UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------------------
8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
----------------------------------------------
Date of Report (Date of earliest event reported): April 9, 1999
MEDICAL INDUSTRIES OF AMERICA, INC.
(Exact name of registrant as specified in its Charter)
FLORIDA 0-20356 65-0158479
(State of other jurisdiction (Commission file no.) (IRS Employer ID
of incorporation) Number)
1903 S. CONGRESS AVENUE, SUITE 400, BOYNTON BEACH, FLORIDA 33426
(Address of principal executive offices)
Registrant's telephone number, including area code: 561-737-2227
<PAGE>
Item 2. Acquisition and Disposition of Assets
(a) Description of Acquisitions
On April 9, 1999, the Company, through MIOA Acquisition Company
I, Inc. and MIOA Acquisition Company VII, Inc. (wholly owned
subsidiaries of Medical Industries of America, Inc.), executed
an agreement and plan of merger effective March 1, 1999 with Air
Response, Inc. The Company received 100% of the outstanding
stock of Air Response, Inc. for $2,900,000, represented by
3,866,667 shares of the Company's restricted common stock with a
value of $2,900,000. In addition, the Company will issue up to
$2,900,000 convertible debentures over three years based on
earnings, as defined.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Audited financial statements of Air Response, Inc. as of
December 31, 1998 and the year then ended.
Report of: Balance Sheet
Statement of Operation and Retained Earnings
Statement of Cash Flows
Notes to Financial Statements
(b) Pro forma financial information required pursuant to Article II
of Registration S-X:
(i) Pro Forma Condensed Combined Balance Sheet as of
December 31, 1998
(ii) Pro Forma Condensed Combined Statement of Income (Loss)
for the twelve months ended December 31, 1998.
The unaudited Pro Forma Condensed Balance Sheet as of December 31, 1998
and the unaudited Pro Forma Condensed Combined Statement of Income (Loss) for
the twelve months ended December 31, 1998 give effect to the acquisition
accounted for as a purchase as if it had occurred on January 1, 1998. The pro
forma information is based on historical financial statements of Air Response,
Inc. and Medical Industries of America, Inc. after giving effect to the proposed
transaction using the purchase method of accounting and the assumptions and
adjustments in the accompanying notes to the pro forma financial statements. The
pro forma financial statements have been prepared on the basis of preliminary
estimates.
The pro forma statements have been prepared by Medical Industries of
America, Inc. based upon the financial statements of Air Response, Inc. which
have been provided by Air Response, Inc. These pro forma financial statements
may not be indicative of the results that actually would have occurred if the
combination had been in effect on the date indicated or which may be obtained in
the future. The pro forma financial statements should be read in conjunction
with the audited financial statements and notes to the Air Response, Inc.
audited financial statements.
(c) Exhibits
Exhibit Number Description
-------------- -----------
2 Agreement and Plan of Merger by and among Medical Industries of
America, Inc., MIOA Acquisition Company I, Inc., MIOA
Acquisition Company VII, Inc., Air Response, Inc. and Louis R.
Capece, Jr. and Donald Jones.
2
<PAGE>
Date: June 18, 1999 By: /s/ ARTHUR KOBRIN
Arthur Kobrin
Chief Financial Office
3
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report, dated March 26, 1999 (except for footnote H-3, for
which the date is April 13, 1999), accompanying the financial statement of Air
Response, Inc. contained in the Form 8-K/A. We consent to the use of the
aforementioned report in the Form 8-K/A.
/s/ Grant Thornton LLP
GRANT THORNTON LLP
Denver, Colorado
June 18, 1999
<PAGE>
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
AIR RESPONSE, INC.
December 31, 1998
<PAGE>
REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Air Response, Inc.
We have audited the accompanying balance sheet of Air Response, Inc.(a New York
corporation) as of December 31, 1998, and the related statements of operations
and retained earnings and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Air Response, Inc. as of
December 31, 1998, and the results of its operations and its cash flows the year
then ended, in conformity with generally accepted accounting principles.
GRANT THORNTON LLP
/s/ Grant Thornton LLP
Denver, Colorado
March 26, 1999 (except for
footnote H-3, for which the
date is April 13, 1999)
<PAGE>
FINANCIAL STATEMENTS
Air Response, Inc.
BALANCE SHEET
December 31, 1998
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Unrestricted $ 28,473
Restricted 121,474
Receivables
Trade, net of allowance of $152,000 986,790
Other 6,787
Prepaid expenses 160,835
Deferred income taxes 91,000
------------
Total current assets 1,395,359
PROPERTY AND EQUIPMENT -- AT COST
Aircraft 9,920,888
Furniture and fixtures 52,434
Medical equipment 191,385
------------
10,164,707
Less accumulated depreciation (2,176,278)
------------
7,988,429
OTHER ASSETS
Note receivable, officer 50,000
Deposits 12,533
------------
62,533
------------
Total assets $ 9,446,321
============
LIABILITIES AND STOCKHOLDER'S (DEFICIT)
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 1,915,728
Income taxes payable 83,000
Current portion of notes payable 1,531,195
------------
Total current liabilities 3,529,923
Notes payable, less current portion 5,965,256
Deferred income taxes 130,000
------------
Total liabilities 9,625,179
COMMITMENTS AND CONTINGENCIES --
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock -- authorized 200 shares no par
value; 100 shares issued and outstanding 1,000
Retained earnings 373,109
Less note receivable from stockholder (552,967)
------------
Total stockholders' (deficit) (178,858)
------------
Total liabilities and stockholders' (deficit) $ 9,446,321
============
The accompanying notes are an integral part of this statement.
<PAGE>
Air Response, Inc.
STATEMENT OF OPERATIONS AND RETAINED EARNINGS
Year ended December 31, 1998
Operating revenue
Air ambulance $ 11,036,823
Medical 1,692,727
Charter 49,585
------------
Total operating revenue 12,779,135
Operating expenses
Flying operations 7,741,390
Maintenance 1,666,304
Promotion and sales 718,618
General and administrative 1,121,387
Depreciation 562,465
------------
Total operating expenses 11,810,164
Operating income 968,971
Nonoperating expenses (income)
Interest expense 653,769
Release of debt for extension of an
acquisition agreement (222,500)
Other (4,413)
------------
Total nonoperating
expenses (income) 426,856
------------
Income before income taxes 542,115
Provision for income taxes 214,000
------------
NET INCOME 328,115
Retained earnings, beginning of year 44,994
------------
Retained earnings, end of year $ 373,109
============
The accompanying notes are an integral part of this statement.
<PAGE>
Air Response, Inc.
STATEMENT OF CASH FLOWS
Year ended December 31, 1998
Increase (decrease) in cash and cash equivalents
Cash flows from operating activities
Net income $ 328,115
Adjustment to reconcile net income to net cash
provided by operating activities
Depreciation 562,465
Note payable released as consideration for
extending acquisition agreement (222,500)
Provision for losses on accounts receivable 103,661
Deferred income taxes 39,000
Changes in operating assets and liabilities
(Increase) in accounts receivable (449,508)
(Increase) in prepaid expenses and other assets (34,966)
Increase in accounts payable and accrued
Expenses 530,920
Increase in income taxes payable 137,556
---------
Net cash provided by operating activities 994,743
Cash flows from investing activities
Acquisition of property and equipment (60,994)
Advances on notes receivable -- officers (105,226)
---------
Net cash flows (used in) investing activities (166,220)
Cash flows from financing activities
Principal payments on notes payable (878,743)
Proceeds from notes payable 160,494
---------
Net cash (used in) financing activities (718,249)
---------
NET INCREASE IN
CASH AND CASH EQUIVALENTS 110,274
Cash and cash equivalents, beginning of year 39,673
---------
Cash and cash equivalents, end of year $ 149,947
=========
Supplemental disclosure of cash flow information
Cash paid during the year for interest 629,962
The accompanying notes are an integral part of this statement.
<PAGE>
Air Response, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies is presented to assist in
the understanding of Air Response, Inc.'s (the Company) financial
statements. The financial statements and notes are representations of the
Company's management, which is responsible for their integrity and
objectivity. These accounting policies conform to generally accepted
accounting principles and have been consistently applied in the preparation
of the financial statements.
1. HISTORY AND BUSINESS ACTIVITY
The Company provides airborne transport for patients who are critically
ill, injured or otherwise incapacitated such that they may require
emergency medical care during flight. Services are provided by the Company
for hospital patients who need to be transported to other hospitals;
hospital patients who need to be transported to residences or nursing homes
and other convalescent facilities; organ transplant harvest teams and
harvested organs and significant numbers of vacationers who become ill or
injured during trips. The flights operated are generally long distance in
nature and they include international as well as domestic transport.
2. CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all
highly liquid cash investments with an original maturity of three months or
less to be cash equivalents.
3. ACCOUNTS RECEIVABLE -- ALLOWANCE FOR DOUBTFUL ACCOUNTS
The Company provides for doubtful accounts receivable using the allowance
method based on actual outstanding account balances at year-end and
management's estimation of collectability of these accounts.
4. MEDICAL SUPPLIES
It is the Company's policy to expense all purchases of medical supplies as
incurred as large quantities of these items are generally not held in an
inventory for long periods.
<PAGE>
Air Response, Inc.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
5. PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Major additions, betterments,
and renewals are capitalized. Maintenance and repairs are charged to
operating expenses as they are incurred. Depreciation to estimated residual
values are computed on; the units-of-production method for aircraft
engines/overhauls; the straight-line method, using a half year convention,
is used for all other property and equipment, over the estimated useful
lives of the related assets as follows:
Aircraft 20 years
Aircraft engines/overhauls Estimated flight hours
Furniture and fixtures 5-- 7 years
Medical equipment 5-- 7 years
6. INCOME TAXES
The Company provides for income taxes on the liability method. Deferred
income taxes are provided for items, which are reported for tax purposes in
different periods than for financial statement purposes. The tax effects of
these differences are recorded as deferred income taxes.
7. IMPAIRMENT OF LONG-LIVED ASSETS
Statement of Financial Accounting Standards 121, ACCOUNTING FOR THE
IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF
(SFAS 121) requires that long-lived assets and certain identifiable
intangibles held and used by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. If the sum of the expected future cash flows
(undiscounted and without interest) is less than the carrying amount of the
asset, an impairment loss is recognized.
<PAGE>
Air Response, Inc.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
7. IMPAIRMENT OF LONG-LIVED ASSETS (Continued)
Measurement of that loss would be based on the fair value of the asset.
SFAS 121 also generally requires that long-lived assets and certain
identifiable intangibles to be disposed of be reported at the lower of the
carrying amount or the fair value, less cost to sell. Any impairment
provisions recognized in accordance with SFAS 121 are permanent and may not
be restored in the future. No impairment expense was recognized for the
year ended December 31, 1998.
8. USE OF ESTIMATES
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
9. GOVERNMENTAL REGULATION
The Company is subject to the rules and regulations of the Federal Aviation
Administration (FAA) and the State of Colorado Department of Health and
Rehabilitative Services.
NOTE B -- ACCOUNTS RECEIVABLE FACTORING AGREEMENT
The Company has an agreement to sell with recourse certain specific accounts
receivable to a financial institution. At December 31, 1998, the balance of
sold accounts receivable that had not been collected was approximately
$363,000. The sold accounts receivable have been excluded from trade
receivables in the accompanying balance sheet. The full amount of the
allowance for doubtful accounts has been retained because the Company has
retained substantially the same risk of credit loss as if the receivables had
not been sold. Finance charges under this agreement have been included in
interest expense. Restricted cash represents cash that has been restricted in
the event of default. In addition, this agreement has been personally
guaranteed by the Company's President and sole shareholder.
<PAGE>
Air Response, Inc.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
NOTE C -- NOTES PAYABLE
Notes payable at December 31, 1998 consisted of the following:
Prime plus 2.0% (9.75% at December 31, 1998) note due
in 72 monthly installments of $2,728 including
interest, beginning August 1993 and maturing July
1999; collateralized by a 1976 Piper PA-31-50, FAA#
N621PG and certain of its aviation equipment. $ 23,773
Prime plus 1.50% (9.25% at December 31, 1998) note
due in 72 monthly installments of $2,728 including
interest, beginning January 1995 and maturing
December 2000; collateralized by a 1975 Cessna 421B,
FAA# N918WK and certain of its aviation equipment. 63,985
Prime plus 1.25% (9.25% at December 31, 1998) note
due in 84 monthly installments of $4,149 including
interest, beginning October 1996 and maturing
September 2003; collateralized by a 1972 Mitsubishi
MU-2B-35, FAA# N333OK. The note is personally
guaranteed by the Company's President and sole
shareholder. 190,584
Prime plus 1.50% (9.25% at December 31, 1998) note
due in 60 monthly installments of $3,081 including
interest, beginning November 1996 and maturing
October 2001; collateralized by a 1968 Learjet 25,
FAA# N102AR and certain of its aviation equipment as
well as a 1976 Cessna 340A, FAA# N986OO. The note is
personally guaranteed by the Company's President and
sole shareholder. 90,634
Prime plus 1.50% (9.25% at December 31, 1998) note
due in 60 monthly installments of $5,460 including
interest, beginning January 1997 and maturing
December 2001; collateralized by a 1967 Learjet 24,
FAA# N777MR and certain of its aviation equipment.
The note is personally guaranteed by the Company's
President and sole shareholder. 169,482
<PAGE>
Air Response, Inc.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
NOTE C -- NOTES PAYABLE (CONTINUED)
Prime plus 1.50% (9.25% at December 31, 1998) note
due in 60 monthly installments of $26,288 including
interest, beginning February 1998 and maturing
January 2003; collateralized by a 1979 Learjet 25D,
FAA# N444WW and certain of its aviation equipment.
The note is personally guaranteed by the Company's
President and sole shareholder. 1,167,715
Prime plus 1.50% (9.25% at December 31, 1998) note
due in 60 monthly installments of $47,211 including
interest, beginning February 1998 and maturing
January 2003; collateralized by a 1978 Learjet 35A,
FAA# N18FN and certain of its aviation equipment. The
note is personally guaranteed by the Company's
President and sole shareholder. 2,093,023
Prime plus 1.50% (9.25% at December 31, 1998) note
due in 39 monthly installments of $11,917 including
interest, beginning July 1998, with a balloon payment
of approximately $575,000 due October 2001;
collateralized by a 1968 Learjet 25, FAA# N102AR and
certain of its aviation equipment as well as a 1976
Cessna 340A, FAA# N986OO. The note is personally
guaranteed by the Company's President and sole
shareholder. 774,854
Prime plus 1.50% (9.25% at December 31, 1998) note
due in 60 monthly installments of $40,237 including
interest, beginning July 1998 and maturing June 2003;
collateralized by a 1975 Learjet 35, FAA# N435JL and
certain of its aviation equipment. The note is
personally guaranteed by the Company's President and
sole shareholder. 1,836,203
Prime plus 1.50% (9.25% at December 31, 1998) note
due in 60 monthly installments of $3,863 including
interest, beginning December 1998 and maturing
November 2003; collateralized by a jet engine. The
note is personally guaranteed by the Company's
President and sole shareholder. 177,198
<PAGE>
Air Response, Inc.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
NOTE C -- NOTES PAYABLE (CONTINUED)
Prime plus 1.50% (9.25% at December 31, 1998) note
due in 36 monthly installments of $29,331 including
interest, beginning February 1999 and maturing
January 2002; collateralized by a 1972 Learjet 25B,
FAA# N700FC and certain of its aviation equipment.
The note is personally guaranteed by the Company's
President and sole shareholder. 909,000
-----------
7,496,451
Less current maturities (1,531,195)
-----------
$ 5,965,256
===========
The aggregate maturities of the notes payable are as follows:
Year ending December 31,
1999 $ 1,531,195
2000 1,696,689
2001 2,374,874
2002 1,489,312
2003 404,381
-----------
$ 7,496,451
===========
NOTE D - INCOME TAXES
Deferred income taxes reflect the net effects of temporary differences between
the carrying amounts of assets and liabilities for financial reporting and
the amounts used for income tax purposes. Significant components of the
Company's deferred income tax assets and liabilities are as follows as of
December 31, 1998:
Current deferred income tax assets
Allowance for bad debts $ 59,000
Accrued vacation 23,000
Other 9,000
-------
91,000
<PAGE>
Air Response, Inc.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
NOTE D - INCOME TAXES (CONTINUED)
Long-term deferred income tax assets
Alternative minimum tax credits $ 217,000
---------
Total deferred income tax assets 308,000
---------
Current deferred income tax liabilities -
Long-term deferred income tax liabilities
Accumulated depreciation (347,000)
---------
Total deferred income tax liabilities (347,000)
---------
Net deferred income tax liability $ (39,000)
=========
Current components of income tax expense are as follows for the year ended
December 31, 1998:
CURRENT DEFERRED TOTAL
--------- -------- ---------
Federal $ 160,000 $ 14,000 $ 174,000
State 15,000 25,000 40,000
--------- -------- ---------
$ 175,000 $ 39,000 $ 214,000
========= ======== =========
The Company made no income tax payments for the year ended December 31, 1998.
