STOCK PURCHASE AGREEMENT
SELLERS
Xxxxx X. Xxxxx
J. Xxxxxx Xxxxxxxxx
Xxx X. Xxxx
Xxxxx X. Xxxx
Xxxxxxx X. Xxxxx
BUYER
Air Methods Corporation
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (the "Agreement") is made as of July 11,
1997, among XXXXX X. XXXXX, J. XXXXXX XXXXXXXXX, XXX X. XXXX, XXXXX X. XXXX and
XXXXXXX X. XXXXX (individually, a "Seller" and collectively the "Sellers"), and
AIR METHODS CORPORATION, a Delaware corporation (the "Buyer").
R E C I T A L S
A. The Sellers own, in the proportions set forth in SCHEDULE 2.1 hereto,
all of the issued and outstanding shares of common stock (the "Shares") of Mercy
Air Service, Inc., a California corporation ("Mercy" or the "Company"). Mercy
owns and operates a medical transportation business which provides air-based
transport, by helicopter, to individuals requiring advanced life support
services during transport, in the counties of Los Angeles, Orange, Riverside,
San Bernardino, Kern, Imperial, San Diego, Ventura and Santa Xxxxxxx in
California (the "Service Area").
X. Xxxxxxx also own, in the aggregate, all of issued and outstanding shares
of common stock of Helicopter Services, Inc., a California corporation ("HSI"),
which provides helicopter maintenance services primarily to Mercy and does
business under the name "Western Helicopter Inc."
C. Buyer desires to purchase from each Seller, and each Seller desires to
sell and transfer to Buyer, all of the Shares owned by each Seller, on the terms
and conditions hereinafter set forth.
D. Concurrently herewith, Buyer and HSI are entering into an Asset Purchase
Agreement of even date herewith (the "HSI Agreement"), which provides for the
sale by HSI of substantially all of its assets to Buyer concurrently with the
sale by Sellers of their respective Shares of Mercy hereunder.
NOW, THEREFORE, in consideration of the respective covenants and promises
of the Sellers and the Buyer hereinafter set forth, the parties hereto agree as
follows:
1. PURCHASE AND SALE OF SHARES. Subject to the terms and conditions of this
Agreement, on the Closing Date (as hereinafter defined), each Seller agrees
severally, and not jointly, to sell, convey, assign, transfer, set over and
deliver the Shares owned by him to Buyer, free and clear of pledges, options and
any other adverse interests whatsoever, and Buyer shall purchase and accept such
Shares from each of the Sellers.
2. PURCHASE PRICE AND TERMS OF PAYMENT.
2.1 PURCHASE PRICE. As consideration for the sale to Buyer of the Shares,
on the Closing Date Buyer shall pay to Sellers, in the manner hereinafter set
forth, a purchase price (the "Purchase Price") that shall consist of Four
Million Twenty-Six Thousand Three Hundred Thirty-Five Dollars ($4,026,235) and
(ii) the assumption by Buyer or the Company of certain obligations of the
Sellers set forth on SCHEDULE 2.2 hereto (the "Assumed Obligations"). The
Purchase Price shall be subject to adjustment, pursuant to Section 2.3 and
Section 8.6 hereof (and, as so adjusted, shall be referred to as the "Adjusted
Purchase Price").
2.2 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be paid by Buyer to
the Sellers on the Closing Date, as follows:
(a) CLOSING DATE CASH PAYMENT. A wire transfers of funds to each
Seller in an amount that constitutes each Seller's proportionate share, as
set forth in SCHEDULE 2.1 hereto (the "Proportionate Share"), of a cash
payment in an amount aggregating Two Million Five Hundred Twenty-Six
Thousand Two Hundred Thirty-Five Dollars ($2,526,235) (the "Closing Date
Cash Payment");
(b) SECURED NOTES. Delivery to each Seller of a secured promissory
note of Buyer in a principal amount which represents each such Seller's
Proportionate Share, of a principal sum totaling One Million Five Hundred
Thousand Dollars ($1,500,000). Each of such secured promissory notes (a
"Note" or, collectively, the "Notes") shall be in the form attached hereto
as EXHIBIT A and shall be secured, in accordance with the terms and
provisions contained in a security agreement, in the form attached hereto
as EXHIBIT B (each, a "Security Agreement"), granting to Sellers a security
interest in all present and future accounts receivable of Mercy, more fully
described in Section 8 below; and
(c) ASSUMPTION AGREEMENT. The execution and delivery by Buyer of an
assumption agreement, (the "Assumption Agreement"), which shall provide for
the assumption by Buyer or the Company of each of the Assumed Obligations,
together with written consents of the creditors to which such obligations
are payable (the "Creditors") that shall contain a release, in form and
substance satisfactory to Sellers and their counsel, which releases and
discharges each of the Sellers from all of such Assumed Obligations.
2.3 ADJUSTMENTS TO PURCHASE PRICE. The Purchase Price shall be subject to
possible adjustments (the "Purchase Price Adjustments"), which are described in,
and the respective amounts of which shall be determined in accordance with the
terms and provisions of, SCHEDULE 2.3 hereof, which terms and provisions have
been agreed upon by the parties hereto, and by this reference, are incorporated
herein and made an integral part of this Agreement. Buyer shall arrange for KPMG
Peat Marwick LLP, independent certified public accountants ("Peat Marwick"), to
determine such Purchase Price Adjustments, to the extent necessary, as provided
in SCHEDULE 2.3 hereto. Any increase or reduction in the Purchase Price as a
result of any Purchase Price Adjustment shall be effectuated in the manner set
forth in SCHEDULE 2.3 and shall be allocated among the Sellers in accordance
with the respective Proportionate Share of each Seller as set forth on SCHEDULE
2.1. Notwithstanding the foregoing, immediately prior to Closing, the parties
shall prepare an estimate of Closing Date Indebtedness (as that term is defined
in SCHEDULE 2.3). If the estimate of the Closing Date Indebtedness is less than
$8,200,000, then, the Closing Date Cash Payment shall be increased by the
difference between $8,200,000 and such estimate. If, on the other hand, the
estimate of Closing Date Indebtedness exceeds $8,200,000, then, the Closing Date
Cash Payment shall be reduced by the amount of such excess. Any such adjustment
to the Closing Date Cash Payment (which also shall constitute an adjustment to
the Purchase Price) shall be documented in a written instrument executed and
delivered by the parties at Closing concurrently with the payment of the Closing
Date Cash Payment, as so adjusted, and shall be taken into account when Closing
Purchase Price Adjustments are determined and effectuated pursuant to SCHEDULE
2.3 so that the Purchase Price is not adjusted more than once for the same item.
3. NON-COMPETITION AGREEMENTS. At Closing, each Seller shall enter into an
agreement with Buyer, pursuant to which, among other things, such Seller shall
agree not to compete with the business of the Company following the Closing, in
consideration for Buyer's payment, by wire transfer, to such Seller at the
Closing of a cash sum of $10,000.
4. REPRESENTATIONS AND WARRANTIES OF EACH SELLER. Each Seller, severally, as to
himself and not jointly with any other of the Sellers, represents and warrants
to Buyer as follows:
4.1 AUTHORITY AND CAPACITY. Such Seller (i) has the full legal right and
capacity to execute and deliver, and to perform his respective obligations
under, this Agreement and his Non-Competition Agreement and (ii) has duly
executed and delivered this Agreement on the date hereof with the intent to be
legally bound hereby and to perform his obligations hereunder. This Agreement
constitutes a valid and legally binding obligation of such Seller and is
enforceable against such Seller in accordance with its terms, and such Seller's
Non-Competition Agreement, when executed and delivered by the Seller, shall be a
valid and legally binding obligation of such Seller enforceable against him in
accordance with its terms, except,
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in each case, as such enforceability may be limited by (i) bankruptcy,
insolvency, moratorium or other similar laws affecting creditors' rights and
(ii) general principles of equity relating to the availability of equitable
remedies (regardless of whether any such agreements are sought to be enforced in
a proceeding at law or in equity).
4.2 OWNERSHIP OF SHARES. Such Seller is the sole beneficial and record
owner of, and at the Closing Seller will sell and convey to Buyer, the number of
the Shares set forth opposite such Seller's name on SCHEDULE 2.1, free and clear
of any pledges, options and any adverse interests of any nature whatsoever,
other than restrictions imposed by federal and applicable state securities laws
which do not constitute an impediment to the transfer of such Shares to Buyer as
described in this Agreement. Such Seller has not, and as of the Closing he shall
not have, sold, or granted any options or rights to purchase, and he has not
entered, and as of the Closing he shall not have entered, into any agreement
obligating him to sell or grant options or rights to purchase, any of such
Shares, except to the Buyer.
4.3 NO CONFLICTS. Except as set forth on SCHEDULE 4.3 , neither the
execution and delivery nor the performance of this Agreement by such Seller, or
of any of the other agreements to be entered into by such Seller with Buyer in
connection with the transactions contemplated by this Agreement, will result in
any of the following: (i) a default or an event that, with notice or lapse of
time, or both, would be a default or breach of any lease, promissory note,
security or pledge or any other agreement to which such Seller is a party or is
subject and which is material to such Seller (a "Material Seller Contract");
(ii) the termination of any Material Seller Contract of such Seller or the
acceleration of the maturity of any material amount of indebtedness of such
Seller; (iii) the creation or imposition of any liens, charges or encumbrances
on any of the Shares of such Seller; or (iv) a violation or breach of any writ,
injunction or decree of any court or governmental instrumentality to which such
Seller is a party or is subject.
4.4 DISCLOSURE. To the knowledge of such Seller, his representations and
warranties contained in this Section 4, as modified by his Disclosure Schedules
attached hereto, do not contain any statement of a material fact that was untrue
when made or omits any material fact necessary to make the statements contained
in such representations and warranties (as modified by such Disclosure
Schedules) not misleading in light of the circumstances under which such
statements were made. For purposes of this Section 4, the phrases "knowledge" or
"best knowledge" of any Seller, means such Seller's actual knowledge.
5. JOINT REPRESENTATIONS AND WARRANTIES OF SELLERS. Subject to the disclosures
and exceptions set forth in the Sellers' Disclosure Schedules, the Sellers
hereby jointly make the following representations and warranties to Buyer with
respect to the Company:
5.1 ORGANIZATION AND STANDING. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of California,
and is authorized to do business in each jurisdiction in which the character of
the properties owned by it or the nature of its business makes such
authorization necessary and where the failure to be so qualified has had or is
expected to have a Material Adverse Effect (as defined hereinafter) on the
Company. The Company has the requisite corporate power and authority to conduct
its business as now conducted and to own or lease (as the case may be), and to
use, the properties and assets used therein. Complete and correct copies of (i)
the Company's Articles of Incorporation and all amendments thereto, certified by
the California Secretary of State; (ii) the Company's Bylaws, as amended to
date, certified by the Company's Secretary; (iii) the stock and minute books of
the Company; and (iv) any agreements restricting the transfer of or otherwise
pertaining to any of the Shares, have been furnished to Buyer.
The term "MATERIAL ADVERSE EFFECT," when used in connection with the
Company, means any change, effect or circumstance that is materially adverse to
the business, assets, financial condition or results of operations of the
Company, other than such changes, circumstances or effects that: (i) are set
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forth or described in or contemplated by the Disclosure Schedules attached
hereto, (ii) are set forth or described in the Financial Statements or the notes
thereto, or (iii) that affects the medical air transportation business
generally.
5.2 CAPITALIZATION. The Company's authorized capital stock consists solely
of 10,000 shares of common stock, without par value (the "Stock"), of which
83-1/3rd shares are issued and outstanding. All of the outstanding Shares are
validly issued, fully paid and nonassessable and, to the knowledge of the
Sellers, none of such Shares have been issued in violation of any preemptive
rights or any agreement to which the Company is or was a party. Except as set
forth on SCHEDULE 5.2 hereto, there are no outstanding warrants, options or
subscriptions or other rights to purchase (collectively, "Options") or any
outstanding convertible or exchangeable securities entitling the holders thereof
to convert or exchange such securities ("Convertible Securities") into, shares
of Company Stock, nor is the Company a party to any agreement obligating it to
sell, grant or issue any Options or Convertible Securities.
5.3 SUBSIDIARIES; INVESTMENTS. The Company does not own, directly or
indirectly, shares of capital stock of any other corporation or any equity
interest in any other entity or business.
5.4 NO CONFLICTS. Except as set forth in SCHEDULE 5.4, neither the
execution and delivery nor the performance of this Agreement by the Sellers, or
of any of the other agreements to be entered into by Sellers pursuant to or in
connection with the transactions contemplated by this Agreement, will result in
any of the following: (i) a default or an event that, with notice or lapse of
time, or both, would be a default, breach or violation of the Articles of
Incorporation or Bylaws of the Company, or any Material Company Contract (as
defined in Section 5.12 hereof); (ii) the termination of any Material Company
Contract or the acceleration of the maturity of any material indebtedness of the
Company; (iii) the creation or imposition of any liens or encumbrances on any of
the material assets of the Company which have had or are expected to have a
Material Adverse Effect on the Company; or (iv) a violation or breach of any
law, regulation, writ, injunction or decree of any court or governmental
instrumentality to which the Company is a party or by which any of its material
properties are bound, where such violation has had or is expected to have a
Material Adverse Effect on the Company.
5.5 FINANCIAL STATEMENTS. The Sellers have delivered to Buyer financial
statements of the Company consisting of unaudited balance sheets, and related
statements of operation, stockholders equity and cash flows, as of and for the
fiscal years ended December 31, 1994, 1995 and 1996 (the "Financial
Statements"). Except as otherwise set forth in the footnotes contained therein
or in SCHEDULE 5.5, the Financial Statements were prepared on an accrual basis
in accordance with generally accepted accounting principles consistently applied
("GAAP") and fairly present the financial condition of the Company as at the
relevant dates thereof and the results of its operations for the respective
periods covered thereby. Except as set forth in SCHEDULE 5.5, the Company has no
debts, obligations or liabilities, fixed or contingent, of a nature that would
be required, in accordance with GAAP, to be shown on a balance sheet and that
are not shown as of December 31, 1996 on the balance sheet (the "1996 Balance
Sheet") that is included in the Financial Statements for the fiscal year then
ended (the "1996 Financial Statements"), other than liabilities incurred after
December 31, 1996 in the ordinary course of the Company's business and
consistent with past practice (the "Post-1996 Liabilities").
5.6 ABSENCE OF CERTAIN CHANGES. Except as otherwise set forth on SCHEDULE
5.6, subsequent to December 31, 1996 there has not been:
(a) Any change in or amendment to the Articles of Incorporation or
Bylaws of the Company or any recapitalization of the Company's authorized
or outstanding capital stock;
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(b) Any sale or issuance of any shares of Company Stock, any grant,
sale or issuance of any Options or Convertible Securities of the Company,
any declaration, setting aside or payment of any dividends in respect of,
or any direct or indirect redemption, purchase, or other acquisition of,
any Company Stock or other securities of the Company, or any agreement to
do any of the foregoing;
(c) The execution of, or the commencement of performance under, any
Material Company Contract not in existence on December 31, 1996, or any
amendment, termination or revocation, of any Material Company Contract, to
which the Company is, or at December 31, 1996 was, a party and which has
had or is expected to have a Material Adverse Effect on the Company;
(d) Any termination or revocation of, or any amendment to, or, to
Sellers' knowledge, any threatened termination or revocation of or
amendment to, any license, permit or franchise held by the Company which
has had or is expected to have a Material Adverse Effect on the Company;
(e) Any sale or transfer of, or the imposition of any lien or
encumbrance on or affecting any of the assets of the Company with a book
value at or above $25,000 individually or $50,000 in the aggregate, except
sales or utilization of inventory or supplies and obsolete equipment in the
ordinary course of business and consistent with past practices of the
Company and liens for current taxes not yet due and payable;
(f) Any material increase in the compensation (other than cost of
living increases) paid or payable or in the fringe benefits provided to any
employees of the Company, or the adoption of any employee benefit plans not
in existence in the year ended December 31, 1996;
(g) Any damage, destruction or loss, whether or not covered by
insurance, of any of the assets of the Company in an amount which exceeds
$25,000, individually, or $50,000 in the aggregate and has had or is
expected to have a Material Adverse Effect on the Company;
(h) The incurrence by the Company of any indebtedness (other than
trade payables incurred in the ordinary course of business), either for
borrowed money or in connection with any purchase of assets, that is not
reflected in the 1996 Balance Sheet and individually or in the aggregate
involves more than $50,000, other than borrowings incurred in the ordinary
course of business and consistent with past practices under and within the
limits of the Company's revolving bank credit line;
(i) Any purchase or lease, or commitment to purchase or lease,
helicopters or other vehicles, equipment, machinery, leasehold improvements
or other capital items not disclosed in the 1996 Financial Statements
involving amounts exceeding $50,000 individually, or $100,000 in the
aggregate; and
(j) The occurrence of any other event or circumstance which has had or
is expected to have a Material Adverse Effect on the Company.
5.7 TANGIBLE ASSETS. SCHEDULE 5.7 contains a list of all helicopters and
other vehicles, machinery, equipment, computers, and substantially all of the
furniture, fixtures, tools, and other similar depreciable tangible personal
property with a book value in excess of $1,000, wherever located, that are owned
by the Company (the "Tangible Assets"). Except as set forth on SCHEDULE 5.7, all
helicopters and rotable equipment thereon are in an air-worthy and good flying
condition in accordance with the maintenance requirements of (i) the Federal
Aviation Administration (the "FAA") and (ii) the manufacturers of such
helicopters or such components or equipment (as the case may be), and are free
of rental parts. All other Tangible Assets are in good working order and
condition (ordinary wear and tear excepted). For purposes of this Agreement
"rotable equipment" means all engine and airframe components having a mandatory
retirement life or overhaul cycle as published by the manufacturers of the
helicopters to which such equipment relates.
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5.8 INTANGIBLE PERSONAL PROPERTY. SCHEDULE 5.8 is a true and correct list
of all proprietary information and know-how documented in writing, and any other
intellectual property or intangible assets, owned by the Company or in which the
Company has rights or licenses, and which are material to the business of the
Company, including any patents, copyrights, trademarks, service marks, trade
names and all applications therefor. Except as set forth on SCHEDULE 5.8, (i) to
the knowledge of the Sellers, the Company has not infringed, and is not now
infringing, any patent, trade name, trademark, service xxxx, copyright or trade
secret rights belonging to any other person, firm or corporation; and (ii) the
Company owns, or holds adequate licenses or other rights to use, all patents,
trademarks, service marks, trade names, copyrights, and trade secrets used in or
necessary for the operation of the Company's business as now conducted.
5.9 REAL PROPERTIES; LEASES. The Company does not own a fee interest in any
real property. Attached hereto as SCHEDULE 5.9 is a list setting forth all
leases under which the Company possesses or uses real property (the "Real
Property Leases") and all leases under which the Company possesses or uses items
of tangible personal property that are material to conduct of the Company's
business (the "Personal Property Leases"). True, correct and complete copies of
the Real Property Leases and Personal Property Leases (collectively, the
"Leases") have been delivered to Buyer, together with the names and addresses of
the lessors thereunder. The Leases are in full force and effect and the Company
is not in default. To the knowledge of Sellers, (i) the other parties to the
Leases are not in default thereunder and (ii) no facts or circumstances have
occurred which, with the passage of time or the giving of notice, or both, would
constitute a default by the Company or the other parties, under any of the Real
Property Leases or the Personal Property Leases. To the knowledge of the
Sellers, (i) all structures and facilities on the real properties listed on
SCHEDULE 5.9 are equipped in substantial conformity with laws and governmental
regulations applicable to the Company, (ii) the zoning of each parcel of real
property permits the presently existing improvements and continuation of the
business presently conducted thereon by the Company, and (iii) no zoning
changes, and no condemnation or similar proceedings, are pending or threatened
against any of the real properties listed on SCHEDULE 5.9.
5.10 INVENTORIES. All inventories of the Company, including, without
limitation, medical supplies and repair and replacement parts for helicopters
(the "Inventory") are of a quality and quantity usable in the ordinary course of
the Company's business, except for obsolete items, damaged items, and materials
at below standard quality, which, in the aggregate, are not material in amount
or have been written off or written down to net realizable value or for which
reserves have been established on the books of the Company.
5.11 TITLE TO AND ADEQUACY OF ASSETS.
(a) Except as disclosed on SCHEDULE 5.11 hereto, the Company has good
and marketable title to its material assets, free and clear of restrictions
or conditions on transfer or assignment, and free and clear of all
mortgages, liens, security interests, encumbrances, pledges, claims,
charges, and conditional sale contracts (collectively, "liens and
encumbrances"), except for liens for taxes not yet due and other liens and
encumbrances that do not materially detract from the value of or interfere
in any material way with the present use of the assets affected thereby or
which have not had and are not expected to have a Material Adverse Effect
on the Company.
(b) The assets of the Company as shown on the December 31, 1996
Balance Sheet constitute all the assets necessary for the conduct of the
Company's business in substantially the same manner as such business was
conducted during the fiscal year ended December 31, 1996.
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5.12 MATERIAL COMPANY CONTRACTS. Except for leases disclosed in SCHEDULE
5.9 and any agreements and employee benefit plans disclosed on SCHEDULE 5.14,
there is set forth on SCHEDULE 5.12 an accurate list of the contracts,
agreements, licenses and instruments to which the Company is a party or is
subject, the performance by the Company under which, or the termination of
which, would have a Material Adverse Effect on the Company (the "Material
Company Contracts"). Without limiting the generality of the foregoing, such list
includes each contract of the Company which (i) grants a security interest in
any material assets of the Company; (ii) requires the consent of any third party
to, or would be violated by, the consummation of the transactions contemplated
by this Agreement; or (iii) involves the borrowing of money by the Company; or
(iv) commits the Company to make or incur capital expenditures in the future, in
excess of $25,000 individually, or $50,000 in the aggregate, except for any such
commitments that were made in the ordinary course of business, consistent with
past practices. Correct and complete copies of all of the Material Company
Contracts so listed in SCHEDULE 5.12 have been furnished to Buyer. To the
knowledge of the Sellers, each of the Material Company Contracts is a valid and
binding obligation of the Company and is enforceable in accordance with its
terms, except as may be affected by bankruptcy, insolvency, moratorium or
similar laws affecting creditors' rights generally and general principles of
equity relating to the availability of equitable remedies. Except as otherwise
set forth in SCHEDULE 5.12, (i) there are no outstanding unresolved defaults by
the Company under, or to the knowledge of the Sellers any such defaults, or
claims of default, by the other party or parties to, any of the Material Company
Contracts which, individually or in the aggregate, have had or are expected to
have a Material Adverse Effect on the Company, and (ii) to the knowledge of the
Sellers there are no facts or conditions that have occurred which, with the
passage of time or the giving of notice, or both, would constitute a default by
the Company or the other party or parties to any such Contract under any of such
Contracts that is expected to have a Material Adverse Effect on the Company.
Except as set forth on SCHEDULE 5.4 or SCHEDULE 5.12, no consent or approval of
any party to any of the Material Company Contracts is necessary in order to
permit the Sellers to consummate the transactions contemplated hereby and to
allow Buyer to acquire the Shares, without thereby violating any such Material
Company Contracts.
5.13 COMPLIANCE WITH LAW/PERMITS. Except as set forth in SCHEDULE 5.13
hereto, to the knowledge of the Sellers (i) the Company is not in violation or
in default of any law, rule, regulation, order, judgment, writ or decree
applicable to the Company or by which it or any of its material properties is
bound or affected, except for any such violations or defaults which have not had
and are not expected to have a Material Adverse Effect on the Company, and (ii)
the Company holds all permits, licenses, easements, variances, exemptions,
consents, certificates, orders and approvals from governmental authorities which
are material to the operation of the business of the Company as it is now being
conducted (collectively, the "licenses and permits"). The Company is in
compliance with the terms of the licenses and permits, except where the failure
to so comply has not had and is not expected to have a Material Adverse Effect
on the Company.
5.14 EMPLOYEES; LABOR AND EMPLOYMENT AGREEMENTS; BENEFIT PLANS.
(a) SCHEDULE 5.14 sets forth the name of each director and officer of
the Company, and of each employee of and consultant to the Company whose
annual cash compensation exceeds $60,000 per year, sets forth the annual
compensation paid to each Seller which is reflected as an expense on the
financial statements whether or not such amount exceeds $60,000, and
identifies those officers or employees which the Company employs and any
independent contractor that the Company has retained under an employment or
similar agreement or with which it has any severance agreement. Copies of
any such agreements and a copy of its employee handbook have been furnished
to Buyer.
(b) Except as set forth in SCHEDULE 5.14, (i) the Company is not a
party to or otherwise bound by or subject to any collective bargaining or
other labor, employment, deferred compensation, bonus, retainer,
consulting, or incentive agreement, plan or contract, (ii) there has been
no
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strike or other work stoppage by, nor, to the knowledge of any of the Sellers,
has there been any union organizing activity among any of the employees of the
Company during the past three (3) years. Except as set forth in SCHEDULE 5.14,
to the knowledge of the Sellers, (i) the Company is in compliance with all
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, except where any noncompliance has
not had and is not expected to have a Material Adverse Effect on the Company,
and (ii) there is no unfair labor practice complaint pending or threatened
against the Company.
(c) SCHEDULE 5.14 hereto also contains a complete list of the Employee
Plans of the Company or any subsidiary thereof (correct copies of which
have been delivered to Buyer). For purposes of this Section 5.14, the term
"Employee Plan" means all plans and programs (including all amendments to
and components of the same, such as a trust with respect to a plan)
providing any remuneration or benefits, other than current cash
compensation, to any current or former employee of the Company or any
subsidiary thereof, or to any other person who provides, or during the past
three years provided, services to the Company, or any subsidiary thereof,
whether or not such plan or plans or programs are subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or are
qualified under the Internal Revenue Code of 1986, as amended (the "Code").
The term Employee Plan includes (i) any employee benefit plan as defined in
Section 3(3) of ERISA; (ii) any pension, retirement, profit sharing,
incentive compensation, stock option, stock bonus, and nonqualified
deferred compensation plan; (iii) any multiemployer plan as defined in
Section 3(37) of ERISA; and (iv) any disability, medical, dental, worker's
compensation, or health or life insurance plan or vacation program. Any and
all tax returns, reports, forms or other documents required to be filed by
the Company under applicable federal, state or local law with respect to
any of the Employee Plans listed on SCHEDULE 5.14 have been timely filed
and are correct and complete in all material respects; and any and all
amounts due by the Company to any governmental agency or entity with
respect to any of the Employee Plans have been timely and fully paid. To
the Seller's knowledge, there have been no filings with respect to any
Employee Plan with the Pension Benefit Guaranty Corporation ("PBGC") and,
to the knowledge of the Sellers, no liability to the PBGC has been incurred
or is expected with respect to any Employee Plan except for any accrued
insurance premiums which either have been or will be timely paid by the
Company.
(d) Except as set forth in SCHEDULE 5.14, all Employee Plans were
established and are being maintained and operated in compliance, in all
material respects, with applicable laws (including, but not limited to,
ERISA and the Code) and all regulations and interpretations thereunder and
in accordance with their plan documents, except for any noncompliance that
has not had and is not expected to have a Material Adverse Effect on the
Company. Each funded Employee Plan, if any, providing for payment of
deferred compensation has been and is qualified under Section 401 of the
Code and the Internal Revenue Service has issued one or more determination
letters with respect thereto stating that such funded Employee Plan has
been and is qualified under Section 401 of the Code and each trust
maintained in connection with each such funded Employee Plan has been and
is exempt under Section 501 of the Code. Except as set forth in SCHEDULE
5.14, there is no unfunded liability for vested or nonvested benefits under
any funded Employee Plan, and all contributions required to be made to each
such funded Employee Plan have been fully and timely paid. There has been
(i) no event or condition which would constitute a "reportable event"
within the meaning of Section 404(3) of ERISA and the regulations and
interpretations thereunder, (ii) no prohibited transaction as described in
Section 406 of ERISA and Section 4975 of the Code with respect to any
Employee Plan, and (iii) no written complaints to or by any government
entity have been filed or to the knowledge of the Sellers have been overtly
threatened with respect to any Employee Plan. Neither the Company nor any
Employee Plan has any material liability to any plan participant,
beneficiary or other person under any provision of ERISA, the Code or any
other applicable law other than the obligation to make contributions which
are not yet due and payable. To the knowledge of any of the Sellers, there
is no
8
contract, agreement or benefit arrangement covering any employee of the Company
which individually or collectively would constitute an "excess parachute
payment" under Section 280G of the Code.
