
If the Lender rejects the Proposed Appraiser, the Lender shall include in the
Lender's notice to the Borrower another internationally recognized appraiser
(such appraiser or the Proposed Appraiser, to the extent such Proposed Appraiser
is not rejected by the Lender, being hereinafter referred to as the "Accepted
Appraiser") which the Borrower shall be obligated to retain for purposes of
performing the Prepayment Appraisal. Not less than thirty (30) days prior to the
Repayment Date set forth in the Prepayment Notice, the Borrower shall deliver
(or cause to be delivered) to the Lender the Prepayment Appraisal prepared by
the Accepted Appraiser which shall include an appraisal of all of the then
remaining Aircraft (excluding any Aircraft that, prior to the date of the
prepayment in question, has been sold, suffered an Event of Loss or has been
released from the Lien of the Security Agreement). On the Repayment Date
specified in the Prepayment Notice, the Borrower shall pay to the Lender: (A)
the scheduled payment of principal and accrued interest
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payable set forth in the Repayment Schedule; (B) an amount equal to the
Applicable Amount (defined in Section 7.2(c)); and (C) a prepayment fee equal to
the Rate Prepayment Amount.
(c) In connection with a partial prepayment of the Loan pursuant to Section
7.2(b), the "Applicable Amount" shall equal the product of (i) the outstanding
amount of the Loan immediately prior to such prepayment multiplied by (ii) the
greater of (A) a ratio, the numerator of which is the appraised value of the
Prepayment Aircraft as set forth in the Prepayment Appraisal and the denominator
of which is the aggregate appraised value of all of the Aircraft (excluding any
Aircraft that, prior to the date of the prepayment, has been sold, suffered an
Event of Loss or has been released from the Lien of the Security Agreement) as
set forth in the Prepayment Appraisal or (B) a ratio, the numerator of which is
the appraised value of the Prepayment Aircraft as set forth in the Closing
Appraisal and the denominator of which is the aggregate appraised value of all
of the Aircraft (excluding any Aircraft that, prior to the date of the
prepayment, has been sold, suffered an Event of Loss or has been released from
the Lien of the Security Agreement) as set forth in the Closing Appraisal.
(d) The "Rate Prepayment Amount" shall equal: (i) if such prepayment is
made after the Closing Date but on or prior to the third year anniversary of the
Closing Date, 5.0% of the principal amount prepaid (provided, however, that this
clause (i) shall only apply to prepayments under Sections 8.1 and 8.2 hereof);
(ii) if such prepayment is made after the third year anniversary and on or prior
to the fourth year anniversary of the Closing Date, 4.0% of the principal amount
prepaid; (iii) if such prepayment is made after the fourth year anniversary and
on or prior to the fifth year anniversary of the Closing Date, 3.0% of the
principal amount prepaid; (iv) if such prepayment is made after the fifth year
anniversary and on or prior to the sixth year anniversary of the Closing Date,
1.35% of the principal amount prepaid; (v) if such prepayment is made after the
sixth year anniversary and on or prior to the seventh year anniversary of the
Closing Date, 1.10% of the principal amount prepaid; (vi) if such prepayment is
made after the seventh year anniversary and on or prior to the ninth year
anniversary of the Closing Date, 1.00% of the principal amount prepaid; and
(vii) if such prepayment is made after the ninth year anniversary and prior to
the tenth year anniversary of the Closing Date, 0.40% of the principal amount
prepaid.
7.3 The amount of any prepayment under Section 7.2(a), 7.2(b), 8.1,
8.2,11.2 or 11.3 hereof shall be applied: (a) first, against the Rate Prepayment
Amount; (b) second, against accrued interest; and (c) thereafter, against
principal, subject to the applicable provisions of the Security Agreement. The
amount of any prepayment applied
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to principal of the Loan shall be applied to the payments of principal due with
respect to the Loan in inverse chronological order.
8. MANDATORY PREPAYMENTS.
8.1 Immediately upon the 90th day after an Event of Loss with respect to an
Aircraft then: (i) the Applicable Amount; (ii) all accrued but unpaid interest
thereon; and (iii) a fee equal to the Rate Prepayment Amount shall become
immediately due and payable. Notwithstanding the immediately preceding sentence,
provided that no Event of Default has occurred and is continuing, the Borrower
for a period of 90 days after receipt by the Lender of any insurance proceeds in
connection with an Event of Loss to an Aircraft, shall have the right to apply
such proceeds to the purchase price of a new aircraft; provided, however, that:
(a) the appraised value of such replacement aircraft as determined by an
Accepted Appraiser, must be greater than or equal to the value of the Aircraft
that suffered the Event of Loss and (b) the Borrower shall have granted to the
Lender a first priority lien and security interest with respect to such
replacement aircraft on or prior to the date of the release by the Lender to the
Borrower of the insurance proceeds.
8.2 Upon the occurrence of an Event of Default: (i) the Loan; (ii) all
accrued but unpaid interest thereon; (iii) the Rate Prepayment Amount and (iv)
any and all other fees and amounts which may be or become payable hereunder and
under the Note, the Security Agreement and any other Loan Document shall become
immediately due and payable.
9. REPRESENTATIONS AND WARRANTIES.
9.1 The Borrower hereby represents and warrants to the Lender as of the
date hereof:
(a) the Borrower is a corporation duly formed, validly existing and in good
standing under the laws of the State of California and maintains its principal
place of business and its chief executive office at 8190 Mango, Fontana,
California 92334; the Borrower's Federal employer tax identification number is ;
(b) on the Closing Date, the Borrower will have good and marketable title
to, and will be the sole legal owner of, all the Mortgaged Property (as defined
in Security Agreement) free and clear of all liens, pledges, options, mortgages,
claims, charges, encumbrances, security interests and use restrictions, except
for Permitted Liens (as
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defined in the Security Agreement) and no security agreement, financing
statement, equivalent security or lien instrument or continuation statement or
other Lien, whether voluntary or involuntary, covering all or any part of the
Mortgaged Property (as defined in the Security Agreement) has been placed on
file or of record by the Borrower with any governmental agency or bureau or any
political subdivision thereof or is otherwise in effect with respect to any of
the Mortgaged Property (as defined in Security Agreement) except such as may
have been filed by the Borrower pursuant to the Security Agreement and for
Permitted Liens (as defined in the Security Agreement);
(c) the Borrower has full power to carry on its business as it is now being
conducted and to enter into, legally bind itself by, and perform its obligations
under this Agreement, and all of the other Loan Documents to which it is a
party, and has complied with all material statutory and other requirements
relative to the business carried on by it; it is duly qualified and in good
standing in all of the jurisdictions in which the character of the properties
owned or leased by it or the business transacted by it makes such qualification
necessary and where the failure to so qualify would preclude it from being able
to fulfill its obligations and to enforce its rights with respect to the Loan
Documents;
(d) all necessary consents, resolutions and authorizations for the Borrower
to enter into this Agreement and all of the other Loan Documents to which it is
a party, and to make and repay the borrowings in respect of the Commitment have
been obtained, no further consents or authorizations are necessary for the
service and repayment of the Loan pursuant to the provisions hereof and of the
Note and for the performance by the Borrower of all its obligations pursuant to
the provisions of all of the Loan Documents to which it is a party;
(e) the Borrower is a United States Citizen as that term is defined in
Title 49 of the United States Code (a "United States Citizen");
(f) this Agreement, and all of the other Loan Documents to which the
Borrower is a party, have been duly and validly executed and delivered by it and
constitute valid and binding obligations of it, enforceable in accordance with
their terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency or other laws affecting creditors' rights in general;
(g) the execution and delivery of, and the performance of the provisions
of, this Agreement and each other Loan Document to which the Borrower is a party
and of the transactions contemplated thereby and hereby do not and will not
during the Loan Term contravene or violate in any material respect its Articles
of Incorporation or by-laws
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or any applicable Law, regulation, decree, order, license or permit or result in
a default under any contractual or other restriction now existing and binding on
the Borrower or on any of its properties or result in the creation of any Lien
on any of such properties;
(h) there are no outstanding judgments against the Borrower and no action,
claim, suit or proceeding is pending or, to the best of the Borrower's knowledge
threatened (including, but not limited to, tax liens or tax actions) against or
affecting the Borrower before any court, board or arbitration or administrative
agency which would likely result in any material adverse change in the business
or condition (financial or otherwise) of the Borrower or on the ability of the
Borrower to perform its obligations under any Loan Document;
(i) all tax returns required to be filed by the Borrower have been properly
prepared, executed and filed. All taxes, assessments, fees and other
governmental charges upon the Borrower or upon any of its properties, incomes,
sales or franchises which are due and payable have been paid, other than those
taxes which the Borrower is contesting in good faith by appropriate proceedings
and for which the Borrower has recorded sufficient reserves in its financial
statements in accordance with GAAP;
(j) the Borrower is not engaged in the business of extending credit for the
purpose of purchasing or carrying "margin stock", as such term is used in
Regulations G or U promulgated by the Board of Governors of the Federal Reserve
System as amended from time to time. No part of the proceeds of the Loan will be
used to purchase or carry any margin stock or to extend credit to others for the
purpose of purchasing or carrying any "margin stock". The Borrower does not own
any "margin stock";
(k) no written information given by the Borrower in relation to this
Agreement or any other Loan Document to which it is a party contains any
misstatement of fact or omits to state a fact which would be adverse to the
interest of the Lender or which would be necessary to make any statement or
representation or warranty contained herein or therein not misleading;
(l) No Default or Event of Default has occurred and is continuing;
(m) the Borrower does not transact or do business under any assumed or
trade name;
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(n) The Borrower will use the proceeds of the Loan for the purpose set
forth in Section 1.1 hereof and for no other purpose;
(o) The Borrower has no outstanding indebtedness other than the
indebtedness created by this Agreement and Permitted Indebtedness.
(p) Neither the Borrower nor the Guarantor nor any Plan is or has been in
violation of any of the provisions of ERISA, any of the qualification
requirements of the Internal Revenue Code Section 401(a) or any of the published
interpretations thereunder, nor has Borrower or the Guarantor received any
notice to such effect. No notice of intent to terminate a Plan has been filed
under Section 4041 of ERISA, nor has any Plan been terminated under ERISA. The
Pension Benefit Guarantee Corporation has not instituted proceedings to
terminate, or appointed a trustee to administer, a Plan and no lien upon the
assets of the Borrower or the Guarantor has arisen with respect to a Plan. No
prohibited transaction or Reportable Event has occurred with respect to a Plan.
Neither Borrower nor Guarantor has incurred any withdrawal liability with
respect to any Multiemployer Plan. There is no accumulated funding deficiency in
any Plan, whether or not waived; and
(q) the Borrower has furnished to Lender certain audited financial
statements for the annual period ending December 31, 1996 and unaudited
quarterly financial statements for the periods ending March 31, 1997
(collectively, the "Financial Statements"). Such Financial Statements (including
the notes thereto) present fairly the financial condition of the Borrower as of
the dates of the balance sheets contained therein, and the results of its
operations for the periods then ended, all in conformity with GAAP on a basis
consistent with that of Financial Statements for corresponding prior periods.
Except as disclosed therein, the Borrower does not have any material contingent
liabilities (including liabilities for taxes), unusual forward or long-term
commitments or unrealized or anticipated losses from unfavorable commitments.
Since the date of such Financial Statements there has been no material adverse
change in the business, operations or financial condition of the Borrower.
9.2 The rights and remedies of the Lender in relation to any
misrepresentation or breach of warranty on the part of the Borrower or the
Guarantor shall not be prejudiced by any lack of investigation by or on behalf
of the Lender into the affairs of any of the Borrower or the Guarantor or by the
performance of this Agreement or by any other act or thing which may be done by
it in connection with this Agreement and which would, apart from this Section 9,
prejudice such rights or remedies.
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10. UNDERTAKINGS.
The Borrower hereby undertakes during the Loan Term:
10.1 to furnish Lender with proof satisfactory to Lender that all insurance
required under the Security Agreements and the Mortgage is in full force and
effect at each renewal of any such contract or policy of insurance or upon
Lender's request;
10.2 to inform the Lender immediately upon the occurrence of a Default or
an Event of Default;
10.3 (a) to comply with all Laws relative to the conduct of its business or
the location of the properties owned or leased by it, (including, but not
limited to, the payment of all Taxes when due (other than those Taxes which the
Borrower is contesting in good faith by appropriate proceedings and for which
the Borrower has allocated sufficient reserves in accordance with GAAP )), the
non-compliance with which could have a material adverse effect on its business,
operations, assets or financial or other condition, as contemplated hereby, or
the ability of the Borrower to perform its obligations under this Agreement, the
Note, or the other Loan Documents and (b) to maintain, to obtain or to cause to
be obtained any permit, license, consent or approval of any governmental
authority and make any filing or registration therewith which is or shall be
required with respect to the performance of its obligations under this
Agreement, the Note or the other Loan Documents or for the operation of its
business as presently conducted or as contemplated by it.
10.4 to at all times preserve and keep in full force and effect its
corporate existence and remain a United States Citizen.
10.5 promptly upon becoming aware thereof, to give Lender written notice
about any material adverse change in the business, operations or financial
condition of the Borrower.
10.6 promptly upon becoming aware thereof, to give Lender written notice of
the commencement, existence or threat of any proceeding by or before any court
or administrative agency against or affecting the Borrower which, if adversely
decided, would have a material adverse effect on the business, operations or
financial condition of the Borrower or on the ability of the Borrower to perform
its obligations under this Agreement, the Note, or the other Loan Documents to
which it is a party.
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10.7 not to enter into any merger, reorganization, or consolidation or wind
up, liquidate or dissolve, nor agree to do any of the foregoing.
10.8 not to convey, assign, sell, mortgage, encumber, pledge, hypothecate,
grant a security interest in, grant options with respect to, lease or otherwise
dispose of all or any part of any legal or beneficial interest in the Aircraft
or any interest therein other than a Permitted Lien (as defined in Security
Agreement);
10.9 not to convey, assign, transfer or otherwise dispose of all or
substantially all of the assets of the Borrower.
10.10 to furnish to the Lender simultaneously with the delivery of any
financial statements delivered by the Guarantor to the Lender pursuant to the
terms of the Guaranty, an officer's certificate from the chief financial officer
of the Borrower certifying that the Borrower has complied with all of the
covenants of the Borrower set forth in the Loan Documents and that no Default or
Event of Default has occurred and is continuing.
10.11 to promptly furnish to Lender any other information concerning the
Borrower in such form as Lender may reasonably request.
10.12 in connection with the execution of any Service Agreement with
respect to any of the Aircraft, to simultaneously deliver to Lender an
Assignment.
10.13 the Borrower shall take all actions as are required to keep the
representations and warranties applicable to it in Section 9.1 (b), (c), (d),
(i), (j), (k) and (p), hereof true and correct, in all material respects, until
such time as all of the Loan shall have been paid in full.
11. FORCE MAJEURE, CHANGE IN LAW, INCREASED COSTS.
11.1 The Lender shall not be held responsible for any loss or damage
arising out of any action taken or omitted by Lender (including but not limited
to the failure to advance the Commitment) or to which Lender becomes subject
resulting from a legal enactment or any measure of a public authority, or any
war, strike, boycott, blockade, flood, natural disaster, act of God or any other
cause beyond the Lender's control (a "Force Majeure").
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11.2 In the event that in the reasonable judgment of Lender, the making or
maintaining of the Loan by the Lender or the performance by the Borrower of any
obligation on its part to be performed hereunder or under any other Loan
Document to which they are a party has become unlawful by reason of any change
after the date of this Agreement in any applicable law or governmental
regulation or order or in any requirement of any monetary authority whether or
not having the force of law, or in the interpretation of any of the same, with
respect to this Agreement, any other Loan Document to which it is a party or the
Loan, then the Lender shall notify the Borrower thereof immediately and to the
extent that the Commitment has not been made available, the obligation pursuant
to Section 2 of the Lender to make its Commitment available shall terminate, and
in the case the Commitment has been made available the Borrower shall within 30
days after receipt of such notice or any later date permitted by applicable law
or governmental regulation or order repay the Loan and pay interest accrued
thereon at the Interest Rate and all other sums payable hereunder and all actual
out-of-pocket expenses incurred by Lender in complying with any changed law,
governmental regulation or order or any requirement of any monetary authority
prior to the date on which the Borrower repays the Loan, and all accrued
interest thereon, pursuant to this Section 11.2, if and to the extent such
expenses are incurred in relation to the Commitment.
11.3 Should the Lender become subject to levies, imposts, duties, fees, or
sales, use, excise, gross receipts, value added, personal property, stamp or
documentary taxes, ad valorem taxes, license fees, registration fees,
assessments, fines, penalties or similar charges imposed on the Aircraft and all
other taxes of whatsoever kind imposed upon Lender with respect to the Aircraft
or this Agreement, any other Loan Document, the transactions contemplated by any
of the aforesaid documents or any documents executed in connection therewith or
contemplated thereby, or the payments to be made pursuant to this Agreement and
the Note and any other payments of whatsoever kind required to be paid by the
Borrower to the Lender pursuant to the terms of this Agreement excluding,
however, any taxes imposed upon or measured by the income or earnings and
profits of Lender resulting from the transactions contemplated by this Agreement
or otherwise (collectively, "Taxes"), which will increase the Lender's total
cost with respect to the Loan, then, in such event, the Borrower, upon receipt
of written notice from the Lender (the "Tax Notice"), shall pay to the Lender an
amount which will compensate the Lender for such increased costs.
12. PAYMENTS.
12.1 All payments required to be made to the Lender hereunder or under the
Note shall be due at 12:00 noon, New York time, on the date when due, without
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presentment, demand, protest or notice of any kind, all of which are expressly
waived. Such payments shall be made in Dollars via wire transfer to the
following account at the financial institution listed below:
Citibank
New York, New York
ABA No.: 021000089
In Favor of: FINOVA Capital Corporation
Account No.: 4072-7239
Reference: CEF/ Mercy Air
Attention: P. Marchant
or to such other account at such other financial institution as Lender may
designate by written notice sent pursuant to Section 15 hereof.