NOTE E -- EMPLOYEE BENEFITS PLAN
The Company had a voluntarily defined contribution savings plan covering all
of their employees who had met certain age and length of service
requirements. The plan qualified under Section 401(k) of the Internal Revenue
Code. The Company had the option to provide discretionary matching
contributions each year. Matching contributions totaled $3,510 for 1998. This
plan was terminated in the first quarter of 1998.
NOTE F -- RELATED PARTY TRANSACTIONS
NOTES RECEIVABLE, OFFICERS
The Company has unsecured notes due from its officers amounting to $602,967
as of December 31, 1998. These non-interest-bearing notes are due on demand.
A $50,000 note has been reflected as non-current as it is not the Company's
intent to collect this note within the next year. The balance of the notes
receivable of $552,967 has been deducted from equity since it was repaid
through a dividend declared by the Company subsequent to December 31, 1998.
In January, 1999, the Company issued 25 shares of common stock to an officer
subject to the terms and conditions of an employment agreement.
<PAGE>
Air Response, Inc.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
NOTE F -- RELATED PARTY TRANSACTIONS (CONTINUED)
TRANSACTIONS WITH PROFLIGHT MEDICAL RESPONSE, INC. (PROFLIGHT)
In April 1997, the Company entered into an Amended Agreement and Plan of
Reorganization with Proflight. This agreement was contingent upon the success
of the initial public offering of Proflight's securities. The agreement was
revised several times during 1998, before it finally terminated in November
1998.
During 1997, the Company moved its headquarters from New York to Colorado in
anticipation of the merger with Proflight. During 1998, the Company paid
Proflight approximately $1,442,000 related to certain costs of operations,
which were provided to the Company by Proflight, including but not limited to
costs of leased aircraft, pilots, mechanics and certain administrative costs.
During 1998, the Company subleased an aircraft from Proflight. The total
payments under the sublease were approximately $56,000. This aircraft was
subsequently acquired by the Company.
During 1998, the Company had approximately $442,000 in sales to Proflight.
Proflight owes the Company approximately $5,000 as of December 31, 1998. This
amount has been included in the Company's allowance for doubtful accounts as
of year-end.
On January 23, 1998, the Company purchased a 1978 Learjet 35A, N18FN for $2.2
million from Proflight.
In March 1998, Proflight released its 1996 note receivable of $200,000 from
the Company and accrued interest of $22,500 as consideration for extending
the acquisition agreement.
<PAGE>
Air Response, Inc.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
NOTE F -- RELATED PARTY TRANSACTIONS (CONTINUED)
TRANSACTIONS WITH PROFLIGHT MEDICAL RESPONSE, INC. (PROFLIGHT) (CONTINUED)
In May 1998, Proflight pledged all of its medical and maintenance equipment,
not subject to prior liens to the Company as consideration for extending the
acquisition agreement. In June 1998, the Company agreed to pay Proflight
$25,000 for certain medical and office equipment, which amount was
subsequently paid.
NOTE G -- COMMITMENTS AND CONTINGENCIES
1. LEASES
The Company leases aircraft, office space and office equipment under
operating lease arrangements. Total lease expense was $365,233 for the year
ended December 31, 1998.
The minimum rental commitments under the noncancelable lease agreements
are as follows:
Year ending December 31,
1999 $ 327,291
2000 354,134
2001 174,187
2002 172,107
2003 86,873
Thereafter --
-----------
$ 1,014,592
===========
NOTE H - SUBSEQUENT EVENTS
1. CHANGE IN CONTROL
Effective March 1, 1999, the Medical Industries of America, Inc. (MIOA)
acquired 100% of the outstanding stock of Air Response, Inc. in exchange
for up to a maximum of $5,800,000. One-half of the consideration will be
paid in common stock of the MIOA at a rate of $.75 per share with the
balance under an earnings arrangement payable over three years. During
1998, the Company paid approximately $477,000 to Global Air Charter, Inc.,
a subsidiary of MIOA, for international air ambulance services. As of
December 31, 1998, the Company owes Global Air Charter, Inc.
approximately $129,000.
<PAGE>
Air Response, Inc.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
NOTE H - SUBSEQUENT EVENTS (CONTINUED)
2. FINANCING
On March 31, 1999, the Company was included in MIOA's
revolving loan arrangement which provides advances to
MIOA and its subsidiaries in total amounts not to
exceed $3,500,000 or 85% or the borrowing base
(primarily accounts receivable of MIOA and its
subsidiaries).
3. LITIGATION
On April 13, 1999, litigation was filed against the
Company alleging that the Company is responsible for
debts of Proflight as a result of its previous
relationship with Proflight (see note F). The Company
is unable to determine its liability, if any, because
the litigation is in its preliminary stages. The
Company intends to defend itself vigorously in this
matter.
<PAGE>
Medical Industries of America, Inc.
Pro Forma Condensed Combined Balance Sheet (Unaudited)
As of December 31, 1998
<TABLE>
<CAPTION>
MEDICAL PRO
INDUSTRIES AIR PRO FORMA FORMA
OF AMERICA RESPONSE ADJUSTMENTS COMBINED
---------- -------- ----------- --------
Assets
<S> <C> <C> <C> <C>
Cash $ 698,574 $ 149,947 $ -- $ 848,521
Accounts Receivable 3,409,025 993,577 (b)(128,640) 4,273,962
Current portion of notes
and mortgages receivables 79,119 -- -- 79,119
Inventories 125,525 -- -- 125,525
Medical equipment held for
sale 92,540 -- -- 92,540
Prepaid expenses and other
current assets 549,896 251,835 -- 801,731
----------- ----------- ----------- -----------
Total current assets 4,954,679 1,395,359 (128,640) 6,221,398
Property and equipment, net 10,468,420 7,988,429 (a)2,233,368 20,590,217
(c)(100,000)
Notes and mortgages
receivables, less current
maturity 97,580 -- -- 97,580
Goodwill 8,338,972 -- (a)845,490 9,150,462
(c)(34,000)
Investment in equity
securities 2,863,840 -- -- 2,863,840
Other assets 1,609,219 62,533 -- 1,671,752
----------- ----------- ----------- -----------
Total assets $28,332,710 $ 9,446,321 $ 2,816,218 $40,595,249
=========== =========== =========== ===========
Liabilities and
Shareholders' Equity
Line of credit $ 1,789,827 $ -- $ -- $ 1,789,827
Current portion of notes
payable & long-term debt 1,827,835 1,531,195 -- 3,359,030
Current portion of capital
lease obligations 163,595 -- -- 163,595
Current maturities of
convertible subordinated
debentures 125,000 -- -- 125,000
Accounts payable 2,117,079 1,915,728 (b)(128,640) 3,904,167
Accrued liabilities 1,009,564 83,000 -- 1,092,564
Net liabilities of
discontinued operations 418,243 -- -- 418,243
----------- ----------- ----------- -----------
Total current
liabilities 7,451,143 3,529,923 (128,640) 10,852,426
----------- ----------- ----------- -----------
Notes payable & long-term
debt, net of current
portion 6,184,737 5,965,256 -- 12,149,993
Convertible subordinated
debentures 3,367,500 -- -- 3,367,500
Capital lease obligations,
net of current portion 681,335 -- -- 681,335
Other liabilities -- 130,000 -- 130,000
Payable to officers 151,169 -- -- 151,169
----------- ----------- ----------- -----------
Total long-term
liabilities 10,384,741 6,095,256 -- 16,479,997
----------- ----------- ----------- -----------
Total liabilities 17,835,884 9,625,179 -- 27,332,423
----------- ----------- ----------- -----------
(c)(134,000)
Shareholders' equity 10,496,826 (178,858) (a)3,078,858 13,262,826
----------- ----------- ----------- -----------
Total liabilities and
shareholders' equity $28,332,710 $ 9,446,321 $ 2,816,218 $40,595,249
=========== =========== =========== ===========
</TABLE>
<PAGE>
Medical Industries of America, Inc.
Pro Forma Condensed Combined Statement of Income (Loss) (Unaudited)
For the year ended December 31, 1998
<TABLE>
<CAPTION>
MEDICAL
INDUSTRIES AIR PRO-FORMA PRO FORMA
OF AMERICA RESPONSE ADJUSTMENTS COMBINED
Revenue
<S> <C> <C> <C> <C> <C>
Revenue $ 14,448,523 $12,779,135 $(b)(488,838) $ 26,738,820
Interest income 282,803 -- -- 282,803
------------ ----------- ------------- ------------
Total revenue 14,731,326 12,779,135 (488,838) 27,021,623
------------ ----------- ------------- ------------
Expenses
Cost of services 6,915,503 9,407,694 (b)(488,838) 15,834,359
General and administrative
expenses 8,425,420 1,840,005 -- 10,265,425
Depreciation and
amortization 1,458,595 562,465 (c)134,000 2,155,060
Interest expense 2,026,924 653,769 -- 2,680,693
Other 300,951 -- -- 300,951
------------ ----------- ------------- ------------
Total expenses 19,127,393 12,463,933 (354,838) 31,236,488
------------ ----------- ------------- ------------
Non-operating income -- 226,913 -- 226,913
------------ ----------- ------------- ------------
Income (loss) from continuing
operations $ (4,396,067) $ 542,115 $ -- $ (3,987,952)
Loss from discontinued
operations $ (2,952,107) $ -- $ -- $ (2,952,107)
------------ ----------- ------------- ------------
Income (loss) before
extraordinary item and
taxes $ (7,348,174) $ 542,115 $ -- $ (6,940,059)
Extraordinary item 169,566 -- -- 169,566
------------ ----------- ------------- ------------
Income (loss) before income
taxes (7,178,608) 542,115 -- (6,770,493)
Income taxes -- 214,000 -- 214,000
------------ ----------- ------------- ------------
Net income (loss) $ (7,178,608) $ 328,115 $ -- $ (6,984,493)
============ =========== ============= ============
(Loss) Income per share $ (.38) $ 3,281 $ (.30)
============ =========== ============= ============
Weighted average common
shares outstanding 18,873,992 100 -- 22,740,659
============ =========== ============= ============
</TABLE>
<PAGE>
Medical Industries of America, Inc.
Notes to Pro Forma Condensed Combined Financial Statements (Unaudited)
(a ) The following pro forma adjustments are made to reflect estimated fair
value adjustments at December 31, 1998 between Medical Industries and Air
Response, Inc.
Fair value adjustments
Goodwill $ 845,490
Aircraft 2,233,368
-----------
Shareholders' Equity $3,078,858
==========
(b) The following pro forma adjustments reflect Inter-company adjustments
between Medical Industries and Air Response, Inc.
Accounts receivable $ 128,640
============
Accounts payable $ 128,640
============
Revenue $ 488,838
============
Cost of Revenue $ 488,838
============
(c) The following pro forma adjustments reflect additional depreciation and
amortization based on fair market value adjustment.
EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
MEDICAL INDUSTRIES OF AMERICA, INC.,
a Florida corporation,
MIOA ACQUISITION COMPANY I, INC.,
a Florida corporation
MIOA ACQUISITION COMPANY VII, INC.,
a Florida corporation
AIR RESPONSE, INC.,
a New York corporation,
AND
LOUIS R. CAPECE, JR.
AND
DONALD JONES
<PAGE>
TABLE OF CONTENTS
ARTICLE I - THE MERGER
1.1 The Merger............................................................2
1.2 Effectiveness of the Merger...........................................2
1.3 Effect of the Merger..................................................2
1.4 Surviving Corporation.................................................2
1.5 Holding Corp..........................................................3
1.6 Subsequent Actions....................................................3
1.7 Status and Conversation of Shares.....................................3
1.8 Books and Records.....................................................4
ARTICLE II - MERGER CONSIDERATION
2.1 Shareholders Merger Consideration.....................................4
2.2 No Registration......................................................10
2.3 Incidental Registration..............................................10
2.4 Closing..............................................................11
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.1 Company Shares........................................................11
3.2 Organization..........................................................11
3.3 Capitalization........................................................11
3.4 Authority and Approval of Agreement...................................12
3.5 No Violations.........................................................12
3.6 Financial Statements..................................................13
3.7 Conduct Since Date of Recent Balance Sheet............................13
3.8 Subsidiaries..........................................................15
3.9 Liabilities...........................................................15
3.10 Title to and Condition of Properties.................................15
3.11 Accounts Receivable..................................................16
3.12 Contracts and Commitments............................................16
3.13 Officers, Directors, Agents, etc.....................................17
3.14 Labor Matters........................................................17
3.15 Compliance With Laws and Orders......................................18
3.16 Books and Records....................................................20
3.17 Tax Matters..........................................................20
3.18 Real Estate..........................................................21
3.19 Insurance............................................................21
3.20 Personnel............................................................22
3.21 Litigation...........................................................22
3.22 Other Liabilities....................................................22
3.23 Consents.............................................................23
3.24 Judgments............................................................23
3.25 Brokers..............................................................23
3.26 Trade Rights.........................................................23
3.27 Bank Accounts........................................................24
ii
<PAGE>
3.28 Operation of Aircraft................................................24
3.29 Care, Use and Maintenance............................................24
3.30 Disclosure...........................................................25
3.31 Y2K Compliant........................................................25
3.32 Air Response South, Inc. ............................................25
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
4.1 MIOA Shares...........................................................26
4.2 Organization..........................................................26
4.3 Authority and Approval of Agreement...................................26
4.4 No Violations.........................................................26
4.5 Consents..............................................................26
4.6 S.E.C. Documents......................................................26
4.7 Absence of Certain Changes or Events..................................27
4.8 Brokers...............................................................27
4.9 Full Disclosure.......................................................27
4.10 No Encumbrances on MIOA Securities...................................27
4.11 Global Air Charter and Global Air Rescue.............................27
4.12 Global Financials....................................................28
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF MIOA
5.1 Interpretation........................................................28
5.2 Survival..............................................................28
5.3 Indemnification.......................................................28
5.4 Limitation............................................................29
5.5 Setoffs...............................................................29
ARTICLE VI - OTHER COVENANTS
6.1 General Releases......................................................30
6.2 Access to Information and Records.....................................30
6.3 Conduct of Business Pending the Effective Date........................30
6.4 Consents..............................................................31
6.5 Other Action..........................................................32
6.6 Disclosure Schedule...................................................32
6.7 Capital Infusion......................................................32
ARTICLE VI I - CONDITIONS PRECEDENT TO THE SHAREHOLDERS' OBLIGATIONS
7.1 Representations and Warranties of MIOA................................32
7.2 Performance of This Agreement.........................................32
7.3 Absence of Litigation.................................................32
7.4 Shareholders Guarantees...............................................32
7.5 Deliveries at Closing.................................................33
ARTICLE VII - CONDITIONS PRECEDENT TO THE SHAREHOLDERS' OBLIGATIONS
8.1 Representations and Warranties of the Shareholder.....................33
8.2 Performance of This Agreement.........................................33
8.3 Absence of Litigation.................................................33
iii
<PAGE>
8.4 Deliveries at Closing.................................................33
ARTICLE IX - OBLIGATIONS ON OR BEFORE CLOSING DATE
9.1 Obligations of MIOA to the Shareholders on or before the
Closing Date........................................................34
9.2 Obligations of the Company and the Shareholders to MIOA on or
Before the Closing Date.............................................34
ARTICLE X - TERMINATION AND RECISION
10.1 Termination Prior to Closing Date....................................35
10.2 Recision Post Closing Date...........................................36
ARTICLE XI - MISCELLANEOUS
11.1 Notices..............................................................37
11.2 Entire Agreement.....................................................37
11.3 Binding Effect; Assignment...........................................37
11.4 Amendment............................................................38
11.5 No Waiver............................................................38
11.6 Gender and Use of Singular and Plural................................38
11.7 Counterparts.........................................................38
11.8 Headings.............................................................38
11.9 Governing Law........................................................38
11.10 Further Assurances..................................................38
11.11 Litigation..........................................................38
11.12 Costs and Expenses..................................................38
11.13 Pledge Agreement....................................................39
11.14 Shareholder Elections, Consents or Approval.........................39
11.15 Loans...............................................................39
iv
<PAGE>
EXHIBIT INDEX
EXHIBIT A Articles of Merger
EXHIBIT B Articles of Incorporation
EXHIBIT C Bylaws
EXHIBIT D Example of Formula
EXHIBIT E Debenture
EXHIBIT F Stock Pledge Agreement
EXHIBIT G MIOA Stock Certificate Legends
EXHIBIT H General Releases
EXHIBIT I Employment Agreements
v
<PAGE>
SCHEDULE INDEX
SCHEDULE 2.1 Shareholders Merger Consideration
SCHEDULE 3.2 Articles and Bylaws
SCHEDULE 3.3 List of Security Holders of the Company
SCHEDULE 3.5 No Violations
SCHEDULE 3.6 Financial Statements of the Company
SCHEDULE 3.7 Conduct Since Recent Balance Sheet
SCHEDULE 3.9 Liabilities
SCHEDULE 3.10 Liens
SCHEDULE 3.11 Accounts Receivable
SCHEDULE 3.12(B) Personal Property Leases
SCHEDULE 3.12(D) Sales Commitments
SCHEDULE 3.12(E) Contracts with Affiliates and Certain Others
SCHEDULE 3.12(G) Loan Agreements
SCHEDULE 3.12(H) Guarantees
SCHEDULE 3.12(K) Other Material Contracts
SCHEDULE 3.13 Officers and Directors
SCHEDULE 3.14 Labor Matters
SCHEDULE 3.15(A) Compliance
SCHEDULE 3.15(B) Licenses and Permits
SCHEDULE 3.15(C) Environmental Matters
SCHEDULE 3.17 (B) Tax Returns Not Filed
SCHEDULE 3.17(D) Agreements under Section 341(f) of the I.R.C. of 1986, as
amended
SCHEDULE 3.18 Real Estate
SCHEDULE 3.19 Insurance
SCHEDULE 3.20 Personnel
SCHEDULE 3.21 Litigation
SCHEDULE 3.26 Trade Rights
SCHEDULE 3.27 Bank Accounts
SCHEDULE 3.28 List of Aircraft
SCHEDULE 4.7 Absence of Certain Changes or Events
SCHEDULE 4.12 Global Financials
SCHEDULE 7.4 Shareholders Guarantees
vi
<PAGE>
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (the "AGREEMENT") is entered into this
9th day of April, 1999 by and among MEDICAL INDUSTRIES OF AMERICA, INC., a
Florida corporation ("MIOA"), MIOA ACQUISITION COMPANY I, INC., a Florida
corporation (the "HOLDING CORP"), MIOA ACQUISITION COMPANY VII, INC., a Florida
corporation (the "ACQUISITION CORP"), AIR RESPONSE, INC., a New York corporation
(the "COMPANY"), LOUIS R. CAPECE, JR. (hereinafter "CAPECE") and DONALD JONES
(hereinafter "JONES") (hereinafter Capece and Jones shall collectively be known
as the "SHAREHOLDERS").