5.15 LITIGATION AND PROCEEDINGS. Except as set forth in SCHEDULE 5.15
hereto, there are no claims, actions, suits, proceedings or investigations
pending or, to the knowledge of the Sellers, overtly threatened against the
Company before any court, arbitrator or administrative, governmental or
regulatory authority or body, domestic or foreign, that, if adversely determined
against the Company, would be expected to have a Material Adverse Effect.
5.16 ENVIRONMENTAL AND SAFETY MATTERS. To the knowledge of the Sellers,
except as set forth on SCHEDULE 5.16, and, except for any instances of
noncompliance or any violations which have not had and are not expected to have
a Material Adverse Effect on the Company, (i) the Company is in compliance, in
all material respects, with all federal, state, local and regional statutes,
laws, ordinances, rules, regulations and orders relating to the protection of
human health and safety, natural resources or the environment, including, but
not limited to, air pollution, water pollution, noise control, on-site or
off-site hazardous substance discharge, disposal or recovery, toxic or hazardous
substances, training, information and warning provisions relating to toxic or
hazardous substances, and employee safety (collectively the "Environmental
Laws"), and (ii) no notice of violation of any Environmental Laws or of any
permit, license or other authorization relating thereto has been received, nor
is any such notice pending or threatened. To the knowledge of the Sellers, none
of the Company's real properties, whether owned or leased, is currently listed,
or threatened to be listed, on any state or federal "superfund" list. For the
purposes of this Section 5.16, "toxic or hazardous substances" shall include any
material, substance or waste that, because of its quantity, concentration or
physical or chemical characteristics, is deemed under any federal, state, local
or regional statute, law, ordinance, regulation or order, or by any governmental
agency pursuant thereto, to pose a present or potential hazard to human health
or safety or the environment, including, but not limited to, (i) any material,
waste or substance which is defined as a "hazardous substance" pursuant to the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980
(42 U.S.C. ss. 9601 ET SEQ.), as amended ("CERCLA"), and its related state and
local counterparts, (ii) asbestos and asbestos containing materials and
polychlorinated biphenyls, and (iii) any petroleum hydrocarbon including oil,
gasoline (refined and unrefined) and their respective constituents and any
wastes associated with the exploration, development or production of crude oil,
natural gas or geothermal energy.
5.17 ILLEGAL OR IMPROPER PAYMENTS. To the knowledge of the Sellers, during
the past three (3) years neither the Company, any subsidiary of the Company nor
any of the directors, officers or employees of the Company have, in connection
with the operation of the Company's business, (i) made any illegal political
contribution from Company assets, (ii) been involved in the disbursement or
receipt of corporate funds in violation of law, for the purpose of influencing
the decision of any governmental or private official in any illegal or improper
manner, (iii) made or received payments to or from government officials,
employees or agents for purposes other than the satisfaction of lawful
obligations, or (iv) been involved in the willful inaccurate recording of
payments and receipts on the books of the Company which would result in a
violation of law, except for any instance thereof that has not had and is not
expected to have a Material Adverse Effect on the Company.
5.18 RELATED PARTY TRANSACTIONS. Except as set forth in SCHEDULE 5.18,
there are no existing or pending transactions, nor are there any agreements or
understandings, between the Company and any of the Sellers, or between the
Company and any of its officers, directors, or employees, including any
transactions or agreement relating to (i) the purchase from or sale to the
Company of any goods or services, (ii) the sale, lease, licensing or use of any
of the assets of or by the Company, with or without adequate compensation, or
(iii) any borrowings from or loans to the Company, where the amounts involved in
any such transaction or under such agreement exceed $60,000, individually.
9
5.19 TAXES AND TAX RETURNS.
(a) Except as set forth on SCHEDULE 5.19 and except where any of the
following has not had and is not expected to have a Material Adverse Effect
on the Company: (i) the Company has duly filed all Tax Returns (as
hereinafter defined) which are required by law to be filed by it and has
duly and properly paid, or withheld or accrued (on the Company's financial
statements) for payment, when due, all foreign, federal, state and local
Taxes (as hereinafter defined) due or claimed to be due from the Company as
reflected on such Tax Returns, (ii) there are no assessments or claims for
payment of such Taxes which have not been paid or accrued for on the
Company's books and records, (iii) there is no foreign, federal or state
tax audit of the Company now pending or threatened by any taxing authority,
(iv) the Company is not currently the beneficiary of any extension of time
within which to file any Tax Return, and (v) the Company has properly
withheld and paid, or accrued for payment, when due, to appropriate state
and/or federal authorities, all sales and use taxes, if any, and all
amounts required to be withheld from payments made to its employees, and
also has paid all employment taxes as required under applicable laws. A
correct and complete copy of all income tax returns filed by the Company
relating to any of the preceding three calendar years have been furnished
to Buyer.
(b) Except as set forth in SCHEDULE 5.19, the Company has not (i)
waived any statute of limitation in respect of any Taxes assessed by any
federal, state, or local taxing authority or agreed to any extension of
time with respect to an assessment of or deficiency in any Tax, (ii) filed
a consent under Section 341(f) of the Code, concerning collapsible
corporations, and (iii) been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(c) Except as set forth in SCHEDULE 5.19, the Company (i) is not
required to file a consolidated or combined state or federal income Tax
Return with any other person or entity and (ii) is not liable for the Taxes
of any person under Treasury Regulation ss. 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or successor,
by contract or otherwise, and (iii) the Company is not a party to any tax
allocation or tax sharing agreement.
(d) For purposes of this Agreement, (i) the term "Tax" or "Taxes"
means any federal, state or local income, gross receipts, license, payroll,
employment, excise, severance, stamp, occupation, premium, windfall
profits, environmental (including taxes under Code Section 59A), customs
duties, capital stock, franchise, profits, withholding, social security,
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not; and the term "Tax
Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule
or attachment thereto, and including any amendment thereof.
5.20 INSURANCE. SCHEDULE 5.20 contains a listing of all policies of fire,
general liability, worker's compensation, errors and omissions, malpractice and
other types of insurance maintained by or on behalf of the Company, to provide
insurance protection for the assets and business of the Company. Except as set
forth in SCHEDULE 5.20 hereto, all of such policies are now in full force and
effect and those policies or other policies covering the same risks and in
substantially the same amounts have been in full force and effect continuously
for the past three (3) years. The Company has not received any notice of
cancellation or material amendment of any such policies; and, to the knowledge
of the Sellers, all material claims thereunder have been filed in a timely
fashion.
5.21 BANK ACCOUNTS; POWERS OF ATTORNEY. SCHEDULE 5.21 sets forth a true and
complete listing, as of the date hereof, of the name and addresses of each bank
or other institution in which the Company has an account or safe deposit box,
the account numbers thereof, and the names of all persons
10
authorized to draw thereon or to have access thereto, and the names of all
persons, if any, who hold any powers of attorney for or granted by the Company.
5.22 NO BROKER. Except as set forth in SCHEDULE 5.22, neither the Company
nor any of the Sellers has retained an agent, finder or broker in connection
with the transactions contemplated by this Agreement. The Sellers shall
indemnify, hold harmless and defend Buyer and the Company from all commissions,
finder's and other fees and expenses of any such persons.
5.23 DISCLOSURE. To the knowledge of the Sellers, their representations and
warranties contained in this Section 5, as modified by the Disclosure Schedules
attached hereto, do not contain any statement of a material fact that was untrue
when made or omit any material fact necessary to make the statements contained
therein not misleading in light of the circumstances under which such statements
were made. For purposes of this Section 5, the phrases "knowledge" or "best
knowledge" of any Seller or the Sellers, means such Seller's or the Sellers'
actual knowledge. Although each of the Sellers' Disclosure Schedules is intended
to qualify or modify the representations and warranties of the Sellers contained
in the Subsection of this Section 5 that corresponds, by number, to the number
used to designate such Disclosure Schedule, the disclosures therein shall also
qualify or modify any representation or warranty in any other Subsection of this
Section 5 to which it may also relate and, therefore, any information in any
such Disclosure Schedule need not be repeated in any other Disclosure Schedule,
in order to qualify any of the representations or warranties to which such other
Disclosure Schedule relates.
6. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer makes the following
representations and warranties as of the date of this Agreement and, again, as
of the Closing Date:
6.1 ORGANIZATION. Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware.
6.2 CORPORATE POWER. Buyer possesses the requisite corporate power and
authority to enter into and perform its obligations under this Agreement, the
Non-Competition Agreements, the Security Agreement and the Notes.
6.3 NECESSARY ACTIONS; BINDING EFFECT. Buyer has taken all corporate action
necessary to authorize the execution and delivery of, and the performance of its
obligations under, this Agreement, the Notes, the Security Agreements and the
Non-Competition Agreements. This Agreement constitutes, and upon their execution
and delivery by Buyer on the Closing Date, the Notes, the Security Agreements
and the Non-Competition Agreements, will each constitute, valid obligations of
Buyer that are legally binding on and enforceable against Buyer in accordance
with their respective terms, except as such enforceability may be limited by (i)
bankruptcy, insolvency, moratorium or other similar laws affecting creditors'
rights and (ii) general principles of equity relating to the availability of
equitable remedies (regardless of whether such Agreements or Notes are sought to
be enforced in a proceeding at law or in equity).
6.4 NO CONFLICTS. Neither the execution and delivery nor the performance of
this Agreement, the Notes, the Security Agreements or the Non-Competition
Agreements by Buyer will result in any of the following: (i) a default or an
event that, with notice or lapse of time, or both, would constitute a default,
breach or violation of the Certificate of Incorporation or Bylaws of Buyer, or
any contract, lease, license, franchise, promissory note, indenture, mortgage,
deed of trust, security or pledge agreement, or other agreement to which Buyer
is a party and which is material to Buyer (a "Material Buyer Contract"); (ii)
the termination of any Material Buyer Contract or the acceleration of the
maturity of any material indebtedness of Buyer; or (iii) a violation or breach
of any writ, injunction or decree of any court or governmental instrumentality
to which the Buyer is a party or by which any of its properties is bound or any
laws or regulations applicable to Buyer, where the violation would have a
material adverse effect on Buyer.
11
6.5 INVESTMENT INTENT. Buyer is acquiring the Shares from the Sellers for
its own account for investment and not with a view to the sale or distribution
thereof.
6.6 BROKER. Buyer has not retained any broker, agent or finder in
connection with the transactions contemplated by this Agreement, and Buyer shall
hold harmless the Sellers from any commission, fee or expenses payable to any
such broker, finder or agent by reason of his or her retention by Buyer.
6.7 BUYER'S SECURITIES EXCHANGE ACT REPORTS AND FINANCIAL INFORMATION.
Buyer has furnished to the Sellers true and complete copies of its Annual Report
on Form 10K for its fiscal year ended December 31, 1996 (the "Annual Report")
and its quarterly report on Form 10Q for the quarter ended March 31, 1997 (the
"Quarterly Report"), as filed by Buyer with the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended (the "1934
Act"). The consolidated financial statements of Buyer contained in its Annual
Report and the consolidated financial statements of Buyer contained in its
Quarterly Report were prepared on an accrual basis in accordance with GAAP and
fairly present the consolidated financial condition of Buyer as of, and the
consolidated results of operations of Buyer for the year and three months ended,
December 31, 1996 and March 31, 1997, respectively; neither the Annual Report
nor the Quarterly Report of Buyer contains any statement of a material fact that
was untrue when made or omits any material fact necessary to make the statements
contained therein, in light of the circumstances under which such statements
were made not misleading; and nothing has occurred since March 31, 1997 that has
had or is reasonably expected to have a material adverse effect on the financial
condition or results of future operations of Buyer or has impaired or reasonably
could be expected to impair Buyer's ability to perform its obligations under
this Agreement, the Notes or the Security Agreements.
6.8 RESULTS OF DUE DILIGENCE REVIEW. Except as otherwise set forth in
writing delivered to Sellers prior to the execution hereof, nothing has come to
the attention of Buyer as a result of its due diligence investigation of the
Company, or otherwise, that has caused or causes it to believe that any of the
representations or warranties of the Sellers contained herein, or any of the
information contained in the Sellers' Disclosure Schedules attached hereto, is
not materially accurate or is not materially complete.
6.9 REPRESENTATIONS AND WARRANTIES. Each representation, warranty or
statement made, or information provided, by Buyer in this Agreement, or in the
Exhibits or Schedules hereto, or in any certificates to be delivered by Buyer at
the Closing is, or when made shall be, true, complete and correct in all
material respects.
7. CONDUCT OF BUSINESS PENDING THE CLOSING. Between the date hereof and the
Closing, and except as otherwise consented to by Buyer in writing, or permitted
pursuant to Section 8 below, the Sellers jointly covenant, as follows:
7.1 ACCESS. Subject to the provisions of Section 14 below, the Sellers
shall cause the Company to give to Buyer and its representatives, from and after
the date of execution of this Agreement, on prior request therefor from Buyer or
such representatives, such access to the premises, employees, agents and
consultants of the Company, and such copies of the Company's financial
statements, books and records, and contracts and leases and other documentation,
so as to enable Buyer to inspect and evaluate all aspects of the business and
operations, assets, operating results, financial condition, capitalization,
ownership, and legal affairs of the Company. Buyer agrees to conduct its review,
and to cause its representatives to conduct their review, in a manner designed
to minimize any disruption of the operations of the Company. In addition,
subject to the provisions of Section 14 below, Sellers shall (i) arrange for
Company to permit the Buyer's independent public accountants to obtain access to
the financial books and records of the Company, and to such other documentation
which such accountants may reasonably request and the Company can obtain without
unreasonable expense and effort, in connection with an audit, to be
12
conducted by such accountants, of the Company's Financial Statements to enable
Buyer to satisfy its financial reporting obligations under the Securities
Exchange Act of 1934 that will arise upon consummation of the acquisition by
Buyer of the Shares pursuant hereto (the "Company Audit"), and (ii) use their
reasonable efforts to arrange for the Company's independent public accountants
to provide such assistance as Buyer's accountants may reasonably request in
connection with the Company Audit.
7.2 CONDUCT OF COMPANY'S BUSINESS. From the date of this Agreement and
until the Closing or termination of this Agreement, whichever first occurs, the
Sellers shall cause the Company to operate and conduct its business diligently
and only in the ordinary course, consistent with past practices. In furtherance
thereof, unless Buyer's prior consent to do otherwise is obtained (which consent
shall not be unreasonably withheld or delayed), Sellers shall cause the Company
to:
7.2.1 ORGANIZATION. Use its best efforts to preserve intact its
organization and use its reasonable efforts to retain all of its employees
and the services of all vendors, suppliers, agents and consultants to the
Company, commensurate with the requirements of the Company's business;
7.2.2 INSURANCE. Maintain insurance, including liability and errors
and omissions insurance, consistent with past practices and, unless
comparable insurance is substituted therefor or is not generally available
to businesses of the type conducted by the Company, not take any action to
terminate or modify, or permit the lapse or termination of, the present
insurance policies and coverages of the Company as set forth in SCHEDULE
5.20 hereto;
7.2.3 LAWSUITS, CLAIMS.
(a) Promptly notify Buyer of any lawsuit or other legal proceeding
that is commenced, or that is threatened in writing, against the Company
and that (i) relates to or arises out of the Company's business or
operations and, if adversely determined against the Company, would be
expected to have a Material Adverse Effect on the Company, or (ii) relates
to any of the Shares or any of the transactions contemplated by this
Agreement; and
(b) Not settle any action or proceeding on terms that are expected to
have a Material Adverse Effect on the Company, and not release, settle,
compromise or relinquish any claims, causes of action or rights involving
more than $25,000 individually or $50,000 in the aggregate which the
Company may have against any other persons, including, without limitation,
claims or rights to reimbursement or payment for services rendered by the
Company;
7.2.4 CERTAIN CHANGES. Not encumber or place any liens or security
interests on any of its material properties, other than (i) liens or
security interests in existence on the date hereof, (ii) statutory liens to
secure taxes that are not yet due and payable, and (iii) purchase money
security interests in connection with the acquisition of equipment that may
be acquired in the ordinary course of the Company's business and in
conformity with Paragraph 7.2.6(b) hereof;
7.2.5 CONDITION OF ASSETS. Maintain in good working order and
condition, ordinary wear and tear excepted, the tangible assets that are
used, leased or owned by it and maintain all helicopters and rotable
equipment thereon in an air-worthy and good flying condition, in accordance
with the maintenance requirements of (i) the FAA and (ii) the manufacturers
of such helicopters or such components or equipment (as the case may be)
and free of rental parts.
7.2.6 AGREEMENTS.
(a) Use its best efforts to observe and perform all of its obligations
in the Material Company Contracts, the violation of which would have a
Material Adverse Effect on the Company;
13
(b) Except as required by any existing contracts or agreements, not
enter into any new agreement that would constitute a Material Company
Contract or amend any Material Company Contract, or incur any new monetary
obligation involving more than $25,000 individually or $50,000 in the
aggregate, other than monetary obligations that are incurred in the
ordinary course consistent with past practices;
(c) Promptly notify Buyer in writing of the occurrence of any breach
or default of any Material Company Contract; and
(d) Not enter into any transaction with any shareholder, director or
officer, or any person or entity related to or affiliated with any such
person, other than those transactions that are described on SCHEDULE 5.18
hereto;
7.2.7 CONSENTS; COMPLIANCE WITH LAWS.
(a) Use its best reasonable efforts to obtain and maintain all
consents, assignments or approvals of, and licenses, permits and franchises
and rights to operate granted by, governmental authorities, the absence or
loss of which is expected to have a Material Adverse Effect on the Company;
(b) Not take any action which would be expected to result in a
violation of or in noncompliance with any laws or regulations applicable to
the Company that would be expected to have a Material Adverse Effect on the
Company; and
(c) Cooperate with Buyer and render to Buyer such assistance as Buyer
may reasonably request, at Buyer's sole expense, in obtaining such
governmental approvals;
7.2.8 TAXES. Pay, when due, and prior to the imposition or assessment
of any interest, penalties or liens by reason of the nonpayment of, all
Taxes (as defined in Section 5.19 hereof) due or assessed against it,
except for any Taxes being contested in good faith and for which reserves
have been established by the Company.
7.2.9 DIVIDENDS, ETC. Not:
(a) Declare or pay any dividends or make any distributions with
respect to or, redeem any of the Shares, except for dividends permitted by
the provisions of SCHEDULE 7.2 hereto ("Permitted Dividends");
(b) Approve or effect any reclassification or recapitalization of the
Company or the Company's authorized or outstanding shares;
(c) Approve or commence any proceedings for the liquidation of the
Company; and
(d) Enter into any agreement to do any of the foregoing.
7.2.10 CORPORATE MATTERS. Not:
(a) Amend the Articles of Incorporation or Bylaws of the Company;
(b) Alter the composition or membership of the Company's Board of
Directors;
(c) Authorize the creation or any new class or series of shares of
capital stock or sell or issue any authorized, but unissued shares of stock
or any other equity securities of the Company to any one other than Buyer;
14
(d) Sell, grant or issue any Options or Convertible Securities or any
other rights to acquire any authorized but unissued shares of Stock or
other equity securities of the Company; or
(e) Agree to do any of the above.
8. OBLIGATIONS PENDING AND FOLLOWING THE CLOSING.
8.1 CONSENTS. Each party to this Agreement shall use its reasonable best
efforts to obtain or cause to be obtained at the earliest practicable date, and
in any event prior to Closing, all consents, approvals, if any, or confirmation
satisfactory to such party that any such consent or approval will be issued
simultaneously with, or immediately after, the Closing, which such party
requires to permit it to consummate the transactions contemplated hereby without
violating any material agreement or contract or applicable law or regulation to
which it is a party or to which it is subject. The parties hereto shall
cooperate with each other in their efforts to obtain all such consents,
approvals and licenses.
8.2 FURTHER ASSURANCES. Each party hereto shall execute and deliver, both
before and after the Closing, such instruments and take such other actions as
the other party or parties, as the case may be, may reasonably request in order
to carry out the intent of this Agreement or to better evidence or effectuate
the transactions contemplated herein.
8.3 NOTICE OF BREACH OR OF FAILURE OF CONDITIONS. Each party to this
Agreement will immediately give notice to the other parties of the occurrence of
any event, or the failure of any event to occur, that results in a breach of any
representation or warranty of such party or a failure to comply with or fulfill
any covenant, condition or agreement contained herein.
8.4 EXPENSES. Sellers shall pay all costs and expenses incurred or to be
incurred by any of the Sellers in connection with the negotiation, preparation,
execution and delivery of, and the performance of their respective obligations
under, this Agreement and in closing and carrying out the transactions
contemplated by this Agreement, including the costs of preparing income tax
returns of the Company for the period from January 1, 1997 to the Closing Date
(the "Short-Period Returns"). Buyer shall pay all of the costs and expenses
incurred by it in connection with the negotiation, preparation, execution and
delivery of, and the performance of its obligations under, this Agreement and in
closing and carrying out the transactions contemplated by this Agreement,
including (i) the fees and disbursements of the Buyer's accountants incurred in
connection with the completion of the Company Audit or the determination of the
Purchase Price Adjustments, and (ii) the reasonable fees and disbursements of
the Company's accountants in providing any services or assistance requested of
them by the Buyer's accountants in connection with or for purposes of that Audit
or the determination of the Purchase Price Adjustments.
8.5 RELEASE OF SELLER OBLIGATIONS. At the time of Closing, Buyer shall
assume or discharge, without liability or cost to the Sellers, and shall obtain,
on terms and conditions approved by Sellers and their counsel, the release of
any obligations of Sellers with respect to and any guaranties by Sellers of any
of the Assumed Obligations, including the Textron Debt (as defined in SCHEDULE
8.5 hereto).
8.6 TRANSFER OF CASH TO SELLERS. As additional Purchase Price for the
Shares, at the Closing Buyer shall pay, by wire transfer of funds to each Seller
an amount equal to the Seller's Proportionate Share of all of the cash that the
Company has on hand or in banks on the Closing Date. For purposes hereof, cash
shall not include the short-term investments identified on SCHEDULE 8.6 hereto.
8.7 SETTLEMENT OF CERTAIN RELATED PARTY OBLIGATIONS.
(a) Except as otherwise provided in Section 8.7(b), effective as of
the Closing all accounts receivable or other items due to the Company from,
and all accounts payable or other items due by the Company to, the Sellers
or any entity controlled by the Sellers (other than HSI) shall be canceled
15
and each of the Company, the Sellers and such other entities affiliated
with the Sellers shall be released from their respective obligations
thereunder.
(b) Notwithstanding Section 8.7(a), (i) on the Closing Date,
immediately following the Closing, Buyer shall pay to Sellers and, thereby
retire, the indebtedness owed by the Company to the Sellers for loans made
by Sellers to the Company as set forth in SCHEDULE 8.7 hereto (the "Seller
Loans") and (ii) the Real Property Lease listed in item 1(a) on SCHEDULE
5.9 hereto, and Mercy's present and future payment and other obligations
thereunder shall remain in full force and effect. On or before the Closing
Date, the Company shall pay any interest that has accrued and is unpaid on
the Shareholder Loans so that, as of the Closing Date the amounts owed in
respect of the Seller Loans shall not exceed the aggregate amount of such
Loans set forth in SCHEDULE 8.7 hereto. On the payment of such Seller
Loans, the right of Sellers to receive a prepayment penalty in connection
therewith, if any such right exists, shall be cancelled and no such payment
shall be required to be made either by Buyer or the Company.
8.8 EMPLOYMENT AND CONSULTING AGREEMENTS. At the Closing, Buyer shall enter
into (i) employment agreements, substantially in the forms of EXHIBIT C and
EXHIBIT D, respectively, (collectively, the "Management Employment Agreements")
with Xx. Xxxxx X. Xxxxxxxx and Ms. Xxxx Xxxxx, and (ii) consulting agreements,
each in substantially in the form of EXHIBIT E hereto, with each of the Sellers
other than Xxxxx X. Xxxxx (the "Seller Consulting Agreements"), a consulting
agreement, substantially in the form of EXHIBIT F hereto, with Xxxxx X. Xxxxx
(the "Aerts Agreement") and (iii) a stock option agreement, each substantially
in the form of EXHIBIT G hereto (the "Option Agreements"), with each of the
Sellers, evidencing the grant on the Closing Date, to the Sellers, by action of
the Buyer's Board of Directors or any Compensation or Stock Option Committee
thereof, of options entitling each Seller to purchase, in accordance with the
terms and conditions contained in such form of Option Agreement, the respective
number of shares of Buyer's common stock set forth opposite each Seller's name
on SCHEDULE 8.8 hereto.
8.9 ACCOUNTS RECEIVABLES. On the terms and conditions hereinafter set
forth, the Sellers shall guarantee Net Collections (as hereinafter defined),
during the three year period ending on the third (3rd) anniversary of the
Closing Date (the "Guarantee Period"), aggregating $3,100,000 of accounts
receivable of the Company, made up of Net Collections of:
(a) Accounts receivable outstanding on the Closing Date as set forth
in the Closing Date Balance Sheet of the Company, as defined in SCHEDULE
2.3 hereto (the "CLOSING DATE RECEIVABLES"), that are to be collected
during the two-year period from the Closing Date to the second (2nd)
anniversary thereof (the "RECEIVABLES COLLECTION PERIOD"), and
(b) Accounts receivable of the Company that were or will have been
written off by the Company prior to the Closing (the "WRITTEN-OFF
ACCOUNTS") to be collected at any time during the three-year Guarantee
Period.
For purposes hereof "NET COLLECTIONS" shall mean the gross amount of any
Closing Date Receivables or Written-Off Accounts that are collected, less any
commissions paid with the prior written approval of the Sellers to third-party
collection agencies whose services are employed in the collection of such
Closing Date Receivables or such Written-Off Accounts ("Collection Costs"). The
term "TOTAL GUARANTEE AMOUNT" means the sum of $3,100,000 and the term "ACCOUNTS
RECEIVABLE GUARANTEE" refers to the guarantee by the Sellers of the Total
Guarantee Amount on the terms and conditions contained in this Section 8.9.
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8.9.1 COLLECTION PERIOD GUARANTEE. Pursuant to the Accounts Receivable
Guarantee hereunder, during the two-year Receivables Collection Period,
each Seller shall severally guarantee, on the terms and conditions and in
the manner hereinafter set forth, that the Company will have Net
Collections either of Closing Date Receivables alone, or of a combination
of Closing Date Receivables and Written Off Accounts, aggregating
$2,700,000 (the "COLLECTION PERIOD GUARANTEE AMOUNT") out of the Total
Guarantee Amount of $3,100,000. Such guarantee of the Collection Period
Guarantee Amount is sometimes referred to herein as the "COLLECTION PERIOD
GUARANTEE."
(a) SATISFACTION OF COLLECTION PERIOD GUARANTEE BY COLLECTIONS. The
Collection Period Guarantee shall be satisfied, and the several obligation
of each Seller with respect thereto shall be deemed discharged if, at any
time during the Receivables Collection Period the Company has realized or
obtained Net Collections of any combination of Closing Date Receivables
and/or Written-Off Accounts in an aggregate amount equal to the Collection
Period Guarantee Amount.
(b) COLLECTION PERIOD SHORTFALL. In the event that, following the end
of the Receivables Collection Period, it is determined, in the manner set
forth in SCHEDULE 8.9 hereto, that the Collection Period Guarantee Amount
of $2,700,000 exceeds the aggregate amount of Net Collections of Closing
Date Receivables and Net Collections of Written-Off Accounts that were made
during the Receivables Collection Period, such excess shall constitute a
"COLLECTION PERIOD SHORTFALL." In that event each Seller's Collection
Period Guarantee shall be satisfied and discharged by reducing the then
remaining principal amount of such Seller's Note by his Proportionate Share
(as hereinabove defined) of the Collection Period Shortfall. Such reduction
in the principal amount of each Seller's Note shall be implemented in the
manner set forth in Subsection 8.9.3 hereof.
(c) ASSIGNMENT OF UNCOLLECTED CLOSING DATE RECEIVABLES. At, and
effective as of, the earlier of the following: (i) the second (2nd)
anniversary of the Closing Date or (ii) the earliest date as of which the
Accounts Receivable Guarantee is satisfied and discharged as provided in
Paragraph 8.9.2(a) or Paragraph 8.9.2(b), all of the then uncollected
Closing Date Receivables (the "Assigned Closing Date Receivables") shall be
assigned and transferred to Sellers, and Buyer shall cause the Company to
effectuate such assignment and transfer, effective as of such date pursuant
to Paragraph 8.9.3(b) hereof.