12.2 All payments falling due on a date that is not a Banking Day shall be
paid on the next succeeding Banking Day.
12.3 Should the Borrower fail to pay any sum on the due date for payment
thereof, whether by acceleration, prepayment or otherwise, and in addition to
any other sum or fees which may become payable hereunder or under the Note or
the Security Agreement, the Borrower shall pay interest on such sum from the due
date up to and including the date of actual payment at an annual interest rate
equal to the Overdue Interest Rate.
12.4 All payments by the Borrower under this Agreement shall be made
without deduction by reason of any defense, set off or counterclaim of any kind,
nature or description whatever (subject to the provisions of Section 12.5
hereof).
12.5 All payments under this Agreement shall be made free and clear of, and
without deduction for, any Taxes, now or hereafter imposed by or within any
governmental authority or pursuant to any governmental rule or regulation or any
administrative subdivision or taxing authority thereof or herein, respectively,
unless the Borrower is compelled by law to deduct or withhold such Taxes, in
which event the Borrower shall pay to the Lender such additional amounts as
shall result in the effective receipt by the Lender of the gross amount of all
sums due the Lender hereunder and under the Note had no such deduction or
withholding been made; PROVIDED, HOWEVER, that Borrower shall have no obligation
to pay any additional amount with respect to United
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States withholding taxes imposed as a result of any transfer, assignment or
grant of a participation in Lender's rights hereunder to a foreign party.
13. EVENTS OF DEFAULT.
13.1 Upon the occurrence of any of the following, each of which is referred
to as an Event of Default:
(a) (i) The failure of the Borrower to pay when due and payable any
principal portion of the Loan or accrued interest thereon within ten (10)
days of the due date thereof (whether by reason of stated maturity or due
date, notice of prepayment, cancellation, acceleration or otherwise);
(ii) The failure of the Borrower to pay when due and payable any
amounts (other than principal or interest) due with respect to this
Agreement, the Note, or the Security Agreement, or other sums which may
become due hereunder or under any Loan Document within fifteen (15) days
after delivery of notice thereof from the Lender to the Borrower;
(b) (i) Any lapse of, or failure to maintain, insurance coverage on
the Aircraft required to be maintained under the Security Agreement and the
Insurance Side Letter;
(ii) Any failure of the Borrower to perform its obligations set forth
in Sections 10.2, 10.5, 10.6 or 10.8 hereof;
(iii) Any failure by the Borrower to perform or cause to be performed
its obligations as set forth in the Security Agreement concerning the
preparation or recordation of any document or instrument required by Lender
for the maintenance or perfection of any lien on the Mortgaged Property;
(iv) Any failure of the Borrower to perform or cause to be performed
its obligations set forth in the Security Agreement concerning the
maintenance of the Aircraft within thirty (30) days after notice thereof
from the Lender; or
(v) Any failure by either the Borrower or the Guarantor to fulfill any
other covenant or to perform any other obligation on its part to be
performed under any Loan Document to which it is a party and such failure
is not cured within thirty (30) days after notice thereof from the Lender;
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(c) Any representation or warranty made by the Borrower or the Guarantor in
this Agreement or any other Loan Document or any financial statement shall prove
to have been untrue, inaccurate or incomplete in any material respect at the
time when made or when effective and such party fails to do that which shall be
necessary in order that said representation or warranty shall be true, accurate
or complete within thirty (30) days after the earlier of actual knowledge
thereof by an officer of the Borrower or the Guarantor or of receipt of notice
thereof;
(d) Any approval required from or to be issued by the Borrower or by the
Guarantor in connection with this Agreement or under any Loan Document or the
transactions contemplated herein or therein, shall be revoked, rescinded,
suspended or otherwise limited in effect and same shall not have been reinstated
within thirty (30) days after the first effective date of such revocation,
rescission, suspension or limitation;
(e) Either of the Borrower or the Guarantor shall file a voluntary petition
in bankruptcy or a voluntary petition or an answer seeking readjustment of its
debts or for any other relief under any bankruptcy, insolvency, or other similar
act or law of any jurisdiction, domestic or foreign, now or hereafter existing,
or any action by either of the Borrower or the Guarantor indicating its consent
to, approval of, or acquiescence in, any such petition or proceeding; or if
either of the Borrower or the Guarantor shall apply or sustain the appointment
by consent or acquiescence of, a receiver or trustee for either of the Borrower
or the Guarantor or for all or a substantial part of their respective
properties; or if either of the Borrower or the Guarantor shall make an
assignment for the benefit of its creditors, or if either of the Borrower or the
Guarantor shall fail to pay or becomes unable to pay its debts as they mature;
(f) An involuntary petition against either of the Borrower or the Guarantor
in bankruptcy or seeking readjustment of its debts or for any other relief under
any bankruptcy, insolvency, or other similar act or law of any jurisdiction,
domestic or foreign, now or hereafter existing; or a receiver or trustee shall
be involuntarily appointed for either of the Borrower or the Guarantor or for
all or a substantial part of its property; or a warrant of attachment, execution
or similar process against any substantial part of the property of either of the
Borrower or the Guarantor shall be served on either of the Borrower or the
Guarantor and such events continues for sixty (60) days undismissed, unbonded or
undischarged;
(g) This Agreement or any Loan Document shall at any time after its
respective execution and delivery and for any reason cease to be in full force
and effect or any certificate, instrument or documents issued and executed
pursuant hereto or thereto
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<PAGE>
shall for any reason cease to be effective to constitute a valid and perfected
first priority Lien and security interest in and to the Mortgaged Property
except for Permitted Liens;
(h) A material, adverse change in the financial condition of either of the
Borrower or the Guarantor shall occur;
(i) An "Event of Default" under and as defined in the Wells Fargo Loan
Agreement shall have occurred and be continuing;
(j) If an event of default occurs under a Subsequent Agreement; or
(k) If at any time during the Loan Term, the Borrower is not the wholly
owned subsidiary of the Guarantor.
13.2 Upon the occurrence of any Event of Default set forth in Section
13.1(e) or (f) hereof and without notice to the Borrower, the outstanding
principal of, and all accrued interest on, the Loan and the Note, and any and
all other sums due to Lender under this Agreement, the Note and any other Loan
Document shall be due and payable. Upon the occurrence of any other Event of
Default, Lender may declare the entire outstanding principal of, and all accrued
interest on, the Loan and the Note and any and all other sums due to Lender
under this Agreement, the Note or any other Loan Document to be forthwith due
and payable and such principal, interest and other amounts shall thereupon
become due and payable. Presentment, demand (other than as set forth in the
immediately previous sentence), protest or other notice of any kind are hereby
expressly waived, anything contained herein or in the Note or other Loan
Document to the contrary notwithstanding, and Lender may exercise any and all
rights and remedies of a secured party under the Arizona Uniform Commercial Code
hereunder and under the Security Agreement, or under any governing law.
13.3 If Lender shall be prevented by any order of any court or by operation
of any law from sending any notice permitted or required to commence a period
during which the Borrower may cure any Event of Default hereunder, then the
period during which the Borrower may cure such Event of Default shall commence
to run without notice on the first date on which Lender would have been entitled
to give such notice but for the effectiveness of such order or law.
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14. FEES AND EXPENSES.
14.1 The Borrower will on the Closing Date and subsequently thereafter upon
receipt of invoices by Lender or upon Lender's demand, pay to or reimburse
Lender for: (a) all reasonable out-of-pocket expenses of Lender incurred in
connection with the negotiation, drafting, execution and delivery of this
Agreement and each Loan Document, including, without limitation, all travel
expenses, inspection costs, appraisal fees, audit fees, due diligence search
costs, registration fees and costs, and reasonable legal fees and disbursements
of Lender's counsel (including, without limitation, the amount of the fees and
disbursements incurred by, William C. Boston & Associates, special FAA counsel,
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<PAGE>
and Todd & Levi, LLP); provided, however, that the Borrower's obligation with
respect to legal fees and disbursements shall not exceed $25,000.00; provided,
further, that the $25,000.00 limitation on legal fees and expenses shall not
apply to any other out-of-pocket costs and expenses incurred by the Lender and
(b) for all out-of-pocket expenses
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<PAGE>
of Lender reasonably incurred in connection with the preservation and/or
enforcement of any rights granted to the Lender hereunder or under any other
Loan Document.
14.2 The Guarantor has previously paid to the Lender a commitment fee equal
to $100,000.00 (the "Commitment Fee"). The Lender shall apply such fee to the
expenses payable by the Borrower pursuant to Section 14.1 and the remainder
shall be applied to the amounts due by the Borrower to the Lender on the first
Repayment Date with respect to the Loan.
14.3 The Borrower's obligations under this Section 14 shall survive the
payment in full of the principal of the Loan, accrued interest thereon and all
other amounts due hereunder. This Agreement shall remain in full force effect
until Borrower's obligations under this Section 14 are satisfied.
15. NOTICES.
Except as otherwise specifically provided to the contrary herein or in the
Security Agreement:
15.1 Every notice or demand under this Agreement shall be in writing and
may be given or made by registered mail, return receipt requested, or by
internationally recognized overnight courier service.
15.2 Every notice or demand shall be sent, in the case of internationally
recognized overnight courier or registered mail, to the Lender or to the
Borrower, at its respective address, as set forth in Section 1.2 hereof.
15.3 Every notice or demand shall, except so far as otherwise expressly
provided by this Agreement, be deemed to have been received, in the case of a
notice or demand sent by internationally recognized overnight courier service or
registered mail, when actually delivered to the Borrower or the Lender at their
respective addresses referred to in Section 15.2 or as of the date on which
receipt of such notice or demand delivered by overnight courier or registered
mail is refused or such courier or the U.S. Postal Service advises that such
notice or demand is not deliverable at the address set out in Section 1.2.
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16. ENTIRE AGREEMENT; NO ORAL CHANGE.
This Agreement (including all Exhibits and Appendices hereto and documents
or instruments executed in connection herewith) and all of the other Transaction
Documents embody the entire agreement and understanding between the Borrower and
Lender relating to the subject matter hereof and thereof and supersede all prior
agreements and understandings relating hereto and thereto and none of the
parties hereto or thereof shall be bound by or charged with any oral or written
agreements, representations, warranties, statements, promises or understandings
not specifically set forth herein or therein. This Agreement may not be changed
and no right granted or obligation imposed hereunder may be waived orally, but
only by an instrument in writing signed by the party against whom enforcement of
any waiver, change, modification or discharge is sought.
17. GOVERNING LAW; JURISDICTION AND VENUE.
THIS AGREEMENT SHALL BE DEEMED TO HAVE BEEN NEGOTIATED AND MADE IN, AND
SHALL BE GOVERNED AND INTERPRETED UNDER THE LAWS OF, THE STATE OF ARIZONA
APPLICABLE TO AGREEMENTS MADE BY RESIDENTS THEREOF TO BE WHOLLY PERFORMED
THEREIN. Each of the Borrower and the Lender hereby agree that all actions or
proceedings initiated by the Borrower and arising directly or indirectly out of
this Loan Agreement shall be litigated exclusively in the Superior Court of
Arizona, Maricopa County, or the United States District Court for the District
of Arizona (the "Arizona Courts"), and that any action initiated by the Lender
and arising directly or indirectly out of this Loan Agreement may be litigated
in any jurisdiction, at Lender's discretion. Each of the Borrower and Lender
hereby: (a) expressly submit and consent in advance to the jurisdiction and
venue of the Arizona Courts in any action or proceeding commenced by the
Borrower or the Lender in any of the Arizona Courts, and (b) agree that
jurisdiction and venue is proper in such courts. Each of the Borrower and the
Lender waives any claim that Phoenix, Arizona or the District of Arizona is an
inconvenient forum or an improper forum based on lack of venue. Should either of
the Borrower or the Lender, as the case may be, after being properly served,
fail to appear or answer any summons, complaint, process or paper so served
within 30 days after service thereof, each of the Borrower and the Lender
acknowledge that as a result thereof, an order and/or judgment may be entered by
the Lender or the Borrower against the other as demanded or pleaded for in such
summons, complaint, process or papers. The exclusive choice of forum set forth
herein shall not be deemed to preclude the enforcement by the
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Lender or the Borrower, as the case may be, of any judgment in any other
appropriate jurisdiction.
18. USURY.
Notwithstanding any provision to the contrary herein contained, Lender
shall not collect a rate of interest on any obligation owing by the Borrower to
Lender in excess of the maximum rate of interest permitted by applicable law.
The Borrower understands and believes that the lending transaction which is the
subject of this Agreement complies with all applicable usury laws; however, if
any interest or other charges in connection with such lending transaction is
ever determined to exceed the maximum amount permitted by law, then the Borrower
agrees that (a) the amount of interest or charges payable pursuant to this
Agreement and the Note shall be reduced to the maximum amount permitted by law,
and (b) any excess amount previously collected from the Borrower in connection
with this Agreement or Note that exceeds the maximum amount permitted by law
shall be credited against the principal amount of the Loan then outstanding. If
the outstanding principal balance of the Loan has been paid in full, the excess
amount paid shall be refunded to the Borrower. The "contracted for rate of
interest" of the Commitment to be advanced pursuant to the terms hereof
includes, without limitation, the following: (i) the Interest Rate, calculated
and applied to the principal balance of the Loan in accordance with the
provisions of this Agreement and the Note; (ii) the Overdue Interest Rate to be
applied with respect to the principal balance of the Loan outstanding in
accordance with the provisions of Section 12.3 hereof; (iii) the amounts
referred to in Section 14 hereof, and (iv) all fees, charges, goods, things in
action or any sum or things of value ("Additional Sums") paid or payable by the
Borrower whether pursuant to this Agreement or any other Loan Document. If any
such Additional Sums may, under applicable law, be deemed to be interest with
respect to the lending transaction which is the subject of this Agreement, then,
for the purpose of any applicable law that may limit the maximum amount of
interest to be charged with respect to the lending transaction which is the
subject of this Agreement, such Additional Sums shall be payable by the Borrower
as, and shall be deemed to be, additional interest, and for such purposes only,
the agreed upon and "contracted for rate of interest" of this transaction shall
be deemed to be increased by the rate of interest resulting from the Additional
Sums.
19. NO BROKER.
The Borrower hereby represents and warrants to the Lender that no broker
retained by the Borrower brought about the transactions contemplated hereby and
each Borrower hereby agrees to indemnify and hold the Lender harmless from, any
and all
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<PAGE>
liabilities and costs (including with out limitation, costs of counsel) to any
person or entity claiming brokerage commissions or finder's fees on account of
such broker being retained by the Borrower in connection with this transaction.
20. SURVIVAL.
Each of the representations, warranties and covenants of the Borrower
contained herein shall survive the closing of the transactions herein
contemplated.
21. INDEMNIFICATION.
In addition to the Borrower's obligations and Lender's remedies provided
elsewhere in this Agreement: (a) the Borrower hereby indemnifies Lender and
agrees to hold Lender harmless against any and all liabilities, damages, losses,
claims, reasonable costs or expenses whatsoever, and to reimburse Lender for any
reasonable legal or other fees or expenses (including but not limited to legal
fees and expenses and the fees and expenses of expert witnesses) incurred by it
in connection with any claim or defending or prosecuting any action or
proceeding relating to the use, possession, ownership and operation of the
Aircraft; and (b) the Borrower hereby indemnifies the Lender and agrees to hold
Lender harmless against any and all liabilities, damages, losses, claims, costs
or expenses whatsoever and to reimburse Lender for any reasonable legal or other
fees or expenses incurred by it in connection with or arising out of or
resulting from any breach of warranty or material misrepresentation by the
Borrower, or the performance or non-performance of any covenant or obligation to
be performed on the part of the Borrower, under this Agreement, the Note or any
Loan Document, or arising out of or resulting from any misrepresentation or
omission from any certificate, instrument or paper delivered or to be delivered
by the Borrower to Lender pursuant to this Agreement or any Loan Document or in
connection with the transactions contemplated herein or therein.
22. WAIVER OF JURY.
EACH OF THE BORROWER AND LENDER IRREVOCABLY WAIVE THE RIGHT TO A TRIAL BY
JURY IN ANY ACTION OR PROCEEDING BROUGHT TO ENFORCE ANY PROVISION OF ANY OF THE
LOAN DOCUMENTS.
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<PAGE>
23. ASSIGNMENT, SUCCESSORS AND ASSIGNS.
23.1 The Borrower shall not assign any rights under this Agreement nor
shall any of the Borrower's duties hereunder or under the Note, the Security
Agreement, or any of the other Loan Document be assigned or delegated without
the prior written consent of Lender.
23.2 Lender may assign or obtain participations with other Persons in
regard to its rights hereunder and under the Note and any other Loan Document
and in respect of the Loan, provided only that no such assignment or
participation shall impose any greater obligation on the Borrower than set forth
herein or therein. Nothing contained in this Agreement, express or implied, is
intended to confer upon any person or entity, other than the parties hereto and
their permitted successor in interest and permitted assigns, any rights or
remedies under or by reason of this Agreement unless expressly herein stated to
the contrary. All covenants, representations, warranties and agreements of the
parties contained herein shall, subject to the provisions of the preceding
sentence, be binding upon and inure to the benefit of their respective
successors and permitted assigns.
24. CAPTIONS AND SECTION HEADINGS; CONSTRUCTION.
Captions and section headings used herein are for convenience only and are
not a part of this Agreement and shall not be used in construing it. This
Agreement and all documents executed in connection herewith shall be construed
without regard to the identity of the party which prepared the same, and no
presumption shall arise as a result thereof.