RECITALS:
A. The Company is the owner and operator of an international air ambulance
and charter business (the "BUSINESS") with five (5) bases (hereinafter the
"BASES") located at:
Arapahoe County Airport Midwest Aviation
7241 S. Peoria 200 Hardy Robbers Drive
Englewood, Colorado 80112 Puducah, Kentucky 42003
Schenectady County Airport Opa Locka Airport
130 Saratoga Road 14980 NE 44th Court
Scotia, New York 12302 Miami, Florida 33054
Universal Air Services
359 N. Crystal Lake Drive
Orlando, FL 32803
B. The Company's billing and administrative offices are located at 7211 S.
Peoria, Suite 200, Englewood, CO 80112.
C. Shareholders own one hundred twenty-five (125) shares of common stock, no
par value per share, of the Company (the "COMPANY SHARES"), which shares
represent one hundred percent (100%) of the outstanding shares of capital
stock of the Company.
D. The Company will, immediately after the execution of this Agreement, file
articles of merger with the Secretary of State of the State of New York
and MIOA will file articles of merger with the Secretary of State of the
State of Florida thereby statutorily merging the Company into Acquisition
Corp, (such merger being referred to herein as the "Merger"). The Merger
shall be in accordance with this Agreement, the Articles of Merger (as
defined in Section 1.1 below), the Florida Business Corporation Act (the
"FLORIDA STATUTE") and the Business Corporation Law of the State of New
York (the "NEW YORK STATUTE").
E. MIOA presently owns and upon consummation of the Merger will own 100% of
all issued and outstanding capital stock of the Holding Corp and the
Holding Corp presently owns and upon consummation of the Merger will own
100% of all issued and outstanding capital stock Global Air Charter, Inc.,
Global Air Rescue, Inc., (the Global companies are hereinafter
collectively called "GLOBAL) and of the Acquisition Corp into which the
Company will be merged pursuant to this Agreement and the Articles of
Merger.
F. The Shareholders shall receive in exchange for the Company Shares, the
Merger Consideration as set forth in Section 2.1 of this Agreement subject
the terms and conditions hereof.
1
<PAGE>
G. The Merger shall constitute a "B" Reorganization structured as a "forward
subsidiary merger" pursuant to Section 368(a)(1)(B) of the Internal
Revenue Code, as amended.
ARTICLE I
THE MERGER
1.1. THE MERGER. As of the Effective Date (as hereinafter defined)
and in accordance with the applicable provisions of the Florida Statute and the
New York Statute, the Company shall be merged with and into the Acquisition
Corp, in accordance with the terms and conditions of this Agreement and the
articles of merger in substantially the form of EXHIBIT A annexed hereto,
subject to such changes as to form (but not substance) as may be required by the
Florida Statute and the New York Statute (hereinafter referred to as the
"ARTICLES OF MERGER"). The Acquisition Corp shall be the surviving corporation
of the Merger (the Acquisition Corp, in such capacity, being hereinafter
sometimes referred to as the "SURVIVING CORPORATION"). Thereupon, the separate
existence of the Company shall cease, and the Acquisition Corp, as the Surviving
Corporation, shall continue its corporate existence and shall amend its name to
"AIR RESPONSE, INC." in accordance with the Florida Statute, the New York
Statute and the Articles of Merger.
1.2. EFFECTIVENESS OF THE MERGER. As soon as practicable upon or
after the satisfaction or waiver of the conditions precedent set forth in
Articles VII and VIII of this Agreement, the Acquisition Corp and the Company
will execute the Articles of Merger, and shall file or cause to be filed such
Articles of Merger with the Secretary of State of Florida and the Secretary of
State of New York; and, the subject Merger shall become effective for purposes
of the business arrangement between the parties as of the close of business on
February 28, 1999 (the "Effective Date") notwithstanding that the statutory
effective date shall be the later of (i) the filing of the Articles of Merger
with the Secretary of the State of Florida or (ii) the approval of the Articles
of Merger by the Secretary of State of New York.
1.3.EFFECT OF THE MERGER. Upon the effectiveness of the Merger,
(a) the Surviving Corporation shall own and possess all assets and property of
every kind and description, and every interest therein, wherever located, and
all rights, privileges, immunities, powers, franchises and authority of a public
as well as of a private nature, of the Acquisition Corp and the Company (the
"CONSTITUENT CORPORATIONS"), and all obligations owed to, belonging to or due to
each of the Constituent Corporations, all of which shall be vested in the
Surviving Corporation pursuant to the Florida Statute and the New York Statute
without further act or deed, and (b) the Surviving Corporation shall be liable
for all claims, liabilities and obligations of the Constituent Corporations, all
of which shall become and remain the obligations of the Surviving Corporation
pursuant to the Florida Statute and the New York Statute without further act or
deed. Until such time as the Merger is approved under the Florida Statute and
the New York Statute, the conduct of the parties will be such that the Company
could be returned to the Shareholders in the same condition as it was at the
Closing subject only to operations of the Business in the ordinary course.
1.4. SURVIVING CORPORATION. Upon the effectiveness of the Merger,
the Articles of Incorporation and Bylaws of the Surviving Corporation shall be
identical to those attached hereto as EXHIBITS B AND C, respectively. The
directors of the Surviving Corporation initially shall be Donald Jones, Louis R.
Capece, Jr., Paul C. Pershes, E. Nicholas Davis, III and Arthur Kobrin each of
whom shall continue to be the directors of the Surviving Corporation, subject to
the Articles of Incorporation, the Bylaws and their respective employment
agreements.
1.5. HOLDING CORP. Upon the effectiveness of the Merger, the
directors of the Holding Corp shall be six (6) MIOA appointees who shall
initially be Michael Morrell, Paul C. Pershes, Arthur Kobrin, E. Nicholas Davis,
III, Christopher Doscher and Blaise "Skip" Sciarra together with Louis R Capece,
Jr., and Donald Jones both of whom shall continue to be the directors of the
Holding Corp, subject to the Holding Corp's articles of incorporation, bylaws,
and their respective employment agreements.
1.6. SUBSEQUENT ACTIONS. If at any time after the Effective Date,
the Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurance or any other actions or things are necessary or
2
<PAGE>
desirable to (i) vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of either Acquisition Corp or the Company acquired
or to be acquired by the Surviving Corporation as a result of, or in connection
with, the Merger or (ii) otherwise to carry out this Agreement, then the
officers and directors of the Surviving Corporation shall be authorized to (x)
execute and deliver, in the name and on behalf of either the Acquisition Corp or
the Company, as the case may be, all such deeds, bills of sale, assignments and
assurances and (y) to take and do, in the name of and on behalf of each
corporation or otherwise, all such actions and things as may be necessary or
desirable, to vest, perfect or confirm any and all right, title and interest in,
to and under such rights, properties or assets in the Surviving Corporation or
otherwise to carry out this Agreement.
1.7. STATUS AND CONVERSION OF SHARES. Upon the Effective Date
of the Merger:
(a a) Each share certificate representing each outstanding
share of capital stock of Acquisition Corp shall continue to be a share of
issued and outstanding capital stock of the Surviving Corporation and shall be
retained by the Holding Corp (the "ACQUISITION CORP STOCK").
(b b) The share certificates representing all the outstanding
shares of capital stock of the Company (i.e., the COMPANY SHARES) issued and
outstanding immediately prior to the effectiveness of the Merger shall, by
virtue of the Merger and without any action on the part of the holder thereof,
be deemed canceled and extinguished. In exchange for the merger of the Company
into the Acquisition Corp, the Shareholders shall receive the Merger
Consideration set forth and defined in Section 2.1 below (the "MERGER
CONSIDERATION").
1.8...BOOKS AND RECORDS. On the Closing Date (as hereinafter
defined), the Company shall deliver to MIOA all of the stock books, records and
minute books of the Company. All financial and accounting books and records of
the Company, all tax returns and records of the Company, and all supplier,
client, customer, sales and other business records of the Company shall be
maintained in the offices of the Company in Englewood, CO.
ARTICLE II II.
MERGER CONSIDERATION
2.1. SHAREHOLDERS MERGER CONSIDERATION. In exchange for merging
the Company into the Acquisition Corp and canceling and extinguishing the
Company Shares in accordance with this Merger Agreement, the Shareholders, as
designated and in the amounts set forth in SCHEDULE 2.1, shall receive the
following Merger Consideration:
(a) PURCHASE PRICE. MIOA agrees, subject to the provisions
of this Agreement, to pay to the Shareholders an amount up to, but not
exceeding, Five Million Eight Hundred Thousand Dollars ($5,800,000.00) as set
forth below (hereinafter the "PURCHASE PRICE"). The Purchase Price has been
initially calculated and its full payment is conditioned upon the Holding Corp
realizing the Formula Profits (as defined in Section 2.1(a)(ii)B below). The
calculation of the actual Purchase Price that will be paid pursuant to this
Agreement shall be as follows:
(i) INITIAL PAYMENT. MIOA will pay the Shareholders (as
provided in Section 2.1(b) below) the sum of Two Million Nine Hundred Thousand
Dollars ($2,900,000.00).
(ii) CALCULATIONS OF INSTALLMENT PAYMENTS. On the
Effective Date, the Shareholders shall have the right to earn the remaining
portion of the Purchase Price (i.e., $2,900,000.00) during the Formula Periods
in accordance with the following formula:
3
<PAGE>
A. INSTALLMENT FORMULA:
1. FORMULA PERIOD 1. In respect of Formula
Period 1 as defined below: (x) If Formula Profits of the Holding Corp equal One
Million Dollars ($1,000,000.00) (hereinafter the "FORMULA PERIOD 1 EARNINGS
TARGET"), MIOA will pay the Shareholders an amount equal to Seven Hundred
Forty-Three Thousand Five Hundred Ninety Dollars ($743,590.00) (hereinafter the
"FORMULA PERIOD 1 INSTALLMENT PAYMENT"); (y) If Formula Profits exceed the
Formula Period 1 Earnings Target, MIOA will pay the Shareholders the Formula
Period 1 Installment Payment plus One Dollar ($1.00) for each dollar of Formula
Profits in excess of the Formula Period 1 Earnings Target; or, (z) If Formula
Profits are less than the Formula Period 1 Earnings Target, the amount the
Shareholders shall be paid shall be equal to: the actual Formula Profits of the
Holding Corp divided by the Formula Period 1 Earnings Target; then multiple the
resulting quotient (i.e., percentage) by the Formula Period 1 Installment
Payment; the resulting product shall then be reduced by ten percent (10%) of the
Formula Period 1 Earnings Target.
2. FORMULA PERIOD 2. In respect of Formula
Period 2: (x) If Formula Profits of the Holding Corp equal One Million Three
Hundred Thousand Dollars ($1,300,000.00) (hereinafter the "FORMULA PERIOD 2
EARNINGS TARGET"), MIOA will pay the Shareholders an amount equal to Nine
Hundred Sixty-Six Thousand Six Hundred Sixty-Seven Dollars ($966,667.00)
(hereinafter the "FORMULA PERIOD 2 INSTALLMENT PAYMENT"); (y) If Formula Profits
exceed the Formula Period 2 Earnings Target, MIOA will pay the Shareholders the
Formula Period 2 Installment Payment plus One Dollar ($1.00) for each dollar of
Formula Profits in excess of the Formula Period 2 Earnings Target; or, (z) If
Formula Profits are less than the Formula Period 2 Earnings Target, the amount
the Shareholders shall be paid shall be equal to: the actual Formula Profits of
the Holding Corp divided by the Formula Period 2 Earnings Target; then multiple
the resulting quotient (i.e., percentage) by the Formula Period 2 Installment
Payment; the resulting product shall then be reduced by ten percent (10%) of the
Formula Period 2 Earnings Target.
3. FORMULA PERIOD 3. In respect of Formula
Period 3: (x) If Formula Profits of the Holding Corp equal One Million Six
Hundred Thousand Dollars ($1,600,000.00) (hereinafter the "FORMULA PERIOD 3
EARNINGS TARGET"), MIOA will pay the Shareholders an amount equal to One Million
One Hundred Eighty-nine Thousand Seven Hundred Forty-three Dollars
($1,189,743.00) (hereinafter the "FORMULA PERIOD 3 INSTALLMENT PAYMENT"); (y) If
Formula Profits exceed the Formula Period 3 Earnings Target, MIOA will pay the
Shareholders the Formula Period 3 Installment Payment plus One Dollar ($1.00)
for each dollar of Formula Profits in excess of the Formula Period 3 Earnings
Target; or, (z) If Formula Profits are less than the Formula Period 3 Earnings
Target, the amount the Shareholders shall be paid shall be equal to: the actual
Formula Profits of the Holding Corp divided by the Formula Period 3 Earnings
Target; then multiple the resulting quotient (i.e., percentage) by the Formula
Period 3 Installment Payment; the resulting product shall then be reduced by ten
percent (10%) of the Formula Period 3 Earnings Target.
4. REDUCTION OF INSTALLMENT PAYMENTS.
Notwithstanding anything in the foregoing to the contrary, if the Formula
Profits in any Formula Period are less than Six Hundred Thousand Dollars
($600,000.00) then, in such event, the Installment Payment(s) shall be reduced
by Nine Hundred Sixty-Six Thousand Six Hundred Sixty-seven Dollars
($966,667.00). Such reduction shall first be applied to the Installment Payment
for the Formula Period in which such event occurs and if such Installment
Payment is not sufficiently large enough to satisfy the reduction then, in such
event, the reduction shall than be applied to the earliest Installment Payment
and then to each subsequent Installment Payment until the entire amount of the
reduction has been satisfied.
5. MAXIMUM PAYMENTS AND OFFSETS. The
fore-going notwithstanding, the maximum amount of Installment Payments the
Shareholders may receive shall not exceed Two Million Nine Hundred Thousand
Dollars ($2,900,000.00). Further, to the extent that the Formula Profits in
Formula Year 1, 2 and/or 3 are such that an adjustment to the subject Formula
Year Installment Payment (as calculated above) would result in a negative amount
(hereinafter the "OFFSET") the Offset shall be applied to the Installment
Payment(s) for the preceding Formula Period(s) to the effect that such
Installment Payment(s) for the preceding Formula Period(s) is reduced by the
amount of the Offset and to the extent that the Installment Payments for the
preceding Formula Periods are not sufficiently large enough to fully satisfy the
Offset then, in such respect, the Offset shall be applied to future Installment
Payments.
4
<PAGE>
6. ACCELERATION OF INSTALLMENT PAYMENTS.
In the event MIOA or any successor company causes the Surviving Company or the
Holding Corp to undertake a Spin-Off (as hereinafter defined) or Offering (as
hereinafter defined) of its stock prior to the expiration of the Formula
Periods, the Shareholders shall, at their election, be paid the portion of the
unpaid Purchase Price immediately prior to the Spin-Off or Offering by applying
the above formula to the proforma Formula Profits for the remainder of the
Formula Period(s) calculated based on the immediately preceding twelve (12)
month period or such shorter period if less than 12 months. The term "SPIN-OFF"
shall mean a spin-off of all or a part of the capital stock of the Surviving
Company or the Holding Corp, as the case may be, to the public Shareholders of
MIOA resulting in the Surviving Company or the Holding Corp, as the case may be,
becoming a separate and independent (non-subsidiary) corporation. The term
"OFFERING" shall mean a public offering of the equity securities of the
Surviving Company or the Holding Corp, as the case may be. In the event the
Shareholders do not elect to accelerate the Installment Payments pursuant to
this Section, the Installment Formula shall remain in effect as provided herein.