8.9.2 SATISFACTION OF THE ACCOUNTS RECEIVABLE GUARANTEE IN ITS
ENTIRETY.
(a) SATISFACTION OF ACCOUNTS RECEIVABLE GUARANTEE BY COLLECTIONS. If,
at any time during the Receivable Collections Period, the aggregate sum of
the Net Collections of Closing Date Receivables and Written-Off Accounts
reaches the Total Guarantee Amount of $3,100,000, the entire Accounts
Receivable Guarantee and the respective obligations of Sellers under this
Section 8.9 shall thereupon and thereby be fully satisfied and discharged
and the Sellers shall have no further obligations to Buyer under this
Section 8.9.
(b) SATISFACTION OF GUARANTEE DURING RECOVERIES PERIOD. In the event
that, at the end of the Receivables Collection Period, the Total Guarantee
Amount of $3,100,000 exceeds the aggregate amount of the Net Collections of
Closing Date Receivables and Written-off Accounts collected during the
Receivables Collection Period, plus any reduction in the principal amount
of the Notes pursuant to Paragraph 8.9.1(b) hereof, then, the amount of
such excess (the "GUARANTEE SHORTFALL") shall be reduced by the amount of
any Net Collections of Written-Off Accounts that are collected during the
year ending on the third (3rd) anniversary of the Closing Date (the
"RECOVERIES COLLECTION PERIOD"). If at any time during or by the end of the
Recoveries Collection Period, the amount of the Net Collections of
Written-Off Accounts equals the amount of the Guarantee Shortfall, then,
the Sellers Accounts Receivable Guarantee,
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in its entirety, and the Sellers' obligations under this Section 8.9, shall
thereupon and thereby be fully satisfied and discharged and Seller shall
have no further obligations to Buyer under this Section 8.9.
(c) RECOVERIES PERIOD SHORTFALL. If on the other hand, at the end of
the one-year Recoveries Collection Period, the Net Collections of
Written-Off Accounts during that one-year period were not sufficient to
offset fully the Guarantee Shortfall that existed at the beginning of the
Recoveries Collection Period, the Guarantee Shortfall then remaining, which
shall be equal to the amount by which the Guarantee Shortfall at the
beginning of the Recoveries Collection Period exceeds the aggregate amount
of Net Collections of Written-Off Accounts made during that Period (the
"REMAINING SHORTFALL"), shall be satisfied and discharged by reducing the
then remaining principal amount of each Seller's Note by his Proportionate
Share (as hereinabove defined) of such Remaining Shortfall.
(d) ASSIGNMENT OF ALL UNCOLLECTED RECEIVABLES. At, and effective as
of, the earliest date as of which the Accounts Receivable Guarantee is
satisfied and discharged as provided in Paragraph 8.9.2(a), Paragraph
8.9.2(b) or Paragraph 8.9.2(c), as the case may be, all of the then
uncollected (i) Closing Date Receivables (to the extent not previously
assigned to Sellers pursuant to Paragraph 8.9.1(c) above) and (ii)
Written-Off Accounts shall be assigned and transferred to Sellers, and
Buyer shall cause the Company to effectuate such assignment and transfer,
effective as of such date pursuant to Paragraph 8.9.3(b) hereof.
8.9.3 EFFECTUATION OF SATISFACTION OR DISCHARGE OF THE ACCOUNTS
RECEIVABLE GUARANTEE.
(a) EVIDENCE OF SATISFACTION AND DISCHARGE. If the Collection Period
Guarantee, or the Accounts Receivable Guarantee is satisfied and
discharged, in its entirety, as provided in Paragraphs 8.9.1(a) or 8.9.1(b)
or Paragraphs 8.9.2(a), 8.9.2(b) or 8.9.2(c) hereof, then, not later than
thirty (30) days thereafter or five (5) business days of any request
therefor made of Buyer by any of the Sellers, whichever is earlier, Buyer
shall execute and deliver to each Seller a document or instrument,
including a release, in form and substance satisfactory to such Seller and
his counsel, to evidence and confirm the satisfaction and discharge of the
Collection Period Guarantee or the Accounts Receivable Guarantee, as the
case may be; PROVIDED, HOWEVER that any such satisfaction and discharge
shall not be conditioned on the execution and delivery by Buyer of, and the
effectiveness thereof shall not be impaired by any failure of Buyer to
execute and deliver, any such instruments and documents.
(b) EFFECTUATION OF ASSIGNMENT OF UNCOLLECTED RECEIVABLES. At the
effective time of any such assignment by the Company of the Assigned
Closing Date Receivables or any of the uncollected Written-Off Accounts
(collectively, the "ASSIGNED RECEIVABLES") to Sellers, whether pursuant to
Paragraph 8.9.1(c) or Paragraph 8.9.2(d), Buyer shall transfer and convey
the Assigned Receivables, together with all records and other information
in the possession of Buyer or the Company relating thereto, to Sellers and
Sellers shall acquire and become the owner of the Assigned Receivables and
related records and other information, free and clear of all claims, liens
encumbrances, security interests and prior assignments and adverse
interests, other than such of the foregoing as were consented to by Sellers
in writing. Buyer also shall, and shall cause the Company to, provide such
cooperation as the Sellers may reasonably request to better evidence and
effectuate such assignment and transfer, including (i) obtaining the
termination of any claims, liens, encumbrances, security interests or other
adverse interests on or any prior assignments of any of the Assigned
Receivables, (ii) advising the account debtors, and joining with
Sellers in preparing, executing and sending written notices to such account
debtors instructing them to make payments on those Assigned Receivables to
the Sellers and arranging to send any payments that may be received by the
Company or Buyer in respect thereof, immediately after such receipt and
with proper endorsements thereon, to Sellers.
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(c) DISCHARGE OF SHORTFALL BY REDUCTION IN PRINCIPAL AMOUNT OF NOTES.
In the event any Receivables Collection Period or Guarantee Shortfall is to
be discharged by reductions in the respective principal amounts of the
Sellers' Notes pursuant to Paragraph 8.9.1(b) or Paragraph 8.9.2(c), such
reductions shall not be implemented until the existence and amount of any
such Shortfall are established, by agreement between the Sellers, on the
one hand, and the Buyer, on the other hand. At such time as a final
determination is reached with respect to the existence and amount of any
such Shortfall (the "DETERMINATION DATE"), each Seller shall deliver his
Note to Buyer in exchange for which the Buyer shall issue to such Seller a
new Note, of like form and tenor (a "Replacement Note"), except that such
Replacement Note shall give effect to the reduction, retroactive to the
last day of the Receivables Collection Period or the Recoveries Collection
Period, as the case may be, in the principal amount of each such Seller's
Note by the amount of his Proportionate Share of the Collection Period
Shortfall or the Guarantee Shortfall, as the case may be. Notwithstanding
any failure or refusal on the part of any Seller to deliver his Note for
exchange in this manner, however, such reduction in the principal amount of
his Note shall, nonetheless, be given effect automatically and without the
necessity of any action on the part of any Seller, at the Determination
Date (but then, retroactive to the last day of the Receivables Collection
Period or the Recoveries Collection Period, as the case may be).
(d) COLLECTION OF ASSIGNED RECEIVABLES. For a period of two (2) years
following the assignment by the Company of the Assigned Receivables to the
Sellers, the Company shall continue to collect the Assigned Receivables for
the benefit of the Sellers in accordance with the accounts receivable
collection procedures set forth in the Company's SOP and set forth in
Section 8.9.4 below. In consideration of the foregoing, the Sellers agree
to reimburse the Company for its reasonable out-of-pocket costs incurred in
connection with the collection by the Company of such Assigned Receivables,
including, without limitation, any out-of pocket expenses incurred in
connection with the use or employment of the services of any third-party
collection agencies; PROVIDED, HOWEVER, that the Sellers shall have sole
and absolute discretion as to whether the services of any third-party
collection agencies shall be employed, and the Company shall not use or
employ the services of any third-party collection agencies in connection
with the collection by the Company of any Assigned Receivables without the
prior written consent of the Sellers.
8.9.4 COLLECTION PROCEDURES AND REPORTS.
(a) COLLECTION EFFORTS AND PROCEDURES. Buyer shall cause the Company
to use its best efforts to collect the Closing Date Receivables during the
Receivables Collection Period and the Written Off Accounts during the
Guarantee Period in accordance with the accounts receivable collection
procedures set forth in the Company's Standard Operating Procedures Manual
(the "SOP"), a copy of which has been furnished to and reviewed by Buyer.
Buyer shall not authorize or permit the Company to make material changes to
or to fail, in any material respect to comply with the SOP during the
Guarantee Period with respect to the collection of the Closing Date
Receivables and Written Off Accounts and Buyer shall provide to the Company
such assistance as it may require in connection with such Receivables and
Accounts. Notwithstanding anything to the contrary contained in this
Agreement or in the SOP, Buyer agrees that without the prior written
consent of the Majority Holders (as defined below), which consent shall not
be unreasonably withheld, neither the Company nor the Buyer shall (i)
authorize or permit any collection agency or any other person or entity to
collect, or assign or otherwise transfer to any collection agency or any
other person or entity for purposes of collection, any of the Closing Date
Receivables or Written Off Accounts; (ii) initiate any legal, arbitration
or other proceeding to collect any Closing Date Receivables or Written Off
Accounts; (iii) return any sums in respect of any Closing Date Receivables
or Written Off Accounts collected from any insurers, third party
administrators or healthcare reimbursement programs (governmental or other)
("Third-Party Payors") in response to any claim or assertion that such sums
represent overpayments to or were not properly due the Company; (iv) accept
any partial or installment payments on or in respect of any Closing Date
Receivables or Written Off Accounts from any
19
Third Party Payor or any other person or (v) compromise, settle or waive or
terminate the payment obligation of any person, entity or Third Party Payor
in respect of, or accept any consideration other than cash for the payment
of, any Closing Date Receivables or Written Off Accounts. For purposes of
this Section 8.9.4, "Majority Holders" shall mean Sellers holding more than
50% of the aggregate indebtedness then outstanding under the Notes.
Notwithstanding the foregoing, in the event that the Majority Holders have
not expressly refused or consented, in writing, to any request for consent
to take actions specified in subsections (iii) or (iv) above, within ten
(10) days from the date all Sellers received such request for consent, the
Sellers shall be deemed to have given their consent to take such actions.
(b) REPORTS. During the Receivables Collection Period, Buyer shall
deliver or cause to be delivered to each Seller a monthly report, by no
later than the 10th business day of each calendar month, identifying the
Closing Date Receivables and Written Off Accounts collected during the
prior calendar month; and during the final year of the Guarantee Period
Buyer shall deliver or cause to be delivered to each Seller a similar
monthly report, by the 10th business day of each calendar month,
identifying the Written Off Accounts collected during the immediately
preceding calendar month. Such reports shall also identify any Closing Date
Receivables which Buyer or the Company believes (i) would, under GAAP, be
required to be written down or written off, (ii) should be assigned or
transferred to a collection agency for collection or (iii) should be turned
over to an attorney for the initiation of legal action against the account
debtor. Sellers represent that information which is similar to the
information to be set forth in the foregoing reports, is currently
available from the Company. In addition, Buyer shall promptly notify the
Sellers in writing of any notice from any account debtor or Third Payor, or
any fiscal intermediary thereof, (i) asserting any counterclaim or defense
to its payment obligation to the Company, or (ii) denying any reimbursement
claim, or (iii) asserting that any overpayment was made or any refund is
due, in respect to any Closing Date Receivable or Written Off Account that
is due or was previously paid by such account debtor or Third Party Payor.
In no event shall Buyer or the Company be obligated hereunder to provide,
in any reports required to be delivered hereunder to the Sellers, any
information that is not currently available to the Sellers from the
Company, unless Buyer or the Company generates such information for either
of their respective businesses or such information can be obtained or
produced by Buyer or the Company without having to incur undue or
unreasonable burden or expense.
8.10 SECURITY FOR NOTES AND OTHER PAYMENT OBLIGATIONS. The Notes to be
issued to the Sellers as part of the Purchase Price pursuant to Section 2.2
hereof, and any other payment obligations of the Buyer to the Sellers
pursuant to the terms hereof (the "Secured Obligations") shall be secured
by a perfected security interest in the present and future accounts
receivable of the Company and all of the proceeds thereof (the
"Collateral"). Buyer agrees that, until the Secured Obligations have been
paid in full, there shall be no security interest, or other lien or
encumbrance, in the Collateral that is senior in priority to the Sellers'
security interest in the Collateral, except for a first security interest
now or hereafter held by a bank or other lender that secures up to, but not
to exceed, $700,000 of the indebtedness and other obligations under a
revolving line of credit for the Company (the "Credit Line"). Buyer further
agrees that, until the Secured Obligations, and any other indebtedness or
monetary obligations that the Company or Buyer may owe hereafter to any of
the Sellers are paid in full, (i) neither Buyer nor the Company shall place
or permit the existence of any other security interests or other liens or
encumbrances on any of the Collateral, unless the party being granted such
security interest or holding any such other lien or encumbrance (the
"Subsequent Lienholder") has agreed, in writing for the direct benefit of
the Sellers, that its security interest or other lien or encumbrance in the
Collateral is junior and subordinate to the security interest in the
Collateral granted to Sellers and the Subsequent Lienholder executes and
delivers such documents and instruments as any of the Sellers or their
counsel may reasonably request to evidence and effectuate such
subordination and (ii) Buyer shall not, and shall not permit the Company,
to alter or modify, in any material respect (except under circumstances
where such modifications or alterations are caused by events outside of the
control of the Company and Buyer), any business or operations of the
20
Company in a manner that either would or does cause the amount of the
Company's outstanding accounts receivable at any time to decline by more
than twenty percent (20%) from the amounts that were outstanding during the
calendar year 1996 or materially adversely affect the collectibility of
such accounts receivable. Any breach of the foregoing provisions of this
Section 8.10 which is not cured within thirty (30) days from the date
Sellers notify the Buyer of such breach, shall constitute a breach of the
Notes and the Security Agreement and shall entitle the holders of the
Notes, or any of them, to accelerate the maturity date of the Notes and to
exercise the rights and remedies which they have, and each of them,
individually has, under the Note, the Security Agreement and applicable
Laws.
8.11 FINANCIAL INFORMATION. While any of the Notes remain outstanding,
Buyer shall deliver to the holders thereof all reports and proxy statements
filed by Buyer under the 1934 Act and all reports sent to security holders
of Buyer, at the same time as such reports are filed under the 1934 Act or
sent by Buyer to its security holders (as the case may be).
8.12 USE OF HELICOPTER IN HAWAII.
(a) An affiliate of Sellers (the "Hawaii Air Transport Affiliate") is
using a helicopter owned by the Company, Serial No. 47134 (the "Hawaii
helicopter"). In its place, the Company is using a helicopter that had been
used by the Hawaii Air Transport Affiliate, Serial No. 47135 (the "Leased
Helicopter") and is being leased from an unrelated third party under a
lease agreement listed as item 2(b) on Disclosure SCHEDULE 5.9 hereof (the
"Helicopter Lease"). Sellers agree that after the Closing Date they shall
comply, or cause to be complied with, at their expense, all terms of the
Helicopter Lease, and shall hold Buyer harmless from any expenses or
liability due or to become due under such Helicopter Lease and Buyer agrees
that it shall permit the Hawaii Air Transport Affiliate to continue
operating the Hawaii helicopter in such Affiliate's business in Hawaii,
under the Company's FAA License, for up to the remaining term of the
Helicopter Lease (which is scheduled to expire in December 1998). Buyer
agrees that the Sellers shall be entitled at any time prior to the
expiration of such Helicopter Lease, (i) to negotiate an early termination
of that Lease with the lessor, or (ii) in compliance with the Helicopter
Lease, to sublease that Helicopter or assign the Helicopter Lease to a
third party who is qualified under applicable law and agrees to operate it
under an FAA License other than the Company's, and in either such case, any
costs savings or other amounts received in respect or as a result of any
such early termination of or any sublease under or assignment of the
Helicopter Lease shall be for the sole account of the Sellers; PROVIDED,
HOWEVER, that Sellers agree that Buyer or the Company shall be furnished
with at least 60 days' prior written notice of the effective date of any
such early termination of, sublease under or assignment of such Helicopter
Lease. In the event of any such early termination of, sublease under, or
assignment of, the Helicopter Lease, or, if applicable, upon the expiration
of the Helicopter Lease, Sellers (at their expense) shall cause to be
returned to the Company, in Southern California, the Hawaii, in an air
worthy and good flying condition in accordance with Subsection 7.2.5
hereof.
(b) As of the Closing Date and again upon the termination of the
Helicopter Lease or the occurrence of such other event requiring return of
the Hawaii helicopter (the "Return Date"), the parties shall determine for
each of the Hawaii helicopter and the Leased Helicopter the cumulative
component dollar value of all engine and airframe components having a
mandatory retirement life or overhaul cycle as published by the respective
manufacturers of such helicopters. The cumulative component dollar value
shall be based on manufacturer cost of parts and estimated labor to comply
with mandatory retirements and overhauls for all parts and components in
the respective helicopters on the date of the determination. The cumulative
component dollar value of each helicopter as of the Return Date shall be
compared to the cumulative component dollar for the same helicopter as of
the Closing Date. If the cumulative component dollar value of the Hawaii
helicopter as of the Return Date is less than its cumulative component
dollar value as of the Closing Date, each Seller shall owe its
Proportionate Share of such difference to Buyer. If the cumulative
component dollar value of the Hawaii helicopter as the Return Date is
greater than its
21
cumulative component dollar value as of the Closing Date, Buyer shall owe
such difference to Sellers. Similarly, if the cumulative component dollar
value of the Leased Helicopter as of the Return Date is less than its
cumulative component dollar value as of the Closing Date, Buyer shall owe
such difference to Sellers, and if the cumulative component dollar value of
the Leased Helicopter as of the Return Date is greater than its cumulative
component dollar value as of the Closing Date, Sellers shall owe such
difference to Buyer. The amount owed by the Sellers, on the one hand, and
the Buyer, on the other, pursuant to the foregoing provisions, shall be
netted against each other so that only the party owing the greater amount
actually needs to make a payment. All amounts due pursuant to this section
shall be paid within thirty (30) days of the Return Date. Failure of any
Seller to pay his Proportionate Share of any amounts due hereunder shall
entitle Air Methods to reduce the outstanding balance on such Seller's Note
in addition to any other remedies which may be available. If the Buyer
fails to pay any amounts due hereunder, the delinquent sum shall bear
interest, until it is paid, at a rate of 9% per annum.
8.13 ACCOUNTS RECEIVABLE BILLING AND COLLECTION SERVICES. The Company
currently provides customer billing and accounts receivable collection services
for the Sellers' Hawaii Air Transport Affiliate and another affiliate of Sellers
that operates a ground medical transportation business in Hawaii (collectively,
the "Hawaii Affiliates"). The Buyer agrees to cause the Company, for a term of
at least three (3) years following the Closing, to continue providing those same
services, utilizing substantially the same resources and procedures that are
currently being utilized, to provide substantially the same billing and accounts
receivable collection services to the Hawaii Affiliates. As consideration for
such services, Sellers agree to cause such Hawaii Affiliates to pay to the
Company, on a monthly basis, the incremental labor costs (including benefits and
taxes) and reasonable out-of-pocket costs incurred by the Company in providing
such services to the Hawaii Affiliates. Buyer agrees that (i) any collections of
accounts receivable of the Hawaii Affiliates received by the Company or Buyer
shall be immediately remitted to such entities and shall not be commingled with
any funds of the Company or Buyer and (ii) no accounts receivable of the Hawaii
Affiliates shall be turned over to any outside collection agency or service, nor
shall any legal proceedings to collect delinquent accounts of any of the Hawaii
Affiliates be initiated by the Company, without the prior written approval of
Sellers. The services to be provided pursuant hereto shall include the
preparation and furnishing to such Hawaii Affiliates of billing, accounts
receivable and collection reports comparable to those currently being furnished
by the Company to the Hawaii Affiliates. The Sellers may terminate this service
arrangement at any time prior to the end of its three (3) year term on thirty
(30) days prior written notice to Buyer or the Company.
9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER. The obligations of Buyer to
consummate the purchase of the Shares and to perform its other obligations under
this Agreement shall be subject to the fulfillment, or waiver by Buyer, at or
prior to the Closing Date of each of the following conditions:
9.1 REPRESENTATIONS AND WARRANTIES. The respective representations and
warranties made by each of the Sellers in this Agreement or in their Disclosure
Schedules hereto shall have been true and correct on the date hereof, and also
shall be true and correct at and as of the Closing Date with the same force and
effect as if made again at and as of that time, except for any breach of any
such representations or warranties that has not had and is not expected to have
a Material Adverse Effect on the Company.
9.2 ABSENCE OF MATERIAL LITIGATION. There shall be (i) no pending or
overtly threatened litigation (other than litigation which is determined by the
parties in good faith, after consulting their respective attorneys, to be
without legal or factual substance or merit), whether brought against the
Company, Buyer, or any of the Sellers, that seeks to enjoin the consummation of
any of the transactions contemplated by this Agreement, (ii) no order that has
been issued by any court or governmental agency having jurisdiction that
restrains or prohibits the consummation of the purchase and sale of the Shares
hereunder and no proceedings pending which are reasonably likely to result in
the issuance of such an
22
order; and (iii) no pending or overtly threatened litigation, which has had or
is expected to have a Material Adverse Effect on the Company, other than as
disclosed in any of the Sellers' Disclosure Schedules.
9.3 PERFORMANCE OF OBLIGATIONS. The Sellers shall have performed and
complied, in all material respects, with all of their respective covenants
required by this Agreement to have been performed at or prior to the Closing,
except where any failure to have so performed or to have so complied has not had
and is not expected to have a Material Adverse Effect on the ability of the
parties to consummate the transactions contemplated hereby or on the Company.
9.4 NO MATERIAL ADVERSE CHANGES. Since December 31, 1996, there shall not
have been any change in or other event affecting the business or the condition
(financial or other) or operating results of the Company that has had or is
expected to have a Material Adverse Effect on the Company, other than any
disclosed in the Seller's Disclosure Schedules.
9.5 THIRD PARTY APPROVALS AND CONSENTS. Receipt of all approvals and
consents of third parties (governmental or other) needed to have been obtained
by the Closing Date to enable Buyer to consummate the transactions contemplated
in this Agreement and not thereby violate any contracts, writs, orders, laws or
regulations the violation of which would have a Material Adverse Effect on Buyer
or on the Company.
9.6 CONSUMMATION OF PURCHASE AND SALE OF HSI ASSETS. The transactions
contemplated by the HSI Purchase Agreement shall have been consummated
concurrently with the Closing of the transactions contemplated by this
Agreement.
9.7 CONFIRMATION FROM BUYER'S ACCOUNTANTS. Receipt by Buyer of confirmation
from its independent public accountants that such accountants believe that they
can complete the Company Audit in order to enable Buyer to meet its financial
reporting responsibilities with respect to the purchase hereunder of the Shares
pursuant to the Securities Exchange Act of 1934, provided that Buyer has made a
good faith and diligent effort to obtain such confirmation by the date hereof.
9.8 CERTIFICATES. Receipt of a certificate executed by each Seller, dated
as of the Closing Date and reasonably satisfactory in form and substance to
Buyer, certifying that (i) each of the representations and warranties of such
Seller contained herein was true and correct in all material respects when made
and is true and correct in all material respects on and as of the Closing Date
with the same force and effect as if such representations and warranties had
been made on the Closing Date, (ii) such Seller has performed and complied in
all material respects with all his respective covenants required to have been
performed or complied with by him pursuant hereto on or prior to the Closing
Date, except as may have been waived in writing by Buyer or where the failure to
have so complied has not had and is not expected to have a Material Adverse
Effect on the ability of the parties to consummate the purchase and sale of the
Shares or on the Company, and (iii) all of the conditions precedent to Buyer's
obligations the satisfaction of which was the responsibility of such Seller have
been satisfied, except to the extent waived by Buyer.
9.9 LEGAL OPINION AND ADDITIONAL INSTRUMENTS. Sellers shall have arranged
for and caused (i) the delivery of a legal opinion, substantially in the form of
EXHIBIT H hereto, of Stradling, Yocca, Xxxxxxx & Xxxxx, a Professional
Corporation, special counsel to Sellers, to Buyer and (ii) the Company to have
delivered to Buyer a good standing certificate, dated as of a date that is not
more than 10 days prior to the Closing Date, from the Secretary of State of
California and such other or additional instruments, consents, endorsements and
documents as Buyer reasonably deems to be necessary to enable the transactions
contemplated by this Agreement to be consummated as provided in this Agreement.
All other proceedings in connection with this Agreement and the transactions
contemplated hereby, and all documents and instruments incident to such
transactions, shall be reasonably satisfactory in form and substance to Buyer
and its counsel.
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10. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS. The respective
obligations of the Sellers to consummate the sale of the Shares to Buyer shall
be subject to the fulfillment, or the waiver by the Sellers, at or prior to the
Closing, of each of the following conditions precedent:
10.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
made by Buyer in this Agreement or in Buyer's Disclosure Schedules hereto shall
have been true and correct on the date hereof, and also at and as of the Closing
Date with the same force and effect, in all material respects, as if made again
at and as of that time.
10.2 ABSENCE OF MATERIAL LITIGATION. There shall be (i) no pending or
overtly threatened litigation (other than litigation which is determined by the
parties in good faith, after consulting their respective attorneys, to be
without legal or factual substance or merit), whether brought against the
Company, Buyer, or any of the Sellers, that seeks to enjoin the consummation of
any of the transactions contemplated by this Agreement, (ii) no order that has
been issued by any court or governmental agency having jurisdiction that
restrains or prohibits the consummation of the purchase and sale of the Shares
hereunder or any proceedings pending which are reasonably likely to result in
the issuance of such an order; and (iii) no other pending or overtly threatened
litigation, which has had or is expected to have a Material Adverse Effect on
the ability of the parties to consummate the transactions contemplated hereby.
10.3 PERFORMANCE OF OBLIGATIONS. Buyer shall have performed and complied,
in all material respects, with all of its covenants required by this Agreement
to have been performed by it at or prior to the Closing, except for any failure
of performance or non-compliance that does not and will not materially and
adversely affect the ability of the Sellers to consummate the transactions
contemplated hereby.
10.4 NO MATERIAL ADVERSE CHANGES. Since March 31, 1997, there shall not
have been any change in or other event affecting the business or the condition
(financial or other) or operating results of Buyer that has had or is expected
to have a material adverse effect on Buyer or its ability to meet its
obligations under the Notes or the Security Agreements.
10.5 THIRD PARTY APPROVALS AND CONSENTS. Receipt of all approvals and
consents of third parties (governmental or other) needed to have been obtained
by the Closing Date to enable each of the Sellers to consummate the transactions
contemplated in this Agreement and not thereby violate any contracts, writs,
orders, laws or regulations the violation of which would have a Material Adverse
Effect on any of the Sellers.
10.6 CONSUMMATION OF PURCHASE AND SALE OF HSI ASSETS. The transactions
contemplated by the HSI Purchase Agreement shall have been consummated
concurrently with the Closing of the transactions contemplated by this
Agreement;
10.7 CERTIFICATES. Receipt from Buyer of a certificate, dated as of the
date of Closing and signed by the President or the Chief Financial Officer of
Buyer, certifying that (i) each of its representations and warranties contained
herein was true and correct when made and is true and correct in all material
respects on and as of the Closing Date with the same force and effect as if such
representations and warranties had been made on the Closing Date, and (ii) it
has performed and complied in all material respects with all agreements,
obligations, covenants and conditions required to be performed or complied with
by it pursuant hereto on or prior to the Closing Date, except as may be waived
in writing by the Sellers.
10.8 OPINION OF COUNSEL. Receipt of an opinion dated as of the Closing Date
from Xxxxx, Xxxxxx & Xxxxxx LLP substantially in the form of EXHIBIT I hereto.
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10.9 ADDITIONAL INSTRUMENTS. The Buyer shall have delivered to Sellers
certified copies of resolutions duly adopted by its Board of Directors approving
this Agreement and authorizing the Buyer to consummate the transactions
contemplated hereby, and such other or additional instruments, consents,
endorsements and documents as Sellers reasonably deem to be necessary to enable
the transactions contemplated by this Agreement to be consummated as provided in
this Agreement, including good standing certificates, dated not more than 10
days prior to the Closing Date, evidencing the good standing of Buyer in the
state of its incorporation and, as a foreign corporation qualified to do
business in California. All other proceedings in connection with this Agreement
and the transactions contemplated hereby, and all documents and instruments
incident to such transactions, shall be reasonably satisfactory in form and
substance to Sellers and their counsel.