25. SEVERABILITY.
In the event that any one or more of the provisions of this Agreement, any
Loan Document, or the Note shall be invalid, illegal or unenforceable in any
respect or in any jurisdiction, the validity, legality and enforceability of the
remaining provisions contained herein therein or of the same provisions in any
other jurisdiction shall not in any way be affected or impaired thereby.
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<PAGE>
26. TIME OF THE ESSENCE.
Time is of the essence with respect to all of the payment and performance
obligations of the Borrower hereunder. Time is of the essence with respect to
all of the performance obligations of Lender hereunder.
27. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of which
shall constitute an original and, when taken together, all of which shall
constitute one and the same Agreement.
28. TERM OF AGREEMENT.
This Agreement and all covenants, agreements, representations and
warranties made herein shall survive the making by the Lender of the Loans and
the execution and delivery to the Lender of the Note and shall continue in full
force and effect until the payment in full of all of the Borrower's obligations
under the Loan Documents.
29. PERFORMANCE BY THE LENDER.
If the Borrower fails to perform any of its obligations under the Loan
Documents in a timely fashion, the Lender shall be entitled, but not obligated,
to perform such obligation at the expense of the Borrower. The Lender shall
promptly be reimbursed for all reasonable expenses incurred by it pursuant to
this Section 29 with interest from the date such expenses shall have been
incurred until such expenses shall have been paid in full in an amount equal to
the Overdue Interest Rate.
30. PUBLICITY. Lender is hereby authorized to issue appropriate press
releases and to cause a tombstone to be published announcing the consummation of
this transaction and the aggregate amount thereof.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized officers as of the day and year first
above written.
Borrower: Lender:
MERCY AIR SERVICE, INC. FINOVA CAPITAL CORPORATION
By: /s/ David L. Dolstein By: /s/ Pamela Marchant
------------------------------- -------------------------------
Name: David L. Dolstein Name: Pamela Marchant
----------------------------- -----------------------------
Title: President Title: Vice President
---------------------------- ----------------------------
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<PAGE>
APPENDIX "I" - REPAYMENT SCHEDULE
TO SECURED LOAN AGREEMENT
The Borrower shall repay the Loan in accordance with the amortization
schedule provided on the following three pages; provided, however, that on the
final Repayment Date, the Borrower shall repay the remaining unpaid principal
balance of the Loan, plus all interest accrued and unpaid on the Loan calculated
at the Interest Rate and all other amounts payable by the Borrower to the Lender
under the Loan Documents.
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<PAGE>
SCHEDULE I
PERMITTED INDEBTEDNESS
(i) a working capital facility in an amount not more than $700,000.00 with
California State Bank, N.A. or any other bank or financing party .
(ii) a loan from the Sellers to the Guarantor in an amount not to exceed
$1,500,000.00 (plus or minus 15% based on the actual purchase price in
connection with the stock and asset acquisition) which will be secured by
accounts receivable of the Borrower
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AIRCRAFT CHATTEL MORTGAGE
AND SECURITY AGREEMENT
This AIRCRAFT CHATTEL MORTGAGE AND SECURITY AGREEMENT (this "Chattel
Mortgage"), dated July 31, 1997, between MERCY AIR SERVICE, INC., a corporation
organized and existing under the laws of the State of California having its
chief executive office and principal place of business at 8190 Mango, Fontana,
California 92334 (hereinafter called the "Mortgagor"), as mortgagor, and FINOVA
CAPITAL CORPORATION, a Delaware corporation, having an office at 115 West
Century Road, Paramus, New Jersey 07652 (hereinafter called the "Mortgagee"), as
mortgagee.
W H E R E A S:
(A) The Mortgagor, as borrower, and Mortgagee, as lender, have entered into
a Secured Loan Agreement dated as of July 31, 1997 (as at any time amended or
supplemented, hereinafter referred to as the "Loan Agreement"), providing for
the making of the Loan (hereinafter defined) by the Mortgagee to the Mortgagor;
(B) The Mortgagee has agreed to make the Loan to the Mortgagor to enable,
among other things, the Mortgagor to refinance the existing secured indebtedness
relating to the Aircraft; and
(C) It is a condition precedent to the Mortgagee's obligation to make the
Loan to the Mortgagor under the Loan Agreement that Mortgagor execute and
deliver this Chattel Mortgage for the purposes, among other things, of securing
(i) the payment of all sums which may become payable by the Mortgagor under the
Loan Agreement and this Chattel Mortgage and each other Loan Document
(hereinafter defined), and (ii) the performance of the covenants, undertakings
and obligations of the Mortgagor under the Loan Agreement, this Chattel Mortgage
and each other Loan Document (the payment and performance obligations of the
Mortgagor described in clauses (i) and (ii) above being hereinafter collectively
referred to as the "Obligations"), and for the purpose of subjecting the
properties and assets hereinafter described to the Lien of this Chattel
Mortgage.
NOW, THEREFORE, in consideration of the premises and Mortgagee's making the
Loan and other good and valuable consideration the receipt and sufficiency of
which is hereby acknowledged, and intending to be legally bound and to secure
the performance of the Obligations, the Mortgagor does hereby grant, bargain,
sell, transfer, convey and mortgage unto the Mortgagee, its successors and
assigns, and gives to the Mortgagee: (i)
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a first priority security interest in and Lien upon the Flight Equipment
(hereinafter defined) and (ii) a first priority security interest in and Lien
upon all the rest of the following described property (the Flight Equipment
together with the rest of the property described below being hereinafter
collectively referred to as the "Mortgaged Property"), to wit:
SCHEDULE OF MORTGAGED PROPERTY
CLAUSE FIRST.
Airframe
One (1) airframe ("Airframe 47135"), identified as follows:
FAA Registra- Manufacturer's
Manufacturer Model tion Number Serial Number
Bell 222B N408MA 47135
Helicopter
together with all jet fuel, Parts, appliances, modules, instruments, avionics,
rotors, rotor blades, gear boxes, accessories and any other equipment
(including, without limitation, radio and radar) whether now owned or hereafter
acquired from time to time thereto belonging, owned by the Mortgagor and
installed in or appurtenant to Airframe 47135.
Engines
Two (2) Avco Lycoming model LTS101-750C-1 Engines (the "47135 Engines")
(each such engine having less than 750 or more rated take-off horsepower or the
equivalent thereof), identified by the following manufacturer serial numbers:
LE-47155AE
LE-47158AE
together with all Parts, appliances, modules, instruments, accessories and any
other equipment thereto belonging, by whomsoever manufactured, now owned by the
Mortgagor or hereafter acquired by the Mortgagor and installed in or appurtenant
to either of said 47135 Engines.
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<PAGE>
CLAUSE SECOND.
Airframe
One (1) airframe ("Airframe 47516"), identified as follows:
FAA Registra- Manufacturer's
Manufacturer Model tion Number Serial Number
Bell 222U N403MA 47516
together with all jet fuel, Parts, appliances, modules, instruments, avionics,
rotors, rotor blades, gear boxes, accessories and any other equipment
(including, without limitation, radio and radar) whether now owned or hereafter
acquired from time to time thereto belonging, owned by the Mortgagor and
installed in or appurtenant to Airframe 47516.
Engines
Two (2) Avco Lycoming model LTS101-750C-1 Engines (the "47516 Engines")
(each such engine having less than 750 or more rated take-off horsepower or the
equivalent thereof), identified by the following manufacturer serial numbers:
LE-47008AE
LE-47041AE
together with all Parts, appliances, modules, instruments, accessories and any
other equipment thereto belonging, by whomsoever manufactured, now owned by the
Mortgagor or hereafter acquired by the Mortgagor and installed in or appurtenant
to either of said 47516 Engines.
CLAUSE THIRD.
Airframe
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<PAGE>
One (1) airframe ("Airframe 47526"), identified as follows:
FAA Registra- Manufacturer's
Manufacturer Model tion Number Serial Number
Bell 222UT N416MA 47526 Helicopter
together with all jet fuel, Parts, appliances, modules, instruments, avionics,
rotors, rotor blades, gear boxes, accessories and any other equipment
(including, without limitation, radio and radar) whether now owned or hereafter
acquired from time to time thereto belonging, owned by the Mortgagor and
installed in or appurtenant to Airframe 47526.
Engines
Two (2) Avco Lycoming model LTS101-750C-1 Engines (the "47526 Engines")
(each such engine having less than 750 or more rated take-off horsepower or the
equivalent thereof), identified by the following manufacturer serial numbers:
LE-47075AE
LE-47061AE
together with all Parts, appliances, modules, instruments, accessories and any
other equipment thereto belonging, by whomsoever manufactured, now owned by the
Mortgagor or hereafter acquired by the Mortgagor and installed in or appurtenant
to either of said 47526 Engines.
CLAUSE FOURTH.
Airframe
One (1) airframe ("Airframe 47568"), identified as follows:
FAA Registra- Manufacturer's
Manufacturer Model tion Number Serial Number
Bell 222U N415MA 47568
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together with all jet fuel, Parts, appliances, modules, instruments, avionics,
rotors, rotor blades, gear boxes, accessories and any other equipment
(including, without limitation, radio and radar) whether now owned or hereafter
acquired from time to time thereto belonging, owned by the Mortgagor and
installed in or appurtenant to Airframe 47568.
Engines
Two (2) Avco Lycoming model LTS101-750C-1 Engines (the "47568 Engines")
(each such engine having less than 750 or more rated take-off horsepower or the
equivalent thereof), identified by the following manufacturer serial numbers:
LE-47063AE
LE-47140AE
together with all Parts, appliances, modules, instruments, accessories and any
other equipment thereto belonging, by whomsoever manufactured, now owned by the
Mortgagor or hereafter acquired by the Mortgagor and installed in or appurtenant
to either of said 47568 Engines.
CLAUSE FIFTH.
Airframe
One (1) airframe ("Airframe 33060"), identified as follows:
FAA Registra- Manufacturer's
Manufacturer Model tion Number Serial Number
Bell 412 N401MA 33060
together with all jet fuel, Parts, appliances, modules, instruments, avionics,
rotors, rotor blades, gear boxes, accessories and any other equipment
(including, without limitation, radio and radar) whether now owned or hereafter
acquired from time to time thereto belonging, owned by the Mortgagor and
installed in or appurtenant to Airframe 33060.
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<PAGE>
Engines
Two (2) Pratt & Whitney Canada model PT6T-3B Engines (the "33060 Engines")
(each such engine having 750 or more rated take-off horsepower or the equivalent
thereof), identified by the following manufacturer serial numbers:
61584
61585
together with all Parts, appliances, modules, instruments, accessories and any
other equipment thereto belonging, by whomsoever manufactured, now owned by the
Mortgagor or hereafter acquired by the Mortgagor and installed in or appurtenant
to either of said 33060 Engines.
CLAUSE SIXTH.
Airframe
One (1) airframe ("Airframe 36009"), identified as follows:
FAA Registra- Manufacturer's
Manufacturer Model tion Number Serial Number
Bell 412 N586AC 36009
together with all jet fuel, Parts, appliances, modules, instruments, avionics,
rotors, rotor blades, gear boxes, accessories and any other equipment
(including, without limitation, radio and radar) whether now owned or hereafter
acquired from time to time thereto belonging, owned by the Mortgagor and
installed in or appurtenant to Airframe 36009.
Engines
Two (2) Pratt & Whitney Canada model PT6T-3B Engines (the "36009 Engines")
(each such engine having 750 or more rated take-off horsepower or the equivalent
thereof), identified by the following manufacturer serial numbers:
63209
63210
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<PAGE>
together with all Parts, appliances, modules, instruments, accessories and any
other equipment thereto belonging, by whomsoever manufactured, now owned by the
Mortgagor or hereafter acquired by the Mortgagor and installed in or appurtenant
to either of said 36009 Engines.
CLAUSE SEVENTH.
All property which shall be subjected to the Lien of this Chattel Mortgage
by a supplemental chattel mortgage in substantially the form of Schedule II
hereto.
The Airframe and Engines referred to in Clauses First, Second Third,
Fourth, Fifth and Sixth and all property which shall be identified as an
Airframe or an Engine in, and subjected to the Lien of this Chattel Mortgage by,
a supplemental chattel mortgage as provided in this Clause Seventh are
hereinafter collectively referred to as the "Flight Equipment."
CLAUSE EIGHTH.
All warranties, service contracts, product agreements and maintenance
service plans of any manufacturer or of any maintenance or overhaul agency of or
for the Flight Equipment, or any subcontractor or supplier or vendor thereof, to
the extent assignable or enforceable, and any and all rights of the Mortgagor to
compel performance of the terms of such warranties, service contracts, product
agreements and maintenance service plans in respect of any of the Flight
Equipment.
CLAUSE NINTH.
All substitutions, replacements, proceeds (including, but not limited to,
insurance proceeds) and renewals of all property subjected or required to be
subjected to the Lien hereof and all property which shall hereafter become
physically attached to or incorporated in all property subjected or required to
be subjected to the Lien hereof, in each case whether the same are now owned by
the Mortgagor or shall hereafter be acquired by it.
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CLAUSE TENTH.
All monies deposited from time to time with the Mortgagee (including, but
not limited to, insurance proceeds pursuant to Section 2.1 hereof and all
Maintenance Reserves).
CLAUSE ELEVENTH.
All records, logs, manuals and documents or other materials of any kind
relating to the condition, use, location, maintenance of or repairs or overhauls
to all or any part of the Flight Equipment.
CLAUSE TWELFTH.
All insurance policies covering the Flight Equipment which are carried or
maintained to satisfy the terms of this Chattel Mortgage.
CLAUSE THIRTEENTH.
All right, title and interest of Mortgagor in and to any lease, hire,
Service Contract or other agreement for the use of the aircraft (including, but
not limited to the right to receive any rent, insurance proceeds or other
amounts thereunder).
CLAUSE FOURTEENTH.
All Proceeds of any of the foregoing.
Title to or a Lien upon all property mortgaged hereby, or intended to be,
and which is hereafter acquired by the Mortgagor or to which it may at any time
hereafter be, in any manner, entitled at law or in equity, and required to be
subjected hereto or intended so to be, shall vest in the Mortgagee, under the
terms and conditions of this Chattel Mortgage, forthwith upon acquisition
thereof by the Mortgagor, and such property shall be as fully embraced within
the provisions of this Chattel Mortgage and subject to the Lien hereof as if
such property were now owned by the Mortgagor and were specifically described
herein and mortgaged hereby.
TO HAVE AND TO HOLD, all and singular said property unto the Mortgagee, its
successors and assigns, as security as aforesaid.
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All of the Mortgaged Property shall secure all of the Obligations.
IT IS HEREBY COVENANTED AND DECLARED by and between the parties hereto and
their respective successors and assigns that the terms upon which the Mortgaged
Property shall be held, used and operated are as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS. For all purposes of this Chattel Mortgage, unless
the context otherwise requires:
"AIRCRAFT" shall mean, collectively, Aircraft 47135, Aircraft 47516,
Aircraft 47526, Aircraft 47568, Aircraft 33060 and Aircraft 36009.
"AIRCRAFT 47135" shall mean the airframe and engines described in Clause
FIRST of the Granting Clauses, along with any replacement engines related
thereto.
"AIRCRAFT 47516" shall mean the airframe and engines described in Clause
SECOND of the Granting Clauses, along with any replacement engines related
thereto.
"AIRCRAFT 47526" shall mean the airframe and engines described in Clause
THIRD of the Granting Clauses, along with any replacement engines related
thereto.
"AIRCRAFT 47568" shall mean the airframe and engines described in Clause
FOURTH of the Granting Clauses, along with any replacement engines related
thereto.
"AIRCRAFT 33060" shall mean the airframe and engines described in Clause
FIFTH of the Granting Clauses, along with any replacement engines related
thereto.
"AIRCRAFT 36009" shall mean the airframe and engines described in Clause
SIXTH of the Granting Clauses, along with any replacement engines related
thereto.
"AIRCRAFT ENGINES", "APPLIANCES" and "SPARE PARTS" shall have the
respective meanings given to these terms in Title 49 of the United States Code
as in effect on the date of this instrument.
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"AIRFRAME" shall mean any of the airframes that constitute a part of any of
the Aircraft.
"CHATTEL MORTGAGE" shall mean this instrument.
"CLOSING DATE" shall mean the date the Loan is advanced under the Loan
Agreement and shall be the date hereof.
"DEFAULT" shall mean an event which, with the passage of time, or giving of
notice, or both, would constitute an Event of Default . "ENGINE" or "ENGINES"
shall mean any or all of the Engines which are part of the Flight Equipment.
"EVENT OF DEFAULT" shall have the meaning ascribed to such term in Schedule
I hereto.
"EVENT OF LOSS" with respect to any of the Aircraft, any of the Airframes
or any Engine shall mean (a) the loss of use of such property due to the
destruction of or damage to such property which renders repair uneconomic or
which renders such property permanently unfit for normal use by Mortgagor for
any reason whatsoever; (b) any damage to such property which results in an
insurance settlement with respect to such property on the basis of an actual, or
a constructive total loss; (c) the theft or disappearance of such property for a
period in excess of 90 days; (d) the confiscation, condemnation, or other
requisition of title to, or use of, such property by any governmental or
purported governmental authority, which in the case of any event referred to in
this clause (d) shall have resulted in the loss of possession of such property
by Mortgagor or loss of title by Mortgagor for a period in excess of 90 days or
(e) the "grounding" of the Aircraft for a period of 90 days due to any law,
rule, regulation, order or other action by the FAA or by any governmental body
(including any court) having jurisdiction affecting such Aircraft.
"EXCLUDED AMOUNTS" means (i) proceeds of public liability insurance in
respect of the Mortgaged Property payable as a result of insurance claims made,
or losses suffered, by Mortgagor, any affiliate of Mortgagor or any director,
officer, employee, representative or agent of Mortgagor or any such affiliate,
(ii) proceeds of insurance maintained with respect to the Mortgaged Property by
Mortgagor or any such affiliate and not required under any other Loan Document,
(iii) any interest paid or payable on any amounts described in clauses (i)
through (ii) of this definition, and (iv) the proceeds from
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the enforcement of the payment of any amount described in clauses (i) through
(ii) of this definition.