B. FORMULA PROFITS. For the purposes of this
Agreement, the term "FORMULA PROFITS" shall mean the pre-tax consolidated net
profits of the Holding Corp, as calculated utilizing generally accepted
accounting principles by MIOA's independent certified public accountants for
annual Formula Periods, where possible, and as calculated by MIOA for its 10Qs
otherwise. Notwithstanding the foregoing, for purposes of determining Formula
Profits: (i) there shall not be included any charge for corporate overhead of
MIOA or other administrative or similar charges that MIOA might impose upon the
Surviving Company, Global, or the Holding Corp except those charges for which
the Surviving Company, Global and/or the Holding Corp receives a direct and cost
efficient benefit, (ii) there shall not be included any non-recurring charges,
losses, profits, gains, or non-cash adjustments not related to the ongoing
operations of the business, including, but not limited to discount operations,
extraordinary items, acquisition costs, goodwill charges, or unusual or
infrequent items as they are defined under generally accepted accounting
principles, and (iii) there shall not be included any charge related to grants
or exercises of options pursuant to the employment agreements with the
Shareholders.
C. FORMULA PERIODS. The period commencing on the
Effective Date and ending on the last day of the 15th month following the
Effective Date shall be deemed to be "FORMULA PERIOD 1". The period commencing
on the first day following FORMULA PERIOD 1 and ending on the last day of the
12th month following FORMULA PERIOD 1 shall be deemed to be "FORMULA PERIOD 2".
The period commencing on the first day following FORMULA PERIOD 2 and ending on
the last day of the 12th month following FORMULA PERIOD 2 shall be deemed to be
"FORMULA PERIOD 3".
D. CALCULATION TIMING. MIOA, the Holding Corp,
the Surviving Company and Shareholders shall each work in good faith to derive
the calculations required herein, it being understood and agreed that the
parties shall cause such calculations to be made as soon as reasonably possible
and the Installment Payments paid to the Shareholders within fifteen (15) days
of such calculation but in no event later than the 90th day following each
Formula Period.
E. EXAMPLE. Attached hereto as EXHIBIT D and
incorporated herein by this reference is an example of how the aforementioned
Formula is to be applied.
(b) PAYMENT OF PURCHASE PRICE.
(i) INITIAL PAYMENT. MIOA will pay the Shareholders in
accordance with SCHEDULE 2.1, on the Closing Date, or as soon thereafter as is
reasonably possible, the Initial Payment. The Initial Payment shall be made in
non-registered MIOA voting common stock (the "MIOA SHARES" or "STOCK"). For
purposes of determining the number of MIOA Shares the Shareholders will receive
in respect of the Initial Payment, the following calculation shall be made: the
amount of the Initial Payment shall be divided by $.75 with the resulting
quotient equaling the number of MIOA Shares that shall be delivered to the
Shareholders in respect of such payment (which shall be subject to adjustments
for subdivisions or combinations that occur prior to Closing so that the
Shareholders shall be entitled to receive after the happening of any such event
the number and kind of voting common stock that the Shareholders would have
received if the Closing would have occurred prior to any such event).
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Notwithstanding, in the event the common shares of
MIOA or its successor are not trading at a price of at least $.75 per share
(based upon an average trailing 20 day close price as reported on NASDAQ or
other national exchange) at anytime within the period beginning on the first
anniversary date of the Closing and ending on the 15th month following the
Closing Date (the "TRADING PERIOD"), the Shareholders will receive an additional
number of MIOA Shares. To illustrate, if the Shareholders receive 3,866,666 MIOA
Shares in respect of his Initial Payment (i.e., $2,900,000.00/$.75) and if the
MIOA Shares are trading at less than $.75 as calculated above during the Trading
Period then, in such event, divide $2,900,000.00 trading price (but in no event
less than $.50); then subtract 3,866,666 from the resulting quotient to
determine the additional number of MIOA Shares the Shareholders will receive.
For example, if the trading price is $.60, then the Shareholders will receive
966,667 more MIOA Shares ($2,900,000.00/$.60 = 4,833,333; 4,833,333 - 3,866,666
= 966,667).
(ii) INSTALLMENT PAYMENTS. The Installment Payments
shall be made within fifteen (15) days of calculating the Installment Payment
for each Formula Period but in no event later than the 90th day following the
end of each Formula Period by delivering to the Shareholders, in accordance with
their percentage of ownership interest as described in SCHEDULE 2.1, a series of
convertible collaterialized promissory notes (the "DEBENTURES"), one to each
Shareholder for each Installment Payment, in the form annexed hereto as EXHIBIT
"E". The Debentures will bear interest at an annual rate of 9.5% and the payment
of such Debentures will be secured by the issued and outstanding capital stock
of the Surviving Company. To that end, the Surviving Company will enter into
with the Shareholders a pledge agreement in the form attached hereto as EXHIBIT
"F" (hereinafter the "PLEDGE AGREEMENT"). Interest will be paid on the Formula
Earnings as calculated herein on a quarterly basis, in arrears, commencing at
the end of the second calendar quarter following the Closing Date and will be
subject to adjustment at the end of each Formula Period based upon the principal
face value of the applicable Debenture earned during such Formula Period. If
excess interest is paid pursuant to this Section in any Formala Period as the
result of the foregoing, such excess interest will be offset first against any
future interest to be paid pursuant to this Section and then, if necessary,
against the principal face value of the Debentures. Two Hundred Thousand Dollars
($200,000.00) of the principal face value (or if such Debenture is less than
$200,000.00 the entire principal amount) plus all accrued but unpaid interest on
the Debenture for Installment Period 1 ("Debenture No. 1") shall be paid on the
last day of the 27th month following the Effective Date. The remaining unpaid
principal, if any, on Debenture No.1 together with the principal face value of
Debentures Nos. 2 and 3 together with all accrued but unpaid interest on said
Debentures shall be due and payable on the last day of the 42th month following
the Effective Date. The Debentures may be prepaid by MIOA at any time without
penalty or additional interest. The Shareholders may convert the principal face
value of the Debenture at any time prior to redemption into MIOA Shares at the
rate of $1.00 per share. Cash will be paid in lieu of any fractional shares. To
the extent that there are reductions or Offsets pursuant to Sections
2.1(a)(ii)A.4 or 5 above and a Shareholder has converted such Debenture(s) prior
to any such reduction or Offset than, in such event, the Shareholder shall be
required to either return to MIOA the appropriate number of MIOA Shares (with
such value per share for this purposes being the conversion price per share) or
if such Shares have been sold or otherwise disposed of, pay MIOA the amount of
such reduction or Offset in readily available funds within ten (10) days of
request.
(iii) CAPITAL ADJUSTMENTS AFFECTING DEBENTURES.
A. The existence of the Debentures or the
Rights set forth therein shall not affect in any way the right or power of the
Surviving Company, the Holding Corp or MIOA to make or authorize any or all
adjustments, subdivisions, combinations, recapitalizations, reorganizations or
other changes their capital structure or their business, or any merger or
consolidation of the Surviving Company, the Holding Corp or MIOA or to issue any
securities, bonds, debentures, or preferred or prior preference stock ahead of
or affecting the common stock of the Surviving Company, the Holding Corp or
MIOA, the rights thereof or to effect the dissolution or liquidation of the
Surviving Company, the Holding Corp or MIOA, or any sale or transfer of all or
part of their assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise.
B. In the event of a stock dividend,
recapitalization, or merger in which MIOA is the surviving corporation,
split-up, combination or exchange of shares or the like which results in a
change in the number or kind of shares of common stock which is outstanding
immediately prior to such event, the aggregate number and kind of MIOA Shares
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owned by the Shareholders and the rights of the Shareholders to receive MIOA
Shares in respect of this Agreement and prior to Closing the Debentures and the
price thereof, shall be appropriately adjusted in the same manner as the number
and kind of shares a shareholder of MIOA who owned the same number and kind of
shares immediately prior to such event. Such adjustments shall be made in good
faith by the Board of Directors of MIOA, whose determination shall be conclusive
and binding on all parties.
C. Except as otherwise expressly provided herein,
the issuance of shares of MIOA's capital stock of any class, or securities
convertible into shares of capital stock of any class, either in connection with
the direct sale or upon the exercise of rights or warrants to subscribe
therefor, or upon conversion of shares or obligations of MIOA convertible into
such shares or other securities, shall not affect, and no adjustment by reason
thereof shall be made with respect to the number of or price of the MIOA Shares
which the Shareholders then own or their rights in respect of additional MIOA
Shares which they may receive upon the conversion of the Debentures.
D. In case of any consolidation or merger of MIOA
with or into another corporation or the conveyance of all or substantially all
of the assets of MIOA to another corporation or a share exchange transaction
involving more than 50% of the issued and outstanding common stock of MIOA, the
MIOA Shares and right to receive MIOA Shares upon the conversion of the
Debentures shall thereafter be convertible into the number of shares of stock,
options or other securities or property to which a holder of the number of
shares of common stock deliverable upon entitlement to the MIOA Shares would
have been entitled upon such consolidation, merger, conveyance, conversion or
exchange; and, in any such case, appropriate adjustment shall be made in the
application of the provisions herein set forth with respect to the rights and
interest thereafter of the Shareholders' rights to receive MIOA Shares upon the
conversion of the Debentures, to the end that the provisions set forth herein
shall thereafter be applicable, as nearly as reasonably possible, in relation to
any shares of stock, options or other property thereafter deliverable upon
entitlement to the Debentures.
2.2 2. NO REGISTRATION. The Shareholders acknowledge and agree that:
(a) Except as otherwise provided herein, the MIOA Shares and
the Debentures (collectively hereafter called the "MIOA SECURITIES") are being
granted and issued without registration under applicable federal and state
securities laws in reliance upon certain exemptions from registration under such
securities laws;
(b) Each certificate representing the MIOA Securities will
bear a legend (in the form attached hereto as EXHIBIT G) restricting its
transfer, sale, conveyance or hypothecation, unless such MIOA Securities are
either registered under applicable securities laws or an exemption from such
registration is applicable;
(c) The Shareholders shall not transfer all or any of the MIOA
Securities except in compliance with all applicable securities laws including
Rule 144 of the Securities Act of 1933. Rule 144 presently allows a sale, within
certain limitations, of the MIOA Securities after one (1) year from the date the
MIOA Securities are unconditionally earned pursuant to this Agreement;
(d) The Shareholders are acquiring the MIOA Securities for
their own account, for investment purposes only and not with a view to the sale
or distribution thereof.
2.3 INCIDENTAL REGISTRATION. Except in respect of any registration
statement filed prior to August 15, 1999, MIOA agrees that if at any time it
shall propose to file a registration statement under the Securities Act of 1933,
as amended (the "SECURITIES ACT") on a form suitable for sales by its
Shareholders, it will give written notice to such effect to the Shareholders, at
least thirty (30) days prior to such filing, and, at the written request of the
Shareholders, made within ten (10) days after the receipt of such notice, will
include therein at MIOA's cost and expense (except for the fees and expenses of
counsel to the Shareholders and, commissions attributable to the MIOA Shares and
the shares underlying the Debentures included therein) such of the MIOA Shares
and the shares underlying the Debentures held by the Shareholders as they shall
request; provided, however, that if the offering being registered by MIOA is
underwritten and if no other outstanding shares of MIOA's common stock are
included therein and if the representative of the underwriters certifies that
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the inclusion therein of the MIOA Shares or the shares underlying the Debentures
would materially and adversely effect the sale of the securities to be sold by
MIOA thereunder, the public offering of the MIOA Shares and the shares
underlying the Debentures included in such registration statement either shall
be delayed for a period of ninety (90) days after the commencement of the
underwritten public offering, provided that the representative of the
underwriters certifies in writing that such delay would not materially and
adversely effect the sale of the securities to be sold by MIOA or, if the
representative of the underwriters will not so certify, the Shareholders shall
not be permitted to participate in such registration except to the extent, and
then only in proportion thereto, that the other MIOA officers/directors and
other shareholders of MIOA possessing similar registration rights are entitled
to participate.
2.4. CLOSING. Consummation of the contemplated transaction (the "CLOSING")
shall take place on April 9, 1999 or on such other date or at such other time or
place as may be mutually agreed upon in writing by the parties hereto (the
"CLOSING DATE"). Notwithstanding the foregoing Closing Date, the subject Merger
shall become effective for the purposes of the business arrangement between the
parties as of the close of business on February 28, 1999 notwithstanding that
the statutory effective date shall be as of the later of (i) the filing of the
Articles of Merger with the Secretary of the State of Florida or (ii) the
acceptance of the Articles of Merger with the Secretary of the State of New
York.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND SHAREHOLDERS
The Company and the Shareholders, jointly and severally, make the
following representations and warranties to MIOA, each of which is true and
correct on the date hereof, shall remain true and correct to and including the
Effective Date, shall be unaffected by any investigation heretofore or hereafter
made by MIOA, or any knowledge of MIOA other than as specifically disclosed
herein, or in the disclosure schedules attached hereto to MIOA or otherwise in a
writing in the possession of MIOA, and shall survive the Closing of the
transactions provided for herein for a period of 120 days following the end of
Formula Period 3.
3.1 COMPANY SHARES. The Shareholders are the owners of the Company Shares
free and clear of any direct or indirect claims, liens, security interests,
charges, pledges or encumbrances of any nature whatsoever and will be free of
such claims, liens, security interests, charges, pledges or encumbrances as of
the Effective Date. All of the Company Shares are validly issued to the
Shareholders fully paid and nonassessable. There are no existing options, calls,
rights or commitments of any character relating to the Company Shares or any
Company securities of any kind.
3.2 ORGANIZATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of New York and is
validly qualified and licensed in each jurisdiction wherein the character of the
property owned or leased by it, or the nature of its business, makes such
licensing and/or qualification necessary other than as set forth in SCHEDULE
3.2. Accurate, current and complete copies of the Articles of Incorporation and
Bylaws of the Company are attached hereto as SCHEDULE 3.2.
3.3 CAPITALIZATION. The authorized capital stock of the Company consists
of 200 shares of common stock, no par value per share (the "COMPANY STOCK"), 125
shares of which are issued and outstanding (i.e., the Company Shares). No shares
of capital stock or other equity securities of the Company are issued, reserved
for issuance or outstanding. All outstanding shares of capital stock of the
Company are duly authorized, validly issued, fully paid and nonassessable and,
not subject to preemptive rights. There are no outstanding bonds, debentures,
notes or other indebtedness or other securities of the Company having the right
to vote (or convertible into, or exchangeable for, securities having the right
to vote) on any matters on which Shareholders of the Company may vote. Except as
set forth above, there are no outstanding securities, options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings of any kind to
which the Company is a party or by which it is bound obligating the Company to
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issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock or other equity securities of the Company or obligating
the Company to issue, grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement, arrangement or undertaking. There
are no outstanding contractual obligations, commitments, understandings or
arrangements of the Company to repurchase, redeem or otherwise acquire or make
any payment in respect of any shares of capital stock of the Company. A complete
list of security holders of the Company and their addresses is attached hereto
as SCHEDULE 3.3.
3.4 AUTHORITY AND APPROVAL OF AGREEMENT.
(a) The execution and delivery of this Agreement by the Company and
the Shareholders and the performance of all the Company's and the Shareholders'
obligations hereunder have been duly authorized and approved by all requisite
corporate action on the part of the Company and the Shareholders pursuant to
applicable law. The Company and the Shareholders have the power and authority to
execute and deliver this Agreement and to perform all their obligations
hereunder.
(b) This Agreement and any other documents, instruments and
agreements executed by the Company and the Shareholders in connection herewith
constitute the valid and legally binding agreements of the Company and the
Shareholders, enforceable against the Company and the Shareholders in accordance
with their terms, except that (i) enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws of general
application affecting the enforcement of the rights and remedies of creditors;
and (ii) the availability of equitable remedies may be limited by equitable
principles.