11. CLOSING. Provided that all conditions precedent to the consummation of the
sale and purchase of the Shares set forth in Sections 9 and 10 have been
satisfied or waived, the consummation of the sale and purchase of the Shares
pursuant hereto (the "Closing") shall take place at the offices of Stradling,
Yocca, Xxxxxxx & Xxxxx, 000 Xxxxxxx Xxxxxx Xxxxx, 00xx Xxxxx, Xxxxxxx Xxxxx,
Xxxxxxxxxx (or such other place as the parties may agree), at 10:00 A.M. on
Wednesday, July 30, 1997, or on such other date as may be mutually agreed upon
by the parties hereto ("Closing Date"). In connection with and at the time of
the Closing:
11.1 CLOSING DELIVERIES BY SELLERS. The Sellers shall deliver to Buyer the
following:
(a) The stock certificates evidencing all of the Shares, accompanied
by appropriate instruments of transfer, duly executed by the Sellers;
(b) Agreements referenced in Section 3 above, duly executed and
delivered by each of the Sellers;
(c) Management Employment Agreements, substantially in the forms of
EXHIBIT C and EXHIBIT D, duly executed by Xx. Xxxxx X. Xxxxxxxx and by
Ms. Xxxx Xxxxx, respectively;
(d) Evidence of the receipt of required third party consents and
approvals that are required to be obtained by Sellers hereunder to enable
Buyer to consummate the transactions contemplated hereby, as contemplated
by Section 9.5 above;
(e) The minute books, stock transfer books and records, the corporate
seal and other corporate records of the Company;
(f) Resignations of the officers and directors of the Company;
(g) All documents and instruments and records pertaining to bank
accounts and safety deposit boxes of the Company, together with such
instruments as the depository institutions where such accounts and safety
boxes are maintained may require to change the signatories on such accounts
and for such safety deposit boxes;
(h) A copy of the Company's Standard Operating Procedures Manual; and
(i) Each of the other certificates, documents, instruments and
evidences required to be delivered to Buyer pursuant to Section 8 or
Section 9 above.
11.2 CLOSING DELIVERIES BY BUYER. Buyer shall deliver:
(a) To each Seller wire transfers of funds payable to the order of
each Seller (i) in an amount equal to such Seller's Proportionate Share of
the Closing Date Payment, and (ii) the cash payment in the amount of
$10,000 constituting the consideration for such Seller's Non-Competition
Agreement and (iii) such Seller's Proportionate Share of the cash balances
of the Company as provided by Section 8.6 hereof;
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(b) To each Seller, a Note in the form of EXHIBIT A hereto in a
principal amount equal to his Proportionate Share of the aggregate
principal amount of the Notes issuable to Sellers by Buyer as part of the
Purchase Price pursuant to Section 2 hereof, duly executed by the Buyer;
(c) To each Seller, a Security Agreement in the form of EXHIBIT B
hereto, duly executed by Buyer;
(d) To the Sellers, an Assumption Agreement duly executed by Buyer and
accompanied by consents from the creditors under the Assumed Obligations,
including the Textron Debt, to the assumption thereof by Buyer and
releases, in form and substance satisfactory to the Sellers and their
counsel, from such creditors of the obligations of Sellers with respect to
and of any guaranties by the Sellers of, any of the Assumed Obligations, as
provided in Section 8.5 hereof;
(e) To each Seller, other than Xxxxx X. Xxxxx, a Seller Consulting
Agreement in the form of EXHIBIT E hereto duly executed by the Buyer, to
Xxxxx X. Xxxxx, the Xxxxx Agreement in the form of EXHIBIT F hereto and a
Stock Option Agreement in the form of EXHIBIT G hereto, evidencing the
grant of stock options to each Seller entitling him to purchase a number of
shares of Buyer's common stock set forth in SCHEDULE 8.8, at the price and
on the terms and conditions set forth in such Stock Option Agreement;
(f) To Xxxxx X. Xxxxxxxx and Xxxx Xxxxx, the Management Employment
Agreements, in the forms of EXHIBIT C and EXHIBIT D, respectively, duly
executed by Buyer;
(g) To the Sellers, evidence of the receipt of required third party
consents and approvals that are required to be obtained by Buyer hereunder
to enable the Sellers to consummate the transactions contemplated hereby,
as contemplated by Section 10.5 above; and
(h) To the Sellers, each of the other certificates, documents,
instruments and evidences required to be delivered by Buyer pursuant to
Section 8 or Section 10 above.
12. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the respective
representations and warranties of the Sellers set forth in this Agreement or in
any of their respective Disclosure Schedules or Closing Certificates delivered
pursuant hereto shall terminate on the first (1st) anniversary of the Closing
Date, except as follows: (i) the representations and warranties of the Sellers
contained in Sections 5.5, 5.10, 5.11(b) and 5.13 shall terminate on and shall
not survive the Closing Date, (ii) the respective severally made representations
and warranties of each Seller set forth in Section 4 and the representations and
warranties jointly made by the Sellers in Subsections 5.1, 5.2 and 5.3 shall
survive the Closing for the statutory limitations period under California law
that is applicable to written contracts and (iii) the respective representations
and warranties of the Sellers contained in Subsection 5.19 survive the Closing
for the statutory limitations period applicable to the filing of Tax Returns and
payment of income Taxes under the Internal Revenue Code of 1986, as amended and
in effect on the date of this Agreement. The representations and warranties of
the Buyer in Section 6 hereof shall survive the Closing for the statutory
limitations period under California law that is applicable to written contracts.
13. TERMINATION.
13.1 METHODS OF TERMINATION. This Agreement may be terminated and the
transactions herein contemplated may be abandoned at any time prior to the
Closing:
(a) By mutual written consent of Buyer and the Sellers; or
(b) By Buyer if any of the conditions precedent set forth in Section 9
has not been satisfied on or before the Closing Date; or
(c) By any of the Sellers if any of the conditions precedent set forth
in Section 10 has not been satisfied on or before the Closing Date; or
26
(d) By the Buyer, if there has been a material breach by any Seller of
any of his material covenants or any of his material representations or
warranties contained in this Agreement (a Material Seller Default"); or
(e) By any of the Sellers, if there has been a material breach by
Buyer of any of its material covenants or its material representations or
warranties contained in this Agreement (a "Material Buyer Default").
Notwithstanding the foregoing, if Buyer or any Seller is in breach of any of its
respective material obligations under this Agreement; the Buyer or such Seller
(as the case may be) shall not be entitled to exercise its termination right
under Paragraph 13.1 (b), (c), (d) or (e) above during the continuance of such
breach.
13.2 PROCEDURE UPON TERMINATION. In the event of termination of this
Agreement by Buyer or the Sellers or by both Buyer and the Sellers pursuant to
Section 13.1 hereof, written notice thereof shall forthwith be given to the
other party or parties hereto and the transactions contemplated herein shall be
abandoned without further action by Buyer, the Company or the Sellers. In
addition, if this Agreement is terminated as provided herein:
(a) Each party will redeliver all documents, workpapers and other
material of any other party relating to the transactions contemplated
hereby, whether so obtained before or after the execution hereof, to the
party furnishing the same.
(b) All information of a confidential nature received by any party
hereto with respect to the business of any other party (other than
information which is a matter of public knowledge or which has heretofore
been or is hereafter published in any publication for public distribution
or filed as public information with any governmental authority) shall
continue to be subject to the provisions of Section 14 of this Agreement,
which provisions shall survive any such termination.
(c) Upon any termination of this Agreement pursuant to this Section
13, the respective obligations of the parties hereto under this Agreement
(other than under Paragraphs 13.2(a) and (b) above) shall terminate and no
party shall have any liability whatsoever to any other party hereto by
reason of such termination, irrespective of the cause of such termination,
PROVIDED, HOWEVER, that a termination of this Agreement by Buyer pursuant
to Paragraph 13.1(d) due to a Material Seller Default, or by any of the
Sellers pursuant to Paragraph 13.1(e) due to a Material Buyer Default,
shall not relieve the Sellers who committed such Material Seller Default
(each, a "Defaulting Seller") or the Buyer (as the case may be) of their
liability hereunder to the non-defaulting parties; and PROVIDED, FURTHER,
that (i) if such termination is by Buyer as a result of a Material Seller
Default, then, each Defaulting Seller shall be severally liable to Buyer
for that percentage of the direct damages incurred by Buyer by reason of
such Material Seller Default which is equal to the percentage that such
Defaulting Seller owns, on the date hereof, of the total number of the
Shares of common stock of the Company owned by all of the Defaulting
Sellers on the date hereof and any Seller who is not a Defaulting Seller
shall have no liability to Buyer by reason of such Material Seller Default
and the resulting termination of this Agreement by Buyer; (ii) if,
notwithstanding a Material Seller Default or a Material Buyer Default, the
Buyer (in the case of a Material Seller Default) closes, or the Sellers (in
the case of a Material Buyer Default) close, the transactions contemplated
hereby, such action by the non-defaulting party or parties shall constitute
a waiver of such Material Seller Default or Material Buyer Default, as the
case may be (PROVIDED, HOWEVER, that the closing by Buyer of the
transactions contemplated hereby shall not constitute a waiver of a
Material Seller Default of any Seller that arises out of a material breach
by that Seller of any of his Ownership, Capitalization or Tax
Representations as defined in Section 14.2); and (iii) notwithstanding
anything to the contrary contained herein, in no event shall any of the
Sellers be liable to Buyer by reason of a material breach of this Agreement
by any Seller,
27
and in no event shall Buyer be liable to any or all of the Sellers by
reason of a material breach of this Agreement by Buyer, for any
consequential damages, special damages or lost profits or lost business
opportunities arising from such breach.
13.3 SPECIFIC PERFORMANCE. Sellers acknowledge that a breach of any of
their covenants under this Agreement that would constitute a Material Seller
Default would result in damages to Buyer that would be extremely impracticable
to measure. Accordingly, Sellers agree that, in lieu of termination of this
Agreement and (subject to clause (ii) of Paragraph 13.2(c) above) in addition to
any other remedies Buyer may have, Buyer may xxx in equity for specific
performance of any such covenants in the event of a breach thereof and Sellers
expressly waive the defense that a remedy in damages will be available.
14. INDEMNIFICATION.
14.1 INDEMNIFICATION OBLIGATION OF SELLERS.
(a) Subject to the limitations hereinafter set forth in this Section
14, each Seller hereby agrees that he will, severally, and not jointly with
any of the other Sellers, indemnify and hold harmless Buyer and its
directors, officers, employees, agents and successors and assigns
(collectively, including Buyer, the "Buyer Group") from and against any and
all claims, actions, suits or other proceedings brought against and any
liabilities, damages, Taxes, costs and expenses (collectively, "Buyer
Liabilities"), including, without limitation, reasonable attorneys' fees,
incurred by any of the members of the Buyer Group that arise from:
(i) Any material breach of or material inaccuracy in any of the
representations or warranties of any of such Seller contained in
Section 4 hereof (as modified by such Seller's Disclosure Schedules
pertaining thereto);
(ii) Any material breach of or material inaccuracy in any of the
representations or warranties of any of Sellers contained in Section 5
hereof (as modified by the Sellers' Disclosure Schedules), except that
Sellers shall have no liability to Buyer or the Company after the
Closing for or arising out of any breach of or inaccuracy in the
representations and warranties contained in Subsections 5.5, 5.10,
5.11(b) and 5.13 hereof (the "Excluded Representations"), which shall
terminate at the conclusion of and shall not survive the Closing; and
(b) As an inducement to Buyer to enter into, and to consummate the
transactions contemplated by the Asset Purchase Agreement, which will
directly benefit the Sellers, each Seller further agrees that he will,
severally, and not jointly with any of the other Sellers, indemnify and
hold harmless Buyer and the other members of the Buyer Group from any Buyer
Liabilities (as hereinabove defined) arising from any material breach of or
material inaccuracy in any of the representations or warranties of HSI
contained in Section 4 of the Asset Purchase Agreement (as modified by its
Disclosure Schedules pertaining thereto), except that the Sellers shall
have no liability to Buyer after the consummation of the transactions
contemplated by that Agreement (the "Asset Sale Closing") for or arising
out of any breach of or inaccuracy in the representations and warranties
contained in Subsections 4.6, 4.12 and 4.14 of the Asset Purchase Agreement
(as modified by the disclosures and the "HSI Excluded Representations"),
which shall terminate at the conclusion of and shall not survive the Asset
Purchase Closing.
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14.2 CERTAIN LIMITATIONS ON INDEMNIFICATION OBLIGATIONS OF SELLERS.
The liability of each Seller to the members of the Buyer Group under
Subsection 14.1 shall be subject to the following limitations:
(a) DEDUCTIBLE. No Seller shall be liable for indemnity under this
Section 14 unless (i) the aggregate amount of Buyer Liabilities incurred by
members of the Buyer Group, either under this Agreement or under the Asset
Purchase Agreement, exceeds the sum of $200,000 (the "Deductible"), and
(ii) such Deductible is exceeded prior to the expiration of the Applicable
Limitations Period (as hereinafter defined).
(b) GENERAL LIABILITY CEILING. Except as otherwise provided in
Paragraph 14.2(c) hereof, if the aggregate amount of Buyer Liabilities
incurred by members of the Buyer Group has exceeded the $200,000 Deductible
prior to the expiration of the Applicable Limitations Period, each Seller
shall become and be severally liable to indemnify the members of the Buyer
Group for the Seller's Proportionate Share (as hereinabove defined in
Subsection 2.2) of all Buyer Liabilities incurred by the members of the
Buyer Group that exceed the Deductible, PROVIDED, HOWEVER, that, subject to
the exceptions and limitations set forth elsewhere in this Section 14, no
Seller shall be liable to any members of the Buyer Group for an amount in
excess of his Proportionate Share of a cumulative aggregate amount of Buyer
Liabilities equal to One Million Five Hundred Thousand Dollars ($1,500,000)
(the "Liability Ceiling"), whether such Buyer Liabilities have been
incurred under this Agreement or under the Asset Purchase Agreement. (For
example, subject to the exceptions set forth hereinafter, if a Seller's
Proportionate Share is 20%, then, his maximum aggregate liability hereunder
for all Buyer Liabilities, whether arising under this Agreement or under
the Asset Purchase Agreement, shall be Three Hundred Thousand Dollars
$300,000.)
(c) SPECIAL LIABILITY CEILINGS. Notwithstanding the limitation set
forth in Paragraph 14.2(b), provided that the Deductible has been exceeded
before the expiration of the Applicable Limitations Period and there has
been a breach of:
(i) Any Seller's representations and warranties contained in
Section 4 of this Agreement (the "Ownership Representations") as a
result of the existence of any liens, claims, pledges or other
encumbrances on any of the Shares sold by such Seller hereunder to
Buyer (the "Affected Shares"), then, subject to the limitation
hereinafter set forth in Paragraph 14.2(d), such Seller shall be
liable to Buyer for the lesser of (x) any amounts that Buyer incurs to
discharge or remove such liens, claims, pledges or other encumbrances
from such Affected Shares, or (y) the diminution in the value of the
Affected Shares as a result of the existence of such liens, claims,
pledges or encumbrances;
(ii) Any representations and warranties of any Seller contained
in Subsection 5.2 of this Agreement (the "Capitalization
Representations") as a result of the ownership prior to the Closing by
any person of any shares of common stock of the Company, or options or
rights or convertible or other securities that entitle any person to
acquire any shares of common stock of the Company, which have the
effect of reducing the Buyer's percentage ownership of the Company to
less than 100%, then, subject to the limitation hereinafter set forth
in Paragraph 14.2(d), each Seller shall be severally liable to pay to
Buyer an amount equal to such Seller's Proportionate Share of the
Buyer Liabilities incurred by any members of the Buyer Group by reason
thereof;
(iii) Any of the representations and warranties of any Seller
contained in Subsection 5.19 of this Agreement (the "Tax
Representations") as a result of the incurrence of any liabilities by
Buyer or the Company, after the Closing, for any Taxes that arose out
of
29
the operations of the Company prior to the Closing and were neither
reserved for in the Company's Closing Date Balance Sheet nor otherwise
paid by the Sellers ("Excess Mercy Taxes"), then, subject to the
limitation hereinafter set forth in Paragraph 14.2(d), each Seller
shall be severally liable to reimburse Buyer or the Company, as the
case may be, for his Proportionate Share of such Excess Mercy Taxes;
and
(iv) Any of the representations and warranties of HSI contained
in Subsection 4.17 of the Asset Purchase Agreement (the "HSI Tax
Representations") as a result of the incurrence of any liabilities by
Buyer, after the Closing, for any Taxes that arose out of the
operations of HSI prior to the Closing and were neither reserved for
in HSI's Closing Date Balance Sheet nor otherwise paid by the HSI
("Excess HSI Taxes"), then, subject to the limitation hereinafter set
forth in Paragraph 14.2(d), each Seller shall be severally liable to
reimburse Buyer for his Proportionate Share of such Excess HSI Taxes;
(d) OVERALL LIABILITY CEILINGS. Notwithstanding anything to the
contrary contained above or elsewhere in this Agreement or in the Asset
Purchase Agreement, in no event shall:
(i) The aggregate sum of any Seller's liability to the Buyer
under Clauses (i), (ii) and (iii) of Paragraph 14.2(c) exceed an
amount which, when added to such Seller's Proportionate Share of Buyer
Liabilities incurred for breach of any of the representations and
warranties of the Sellers contained in this Agreement, other than the
Ownership, Capitalization or Tax Representations, would equal the
Purchase Price paid to Seller under this Agreement (after taking into
account any downward adjustments in such Purchase Price pursuant to
SCHEDULE 2.3 hereto); and
(ii) Any Seller's liability to the Buyer under Clause (iv) of
Paragraph 14.2(c) exceed an amount which, when added to such Seller's
Proportionate Share of Buyer Liabilities incurred for breach of any of
the representations and warranties of HSI contained in the Asset
Purchase Agreement, other than the HSI Tax Representations, would
equal the result obtained by multiplying the Purchase Price paid to
HSI under the Asset Purchase Agreement (after taking into account any
downward adjustments in such Purchase Price pursuant to Section 3.2 of
that Agreement) by such Seller's Proportionate Share (as set forth in
SCHEDULE 2.1 of this Agreement).
(e) SPECIAL LIABILITY PROVISIONS. None of the Sellers shall have any
liability to Buyer or the Company for breach of the provisions of Section
5.7 or Section 7.2.5 of this Agreement relating to the airworthiness of any
of the helicopters and rotable equipment of Mercy unless, on the Closing
Date, any of the Company's helicopters or rotable equipment either is not
in an airworthy condition (as defined in Section 5.7) or contains any
rented parts (other than parts owned by HSI). If, on the Closing Date, any
helicopter or rotable equipment is not in an airworthy condition or
contains any rented parts (excluding any such parts owned by HSI), then,
each Seller shall be liable for his Proportionate Share of the
out-of-pocket costs of repairs or of replacement parts required to bring
such helicopter or such rotable equipment back to an airworthy condition,
including the out-of-pocket costs to repair or replace any such parts or
equipment for which there has been substituted rented parts or equipment,
PROVIDED, HOWEVER, that the Sellers shall not be liable to pay or indemnify
Buyer or the Company for (i) such out-of-pocket costs included in trade
payables outstanding on the Closing Date Balance Sheet prepared pursuant to
SCHEDULE 2.3 or (ii) the rent payable for any such rented parts or
equipment.
(f) TIME LIMITATIONS.
(i) Except as otherwise provided in Clause (ii) of this Paragraph
14.2(f), the "Applicable Limitations Period" within which any claim
for indemnification may be brought by
30
Buyer or any other members of the Buyer Group under this Section 14
shall be the one (1) year period ending on the first anniversary of
the Closing Date, after which no claims of material breach of any
representations or warranties of Sellers under this Agreement or of
HSI under the Asset Purchase Agreement or for indemnification for any
Buyer Liabilities that may have arisen therefrom may be brought by
Buyer or any other member of the Buyer Group against any of the
Sellers.
(ii) Notwithstanding Clause (i) of this Paragraph 14.2(f), the
"Applicable Limitations Period" for claims for indemnification arising
from a material breach of any of the Share Ownership, Capitalization
or Tax Representations or of the representations or warranties of the
Sellers contained in Paragraphs 5.14(c) and 5.14(d) hereof (the "ERISA
Representations"), or the HSI Tax Representations or the HSI ERISA
Representations contained in Paragraphs 4.18(c) and 4.18(d) of the HSI
Agreement, shall be a period of time equal to the statutory
limitations period that would apply to the facts or circumstance that
gave rise to such material breach of any such Representation; and no
claims of material breach of any such Representations or for
indemnification of Buyer Liabilities that may have arisen out of any
such material breach may be brought by Buyer or any other member of
the Buyer Group against any of the Sellers after the expiration of the
Applicable Limitations Period that would, under applicable statute,
apply to such breach. (For example, if the Tax Representations were to
be breached due to a failure of Mercy to have fully paid all of the
state franchise taxes due by it for any period prior to the Closing
and the statutory limitations period during which a claim might be
brought against Mercy for such failure by state taxing authorities
would expire on the second anniversary of the Closing Date, then, the
Applicable Limitations Period with respect to such breach also would
expire on that same date, rather than on the first anniversary of the
Closing Date.
To be effective, any claim for indemnification by any member of the Buyer Group
must be made by a written notice (a "Notice of Claim") to the Sellers, given in
accordance with the provisions of Section 16.1 hereof, accompanied by
documentation supporting the claim, by no later than the expiration of the
Applicable Limitation Period set forth above in this Paragraph 14.2(f). If the
member of the Buyer Group asserting any such claim for indemnification hereunder
has made such a claim prior to the expiration of the Applicable Limitations
Period, then, subject to the Deductible and the applicable Liability Ceiling in
this Subsection 14.2, such member of the Buyer Group shall be entitled to
recover the full amount of the Buyer Liabilities incurred by it even if that
amount is not finally determined until after such expiration.
14.3 THIRD PARTY CLAIMS. In the event of the assertion, in writing, of a
third-party claim or dispute which, if adversely determined would entitle any of
the members of the Buyer Group to indemnification hereunder, it shall be a
condition precedent to the liability of Sellers hereunder that Buyer promptly
notify the Sellers thereof in writing. Following receipt of such notice, the
Sellers, or any of them, may elect, by written notice to Buyer, to assume and
direct, at their sole expense, the defense of any such third-party claim or
dispute, and may, at their sole expense, retain counsel in connection therewith,
provided that such counsel is acceptable to Buyer (which acceptance shall not be
unreasonably withheld or delayed by Buyer). After such an assumption of the
defense of a third-party claim or dispute by any of the Sellers, Sellers shall
not be responsible for the payment of legal fees incurred thereafter in
connection with such third-party claim or dispute by the members of the Buyer
Group (who may, however, continue to participate in the defense thereof with
separate counsel). If, following the timely notice of any such third-party claim
or dispute from Buyer to Seller, Sellers fail to, and until Sellers do,
undertake the defense of any such third-party claim or dispute, any of the
members of the Buyer Group may undertake such defense and Sellers shall be
responsible for
31
reimbursing such members of the Buyer Group for the reasonable legal fees and
expenses they incur in defense of such third-party claim or dispute. No party
hereto (including any members of the Buyer Group) may settle or compromise any
such third-party claim or dispute without the prior written consent of the other
parties hereto, which consent shall not be unreasonably withheld or delayed.
14.4 ESTABLISHMENT AND CONTESTING OF INDEMNIFICATION LIABILITY. Upon
receipt of a Notice of Claim, Sellers shall have thirty (30) business days to
contest their indemnification obligation with respect to such claim, or the
amount thereof, by written notice to Buyer (a "Contest Notice"). Such Contest
Notice shall specify the reasons or bases for the objection of Sellers to the
claim. If no such Contest Notice is given within such 30-business day period,
the obligation of Sellers to pay the amount of the Buyer Liability incurred by
the members of the Buyer Group in connection with the claim shall be deemed
established and accepted by Sellers. If, on the other hand, Sellers contest a
Notice of Claim within such 30-business day period, Buyer and the Sellers shall
thereafter attempt in good faith to resolve their dispute by agreement. If they
are unable to so resolve their dispute within the immediately succeeding thirty
(30) business days, such dispute shall be resolved by binding arbitration in San
Bernardino, California, as provided in Section 16.10 below. The award of the
arbitrator shall be final and binding on the parties and may be enforced in any
court of competent jurisdiction. Upon final determination of the amount of the
Buyer Liability that is the subject of an indemnification claim (whether such
determination is the result of Sellers' acceptance of, or failure to contest, a
Notice of Claim, or of a resolution of any dispute with respect thereto by
agreement of the parties or binding arbitration), each Seller's Proportionate
Share of such amount shall be applied as a reduction of the then remaining
unpaid principal balance of such Seller's Note; PROVIDED, HOWEVER, that if a
Seller's Proportionate Share of such established Buyer Liability exceeds the
then remaining unpaid principal sum of the Seller's Note, such excess shall be
payable by such Seller to Buyer within thirty (30) days of such final
determination of the amount of the Buyer Liability due by that Seller. If a
Seller fails to make any such payment within such thirty (30) day period, the
delinquent sum shall bear interest, until it is paid, at a rate of 9% per annum.
14.5 EXCLUSIVE REMEDY. Buyer hereby expressly agrees, as a material
inducement to Sellers to undertake the indemnification obligations contained in
this Section 14, and as consideration therefor, that (i) the rights and remedies
of Buyer and the other members of the Buyer Group contained in this Section 14
shall be the sole and exclusive rights and remedies that they shall have against
the Sellers, or any of them, for any breach of or inaccuracy in any of the
representations or warranties of Sellers, or any of them, contained in this
Agreement, in the Sellers' Disclosure Schedules and in the Sellers' Closing
Certificates, or in any of the representations or warranties of HSI under the
Asset Purchase Agreement or in its Disclosure Schedules or in any of its
Certificates delivered at the Asset Purchase Closing, (ii) Buyer, for itself and
the other members of the Buyer Group, including its and their respective
successors and assigns, hereby waives and agrees that it or they will not assert
or seek to enforce any other rights or remedies, whether available under statute
or at common law, that Buyer or any of the other members of the Buyer Group
would otherwise have against any of the Sellers or against HSI by reason of or
in respect of any such breach or inaccuracy in any of such representations or
warranties of the Sellers or HSI, or any of them (collectively, "Other
Remedies"), and (iii) except as provided in the next sentence, Buyer shall hold
harmless and indemnify the Sellers and their respective heirs, representatives,
successors and assigns from and against any claims, demands, actions, suits or
other proceedings brought against any of them, and any liabilities, damages,
costs and expenses, including, without limitation, reasonable attorneys' fees,
incurred by any of the Sellers or HSI, or any of their respective heirs,
representatives, successors or assigns, arising out of any attempt or any
efforts (successful or unsuccessful) by any members of the Buyer Group to assert
or exercise any of the Other Remedies. Notwithstanding the foregoing, the
provisions of this Subsection 14.5 with respect to the exclusive rights and
remedies of the Buyer and other members of the Buyer Group shall not apply to
any breach of representation or warranty of any Seller
32
contained in this Agreement (as the same has been modified by the Disclosure
Schedules attached hereto), or of any representation or warranty of HSI
contained in the Asset Purchase Agreement (as the same has been modified by the
Disclosure Schedules attached thereto), if a court or arbitrator having
jurisdiction has found that such Seller or HSI (as the case may be) committed
common law fraud or that such Seller committed a violation of the antifraud
provisions of the Federal Securities Laws in making such representation or
warranty and such finding has become final and is no longer appealable,
PROVIDED, HOWEVER, that limitations on and the exclusions from the amount of
each Seller's liability to Buyer and the other members of the Buyer Group
contained in this Section 14 (including the limitation contained in the last
sentence of Subsection 14.2(d) above) and the provisions establishing Applicable
Limitations Period on the rights of the Buyer and the other members of the Buyer
Group to assert indemnification claims shall nevertheless continue to apply
notwithstanding any such finding or findings.