"FEDERAL AVIATION ADMINISTRATION" OR "FAA" shall mean the Federal Aviation
Administration, or any successor or substituted governmental authority at the
time having jurisdiction over the Flight Equipment.
"MAINTENANCE RESERVES" shall have the meaning set forth in Section 3.5(B)
hereof.
"FLIGHT EQUIPMENT" shall have the meaning ascribed to such term in the
granting clause SEVENTH hereof.
"FLIGHT HOUR" with respect to each Aircraft, shall mean each hour or
fraction thereof elapsed from the moment the Aircraft leaves the ground through
the moment the Aircraft touches down upon the ground.
"GAAP" shall mean generally accepted accounting principles in the United
States of America and Canada (as such principles may change from time to time)
applied on a consistent basis (except for changes in application in which
Mortgagor's independent certified public accountants concur), applied both to
classification of items and amounts.
"GUARANTOR" shall mean Air Methods Corporation, a corporation organized and
existing under the laws of the State of Delaware.
"GUARANTY" shall mean the continuing Guaranty and Subordination Agreement
dated as of the Closing Date between the Guarantor and the Mortgagee.
"INSURANCE SIDE LETTER" shall mean the side letter dated on or before the
Closing Date between the Mortgagor and the Mortgagee which sets forth the
insurance requirements with respect to the Aircraft.
"LAW" shall mean any law (including common law), constitution, statute,
treaty, regulation, rule, ordinance, order, injunction, writ, decree or award of
any government, any governmental agency or any court.
"LIEN" shall mean any mortgage, pledge, lien, charge, encumbrance, option,
security interest or lease (including any conditional sale agreement, equipment
trust
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agreement, or other title retention agreement) or right or claim of any person,
whether voluntary or involuntary in nature.
"LOAN" shall mean the principal amount of the loan made by the Mortgagee
pursuant to the Loan Agreement, which is outstanding from time to time and due
the Mortgagee under the Loan Agreement and the Notes.
"LOAN AGREEMENT" shall have the meaning ascribed to such term in Paragraph
(A) of the recitals of this Chattel Mortgage.
"LOAN DOCUMENTS" shall mean, collectively, the Loan Agreement, the Note,
this Chattel Mortgage, the Guaranty, the Insurance Side Letter and all other
documents executed in connection with each of the foregoing agreements or
contemplated thereby or the transactions related thereto.
"LOAN TERM" shall mean the period commencing on the Closing Date through
and including that date which shall be the earlier of: (i) the date on which the
Loan together with all fees and sums which may become payable under the Loan
Agreement and under the other Loan Documents becomes repayable, or (ii) the date
on which the Loan becomes payable in full under the provisions of Section 7 or 8
of the Loan Agreement.
"MAINTENANCE RESERVES" shall have the meaning set forth in Section 3.5(B)
hereof.
"MORTGAGOR ORDER" and "MORTGAGOR REQUEST" shall mean, respectively, a
written order or request signed in the name of the Mortgagor by a member of the
Mortgagor and delivered to the Mortgagee in accordance with the terms hereof.
"NOTE" shall mean the Promissory Note, dated the Closing Date, issued by
the Mortgagor to the Mortgagee pursuant to the terms of the Loan Agreement.
"OBLIGATIONS" shall have the meaning set forth in Paragraph (C) of the
recitals of this Chattel Mortgage.
"OFFICER'S CERTIFICATE" shall mean a certificate signed by an authorized
officer of the Mortgagor and delivered to the Mortgagee.
"PERMITTED LIENS" shall mean:
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(i) materialmen's, mechanics', workmen's, repairmen's,
employees' or other like Liens arising in the ordinary course of Mortgagor's
business securing obligations that are not overdue for a period of more than
thirty (30) days or are being contested in good faith by appropriate
proceedings, so long as during such 30-day period there is not, or such
proceedings do not involve, any material risk of the sale, forfeiture or loss of
either of the Airframe or any Engine or any interest therein;
(ii) Liens arising out of any judgment or award against
Mortgagor, unless the judgment secured shall not, within thirty (30) days after
the entry thereof, have been discharged, vacated, reversed or execution thereof
stayed pending appeal or shall not have been discharged, vacated or reversed
within thirty (30) days after the expiration of such stay, so long as during any
such 30-day period there is not, or any such judgment or award does not involve,
any material risk of the sale, forfeiture or loss of either of any Airframe or
any Engine or any interest therein unless Mortgagor shall have provided a bond
or other security in an amount and under terms reasonably satisfactory to
Mortgagee;
(iii) any Liens for Taxes: (a) which the Mortgagor is contesting
in good faith through appropriate proceedings; (b) for which the Mortgagor is
recording reserves in accordance with GAAP or otherwise maintaining reserves;
and (c) which Liens do not involve any material risk of the sale, forfeiture or
loss of any Airframe or Engine or any interest therein;
(iv) any other Lien with respect to which Mortgagor shall have
provided a bond or other security in an amount and under terms reasonably
satisfactory to Mortgagee;
(v) any Lien, lease or Service Contract consented to by the
Mortgagee; and
(vi) the Lien of this Chattel Mortgage.
"PERMITTED SALE" shall mean a sale of any of the Aircraft consented to by
the Mortgagee or a sale of an Aircraft in connection with a prepayment of a
portion of the Loan as set forth in Section 7.2 of the Loan Agreement.
"PROCEEDS" shall have the broadest meaning permissible under the Uniform
Commercial Code of Arizona and shall include all proceeds, whether such proceeds
are money, accounts, instruments, chattel paper, documents, equipment,
inventory, farm products, consumer goods, general intangibles, or deposit
accounts, and, in any event,
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shall include but shall not be limited to (i) all rents, fees, lease payments,
sublease payments and all other amounts due or collected under or in respect of
leases, subleases, all insurance proceed, judgments or awards relating to any of
the foregoing and all goods, documents, instruments, general intangibles,
chattel paper and accounts, wherever located, acquired with the cash proceeds of
such equipment or the proceeds thereof and (ii) any and all payments (in any
form whatsoever) made or due and payable to the Mortgagor, from time to time, in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Mortgaged Property by any governmental
body, authority, bureau or agency (or any person or entity acting under color of
governmental authority).
"REPAYMENT DATE" shall mean each day on which principal or interest is due
on the Loan as set forth in the Loan Agreement.
"SERVICE CONTRACT" shall mean any service contract or wet lease for the
charter of any of the Aircraft.
"SUBSEQUENT AGREEMENT" any credit facility, loan agreement, lease or other
financing document entered into between the Mortgagor or the Guarantor and the
Mortgagee after the date hereof.
"TAXES" shall mean all present and future taxes, levies, imposts, duties or
charges of any nature whatever and wherever imposed, including, without
limitation, value added taxes or similar taxes and any franchise, transfer,
sales, use, business, occupation, excise, personal property, real property,
stamp or other tax imposed by any national or local taxing or fiscal authority
or agency, together with any penalties, additions to tax, fines or interest
thereon, excluding, however, any and all taxes imposed upon or measured by the
income of the Mortgagee; and "TAX" and "TAXATION" shall be construed
accordingly.
"TITLE 49" shall mean Title 49 of the United States Code, and the rules and
regulations promulgated thereunder, as in effect on the date of this Chattel
Mortgage and as modified or amended hereafter, or any successor or substituted
legislation at the time in effect and applicable.
SECTION 1.2 CONSTRUCTION. (A) Unless the context of this Chattel Mortgage
otherwise clearly requires, references to the plural include the singular, the
singular the plural, the part the whole, and "or" has the inclusive meaning
frequently identified by the phrase "and/or." References to "determination" by
Mortgagee include a
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good-faith estimate by Mortgagee (in the case of a quantitative determination)
and a good faith belief by Mortgagee (in the case of a qualitative
determination). References to the terms "acting reasonably" or "reasonably
satisfactory to Mortgagee, acting reasonably" or terms of similar import mean
satisfactory or acceptable to the Mortgagee acting in a reasonable manner but in
accordance with our business practices. The words "herein," "hereunder" and
"hereof" and similar terms in this Chattel Mortgage refer to this Chattel
Mortgage as a whole and not to any particular provision of this Chattel
Mortgage. The Section, Paragraph and other headings contained in this Chattel
Mortgage are for reference purposes only and shall not control or affect the
construction of this Chattel Mortgage or the interpretation thereof in any
respect.
(B) Any defined term contained in this Chattel Mortgage or in any of the
Loan Documents which refers to a document, instrument, agreement or mortgage
shall include any amendments, supplements or modifications entered into from
time to time with respect to such document, instrument, agreement or mortgage.
ARTICLE II
CASH COLLATERAL
SECTION 2.1 A. CASH COLLATERAL. All monies received by the Mortgagee as
proceeds of insurance upon any part of the Mortgaged Property, the Maintenance
Reserves and all monies elsewhere herein provided to be held and applied under
this Section, and all monies, if any, required to be paid to the Mortgagee
hereunder, whose disposition is not elsewhere herein otherwise specifically
provided for (all such monies being hereinafter sometimes called the "Cash
Collateral"), shall be held by the Mortgagee and applied by the Mortgagee from
time to time as provided herein and in the Loan Agreement. Unless otherwise
expressly set forth herein to the contrary, Mortgagee shall have no obligation
to segregate Cash Collateral.
B. PROCEEDS OF INSURANCE USED FOR REPAIR. Provided an Event of Default
shall not have occurred and be continuing, to the extent that any Cash
Collateral is the proceeds of insurance upon any part of the Mortgaged Property
not subject to an Event of Loss, the same may be withdrawn by the Mortgagor and
shall be paid by the Mortgagee, upon Mortgagor Order, (a) to reimburse the
Mortgagor for, and up to an amount not exceeding, expenditures made to repair
and/or restore the property damaged as required hereunder, but only upon receipt
by the Mortgagee of (1) a Mortgagor Request for the withdrawal and payment of
specified proceeds of insurance then included in the Cash Collateral, and (2) an
Officer's Certificate, dated not more than five days prior to the
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application for such withdrawal, stating that expenditures have been made by the
Mortgagor in a specified amount for one or more of the purposes aforesaid, which
shall be briefly described, and also stating that no part of such expenditures
has been or is then being used in any other previous or then pending
application, as the basis for the withdrawal of any Cash Collateral from the
Mortgagee hereunder; or (b) directly to the vendor or contractor who has
provided parts and/or labor, specified proceeds of insurance then included in
the Cash Collateral, upon receipt by the Mortgagee of a Mortgagor Request for
withdrawal and payment of such insurance proceeds and upon receipt by Mortgagee
of an invoice for payment for such labor or parts used to repair the Flight
Equipment, and for which an insurance payment has been made to Mortgagee.
ARTICLE III
PARTICULAR COVENANTS OF THE MORTGAGOR
The Mortgagor covenants, agrees, represents and warrants in particular as
hereinafter in this Article set forth:
SECTION 3.1 WARRANTY AND COVENANT OF TITLE. At the time of the execution
and delivery of this instrument, the Mortgagor owns the Flight Equipment subject
to no Lien, except Permitted Liens, and has full power and authority to grant,
bargain, sell, transfer, convey and mortgage, and give a security interest in,
the Flight Equipment in the manner and form as set forth in this Chattel
Mortgage. Except for a Permitted Sale, the Mortgagor is and shall remain the
legal owner, free and clear of all Liens, of the Flight Equipment.
The Mortgagor hereby does and will forever warrant and defend the title to
and possession of the Mortgaged Property against the claims and demands of all
persons whomsoever, except the claims and demands under the Permitted Liens.
Mortgagor shall preserve and maintain the security interest in the Mortgaged
Property granted by Mortgagor to Mortgagee hereunder. Mortgagor: (a) shall
execute, deliver and file all documents and take all actions necessary to at all
times keep the Lien and security interest granted herein with respect to the
Mortgaged Property, at the Mortgagor's expense, a duly perfected first priority
security interest in and Lien upon the Flight Equipment, and a duly perfected
first priority security interest in and Lien upon all of the other Mortgaged
Property as constituted from time to time, superior to the rights of all third
parties (except Permitted Liens) to the fullest extent permitted by applicable
law, and (b) shall obtain any authorization, approval, license, or consent of
any competent governmental or judicial authority, including, without limitation,
the FAA Aircraft Registry which may be or
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become necessary in order for the Mortgagee to obtain the full benefits of this
Chattel Mortgage and all rights and powers granted or to be granted herein.
SECTION 3.2 RECORDING. (A) The Mortgagor, at its own expense, will record,
re-record, register, re-register, file and re-file this Chattel Mortgage and
each and every supplemental chattel mortgage and such other financing statements
or other instruments in all such jurisdictions and offices as the Mortgagee
reasonably shall from time to time require in order that: (a) the Lien hereof as
a first priority lien on the Flight Equipment and on all of the other Mortgaged
Property, subject to Permitted Liens, (b) the security for the Obligations, and
(c) the rights and remedies of the Mortgagee, may be established, confirmed,
maintained and protected.
(B) The Mortgagor hereby appoints Mortgagee as its irrevocable attorney in
fact (said agency coupled with an interest) to take all such action and execute
all such documents in Mortgagee's own name or in the name of the Mortgagor that
is necessary to carry out the purposes of Paragraph 3.2(A).
(C) Except for a Permitted Sale, the Aircraft shall at all times be
registered in the United States in the name of the Mortgagor.
SECTION 3.3 TO KEEP IN EFFECT AUTHORIZATIONS; TO PAY TAXES. The Mortgagor
will obtain and maintain, or cause to be obtained or maintained, in full force
and effect, any authorization, approval, license, or consent of any governmental
or judicial authority including, without limitation, registration of the
Aircraft with the FAA Aircraft Registry, which may be or become necessary in
order to obtain the full benefits of this Chattel Mortgage and all rights and
remedies granted or to be granted herein, and will not create or suffer to exist
any Lien upon the Mortgaged Property or any part thereof or upon the income
therefrom other than Permitted Liens; and the Mortgagor will from time to time
pay or cause to be paid as they become due and payable all taxes, assessments
and governmental charges lawfully levied or assessed or imposed upon the Lien of
the Mortgagee so that the Lien of this Chattel Mortgage shall at all times be
wholly preserved at the cost of the Mortgagor and without expense to the
Mortgagee; and the Mortgagor will not suffer any other matter or thing
whatsoever whereby the Lien of or security interest created by this Chattel
Mortgage might be impaired.
SECTION 3.4 INDEMNIFICATION. The Mortgagor shall assume liability for and
indemnify, protect, save, and keep harmless the Mortgagee, its officers,
directors, agents, and employees from and against any and all liabilities,
losses, damages, taxes (excluding, however, any and all taxes imposed upon or
measured by the income of the
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Mortgagee), claims, actions, suits, reasonable costs and expenses of whatsoever
kind (excluding, however, (i) any and all taxes imposed upon or measured by the
income of the Mortgagee and (ii) any liabilities, losses, damages or claims
directly resulting from the gross negligence or willful misconduct of the
Mortgagee), including, without limitation, reasonable legal fees and
disbursements, imposed on, incurred by, or asserted against the Mortgagee, its
stockholders, officers, directors, agents and employees in any way relating to
or arising out of the purchase, ownership, delivery, possession, use, operation,
condition, performance, quality, suitability, airworthiness, maintenance,
registration, loss, confiscation, seizure, requisition, lease, sale, or other
disposition of the Mortgaged Property or any part thereof, or this Chattel
Mortgage or any other Loan Document or any of the instruments or agreements to
be entered into by the parties pursuant hereto or thereto.
SECTION 3.5 TO MAINTAIN FLIGHT EQUIPMENT. (A) The Mortgagor shall at all
times maintain, preserve and keep (or cause to be maintained, preserved and
kept) all of the Flight Equipment as from time to time constituted and every
part thereof in good order and repair (ordinary wear and tear excepted): (i) in
order to maintain and preserve at all times the FAA Certificate of Airworthiness
("COA"); (ii) in conformity with Title 49, all FAA regulations, all other local
aviation authority requirements and all other applicable Law; (iii) in
accordance with the Mortgagor's or manufacturer's FAA approved maintenance
program; and (iv) to the extent the Mortgagor or Lessee owns or leases aircraft
of a similar make and model as the Aircraft, in accordance with the same
standards employed by the Mortgagor with respect to such other aircraft. In
complying with items (i), (ii), (iii) and (iv) of the previous sentence the
Mortgagor will make, or cause to be made, all needed and proper service and
repairs to the Flight Equipment, including the completion or termination of all
airworthiness directives and mandatory manufacturer's service bulletins. The
Mortgagor shall perform, or cause to be performed, all other maintenance,
service and repairs to the Flight Equipment necessary to obtain and maintain all
licenses, permits, certificates, registrations or other documents required by
any insurance policy or any governmental authority having jurisdiction regarding
the Flight Equipment.