3.5 NO VIOLATIONS. Other than as set forth in SCHEDULE 3.5, neither the
execution, delivery nor performance of this Agreement or any other documents,
instruments or agreements executed by the Shareholders and the Company in
connection herewith, nor the consummation of the transactions contemplated
hereby: (a) will violate any statute, law, ordinance, rule or regulation
(collectively, "LAWS") or any order, writ, injunction, judgment, plan or decree
(collectively, "ORDERS") of any court, arbitrator, department, commission,
board, bureau, agency, authority, instrumentality or other body, whether
federal, state, municipal, foreign or other (collectively, "GOVERNMENT
ENTITIES"), (b) will require any authorization, consent, approval, exemption or
other action by or notice to any Government Entity; (c) subject to obtaining the
consents referred to in this Agreement, will violate or conflict with, or
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, or will result in the termination of, or
accelerate the performance required by, or result in the creation of any Lien
(as hereinafter defined) upon any of the assets of the Company (or the Company
Shares) under any term or provision of the Articles of Incorporation or By-Laws
of the Company or any contract, commitment, understanding, arrangement,
agreement or restriction of any kind or character to which the Company or the
Shareholders is a party or by which the Company or the Shareholders or any of
its or their assets or properties may be bound or affected; or (d) will or could
result in the loss or adverse modification of, or the imposition of any fine or
penalty with respect to, any license, permit or franchise granted or issued to,
or otherwise held by or for the use of, the Company.
3.6 FINANCIAL STATEMENTS. Included as SCHEDULE 3.6 are true and complete
copies of (i) the combined audited financial statements of the Company and Air
Response South, Inc. consisting of the balance sheets of the Company and Air
Response South, Inc. as of December 31, 1997, and 1996 and the related
statements of operations and cash flows for the years then ended (including the
notes contained therein or annexed thereto), (ii) audited financial statements
of the Company as of December 31, 1998, and (iii) an unaudited balance sheet of
the Company as of February 28, 1999 (the "RECENT BALANCE SHEET"), and the
related unaudited statements of operations and cash flows for the two (2) months
then ended (the "RECENT STATEMENT OF Operations") and for the corresponding
period of the prior year (including the notes and schedules contained therein or
annexed thereto). All of such financial statements (including all notes and
schedules contained therein or annexed thereto) are true, complete and accurate,
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis, have been prepared in accordance with the books
and records of the Company, and fairly present, in accordance with generally
accepted accounting principles, the assets, liabilities and financial position,
the results of operations and cash flows of the Company as of the dates and for
the years and periods indicated.
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3.7 CONDUCT SINCE DATE OF RECENT BALANCE SHEET. Except for this Agreement
and as disclosed in SCHEDULE 3.7 hereto, none of the following has occurred
since the date of the Recent Balance Sheet:
(a) NO ADVERSE CHANGE. Any material adverse change in the financial
condition, assets, liabilities, business, prospects or operations of the
Company;
(b) NO DAMAGE. Any loss, damage or destruction, whether covered by
insurance or not, affecting the Company's business or properties;
(c) NO INCREASE IN COMPENSATION. Any increase in the compensation,
salaries or wages payable or to become payable to any employee or agent of the
Company (including, without limitation, any increase or change pursuant to any
bonus, pension, profit sharing, retirement or other plan or commitment), or any
bonus or other employee benefit granted, made or accrued;
(d) NO LABOR DISPUTES. Any labor dispute or disturbance, other than
routine individual grievances which are not material to the business, financial
condition or results of operations of the Company.
(e) NO COMMITMENTS. Any commitment or transaction by the Company
(including, without limitation, any borrowing or capital expenditure) other than
in the ordinary course of business consistent with past practice;
(f) NO DIVIDENDS. Any declaration, setting aside, or payment of any
dividend or any other distribution in respect of the Company's capital stock;
any redemption, purchase or other acquisition by the Company of any capital
stock of the Company, or any security relating thereto; or any other payment to
any Shareholder of the Company as a shareholder;
(g) NO DISPOSITION OF PROPERTY. Any sale, lease or other transfer or
disposition of any properties or assets of the Company, except in the ordinary
course of business;
(h) NO INDEBTEDNESS. Any indebtedness for borrowed money incurred,
assumed or guaranteed by the Company;
(i) NO LIENS. Any mortgage, pledge, lien or encumbrance made on any
of the properties or assets of the Company;
(j) NO AMENDMENT OF CONTRACTS. Any entering into, amendment or
termination by the Company of any contract, or any waiver of material rights
thereunder, other than in the ordinary course of business;
(k) LOANS AND ADVANCES. Any loan or advance (other than advances to
employees in the ordinary course of business for travel and entertainment in
accordance with past practice) to any person including, but not limited to, any
Affiliate (for purposes of this Agreement, the term "Affiliate" shall mean and
include all shareholders, directors and officers of the Company; the spouse of
any such person; any person who would be the heir or descendant of any such
person if he or she were not living; and any entity in which any of the
foregoing has a direct or indirect interest);
(l) CREDIT. Any grant of credit to any customer or distributor on
terms or in amounts more favorable than those which have been extended to such
customer or distributor in the past, any other change in the terms of any credit
heretofore extended, or any other change of the Company's policies or practices
with respect to the granting of credit; or
(m) NO UNUSUAL EVENTS. Any other event or condition not in the
ordinary course of business of the Company.
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3.8 SUBSIDIARIES. The Company has no subsidiaries. It does not own or
control, directly or indirectly, any capital stock of any corporation or
interest in any partnership, trust or unincorporated association, or any
interest or investment in any other corporation, association or other business
entity.
3.9 LIABILITIES. Except as and to the extent specifically disclosed in the
Recent Balance Sheet, or in SCHEDULE 3.9, the Company does not have any
liabilities, commitments or obligations (secured or unsecured, and whether
accrued, absolute, contingent, direct, indirect or otherwise), other than
commercial liabilities and obligations incurred since the date of the Recent
Balance Sheet in the ordinary course of business and consistent with past
practice and none of which has or will have a material adverse effect on the
business, financial condition or results of operations of the Company. Except as
and to the extent described in the Recent Balance Sheet or in SCHEDULE 3.9,
neither the Company nor the Shareholders have knowledge of any basis for the
assertion against the Company of any liability and neither has knowledge of any
circumstances, conditions, happenings, events or arrangements, contractual or
otherwise, which may give rise to liabilities, except commercial liabilities and
obligations incurred in the ordinary course of the Company's business and
consistent with past practice.
3.10 TITLE TO AND CONDITION OF PROPERTIES.
(a) MARKETABLE TITLE. The Company has good and marketable title to
all of the Company's assets, business and properties, including, without
limitation, all such properties (tangible and intangible) reflected in the
Recent Balance Sheet, except for items disposed of in the ordinary course of
business since the date of such Recent Balance Sheet, free and clear of all
mortgages, liens, (statutory or otherwise) security interests, claims, pledges,
licenses, equities, options, conditional sales contracts, assessments, levies,
easements, covenants, reservations, restrictions, rights-of-way, exceptions,
limitations, charges or encumbrances of any nature whatsoever (collectively,
"LIENS") except those described in SCHEDULE 3.10. None of the Company's assets,
business or properties are subject to any restrictions with respect to the
transferability thereof, except as otherwise provided for in Schedule 3.10; and
the Company's title thereto will not be affected in any way by the transactions
contemplated hereby.
(b) CONDITION. All property and assets owned, leased or otherwise
utilized by the Company, including without way of limitation, all aircraft,
engines on said aircraft and airframes of said aircraft, are in good operating
condition and repair, free from any defects (except such minor defects as do not
interfere with the use thereof in the conduct of the normal operations of the
Company), have been maintained consistent with the standards of the FAA, the
manufacturers, any lenders or lessors and as generally followed in the industry
and are sufficient to carry on the Business of the Company as conducted during
the preceding 12 months. All buildings, plants and other structures owned or
otherwise utilized by the Company are in good condition and repair and to the
best of the Company's and the Shareholders' knowledge, have no structural
defects or defects affecting the plumbing, electrical, sewerage, or heating,
ventilating or air conditioning systems.
3.11 ACCOUNTS RECEIVABLE. All accounts receivable of the Company reflected
on the Recent Balance Sheet, and as incurred in the normal course of business
since the date thereof, represent arm's length sales actually made in the
ordinary course of business; are collectible (net of the reserve shown on the
Recent Balance Sheet for doubtful accounts) in the ordinary course of business
without the necessity of commencing legal proceedings; are subject to no
counterclaim or setoff; and are not in dispute. SCHEDULE 3.11 contains an aged
schedule of accounts receivable which reconciles with the accounts receivable
balance as reflected in the Recent Balance Sheet.
3.12 CONTRACTS AND COMMITMENTS.
(a) REAL PROPERTY LEASES. Except as set forth in SCHEDULE 3.18, the
Company has no leases of real property.
(b) PERSONAL PROPERTY LEASES. Except as set forth in SCHEDULE
3.12(B), the Company has no leases of personal property involving consideration
or other expenditure in excess of $10,000.00 or involving performance over a
period of more than six (6) months.
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(c) PURCHASE COMMITMENTS. The Company has no purchase commitments
for inventory items or supplies that, together with amounts on hand, constitute
in excess of two (2) months normal usage, or which are at an excessive purchase
price.
(d) SALES COMMITMENTS. Except as set forth in SCHEDULE 3.12(d),
attached hereto the Company has no sales contracts or commitments to customers
which aggregate in excess of $100,000.00 to any one customer (or group of
affiliated customers). The Company has no sales contracts or commitments except
those made in the ordinary course of business, at arm's length, and no such
contracts or commitments are for a sales price which would result in a loss to
the Company.
(e) CONTRACTS WITH AFFILIATES AND CERTAIN OTHERS. The Company has no
agreement, understanding, contract or commitment (written or oral) with any
Affiliate or any employee, agent, consultant, distributor or dealer that is not
cancelable by the Company on notice of not longer than 30 days without
liability, penalty or premium of any nature or kind whatsoever except as
identified in SCHEDULE 3.12(E).
(f) POWERS OF ATTORNEY. The Company has not given a power of
attorney, which is currently in effect, to any person, firm or corporation for
any purpose whatsoever.
(g) LOAN AGREEMENTS. Except as set forth in SCHEDULE 3.12 (G), the
Company is not obligated under any loan agreement, promissory note, letter of
credit, or other evidence of indebtedness as a signatory, guarantor or
otherwise.
(h) GUARANTEES. Except as disclosed on SCHEDULE 3.12 (H), the
Company has not guaranteed the payment or performance of any person, firm or
corporation, agreed to indemnify any person or act as a surety, or otherwise
agreed to be contingently or secondarily liable for the obligations of any
person.
(i) GOVERNMENT CONTRACTS. The Company is not a party to any contract
with any governmental body.
(j) BURDENSOME OR RESTRICTIVE AGREEMENTS. The Company is not a party
to nor is it bound by any agreement, deed, lease or other instrument which is so
burdensome as to materially affect or impair the operation of the Company.
Without limiting the generality of the foregoing, the Company is not a party to
nor is it bound by any agreement requiring the Company to assign any interest in
any trade secret or proprietary information, or prohibiting or restricting the
Company from competing in any business or geographical area or soliciting
customers or otherwise restricting it from carrying on its business anywhere in
the world.
(k) OTHER MATERIAL CONTRACTS. The Company has no lease, contract or
commitment of any nature involving consideration or other expenditure in excess
of $100,000.00, or involving performance over a period of more than six (6)
months, or which is otherwise individually material to the operations of the
Company, except as described in SCHEDULE 3.12(K) or in any other Schedule.
(l) NO DEFAULT. The Company is not in default under any lease,
contract or commitment, nor has any event or omission occurred which through the
passage of time or the giving of notice, or both, would constitute a default
thereunder or cause the acceleration of any of the Company's obligations or
result in the creation of any Lien on any of the assets owned, used or occupied
by the Company. To the best of the Company's and the Shareholders' knowledge, no
third party is in default under any lease, contract or commitment to which the
Company is a party, nor has any event or omission occurred which, through the
passage of time or the giving of notice, or both, would constitute a default
thereunder or give rise to an automatic termination, or the right of
discretionary termination, thereof.
3.13 OFFICERS, DIRECTORS, AGENTS, ETC. Set forth on SCHEDULE 3.13 attached
hereto is a complete list of all officers (with office held), directors,
contractors and agents of the Company, and the compensation and all vacation and
other benefits they are entitled to receive from the Company.
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3.14 LABOR MATTERS. Except as set forth on SCHEDULE 3.14, the Company is
not and has never been a party to: (a) any profit sharing, pension, retirement,
deferred compensation, bonus, stock option, stock purchase, retainer,
consulting, health, welfare or incentive plan or agreement or other employee
benefit plan, whether legally binding or not; or other employee benefit plan,
whether legally binding or not; or (b) any plan providing for "fringe benefits"
to its employees, including, but not limited to, vacation, disability, sick
leave, medical, hospitalization and life insurance and other insurance plans, or
related benefits; or (c) any employment agreement. To the best of the Company's
and the Shareholders' knowledge, no former employee of the Company has any claim
against the Company (whether under federal or state law, any employment
agreement or otherwise) on account of or for: (a) overtime pay; (b) wages or
salary for any period; (c) vacation, time-off or pay in lieu of vacation or
time-off; or (d) any violation of any statue, ordinance or regulation relating
to minimum wages or maximum hours of work. To the best of the Company's and the
Shareholders' knowledge, no person or party (including, but not limited to,
governmental agencies of any kind) has any claim or basis for any action or
proceeding against the Company arising out of any statute, ordinance or
regulation relating to discrimination in employment or to employment practices
or occupational safety and health standards.
3.15 COMPLIANCE WITH LAWS AND ORDERS.
(a) COMPLIANCE. Except as set forth in SCHEDULE 3.15(A), the Company
(including each and all of its operations, practices, properties, contracts,
agreements and assets) is in compliance with all applicable Laws and Orders,
including, without limitation, those applicable to aviation, transportation,
discrimination in employment, insurance, advertising, occupational safety and
health, trade practices, competition, pricing and billing, zoning, building and
sanitation, employment, retirement and labor relations, product advertising and
the Environmental Laws as hereinafter defined. Except as set forth in SCHEDULE
3.15(A), the Company has not received notice of any violation or alleged
violation of, and to the best of the Company's and the Shareholders' knowledge,
is subject to no Liability for past or continuing violation of, any Laws or
Orders. All reports and returns required to be filed by the Company with any
Government Entity have been filed, and were accurate and complete when filed.
Without limiting the generality of the foregoing:
(i) The operation of the Company's business as it is now
conducted does not, nor does any condition existing at any of its facilities, in
any manner constitute a nuisance or other tortuous interference with the rights
of any person or persons in such a manner as to give rise to or constitute the
grounds for a suit, action, claim or demand by any such person or persons
seeking compensation or damages or seeking to restrain, enjoin or otherwise
prohibit any material aspect of the conduct of such business or materially
affect the manner in which it is now conducted.
(ii) The Company has made all required payments to its
unemployment compensation reserve accounts with the appropriate governmental
departments of the states where it is required to maintain such accounts, and
each of such accounts has a positive balance.
(iii) The Company has timely filed, in a complete and correct
manner, all requisite claims and other reports required to be filed in
connection with all state, federal and foreign administrative and governmental
authorities due on or before the date hereof. There are no claims, actions,
payment reviews, or appeals pending or to the best of the Company's and the
Shareholders' knowledge, threatened before any commission, board or agency,
including, without limitation, any intermediary or carrier, the Federal Aviation
Authority, Administrator of the Health Care Financing Administration, the
Department of Transportation, the Department of Health and Rehabilitative
Services, or any other state or federal agency or compliance matters, which
would materially adversely affect the Business, the Company or the consummation
of the transactions contemplated hereby. No validation review or program
integrity review related to the Company (other than normal, routine reviews) has
been conducted by any commission, board or agency and no such reviews are
scheduled, pending or, to the best of the Company's and the Shareholders'
knowledge, threatened against or affecting the Company or the consummation of
the transactions contemplated hereby.
(iv) Neither the Company nor any person or entity providing
services for the Company have engaged in any activities pursuant to any statute
or governmental regulation, whether state, federal or foreign related to: (a)
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the making of a false statement or representation of a material fact in any
application for any benefit or payment; (b) knowingly and willfully making or
causing to be made any false statement or representation of a material fact for
use in determining rights to any benefit or payment; (c) failing to disclose
knowledge of the occurrence of any event affecting the right to any benefit or
payment on its, his or her own behalf or on behalf of another, with intent to
fraudulently secure such benefit or payment; and (d) knowingly and willfully
soliciting or receiving any remuneration, kickback, bribe or rebate, directly or
indirectly, overtly or covertly, in cash or in kind, or offering to pay or
receive such remuneration in return for the right to any benefit or payment.
(v) The Company has filed when due any and all material
reports and other documentation and reports, if any, required to be filed with
third-party payors and governmental agencies in compliance with applicable
contractual provisions and/or laws, regulations and rules.
(b) LICENSES AND PERMITS. Except as set forth in SCHEDULE 3.15(B)
attached hereto, the Company has all licenses, permits, approvals,
authorizations and consents of all Government Entities and all certification
organizations required for the conduct of the Business and operation of its
facilities. All such licenses, permits, approvals, authorizations and consents
are described in SCHEDULE 3.15(B), are in full force and effect and will not be
affected or made subject to loss, limitation or any obligation to reapply as a
result of the transactions contemplated hereby. Except as set forth in SCHEDULE
3.15(B), the Company (including its Business, operations, properties and assets)
is and has been in compliance with all such permits and licenses, approvals,
authorizations and consents.