15. CONFIDENTIALITY.
15.1 CONFIDENTIALITY COVENANTS. Each party acknowledges that it may have
access to various items of Confidential Information (as hereinafter defined) of
the other, or in the case of Buyer, Confidential Information of the Company, in
the course of investigations and negotiations prior to Closing. Each party who
receives any Confidential Information (a "Receiving Party") from any other party
hereto, (or in the case of Buyer from the Company) (the "Disclosing Party"), may
disclose any such Confidential Information to such party's employees, attorneys,
accountants, financial advisors or agents or representatives that have a need to
know such Information to facilitate or assist with the consummation of the
transactions contemplated hereby (collectively, "Representatives"). Subject to
the foregoing exception, and the exception hereinafter set forth in Subsection
15.2 below (i) a Receiving Party shall keep, and shall cause its Representatives
to keep, all Confidential Information received from a Disclosing Party hereunder
strictly confidential and shall not disclose, and shall cause its
Representatives not to disclose, any such Confidential Information to any third
party; and (ii) any Receiving Party and its Representatives shall not make any
uses of Confidential Information received from a Disclosing Party except to
facilitate or assist with the consummation of the transactions contemplated
hereby. Confidential information shall include any business, financial,
technical or other information, including, but not limited to, business plans,
forecasts, marketing plans or initiatives, customer, client and vendor lists,
training materials developed by the Disclosing Party, information regarding the
identities, qualifications and compensation being paid to key employees,
information received from customers, vendors or clients with the expectation,
whether explicit or implicit, that such information would be protected from
disclosure or dissemination to third parties, and other information the value of
which to the Disclosing Party is dependent on the non-disclosure of such
information. Confidential Information shall not include information that,
although disclosed or made available by a Disclosing Party or any of its
Representatives to a Receiving Party or any of its Representatives, (i) can be
obtained by persons not subject to confidentiality or use restrictions from
public sources, including periodicals, government and industry publications and
other media that is readily accessible to the public or competitors of the
Disclosing Party, (ii) has been disclosed by the Disclosing Party or any of its
Representatives to any unaffiliated third parties without the imposition of any
restrictions or prohibitions on disclosure or use thereof and has been, as a
result, disclosed by that third party to other third parties, or (iii)
information that the Receiving Party can demonstrate convincingly was in its
possession prior to its disclosure to the Receiving Party by the Disclosing
Party or any of its Representatives, PROVIDED that the Receiving Party had not
obtained possession of such Confidential information from any one that the
Receiving Party knew or should have known was subject to restrictions on its
right to disclose such information to the Receiving Party, either pursuant to an
agreement or by reason of his position or relationship with the Disclosing
Party.
15.2 DISCLOSURE PURSUANT TO LEGAL PROCESS. If a Receiving Party is required
by subpoena or other legal process, or by laws applicable to it, to disclose or
produce any Confidential Information
33
belonging to a Disclosing Party, then, the Receiving Party shall (i) provide the
Disclosing Party prompt notice thereof and copies, if possible, and, if not, a
description, of the Confidential Information requested or required to be
produced so that Disclosing Party may seek an order to quash such subpoena or
other legal process or an appropriate protective order or may elect to waive
compliance with the provisions of this Section 14 as to any portion or all of
such Confidential Information (ii) consult with the Disclosing as to the
advisability of taking legally available steps to quash or narrow such request,
and (iii) provide such reasonable cooperation as the Disclosing Party may
request in connection with efforts by the Disclosing Party to quash the subpoena
or other legal process or to obtain a protective order with respect to the
Confidential Information being sought. If, in the absence of a protective order
or the receipt of a waiver hereunder, a Receiving Party is nonetheless, in the
opinion of his legal counsel, compelled to disclose or produce any such
Confidential Information of the Disclosing Party to any tribunal legally
authorized to request and entitled to receive such Confidential Information or
to any government agency with which the Receiving Party is required by law to
file any such Information or otherwise stand liable for contempt or suffer other
censure or penalty or liability, the Disclosing Party may disclose or produce
such Confidential Information to such tribunal or government agency,
notwithstanding the fact that such information may, as a result become available
to the public, without incurring liability hereunder to the Disclosing Party;
PROVIDED, HOWEVER, that the Receiving Party shall give the Disclosing Party
written notice of the Confidential Information to be so disclosed or produced as
far in advance of its disclosure or production as is practicable and shall use
his best efforts to obtain, to the greatest extent practicable, an order or
other reliable assurance that confidential treatment will be accorded to such
Confidential Information so required to be disclosed or produced.
Notwithstanding the foregoing, the parties agree that the Buyer may file a
report on Form 8-K with the Securities and Exchange Commission regarding the
transactions contemplated by this Agreement and file as exhibits thereto, this
Agreement, the Asset Purchase Agreement, and all schedules and exhibits thereto
without requesting confidential treatment for such documents.
15.3 TERMINATION OF CONFIDENTIALITY OBLIGATIONS. The obligations of Buyer
under this Section 15 shall terminate on the Closing of the transactions
contemplated hereby, but the obligations of each Seller hereunder, which shall
be several and not joint, shall survive the Closing for a period of five (5)
years thereafter with respect to Confidential Information belonging to Buyer or
the Company. In the event of a termination of this Agreement, the respective
obligations of each Seller with respect to Confidential Information of Buyer and
the obligations of Buyer with respect to Confidential Information of the Company
and the Sellers shall survive for a period of five (5) years from the date of
such termination. The Company is an intended third party beneficiary of the
respective covenants of Buyer, on the one hand, and Sellers, on the other, under
this Section 15 with respect to Confidential Information of the Company
furnished or made available to any of them.
15.4 NO SOLICITATION OF EMPLOYEES. Between the date hereof and the Closing
of this the transactions contemplated hereby, neither Buyer nor the Company
shall (i) offer or extend employment or any position to any officers or
employees of the other and (ii) solicit or attempt to entice any of such
officers or employees of the other entity to leave its employ. In the event this
Agreement is terminated and the transactions contemplated hereby or abandoned,
then, the respective covenants of Buyer and the Company hereunder shall survive
that termination and shall remain in full force and effect for a period of two
(2) years from the date thereof.
16. MISCELLANEOUS.
16.1 NOTICES. All notices, requests, demands or other communications
hereunder to any of the parties hereto shall be in writing and shall be deemed
to have been duly given, if delivered in person or mailed, certified,
return-receipt requested, postage prepaid to the respective addresses of such
parties set forth in SCHEDULE 16.1 hereto. Any party hereto may from time to
time, by written notice to the other parties, designate a different address,
which shall be substituted for the one specified above for such party.
34
If any notice or other document is sent by certified or registered mail, return
receipt requested, postage prepaid, properly addressed as aforementioned, the
same shall be deemed served or delivered seventy-two (72) hours after mailing
thereof. If any notice is sent by facsimile machine ("fax") to a party, it will
be deemed to have been delivered on the date the fax thereof is actually
received, provided the original thereof is sent by mail, in the manner set forth
above, within twenty-four (24) hours after the fax is sent.
16.2 ASSIGNMENT. None of the Sellers nor the Buyer may assign this
Agreement, or assign their respective rights or delegate their respective duties
hereunder, without the prior written consent of the other parties hereto.
16.3 SEVERABILITY. Any provision of this Agreement which is illegal,
invalid or unenforceable shall be ineffective to the extent of such illegality,
invalidity or unenforceability, without affecting in any way the remaining
provisions hereof.
16.4 JOINT PRESS RELEASE. The parties agree to consult with each other and
to cooperate prior to issuing any press release or other public announcement
with respect to the transactions contemplated by this Agreement. No such press
release shall be issued by any party without the prior written consent of the
other party or in the case of Sellers, the written consent of a as
representative of the Sellers who shall be identified in a writing delivered by
the Sellers to the Buyer, from time to time, after the Closing Date; PROVIDED,
HOWEVER, that a party may proceed with publication of such a release or other
public disclosure even if another party hereto has refused to give its consent
thereto, if (i) the release or public disclosure is, in the reasonable judgment
of the releasing party, required for it to meet, on a timely basis, its
obligations under laws or regulations applicable to it, including under the
Federal Securities Laws and (ii) the releasing party furnishes a copy of such
release or public disclosure to the other party at least twenty-four (24) hours
in advance of the release or public disclosure and provides a reasonable
opportunity for the other party to comment thereon. Notwithstanding the
foregoing, the parties agree that the Buyer may, immediately after the execution
and delivery of this Agreement by the parties issue a press release, in
substantially the form previously delivered to the Sellers and file a report on
Form 8-K with the Securities and Exchange Commission regarding the transactions
contemplated by this Agreement and file as exhibits thereto, such this
Agreement, the Asset Purchase Agreement, the exhibits thereto and such press
release without requesting confidential treatment for such documents.
16.5 GOVERNING LAW. This Agreement is deemed to have been made in the State
of California, and its interpretation, its construction and the remedies for its
enforcement or breach are to be applied pursuant to, and in accordance with, the
laws of California for contracts made and to be performed in that state.
16.6 INCORPORATION AND AMENDMENT. This Agreement, the Schedules and
Exhibits hereto and each additional agreement and document referred to herein
constitute the entire Agreement of the parties, and supersede and extinguish all
prior agreements and understandings, representations and warranties of the
parties relating to the subject matter hereof. This Agreement may not be
modified, amended or terminated except by written agreement specifically
referring to this Agreement signed by the parties hereto.
16.7 WAIVER. No waiver of a breach or default hereunder shall be considered
valid unless in writing and signed by the party giving such waiver, and no such
waiver shall be deemed a waiver of any subsequent breach or default of the same
or similar nature or of any breach or default of any other provisions of this
Agreement.
16.8 INTERPRETATION; HEADINGS. This Agreement, and the other agreements
being entered into by any of the Sellers and the Buyer pursuant hereto, are the
result of arms'-length negotiations between the parties hereto and no provision
hereof or thereof, because of any ambiguity found to be contained herein,
35
therein or otherwise, shall be construed against a party by reason of the fact
that such party or its legal counsel was the draftsman of that provision. Unless
otherwise indicated elsewhere in this Agreement, (i) the term "or" shall not be
exclusive; (ii) the term "including" shall mean "including, but not limited to,"
and (iii) the terms "herein," "hereof," "hereto," "hereunder" and other terms
similar to such terms shall refer to this Agreement as a whole and not merely to
the specific section, subsection, Paragraph or clause where such terms may
appear. The section, subsection and any Paragraph headings contained herein are
for purposes of convenience only and are not intended to define or limit or
affect, and shall not be considered in connection with, the interpretation of
any of the terms or provisions of this Agreement.
16.9 COUNTERPARTS. This Agreement may be executed in separate counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
16.10 ARBITRATION. All disputes between the parties hereto relating to this
Agreement shall be determined solely and exclusively by arbitration in
accordance with the rules then in effect of the American Arbitration Association
pertaining to commercial arbitrations, or any successors hereto ("AAA"), in San
Bernardino, California, unless the parties otherwise agree in writing. The
parties shall jointly select an arbitrator. In the event the parties fail to
agree upon an arbitrator within ten (10) days, then each party shall select an
arbitrator and such arbitrators shall then select a third arbitrator to serve as
the sole arbitrator; provided, that if either party, in such event, fails to
select an arbitrator within seven (7) days, such arbitrator shall be selected by
the AAA upon application of either party. Judgment upon the award of the agreed
upon arbitrator or the so chosen third arbitrator, as the case may be, shall be
binding on the parties and shall be entered by any court of competent
jurisdiction.
IN WITNESS WHEREOF, the undersigned have executed this Stock Purchase
Agreement, on the date first above stated.
BUYER: SELLERS:
AIR METHODS CORPORATION
/s/ Xxxxx X. Xxxxx
By: /s/ Xxxxxx X. Xxxxxx --------------------------------
----------------------------- XXXXX X. XXXXX
/s/ J. Xxxxxx Xxxxxxxxx
--------------------------------
J. XXXXXX XXXXXXXXX
/s/ Xxx X. Xxxx
--------------------------------
XXX X. XXXX
/s/ Xxxxx X. Xxxx
--------------------------------
XXXXX X. XXXX
/s/ Xxxxxxx X. Xxxxx
--------------------------------
XXXXXXX X. XXXXX
36
LIST OF EXHIBITS
EXHIBIT A Form of Promissory Note
EXHIBIT B Form of Security Agreement
EXHIBIT C Form of Dolstein Employment Agreement
EXHIBIT D Form of Xxxxx Employment Agreement
EXHIBIT E Form of Seller Consulting Agreement
EXHIBIT F Form of Aerts Consulting Agreement
EXHIBIT G Form of Stock Option Agreement
EXHIBIT H Form of Opinion of Special Counsel to Sellers
EXHIBIT I Form of Opinion of Counsel to Buyer
LIST OF SCHEDULES
Schedule 2.1 Ownership of the Shares/Allocation of Closing Date Cash
Payment and Notes
Schedule 2.2 Assumed Obligations
Schedule 2.3 Adjustments to Purchase Price
Schedule 4.3 Seller Conflicts
Schedule 5.2 Securities
Schedule 5.4 Conflicts
Schedule 5.5 Financial Statement Exceptions
Schedule 5.6 Certain Changes
Schedule 5.7 Tangible Assets
Schedule 5.8 Intangible Personal Property
Schedule 5.9 Leases
Schedule 5.11 Title Exceptions
Schedule 5.12 Material Company Contracts
Schedule 5.13 Compliance with Laws
Schedule 5.14 Labor and Employment Agreements; Benefit Plans
Schedule 5.15 Litigation
Schedule 5.16 Environmental Matters
Schedule 5.18 Related Party Transactions
Schedule 5.19 Taxes and Tax Returns
Schedule 5.20 Insurance
Schedule 5.21 Bank Accounts
Schedule 5.22 Brokers
Schedule 7.2 Permitted Dividends
Schedule 8.5 Textron Debt
Schedule 8.6 Short-Term Investments
Schedule 8.7 Indebtedness of Mercy to Sellers
Schedule 8.8 Buyer Stock Options
Schedule 16.1 Mailing Addresses of the Parties
EXHIBIT A
FORM OF SECURED PROMISSORY NOTE
U.S. $ Fontana, California
----------- July , 1997
---
FOR VALUE RECEIVED, Air Methods Corporation, a Delaware corporation (hereinafter
referred to as "Obligor"), promises to pay to (hereinafter referred
-----------
to as "Holder"), the principal sum of U.S. Dollars
----------------------------
($ ), together with interest, which shall accrue at a rate of nine
----------
percent (9%) per annum from the date hereof, in sixty (60) equal monthly
installments of principal and interest, each in the amount of $ , on
----------
the first day of each calendar month commencing on August 1, 1997, and
continuing to and including July 1, 2002, on which date all accrued and unpaid
interest and the remaining balance of the principal then outstanding shall be
due and payable.
This Note is issued pursuant to the terms and provisions of Section 2.2 of that
certain Stock Purchase Agreement dated July , 1997 (the "Purchase
---
Agreement") by and among Obligor, Holder and the Sellers named therein, and
evidences purchase money indebtedness of Obligor to the Holder, as part of the
consideration for the purchase of all of the outstanding shares of capital stock
(the "Shares") of Mercy Air Service, Inc., a California corporation (the
"Company").
The principal amount of this Note is subject to certain adjustments in the
manner and to the extent provided in Section 2.3 and Section 8.9 of the Purchase
Agreement and Schedule 2.3 and Schedule 8.9 thereto. In the event of any such
adjustment, this Note shall be surrendered to the Obligor in exchange for the
issuance by Obligor to the Holder of a replacement promissory note, of like
tenor to this Note, which gives effect to such adjustment.
All payments on this Note shall be made in lawful money of the United States of
America, and all notices by Obligor to the Holder shall be sent by first class
mail and if so sent shall be deemed received by Holder 72 hours after being
deposited in the U.S. mails if addressed to Holder, at ,
------------------------
California or at such other place as the Holder shall have designated hereafter
to Obligor in writing.
1. SECURED OBLIGATION. The Obligor's obligations under this Note are
secured by that certain Security Agreement dated as of the date hereof (the
"Security Agreement"), among the Obligor, the Holder and the Company.
2. PARI PASSU STATUS. The payment of principal of and interest on this Note
shall rank pari passu with any indebtedness or other monetary obligations
incurred by Obligor or for which Obligor is or becomes liable to any Seller
named in the Purchase Agreement in connection with the acquisition by Obligor of
Shares from such Seller pursuant to the terms of the Purchase Agreement,
including the notes of like tenor issued to such other Sellers (the "Other
Seller Notes").
3. NATURE OF NOTE; USURY. The Obligor acknowledges that this Note evidences
purchase money indebtedness arising out of a business transaction. In no event
and upon no contingency shall Obligor be required to pay interest on this Note
in excess of the maximum rate allowed by law. It is the intention of the parties
hereto to conform strictly to the usury laws now in force that would apply to
this Note. Accordingly, notwithstanding anything to the contrary in this Note or
any other agreement entered into in connection herewith, it is agreed that all
charges that constitute interest that are contracted for, chargeable or
receivable under this Note or otherwise in connection with this transaction
shall, under no circumstances, exceed the maximum amount of interest permitted
by law, and any excess shall be deemed a mistake in calculation and cancelled
automatically and, if theretofore paid, shall be, at the Holder's election,
either refunded to Obligor or credited on the unpaid principal of this Note.
4. EVENTS OF DEFAULT. Upon the occurrence and during the continuance of an
Event of Default (as hereinafter defined), but subject to any restrictions or
limitations agreed upon by the Holder of this Note with the other Sellers named
in the Purchase Agreement, the Holder of this Note shall be entitled, by written
notice to the Obligor, to declare this Note to be, and upon such declaration
this Note shall be and become immediately due and payable, in addition to any
other rights or remedies they may have under the laws of the State of
California. The occurrence of any of the following events shall constitute an
"Event of Default":
(a) PAYMENT OF NOTE. Obligor shall fail to pay any principal of or interest
owing on this Note or the Other Seller Notes within fifteen (15) days after the
due date of such payment.
(b) BREACH OF COVENANTS. Obligor shall fail or neglect to perform, keep or
observe any covenant or obligation of Obligor contained in the Purchase
Agreement or in this Note (other than failure to pay principal of or interest on
this Note which is dealt with specifically in Paragraph 4(a) above) and the
breach of any such covenant or obligation is not cured within thirty (30) days
after Obligor's receipt of notice of such breach from Holder.
(c) INSOLVENCY, ETC. Obligor or the Company shall suffer the appointment of
a receiver, trustee, custodian or similar fiduciary for all or substantially all
of their respective assets, or any petition for an order for relief shall be
filed by or against Obligor or the Company under any applicable bankruptcy law,
and such appointment or proceeding, as the case may be, is not controverted
within thirty (30) days, or is not dismissed within ninety (90) days, after such
appointment or the commencement of such proceeding (as the case may be).
(d) EVENT OF DEFAULT UNDER SECURITY AGREEMENT. An "Event of Default" (as
defined in the Security Agreement) shall have occurred.
5. PREPAYMENTS. This Note may be prepaid in whole or in part without
notice, premium or penalty. Unless otherwise agreed by the Holder, in the event
Obligor prepays any Other Seller Note, it shall prepay the same percentage of
the remaining balance outstanding on this Note as paid on such Other Seller
Note. Partial prepayments shall be applied to the installment payments of
principal and interest hereunder in the chronological order in which they come
due until the Note is paid in full.
6. COSTS AND EXPENSES OF COLLECTION. If this Note is collected by or
through an attorney at law, Obligor shall pay all of the Holder's incurred costs
of collection, including, without limitation, Holder's attorneys' fees.
-2-
7. APPLICATION OF PAYMENTS. All installments and prepayments paid hereunder
shall be credited first to accrued and unpaid interest payable on the principal
balance of this Note from time to time outstanding and then to reduction of
principal.
8. WAIVERS BY OBLIGOR. Except as otherwise provided elsewhere in this Note,
Obligor waives presentment for payment, protest, notice of dishonor and protest
and consents to any extensions of time with respect to any payment due under
this Note, and to the addition or release of any party. No waiver of any payment
under this Note shall operate as a waiver of any other payment.
9. EFFECT OF DELAY OR WAIVER BY HOLDER. No delay or failure of the Holder
of this Note in the exercise of any rights or remedy provided for hereunder
shall be deemed a waiver of any other right or remedy which the Holder may have.
10. NOTICES TO OBLIGOR. Any notice or demand to the Obligor shall be by
First Class Mail, addressed to Obligor, c/o Air Methods Corporation, 0000 Xxxxx
Xxxxxx, Xxxxxxxxx, Xxxxxxxx 00000, Attention: Chief Financial Officer, or such
other address as may be designated in writing by Obligor to the Holder and shall
be deemed to have been received seventy-two (72) hours after its deposit,
postage-prepaid, with the United States Postal Service.
11. GOVERNING LAW. This Note is made in and shall be governed by and
construed according to the laws of California.
12. ARBITRATION. All disputes between the parties hereto shall be
determined solely and exclusively by arbitration in accordance with the rules
then in effect of the American Arbitration Association, or any successors hereto
("AAA"), in San Bernardino, California, unless the parties otherwise agree in
writing. The parties shall jointly select an arbitrator. In the event the
parties fail to agree upon an arbitrator within ten (10) days, then each party
shall select an arbitrator and such arbitrators shall then select a third
arbitrator to serve as the sole arbitrator; provided, that if either party, in
such event, fails to select an arbitrator within seven (7) days, such arbitrator
shall be selected by the AAA upon application of either party. Judgment upon the
award of the agreed upon arbitrator or the so chosen third arbitrator, as the
case may be, shall be binding and shall be entered into by a court of competent
jurisdiction.
-3-
13. HEADINGS. The Paragraph headings in this Note are for convenience of
reference only and shall not be considered in, nor shall they affect, the
interpretation or application of any of the provisions of this Note.
Obligor:
AIR METHODS CORPORATION,
a Delaware corporation
By:
---------------------------------
ACCEPTED and AGREED to this
day of July, 1997:
----
----------------------------------
Holder
-4-
EXHIBIT B
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement"), dated as of July 31, 1997, is
made in favor of and for the benefit of those parties whose names are set forth
on Schedule I hereto (individually, a "Secured Party" and, collectively, the
"Secured Parties"), by Air Methods Corporation, a Delaware corporation (the
"Debtor"), and Mercy Air Service, Inc., a California corporation (the "Company")
and J. Xxxxxx Xxxxxxxxx as collateral agent (the "Collateral Agent").
RECITALS
A. Debtor and the Secured Parties are parties to that certain Stock
Purchase Agreement dated July 11, 1997 (the "Purchase Agreement"), pursuant to
which the Secured Parties have agreed to sell to the Debtor, and the Debtor has
agreed to purchase from the Secured Parties, all of the outstanding capital
stock of the Company (the "Shares").
B. As partial consideration for the shares of common stock of the Company
to be sold by the Secured Parties to the Debtor , the Debtor shall deliver to
the Secured Parties promissory notes in the aggregate principal amount of One
Million Five Hundred Thousand Dollars ($1,500,000) (the "Notes") the principal
amounts of which are subject to adjustment pursuant to the terms of the Purchase
Agreement.
C. The Company will derive substantial direct and indirect benefit from the
Secured Parties' sale of the Shares to the Debtor and acceptance of the Notes,
and Secured Parties are willing to sell the Shares to the Debtor and accept the
Notes, but only on the condition, among others, that Debtor agree to grant, and
the Company consent to the grant, to the Secured Parties of a security interest
in the Collateral as provided herein to secure the performance of Debtor's
obligations under the Notes.
D. In addition to the substantial benefit derived by the Company from the
sale of the Shares by the Secured Parties, the Company will derive substantial
direct and indirect benefit from the fact that the Secured Parties are
guaranteeing the collection of certain accounts receivable of the Company
pursuant to the terms of the Purchase Agreement and the Buyer is paying the
Sellers, on behalf of the Company, amounts owed to the Sellers by the Company,
which will reduce the Company's indebtedness.
AGREEMENT
In consideration of the promises and of the mutual covenants herein
contained and for other good and valuable consideration, the parties, intending
to be legally bound, agree as follows:
1. DEFINITIONS. Unless otherwise defined herein, (a) capitalized terms or
matters of construction defined or established in the Purchase Agreement shall
be applied herein as defined or established therein, and (b) the following terms
shall have the respective meanings set forth below:
"ACCOUNT DEBTOR" shall mean any "account debtor" as such term is defined in
the UCC.
"ACCOUNTS" shall mean all "accounts" as such term is defined in the UCC,
now owned or hereafter acquired by the Company and other forms of obligations in
respect of the payment of money (other than forms of obligations evidenced by
Chattel Paper, Documents or Instruments) now owned or hereafter received or
acquired by or belonging or owing to the Company, in any event, including, but
not limited to, (a) all accounts and other receivable and book debts, whether
arising out of goods sold or services rendered by the Company or from any other
transaction (including, but not limited to, any such obligation which may be
characterized as an account under the UCC), (b) all of each Company's right in,
to and under all purchase orders or receipts now owned or hereafter acquired by
it for goods or services, (c) all monies due or to become due to the Company
under all contracts for the performance of services, other than the Hospital
Contracts, by the Company or in connection with any other provision of services
(whether or not yet earned by performance on the part of the Company) now in
existence or hereafter occurring, including, but not limited to, the right to
receive the proceeds of said contracts, and (d) all collateral security and
guaranties of any kind, now or hereafter in existence, given by any Person with
respect to any of the foregoing.
"AGREEMENTS" shall mean all contracts, undertakings or agreements (other
than rights evidenced by Chattel Paper, Documents or Instruments) in or under
which the Company may now or hereafter have any right, title or interest,
including, but not limited to, any or any other agreements relating to the terms
of payment or the terms of performance of any Account.
"CHARGE" shall mean any federal, state, county, city, municipal, local,
foreign or other governmental tax at the time due and payable, levy, assessment,
charge, lien, claim or encumbrance upon or relating to: (i) the Collateral; (ii)
the Secured Obligations; (iii) the employees, payroll, income or gross receipts
of the Company; (iv) the ownership or use of any of the assets of the Debtor; or
(v) any other aspect of the business of the Debtor.
"CHATTEL PAPER" shall mean all "chattel paper," as such term is defined in
the UCC, now owned or hereafter acquired by the Debtor, wherever located.
"COLLATERAL" shall have the meaning specified in SECTION 2.1.
"CONTRACT" shall mean all of the Company's right, title, and interest in
and to each presently existing and hereafter arising loan account, account,
contract right, Instrument, note, document, chattel paper, general intangible,
and all other forms of obligations owing to the Company, all rights of the
Company to receive payment thereof, together with all other rights of the
Company obtained in connection therewith, and any collateral therefor.
"CONTRACT DEBTOR" shall mean each person who is obligated to the Company to
perform any duty under or to make any payment pursuant to the terms of a
Contract.
"DEFAULT" means any event which is, or after notice or lapse of time or
both would be, an Event of Default.
"DOCUMENTS" shall mean all "documents," as such term is defined in the UCC,
now owned or hereafter acquired by the Company, wherever located.
"EVENT OF DEFAULT" shall have the meaning set forth in SECTION 8 of this
Agreement.
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"GOVERNMENTAL AUTHORITY" shall mean any nation or government, any state or
other political subdivision thereof, and any agency, department or other entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"HOSPITAL CONTRACTS" shall mean all contracts between the Company and
hospitals pursuant to which aircraft of the Company pledged to FINOVA Capital
Corporation are employed to provide emergency medical transportation services.
"INSTRUMENTS" shall mean all "instruments," as such term is defined in the
UCC, now owned or hereafter acquired by the Company, wherever located,
including, but not limited to, all certificate securities, all certificates of
deposit, and all notes and other evidences of indebtedness, other than
instruments that constitute, or are a part of a group or writings that
constitute, Chattel Paper.
"LIEN" and "LIENS" shall mean any mortgage, pledge, hypothecation,
assignment, deposit arrangement, lien (including, but not limited to, judgment
liens, liens of suppliers and other Persons for the provision of goods or
services, and all other liens arising under statute, common law or judicial
interpretation), liens securing any Charge, claim, security interest,
preference, priority or other security agreement or other preferential
arrangement of any kind or nature whatsoever intended or having the effect of
providing security for an obligation (including, but not limited to, any lease
or title retention agreement, any financing lease having substantially the same
economic effect as any of the foregoing, and the filing of, or agreement to
give, any financing statement perfecting a security interest under the UCC or
comparable law of any jurisdiction).
"PERMITTED LIENS" shall mean (i) the security interest granted to
California State Bank or any subsequent lender (the "Senior Lender"), to secure
indebtedness up to $700,000 of the Company to the Senior Lender; (ii) any
purchase money security interest and (iii) any tax liens for taxes of the
Company not yet due and payable or which are being contested in good faith.