(B) The Mortgagor will maintain accounting reserves based upon each
Aircraft's hourly usage in the amounts not less than the amounts set forth on
Schedule III attached hereto or in such amounts required pursuant to GAAP
(provided, however, that in all instances such reserves shall properly reflect
the cost of maintaining the Aircraft based on overhaul and maintenance costs in
accordance with industry standards). In the event that the consolidated
financial statements provided by the Guarantor to the Mortgagee pursuant to the
terms of the Guaranty reflect losses in any four successive
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quarterly reporting periods (as determined by the Mortgagee in its reasonable
discretion by examination of the financial statements delivered to the Mortgagee
by the Guarantor pursuant to the terms of the Guaranty) (the "Loss Period"), the
Mortgagor shall pay to the Mortgagee on each Repayment Date for all periods of
time after the Loss Period until the occurrence of the Financial Correction
(defined below), an aggregate amount equal to the product of: (i) the number of
Flight Hours incurred during the prior one month period multiplied by the
greater of: (a) the amounts set forth on Schedule III attached hereto or (b) the
rates employed by the Mortgagor in calculating the accounting reserves for each
Aircraft (the aggregate amount of all such payments less the aggregate amount of
all distributions made by the Mortgagee to the Mortgagor for Covered Maintenance
(defined below) being hereinafter collectively referred to as the "Maintenance
Reserves"). Unless an Event of Default shall have occurred and be continuing,
within five Banking Days after receipt by the Mortgagee of: (i) a certificate of
an officer of the Mortgagor stating that Covered Maintenance has been performed
on an Airframe, an Engine or any other Part, and the cost thereof, or stating
that advance payments are required by a third-party maintenance provider under a
contract covering any such work, and the amount of such payments; and (ii)
appropriate documentation with respect to such work or payments, the Mortgagee
shall pay to the Mortgagor an amount equal to the lesser of: (a) the actual cost
of such work or such advance payment, as the case may be, and (b) the aggregate
amount of the Maintenance Reserves. Upon the satisfaction in full of the
Obligations, any amounts paid to Mortgagee as Maintenance Reserves and not used
to reimburse the Mortgagor for Covered Maintenance or applied by the Mortgagee
as cash collateral after the occurrence of an Event of Default shall be paid to
Mortgagor. The Mortgagee shall deposit the Maintenance Reserves in a separate
interest-bearing account. Any interest accruing to the Maintenance Reserves in
the interest bearing account shall included as a part of the Maintenance
Reserves. If, after the occurrence of an Event of Default, the Mortgagee applies
all or any portion of the Maintenance Reserves to satisfy the Obligations, the
Mortgagor shall be obligated to replenish such Maintenance Reserves upon receipt
of written notice from the Mortgagee informing the Mortgagor that the
Maintenance Reserves have been applied to the Obligations.
(C) "Covered Maintenance" means, with respect to any Airframe, Engine, or
life limited Part, any scheduled mid-life inspection, overhaul or replacement
which is required under the manufacturer's approved maintenance program (but
excluding any maintenance required as a result of foreign object damage,
mishandling, faulty maintenance, accidental damage, abuse, modification or
alteration, or any cost which is covered by insurance or warranty); PROVIDED,
HOWEVER, that the cost of Covered Maintenance shall be limited to the actual
cost of replacement parts plus labor costs charged to the Mortgagor and shall in
no event include late charges, interest or other
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similar amounts; provided, further, however, that to the extent the Mortgagor or
any affiliate of the Mortgagor performs any overhaul or other work which
constitutes Covered Maintenance, the hourly labor charge shall be computed at
the prevailing industry standard (determined by the Mortgagee in its reasonable
discretion) for the performance of such overhaul or other work performed by the
Mortgagor. "Financial Correction" means, after any Loss Period, if the the
Mortgagor records profits (as determined by the Mortgagee in its reasonable
discretion by examination of the financial statements delivered to the Mortgagee
by the Guarantor pursuant to the terms of the Guaranty) which in the aggregate
exceed the aggregate amount of losses recorded for the Loss Period during any
period of time equal to or less than four consecutive quarterly periods.
(D) The Mortgagor will replace or will cause to be replaced all or any part
of the Flight Equipment (including, without limitation, any Engine, but
excluding the entire Aircraft under circumstances constituting an Event of Loss
with respect to the Aircraft) that may be retired (whether by expropriation,
wearing out, loss or destruction or other cause), or may be in any way rendered
unfit for use, with a replacement part of comparable grade, quality and utility,
which replacement part shall be in the same or better serviceable condition by
standards of the FAA as the unit so retired or rendered unfit for use assuming
such replaced part was maintained in accordance with the provisions hereof and
will, with respect to replacement engines, execute and deliver to Mortgagee a
supplemental mortgage in the form of Schedule II attached hereto and such other
documents as may be necessary to accord Mortgagee a first priority Lien under
this Mortgage with respect thereto and to subject such replacement property to
the Lien of this Mortgage as Mortgaged Property. Except as specifically
permitted in this Section 3.5(D), the Mortgagor shall not alter or modify the
Flight Equipment without the prior written consent of the Mortgagee.
(E) The Mortgagor will advise the Mortgagee of the receipt by the Mortgagor
of any notice from the FAA as to any violation of or failure to comply with
Title 49 or any order, rule, directive or regulation of the FAA.
SECTION 3.6 TO INSURE. (A) The Mortgagor shall at all times procure and
maintain, or cause to be procured and maintained, on the Flight Equipment,
without liability and at no cost to the Mortgagee, policies of insurance in such
form, of such type and with insurers reasonably satisfactory to the Mortgagee
and in compliance with the Insurance Side Letter.
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(B) All proceeds of insurance paid to the Mortgagee shall be held and paid
over or applied by the Mortgagee as provided in Section 2.1 and, if an Event of
Default has occurred and is continuing, Article 4.
SECTION 3.7 RECORDS; INFORMATION. The Mortgagor will at all times maintain,
or cause to be maintained, the Records: (i) in accordance with the rules and
regulations of the FAA; (ii) to accurately disclose the use, maintenance,
condition and the income generated by the Flight Equipment; (iii) to enable the
Mortgagor to determine the accounting reserves specified in the first sentence
of Section 3.5(B) and (iv) in order to enable the Mortgagee to complete any
internal or other reports required in connection with the maintenance of the
Loan; provided, however, that the Mortgagor's obligations under this clause (iv)
shall not extend beyond the reports: (a) that the Mortgagor and the Guarantor
are obligated to provide pursuant to any other credit or lease agreement, (b)
that the Mortgagor prepares in the ordinary course of its business or (c) that
are required under the terms of this Chattel Mortgage. Mortgagor shall provide
to the Mortgagee: (a) quarterly maintenance reports on or before the sixtieth
(60th) after the end of each of the first three calendar quarters and (b) on or
before the ninetieth (90th) day after the end of the last quarter for any given
year; (b) monthly usage reports on each Repayment Date setting forth the total
Flight Hours flown for each Aircraft and each Engine for the one month period
immediately prior to such Repayment Date; (c) upon request of the Mortgagee,
copies of all or a portion of the Records or any other information then
available to Mortgagor regarding the location, use and maintenance of the
Aircraft.
SECTION 3.8 INSPECTIONS. Mortgagor shall permit the Mortgagee or any
representative designated by Mortgagee: (a) to inspect the Flight Equipment,
upon Mortgagee's request annually during the Loan Term; provided that Mortgagee
shall provide not less than ten (10) days prior written notice of its intention
to exercise (either by itself or by its designate) such rights, and (b) to
inspect and appraise the Flight Equipment, upon Mortgagee's request, at any time
after the occurrence of an Event of Default, or whenever there has been, in
Mortgagee's reasonable judgment, a material, adverse change in the condition of
the Mortgaged Property or in the financial condition of Mortgagor. Mortgagor
shall permit the Mortgagee or any representative designated by Mortgagee at the
times of the inspection referred to in the immediately preceding sentence, to
inspect the Records, books of account, reports and other papers of the Mortgagor
related to the Mortgaged Property and to make copies and extracts therefrom and
Mortgagor will afford and procure a reasonable opportunity to make any such
inspection and the Mortgagor will furnish the Mortgagee with any and all such
other information and copies of documents and print-outs of data related to the
Mortgaged Property stored on any electronic or data processing medium under the
control of the
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Mortgagor as the Mortgagee may reasonably request, with respect to any Mortgaged
Property and the financial records of the Mortgagor related to the Mortgaged
Property and will permit Mortgagee to discuss any of the foregoing with any
officer or accountant of the Mortgagor, all at such reasonable times and as
often as may be reasonably requested. All inspections and appraisals as are
permitted in the first sentence of this Section 3.8 shall be at the reasonable
cost and expense of Mortgagor, shall be conducted by Mortgagee's in-house
technical representative or by an independent appraiser selected by Mortgagee,
in the presence of a representative of Mortgagor (except in the case of an
inspection or appraisal after the occurrence of an Event of Default). Mortgagee
may require, and Mortgagor shall permit, the Flight Equipment and the Records to
be inspected and appraised by an appraiser selected by Mortgagee at any other
time, at Mortgagee's sole cost and expense.
SECTION 3.9 CITIZENSHIP, ETC. The Mortgagor is as of the date hereof and
will at all times remain a citizen of the United States as defined in 49 U.S.C.
ss. 40102(a)(15).
SECTION 3.10 INSIGNIA. The Mortgagor will plainly, distinctly and
conspicuously place, and leave in the cockpit of the Aircraft and on each
Engine, a plate, insignia or other identification bearing the following words in
letters of a size reasonable under the circumstances and acceptable to the
Mortgagee as follows:
"Owned by Mercy Air Service, Inc. and subject to a Perfected
Security Interest in Favor of FINOVA Capital Corporation."
SECTION 3.11 OPERATION. The Flight Equipment will be operated at all times:
(a) by a currently certificated pilot having the minimum total pilot hours
required by the FAA or as required by the insurance required to be maintained by
Mortgagor under this Mortgage, whichever is stricter, (b) in compliance with the
FAA approved flight manual relating to the Flight Equipment, (c) in compliance
with all FAA rules and regulations and (d) to the extent applicable, in
compliance with any maintenance service plan then in effect with respect to the
Aircraft. The Mortgagor shall not permit the Flight Equipment to be operated in
violation of: (i) the Certificate of Airworthiness for the Aircraft; (ii) any
applicable Law or (iii) any provision of any insurance policy in effect with
respect to the Aircraft or in any jurisdiction where all of the insurance
required hereunder shall not remain in full force and effect. The Flight
Equipment shall only be operated or used by the Mortgagor in the conduct of its
business.
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SECTION 3.12 NO SALE, ALTERATION OR MODIFICATION. (A) Except as expressly
permitted by the Loan Agreement pursuant to a Permitted Sale, Mortgagor shall
not sell, lease, convey, transfer or encumber (other than with Permitted Liens)
or otherwise dispose of all or any part of the Mortgaged Property, or cause or
permit another to do any of the foregoing with respect to any of the Mortgaged
Property, and shall not modify or cause or permit any modification to any of the
Flight Equipment. Mortgagor shall not make or cause to be made or cause or
permit another to make any change or alteration in any registration, filing, or
recordation of any of the Flight Equipment from the registration, filing, or
recordation required by this Chattel Mortgage, or consent to the Flight
Equipment being operated by pilots other than those currently certified by the
appropriate governmental authorities.
ARTICLE IV
REMEDIES
SECTION 4.1 EVENT OF DEFAULT. An Event of Default shall occur hereunder if
any event defined as an Event of Default on Schedule I hereto shall occur.
SECTION 4.2 REMEDIES. Upon the occurrence and continuance of any Event of
Default, the Mortgagee may, at its option, do one, several, or all of the
following, as the Mortgagee, in its sole discretion, shall then elect:
(i) exercise all the rights and remedies granted to secured parties by
the provisions of the Arizona Uniform Commercial Code (whether or not the
Uniform Commercial Code is in effect in the same form in the jurisdiction
where Mortgagee's rights and remedies are asserted) or under the provisions
of any applicable law;
(ii) accelerate the entire principal balance then due and owing under
the Loan Agreement and this Chattel Mortgage, whereupon all such amounts,
accrued interest thereon, and all other amounts due and owing hereunder and
thereunder shall become immediately due and payable;
(iii) institute legal proceedings to foreclose upon and against the
security interest granted in and by this Chattel Mortgage and to recover
judgment for all amounts then due as set forth in subparagraph (ii) of this
Section 4.2;
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(iv) institute legal proceedings for the specific performance of any
covenant or agreement herein contained or in the Loan Agreement or in aid
of the execution of any power herein granted and Mortgagee shall be
entitled as of right to the appointment of a receiver of all or any part of
the Mortgaged Property;
(v) institute legal proceedings for the sale or otherwise for the
enforcement of any right, under the judgment of any court of competent
jurisdiction, of or concerning any of the Mortgaged Property;
(vi) personally, or by agents or attorneys, take possession of all or
any part of the Mortgaged Property and demand, sue for, collect or receive
any money or property at any time payable or receivable on account of or in
exchange for, or make any compromise or settlement deemed desirable with
respect to, any of the Mortgaged Property or any sum payable in connection
therewith;
(vii) to the extent permitted by law, enter any place where the
Mortgaged Property may be found or where Mortgagee reasonably believes some
or all thereof may be kept and personally, or by agents or attorneys, take
possession of any part or all of the Mortgaged Property without being
responsible for loss or damage caused thereby, and sell or dispose of all
or any part of the same, free from any and all claims of the Mortgagor or
of any other party claiming by, through, or under the Mortgagor, at law or
in equity, at one or more public or private sales on such terms as the
Mortgagee may fix, with or without any previous demand or notice to the
Mortgagor or advertisement of any such sale or other disposal except as
otherwise expressly herein provided to the contrary, any notice or demand
and right of equity of redemption otherwise required by or available to the
Mortgagor under applicable law is hereby waived by the Mortgagor to the
fullest extent permitted by applicable law; and/or
(viii) apply any Cash Collateral, including but not limited to the the
Maintenance Reserves and any insurance proceeds held by the Mortgagee to
the satisfaction of the Obligations.
SECTION 4.3 WAIVER OF BONDS, ETC. If Mortgagee seeks to take possession of
any or all of the Mortgaged Property or avail itself of any provisional remedy
by court process, the Mortgagor hereby irrevocably waives any bonds and any
surety or security required by any statute, court rule or otherwise as an
incident to such possession or
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remedy, and waives any demand for possession of the Mortgaged Property prior to
the commencement of any suit or action to recover same.
SECTION 4.4 WAIVER OF APPRAISEMENT. The Mortgagor agrees, to the full
extent that it may lawfully so agree, that neither it nor anyone claiming
through or under it will set up, claim or seek to take advantage of any
appraisement, valuation, stay, extension or redemption law now or hereafter in
force in any locality where any property subject to the Lien hereof may be
situated, in order to prevent, hinder or delay the enforcement or foreclosure of
this Chattel Mortgage, or the absolute sale of the Mortgaged Property or any
part thereof, or the final and absolute putting into possession thereof,
immediately after such sale, of the purchasers thereof; and the Mortgagor, for
itself and all who may at any time claim through or under it, hereby waives, to
the full extent that it may be lawful so to do, the benefit of all such laws,
and any and all right to have any of the properties or assets comprising the
Mortgaged Property marshaled upon any such sale, and agrees that the Mortgagee,
or any court having jurisdiction to foreclose the Lien hereof, may sell the
Mortgaged Property in its entirety or in such parcels as the Mortgagor may
determine.
SECTION 4.5 MULTIPLE SALES. The power of sale hereunder shall not be
exhausted by one or more sales, and the Mortgagee may from time to time adjourn
any sale to be made pursuant hereto. The Mortgaged Property need not be present
at the time and place of sale.
SECTION 4.6 DELIVERY OF MORTGAGED PROPERTY. If the Mortgagee shall demand
possession of the Mortgaged Property or any part thereof pursuant to this
Chattel Mortgage, or any records, including print-outs of data stored on any
electronic or data processing medium, relating to the Mortgaged Property, the
Mortgagor shall, at its own expense, forthwith cause such Mortgaged Property or
any part thereof or any such records designated by the Mortgagee to be assembled
and made available and/or delivered to the Mortgagee at any place reasonably
designated by the Mortgagee.
SECTION 4.7 NOTICES. In addition to any other notices required by law, the
Mortgagee shall give to Mortgagor at least ten (10) days prior written notice of
each public sale or any date after which a private sale or other intended
disposition hereunder shall occur, and the Mortgagor hereby covenants and agrees
that a notice, which shall be sent in accordance with the provisions of Section
7.1 hereof, at least ten (10) days before the date of any such act shall be
deemed to be commercially reasonable notice for such act within the meaning of
Section 9-504 of the Uniform Commercial Code and, specifically, reasonable
notification of the time and place of any public sale hereunder
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and reasonable notification of the time after which any private sale or other
intended disposition to be made hereunder is to be made.
SECTION 4.8 MORTGAGEE REPAIRING AND MANAGING MORTGAGED PROPERTY. Upon every
such taking of possession, the Mortgagee may, but shall have no obligation to,
from time to time, at the expense of the Mortgagor, make all such repairs,
replacements, alterations, additions and improvements to and of the Mortgaged
Property as the Mortgagee may deem proper to protect its interests hereunder. In
each such case, the Mortgagee shall have the right to manage and control the
Mortgaged Property and to carry on the business and to exercise all rights and
powers of the Mortgagor in respect thereof as the Mortgagee shall deem best,
including the right to enter into any and all such agreements with respect to
the leasing and/or operation of the Mortgaged Property or any part thereof as
the Mortgagee may see fit; and the Mortgagee shall be entitled to collect and
receive all rents, issues, profits, revenues and other income of the same and
every part thereof. Such rents, issues, profits, revenues and other income shall
be applied to pay the expenses of holding and operating the Mortgaged Property
and of conducting the business thereof, and of all maintenance, repairs,
replacements, alterations, additions and improvements, and to make all payments
which the Mortgagee may be required or may elect to make, if any, for taxes,
assessments, insurance and other proper charges upon the Mortgaged Property or
any part thereof, and all other payments which the Mortgagee may be required or
authorized to make under any provision of this Chattel Mortgage. The remainder
of such rents, issues, profits, revenues and other income shall be applied only
in accordance with Section 4.10 hereof.
SECTION 4.9 DELIVERY TO PURCHASER. Upon the completion of any sale under
this Article, the Mortgagor shall deliver all of the property sold to the
purchaser or purchasers at such sale on the date of sale, or within a reasonable
time thereafter if it shall be impractical to make immediate delivery, but in
any event full title and right of possession to such property shall pass to such
purchaser or purchasers forthwith upon the completion of such sale.