(c) ENVIRONMENTAL MATTERS. Applicable Laws relating to pollution or
protection of the environment, including Laws relating to emissions, discharges,
generation, storage, releases or threatened releases of pollutants,
contaminants, chemicals or industrial, toxic, hazardous or petroleum or
petroleum-based substances or wastes ("WASTE") into the environment (including,
without limitation, ambient air, surface water, ground water, land surface or
subsurface strata) or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of Waste
including, without limitation, the Clean Water Act, the Clean Air Act, the
Resource Conservation and Recovery Act, the Toxic Substances Control Act and the
Comprehensive Environmental Response Compensation Liability Act ("CERCLA"), as
amended, and their state and local counterparts are herein collectively referred
to as the "Environmental Laws". Without limiting the generality of the foregoing
provisions of this Section 3.15, to the best of the Company's and Shareholders'
knowledge and belief, the Company is in full compliance with all limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in the Environmental Laws or contained in any
regulations, code, plan, order, decree, judgment, injunction, notice or demand
letter issued, entered, promulgated or approved thereunder. Except as set forth
in SCHEDULE 3.15(C), there is no Litigation nor, to the best of the Company's
and the Shareholders' knowledge, any demand, claim, hearing or notice of
violation pending or threatened against the Company relating in any way to the
Environmental Laws or any Order issued, entered, promulgated or approved
thereunder. Except as set forth in SCHEDULE 3.15(C), to the best of the
Company's and Shareholders' knowledge and belief there are no past, present or
future events, conditions, circumstances, activities, practices, incidents,
actions, omissions or plans which may interfere with or prevent compliance or
continued compliance with the Environmental Laws or with any Order issued,
entered, promulgated or approved thereunder, or which may give rise to any
liability, including, without limitation, liability under CERCLA or similar
state or local Laws, or otherwise form the basis of any Litigation, hearing,
notice of violation, study or investigation, based on or related to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling, or the emission, discharge, release or threatened release
into the environment, of any Waste.
3.16 BOOKS AND RECORDS. With respect to all material matters occurring
since the inception of the Company which could have a material adverse effect on
the Company on or after the date hereof, the minute books and other records of
the Company contain complete and accurate records of all such material matters,
meetings and other corporate actions of its shareholders and board of directors.
3.17 TAX MATTERS.
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(a) PROVISION FOR TAXES. The provision made for taxes on the Recent
Balance Sheet is and will be sufficient for the payment of all federal, state,
foreign, county, local and other income, ad valorem, excise, profits, franchise,
occupation, property, payroll, sales, use, gross receipts and other taxes (and
any interest and penalties) and assessments, whether or not disputed, at the
date of the Recent Balance Sheet and for all years and periods prior thereto.
Since the date of the Recent Balance Sheet, the Company has not incurred any
taxes other than taxes incurred in the ordinary course of business consistent in
type and amount with past practices of the Company.
(b) TAX RETURNS FILED. Except as set forth on SCHEDULE 3.17(b), all
federal, state, foreign, county, local and other tax returns required to be
filed by or on behalf of the Company have been timely filed and when filed were
true and correct in all material respects, and the taxes shown as due thereon
were paid or adequately accrued. True and complete copies of all tax returns or
reports filed by the Company for each of its two (2) most recent fiscal years
have been delivered to MIOA. The Company has duly withheld and paid all taxes
which it is required to withhold and pay relating to salaries and other
compensation heretofore paid to the employees of the Company.
(c) TAX AUDITS. The Company has not received from the Internal
Revenue Service or from the tax authorities of any state, county, local or other
jurisdiction any notice of underpayment of taxes or other deficiency which has
not been paid nor any objection to any return or report filed by the Company.
There are outstanding no agreements or waivers extending the statutory period of
limitations applicable to any tax return or report.
(D) OTHER. Except as set forth in SCHEDULE 3.17(D), the Company has
not (i) filed any consent or agreement under Section 341(f) of the Internal
Revenue Code of 1986, as amended (the "Code"), (ii) applied for any tax ruling,
(iii) entered into a closing agreement with any taxing authority, (iv) filed an
election under Section 338(g) or Section 338(h)(10) of the Code (nor has a
deemed election under Section 338(e) of the Code occurred), (v) made any
payments, or been a party to an agreement (including this Agreement) that under
any circumstances could obligate it to make payments that will not be
deductible because of Section 280G of the Code, or (vi) been a party to any tax
allocation or tax sharing agreement. The Company is not a "United States real
property holding company" within the meaning of Section 897 of the Code.
3.18 REAL ESTATE. The Company owns no real estate and has not committed to
purchase any real estate. The Company has good and marketable title to each of
the leaseholds described in SCHEDULE 3.18 attached hereto, free and clear of all
mortgages, liens, encumbrances, leases, equities, claims, shares, easements,
rights-of-way, covenants, conditions and restrictions except as otherwise
described in the leasehold agreements. Except as stated on SCHEDULE 3.18, no
officer, director, shareholders or employee of the Company, or any spouse, child
or other relative thereof, owns directly or indirectly, in whole or in part, any
of the leaseholds described on SCHEDULE 3.18. Each of the leases described on
SCHEDULE 3.18 is a valid and binding obligation of the Company and enforceable
in accordance with its terms and conditions, and to the best knowledge and
belief of the Company and the Shareholders, each of the leases described on
SCHEDULE 3.18 is a valid and binding obligation of each of the other parties
thereto. Neither the Company nor, to the best knowledge of the Company and the
Shareholders, any other party to any such lease is in default with respect to
any material term or condition thereof, nor to the best knowledge of the Company
and the Shareholders, has any event occurred which through the passage of time
or the giving of notice, or both, would constitute a default thereunder, or
would cause the acceleration of any obligation of any party thereto or the
creation of a lien or encumbrance upon any of the assets of the Company. So far
as the Company and Shareholders are aware, use operation of the buildings,
fixtures and other improvements described in SCHEDULE 3.18 as presently
conducted is not in violation of any applicable building code, zoning ordinance
or other law or regulation.
3.19 INSURANCE. True and correct copies of all policies of fire,
liability, product liability, workers compensation, health and other forms of
insurance presently in effect with respect to the Business and properties of the
Company, have heretofore been delivered to MIOA. All such policies are valid,
outstanding and enforceable policies and provide insurance coverage for the
properties, assets and operations of the Company, of the kinds, in the amounts
and against the risks customarily maintained by organizations similarly
situated; and no such policy (nor any previous policy) provides for or is
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subject to any currently enforceable retroactive rate or premium adjustment,
loss sharing arrangement or other actual or contingent liability arising wholly
or partially out of events arising prior to the date hereof. SCHEDULE 3.19
indicates each policy as to which (a) the coverage limit has been reached or (b)
the total incurred losses to date equal 75% or more of the coverage limit. No
notice of cancellation or termination has been received with respect to any such
policy, and neither the Company nor the Shareholders have knowledge of any act
or omission of the Company which could result in cancellation of any such policy
prior to its scheduled expiration date. The Company has not been refused any
insurance with respect to any aspect of the operations of the Business nor has
its coverage been limited by any insurance carrier to which it has applied for
insurance or with which it has carried insurance during the last three years.
The Company has duly and timely made all claims it has been entitled to make
under each policy of insurance. There is no claim by the Company pending under
any such policies as to which coverage has been questioned, denied or disputed
by the underwriters of such policies, and neither the Company nor the
Shareholders know of any basis for denial of any claim under any such policy.
The Company has not received any written notice from or on behalf of any
insurance carrier issuing any such policy that insurance rates therefor will
hereafter be substantially increased (except to the extent that insurance rates
may be increased for all similarly situated risks) or that there will hereafter
be a cancellation or an increase in a deductible (or an increase in premiums in
order to maintain an existing deductible) or nonrenewal of any such policy. Such
policies are sufficient in all material respects for compliance by the Company
with all requirements of law and with the requirements of all material contracts
to which the Company is a party.
3.20 PERSONNEL. SCHEDULE 3.20 attached hereto contains accurate and
complete information as to names and rates of compensation (whether in the form
of salaries, bonuses, commissions or other supplemental compensation now or
hereafter payable) of all personnel of the Company, together with information as
to any contracts with any such personnel. The Company has no pension,
profit-sharing, bonus, incentive, insurance or other employee benefit plans
(including without limitation any such plans within the meaning of Section 3 (3)
of the Employee Retirement Income Security Act of 1974, as amended) in which any
employees of the Company participate, except as set forth on the SCHEDULE 3.20.
3.21 LITIGATION. Other than as set forth in SCHEDULE 3.21, the Company is
not a party to, the subject of, or threatened with any litigation nor to the
best knowledge of the Company and the Shareholders, is there any basis for any
litigation. The Company is not contemplating the institution of any litigation.
3.22 OTHER LIABILITIES. To the best of the Company's and the Shareholders'
knowledge no claim of breach of contract, tort, product liability or other
claim, contingent or otherwise, has been asserted or threatened against the
Company nor is capable of being asserted by any employee, creditor, claimant or
other person against the Company. To the best of the Company's and the
Shareholders' knowledge, no state of facts exists or has existed, nor has any
event occurred, which could give rise to the assertion of any such claim by any
person.
3.23 CONSENTS. The execution, delivery and performance by the Shareholders
of this Agreement and the consummation by the Shareholders of the transactions
contemplated hereby do not require any consent that has not been received prior
to the date hereof.
3.24 JUDGMENTS. There are no outstanding judgments against the Company.
There are no open workers compensation claims against the Company, or to the
best of the Company's and the Shareholders' knowledge, any other obligation,
fact or circumstance which would give rise to any right of indemnification on
the part of any current or former shareholder, director, officer, employee or
agent of the Company, or any heir or personal representative thereof, against
the Company, or any successor to the businesses of the Company.
3.25 BROKERS. Except as previously disclosed in writing, neither the
Shareholders nor the Company have any liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which MIOA could become liable or obligated.
3.26 TRADE RIGHTS. SCHEDULE 3.26 lists all Trade Rights (as defined below)
in which the Company now has any interest, specifying whether such Trade Rights
are owned, controlled, used or held (under license or otherwise) by the Company,
and also indicating which of such Trade Rights are registered. All Trade Rights
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shown as registered in SCHEDULE 3.26 have been properly registered, all pending
registrations and applications have been properly made and filed and all
annuity, maintenance, renewal and other fees relating to registrations or
applications are current. In order to conduct the business of the Company, as
such is currently being conducted or proposed to be conducted, the Company does
not require any Trade Rights that it does not already have. To the best of the
Company's and the Shareholders' knowledge, the Company is not infringing and has
not infringed any Trade Rights of another in the operation of the business of
Company, nor is any other person infringing the Trade Rights of the Company. The
Company has not granted any license or made any assignment of any Trade Right
listed on SCHEDULE 3.26, nor does the Company pay any royalties or other
consideration for the right to use any Trade Rights of others. There is no
Litigation pending or to the best of the Company's and the Shareholders'
knowledge, threatened to challenge the Company's right, title and interest with
respect to its continued use and right to preclude others from using any Trade
Rights of the Company. All Trade Rights of the Company are valid, enforceable
and in good standing, and there are no equitable defenses to enforcement based
on any act or omission of the Company. The consummation of the transactions
contemplated hereby will not alter or impair any Trade Rights owned or used by
the Company. As used herein, the term "Trade Rights" shall mean and include: (i)
all trademark rights, business identifiers, trade dress, service marks, trade
names and brand names, all registrations thereof and applications therefor and
all goodwill associated with the foregoing; (ii) all copyrights, copyright
registrations and copyright applications, and all other rights associated with
the foregoing and the underlying works of authorship; (iii) all patents and
patent applications, and all international proprietary rights associated
therewith; (iv) all contracts or agreements granting any right, title, license
or privilege under the intellectual property rights of any third party; (v) all
inventions, mask works and mask work registrations, know-how, discoveries,
improvements, designs, trade secrets, shop and royalty rights, employee
covenants and agreements respecting intellectual property and non-competition
and all other types of intellectual property; and (vi) all claims for
infringement or breach of any of the foregoing.
3.27 BANK ACCOUNTS. SCHEDULE 3.27 sets forth the names and locations of
all banks, trust companies, savings and loan associations and other financial
institutions at which the Company maintains a safe deposit box, lock box or
checking, savings, custodial or other account of any nature, the type and number
of each such account and the signatories therefor, a description of any
compensating balance arrangements, and the names of all persons authorized to
draw thereon, make withdrawals therefrom or have access thereto.
3.28 OPERATION OF AIRCRAFT. The Company's aircraft as identified in
SCHEDULE 3.28 (hereinafter the "AIRCRAFT") have been and continue to be operated
(i) in accordance with the operating instructions of their respective FAA
approved Aircraft Flight Manual and the manufacturer's operating and maintenance
instructions; (ii) in conformity with all Laws and Orders, now existing or which
may be enacted, which affect the operation, use or possession of the Aircraft or
the use of any airport premises by the Aircraft, including, but not limited to,
all Laws and Orders which must be complied with in order to at all times
maintain the Aircraft's Airworthiness Certificate; (iii) in compliance with the
terms, conditions and limitations of and in the geographical areas allowed by
the insurance policies referred to in Section 3.19 hereof and by Company pilots
holding any and all licenses required under such insurance policies; (iv) in
accordance with all maintenance service plans and (v) in accordance with the
operating and maintenance procedures established by any lender, lessor or any
person with whom the Company may have contracted for the operation and/or
maintenance of the Aircraft. The Aircraft have been operated solely in the
conduct of Company's business and for no other purposes.
3.29 CARE, USE AND MAINTENANCE. During the periods in which the Company
has owned or operated the Aircraft, it shall have (a) maintained, serviced,
repaired, overhauled and tested; or caused the same to be done to, the Aircraft
so as to keep the Aircraft in good operating condition, state of repair and
appearance, ordinary wear and tear excepted, and in such condition as to
required to enable the Airworthiness Certificate of the Aircraft to be
maintained in good standing at all times under Title 49 with the FAA or as
required by any other applicable government authority; (b) maintained all
records, logs, manuals and other material required by the FAA and Title 49 to be
maintained in respect of the Aircraft; (c) promptly furnished its lenders,
lessors and others such information as may be required to file any reports
required to be filed by the Lessor (or the owner, if other than the Company) of
the Aircraft with any governmental authority (d) maintained the engines of the
Aircraft in accordance with all maintenance service plans and lender or lessor
requirements and maintain the Aircraft, the engines and the main components in
accordance with a manufacturer's approved maintenance program or other such
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program to ensure the Aircraft's eligibility to be placed on another operator's
maintenance program; (e) installed all applicable vendor's and manufacturer's
service bulletin kits received by the Company that are required for the
Aircraft, and incorporated all airworthiness directives; (f) notified all
appropriate parties of any notices or similar documents which the Company
received from the manufacturer or any governmental agency concerning the
maintenance, service, repair, overhaul, testing or use of the Aircraft; and (g)
properly maintained the Aircraft in accordance with generally accepted customs
and practice.
3.30 DISCLOSURE. No representation or warranty by the Company and/or the
Shareholders in this Agreement, nor any statement, certificate, schedule,
document or exhibit hereto furnished or to be furnished by or on behalf of the
Company or Shareholders pursuant to this Agreement or in connection with
transactions contemplated hereby, contains or shall contain any untrue statement
of material fact or omits or shall omit a material fact necessary to make the
statements contained therein not misleading. All statements and information
contained in any certificate, instrument, disclosure schedule or document
delivered by or on behalf of the Company and/or Shareholders shall be deemed
representations and warranties by the Company and the Shareholders.
3.31 Y2K COMPLIANT. The Company's equipment, computers, software,
hardware, aircraft, business and processes in which date sensitive software is
utilized are year 2000 compliant such that such equipment, computers, software,
hardware, aircraft, business and processes will not experience failures,
interruptions or malfunctions in a manner that will have a material adverse
effect on such equipment, computers, software, hardware, aircraft, business and
processes, the Company and/or its business.
3.32 AIR RESPONSE SOUTH, INC. Louis R. Capece, Jr. hereby represents and
warrants that he owns 100% of the issued and outstanding stock of Air Reponse
South, Inc. (hereinafter "AIR SOUTH"). Capece further warrants and represents
that Air South does not own any assets, conduct any business or has or otherwise
will engage in any activity that would interfere with the business of the
Surviving Corporation.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF MIOA
MIOA hereby makes the following representations and warranties to the
Shareholders, each of which MIOA represents to be true and correct on the date
hereof, shall remain true and correct to and including the Effective Date, shall
be unaffected by any investigation heretofore or hereafter made by the
Shareholders, or any knowledge of the Shareholders other than as specifically
disclosed in the disclosure schedules attached hereto to the Shareholders or
otherwise in a writing in the possession of a Shareholder, and shall survive the
Closing of the transactions provided for herein for a period of 120 days
following the end of Formula Period 3. Notwithstanding anything herein to the
contrary, if a Shareholder, by written notice prior to the expiration of Formula
Period 3, advises MIOA of his question, dispute, debate, variance or contention
relative to any specific representation or warranty of MIOA such survival period
shall be extended until such time as the matter in question is resolved.