"PROCEEDS" shall mean "proceeds," as such term is defined in the UCC and,
in any event, shall include, but not be limited to, (a) any and all proceeds of
any insurance, indemnity, warranty or guaranty payable to the Company from time
to time with respect to any Collateral, (b) any and all payments (in any form
whatsoever) made or due and payable to the Company from time to time in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any Governmental Authority
(or any person acting under color of Governmental Authority), (c) any recoveries
by the Company against third parties with respect to any litigation or dispute
concerning any of the Collateral, and (d) any and all other amounts from time to
time paid or payable under or in connection with any Collateral, upon
disposition, sale, transfer or otherwise.
"SECURED OBLIGATIONS" shall mean all debts, liabilities, and obligations,
for monetary amounts (whether or not such amounts are liquidated or
determinable), or otherwise, owing by the Debtor to Secured Party, and all
covenants and duties regarding such amounts, of any kind or nature, present or
future, contingent or liquidated, whether or not evidenced by any note,
agreement or other instrument, the payment or performance of which is provided
for or arises now or hereafter under the Notes or the Purchase Agreement
including, but not limited to, all interest, fees, charges, expenses, attorneys'
fees and any other sum chargeable to the Debtor thereunder.
"UCC" shall mean the Uniform Commercial Code as the same may, from time to
time, be in effect in the State of California; PROVIDED, that in the event that,
by reason of mandatory provisions of
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law, any or all of the attachment, perfection or priority of, or the remedies
with respect to, Secured Party's security interest in any Collateral is governed
by the Uniform Commercial Code as in effect in a jurisdiction other than the
State of California, the term "UCC" shall mean the Uniform Commercial Code as in
effect in such other jurisdiction for purposes of the provisions of this
Agreement relating to such attachment, perfection, priority or remedies and for
purposes of the definitions related to such provisions.
2. GRANT OF SECURITY INTEREST
2.1 GRANT; DESCRIPTION OF COLLATERAL. To secure the prompt and complete
payment, performance and observance of all of the Secured Obligations, and to
induce Secured Party to enter into the Purchase Agreement and to consummate the
transactions contemplated thereby, the Debtor hereby pledges and grants to
Secured Party, and the Company hereby consents to the grant by Debtor to Secured
Party of, a security interest in all of the Company's right, title and interest
in, to and under the following property, whether now owned or owing, or
hereafter acquired or arising, and regardless of where located (all of which
being hereinafter collectively referred to as the "Collateral"):
(a) all Accounts;
(b) all books and records pertaining to any of the foregoing; and
(c) to the extent not otherwise included, all Proceeds of the items
set forth in Sections 2.1(a) and (b), inclusive, and all accessions to,
substitutions and replacements for, profits and products of, each of the
items set forth in Sections 2.1(a) and (b).
2.2 INTERESTS OF SECURED PARTIES. Each Secured Party's interest in the
Collateral shall be on a parity with the interests of all other Secured Parties,
and the interest of each Secured Party in the Collateral shall be ratable in the
proportion that the aggregate indebtedness then outstanding and unpaid under the
Notes held by such Secured Party bears to the aggregate indebtedness then
outstanding and unpaid under the Notes held by all Secured parties, regardless
of when such Notes were issued.
2.3 SECURITY INTEREST ABSOLUTE. Subject to the Permitted Liens, all rights
and security interests of each Secured Party in the Collateral shall be absolute
and unconditional, irrespective of: (i) any lack of validity or enforceability
of any of the Secured Obligations or any other agreement or instrument relating
thereto; (ii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations, or any other amendment or
waiver of or any consent to any departure from terms of the Note; (iii) any
exchange or non-perfection of any Collateral for all or any of the Secured
Obligations; or (iv) any other circumstance which might otherwise constitute a
defense available to the Debtor, or a discharge of the Debtor's obligations,
with respect to the validity or enforceability of a security interest to the
Collateral.
3. SECURED PARTY'S RIGHTS; LIMITATIONS ON SECURED PARTY'S OBLIGATIONS.
3.1 CONTRACTUAL LIABILITIES. It is expressly agreed by the Debtor and the
Company that, notwithstanding anything herein to the contrary, the Company shall
remain liable under each Contract to observe and perform all the conditions and
obligations to be observed and performed by it
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thereunder, and Secured Party shall have no obligation or liability under any
Contract by reason of or arising out of this Agreement or the receipt by Secured
Party of any payment relating to any Contract pursuant hereto, and Secured Party
shall not be required or obligated in any manner to perform or fulfill any of
the obligations of the Company under or pursuant to any Contract, or to make any
payment, or to make any inquiry as to the nature or the sufficiency of any
payment received by it or the sufficiency of any performance by any party under
any Contract, or to present or file any claim, or to take any action to collect
or enforce any performance or the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or times.
3.2 ACCOUNT VERIFICATION. Subject to the following sentence, upon prior
notice to the Debtor and the Company (unless a Default or an Event of Default
has occurred and is continuing in which case no notice is necessary), the
Collateral Agent, on behalf of the Secured Parties, shall have the right, at the
Secured Parties' expense, to make test verifications of the Accounts and
physical verifications and appraisals of any other Collateral in any reasonable
manner and through any medium that the Collateral Agent, on behalf of the
Secured Parties, considers advisable, and the Debtor and the Company each agree
to furnish all such assistance and information as the Collateral Agent may
reasonably require in connection therewith. Upon the occurrence of a Default or
an Event of Default, the Debtor, on behalf of the Company, promptly upon the
Collateral Agent's request, at the Debtor's own expense, shall prepare and
deliver to the Collateral Agent the following reports: (a) a reconciliation of
all Accounts; (b) an aging of all Accounts; and (c) an aged receivable trial
balance.
4. REPRESENTATIONS AND WARRANTIES. The Debtor and the Company each hereby
represent and warrant to each Secured Party that:
4.1 Debtor is corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware.
4.2 Debtor has all the necessary corporate power and authority to enter
into this Security Agreement and to perform the obligations to be performed by
it hereunder and to consummate the transactions contemplated hereby. This
Security Agreement has been duly authorized and approved by all necessary action
on the part of the Board of Directors and stockholders of Debtor. This Security
Agreement has been duly executed and delivered by Debtor and constitutes the
valid and binding obligation of Debtor, enforceable against Debtor in accordance
with its terms, subject as to enforceability to any applicable bankruptcy,
insolvency, moratorium or other laws affecting creditor's rights generally or
such principles of equity as a court of competent jurisdiction might apply.
4.3 Except for the Permitted Liens, so long as any of the Secured
Obligations are outstanding, the Collateral will continue to be owned solely by
the Company. Except for the Permitted Liens, the Collateral is, and from time to
time hereafter will be, free from any lien or other rights, title or interest of
any person. Except for the Permitted Liens, Debtor shall cause the Company to,
and the Company shall, defend the Collateral against any claims and demands of
all persons at any time claiming the same or any interest therein adverse to the
Secured Parties.
4.4 Assuming the filing of the UCC-1 Financing Statement in the appropriate
California state or county governmental office, the payment of all requisite
fees in connection with such filing and the satisfaction of all other filing
requirements imposed by statute or otherwise, all filings, registrations and
recordings necessary or appropriate to create, preserve, protect and perfect the
security interest granted by Debtor to Secured Parties hereby in respect of the
Collateral will have been accomplished
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and the security interest granted to Secured Parties pursuant to this Security
Agreement in and to the Collateral will constitute a valid and enforceable
perfected security interest therein.
4.5 Except for the Permitted Liens, so long as any of the Secured
Obligations remain unpaid, neither Debtor nor the Company will execute or
authorize to be filed at any public office any other financing statement (or
similar statement or instrument of registration under the law of any
jurisdiction) or statements relating to the Collateral, except financing
statements filed or to be filed in respect of and covering the security interest
granted hereby by Debtor or upon obtaining the prior written consent of the
Secured Parties.
4.6 On the date hereof, the Company (i) is solvent, after giving effect to
the payments and transactions contemplated by the Purchase Agreement and this
Agreement, (ii) is able to pay its debts as they become due and has capital
sufficient to carry on its business and all businesses in which it is about to
engage and (iii) now owns property having a value both at fair valuation and at
present fair saleable value greater than the amount required to pay its debts
and contingent obligations, including without limitation, the Secured
Obligations. The Company will not be rendered insolvent by the execution and
delivery of the Purchase Agreement, the Notes or this Agreement or any of the
other documents or instruments relating thereto or hereto or by the transactions
contemplated thereunder or hereunder.
4.7 No representations or warranties of Debtor or the Company contained in
this Agreement or in any document, statement or certificate furnished or to be
furnished pursuant to this Agreement, contain any untrue statement of material
fact, or omit to state a material fact necessary to make the statements of fact
not misleading.
4.8 The representations and warranties set forth in this SECTION 4 shall
survive the execution and delivery of this Agreement.
5. COVENANTS. The Debtor and the Company each covenant and agree with the
Secured Parties that, from and after the date of this Agreement and until the
date on which all Secured Obligations shall have been indefeasibly paid in full:
5.1 FURTHER ASSURANCES. At any time and from time to time, upon the request
of the Collateral Agent and at the sole expense of the Debtor, the Debtor shall,
and shall cause the Company to, promptly and duly execute and deliver any and
all such further instruments and documents and take such further action as the
Collateral Agent may reasonably deem necessary to obtain the full benefits of
this Agreement and of the rights and powers herein granted, including, but not
limited to: (a) filing any financing or continuation statements under the UCC
with respect to the Lien granted hereunder; and (b) obtaining waivers, in form
and substance satisfactory to Secured Parties. The Debtor and the Company also
hereby authorize Secured Parties to file any such financing or continuation
statement without the signature of the Debtor or the Company to the extent
permitted by applicable law. Secured Parties shall, provide the Debtor with
photocopies of all such filings at the Debtor's expense.
5.2 BOOKS AND RECORDS. The Debtor shall, and shall cause the Company to,
keep and maintain, at its own cost and expense, satisfactory and complete
records of the Collateral, including, but not limited to, a record of any and
all payments received and any and all credits granted with respect to the
Collateral and all other dealings with the Collateral. The Debtor shall, and
shall cause the Company to, xxxx its books and records pertaining to the
Collateral to evidence this Agreement and
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the Lien granted hereby. Upon the occurrence and during the continuation of an
Event of Default, the Debtor shall, and shall cause the Company to, deliver and
turn over all of its books and records pertaining to the Collateral to the
Collateral Agent at any time on demand of the Collateral Agent. Prior to the
occurrence of an Event of Default, upon prior notice from the Collateral Agent,
the Debtor shall, and shall cause the Company to, permit the Collateral Agent to
inspect such books and records and shall provide photocopies thereof to the
Collateral Agent at the Secured Parties' expense; PROVIDED, HOWEVER, that the
Collateral Agent shall not be entitled to exercise such right more than four (4)
times in any calendar year.
5.3 IDENTITY. The Debtor shall not, and shall cause the Company to not
change its name, identity or structure in any manner that might make any
financing or continuation statement filed in connection herewith misleading
within the meaning of the UCC unless Debtor shall have given Secured Party at
least 30 days' prior written notice thereof and shall have taken all action (or
made arrangements satisfactory to the Collateral Agent, at the Debtor's expense,
to take such action substantially simultaneously with such change if it is
impossible to take such action in advance) necessary or reasonably requested by
the Collateral Agent to amend such financing statement or continuation statement
so that it is not misleading.
5.4 COLLATERAL TRANSFER, REMOVAL OR SALE. The Debtor shall not, and shall
cause the Company to not, without the prior written consent of the Secured
Parties, sell, assign, transfer or otherwise dispose of any Collateral, other
than sales in the ordinary course, consistent with past practices and in a
manner consistent with the best interests of the Debtor, the Company and its
shareholders.
6. COLLATERAL AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT.
6.1 APPOINTMENT; POWERS. Upon the occurrence and during the continuation of
an Event of Default (except as otherwise provided below), the Debtor and the
Company hereby irrevocably constitutes and appoints the Collateral Agent and any
officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place
and stead of the Debtor and the Company and in the name of the Debtor and the
Company or in its own name, from time to time in the Collateral Agent's
discretion, for the purpose of carrying out the terms of this Agreement, to take
any and all appropriate action and to execute and deliver any and all documents
and instruments which may be necessary to accomplish the purposes of this
Agreement and, without limiting the generality of the foregoing, hereby grants
to the Collateral Agent the power and right, on behalf of the Debtor and the
Company, without notice to or assent by the Debtor or the Company, to do the
following, all at the Debtor's expense:
(a) in the name of the Debtor or the Company, or in its own name or
otherwise, take possession of, endorse and receive payment of any checks,
drafts, notes, acceptances, or other Instruments for the payment of monies
due under any Collateral;
(b) receive payment of any and all monies, claims and other amounts
due or to become due at any time arising out of or in respect of any
Collateral;
(c) ask, demand, collect, receive and give acquaintances and receipts
for any and all money due or to become due under any Collateral;
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(d) pay or discharge any charges or Liens levied or placed on or
threatened against the Collateral;
(e) direct any party liable for any payment under or in respect of any
of the Collateral to make payment of any and all monies due or to become
due thereunder, directly to the Collateral Agent or as the Collateral Agent
shall direct;
(f) settle, compromise or adjust any suit, action or proceeding
described in this Section 6.1 and, in connection therewith, give such
discharges or releases as the Collateral Agent may deem appropriate;
(g) file any claim or take or commence any other action or proceeding
in any court of law or equity or otherwise deemed appropriate by the
Collateral Agent for the purpose of collecting any and all such monies due
under any Collateral whenever payable;
(h) commence and prosecute any suits, actions or proceedings at law or
in equity in any court to collect the Collateral or any part thereof and to
enforce any other right in respect of any Collateral;
(i) defend any suit, action or proceeding brought against the Debtor
or the Company with respect to any Collateral if the Debtor or the Company
does not defend such suit, action or proceeding or if the Collateral Agent
believes that the Debtor or the Company is not pursuing such defense in a
manner that will minimize the loss with respect to such Collateral and the
Secured Parties' security interest therein; and
(j) sell, transfer, pledge, make any agreement with respect to, or
otherwise deal with any of the Collateral as fully and completely as though
the Collateral Agent were the absolute owner thereof for all purposes, and
to do, at the Collateral Agent's option, at any time or from time to time,
all acts and other things that the Collateral Agent deems necessary to
perfect, preserve or realize upon the Collateral and the Secured Parties'
Lien therein in order to effect the intent of this Agreement, all as fully
and effectively as the Debtor and the Company might do.
6.2 RATIFICATION. The Debtor and the Company hereby ratify, to the extent
permitted by law, all that said attorneys shall lawfully do or cause to be done
by virtue hereof. The power of attorney granted pursuant to this SECTION 6 is a
power coupled with an interest and shall be irrevocable until all Secured
Obligations shall have been indefeasibly paid in full.
6.3 DUTIES AND LIABILITIES. The powers conferred on the Collateral Agent
hereunder are solely to protect Secured Parties' interests in the Collateral and
shall not impose any duty upon it to exercise any such powers. The Collateral
Agent shall be accountable only for amounts that it actually receives as a
result of the exercise of such powers and neither the Collateral Agent nor any
Secured Party of its officers, directors, partners, employees, agents or
representatives shall be responsible or liable to the Debtor or the Company for
any act or failure to act.
6.4 COMMUNICATION WITH THIRD PARTIES; SALE OF COLLATERAL. Upon the
occurrence and during the continuation of an Event of Default, the Debtor and
the Company also authorize the Collateral Agent, at any time and from time to
time, (a) to communicate in the Collateral Agent's own name with any account
debtor with regard to the assignment of the right, title and interest of the
Company in and
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under the Accounts and other matters relating thereto, and (b) to execute, in
connection with the sale provided for in SECTION 9 hereof, any endorsements,
assignments or other instruments of conveyance or transfer with respect to the
Collateral.
7. PERFORMANCE BY SECURED PARTY OF THE DEBTOR'S OBLIGATIONS. If either the
Debtor or the Company fails to perform or comply with any of its agreements
contained herein or under the Note, and the Collateral Agent shall, on behalf of
the Secured Parties, itself perform or comply, or otherwise cause performance of
or compliance with such agreement, then the expenses (including, but not limited
to, attorneys' fees) of the Collateral Agent incurred in connection with such
performance or compliance, together with applicable interest thereon at the rate
then in effect in accordance with the terms of the Note, shall be payable by the
Debtor to the Collateral Agent, on behalf of the Collateral Agent, on demand and
shall constitute Secured Obligations secured hereby.
8. EVENTS OF DEFAULT. The occurrence of any one or more the following events
shall constitute an "Event of Default" hereunder:
8.1 FAILURE TO MEET SECURED OBLIGATIONS. There shall occur an Event of
Default if the Debtor shall fail to meet its Secured Obligations upon the terms
set forth in the Note or the Purchase Agreement or if an "Event of Default" (as
defined in the Note) shall have occurred.
8.2 MISREPRESENTATION. Any warranty or representation of Debtor or the
Company to Secured Party in this Security Agreement proves to have been false or
misleading in any material respect when made.
8.3 BREACH OF COVENANTS. Debtor or the Company shall fail or neglect to
perform, keep or observe any covenant or obligation of Debtor or the Company
contained in this Security Agreement and the breach of any such covenant or
obligation is not cured within thirty (30) days after Debtor's or the Company's
(as appropriate) receipt of notice of such breach from Secured Party.
8.4 INSOLVENCY, ETC. Debtor or the Company shall suffer the appointment of
a receiver, trustee, custodian or similar fiduciary for all or substantially all
of their respective assets, or shall make an assignment for the benefit of
creditors, or any petition for an order for relief shall be filed by or against
Debtor or the Company under any applicable bankruptcy law and such appointment
or proceeding, as the case may be, is not controverted within thirty (30) days,
or is not dismissed within ninety (90) days, after such appointment or
commencement of such proceeding (as the case may be).
9. REMEDIES; RIGHTS UPON AN EVENT OF DEFAULT.
9.1 RIGHTS UPON COLLATERAL. If any Event of Default shall occur and be
continuing, the Collateral Agent, on behalf of the Secured Parties, and with the
written consent of Secured Parties which together hold more than 50% of the
aggregate indebtedness then outstanding under the Notes (the "Majority
Holders"), may exercise, in addition to all other rights and remedies granted to
it under the Note, this Agreement, or any other instrument or agreement
securing, evidencing or relating to the Secured Obligations, all rights and
remedies of a secured party under the UCC. Without limiting the generality of
the foregoing, the Debtor and the Company expressly agree that in any such event
the Collateral Agent may, with the written consent of the Majority Holders,
without demand of performance or other demand, advertisement or notice of any
kind (except the notice specified below of time and place of public or private
sale) to or upon the Debtor, the Company or any other Person (all
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and each of which demands, advertisements and notices are hereby expressly
waived to the maximum extent permitted by the UCC and other applicable law),
forthwith enter upon the premises of the Debtor or the Company where any
Collateral is located through self-help, without judicial process, without first
obtaining a final judgment or giving the Debtor or the Company notice and
opportunity for a hearing on the Collateral Agent's claim or action, and without
paying rent to the Debtor or the Company, and collect, receive, assemble,
process, appropriate and realize upon the Collateral, or any part thereof, and
may forthwith sell, lease, assign, give an option or options to purchase, or
sell or otherwise dispose of and deliver said Collateral (or contract to do so),
or any part thereof, in one or more parcels at public or private sale or sales
or at any exchange, at such prices as it may deem best, for cash or on credit or
for future delivery without assumption of any credit risk. The Collateral Agent
shall have the right upon any such public sale or sales and, to the extent
permitted by law, upon any such private sale or sales, to purchase for the
benefit of the Secured Parties the whole or any part of said Collateral so sold,
free of any right or equity of redemption, which equity of redemption the Debtor
and the Company hereby release. Such sales may be adjourned or continued from
time to time with or without notice. The Collateral Agent shall have the right
to conduct such sales on the Debtor's or the Company's premises or elsewhere and
shall have the right to use the Debtor's or the Company's premises without
charge for such sales for such time or times as the Collateral Agent deems
necessary or advisable.
The Debtor and the Company further agree, if an Event of Default has
occurred and is continuing, at the Collateral Agent's request, to assemble the
Collateral and make it available to the Collateral Agent at places which the
Collateral Agent shall select, whether at the Debtor's premises, the Company's
premises or elsewhere. Until the Collateral Agent is able to effect a sale,
lease, or other disposition of any Collateral, the Collateral Agent shall have
the right to use or operate the Collateral, or any part thereof, to the extent
that it deems appropriate for the purpose of preserving the Collateral or its
value or for any other purpose deemed appropriate by the Collateral Agent. The
Collateral Agent shall have no obligation to the Debtor or the Company to take
any action to maintain or preserve the rights of the Debtor or the Company as
against third parties with respect to any Collateral while such Collateral is in
the possession of the Collateral Agent. The Collateral Agent may, with the
written consent of the Majority Holders, seek the appointment of a receiver or
keeper to take possession of Collateral and to enforce any of the Secured
Parties' remedies with respect to such appointment without prior notice or
hearing. The Collateral Agent shall apply the net proceeds of any such
collection, recovery, receipt, appropriation, realization or sale, as provided
in SECTION 10 hereof. The Debtor shall remain liable for any deficiency
remaining unpaid after such application, and only after so paying over such net
proceeds and after the payment by the Collateral Agent of any other amount
required by any provision of law. To the maximum extent permitted by applicable
law, the Debtor and the Company waive all claims, damages, and demands against
the Collateral Agent and any Secured Party arising out of the repossession,
retention or sale of the Collateral. The Debtor and the Company agree that ten
(10) days' prior notice by the Collateral Agent to it of the time and place of
any public sale or of the time after which a private sale may take place is
reasonable notification of such matters. The Debtor shall remain liable for (a)
any deficiency if the proceeds of any sale or disposition of the Collateral are
insufficient to pay all amounts to which the Secured Parties are entitled, and
(b) any and all costs and expenses incurred by the Collateral Agent and any
Secured Party, including, but not limited to, attorneys' fees, to collect such
deficiency.
9.2 FEES. The Debtor agrees to pay any and all expenses of the Collateral
Agent (including, but not limited to, attorneys' fees and appraisal costs)
reasonably incurred in connection
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with the enforcement of any of its rights and remedies hereunder in connection
with a Default or Event of Default.
9.3 WAIVER. Except as otherwise specifically provided herein, (to the
maximum extent permitted by applicable law), the Debtor and the Company each
hereby waives presentment, demand, protest or any notice of any kind in
connection with this Agreement or any Collateral.
10. APPLICATION OF PROCEEDS. The Proceeds of any sale, disposition or other
realization upon all or any part of the Collateral shall be distributed by the
Collateral Agent on behalf of the Secured Parties, upon receipt, in the
following order of priorities, subject to the rights of the Senior Lender:
FIRST, to the Secured Parties, on a pro rata basis, in accordance with
the then outstanding unpaid principal balances of the Notes held by
such Secured Parties in an amount sufficient to pay in full the
expenses of the Secured Parties in connection with such sale,
disposition or other realization, including, but not limited to, all
expenses, liabilities and advances incurred or made by Secured Parties
in connection therewith, including, but not limited to, attorneys'
fees;
SECOND, to Secured Parties, on a pro rata basis, in accordance with
the then outstanding unpaid principal balances of the Notes held by
such Secured Parties to be applied, first, to all accrued but unpaid
interest on, and, second, to all principal of, the Note, on a pro rata
basis, in accordance with the then outstanding unpaid principal
balances of the Notes held by such Secured Parties;
THIRD, to all other Secured Obligations; and
FINALLY, upon payment in full of all of the Secured Obligations, to
the Debtor or whomsoever may be lawfully entitled to receive the same,
or as a court of competent jurisdiction may direct.
11. POWERS AND DUTIES OF COLLATERAL AGENT.
(a) Each of the Secured Parties irrevocably authorizes the Collateral
Agent, who has been designated in the manner described in SCHEDULE 11(A)
attached hereto, to take such action and to exercise such powers hereunder
as provided herein or as requested in writing by the Majority Holders,
which may include the Collateral Agent in its capacity as a Secured Party,
in accordance with the terms hereof, together with such powers as are
reasonably incidental thereto. No Secured Party may take any such action or
exercise such powers except through and by way of an authorized action of
the Collateral Agent. The Collateral Agent may execute any of its duties
hereunder by or through agents or employees and shall be entitled to
request and to act in reliance upon the advice of counsel concerning all
matters pertaining to its duties hereunder.
(b) Neither the Collateral Agent nor any of its partners, officers or
employees shall be liable or responsible to any of the Secured Parties, to
Debtor or to the Company for any action taken or omitted to be taken by it
or any of them hereunder or under any related agreement, instrument or
document, except in the case of gross negligence or willful misconduct on
the part of the Collateral
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Agent, nor shall the Collateral Agent or any of its partners, officers or
employees be liable or responsible for (i) the validity, effectiveness,
sufficiency, enforceability or enforcement of this Security Agreement or
any instrument or document delivered hereunder or relating hereto; (ii) the
title of the Company to any of the Collateral or the freedom of any of the
Collateral from any prior or other liens or security interests; (iii) the
determination or verification of the value of the Collateral; (iv) the
determination, verification or enforcement of Debtor's or the Company's
compliance with any of the terms and conditions of this Agreement; (v) the
failure by Debtor or the Company to deliver any instrument or document
required to be delivered pursuant to the terms thereof; or (vi) the
receipt, disbursement, waiver, extension or other handling of payments or
proceeds made or received with respect to the Collateral, the servicing of
the Collateral or the enforcement or collection of any amounts owing with
respect to the Collateral.
(c) The Collateral Agent shall be entitled to rely on any
communication, instrument or document believed by it to be genuine or
correct and to have been signed or sent by a person or persons believed by
it to be the proper person or persons, and it shall be entitled to rely as
to all legal matters on opinions of counsel selected by it. In the case of
this Security Agreement and the transactions contemplated hereby and any
related agreement and each document relating to any of the Collateral, each
of the Secured Parties agrees to pay to the Collateral Agent, on demand,
pro rata in accordance with the then outstanding unpaid principal balances
of the Note held by it or him, all fees and all expenses incurred in
connection with the operation and enforcement of this Security Agreement
which were approved in advance by the Majority Holders, any related
agreement or such other documents, as the case may be, to the extent that
such fees or expenses have not been paid by Debtor. In the case of this
Security Agreement and each instrument and document relating to any of the
Collateral, each of the Secured Parties hereby agrees to hold the
Collateral Agent harmless, and to indemnify the Collateral Agent from and
against any and all loss, damage, expense or liability which may be
incurred by the Collateral Agent in its capacity as Collateral Agent under
this Security Agreement and the transactions contemplated hereby and any
related agreement or such other instrument or document, as the case may be,
unless such liability shall be caused by the willful misconduct or gross
negligence of the Collateral Agent.
(d) The Collateral Agent hereby is authorized to record, file or
otherwise perfect in its name all of the Collateral which is mortgaged,
pledged, assigned, transferred or granted to the Secured Parties hereunder
in the appropriate jurisdiction with respect to all such Collateral;
PROVIDED, HOWEVER, that the Collateral Agent shall not be required to take
any such action in any jurisdiction wherein the taking of such action and
other actions contemplated by this Security Agreement would, in the opinion
of the Collateral Agent or local counsel, require the Collateral Agent to
qualify, register or be licensed to do business under the laws of the
jurisdiction in question by reason of the taking of such action.
(e) If, at any time, the Collateral Agent shall deem it advisable, in
its sole discretion, it may submit to each of the Secured Parties a written
notification of its resignation as Collateral Agent under this Agreement,
such resignation to be effective as of the 61st day after the date of such
notice, whereupon the Majority Holders shall appoint a successor Collateral
Agent in the manner described in SCHEDULE 11(A) attached hereto, which may
but need not be a Secured Party. The Collateral Agent may be removed at any
time by the Majority Holders upon at least 10 days' prior written notice;
PROVIDED, HOWEVER, that a substitute satisfactory to such Majority Holders
shall have agreed in writing to assume the duties of the Collateral Agent
hereunder.