Nevertheless, if so requested by the Mortgagee or by any purchaser, the
Mortgagor shall confirm any such sale or transfer by executing and delivering to
such purchaser all proper instruments of conveyance and transfer and releases as
may be designated in any such request.
Every such sale shall operate to divest all right, title, interest, claim
and demand whatsoever of the Mortgagor and any person claiming such interest by,
through or under the Mortgagor, in and to the property so sold, and shall be a
perpetual bar, both at law and in equity, against the Mortgagor and all such
persons and their respective successors or assigns.
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SECTION 4.10 APPLICATION OF PROCEEDS. The proceeds of any sale, rental or
other use of the Mortgaged Property, or any part thereof, under this Article,
together with any other sums then held by the Mortgagee, as part of the
Mortgaged Property, shall be applied as follows:
(A) FIRST. To the payment of the costs and expenses of such sale and
the exercise of Mortgagee's remedies hereunder, including brokers' fees or
sales commissions, a reasonable compensation to the Mortgagee's agents,
legal fees of Mortgagee's attorneys and counsel, and all other charges,
expenses, liabilities and advances incurred or made by the Mortgagee in
connection therewith, and to the payment of all taxes, assessments or
Liens, if any, prior to the Lien of this Chattel Mortgage, except any
taxes, assessments or Liens subject to which such sale shall have been
made;
(B) SECOND. To the payment of amounts due under the Loan Agreement and
under the other Loan Documents; and
(C) THIRD. The surplus, if any, shall be paid to Mortgagor.
SECTION 4.11 MORTGAGEE MAY PURCHASE. At any public sale under this Article,
to the extent permitted by applicable law the Mortgagee or its nominee may bid
for and purchase the property offered for sale, and, upon compliance with the
terms of sale, may hold, retain and dispose of such property without further
accountability therefor. Mortgagee need not be present at such sale. For the
purpose of making payment for the Mortgaged Property or any part thereof so
purchased, any claim for any amounts owing under the Notes, the Loan Agreement
or hereunder may be used by Mortgagee as a credit against the purchase price.
SECTION 4.12 RIGHT TO POSSESSION. The right of the Mortgagee to take
possession of and sell or operate and manage the Mortgaged Property in
compliance with the provisions of this Chattel Mortgage shall not be adversely
affected by the provisions of the Federal Bankruptcy Code as at any time amended
or of any provision of any succeeding act to the same effect.
SECTION 4.13 REMEDIES CUMULATIVE, ETC. (A) Each right, power, and remedy
specifically given to the Mortgagee herein, or otherwise existing shall be
cumulative and shall be in addition to every other right, power, and remedy
specifically given herein, or in the Loan Agreement or now or hereafter existing
at law, in equity, or otherwise; and each right, power and remedy, whether
specifically given herein or under
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the Loan Agreement or otherwise existing, may be exercised from time to time and
as often and in such order as may be deemed expedient by the Mortgagee; and the
exercise of any right, power or remedy shall not be construed to be a waiver of
the right to exercise at the same time or thereafter any other right, power or
remedy.
(B) No delay or omission by the Mortgagee in the exercise of any right
or power, or in the pursuance of any remedy, shall impair any such right,
power, or remedy or be construed to be a waiver of any default on the part
of the Mortgagor or to be an acquiescence therein.
(C) No waiver by the Mortgagee of any breach or Default or Event of
Default by the Mortgagor under this Chattel Mortgage shall be deemed a
waiver of any other previous breach or default or any thereafter occurring.
(D) The invalidity of any remedy in any jurisdiction shall not
invalidate such remedy in any other jurisdiction. The invalidity or
unenforceability of any of the remedies herein provided in any jurisdiction
shall not in any way affect the right to the enforcement in such
jurisdiction or elsewhere of any of the other remedies herein provided.
SECTION 4.14 MORTGAGEE'S RIGHT TO PERFORM AND INCUR EXPENSES. At any time
and from time to time after an Event of Default has occurred, if the Mortgagor
fails to perform or fulfill or is not the performing or fulfilling any of its
undertakings or obligations contained herein, Mortgagee shall have the right,
but shall not be obligated: (i) to effect such performance or compliance and
(ii) to incur such expenses relative thereto or to the enforcement of
Mortgagee's rights as against, or the preservation, protection, reconditioning,
storage or sale of, the Mortgaged Property including, but without limitation,
such sums as are specified in Section 4.8 and 4.10 FIRST hereof. The amount of
any such expenses and other reasonable costs of Mortgagee incurred as
hereinabove provided shall become payable by the Mortgagor to the Mortgagee as
of the date on which Mortgagee shall pay the same, together with interest
thereon from said date of payment at the rate of 2% over the Interest Rate
specified in the Notes (but in no event higher than the highest rate permitted
by applicable law), until the same shall be repaid.
SECTION 4.15 ADVANCES ARE SECURED. All such costs and expenses incurred
shall become part of the Mortgagor's obligations and shall become part of the
indebtedness secured under this Chattel Mortgage. The Mortgagee shall have the
right (but shall not be obligated) to use and apply any Cash Collateral at any
time held by it for the repayment of all such advances, costs or expenses.
However, no such use of any Cash
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Collateral, nor the making by Mortgagee of any advance in payment of any such
expense, shall relieve the Mortgagor from any Default hereunder.
SECTION 4.16 AGENCY. The Mortgagor hereby appoints Mortgagee, such
appointment being immediately and without further notice or action effective
upon the occurrence of an Event of Default, as the Mortgagor's irrevocable
attorney-in-fact and agent (such appointment being coupled with an interest)
either in the Mortgagee's own name or in the name of the Mortgagor, to (i) incur
and to pay the costs and expenses aforesaid; (ii) make claim for, collect,
compromise and bring suit in respect of all claims relating to the Mortgaged
Property; (iii) execute and endorse all documents, checks or drafts received in
payment of any and all such expenses or any losses or damages under any
insurance policies maintained with respect to any Mortgaged Property; (iv)
execute financing statements in the Mortgagor's name as debtor; and (v) take any
action which the Mortgagor could take as owner of the Flight Equipment in and of
the realization by the Mortgagee of any of its rights and remedies herein
provided.
ARTICLE V
DEFEASANCE
SECTION 5.1 PAYMENT OF INDEBTEDNESS; SATISFACTION. If the Mortgagor shall
pay and discharge all of the Obligations then, upon Mortgagor Request, this
Chattel Mortgage and the Lien, rights and interests hereby granted shall cease,
terminate and become null and void, and the Mortgagee shall execute and deliver
to the Mortgagor such instruments of satisfaction and discharge of this Chattel
Mortgage, and the Lien hereof, as may be reasonably requested by Mortgagor, and
pay and deliver to the Mortgagor upon Mortgagor Order all monies and other
personal property then held as collateral security (but excluding any monies
received by Mortgagee in payment of the Obligations) by the Mortgagee hereunder.
All such instruments and documents of release or discharge shall be prepared and
filed at the sole cost and expense of Mortgagor and shall be reasonably
satisfactory in form and substance to the Mortgagee.
ARTICLE VI
SUNDRY PROVISIONS
SECTION 6.1 NOTICES. Except as otherwise specifically provided to the
contrary herein:
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(A) Every notice or demand under this Chattel Mortgage required or
permitted to be given by the Mortgagee or the Mortgagor shall be in writing
and may be given or made by registered mail, return receipt requested, or
by internationally recognized overnight courier service.
(B) Every notice or demand shall be sent, in the case of a notice sent
by internationally recognized overnight courier service or registered mail,
to the Mortgagee or to the Mortgagor at their respective address set out in
the preamble hereof.
(C) Every notice or demand shall, except so far as otherwise expressly
provided by this Chattel Mortgage, be deemed to have been received, in the
case of a notice or demand sent by internationally recognized overnight
courier service or registered mail, when actually delivered to Mortgagee or
the Mortgagor at their respective addresses referred to in Section 6.1(B),
or as of the date on which receipt of such notice or demand delivered by
internationally recognized overnight courier or registered mail is refused
or such overnight courier or the U.S. Postal Service advises that such
notice or demand is not deliverable at such address with respect to the
Mortgagee or Mortgagor, as the case may be.
(D) Subject to the terms hereof, Mortgagee or the Mortgagor may change
its address by giving notice in accordance with this Section 6.1.
SECTION 6.2 COUNTERPARTS. This Chattel Mortgage may be executed in any
number of counterparts, and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same Chattel Mortgage.
SECTION 6.3 GOVERNING LAW; CONSENT TO JURISDICTION. THIS CHATTEL MORTGAGE
SHALL BE DEEMED TO HAVE BEEN NEGOTIATED AND MADE IN, AND SHALL BE GOVERNED AND
INTERPRETED UNDER THE LAWS OF, THE STATE OF ARIZONA APPLICABLE TO AGREEMENTS
MADE BY RESIDENTS THEREOF TO BE WHOLLY PERFORMED THEREIN. The Mortgagor and the
Mortgagee hereby agree that all actions or proceedings initiated by the
Mortgagor and arising directly or indirectly out of this Chattel Mortgage shall
be litigated exclusively in the Superior Court of Arizona, Maricopa County, or
the United States District Court for the District of Arizona (the "Arizona
Courts"), and that any action initiated by the Mortgagee and arising directly or
indirectly out of this Chattel Mortgage may be litigated in any jurisdiction, at
Mortgagee's discretion. The Mortgagor and the Mortgagee hereby: (a) expressly
submit and consent in advance to the
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jurisdiction and venue of the Arizona Courts in any action or proceeding
commenced by the Mortgagor or the Mortgagee in any of the Arizona Courts and (b)
agree that jurisdiction and venue is proper in such courts. Each of the
Mortgagor and the Mortgagee waives any claim that Phoenix, Arizona or the
District of Arizona is an inconvenient forum or an improper forum based on lack
of venue. Should either of the Mortgagor or Mortgagee, as the case may be, after
being properly served, fail to appear or answer any summons, complaint, process
or paper so served within 30 days after service thereof, each of the Mortgagor
and the Mortgagee acknowledges that as a result thereof, an order and/or
judgment may be entered by the Mortgagee or the Mortgagor against the other as
demanded or pleaded for in such summons, complaint, process or papers. The
choice of forum set forth herein shall not be deemed to preclude the enforcement
by the Mortgagee or the Mortgagor, as the case may be, of any judgment in any
other appropriate jurisdiction.
SECTION 6.4 CAPTIONS AND PARAGRAPH HEADINGS. In construing any provision of
this Chattel Mortgage, no account shall be taken of the identity of the party
who prepared this Chattel Mortgage and no presumption shall arise as a result
thereof. Captions and paragraph headings used herein are for convenience only
and are not part of this Chattel Mortgage and shall not be used in construing
it.
SECTION 6.5 DELIVERY. This Chattel Mortgage is intended to and shall be
deemed to be delivered by the Mortgagor to the Mortgagee and accepted by the
Mortgagee in Arizona.
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IN WITNESS WHEREOF, the Mortgagor and the Mortgagee have caused this
instrument to be duly executed as of the day and year first above written.
FINOVA CAPITAL CORPORATION MERCY AIR SERVICE, INC.
By: /s/ Pamela Marchant By: /s/ David L. Dolstein
-------------------------------- --------------------------------
Title: Vice President Title: President
----------------------------- -----------------------------
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SCHEDULE I
EVENTS OF DEFAULT
The occurrence of any of the following, each of which is an Event of
Default:
1. (i) The failure of the Mortgagor to pay when due and payable any
principal portion of the Loan or accrued interest thereon within ten (10) days
of the due date thereof (whether by reason of stated maturity or due date,
notice of prepayment, cancellation, acceleration or otherwise);
(ii) The failure of the Mortgagor to pay when due and payable any
amounts (other than principal or interest) due with respect to the Loan
Agreement, the Note, or this Chattel Mortgage, or other sums which may become
due hereunder or under any Loan Document within fifteen (15) days after delivery
of notice thereof from the Mortgagee to the Mortgagor;
2. (i) Any lapse of, or failure to maintain, insurance coverage on the
Aircraft required to be maintained under this Chattel Mortgage and the Insurance
Side Letter;
(ii) Any failure of the Mortgagor to perform its obligations set forth
in Sections 10.2, 10.5, 10.6 or 10.8 of the Loan Agreement;
(iii) Any failure by the Mortgagor to perform or cause to be performed
its obligations as set forth in this Chattel Mortgage concerning the preparation
or recordation of any document or instrument required by the Mortgagee for the
maintenance or perfection of any lien on the Mortgaged Property;
(iv) Any failure of the Mortgagor to perform or cause to be performed its
obligations set forth in this Chattel Mortgage concerning the maintenance of the
Aircraft within thirty (30) days after notice thereof from the Lender; or
(v) Any failure by either the Mortgagor or the Guarantor to fulfill any
other covenant or to perform any other obligation on its part to be performed
under any Loan Document to which it is a party and such failure is not cured
within thirty (30) days after notice thereof from the Mortgagee;
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3. Any representation or warranty made by the Mortgagor or the Guarantor in
the Loan Agreement or any other Loan Document or any financial statement shall
prove to have been untrue, inaccurate or incomplete in any material respect at
the time when made or when effective and such party fails to do that which shall
be necessary in order that said representation or warranty shall be true,
accurate or complete within thirty (30) days after the earlier of actual
knowledge thereof by an officer of the Mortgagor or the Guarantor or of receipt
of notice thereof;
4. Any approval required from or to be issued by the Mortgagor or by the
Guarantor in connection with the Loan Agreement or under any Loan Document or
the transactions contemplated herein or therein, shall be revoked, rescinded,
suspended or otherwise limited in effect and same shall not have been reinstated
within thirty (30) days after the first effective date of such revocation,
rescission, suspension or limitation;
5. Either of the Mortgagor or the Guarantor shall file a voluntary petition
in bankruptcy or a voluntary petition or an answer seeking readjustment of its
debts or for any other relief under any bankruptcy, insolvency, or other similar
act or law of any jurisdiction, domestic or foreign, now or hereafter existing,
or any action by either of the Mortgagor or the Guarantor indicating its consent
to, approval of, or acquiescence in, any such petition or proceeding; or if
either of the Mortgagor or the Guarantor shall apply or sustain the appointment
by consent or acquiescence of, a receiver or trustee for either of the Mortgagor
or the Guarantor or for all or a substantial part of their respective
properties; or if either of the Mortgagor or the Guarantor shall make an
assignment for the benefit of its creditors, or if either of the Mortgagor or
the Guarantor shall fail to pay or becomes unable to pay its debts as they
mature;
6. An involuntary petition against either of the Mortgagor or the Guarantor
in bankruptcy or seeking readjustment of its debts or for any other relief under
any bankruptcy, insolvency, or other similar act or law of any jurisdiction,
domestic or foreign, now or hereafter existing; or a receiver or trustee shall
be involuntarily appointed for either of the Mortgagor or the Guarantor or for
all or a substantial part of its property; or a warrant of attachment, execution
or similar process against any substantial part of the property of either of the
Mortgagor or the Guarantor shall be served on either of the Mortgagor or the
Guarantor and such events continues for sixty (60) days undismissed, unbonded or
undischarged;
7. The Loan Agreement or any Loan Document shall at any time after its
respective execution and delivery and for any reason cease to be in full force
and effect or any certificate, instrument or documents issued and executed
pursuant hereto or thereto shall
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for any reason cease to be effective to constitute a valid and perfected first
priority Lien and security interest in and to the Mortgaged Property except for
Permitted Liens;
8. A material, adverse change in the financial condition of either of the
Mortgagor or the Guarantor shall occur;
9. An "Event of Default" under and as defined in the Wells Fargo Loan
Agreement shall have occurred and be continuing (for purposes of this Schedule I
"Wells Fargo Loan Agreement shall mean: (a) collectively, the Letter Agreement
dated October 21, 1996 between Wells Fargo Bank (Colorado) ("Wells Fargo") and
the Guarantor and the Promissory Note executed and delivered by the Guarantor to
Wells Fargo in connection therewith) (item (a) being hereinafter referred to as
the "Original Wells Fargo Facility") and (b) any subsequent working capital
facility entered into by the Guarantor which replaces: (i) the Original Wells
Fargo Facility or (ii) any working capital facility that is subsequent to the
Original Wells Fargo Facility;
10. If an event of default occurs under a Subsequent Agreement occurs; or
11. If at any time during the Loan Term, the Mortgagor is not the wholly
owned subsidiary of the Guarantor.
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<PAGE>
SCHEDULE II
FORM OF
SUPPLEMENTAL CHATTEL MORTGAGE
This SUPPLEMENTAL CHATTEL MORTGAGE, dated , 19 , from MERCY AIR SERVICE,
INC., a corporation organized and existing under the laws of the State of
California having its chief executive office and principal place of business at
8190 Mango, Fontana, California 92334 (hereinafter called the "Mortgagor"), as
mortgagor, and FINOVA CAPITAL CORPORATION, a Delaware corporation, having an
office at 115 West Century Road, Paramus, New Jersey 07652 (hereinafter called
the "Mortgagee"), as mortgagee.
WHEREAS, the Mortgagor has heretofore executed and delivered to the
Mortgagee an Aircraft Chattel Mortgage and Security Agreement dated July , 1997
(hereinafter, as at any time supplemented or amended, called the "Original
Mortgage," terms defined therein, unless otherwise defined herein, being used
herein as therein defined), covering certain Flight Equipment of the Mortgagor,
to secure its Obligations, as defined in the Original Mortgage;
WHEREAS, the Mortgagor is the legal and beneficial owner, free and clear of
all mortgages, security interests, Liens, charges and encumbrances, other than
the Lien of the Original Mortgage and Liens permitted by the Original Mortgage,
of the additional flight equipment hereinbelow described, and desires to execute
and deliver this Supplemental Chattel Mortgage.