4.1. MIOA SHARES. All of the MIOA Shares shall be validly issued to the
Shareholders, fully paid and non-assessable. MIOA shall deliver good and
marketable title to the MIOA Shares, which shares shall be fully paid and
non-assessable and except as otherwise provided in this Agreement shall be free
and clear of all Liens (as defined in Section 3.10(a) above).
4.2. ORGANIZATION. MIOA is a corporation duly organized, validly existing
and in good standing under the laws of the State of Florida and is not required
to be qualified or licensed as a foreign corporation in any other jurisdiction.
MIOA has the full power and authority to own all its assets and to conduct its
business as and where its business is presently conducted.
4.3. AUTHORITY AND APPROVAL OF AGREEMENT.
(a) The execution and delivery of this Agreement by MIOA and the
performance of all MIOA's obligations hereunder have been duly authorized and
approved by all requisite corporate action on the part of MIOA pursuant to
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applicable law. MIOA has the power and authority to execute and deliver this
Agreement and to perform all its obligations hereunder.
(b) This Agreement and each of the other documents, instruments
and agreements executed by MIOA in connection herewith constitute the valid and
legally binding agreements of MIOA, enforceable against MIOA in accordance with
their terms, except that: (i) enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws of general
application affecting the enforcement of the rights and remedies of creditors;
and (ii) the availability of equitable remedies as may be limited by equitable
principles.
4.4. NO VIOLATIONS. Neither the execution, delivery nor performance of
this Agreement or any other documents, instruments or agreements executed by
MIOA in connection herewith, nor the consummation of the transactions
contemplated hereby: (a) constitutes a violation of or default under (either
immediately, upon notice or upon lapse of time) the Articles of Incorporation or
Bylaws of MIOA, any provision of any contract to which MIOA or its assets may be
bound, any judgment to which MIOA is bound or any law applicable to MIOA; or (b)
result in the creation or imposition of any encumbrance upon, or give any third
person any interest in or right to, any or all of the MIOA Securities or any
other capital stock of MIOA or any of the assets of MIOA; or (c) result in the
loss or adverse modification of, or the imposition of any fine or penalty with
respect to, any license, permit or franchise granted or issued to, or otherwise
held by or for the use of, MIOA.
4.5. CONSENTS. The execution, delivery and performance by MIOA of this
Agreement and the consummation by MIOA of the transactions contemplated hereby
do not require any consent that has not been received prior to the date hereof.
4.6. S.E.C. DOCUMENTS. MIOA has delivered or made available to the
Shareholders all required reports, schedules, forms, statements and other
documents filed or to be filed with the Securities and Exchange Commission (the
"SEC") since January 1, 1996 (collectively, the "SEC DOCUMENTS") together with
its Private Placement Memorandum Dated January 19, 1999, including Exhibits and
Supplements (the "PPM") (the SEC Documents and the PPM shall hereinafter be
known as the "DISCLOSURE DOCUMENTS"). The financial statements included in the
SEC Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally accepted
accounting principles (except, in the case of the unaudited statements, as
permitted by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated therein or in the notes thereto).
4.7. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the
Disclosure Documents and as set forth in SCHEDULE 4.7, since the date of the
most recent financial statements included in the SEC Documents, MIOA has
conducted its business only in the ordinary course consistent with past practice
in light of its current business circumstances, and there is not and has not
been: (a) any material adverse change with respect to MIOA or its capital stock;
(b) any condition, event or occurrence which, individually or in the aggregate,
could reasonably be expected to have a material adverse effect or give rise to a
material adverse change with respect to MIOA or its capital stock; or (c) any
condition, event or occurrence which could reasonably be expected to prevent,
hinder or materially delay the ability of MIOA to consummate the transactions
contemplated by this Agreement.
4.8. BROKERS. MIOA has no liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which the Shareholders or the Company could
become liable or obligated.
4.9. FULL DISCLOSURE. To the best knowledge of MIOA, no representation or
warranty by MIOA in this Agreement, nor any statement, certificate, schedule,
document or exhibit hereto furnished or to be furnished by or on behalf of MIOA
pursuant to this Agreement or in connection with transactions contemplated
hereby, contains or shall contain any untrue statement of material fact or omits
or shall omit a material fact necessary to make the statements contained therein
not materially misleading.
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4.10. NO ENCUMBRANCES ON MIOA SECURITIES. Except as set forth in this
Agreement, the MIOA Shares being transferred by MIOA to the Shareholders and
their assigns are free and clear of any liens, claims, encumbrances or
restrictions of any kind, and none of those shares is subject to options,
rights, warrants, or other agreements or commitments other than set forth in
this Agreement.
4.11 GLOBAL. The Global companies are wholly owned subsidiaries of the
Holding Corp. Global has conducted its business only in the ordinary course and
there is not presently: (a) any material adverse change to its business; (b) any
condition, event or occurrence which, individually or in the aggregate, could
reasonably be expected to have a material adverse affect or give rise to a
material adverse affect with respect to its business; or (c) any condition,
event or occurrence which could reasonably be expected to prevent or materially
hinder the ability of Global to realize its projected earnings as delivered to
Shareholders, other than items, events and/or occurrences which are presently
unknown to MIOA.
4.12 GLOBAL FINANCIALS. Included as SCHEDULE 4.12 are true and complete
copies of the audited financial statements of Global consisting of (i) balance
sheets of Global as of December 31, 1998 and the related statement of operations
and cash flows for the year then ended (including the notes contained therein or
annexed thereto), and (ii) an unaudited balance sheet of Global as of February
28, 1999 (the "RECENT BALANCE SHEET"), and the related unaudited statement of
operations and cash flows for the two (2) months then ended (the "RECENT
STATEMENT OF OPERATIONS") and for the corresponding period of the prior year
(including the notes and schedules contained therein or annexed thereto). All of
such financial statements (including all notes and schedules contained therein
or annexed thereto) are true, complete and accurate, have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis, have been prepared in accordance with the books and records of Global,
and fairly present, in accordance with generally accepted accounting principles,
the assets, liabilities and financial position, the results of operations and
cash flows of Global as of the dates and for the year and period indicated.
ARTICLE V.
INTERPRETATION; SURVIVAL OF
REPRESENTATIONS AND WARRANTIES; AND INDEMNIFICATION
5.1. INTERPRETATION. Except where indicated otherwise, each warranty and
representation made by a party in this Agreement or pursuant hereto shall be
read and interpreted in conjunction with all other warranties and
representations made by the same party in this Agreement or pursuant hereto
(whether or not covering identical, related or similar matters) and must not be
independently and separately satisfied.
5.2. SURVIVAL. All representations and warranties made in this Agreement
or pursuant hereto shall survive the date hereof and the Effective Date for a
period ending 120 days following Formula Period 3 (the "SURVIVAL PERIOD").
Notwithstanding anything herein to the contrary, if an indemnitee under this
agreement, by written notice prior to the expiration of the Survival Period,
advises an indemnitor of its question, dispute, debate, variance or contention
relative to any specific representation warranty or other matter which is
subject to the indemnity provisions of this Section, such survival period shall
be extended until such time as the matter in question is resolved.
5.3. INDEMNIFICATION.
(a) BY SHAREHOLDERS. The Shareholders hereby jointly and severally
agree to indemnify, defend and hold harmless MIOA, its subsidiaries and their
directors, officers, employees and controlled and controlling persons
(hereinafter "MIOA'S AFFILIATES"), from and against all Claims (as hereinafter
defined) asserted against, resulting to, imposed upon, or incurred by MIOA,
MIOA's affiliates, the Surviving Company, their businesses or their assets,
directly or indirectly, by reason of, arising out of or resulting from (x) the
inaccuracy or breach of any representation or warranty of the Company or such
Shareholders contained in or made pursuant to Article III of this Agreement; (y)
the breach of any covenant of the Company or such Shareholders contained in this
Agreement, and (z) any Claim against the Surviving Company, its business or its
assets not otherwise disclosed in this Agreement or the disclosure schedules
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relating to or arising from matters related to or arising from the Company, or
its businesses prior to the Effective Date (except those claims disclosed in
SCHEDULE 3.21 for which MIOA, MIOA Affiliates and the Surviving Company shall be
indemnified). As used in this Agreement, the term "CLAIM" shall include (i) all
liabilities; (ii) all losses, damages, judgments, awards, settlements, costs and
expenses (including, without limitation, interest including prejudgment interest
in any litigated matter), penalties, court costs and attorneys fees and
expenses); and (iii) all demands, claims, actions, costs of investigation,
causes of action, proceedings and assessments ultimately determined to be valid.
(b) BY MIOA. MIOA hereby agrees to indemnify, defend and hold
harmless the Shareholders from and against all Claims asserted against,
resulting to, imposed upon or incurred by any such person, directly or
indirectly, by reason of or resulting from (x) the inaccuracy or breach of any
representation or warranty of MIOA contained in or made pursuant to this
Agreement; (y) the breach of any covenant of MIOA contained in this Agreement;
or (z) all Claims of or against Shareholders specifically assumed by MIOA
pursuant hereto.
(c) MATERIALITY. The parties recognize that many of the
representations, warranties and covenants set forth in this Agreement are
qualified by the term "MATERIAL". For purposes of this Agreement, the parties
hereby agree that a "MATERIAL" event(s) has occurred if the impact of such
event(s) has resulted or is reasonably likely to result in costs, expenses
and/or damages for any event(s) singularly or in the aggregate in excess of
Fifty Thousand Dollars ($50,000.00)
5.4. LIMITATION. The parties agree that the indemnification provisions set
forth in this Article shall be limited to all Claims over Fifty Thousand Dollars
($50,000.00) (the "Threshold") but not in excess of the Purchase Price. Once a
Claim exceeds the Threshold, if a party is entitled to indemnification under
Section 5.3, such party shall recover all appropriate funds, as provided in
Section 5.3, with no reduction for the Threshold amount. Further, the
indemnitors shall not be liable for any liabilities resulting from Claims that
are covered by any insurance policy or other indemnity or contribution agreement
unless, and only to the extent that payment is not received from such insurance
policy, indemnity or contribution agreement. Notwithstanding the foregoing, the
$50,000 limitation shall not apply to any claims or damages arising out of the
matter disclosed in SCHEDULE 3.21.
5.5 SETOFFS. If MIOA is entitled to indemnification pursuant to the
provisions of this Agreement then, in such event, MIOA shall be entitled to
setoff or otherwise reduce the Installment Payment(s) due hereunder by the
amount for which it is entitled to indemnification.
ARTICLE VI.
OTHER COVENANTS
6.1. GENERAL RELEASES. At the Closing, the Shareholders shall each deliver
a general release to MIOA, substantially in the form attached hereto as EXHIBIT
H, releasing the Company, Surviving Company and their directors, officers,
agents and employees from all claims through the Effective Date, except (i) as
may be described in written contracts disclosed in the disclosure schedules and
expressly described and excepted from such releases, and (ii) indemnification
rights and compensation for current periods expressly described and excepted
from such releases. Such releases shall also contain waivers of any right of
contribution or other recourse against the Surviving Company with respect to
representations, warranties or covenants made herein by the Company.
6.2. ACCESS TO INFORMATION AND RECORDS. During the period prior to the
Closing Date, the Shareholders shall cause the Company to give MIOA, its
counsel, accountants and other representatives (i) access during normal business
hours to all of the properties, books, records, contracts and documents of the
Company and for the purpose of such inspection, investigation and testing as
MIOA deems appropriate (and the Company shall furnish or cause to be furnished
to MIOA and its representatives all information with respect to the business and
affairs of the Company as MIOA may request); (ii) access to employees, agents
and representatives for the purposes of such meetings and communications as MIOA
reasonably desires; and (iii) with the prior consent of the Company in each
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instance (which consent shall not be unreasonably withheld), access to vendors,
customers, manufacturers of its machinery and equipment, and others having
business dealings with the Company.
6.3. CONDUCT OF BUSINESS PENDING THE CLOSING DATE. From the date hereof
until the Closing Date, except as otherwise approved in writing by MIOA, the
Company and the Shareholders covenant as follows:
(a) NO CHANGES. The Company will carry on its business diligently
and in the same manner as heretofore and will not make or institute any changes
in its methods of purchase, sale, management, accounting or operation.
(b) MAINTAIN ORGANIZATION. The Company and the Shareholders will
take such action as may be necessary to maintain, preserve, renew and keep in
favor and effect the existence, rights and franchises of the Company and they
will use their best efforts to preserve the business organization of the Company
intact, to keep available to the Company the present officers and employees, and
to preserve for the Company their present relationships with suppliers and
customers and others having business relationships with the Company and;
(c) NO BREACH. Neither the Company nor the Shareholders will do or
omit any act, or permit any omission to act, which may cause a breach of any
material contract, commitment or obligation, or any breach of any
representation, warranty, covenant or agreement made by the Company and the
Shareholders herein, which would have required disclosure herein had it occurred
after the date of the Recent Balance Sheet and prior to the date of this
Agreement.
(d) NO MATERIAL CONTRACTS. No contract or commitment will be entered
into, and no purchase of equipment, parts or supplies and no sale of goods or
services (real, personal, or mixed, tangible or intangible) will be made, by or
on behalf of Company, except contracts, commitments, purchases or sales which
are in the ordinary course of business and consistent with past practice, are
not material to the Company (individually or in the aggregate) and would not
have been required to be disclosed in the disclosure schedules had they been in
existence on the date of this Agreement.
(e) NO CORPORATE CHANGES. Except as otherwise provided herein, the
Company shall not amend its Articles of Incorporation or Bylaws or make any
changes in authorized or issued capital stock.
(f) MAINTENANCE OF INSURANCE. The Company shall maintain all of the
insurance in effect as of the date hereof and shall procure such additional
insurance as shall be reasonably requested by MIOA.
(g) MAINTENANCE OF PROPERTY. The Company and the Shareholders shall
use, operate, maintain and repair all the Company's property in a normal
business manner.
(h) INTERIM FINANCIALS. The Company will provide MIOA with interim
monthly financial statements and other management reports as and when they are
available.
(i) NO NEGOTIATIONS. Neither the Company nor the Shareholders will
directly or indirectly (through a representative or otherwise) solicit or
furnish any information to any prospective buyer, commence, or conduct presently
ongoing, negotiations with any other party or enter into any agreement with any
other party concerning the sale of the Company, the Company's assets or business
or any part thereof or any equity securities of the Company (an "ACQUISITION
PROPOSAL"), and the Company and the Shareholders shall immediately advise MIOA
of the receipt of any acquisition proposal.
(j) NO TRANSFER OF SHARES. The Shareholders shall not transfer or
attempt to transfer any of the Company Shares except as provided herein; and the
Company shall refuse to accept any certificates for the Company Shares to be
transferred or otherwise to allow such transfers to occur upon its books.
6.4. CONSENTS. MIOA, the Company and the Shareholders will use their best
efforts prior to the Closing Date to obtain all consents necessary for the
consummation of the transactions contemplated hereby.
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6.5. OTHER ACTION. MIOA, the Company and the Shareholders shall use their
best efforts to cause the fulfillment at the earliest practicable date of all of
the conditions to the parties' obligations to consummate the transactions
contemplated in this Agreement.
6.6. DISCLOSURE SCHEDULE. MIOA, the Shareholders and the Company shall
have a continuing obligation to promptly notify each other in writing with
respect to any matter hereafter arising or discovered which, if existing or
known at the date of this Agreement, would have been required to be set forth or
described in the disclosure schedules, but no such disclosure shall cure any
breach of any representation or warranty which is inaccurate.
6.7. CAPITAL INFUSION. MIOA will use its reasonable best efforts to make
available to the Holding Corp Five Million Dollars ($5,000,000.00) of capital
either in the form of cash, debt, its capital stock or a combination thereof for
the purpose of expanding through internal growth, acquisitions and/or mergers,
its air ambulance and charter business. Notwithstanding, if MIOA is unable to
provide, for whatever reason, the capital necessary to consummate any approved
acquisition and/or merger, the parties agree that the Shareholders have the
right to personally provide such capital for such purpose on mutually agreeable
terms and conditions.
ARTICLE VII.
CONDITIONS PRECEDENT TO THE SHAREHOLDERS' OBLIGATIONS
Notwithstanding the execution and delivery of this Agreement or the
performance of any part hereof, the Shareholders' obligation to consummate the
transaction contemplated by this Agreement shall be subject to the satisfaction
of each of the conditions set forth in this Article VII, except to the extent
that such satisfaction is waived in writing by the Shareholders.
7.1. REPRESENTATIONS AND WARRANTIES OF MIOA. All representations and
warranties made by MIOA in this Agreement and the Schedules hereto shall be true
and correct in all material respects on the date hereof, and shall be true and
correct in all material respects at the time of the Closing as though such
representations were again made, without exception or deviation, at the time of
the Closing.