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12. REINSTATEMENT. This Agreement shall remain in full force and effect and
continue to be effective should any petition be filed by or against the Debtor
or the Company for liquidation or reorganization, should the Debtor or the
Company become insolvent or make an assignment for the benefit of creditors, or
should a receiver or trustee be appointed for all or any significant part of the
Debtor's or the Company's assets, and shall continue to be effective or be
reinstated, as the case may be, if at any time payment and performance of the
Obligations, or any part thereof, is, pursuant to applicable law, rescinded or
reduced in amount, or must otherwise be restored or returned by any obligee of
the Secured Obligations, whether as a "voidable preference," "fraudulent
transfer" or otherwise, all as though such payment or performance had not been
made. In the event that any payment, or any part thereof, is rescinded, reduced,
restored or returned, the Secured Obligations shall be reinstated and deemed
reduced only by such amount paid and not so rescinded, reduced, restored or
returned.
13. SUBORDINATION. The Secured Parties agree that the payment of the Secured
Obligations is subordinated to payment in full of all indebtedness up to
$700,000 of the Debtor to the Senior Lender and the security interest in the
Collateral is subordinate to the security interest in such Collateral granted to
the Senior Lender. The Secured Parties agree to execute such documents as the
Senior Lender may reasonably require from time to time to evidence such
subordination and to enable the Senior Lender to enforce and perfect its first
priority security interest in the Collateral.
14. NOTICES. Any written notice, consent or other communication provided for in
this Security Agreement shall be deemed given if delivered by hand, by courier
against receipt, by certified or registered mail, return receipt requested, or
by overnight delivery service providing evidence of receipt, at the following
addresses, or to such other address with respect to any party as such party
shall notify the other in writing:
Secured Parties: To the addresses set forth opposite their
respective names on Schedule 1 hereto.
Collateral Agent: J. Xxxxxx Xxxxxxxxx
0000 Xxx Xxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Debtor: Air Methods Corporation
0000 Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: President
Company: Mercy Air Service, Inc.
0000 Xxxxx Xxxxxx
Xxxxxxx, XX 00000
Attn: President
15. SEVERABILITY. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or
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unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. This Agreement is to be
read, construed and applied together with the Purchase Agreement and the Notes
which, taken together, set forth the complete understanding and agreement of
Secured Parties, the Debtor and the Company with respect to the matters referred
to herein and therein.
16. NO WAIVER; CUMULATIVE REMEDIES. The Secured Parties shall not, by any act,
delay, omission or otherwise, be deemed to have waived any of their respective
rights or remedies hereunder, and no waiver shall be valid against any Secured
Party unless in writing, signed by such Secured Party and then only to the
extent therein set forth. A waiver by a Secured Party of any right or remedy
hereunder on any one occasion shall not be construed as a bar to any right or
remedy which such Secured Party would otherwise have on any future occasion and
shall not be construed as a waiver of any right or remedy of any other Secured
Party. Neither any Secured Party's failure to exercise, nor any delay in
exercising, any right, power or privilege hereunder, shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or future exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies
hereunder provided are cumulative and may be exercised singly or concurrently,
and are not exclusive of any rights and remedies provided by law. None of the
terms or provisions of this Agreement may be waived, altered, modified or
amended except by a written instrument duly executed by the Secured Parties, the
Collateral Agent, the Debtor and the Company.
17. LIMITATION BY LAW. All rights, remedies and powers provided in this
Agreement may be exercised only to the extent that the exercise thereof does not
violate any applicable provision of law, and all the provisions of this
Agreement are intended to be (i) subject to all applicable mandatory provisions
of law that may be controlling and (ii) limited to the extent necessary so that
they do not render this Agreement invalid or unenforceable, in whole or in part,
or not entitled to be recorded, registered, or filed under the provisions of any
applicable law.
18. TERMINATION OF THIS AGREEMENT. Subject to SECTION 12 hereof, this Agreement
shall terminate upon the date on which all Secured Obligations have been paid in
full. For purposes of this SECTION 18, all Secured Obligations shall be deemed
to have been paid in full at such time as (i) the Debtor shall have fully
satisfied its obligations with respect to the payment of all principal, premium,
interest and other amounts which are or may become due and payable under the
Notes and the Purchase Agreement; and (ii) the Debtor shall have fully satisfied
its obligations with respect to the payment of all accrued and unpaid expenses
(including expense reimbursements) and fees then payable by the Debtor to
Secured Parties, the Collateral Agent or their respective affiliates under this
Agreement. Once the Secured Parties are satisfied that all Secured Obligations
have been paid in full and the Secured Parties do not believe that reinstatement
of the Secured Obligations pursuant to SECTION 12 is possible, the Secured
Parties shall prepare, execute and deliver UCC-3 Financing Statement(s) to the
Debtor to be filed with the Secretary of State of the State of California.
19. SUCCESSORS AND ASSIGNS. This Agreement and all obligations of the Debtor and
the Company hereunder shall be binding upon the successors and assigns of the
Debtor and the Company and, together with the rights and remedies of the Secured
Parties hereunder, shall inure to the benefit of the Secured Parties, all future
holders of any instrument evidencing any of the Secured Obligations, and their
respective successors and assigns. No sales of participations, other sales,
assignments, transfers or other dispositions of any agreement governing or
instrument evidencing any of the Secured
-14-
Obligations or any portion thereof or interest therein shall in any manner
affect the Lien granted to any Secured Party hereunder.
20. ENFORCEMENT. In the event that the Debtor or the Company fail to observe or
perform any covenant or agreement to be observed or performed under this
Agreement, the Secured Parties may proceed to protect and enforce their rights
by suit in equity or action at law, whether for specific performance of any term
contained in this Agreement or for an injunction against the breach of any such
term or in aid of the exercise of any power granted in this Agreement or to
enforce any other legal or equitable right of the Secured Parties, or to take
any one or more of such actions. The Debtor agrees to pay all fees, costs, and
expenses, including without limitation, fees and expenses of attorneys,
accountants and other experts retained by the Secured Parties, and all fees,
costs and expenses of appeals incurred or expended by the Secured Parties in
connection with the enforcement of this Agreement or the collection of any sums
due hereunder, whether or not suit is commenced. None of the rights, powers or
remedies conferred under this Agreement shall be mutually exclusive, and each
such right, power or remedy shall be cumulative and in addition to any other
right, power or remedy whether conferred by this Agreement or now or hereafter
available at law, in equity, by statute or otherwise.
21. DESCRIPTIVE HEADINGS. The descriptive headings of the several paragraphs of
this Agreement are for convenience of reference only and do not constitute a
part of this Agreement and are not to be considered in construing or
interpreting this Agreement.
22. GOVERNING LAW. In all respects, including all matters of construction,
validity and performance, this Agreement and the rights and obligations arising
hereunder shall be governed by, and construed and enforced in accordance with,
the laws of the State of California applicable to contracts made and performed
in such state, without regard to principles thereof regarding conflicts of laws.
23. WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX
FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN
EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL
LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR
DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO
ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, AND UNDERSTANDING THEY ARE WAIVING A CONSTITUTIONAL RIGHT, THE
PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR
PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER IN CONTRACT, TORT, OR
OTHERWISE, ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO, THIS
AGREEMENT, AND/OR THE TRANSACTIONS COMPLETED HEREBY OR THEREBY.
-15-
IN WITNESS WHEREOF, each of the parties hereto has caused this Security
Agreement to be executed and delivered by its duly authorized officer on the
date first set forth above.
"DEBTOR"
Air Methods Corporation,
a Delaware corporation
By:
------------------------------------
Its:
-----------------------------------
"COMPANY'"
Mercy Air Service, Inc.,
a California corporation
By:
------------------------------------
Its:
-----------------------------------
"COLLATERAL AGENT"
---------------------------------------
J. Xxxxxx Xxxxxxxxx
"SECURED PARTIES"
---------------------------------------
Xxxxxxx X. Xxxxx, an individual
---------------------------------------
Xxxxx X. Xxxxx, an individual
-16-
---------------------------------------
Xxxxxx X. Xxxx
---------------------------------------
Xxxxx X. Xxxx
---------------------------------------
J. Xxxxxx Xxxxxxxxx
EXHIBIT C
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made and entered into as of July
31, 1997, between Air Methods Corporation, a Delaware corporation (the
"Company"), and Xxxxx X. Xxxxxxxx, an individual person (the "Executive").
RECITAL
A. The Company desires to employ the Executive as President of its
wholly-owned subsidiary Mercy Air Services, Inc., a California corporation
("Mercy"), and the Executive desires to be employed by the Company in such
position upon the terms and conditions set forth in this Agreement.
B. The Executive acknowledges that during the course of the Executive's
employment the Executive will receive or be exposed to certain confidential
information and trade secrets (collectively referred to as "Confidential
Information") of the Company and Mercy. The Executive also acknowledges that
this Confidential Information is among the Company's and Mercy's most important
assets and that the value of this Confidential Information would be diminished
or extinguished by disclosure.
AGREEMENT
In consideration of the mutual promises contained herein, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Employment; Position; Term. The Company hereby employs the Executive and
the Executive hereby accepts employment with the Company in the capacity of
President of Mercy. Subject to Section 4, the term of Executive's employment
under this Agreement (the "Term") shall be for one year, beginning July 31,
1997. The Term shall be extended for successive one-year periods on July 31 of
each year beginning July 31, 1998, unless on or before May 31 prior to any such
renewal date the Company or the Executive provides written notice to the other
of its or his intention not to renew this Agreement.
2. Duties, Responsibilities and Authority. In his capacity as President of
Mercy, the Executive shall have primary responsibility for the overall
management and operation of Mercy, including directing and planning long and
short range strategies for air medical activities, service pricing, operations
coordination, budgetary planning, contract negotiations, aircraft control,
maintenance coordination and fleet distribution, all of which shall be conducted
in accordance with policies established by the Company's board of directors (the
"Board"). In his capacity as President, the Executive shall report to and be
subject to the direction and control of the Board. The Executive shall devote
his full professional and managerial time and effort to the performance of his
duties as President and he shall not engage in any other business activity or
activities which, in the mutual judgment of the Executive and the Board,
conflict with the performance of his duties under this Agreement.
3. Compensation.
(a) SALARY. For services rendered under this Agreement, the Company shall
pay the Executive a salary at the rate of $125,000 per annum, payable in equal
bi-weekly installments.
(b) ANNUAL REVIEW. The Executive's salary shall be reviewed annually
beginning July 31, 1998 and may be adjusted as the Board deems appropriate.
(c) STOCK OPTIONS. Concurrently with the effectiveness of this Agreement,
and pursuant to action of the Board, the Executive shall be granted an option
under the Company's Stock Option Plan to purchase up to 50,000 shares of the
Company's Common Stock at an exercise price equal to the fair market value on
the date hereof. Such stock options shall be evidenced by a Stock Option
Agreement, a form of which is attached hereto as EXHIBIT A, which sets forth all
applicable terms of the option grants. In addition, the Executive may
participate in stock option programs of the Company upon such terms as the
administrators of such programs in their discretion determine.
(d) BENEFITS AND VACATION. The Executive shall be eligible to participate
in such insurance programs (health, disability or life) or such other health,
dental, retirement or similar employee benefits programs as the Board may
approve, on a basis comparable to that available to other officers and executive
employees of the Company. The Executive shall be entitled to four (4) weeks of
paid vacation. Vacation time may be accumulated for up to one year beyond the
year for which it is accrued and may be used any time during such year. Any
vacation time not used during such additional year shall be forfeited. The value
of any accrued but unused and unforfeited vacation time shall be paid in cash to
the Executive upon termination of his employment for any reason.
(e) REIMBURSEMENT OF EXPENSES. The Company shall reimburse the Executive
for all reasonable out-of-pocket expenses incurred by the Executive in
connection with the performance of his duties under this Agreement; provided
that the Executive presents to the Company an itemized accounting of such
expenses including reasonable supporting data.
4. Termination.
(a) TERMINATION BY THE COMPANY WITHOUT CAUSE. Notwithstanding anything to
the contrary contained herein but subject to Section 7 hereof, the Company may,
by delivering thirty (30) days' prior written notice to the Executive, terminate
the Executive's employment at any time without Cause (as hereinafter defined).
(b) TERMINATION BY THE EXECUTIVE WITHOUT CAUSE. Notwithstanding anything to
the contrary contained herein but subject to Section 7 hereof, the Executive
may, by
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delivering thirty (30) days' prior written notice to the Company, terminate the
Executive's employment hereunder.
(c) TERMINATION BY THE COMPANY FOR CAUSE. The Company may terminate the
Executive's employment for Cause immediately upon written notice stating the
basis for such termination. "Cause" for termination of the Executive's
employment shall only be deemed to exist if the Executive has (i) breached this
Agreement and if such breach continues or recurs more than thirty (30) days
after notice from the Company specifying the action which constitutes the breach
and demanding its discontinuance, (ii) exhibited willful disobedience of
directions of the Board, or (iii) committed gross malfeasance in performance of
his duties hereunder or acts resulting in an indictment charging the Executive
with the commission of a felony; provided that the commission of acts resulting
in such an indictment shall constitute Cause only if a majority of the directors
who are not also subject to any such indictment determine that the Executive's
conduct has substantially adversely affected the Company or its reputation. A
material failure to perform his duties hereunder that results from the
disability of the Executive shall not be considered Cause for his termination.
5. Disability. In the event of disability of the Executive during the term
hereof, the Company shall, during the continuance of his disability but only for
a maximum of 90 days, pay the Executive his then current salary, as provided for
in Section 3(a), and adjusted pursuant to Section 3(b), and continue to provide
the Executive all other benefits provided hereunder. As used herein, the term
"disability" shall mean the complete and total inability of the Executive, due
to illness, physical or comprehensive mental impairment, to substantially
perform all of his duties as described herein for a consecutive period of thirty
(30) days or more.
6. Death. In the event of the death of the Executive, except with respect
to any benefits which have accrued and have not been paid to the Executive
hereunder, the provisions of this Agreement shall terminate immediately. The
Executive's estate shall have the right to receive compensation due to the
Executive as of and to the date of his death and shall have the right to receive
an additional amount equal to one-twelfth (1/12th) of the Executive's annual
compensation then in effect.
7. Severance. In the event that the Executive's employment is terminated by
the Company other than for Cause or death of the Executive, the Executive shall
be entitled to receive his then current salary, as provided for in Section 3(a),
and adjusted pursuant to Section 3(b), payable on bi-weekly installments, for
twelve (12) months following the date of the Executive's termination by the
Company; PROVIDED, HOWEVER, that if any of such payments would (i) constitute a
"parachute payment" within the meaning of Section 280G of the Internal Revenue
Code of 1986 (the "Code") and (ii) but for this provision, be subject to the
excise tax imposed by Section 4999 of the Code (the "Excise Tax"); the amount
payable hereunder shall be reduced to the largest amount which the Executive
determines would not result in any portion of the payments hereunder being
subject to the Excise Tax. If the Executive voluntarily resigns his employment
hereunder or if his employment is terminated for Cause, the Executive shall not
be entitled to any severance pay or other compensation beyond the date of
termination of his employment.
-3-
8. Covenant Not to Compete.
(a) During the continuance of the Executive's employment hereunder and for
a period of twelve (12) months after termination of the Executive's employment
hereunder, the Executive shall not engage in any business which competes
directly or indirectly with the Company or its affiliates within a fifty (50)
mile radius of any location in the United States where the Company or its
affiliates are conducting operations during the Executive's employment hereunder
or at the time of termination. As of the date hereof, Mercy conducts operations
in the following counties of California: Imperial, Xxxx, Los Angeles, Orange,
Riverside, San Bernardino, San Diego, Santa Xxxxxxx and Ventura; and the Company
conducts operations in the following locations: Bend, Oregon; Charlotte and
Winston-Salem, North Carolina; Fairfax and Roanoke, Virginia; Duluth and St.
Xxxx, Minnesota; Evansville, Indiana; Grand Junction, Greeley, and Aurora,
Colorado; San Antonio and Texarkana, Texas; Billings, Montana; Des Moines, Iowa;
Farmington, New Mexico; Marshfield, Wisconsin; Rockford, Illinois; Stanford,
California; and Salt Lake City, Utah.
(b) The Executive shall not, for a period of twelve (12) months after
termination of the Executive's employment hereunder, employ, engage or seek to
employ or engage, directly or indirectly, any individual or entity who is or was
employed or engaged by the Company or any of its affiliates until the expiration
of six (6) months following the termination of such person's or entity's
employment or engagement with the Company or any of its affiliates..
9. Trade Secrets and Confidential Information. During his employment by the
Company and for a period of five (5) years thereafter, the Executive shall not,
directly or indirectly, use, disseminate, or disclose for any purpose other than
for the purposes of the Company's business, any Confidential Information of the
Company or its affiliates, unless such disclosure is compelled in a judicial
proceeding. Upon termination of his employment, all documents, records,
notebooks, and similar repositories of records containing information relating
to any Confidential Information then in the Executive's possession or control,
whether prepared by him or by others, shall be left with the Company or, if
requested, returned to the Company.
10. Severability. It is the desire and intent of the undersigned parties
that the provisions of Sections 8 and 9 shall be enforced to the fullest extent
permissible under the laws in each jurisdiction in which enforcement is sought.
Accordingly, if any particular sentence or portion of either Section 8 or 9
shall be adjudicated to be invalid or unenforceable, the remaining portions of
such section nevertheless shall continue to be valid and enforceable as though
the invalid portions were not a part thereof. In the event that any of the
provisions of Section 8 relating to the geographic areas of restriction or the
provisions of Sections 8 or 9 relating to the duration of such Sections shall be
deemed to exceed the maximum area or period of time which a court of competent
jurisdiction would deem enforceable, the geographic areas and times shall, for
the purposes of this Agreement, be deemed to be the maximum areas or time
periods which a court of competent jurisdiction would deem valid and enforceable
in any state in which such court of competent jurisdiction shall be convened.
-4-
11. Injunctive Relief. The Executive agrees that any violation by him of
the provisions contained in Sections 8 and 9 are likely to cause irreparable
damage to the Company, and therefore he agrees that if there is a breach or
threatened breach by the Executive of the provisions of said sections, the
Company shall be entitled to an injunction restraining the Executive from such
breach. Nothing herein shall be construed as prohibiting the Company from
pursuing any other available remedies for such breach or threatened breach.
12. Miscellaneous.
(a) NOTICES. Any notice required or permitted to be given under this
Agreement shall be directed to the appropriate party in writing and mailed or
delivered, if to the Company, to Air Methods Corporation, to the attention of
the Chairman of the Board, at 0000 Xxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxx 00000, or
to Air Methods then-principal office, if different, and if to the Executive, to
40516 ViaDiamante, Xxxxxxxx, Xxxxxxxxxx 00000.
(b) BINDING EFFECT. This Agreement is a personal service agreement and may
not be assigned by the Company or the Executive, except that the Company may
assign this Agreement to a successor of the Company by merger, consolidation,
sale of substantially all of the Company's assets or other reorganization.
Subject to the foregoing, this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors, assigns, and
legal representatives.
(c) AMENDMENT. This Agreement may not be amended except by an instrument in
writing executed by each of the undersigned parties.
(d) APPLICABLE LAW. This Agreement is entered into in the State of
California and for all purposes shall be governed by the laws of the State of
California.
(e) COUNTERPARTS. This instrument may be executed in one or more
counterparts, each of which shall be deemed an original.
(f) ENTIRE AGREEMENT. This Agreement supersedes and replaces all prior
agreements between the parties related to the employment of the Executive by the
Company or Mercy, including the Employment, Non-Competition and Profit
Participation Agreement, dated December 30, 1994, between the Executive and
Mercy.
[Remainder of Page Intentionally Left Blank]
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SIGNATURES
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
first date mentioned above.
THE COMPANY:
AIR METHODS CORPORATION
By:
-----------------------------------------------
Xxxxxx X. Xxxxxx, Chairman of the Board and
Chief Executive Officer
THE EXECUTIVE:
--------------------------------------------------
Xxxxx X. Xxxxxxxx
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EXHIBIT A
OPTION AGREEMENT
(NON-INCENTIVE STOCK OPTION UNDER STOCK OPTION PLAN)
THIS AGREEMENT is made and entered into this 31st day of July, 1997, by and
between AIR METHODS CORPORATION (the "Company") and Xxxxx X. Xxxxxxxx (the
"Optionee") (together, the "Parties").
RECITALS:
1. On June 1, 1987, the Board of Directors of the Company adopted a Stock
Option Plan (the "Plan") and as amended effective August 15, 1995, provides that
Employees, Non-Employee Directors and Consultants of the Company and its
subsidiaries may receive options to purchase Common Stock of the Company.
2. The Plan permits the granting of incentive stock options, which conform
to the requirements of Xxxxxxx 000 xx xxx Xxxxxx Xxxxxx Internal Revenue Code of
1986, as amended (the "Code"), and non-incentive stock options, which do not
qualify as incentive stock options under that Section.
3. The Optionee has been selected to receive a non-incentive stock option
pursuant to the Plan.
4. The Optionee is desirous of obtaining the non-incentive stock option on
the terms and conditions herein contained.
AGREEMENT:
IT IS THEREFORE agreed by and between the Parties, for and in consideration
of the premises and the mutual covenants herein contained and for other good and
valuable consideration, as follows:
A. The Company hereby confirms and acknowledges that it has granted to the
Optionee, on July 31, 1997, an option to purchase 50,000 shares of Common Stock
of the Company (the "Option") upon the terms and conditions herein set forth and
subject to the terms and conditions of the Plan. The Option is granted as a
matter of separate agreement, and not in lieu of salary or any other regular or
special compensation for services.
B. The purchase price of the shares which may be purchased pursuant to the
Option is $ per share, which is, in the opinion of the Company, not less
-------
than the fair market value of the shares on the date the Option was granted as
specified in paragraph A.
C. Unless sooner terminated or modified under the provisions of this
Agreement, the Option shall continue and shall automatically expire at midnight
July 31, 2002, the fifth anniversary date of the original option grant.
D. The Option may be exercised by the Optionee to purchase the total number
of shares specified in paragraph A as follows:
One-third (1/3rd) of the total number of shares shall be exercisable
on the first anniversary of the date of grant,
An additional one-third (1/3rd) of the total number of shares shall
become exercisable on the second anniversary of the date of
grant, and
The remaining one-third (1/3rd) of the total number of shares shall
become exercisable on the third anniversary of the date of grant.
The Optionee need not exercise any part of the Option when it becomes
exercisable, but may accrue the fractional increments described above and
exercise them in any later period, prior to expiration of the Option.
E. If the Optionee's employment with the Company or a participating
subsidiary of the Company shall terminate for any reason other than the
Optionee's disability, the Option, to the extent then exercisable as provided in
paragraph D, shall remain exercisable after the termination of his employment
for a period of three months. If the Optionee's employment is terminated because
the Optionee is disabled within the meaning of Section 22(e)(3) of the Code, the
Option, to the extent then exercisable as provided in paragraph D, shall remain
exercisable after the termination of his employment for a period of twelve
months. If the Option is not exercised during the applicable period, it shall be
deemed to have been forfeited and of no further force or effect.
F. The Option may not be exercised by anyone other than the Optionee during
his lifetime. In the event of the Optionee's death, the Option may be exercised
by the personal representative of the Optionee's estate or, if no personal
representative has been appointed, by the successor or successors in interest
determined under the Optionee's will or under the applicable laws of descent and
distribution. The Option may not be transferred, assigned, encumbered or
alienated in any way by the Optionee, and any attempt to do so shall render the
Option and any unexercised portion thereof, at the discretion of the Company,
null and void and unenforceable by the Optionee.
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G. The Option may be exercised in whole or in part by delivering to the
Company written notice of exercise together with payment in full for the shares
being purchased upon such exercise.
H. The Company will, upon receipt of said notice and payment, issue or
cause to be issued to the Optionee (or to his personal representative or other
person entitled thereto) a stock certificate for the number of shares purchased
thereby. The Optionee may designate a member of the Optionee's immediate family
as a co-owner of the said shares.
I. The Company may, in its discretion, file and maintain effective with the
Securities and Exchange Commission a Registration Statement on Form S-8 under
the Securities Act of 1933, as amended (the "Act"), covering the sale of the
optioned shares to Optionee upon exercise of the Option. If, at the time of
exercise, the Company does not have an effective Registration Statement on file
covering the sale of the optioned shares, the Optionee represents and agrees
that: (i) the Option shall not be exercisable unless the purchase of optioned
shares upon the exercise of the Option is pursuant to an applicable effective
registration statement under the Act, or unless in the opinion of counsel for
the Company, the proposed purchase of such optioned shares would be exempt from
the registration requirements of the Act, and from the qualification
requirements of any state securities law; (ii) upon exercise of the Option, he
will acquire the optioned shares for his own account for investment and not with
any intent or view to any distribution, resale or other disposition of the
optioned shares; (iii) he will not sell or transfer the optioned shares, unless
they are registered under the Act, except in a transaction that is exempt from
registration under the Act, and each certificate issued to represent any of the
optioned shares shall bear a legend calling attention to the foregoing
restrictions and agreements. The Company may require, as a condition of the
exercise of the Option, that the Optionee sign such further representations and
agreements as it reasonably determines to be necessary or appropriate to assure
and to evidence compliance with the requirements of the Act.
J. If the Company or its stockholders enter into an agreement to dispose of
all, or substantially all, of the assets or outstanding capital stock of the
Company by means of a sale or liquidation, or a merger or reorganization in
which the Company is not the surviving corporation, any unexercised portion of
the Option as of the day before the consummation of such sale, liquidation,
merger or reorganization shall for all purposes under this Agreement become
exercisable in full as of such date even though the anniversary dates, as
provided in paragraph D, have not yet occurred.
K. In consideration of the granting by the Company of the Option, the
Optionee hereby affirms that he has a present intention to remain in the employ
and service of the Company or a participating subsidiary for the period that
this Option continues. This affirmation, however, shall confer no right on the
Optionee to continue in the employ of the Company or a participating subsidiary,
nor interfere in any way with the right of the Company or
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a participating subsidiary to discharge the Optionee at any time for any reason
whatsoever, with or without cause.
L. The Optionee shall have no rights as a stockholder with respect to the
shares of Common Stock which may be purchased pursuant to the Option until such
shares are issued to the Optionee.
M. This Agreement is entered into and shall be governed by, construed and
enforced in accordance with the laws of the State of Colorado.
N. The terms and conditions contained in the Plan, as it may be amended
from time to time hereafter, are incorporated into and made a part of this
Agreement by reference, as if the same were set forth herein in full, and all
provisions of the Option are made subject to any and all terms of the Plan.
IN WITNESS WHEREOF, the parties have hereunto affixed their signatures in
acknowledgment and acceptance of the above terms and conditions on the date
first above mentioned.
AIR METHODS CORPORATION
By:
--------------------------------------
Title:
-----------------------------------
OPTIONEE
-----------------------------------------
Xxxxx X. Xxxxxxxx
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EXHIBIT D
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made and entered into as of July
31, 1997, between Mercy Air Service, Inc., a California corporation, with its
principal place of business at 8190 Mango, Xxxxxxx, Xxxxxxxxxx 00000 (the
"Company"), and Xxxx X. Xxxxx, an individual person (the "Executive").
RECITAL
A. The Company desires to employ the Executive as Clinical Director and the
Executive desires to be employed by the Company in such position upon the terms
and conditions set forth in this Agreement.
B. The Executive acknowledges that throughout the term of this Agreement,
the Executive will receive or be exposed to certain confidential information and
trade secrets (collectively referred to as "Confidential Information") of the
Company. The Executive also acknowledges that this Confidential Information is
among the Company's most important business assets and that the value of this
Confidential Information would be diminished or extinguished by disclosure.
AGREEMENT
In consideration of the mutual promises contained herein, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Employment; Position; Term. The Company hereby employs the Executive and
the Executive hereby accepts employment with the Company in the capacity of Vice
President of Patient Services. Subject to Section 4, the term of Executive's
employment under this Agreement (the "Term") shall be for one year, beginning
July 31, 1997. The Term shall be extended for successive one-year periods on
July 31 of each year beginning July 31, 1998 unless on or before May 31 prior to
any such renewal date the Company or the Executive provides written notice to
the other of its or her intention not to renew this Agreement.
2. Duties, Responsibilities and Authority. In her capacity as Vice
President of Patient Services, the Executive shall have primary responsibility
for clinical and program operations. In her capacity as Vice President of
Patient Services, the Executive shall report to and be subject to the direction
and control of the President of the Company. The Executive shall devote her full
professional and managerial time and effort to the performance of her duties as
Vice President of Patient Services and she shall not engage in any other
business activity or
activities which, in the mutual judgment of the President and the Board of
Directors of the Company, conflict with the performance of her duties under this
Agreement.