NOW, THEREFORE, THIS INSTRUMENT WITNESSETH that to secure the Obligations
and for the purpose of specifically subjecting such property to, and of
confirming, the Lien of the Original Mortgage, the Mortgagor does hereby grant,
bargain, sell, transfer, convey and mortgage unto the Mortgagee, its successors
and assigns, and gives to the Mortgagee a security interest in, the following
described property, to wit:
AIRFRAME
( ) Airframe, identified as follows:
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<PAGE>
FAA Registra- Manufacturer's
Manufacturer Model tion Number Serial Number
together with all aircraft engines, appliances, equipment, jet fuel, instruments
and accessories (including, without limitation, radio and radar), whether now
owned or hereafter acquired from time to time thereto belonging, owned by the
Mortgagor and installed in or appurtenant to said airframe.
AIRCRAFT ENGINES
( ) aircraft engines, each such engine having 750 or more take-off
horsepower or the equivalent thereof, identified as follows:
FAA Registra- Manufacturer's
Manufacturer Model tion Number Serial Number
together with all equipment and accessories thereto belonging, by whomsoever
manufactured, owned by the Mortgagor and installed in or appurtenant to said
aircraft engines.
Together with all substitutions, replacements and renewals of the property
above described, and all property which shall hereafter become physically
attached to or incorporated in the property above described, whether the same
are now owned by the Mortgagor or shall hereafter be acquired by it.
- 37 -
<PAGE>
Together with all rents, issues, profits, proceeds (including insurance
proceeds) revenues and other income of such property, except for Excluded
Amounts, and all of the estate, right, title and interest of every nature
whatsoever of the Mortgagor, at law or in equity, in and to such property and
every part and parcel thereof.
TO HAVE AND TO HOLD all and singular the property aforesaid unto the
Mortgagee, its successors and assigns, as security as aforesaid and for the uses
and purposes and subject to the covenants, agreements, provisions and conditions
set forth in the Original Mortgage.
This instrument shall be construed as supplemental to the Original Mortgage
and shall form a part thereof, and the Original Mortgage and each Supplemental
Chattel Mortgage heretofore executed and delivered, which are hereby, by
reference, incorporated herein, are hereby ratified, approved and confirmed.
This instrument may be simultaneously executed in several counterparts,
each of which shall be deemed to be an original, and all such counterparts shall
together constitute but one and the same Supplemental Chattel Mortgage.
This Supplemental Chattel Mortgage is intended to be and shall be deemed to
be delivered by the Mortgagor to the Mortgagee and accepted by the Mortgagee in
Phoenix, Arizona.
This instrument shall be effective on the date hereof.
IN WITNESS WHEREOF, the Mortgagor has caused this instrument to be duly
executed.
MERCY AIR SERVICE, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
- 38 -
SECURED PROMISSORY NOTE
U.S. $10,152,950.00 Phoenix, Arizona
No. 1 July 31, 1997
FOR VALUE RECEIVED, the undersigned (hereinafter the "Maker") promises to
pay to the order of FINOVA CAPITAL CORPORATION (the "Lender"), or registered
assigns, the principal sum of TEN MILLION ONE HUNDRED FIFTY TWO THOUSAND NINE
HUNDRED FIFTY DOLLARS ($10,152,950.00), together with interest thereon from the
Closing Date in accordance with the terms of that certain Secured Loan Agreement
dated as of July 31, 1997 between Maker, as borrower, and the Lender, as the
same may from time to time be amended (the "Loan Agreement"). Capitalized terms
used herein and not otherwise defined shall have the same meaning as is ascribed
to said terms in the Loan Agreement.
Each payment required to be made hereunder shall be made via wire transfer
of immediately available funds, delivered prior to 12:00 noon, New York time on
the date due, to:
Citibank
New York, New York
ABA No.: 021000089
In Favor of: FINOVA Capital Corporation
Account No.: 4072-7239
Reference: CEF/ Mercy Air Service
Attention: P. Marchant
or to such other account as the holder hereof may designate by written notice
delivered at the Closing Date or thereafter sent pursuant to Paragraph 15 of the
Loan Agreement.
All payments made hereunder shall be applied in accordance with the terms
of the the Loan Agreement. If any sum required to be paid hereunder shall not be
paid when due, whether by acceleration or otherwise, Maker shall pay post
maturity interest at the Interest Rate plus 2%.
<PAGE>
Notwithstanding any provisions to the contrary herein contained, the Lender
shall not collect a rate of interest on any obligation owing by the Maker to the
Lender in excess of the maximum rate of interest permitted by applicable law.
The Maker understands and believes that the obligations evidenced by this Note
comply with all applicable usury laws; however, if any interest or other charges
in connection with the obligations evidenced by this Note are ever determined to
exceed the maximum amount permitted by law, then the Maker agrees that (a) the
amount of interest or charges payable pursuant to this Note shall be reduced to
the maximum amount permitted by law and (b) any excess amount previously
collected from the Maker in connection with this Note that exceeded the maximum
amount permitted by law, shall be credited against the principal balance of this
Note then outstanding. If the outstanding principal balance hereunder has been
paid in full, the excess amount shall be refunded to the Maker.
The contracted for rate of interest with respect to the obligations
evidenced by this Note shall include, without limitation, the following:
(i) the Interest Rate calculated and applied to the principal balance
of this Note in accordance with the provisions hereof;
(ii) post-maturity interest, calculated and applied to the principal
balance of this Note in accordance with the provisions hereof;
(iii) the amounts referred to in Paragraph 14 of the Loan Agreement;
and (iv) all fees, charges, goods, things in action or any sum or things of
value ("Additional Sums") paid or payable by the Maker in accordance with
the provisions of the Loan Agreement or this Note or any other Loan
Document, howsoever described. If any such Additional Sums may, under
applicable law, be deemed to be interest with respect to the lending
transaction which is the subject of this Note and the Loan Agreement, then,
for the purpose of any applicable law that may limit the maximum amount of
interest to be charged with respect to the lending transaction which is the
subject of this Note and Loan Agreement, such Additional Sums shall be
payable by Maker as, and shall be deemed to be, Additional Interest, and,
for such purposes only, the agreed upon and "contracted for rate of
interest" of this transaction shall be deemed to be increased by the rate
of interest resulting from the Additional Sums.
The books and records of the Lender reflecting all amounts payable from
time to time pursuant to this Note and other Loan Documents shall be conclusive
and
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<PAGE>
binding upon the Maker except in the case of manifest error in calculation. The
Lender shall, at the request of Maker, deliver to Maker a statement reflecting
how the Lender calculated the amount owed under this Note.
This Note is the Note referred to in, and the registered holder is entitled
to the rights and benefits of, the Loan Agreement, which Loan Agreement, among
other things, contains provisions for late payment charges, acceleration of the
maturity hereof upon the happening of certain Events of Default specified
therein, and for repayments and prepayments of principal prior to the maturity
hereof upon the terms and conditions therein specified. This Note is secured by,
among other things the Security Agreement and the holder hereof is entitled to
the rights and benefits of the Security Agreement and the collateral referred to
therein. All of the terms and conditions of the Loan Agreement and the Security
Agreement are hereby incorporated by reference herein to the extent necessary
for the enforcement hereof. The Maker will keep at its principal corporate
offices a register (the "Note Register"), in which, subject to such reasonable
regulations as it may prescribe, it will provide for the registration and
transfer of the Note consistent with the transfer and assignment provisions
contained in the Loan Agreement. The Maker and any agent of the Maker or
guarantor may treat the person in whose name this Note is registered as the
owner of this Note for the purpose of receiving payment of the principal of and
interest and any other amounts, if any, on this Note for all other purposes
whatsoever, whether or not this Note be overdue.
The Maker hereby waives all defenses arising from the Lender's failure to
diligently enforce its rights hereunder, presentment, demand, protest and notice
of any kind.
THE MAKER HEREBY WAIVES TRIAL BY JURY IN CONNECTION WITH ANY ACTION ARISING
DIRECTLY OR INDIRECTLY OUT OF THIS NOTE AND THE ENFORCEMENT THEREOF.
The Lender may extend the time of payment of this Note, postpone the
enforcement hereof, release any collateral, or grant any other indulgences
whatsoever, without affecting or diminishing the Lender's right of recourse
against the Maker, as provided herein and in the Loan Agreement and in the other
Loan Documents, which right is hereby expressly reserved. The failure to assert
any right by the Lender shall not be deemed a waiver thereof.
- 3 -
<PAGE>
This Note may not be changed or modified orally, nor may any of the
provisions hereof be waived orally, and any such change, modification or waiver
shall be effective only if set forth in a writing duly executed by the party to
be charged therewith.
In the event that this Note is placed in the hands of an attorney for
collection, for protection, preservation or enforcement of the rights of the
holder, for suit or to compromise or to take any other action with regard
thereto or concerning any collateral provided pursuant to the Security
Agreements or, the Maker agrees to pay the reasonable fees and disbursements of
said attorney.
The Maker shall be in default hereunder if the Maker shall fail to pay any
principal or interest required to be paid hereunder on the due date for the
payment thereof or if there shall occur and be continuing any other Event of
Default under the Loan Agreement.
THIS NOTE SHALL BE DEEMED TO HAVE BEEN MADE IN AND SHALL BE GOVERNED AND
INTERPRETED BY THE LAWS OF THE STATE OF ARIZONA AND THE RIGHTS AND REMEDIES OF
THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS, EXCEPT
TO THE EXTENT THAT THE LAW OF SOME OTHER JURISDICTION MAY BE MANDATORILY
APPLICABLE TO PROCEEDINGS TAKEN FOR THE ENFORCEMENT OF THE RIGHTS HEREUNDER OF
THE REGISTERED HOLDER HEREOF; PROVIDED, HOWEVER, THAT ANY REMEDIES HEREIN
PROVIDED WHICH SHALL BE VALID UNDER THE LAWS OF THE JURISDICTION WHERE
PROCEEDINGS FOR THE ENFORCEMENT THEREOF SHALL BE TAKEN SHALL NOT BE AFFECTED BY
THE INVALIDITY OF SUCH RIGHTS AND REMEDIES UNDER THE LAWS OF THE STATE OF
ARIZONA.
The Maker hereby agrees that all actions or proceedings initiated by the
Maker and arising directly or indirectly out of this Note shall be litigated
exclusively in the Superior Court of Arizona, Maricopa County, or the United
States District Court for the District of Arizona (the "Arizona Courts") and
that all actions initiated by the Lender and arising directly or indirectly out
of this Note may be litigated in any jurisdiction, at the Lender's discretion.
The Maker and the Lender hereby: (a) expressly submit and consent in advance to
the jurisdiction and venue of the Arizona Courts in any action or proceeding
commenced by the Maker or the Lender in any of the Arizona Courts, and (b) agree
that jurisdiction and venue is proper in such courts. The Maker waives any claim
- 4 -
<PAGE>
that Phoenix, Arizona or the District of Arizona is an inconvenient forum or an
improper forum based on lack of venue. Should either of the Maker or the Lender,
as the case may be, after being properly served, fail to appear or answer any
summons, complaint, process or paper properly served within 30 days after
service thereof, the Maker and the Lender acknowledge that as a result thereof,
an order and/or judgment may be entered by the Lender or the Maker against the
other as demanded or pleaded for in such summons, complaint, process or papers.
The choice of forum set forth herein shall not be deemed to preclude the
enforcement by the Lender or the Maker, as the case may be, of any judgment in
any other appropriate jurisdiction.
If any provision of this Note shall be held invalid or inapplicable to any
circumstance or in any jurisdiction, such invalidity or inapplicability shall
not affect any other provision hereof which can be given effect without regard
to the invalid provision, nor to the same provision to the extent valid or
enforceable in any other applicable jurisdiction, nor shall any such
inapplicability to any circumstance affect the applicability of such terms to
any other or different or subsequent circumstances, all of such terms,
conditions or provisions are deemed severable.
This Note will be binding upon the respective successors and permitted
assigns of the Maker.
[signatures on following page]
- 5 -
<PAGE>
MAKER:
MERCY AIR SERVICE, INC.
By: /s/ David L. Dolstein
--------------------------------
Name: David L. Dolstein
------------------------------
Title: President
-----------------------------
WITNESS:
/s/ Aaron D. Todd
- -----------------------------
- 6 -
CONTINUING GUARANTY
AND SUBORDINATION AGREEMENT
CONTINUING GUARANTY AND SUBORDINATION AGREEMENT dated as of July 31, 1997,
made by AIR METHODS CORPORATION, a corporation organized and existing under the
laws of the State of Delaware having its chief executive office and principal
place of business at 7301 South Peoria Street, Englewood, Colorado 80112 (the
"Guarantor") for the benefit of FINOVA CAPITAL CORPORATION, a corporation
organized and existing under the laws of the State of California, having an
office at 115 West Century Road, Paramus, New Jersey 07652.
W I T N E S S E T H
WHEREAS, pursuant to and in accordance with the Secured Loan Agreement
dated as of July 31, 1997 (as at any time amended or supplemented, the "Loan
Agreement") between Mercy Air Service, Inc., a corporation organized and
existing under the laws of the State of California (the "Borrower") and the
Lender, the Lender has agreed to make a loan (the "Loan") to the Borrower;
WHEREAS, the Lender is only willing to make the Loan to the Borrower on the
condition that the Lender receives the guaranty of the Guarantor;
WHEREAS, the Guarantor owns 100% of the outstanding capital stock of the
Borrower and the Guarantor otherwise has a financial interest in the Borrower;
WHEREAS, in order to induce the Lender to make the Loan to the Borrower,
the Guarantor desires to guaranty the Obligations (as defined below) of the
Borrower.
NOW, THEREFORE, for the premises and other good and valuable consideration,
the sufficiency and receipt of which is hereby acknowledged, the parties hereto
agree as follows:
1. DEFINITIONS
1.2 In this Agreement the following words and expressions, except where the
context otherwise requires, shall have the following meanings:
"EBITDA" for any period, with respect to the Guarantor, the sum of: (a)
<PAGE>
Net Income, PLUS (b) taxes on or measured by net income or gain for such period,
PLUS (c) Interest Expense PLUS (d) depreciation and other non-cash charges
against income for such period MINUS (e) income or gain from extraordinary items
for such period all determined on a consolidated basis for the Guarantor and its
Subsidiaries.
"EBITDA COVERAGE RATIO" the ratio of: (a) EBITDA for any given period to
(b) the sum of Interest Expense for such period and scheduled principal
repayments for such period under the Loan Agreement and with respect to any
other indebtedness of the Guarantor and its Subsidiaries.
"INTANGIBLE ASSETS" at a particular date, all assets of the Guarantor and
its Subsidiaries, determined on a consolidated basis at such date, that would be
classified as intangible assets in accordance with GAAP.
"INTEREST EXPENSE" for any period, all interest on any indebtedness of the
Guarantor and its Subsidiaries determined on a consolidated basis for such
period.
"LEVERAGE RATIO" the ratio of Total Liabilities to Tangible Net Worth.
"NET INCOME" for any period, the consolidated net income (or deficit) of
the guarantor and its Subsidiaries taken as a whole, determined in accordance
with GAAP.
"NET WORTH" at a particular date, all amounts which would be included under
shareholders' equity on a consolidated balance sheet of the Guarantor and its
Subsidiaries determined on a consolidated basis in accordance with GAAP as at
such date.
"SUBSIDIARIES" as to the Guarantor, a corporation of which shares of stock
having ordinary voting power to elect a majority of the board of directors or
other managers of such corporation are at any time owned, or the management of
which is otherwise controlled, directly or indirectly, through one or more
intermediaries, by the Guarantor.
"TANGIBLE NET WORTH" at a particular date, the excess, if any, of Net Worth
over Intangibles Assets as at such date.
"TOTAL LIABILITIES" at a particular date, determined on a consolidated
basis at such date in accordance with GAAP, all of the liabilities, debts,
claims and indebtedness, contingent, fixed or otherwise, however evidenced,
created, incurred,
-2-
<PAGE>
acquired, owing or arising, whether under written or oral agreement, operation
of law or otherwise of the Guarantor and its Subsidiaries.
"Working Capital Facility" any working capital credit facility to which the
Guarantor is a party during the Loan Term.
1.2 Capitalized terms not defined in Section 1.1 or elsewhere in this
Guaranty, shall have the meanings ascribed to such terms in the Loan Agreement.
2. GUARANTY.
2.1 The Guarantor does irrevocably and unconditionally guarantee to the
Lender: (a) the prompt payment when due, not merely the collection, of all
amounts payable to the Lender pursuant to: (i) the Loan Agreement; and (ii) the
other Loan Documents (as defined in the Loan Agreement) and (b) the performance
by the Borrower of all other obligations of the Borrower set forth in the Loan
Agreement and the Loan Documents (said obligations and indebtedness being
sometimes hereinafter referred to in the aggregate as the "Obligations").
Without limitation, the Obligations shall include all reasonable attorneys' fees
and expenses and the reasonable fees and expenses of expert witnesses incurred
by the Lender in enforcing any such Obligation or this Guaranty.
2.2 This Guaranty: (a) shall continue from the date of this Guaranty until
the Obligations have been fully satisfied; (b) is a continuing, indivisible and
cumulative Guaranty of each and every Obligation incurred by or owing from the
Borrower to the Lender either at the date hereof or at any time hereafter during
the term of this Guaranty however acquired and arising out of the Documents; and
(c) is a primary obligation of the Guarantor. No invalidity, irregularity or
unenforceability of all or any part of the Obligations hereby guaranteed shall
affect, impair or be a defense to this Guaranty. The liability of Guarantor
hereunder shall be absolute and unconditional and shall not be reduced by
reason, of any defense, set-off, recoupment or counterclaim of Borrower.
2.3 Nothing contained in this Guaranty shall require that the Lender
actually make the Loan to the Borrower.