7.2. PERFORMANCE OF THIS AGREEMENT. MIOA shall have duly performed or
complied with all the obligations under this Agreement to be performed or
complied with by MIOA on or prior to the Closing Date.
7.3. ABSENCE OF LITIGATION. No litigation shall have been threatened or
instituted on or before the time of the Closing Date by any person, the result
of which did or could prevent or make illegal the consummation of the
transaction contemplated by this Agreement, or which had or could have a
material adverse effect on MIOA.
7.4. SHAREHOLDERS GUARANTEES. MIOA shall use all reasonable efforts to
have the Shareholders removed from any and all guarantees, agreements,
obligations or debts, as identified in SCHEDULE 7.4, that were entered into by a
Shareholder to facilitate or induce another party to engage in any business
activity with the Company. If MIOA is unable to remove such Shareholder from
such guarantees, agreements, obligations or debts then, in such event, MIOA will
indemnify the Shareholders for any damages the Shareholders incurs relative to
such guarantees, agreements, obligations or debts.
7.5. DELIVERIES AT CLOSING. On or prior to the Closing Date, in addition
to all other deliveries to be made by MIOA, MIOA shall deliver or cause to be
delivered to the Shareholders (a) a certificate signed by an officer of MIOA,
dated the Closing Date, certifying that: (i) all of the terms and conditions of
this Agreement to be satisfied or performed by MIOA on or before the time of the
Closing Date have been satisfied or performed; and (ii) no litigation has been
instituted or, or to best of said officer's knowledge threatened on or before
the time of the Closing Date by any person, the result of which did or could
prevent or make illegal the consummation of the transaction contemplated by this
Agreement and (b) the employment agreements with Shareholders in substantially
the same forms as attached hereto as composite EXHIBIT I.
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ARTICLE VIII.
CONDITIONS PRECEDENT TO MIOA'S OBLIGATIONS
Notwithstanding the execution and delivery of this Agreement or the
performance of any part hereof, MIOA's obligations to consummate the transaction
contemplated by this Agreement shall be subject to the satisfaction of each of
the conditions set forth in this Article VII, except to the extent that such
satisfaction is waived in writing by MIOA.
8.1. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS. All
representations and warranties made by the Company and the Shareholders
contained in this Agreement and the disclosure schedules hereto shall be true
and correct in all material respects on the date hereof, and shall be true and
correct in all material respects at the time of the Closing as though such
representations were again made, without exception or deviation, at the time of
the Closing.
8.2. PERFORMANCE OF THIS AGREEMENT. The Company and the Shareholders shall
have duly performed or complied with all of the covenants and obligations under
this Agreement to be performed or complied with by them on or prior to the
Closing Date.
8.3. ABSENCE OF LITIGATION. No litigation shall have been threatened or
instituted on or before the time of the Closing Date by any person, the result
of which did or could prevent or make illegal the consummation of the
transaction contemplated by the Agreement, or which had or could have a material
adverse effect on the Company, its assets or its Business.
8.4. DELIVERIES AT CLOSING. On or prior to the Closing Date, in addition
to all other deliveries to be made by the Shareholders hereunder, the
Shareholders shall deliver or cause to be delivered to MIOA: (a) a certificate
signed by the Shareholders, dated as of the Closing Date, certifying that: (i)
all of the terms and conditions of this Agreement to be satisfied or performed
by the Company and the Shareholders on or before the time of the Closing Date
have been satisfied or performed; (ii) no litigation has been instituted or, to
the best of their knowledge, threatened on or before the time of the Closing
Date by any person, the result of which did or could prevent or make illegal the
consummation of the transaction contemplated by this Agreement; or which had or
could have a material adverse effect on the Company, its assets or its Business;
and (iii) there has not been any material adverse change in or affecting the
Company, its assets or its Business between the date of this Agreement and the
Closing Date.
ARTICLE IX.
OBLIGATIONS ON OR BEFORE THE CLOSING DATE
9.1. OBLIGATIONS OF MIOA TO THE SHAREHOLDERS ON OR BEFORE THE CLOSING
DATE. MIOA hereby covenants and agrees to deliver or cause to be delivered to
the Shareholders on or before the Closing Date or when otherwise required by
this Agreement, or if agreed, as soon thereafter as is reasonably possible, the
following:
(a) Duly issued certificates (with legends as provided in Section
2.2 (a) hereof) representing the Initial Payment due at closing, together with
any documentary stamps required in connection with such transfer and such other
appropriate documents and instruments of transfer as the Shareholders may
reasonably request;
(b) A certification by an officer of MIOA that MIOA was authorized
to execute, deliver and perform this Agreement and is authorized to consummate
the transactions contemplated hereby; and
(c) All Schedules, Exhibits, Employment Agreements and other
ancillary documents contemplated by this Agreement and such other documents and
instruments as the Shareholders may reasonably request in order to effectuate
the terms of this Agreement.
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(d) A Good Standing Certificate for Global Air Charter, Inc., MIOA
and the Holding Corp from the State of Florida and in respect of Global Air
Rescue, Inc. from the State of Delaware, dated no later than three (3) days
prior to the Closing Date.
9.2. OBLIGATIONS OF THE COMPANY AND THE SHAREHOLDERS TO MIOA ON OR BEFORE
THE CLOSING DATE. The Company and the Shareholders hereby covenant and agree to
deliver or cause to be delivered to MIOA on or before the Closing Date or, if
agreed, as soon thereafter as is reasonably possible the following:
(a) Duly executed stock certificates representing the Company
Shares, free and clear of all encumbrances together with any documentary stamps
required in connection with such transfer and such other appropriate documents
and instruments of transfer as MIOA may reasonably request ;
(b) A certification by the Company's president that the Company was
authorized to execute, deliver and perform this Agreement and is authorized to
consummate the transactions contemplated hereby;
(c) A Good Standing Certificate for the Company from the State of
New York dated no later than the seven (7) days prior to the Closing Date.
(d) Incumbency certificates relating to each person executing (as a
corporate officer or otherwise on behalf of another person) any document
executed and delivered to MIOA pursuant to the terms hereof.
(e) The General Releases referred to in Section 6.2, duly executed
by the persons referred to in such Section.
(f) All Schedules, Exhibits, Employment Agreements and other
ancillary documents contemplated by this Agreement and such other documents and
instruments as MIOA may reasonably request in order to effectuate the terms of
this Agreement.
(g) The consent and approval of the relevant portions of the
transaction contemplated by this Agreement by the FAA, the Company's lenders and
others, if required, on such terms and conditions, if any, as are acceptable to
MIOA and the Shareholders.
ARTICLE X.
TERMINATION AND RECISION
10.1. TERMINATION PRIOR TO CLOSING DATE. If, prior to the Closing Date:
(a) A party hereto shall materially breach or default in the full
and timely performance and satisfaction of any of its representations and
warranties or obligations under this Agreement, and such breach or default is
not cured on or before the fifth (5th) day (or such reasonably longer period if
five (5) days is an unreasonable period to cure such breach or default) after
the date notice is given by the non-defaulting party to the defaulting party
specifying the nature of such breach or default, then the non-defaulting party
may terminate this Agreement at anytime following the period for curing such
breach or default. The Closing Date will be extended for such reasonable period
necessary to allow the defaulting party to cure the breach or default.
(b) If any of the conditions or obligations set forth in Article VII
and Section 9.1, respectively, are not satisfied at or before the time of the
Closing Date, then the Company and/or the Shareholders may terminate this
Agreement by notifying MIOA within five (5) days immediately following the
Closing Date. The Closing Date may be extended for such reasonable period
necessary to allow for the satisfaction of such conditions; provided that such
extension shall not be beyond April 15, 1999.
(c) If any of the conditions set forth in Article VIII and Section
9.2, respectively, are not satisfied at or before the time of the Closing Date,
then MIOA may terminate this Agreement by notifying the Company and the
Shareholders within five (5) days immediately following the Closing Date. The
Closing Date will be extended for such reasonable period necessary to allow for
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the satisfaction of such conditions; provided that such extension shall not be
beyond April 15, 1999.
(d) The parties hereby acknowledge and agree that at the time of the
execution of this Agreement that the Exhibits and Schedules have not been fully
completed and delivered and that certain provisions herein are subject to
further review and reasonable modification and change by the parties.
Accordingly, either MIOA or the Shareholders may terminate this Agreement by
notifying the other parties prior to the Closing Date if (i) such Exhibits and
Schedules are not completed to the reasonable satisfaction of the parties on or
before April 15, 1999; or, (ii) if the parties are unable to agree by April 15,
1999 to any such changes and/or modifications proposed by the parties. If
terminated, all rights, duties and obligations of the parties shall terminate
and this Agreement shall be null and void with no further force or effect.
10.2. RECISION POST CLOSING DATE.
(a) Due to the material nature of this transaction, the Company is
required to undergo an audit by independent certified accountants. If, for
whatever reason, the Company is deemed to be unauditable by such accountants or
if during the course of the audit a matter is revealed or discovered which
could, in the good faith opinion of MIOA, have a material adverse affect on
MIOA, the Holding Corp or the Surviving Corporation then, in such event, MIOA
shall have the right, in its sole and absolute discretion to rescind this
transaction by providing written notice to the Shareholders. Such notice must be
given no later than May 15. If the transaction is rescinded in accordance with
this provision, MIOA shall transfer all the stock of the Surviving Corporation
to Shareholders in exchange for any and all consideration paid to the
Shareholders in connection with this Agreement. Thereafter, all rights, duties
and obligations of the parties shall terminate and this Agreement shall be null
and void with no further force or effect.
(b) Global as a subsidiary of MIOA is also required to undergo an
audit by independent certified accountants. If, for whatever reason, Global is
deemed to be unauditable by such accountants or if during the course of the
audit a matter is revealed or discovered which could, in the good faith opinion
of the Shareholders, have a material adverse affect on the Holding Corp or the
Surviving Corporation then, in such event, the Shareholders shall have the
right, in their sole and absolute discretion to rescind this transaction by
providing written notice to MIOA. Such notice must be given no later than May
15, 1999. If the transaction is rescinded in accordance with this provision,
MIOA shall transfer all the stock of the Surviving Corporation to Shareholders
in exchange for any and all consideration paid to the Shareholders in connection
with this Agreement. Thereafter, all rights, duties and obligations of the
parties shall terminate and this Agreement shall be null and void with no
further force or effect.
ARTICLE XI.
MISCELLANEOUS
11.1. NOTICES. All notices, requests, demands and other communications
hereunder shall be deemed to have been duly given if the same shall be in
writing and shall be delivered personally or sent by registered or certified
mail, postage prepaid, and addressed as set forth below:
If to the Shareholders: Louis R. Capece, Jr.
10845 Bayshore Drive
Windemere, FL 34786
Donald Jones
C/O Air Response, Inc.
7211 S. Peoria, Suite 200
Englewood, CO 80112
With a copy to: Richard F. Taylor, Jr., Esquire
Walton Crossing I, Suite 225
231 Walton Street
Syracuse, NY 13202
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To Company: Air Response, Inc.
c/o Louis R. Capece, Jr.
108 Bayshore Drive
Windemere, FL 34786
If to MIOA: Medical Industries of America, Inc.
1903 S. Congress Ave., #400
Boynton Beach, FL 33463
Attn: Paul C. Pershes, President
11.2. ENTIRE AGREEMENT. This Agreement, including the disclosure schedules
attached hereto and the documents delivered pursuant hereto, sets forth all the
promises, covenants, agreements, conditions and understandings among the parties
hereto with respect to the subject matter hereof, and supersedes all prior and
contemporaneous agreements, understandings, inducements or conditions, expressed
or implied, oral or written, except as herein contained. No changes of or
modifications or additions to this Agreement shall be valid unless same shall be
in writing and signed by the parties hereto.
11.3. BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon the
parties hereto, their beneficiaries, heirs and administrators. No party may
assign or transfer its interests herein, or delegate its duties hereunder,
without the written consent of the other parties.
11.4. AMENDMENT. The parties hereby irrevocably agree that no attempted
amendment, modification or change (collectively, "AMENDMENT") of this Agreement
shall be valid and effective, unless the parties shall unanimously agree in
writing to such Amendment.
11.5. NO WAIVER. No waiver of any provision of this Agreement shall be
effective unless it is in writing and signed by the party against whom it is
asserted, and any such written waiver shall only be applicable to the specific
instance to which it relates and shall not be deemed to be a continuing or
future waiver.
11.6. GENDER AND USE OF SINGULAR AND PLURAL. All pronouns shall be deemed
to refer to the masculine, feminine, neuter, singular or plural, as the identity
of the party or parties or their personal representatives, successors and
assigns may require.
11.7. COUNTERPARTS. This Agreement and any amendments may be executed in
one or more counterparts, each of which shall be deemed an original and all of
which together shall constitute one and the same instrument.
11.8. HEADINGS. The article and section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of the Agreement.
11.9. GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Florida, and any litigation pertaining or related to
this Agreement shall, to the extent permitted by law, be held in the courts of
the State of Florida.
11.10. FURTHER ASSURANCES. The parties hereto shall execute and deliver
such further instruments and do such further acts and things as may be
reasonably required to carry out the intent and purposes of this Agreement.
11.11. LITIGATION. If any party hereto is required to engage in litigation
or arbitration against any other party hereto, either as plaintiff or as
defendant, in order to enforce or defend any of its or his rights under this
Agreement, and such litigation results in a final judgment in favor of such
party (the "PREVAILING PARTY"), then the party or parties against whom said
final judgment is obtained shall reimburse the Prevailing Party for all direct,
indirect or incidental expenses incurred by the Prevailing Party in so enforcing
or defending its or his rights hereunder, including, but not limited to, all
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reasonable attorneys' fees, paralegal' fees, court costs and other expenses
incurred throughout all negotiations, trials or appeals undertaken in order to
enforce the Prevailing Party's rights hereunder.
11.12. COSTS AND EXPENSES. The parties hereby agreethat MIOA will be
responsible for the payment of its costs and expenses including professional
fees incurred in connection with this transaction and that the Acquisition Corp.
will be responsible for payment of the costs and expenses including professional
fees incurred in connection with this transaction by the Company and the
Shareholders.
11.13 PLEDGE AGREEMENT. The Pledge Agreement shall take precedence over all
provisions of this Agreement for which there might otherwise be deemed a
conflict.
11.14 SHAREHOLDER ELECTIONS, CONSENTS OR APPROVALS. For purposes of determining
any election, consent, approval and/or disapproval of the Shareholders as may be
required by this Agreement, the election, consent, approval and/or disapproval,
as the case may be, of Louis R. Capece, Jr. shall be deemed for these purposes
the election, consent, approval and/or disapproval, as the case may be, of the
Shareholders, except as otherwise specifically stated herein.
11.15 LOANS. MIOA agrees to loan to Shareholders Capece and Jones such amounts
from time to time as is reasonably needed to pay reasonable costs and expenses
with respect to the defense of any claim or suit resulting from the ProFlight
matter disclosed in SCHEDULE 3.21. Any such loan shall be evidenced by a note
payable in not less than twelve (12) months, nor more than thirty-six (36)
months from the date of such note. The loan shall bear interest at the same rate
as is then being paid by MIOA for its borrowings.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year set forth above.
WITNESSES: MEDICAL INDUSTRIES OF AMERICA, INC.
/S/ ROBYN KEHN By: /S/ E. NICHOLAS DAVIS, III
Print name:ROBYN KEHN E. Nicholas Davis, III, Senior Vice
President
SHAREHOLDERS:
/S/ VERONICA L. MUEHLECK /S/ LOUIS R. CAPECE, JR.
Print name: VERONICA L. MUEHLECK Louis R. Capece, Jr.
/S/ DONALD A. JONES
Donald Jones
AIR RESPONSE, INC.
/S/ VERONICA L. MUEHLECK By: /S/ LOUIS R. CAPECE, JR.
Print name: VERONICA L. MUEHLECK Louis R. Capece, Jr., President
MIOA ACQUISITION COMPANY II, INC.
/S/ ROBYN KEHN By: /S/ E. NICHOLAS DAVIS, III
Print name: ROBYN KEHN E. Nicholas Davis, III, Executive Vice
President
MIOA ACQUISITION COMPANY VII, INC.
/S/ ROBYN KEHN By: /S/ E. NICHOLAS DAVIS, III
Print name: ROBYN KEHN E. Nicholas Davis, III, Executive Vice
President
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EXHIBIT A
ARTICLES OF MERGER
30
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EXHIBIT B
ARTICLES OF INCORPORATION
31
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EXHIBIT C
BYLAWS
32
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EXHIBIT D
EXAMPLE OF FORMULA
33
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EXHIBIT E
DEBENTURE
34
<PAGE>
EXHIBIT F
STOCK PLEDGE AGREEMENT
35
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EXHIBIT G
MIOA STOCK CERTIFICATE LEGENDS
36
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EXHIBIT H
GENERAL RELEASES
37
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EXHIBIT I
EMPLOYMENT AGREEMENT
38