-3-
<PAGE>
3. RECOVERED PAYMENTS.
If a claim is ever made by a creditor, custodian, trustee, assignee,
debtor-in-possession or receiver of the Borrower (or by or on behalf of the
Borrower) in an insolvency proceeding or otherwise, upon the Lender for
repayment or recovery of any property or any amounts received by the Lender from
Borrower in payment or on account of any Obligations and the Lender returns any
such property or repays all or part of said amount by reason of (a) any
judgment, decree or order of any court or administrative body having
jurisdiction over the Lender or any of its property or (b) any settlement or
compromise of any such claim effected by the Lender with any such claimant
(including the Borrower) then and in such event the Guarantor agrees that any
such judgment, decree, order, settlement or compromise shall be binding upon the
Guarantor, notwithstanding any cancellation of any Loan Document or other
instrument evidencing any Obligations of the Borrower or any revocation or
termination of this Guaranty, and the Guarantor shall be and remain liable to
the Lender hereunder for the value of such property returned (valued as of the
date on which the Lender obtained repossession thereof) or amount so repaid or
recovered to the same extent as if such property or amount had never originally
been received by the Lender. The cause of action in favor of the Lender under
this paragraph shall accrue as of the date the Lender makes the payment or
returns the property contemplated hereunder, and shall survive any prior
termination or revocation of this Guaranty.
4. NO RELEASE OF GUARANTOR.
Without notice to or the consent of the Guarantor and without reducing,
limiting or terminating the liability of the Guarantor hereunder, the Lender, to
the extent permitted under the Loan Documents, (a) may amend, modify or
supplement the Loan Documents in accordance with the terms thereof; (b) may
renew, increase, extend or modify any such Obligations of the Borrower; (c) may
accept partial payment thereon, or settle, release, compound, compromise or
change the terms of payment of any principal and/or interest; (d) may collect on
or otherwise liquidate any claims held by the Lender in such manner as the
Lender may deem advisable; or (e) may extend or accelerate the times of payment,
renew any such Obligations, or enter into any other compromises, adjustments or
grant any indulgences to the Borrower.
5. WAIVERS.
The Guarantor hereby waives: (a) notice of acceptance of this Guaranty and
of any Obligations of Borrower to which it may apply and of any other notice to
which
-4-
<PAGE>
the Guarantor might otherwise be entitled; (b) notice of default by the Borrower
with respect to any Obligation guaranteed hereby; (c) any demand for payment
under this Guaranty; (d) the right to trial by jury as to any claim arising out
of or in connection with this Guaranty, and (e) all rights to be subrogated to
the Lender or any other party in regard to any amounts paid by the Guarantor
hereunder.
6. METHOD OF PAYMENT.
All amounts to be paid by the Guarantor hereunder shall be paid in
immediately available U.S. Dollars in favor of the Lender with such bank as the
Lender may designate in writing.
7. REPRESENTATIONS AND WARRANTIES.
The Guarantor hereby represents and warrants to the Lender as of the date
hereof:
(a) the Guarantor is a corporation duly formed, validly existing and in
good standing under the laws of the State of Delaware and maintains its
principal place of business and its chief executive office at 7301 South Peoria
Street, Englewood, Colorado 80112;
(b) the Guarantor has full power to carry on its business as it is now
being conducted and to enter into, legally bind itself by, and perform its
obligations under this Guaranty, and has complied with all material statutory
and other requirements relative to the business carried on by it; it is duly
qualified and in good standing in all of the jurisdictions in which the
character of the properties owned or leased by it or the business transacted by
it makes such qualification necessary and where the failure to so qualify would
preclude it from being able to fulfill its obligations with respect to this
Guaranty;
(c) all necessary consents, resolutions and authorizations for the
Guarantor to enter into this Guaranty have been obtained, and no further
consents or authorizations are necessary for the performance by the Guarantor of
all its obligations pursuant to the provisions of all of the Loan Documents to
which it is a party; and
(d) the execution and delivery of, and the performance of the provisions
of, this Guaranty do not and will contravene or violate in any material respect
its Certificate of Incorporation or by-laws or any applicable law, regulation,
decree, order,
-5-
<PAGE>
license or permit or result in a default under any contractual or other
restriction now existing and binding on the Guarantor or on any of its
properties or result in the creation of any Lien on any of such properties.
(e) this Guaranty constitutes the legal, valid and binding obligation of
the Guarantor enforceable in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency or other laws
affecting creditors' rights in general;
(f) the Guarantor has given to the Lender financial statements and tax
returns of the Guarantor and said statements have been prepared in accordance
with generally accepted accounting principles consistently applied and present
fairly and accurately the financial condition of the Guarantor as of said date
and as of the Closing Date (as defined in the Loan Agreement) there has been no
material, adverse change in the Guarantor's financial condition since the date
of such financial statements and tax returns;
(g) no written information given by or made by the Guarantor in relation to
this Guaranty or in connection with the Loan Documents or in any financial or
other statement given by the Borrower or the Guarantor pursuant hereto or
pursuant to any transaction contemplated hereby contains any material
misstatement of material fact or omits to state any fact which would be
materially adverse to the interests of the Lender or which would be necessary to
make any statement or representation or warranty contained herein or therein not
materially misleading;
(h) on the date of this Guaranty, assuming the Lender has fulfilled its
obligations hereunder, the Guarantor has no defense, offset or counterclaim to
any action that may be instituted on this Guaranty;
(i) there are no outstanding judgments against the Guarantor and to the
Guarantor's best knowledge, no action, claim, suit or proceeding is pending or
threatened against or affecting the Guarantor or any of the Guarantor's
properties before any court, board of arbitration or administrative agency which
could or might result in the inability of the Guarantor to perform any
obligation hereunder or result in any material adverse change in the financial
condition of the Guarantor;
(j) the Guarantor is not (I) in default under any agreement to which the
Guarantor is a party or by which the Guarantor or any of its property is bound,
and (II) in default of any kind in respect of any financial commitment or
obligation
-6-
<PAGE>
(including obligations under guarantees) which in either of the cases described
in the preceding clauses (I) and (II) could have a material adverse effect on
the ability of the Guarantor to perform the Guarantor's obligations under this
Guaranty;
(k) the Guarantor has made an independent investigation of all matters
which are in any manner relevant to this Guaranty, the Borrower, and the
Obligations;
(l) no representations have been made by the Lender to the Guarantor
concerning the Aircraft or any of the transactions relative thereto, or any
other matter except as expressly set forth herein and no representations have
been relied upon by the Guarantor in entering into this Guaranty; and
(m) the Guarantor is the owner of 100% of the outstanding capital stock of
the Borrower.
8. UNDERTAKINGS AND COVENANTS.
8.1 The Guarantor shall provide to the Lender:
(a) as soon as available, but in any event within 60 days after the close
of each of the first three (3) quarters of each fiscal year of the Guarantor:
(i) a consolidated balance sheet of the Guarantor as at the end of
such quarter setting forth in comparative form the figures for the end of
the corresponding period of the preceding fiscal year; and
(ii) consolidated statements of income, cash flow and stockholders'
equity of the Guarantor for such quarterly period, setting forth in
comparative form in each case the amount for the corresponding period of
the preceding year; and
(b) as soon as available and in any event within 90 days after the close of
each fiscal year of the Guarantor:
(i) a consolidated balance sheet of the Guarantor as of the end of
such fiscal year setting forth in comparative form the figures for the end
of the preceding fiscal year; and
-7-
<PAGE>
(ii) a consolidated statements of income, cash flow and stockholders'
equity of the Guarantor for such fiscal year setting forth in each case in
comparative form the corresponding figures for the preceding year.
The financial statements referred to in clause (b) above shall be audited by
certified public accountants acceptable to the Lender. The financial statements
referred to in clauses (a) and (b) above: (I) shall be prepared in accordance
with GAAP and (II) shall be accompanied by a certificate executed by the chief
financial officer of the Guarantor certifying that the Guarantor and the
Borrower have complied with all covenants contained in the Loan Documents and
that no Events of Default have occurred and are continuing.
8.2 The Guarantor shall provide to the Lender:
(a) copies of all documents filed by the Guarantor with the SEC, within
three (3) Banking Days of such filing;
(b) a copy of the Guarantor's federal income tax return on IRS Form 1040
within three (3) Banking Days of the filing thereof with the Internal Revenue
Service; and
(c) any further information as the Lender may from time to time reasonably
deem necessary to assess the financial condition of the Guarantor.
8.3 The Guarantor shall, promptly upon request, provide the Lender and its
accountants, attorneys and agents reasonable access to the Guarantor's books and
records and a reasonable opportunity to make copies and to take extracts
therefrom. If any such information is stored on any disk, tape or other medium
for the storage of electronic data, then, at the Lender's request, the Guarantor
shall cause a printout to be made therefrom; provided, however, that so long as
no Default or Event of Default has occurred and is continuing, the Lender shall
not exercise its rights under this Section 8.3 more frequently than on a
quarterly basis.
8.4 The Guarantor shall: (a) take all actions reasonably requested by the
Lender to insure that this agreement will at all times be the legal, valid and
binding obligation of the Guarantor, enforceable in accordance with its terms
and (b) promptly notify the Lender if the Guarantor changes its address.
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8.5 The Guarantor shall at all times during the Loan Term own 100% of the
outstanding capital stock of the Borrower.
8.6 Throughout the Loan Term,
(a) The Guarantor shall not permit the Leverage Ratio to be less than the
lesser of: (i) 3.30 to 1 or (ii) the existing Leverage Ratio under any Working
Capital Facility;
(b) The Guarantor shall not permit the EBITDA Coverage Ratio to be less
than 1.0 calculated on a rolling four quarter basis.
8.7 During the Loan Term, the Guarantor shall not: (a) enter into any
merger, reorganization or consolidation (other than a merger, reorganization or
consolidation in which the Guarantor is the surviving corporation); (b) wind up,
liquidate or dissolve or (c) agree to do any of the foregoing.
9. SUBORDINATION
All rights that the Guarantor may at any time have against Borrower, or any
collateral securing the Obligation (including rights of subrogation,
exoneration, reimbursement and contribution) and all obligations that Borrower
may at any time have to Guarantor, arising by virtue of Guarantor's obligations
under this Guaranty or any payment or performance made or completed pursuant to
the terms hereof are expressly subordinated to the prior payment, observance and
performance in full of the Obligations. The Guarantor shall not enforce any of
the rights, or attempt to obtain payment or performance of any of the
obligations, subordinated pursuant to this Section 9, until the Obligations have
been paid, observed and performed in full, except that such prohibition shall
not apply to routine acts, such as the giving of notices and the filing of
continuation statements, necessary to preserve any such rights. If any amount
shall be paid to or recovered by the Guarantor (whether directly or by way of
setoff, recoupment or counterclaim) on account of any right or obligation
subordinated pursuant to this Section 9, such amount shall be held in trust by
the Guarantor for the benefit of the Lender, not commingled with any of the
Guarantor's other funds and forthwith paid over to the Lender, in the exact form
received, together with any necessary endorsements, to be applied and credited
against, or held as security for, the Obligations and the obligations of the
Guarantor under this Guaranty.
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10. RIGHTS OF THE LENDER.
10.1 In any right of action which shall accrue to the Lender by reason of
this Guaranty, the Lender at its election may proceed: (a) against the Guarantor
together with the Borrower, (b) against the Guarantor and Borrower separately or
(c) against the Guarantor, only, without having first commenced any action or
having obtained any judgment against Borrower. No failure to perfect or enforce
any rights in and to any collateral which has been or may be furnished to secure
any Obligation or this Guaranty shall be a defense hereunder. No alleged failure
by the Lender to dispose of or otherwise deal with the Aircraft in a
commercially reasonable manner or otherwise shall terminate the Guarantor's
obligations hereunder.
10.2 No exercise, delay in exercising or omission to exercise any of the
rights, powers, and remedies of the Lender shall be deemed a waiver thereof, and
every such right, power and remedy may be exercised subsequently or repeatedly.
11. ASSIGNMENT.
The Lender may assign any and all of its rights with respect to the
Borrower or the Guarantor including, but not limited to, the right to receive
payment of any Obligation to third parties from time to time and the Guarantor
hereby consents to any such assignment, and waives notice thereof.
12. EXPENSES.
In the event that the Lender retains counsel and/or expert witnesses in
connection with any effort to enforce this Guaranty, or if the Lender brings any
action or suit in any court of record to enforce any or all liabilities of the
Guarantor hereunder, the Guarantor shall be liable for and shall reimburse the
Lender for any and all fees and disbursements of counsel and expert witnesses
retained by the Lender. Service of process in any such action or suit may be
made upon the Guarantor by mailing a copy of the summons and other court papers
to the Guarantor at the address set forth in the preamble hereof or to any other
address specified by the Guarantor in writing to the Lender prior to default
hereunder, and sent by certified mail, return receipt requested.
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13. MODIFICATIONS AND AMENDMENTS.
This Guaranty is and shall be binding upon the Guarantor and their
successors and assigns and cannot be modified, nor may any provision hereof be
waived, orally. No waiver of any of the Lender's rights hereunder and no
modification or amendment of any provision of this Guaranty shall be made or
discharged except by a written instrument signed by an authorized representative
of the Lender and the Guarantor.
14. GOVERNING LAW.
THIS GUARANTY SHALL BE DEEMED TO HAVE BEEN MADE IN AND SHALL BE GOVERNED
AND INTERPRETED BY THE LAWS OF THE STATE OF ARIZONA WITH RESPECT TO AGREEMENTS
MADE BY RESIDENTS OF SUCH STATE TO BE WHOLLY PERFORMED THEREIN, AND THE RIGHTS
AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH
SUCH LAWS, EXCEPT TO THE EXTENT THAT THE LAW OF SOME OTHER JURISDICTION MAY BE
MANDATORILY APPLICABLE TO PROCEEDINGS TAKEN FOR THE ENFORCEMENT OF THE RIGHTS OF
THE LENDER HEREUNDER; PROVIDED, HOWEVER, THAT ANY REMEDIES HEREIN PROVIDED WHICH
SHALL BE VALID UNDER THE LAWS OF THE JURISDICTION WHERE PROCEEDINGS FOR THE
ENFORCEMENT HEREOF SHALL BE TAKEN SHALL NOT BE AFFECTED BY ANY INVALIDITY
THEREOF UNDER THE LAWS OF THE STATE OF ARIZONA. If any provision of this
Guaranty or of any other agreement between the parties hereto shall be held
invalid or inapplicable to any circumstance or in any jurisdiction, such
invalidity or inapplicability shall not affect any other provision hereof or of
any other agreement between the parties hereto which can be given effect without
regard to the invalid provision, nor to the same provision to the extent valid
or enforceable in any other jurisdiction, nor shall any such inapplicability to
any circumstance affect the applicability of such terms to any other or
different or subsequent circumstance, all of such terms, conditions or
provisions are deemed severable. In construing any provision of this Guaranty,
no account shall be taken of the identity of the party who prepared this
Guaranty and no presumption shall arise as a result thereof.
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15. JURISDICTION.
The Guarantor and the Lender hereby agree that all actions or proceedings
initiated by the Guarantor and arising directly or indirectly out of this
Guaranty shall be litigated exclusively in either the Superior Court of Arizona,
Mariposa County or the United States District Court for the District of Arizona
(the "Arizona Courts") and that any action or proceeding initiated by the Lender
and arising directly or indirectly out of this Guaranty may be litigated in the
Arizona Courts or in any jurisdiction in which the Guarantor or any of its
assets are located, in the Lender's discretion. The Guarantor and the Lender
hereby expressly submit and consent in advance to the jurisdiction and venue in
any action or proceeding commenced by the Lender or the Guarantor in any of the
Arizona Courts, agree that jurisdiction and venue is proper in the Arizona
Courts, and hereby waive personal service of the summons and complaint, or other
process or papers issued therein, and agree that such service of the summons and
complaint may be made by registered mail, return receipt requested, addressed to
the Guarantor or the Lender at their respective addresses set forth in the
preamble hereof. The Guarantor and the Lender waive any claim that Phoenix,
Arizona or the District of Arizona is an inconvenient forum or an improper forum
based on lack of venue. Should the Guarantor, after being so served, fail to
appear or answer any summons, complaint, process or paper so served within 30
days after the mailing thereof, the Guarantor and the Lender acknowledges that
as a result thereof, an order and/or judgment may be entered by the Lender or
the Guarantor against the other as demanded or pleaded for in such summons,
complaint, process or papers. The choice of forum set forth herein shall not be
deemed to preclude the enforcement by the Lender or the Guarantor of any
judgment in any other appropriate jurisdiction.
16. ENTIRE AGREEMENT.
This Guaranty contains the entire and only agreement between the Guarantor
and the Lender with respect to the guaranty of any Obligations of the Borrower
and any representation, promise, condition or understanding in connection
therewith which is not expressed in this Guaranty shall not be binding on the
Lender or upon the Guarantor. All prior understandings and agreements concerning
this Guaranty, have been superseded by and are fully set forth herein.
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17. COUNTERPARTS.
This Guaranty may be executed in any number of counterparts, and each of
such counterparts shall for all purposes be deemed to be an original, and all
such counterparts shall together constitute but one and the same Guaranty.
18. DELIVERY.
This Guaranty is intended to and shall be deemed to be delivered by the
Guarantor to the Lender and accepted by the Lender in Arizona.
19. HEADINGS.
Captions and paragraph headings used herein are for convenience only and
are not part of this Guaranty and shall not be used in construing it.
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IN WITNESS WHEREOF, the undersigned have caused this instrument to be duly
executed as of the day and year first above written.
GUARANTOR: AIR METHODS CORPORATION
By: /s/ Aaron D. Todd
------------------------------------
Name: Aaron D. Todd
Title: CFO
LENDER:
FINOVA CAPITAL CORPORATION
By: /s/ Pamela Marchant
------------------------------------
Name: Pamela Marchant
Title: Vice President
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