3. Compensation.
(a) SALARY. For services rendered under this Agreement, the Company shall
pay the Executive a salary at the rate of $80,000 per annum, payable in equal
bi-weekly installments.
(b) ANNUAL REVIEW. The Executive's salary shall be reviewed annually
beginning July 31, 1998 and may be adjusted as the Board deems appropriate.
(c) BENEFITS AND VACATION. The Executive shall be eligible to participate
in such insurance programs (health, disability or life) or such other health,
dental, retirement or similar employee benefits programs as the Board of
Directors of the Company (the "Board") may approve, on a basis comparable to
that available to other officers and executive employees of the Company. The
Executive shall be entitled to four (4) weeks of paid vacation. Vacation time
may be accumulated for up to one year beyond the year for which it is accrued
and may be used any time during such year. Any vacation time not used during
such additional year shall be forfeited. The value of any accrued but unused and
unforfeited vacation time shall be paid in cash to the Executive upon
termination of her employment for any reason.
(d) REIMBURSEMENT OF EXPENSES. The Company shall reimburse the Executive
for all reasonable out-of-pocket expenses incurred by the Executive in
connection with the performance of her duties under this Agreement; provided
that the Executive presents to the Company an itemized accounting of such
expenses including reasonable supporting data.
4. Termination.
(a) TERMINATION BY THE COMPANY WITHOUT CAUSE. Notwithstanding anything to
the contrary contained herein but subject to Section 7 hereof, the Company may,
by delivering thirty (30) days' prior written notice to the Executive, terminate
the Executive's employment at any time without Cause (as hereinafter defined).
(b) TERMINATION BY THE EXECUTIVE WITHOUT CAUSE. Notwithstanding anything to
the contrary contained herein but subject to Section 7 hereof, the Executive
may, by delivering thirty (30) days' prior written notice to the Company,
terminate the Executive's employment hereunder.
(c) TERMINATION BY THE COMPANY FOR CAUSE. The Company may terminate the
Executive's employment for Cause immediately upon written notice stating the
basis for such termination. "Cause" for termination of the Executive's
employment shall only be deemed to exist if the Executive has (i) breached this
Agreement and if such breach continues or recurs more than thirty (30) days
after notice from the Company specifying the action which
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constitutes the breach and demanding its discontinuance, (ii) exhibited willful
disobedience of directions of the President, or (iii) committed gross
malfeasance in performance of her duties hereunder or acts resulting in an
indictment charging the Executive with the commission of a felony; provided that
the commission of acts resulting in such an indictment shall constitute Cause
only if a majority of the directors who are not also subject to any such
indictment determine that the Executive's conduct has substantially adversely
affected the Company or its reputation. A material failure to perform her duties
hereunder that results from the disability of the Executive shall not be
considered Cause for her termination.
5. Disability. In the event of disability of the Executive during the term
hereof, the Company shall, during the continuance of her disability but only for
a maximum of ninety (90) days, pay the Executive her then current salary, as
provided for in Section 3(a), and adjusted pursuant to Section 3(b), and
continue to provide the Executive all other benefits provided hereunder. As used
herein, the term "disability" shall mean the complete and total inability of the
Executive, due to illness, physical or comprehensive mental impairment, to
substantially perform all of her duties as described herein for a consecutive
period of thirty (30) days or more.
6. Death. In the event of the death of the Executive, except with respect
to any benefits which have accrued and have not been paid to the Executive
hereunder, the provisions of this Agreement shall terminate immediately. The
Executive's estate shall have the right to receive compensation due to the
Executive as of and to the date of her death and shall have the right to receive
an additional amount equal to one-twelfth (1/12) of the Executive's annual
compensation then in effect.
7. Severance. In the event that the Executive's employment is terminated by
the Company other than for Cause or death of the Executive, the Executive shall
be entitled to receive her then current salary, as provided for in Section 3(a),
and adjusted pursuant to Section 3(b), payable on bi-weekly installments, for
twelve (12) months following the date of the Executive's termination by the
Company; PROVIDED, HOWEVER, that if any of such payments would (i) constitute a
"parachute payment" within the meaning of Section 280G of the Internal Revenue
Code of 1986 (the "Code") and (ii) but for this provision, be subject to the
excise tax imposed by Section 4999 of the Code (the "Excise Tax"); the amount
payable hereunder shall be reduced to the largest amount which the Executive
determines would not result in any portion of the payments hereunder being
subject to the Excise Tax. If the Executive voluntarily resigns her employment
hereunder or if her employment is terminated for Cause, the Executive shall not
be entitled to any severance pay or other compensation beyond the date of
termination of her employment.
8. Covenant Not to Compete.
(a) During the continuance of the Executive's employment hereunder and for
a period of twelve (12) months after termination of the Executive's employment
hereunder, the Executive shall not engage in any business which competes
directly or indirectly
-3-
with the Company or its affiliates within a fifty (50) mile radius of any
location in the United States where the Company or its affiliates are conducting
operations during the Executive's employment hereunder or at the time of
termination. As of the date hereof, the Company conducts operations in the
following counties of California: Imperial, Xxxx, Los Angeles, Orange,
Riverside, San Bernardino, San Diego, Santa Xxxxxxx and Ventura; and the
Company's parent, Air Methods Corporation, conducts operations in the following
locations: Bend, Oregon, Charlotte and Winston-Salem, North Carolina; Fairfax
and Roanoke, Virginia, Duluth and St. Xxxx, Minnesota; Evansville, Indiana,
Grand Junction, Greeley, and Aurora, Colorado; San Antonio and Texarkana, Texas;
Billings, Montana; Des Moines, Iowa; Farmington, New Mexico; Marshfield,
Wisconsin; Rockford, Illinois; Stanford, California; and Salt Lake City, Utah.
(b) The Executive shall not, for a period of twelve (12) months after
termination of the Executive's employment hereunder, employ, engage or seek to
employ or engage, directly or indirectly, any individual or entity who is or was
employed or engaged by the Company or any of its affiliates until the expiration
of six (6) months following the termination of such person's or entity's
employment or engagement with the Company or any of its affiliates.
9. Trade Secrets and Confidential Information. During her employment by the
Company and for a period of five (5) years thereafter, the Executive shall not,
directly or indirectly, use, disseminate, or disclose for any purpose other than
for the purposes of the Company's business, any of the Company's Confidential
Information, unless such disclosure is compelled in a judicial proceeding. Upon
termination of her employment, all documents, records, notebooks, and similar
repositories of records containing information relating to any Confidential
Information then in the Executive's possession or control, whether prepared by
her or by others, shall be left with the Company or, if requested, returned to
the Company.
10. Severability. It is the desire and intent of the undersigned parties
that the provisions of Sections 8 and 9 shall be enforced to the fullest extent
permissible under the laws in each jurisdiction in which enforcement is sought.
Accordingly, if any particular sentence or portion of either Section 8 or 9
shall be adjudicated to be invalid or unenforceable, the remaining portions of
such section nevertheless shall continue to be valid and enforceable as though
the invalid portions were not a part thereof. In the event that any of the
provisions of Section 8 relating to the geographic areas of restriction or the
provisions of Sections 8 or 9 relating to the duration of such Sections shall be
deemed to exceed the maximum area or period of time which a court of competent
jurisdiction would deem enforceable, the geographic areas and times shall, for
the purposes of this Agreement, be deemed to be the maximum areas or time
periods which a court of competent jurisdiction would deem valid and enforceable
in any state in which such court of competent jurisdiction shall be convened.
11. Injunctive Relief. The Executive agrees that any violation by her of
the provisions contained in Sections 8 and 9 are likely to cause irreparable
damage to the Company, and therefore she agrees that if there is a breach or
threatened breach by the Executive of the
-4-
provisions of said sections, the Company shall be entitled to an injunction
restraining the Executive from such breach. Nothing herein shall be construed as
prohibiting the Company from pursuing any other available remedies for such
breach or threatened breach.
12. Miscellaneous.
(a) NOTICES. Any notice required or permitted to be given under this
Agreement shall be directed to the appropriate party in writing and mailed or
delivered, if to the Company, to the attention of the President at 8190 Mango,
Xxxxxxx, Xxxxxxxxxx 00000, or to the Company's then-principal office, if
different, with a copy to Air Methods Corporation, to the attention of the
Chairman of the Board, at 0000 Xxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxx 00000, and if
to the Executive, to 00000 Xxxxx Xxxxx, Xxxxxx Xxxxxxxxx, Xxxxxxxxxx 00000.
(b) BINDING EFFECT. This Agreement is a personal service agreement and may
not be assigned by the Company or the Executive, except that the Company may
assign this Agreement to a successor by merger, consolidation, sale of
substantially all of the Company's assets or other reorganization. Subject to
the foregoing, this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors, assigns, and legal
representatives.
(c) AMENDMENT. This Agreement may not be amended except by an instrument in
writing executed by each of the undersigned parties.
(d) APPLICABLE LAW. This Agreement is entered into in the State of
California and for all purposes shall be governed by the laws of the State of
California.
(e) COUNTERPARTS. This instrument may be executed in one or more
counterparts, each of which shall be deemed an original.
(f) ENTIRE AGREEMENT. This Agreement supersedes and replaces all prior
agreements between the parties related to the employment of the Executive by the
Company.
[Remainder of Page Intentionally Left Blank]
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SIGNATURES
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
first date mentioned above.
THE COMPANY:
MERCY AIR SERVICE, INC.
By:
-------------------------------------------
Xxxxx X. Xxxxxxxx, President
THE EXECUTIVE:
----------------------------------------------
Xxxx X. Xxxxx
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EXHIBIT E
CONSULTING AND NON-COMPETITION AGREEMENT
This Consulting and Non-Competition Agreement ("Agreement") is entered into
this day of July, 1997 between Mercy Air Services, Inc., a California
---
corporation, with its principal place of business at 8190 Mango, Xxxxxxx,
Xxxxxxxxxx 00000 (the "Company"), and , an individual person (the
-------------
"Consultant").
RECITALS
A. The Consultant was a major shareholder in the Company, engaged in the
business of transportation services for individuals requiring advanced life
support services during transport to an emergency medical care facility.
B. Pursuant to that certain Stock Purchase Agreement dated July o, 1997
between Air Methods Corporation ("Air Methods"), the Consultant and the
remaining Sellers (as defined in the Purchase Agreement), Air Methods purchased
all of the outstanding shares of common stock of the Company such that the
Company became a wholly-owned subsidiary of Air Methods.
C. The Company desires to continue to consult with and receive advice from
the Consultant and to have the Consultant agree not to compete with the Company.
The Consultant has agreed to provide such consulting services to the Company,
subject to and upon the terms and conditions set forth in this Agreement, and
has also agreed not to compete with the Company during the term of this
Agreement.
D. The Consultant acknowledges that throughout the term of this Agreement
the Consultant will receive or be exposed to certain confidential information
and trade secrets (collectively referred to as "Confidential Information") of
the Company. The Consultant also acknowledges that this Confidential Information
is among the Company's most important business assets and that the value of this
Confidential Information would be diminished or extinguished by disclosure.
AGREEMENT
In consideration of the mutual promises contained herein, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Effective Date. The Consultant hereby resigns all positions which he
holds as an officer, director, and/or employee of the Company and terminates his
employment with the Company effective at the end of business on the first date
mentioned above (the "Effective Date"). On the Effective Date, this Agreement
shall become effective and shall supersede any other agreements between the
Consultant and the Company relating to the employment of the Consultant by the
Company, which shall thereafter be deemed terminated for all purposes.
2. Consultation by the Consultant.
(a) The Consultant shall be reasonably available during the period
beginning on the Effective Date and ending on July o, 2002 (the "Consulting
Period") to perform such assignments as may be reasonably requested by the
Company from time to time, which assignments may include, but shall not be
limited to, advising the Company and/or its affiliates on issues related to the
air medical services business, assisting the Company and/or its affiliates in
its sales and marketing efforts, including preparing and presenting responses to
requests for proposals, and assisting the Company and/or its affiliates with
customer services, collections, and other aspects of their businesses. The
Consultant agrees to provide up to five hundred (500) hours of consultation
services per year under this Agreement. Consultation services hereunder may be
provided in person, by telephone or in writing, depending on the circumstances
of the specific assignment, as mutually agreed upon by the Company and the
Consultant. Subject to specific requirements identified by the Company, the
Consultant shall determine the time and manner of providing such services. The
Consultant shall not be required under this Agreement to provide his services
exclusively to the Company and may provide his services to others, provided the
Consultant does not perform services for any third party which conflict with his
obligations under this Agreement.
(b) Consultants services hereunder shall principally be provided at the
Company's facilities in Fontana, California. In no event shall the Consultant be
required to relocate more than fifty (50) miles from the Company's executive
officers in Fontana, California without the prior written consent of the
Consultant other than a reasonable amount of travel related to the services to
be provided hereunder.
(c) The Consultant will be providing professional services as an
independent contractor and shall not be, or be deemed to be, an employee, agent
or partner of, or joint venturer with the Company. Neither party may represent
nor refer to the Consultant as an employee of the Company to any entity or third
party. Neither party shall have the power to bind nor obligate the other party,
nor shall either party hold itself out as having such authority. THE CONSULTANT
IS NOT ENTITLED TO WORKERS' COMPENSATION BENEFITS OR UNEMPLOY MENT INSURANCE
BENEFITS HEREUNDER AND SHALL NOT RECEIVE SUCH BENEFITS UNLESS SUCH BENEFITS ARE
PROVIDED BY THE CONSULTANT OR SOME PERSON OR ENTITY OTHER THAN THE COMPANY. THE
CONSULTANT AGREES TO PAY AND FILE ALL REPORTS WITH RESPECT TO LOCAL, STATE AND
FEDERAL TAXES, INCLUDING WITHHOLDING AND FICA TAXES, AND UNEMPLOYMENT AND
WORKERS' COMPENSATION INSURANCE, ON ANY MONEYS EARNED PURSUANT TO THIS
AGREEMENT.
3. Consulting Fee.
(a) The Consultant shall be paid the sum of $180,000 (the "Consulting Fee")
in consideration of the services to be provided by the Consultant hereunder and
the agreements of the Consultant set forth herein not to compete with the
Company. The Consulting Fee shall be payable in monthly installments of $3,000,
beginning the day of August, 1997. The Consulting Fee shall be paid to
---
Consultant irrespective of the number of hours actually
-2-
spent by the Consultant in providing services hereunder; PROVIDED, HOWEVER, that
the Company's obligation to pay the Consulting Fee shall terminate upon
termination of the Consultant's services hereunder pursuant to Section 11,
except to the extent otherwise provided in Section 11.
(b) The Company shall reimburse the Consultant, in accordance with the
Company's expense reimbursement policies, for reasonable out-of-pocket expenses
incurred in connection with the services provided pursuant to this Agreement;
provided that the Consultant presents to the Company an itemized accounting of
such expenses including reasonable supporting data.
4. Stock Options. The Consultant shall be granted an option to purchase
100,000 shares of the Common Stock of Air Methods at the closing price on the
NASDAQ National Market on the Effective Date. The terms of the option will be
set forth in an option agreement in the form attached hereto as EXHIBIT A.
5. Health Benefits. The Consultant may, at his election, continue to cover
himself under the group health insurance provided for Company employees (the
"Group Plan"), and continue to cover his family members under the Group Plan on
the same basis as employees of the Company, for such period as (i) the
Consultant's services hereunder have not been terminated under Section 11(a)
(expiration of the Consulting Period), 11(c) (by the Consultant) or 11(d) (by
the Company for Cause) and such coverage is permitted under the Company's health
insurance policies or (ii) the Consultant is entitled to continue coverage under
federal or state law following termination of his employment with Company,
whichever is longer. The time period that the Consultant continues to
participate in the Group Plan after the Effective Date will be applied against
the Consultant's eligibility period for continuation coverage under the
Consolidated Omnibus Budget Reconciliation Act of 1985. Coverage shall be
provided at the Company's expense unless and until such time as the Company's
employees are provided group health insurance through an Air Method's plan, at
which point, coverage for family members shall be paid for by the Company only
to the same extent as such coverage is paid for on behalf of family members of
senior management employees of the Company. During any period that the
Consultant is entitled to health benefits hereunder but for the fact that such
coverage is not permitted under the Group Plan, the Company shall pay the
Consultant on a monthly basis the amount the Company would have paid to cover
the Consultant and, if applicable, his family members, under the preceding
provisions had such coverage been permitted unless the Consultant is already
covered under a comparable plan at the expense of a third party.
6. Covenant Not to Compete.
(a) In further consideration of the payments by the Company provided for
herein, the Consultant shall not, during the term of this Agreement and for a
period of twelve (12) months following the termination of Consultant's services
hereunder (but in no event less than five (5) years from the date hereof),
engage in any activity directly or indirectly related to the air medical
services business at any location in the United States where the Company or its
affiliates are conducting operations during the term of this Agreement or at the
-3-
time of termination; except that the Consultant may continue to participate in
the air medical services operation that has been conducted by the Company in the
State of Hawaii in the same manner that the Consultant has participated in such
operation prior hereto. As of the date hereof, the Company conducts operations
in the following counties of California: Imperial, Xxxx, Los Angeles, Orange,
Riverside, San Bernardino, San Diego, Santa Xxxxxxx and Ventura; and the
Company's parent, Air Methods Corporation, conducts operations in the following
locations: .
(b) The Consultant shall not, for a period of twelve (12) months after
termination of the Consultant's services hereunder (but in no event less than
five (5) years from the date hereof), employ, engage or seek to employ or
engage, directly or indirectly, any individual or entity who is or was employed
or engaged by the Company or any of its affiliates until the expiration of six
(6) months following the termination of such person's or entity's employment or
engagement with the Company or any of its affiliates.
(c) In consideration of Consultant's agreement not to compete as provided
in this Section 6, the Company shall pay to Consultant the sum of $10,000,
payable as of the date first written above.
(d) Notwithstanding the foregoing, the provisions of this Section 6 shall
terminate and shall be of no further force or effect, if during the Consulting
Period, an Event of Default occurs as that term is defined in either or both of
(i) the Promissory Note of even date herewith delivered by Air Methods to the
Consultant or (ii) the Security Agreement of even date herewith among Air
Methods, the Company and as collateral agent.
-------------
7. Trade Secrets and Confidential Information. During the term of this
Agreement and for a period of five (5) years following the termination of
Consultant's services hereunder, the Consultant shall not, directly or
indirectly, use, disseminate, or disclose for any purpose other than at the
specific written request of the Company, any of the Company's Confidential
Information, unless such disclosure is compelled in a judicial or governmental
proceeding or is required by law; provided, however, that the Consultant shall
give the Company written notice of the Confidential Information to be so
disclosed or produced as far in advance of its disclosure or production as is
practicable and shall use his best efforts to obtain, to the greatest extent
practicable, an order or other reliable assurance that confidential treatment
will be accorded to such Confidential Information so required to be disclosed or
produced. All documents, records, notebooks, and similar repositories of records
containing information relating to any Confidential Information now in the
Consultant's possession or control, whether prepared by him or by others, shall
be left with the Company or returned to the Company upon its request.
8. Injunctive Relief. Consultant agrees that any violation by him of the
agreements contained in Sections 6 and 7 are likely to cause irreparable damage
to the Company and the Consultant therefore agrees that if there is a breach or
threatened breach by Consultant of the provisions of said sections, the Company
shall be entitled to an injunction restraining
-4-
Consultant from such breach. Nothing herein shall be construed as prohibiting
the Company from pursuing any other remedies for such breach or threatened
breach.
9. General Release. Except as otherwise expressly stated in this Agreement,
including this Section 9, the undersigned parties, for themselves and their
heirs, successors, subrogees, executors, agents, officers, employees, directors,
administrators and assigns, do hereby voluntarily and knowingly release and
discharge each other, and their respective heirs, successors, subrogees,
assigns, agents, employees, stockholders, officers, and directors from any and
all claims, liabilities, demands, rights, damages, costs, attorneys' fees
(including, without limitation, any claim of entitlement for attorneys' fees
under any contract, statute or rule of law allowing the prevailing party or
plaintiff to recover attorneys' fees), expenses, and controversies of every kind
and description, without limitation, which either party has or may have under
the common law and/or any federal, state or local laws, regulations or
requirements, by reason of or arising out of the Consultant's prior employment
by the Company. This general release includes, by way of example and not
limitation, all claims under the Civil Rights Act of 1964, as amended, The
Employee Retirement Income Security Act of 1974, as amended, the Age
Discrimination in Employment Act, as amended, The Older Workers' Benefit
Protection Act, as amended, The Americans with Disabilities Act, as amended, and
all other state and federal statutes and regulations.
10. Representations of the Consultant. The Consultant represents and
warrants as follows:
(a) He has read this Agreement and agrees to the conditions and obligations
set forth herein and has been advised by the Company to consult with legal
counsel regarding this Agreement;
(b) He has voluntarily executed this Agreement after having had full
opportunity to consult with counsel and without being pressured or influenced by
any statement or representation of any person acting on behalf of the Company,
including the attorneys, officers, directors and employees of the Company;
(c) He has had at least o days to consider all of the material terms of
this Agreement, including the mutual releases.
(d) He has been informed and understands that (i) to the extent that this
Agreement waives or releases any claim he might have under the Age
Discrimination in Employment Act, 29 U.S.C. ss. 621 ET SEQ., he may rescind his
waiver and release within seven (7) calendar days of the execution of this
Agreement and (ii) any such rescission must be in
-5-
writing, and delivered to the Company or, if sent by mail, post marked within
the seven (7) day period, sent by certified mail, return receipt requested and
addressed as follows:
Chairman of the Board
Air Methods Corporation
0000 Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
(e) He has full and complete legal capacity to enter into this Agreement.
(f) He is not aware of any legal proceedings currently pending or
threatened against the Company arising from matters contemplated in this
Agreement.
11. Termination.
(a) TERMINATION UPON EXPIRATION OF CONSULTING PERIOD. The Consultant's
services hereunder shall terminate at the end of the Consulting Period unless
sooner terminated as provided below.
(b) TERMINATION BY THE COMPANY WITHOUT CAUSE. Notwithstanding anything to
the contrary contained herein, the Company may, by delivering thirty (30) days'
prior written notice to the Consultant, terminate the Consultant's services
hereunder at any time without Cause (as hereinafter defined).
(c) TERMINATION BY THE CONSULTANT WITHOUT CAUSE. Notwithstanding anything
to the contrary contained herein, the Consultant may, by delivering prior
written notice to the Company, terminate the Consultant's services hereunder.
(d) TERMINATION BY THE COMPANY FOR CAUSE. The Company may terminate the
Consultant's services hereunder for Cause immediately upon written notice
stating the basis for such termination. "Cause" for termination of the
Consultant's services shall only be deemed to exist if the Consultant has (i)
materially breached this Agreement and if such breach continues or recurs more
than thirty (30) days after notice from the Company specifying the action which
constitutes the breach and demanding its discontinuance, (ii) exhibited willful
disobedience to the Board of Directors, or (iii) committed gross malfeasance in
performance of his duties hereunder or acts resulting in an indictment charging
the Consultant with the commission of a felony; provided that the commission of
acts resulting in such an indictment shall constitute Cause only if a majority
of the directors who are not also subject to any such indictment determine that
the Consultant's conduct has substantially adversely affected the Company or its
reputation.
(e) DISABILITY. In the event of disability of the Consultant during the
term hereof, the Company shall, during the continuance of his disability but
only for a maximum
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of ninety (90) days, pay to the Consultant his monthly installments under the
provision of Section 3 and continue to provide the Consultant all other benefits
provided hereunder. In addition, health benefits shall be continued until the
end of the Consulting Period for the Consultant and his family on the same
basis, and at the same party's expense, as such benefits were being provided
pursuant to Section 5 immediately prior to such disability. As used herein, the
term "disability" shall mean the complete and total inability of the Consultant,
due to illness, physical or comprehensive mental impairment, to substantially
perform all of his duties as described herein for a consecutive period of ninety
(90) days or more.
(f) DEATH. In the event of the death of the Consultant, except with respect
to any benefits which have accrued and have not been paid to the Consultant
hereunder, the provisions of this Agreement shall terminate immediately. The
Consultant's estate shall have the right to receive compensation due to the
Consultant as of and to the date of his death and shall have the right to
receive an additional amount equal to $3,000. In addition, the Consultant's
family members may continue any health insurance coverage being provided
pursuant to Section 5 on the same basis as and to the same extent that family
members of deceased employees of the Company are entitled to continue such
coverage.
(g) SEVERANCE. In the event that the Consultant's services are terminated
by the Company other than for Cause or death of the Consultant, the Consultant
shall be entitled to continue to receive the Consulting Fee in monthly
installments of $3,000 until the Consulting Fee has been paid in full and health
benefits in accordance with Section 5 until the end of the Consulting Period.
12. Irrevocability and Amendment. The obligations of the Company and the
Consultant hereunder are irrevocable. This Agreement may be terminated only
pursuant to Section 11 hereof and amended only pursuant to a written agreement
signed and executed by both the Consultant and the Company.
13. Successors and Assigns. This Agreement and all rights and obligations
of the parties hereunder, and the releases contained herein, shall bind and
inure to the benefit of the heirs, agents, employees, stockholders, partners,
officers, directors, parents, subsidiaries, subrogees, affiliates,
representatives, successors (including, in the case of the Company, any
successor to the business of the Company, whether by merger, consolidation,
acquisition of assets or any other transaction) and assigns of the parties.
14. Nonassignability. This Agreement and the rights, interests and
obligations thereunder may not be assigned or delegated by the parties.
15. Entire Agreement. This Agreement is the entire agreement between the
parties and no representations, warranties or other statements or promises have
been made by either party to the other in connection with this Agreement.
-7-
16. Severability. If any provision of this Agreement is held to be illegal,
invalid or unenforceable, such provision(s) shall be fully severable. In lieu
thereof, there shall be added a provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible, and be legal, valid and
enforceable. In particular, it is the desire and intent of the parties that the
provisions of Sections 6 and 7 shall be enforced to the fullest extent
permissible under the laws of each jurisdiction in which enforcement is sought.
Accordingly, in the event that any of the provisions of Section 6 relating to
the geographic areas of restriction or the provisions of Section 6 or 7 relating
to the duration of such sections shall be deemed to exceed the maximum area or
period of time which a court of competent jurisdiction would deem enforceable,
the geographic areas and times shall, for the purposes of this Agreement, be
deemed to be the maximum areas or time periods which a court of competent
jurisdiction would deem valid and enforceable in any state in which such court
of competent jurisdiction shall be convened.
17. Applicable Law. This Agreement shall be interpreted and construed in
accordance with the laws of the State of California.
18. Enforcement Expenses. In any action for breach or enforcement of the
terms of this Agreement, the prevailing party shall be entitled to all costs of
enforcement including, without limitation, his/its attorneys' fees and costs.
[Remainder of Page Intentionally Left Blank]
-8-
SIGNATURES
IN WITNESS WHEREOF, the Consultant and the Company have caused this
Agreement to be executed and delivered as of the first date mentioned above.
THE COMPANY:
MERCY AIR SERVICES, INC.
By:
-------------------------------------------
THE CONSULTANT:
----------------------------------------------
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EXHIBIT F
CONSULTING AND NON-COMPETITION AGREEMENT
This Consulting and Non-Competition Agreement ("Agreement") is entered into
this 31st day of July, 1997 between Mercy Air Service, Inc., a California
corporation, with its principal place of business at 8190 Mango, Xxxxxxx,
Xxxxxxxxxx 00000 (the "Company"), and Xxxxx X. Xxxxx, an individual person (the
"Consultant").
RECITALS
A. The Consultant was a major shareholder in the Company, engaged in the
business of transportation services for individuals requiring advanced life
support services during transport to an emergency medical care facility.
B. Pursuant to that certain Stock Purchase Agreement dated July 11, 1997
between Air Methods Corporation ("Air Methods"), the Consultant and the
remaining Sellers (as defined in the Purchase Agreement), Air Methods purchased
all of the outstanding shares of common stock of the Company such that the
Company became a wholly-owned subsidiary of Air Methods.
C. The Company desires to continue to consult with and receive advice from
the Consultant and to have the Consultant agree not to compete with the Company.
The Consultant has agreed to provide such consulting services to the Company,
subject to and upon the terms and conditions set forth in this Agreement, and
has also agreed not to compete with the Company during the term of this
Agreement.
D. The Consultant acknowledges that throughout the term of this Agreement
the Consultant will receive or be exposed to certain confidential information
and trade secrets (collectively referred to as "Confidential Information") of
the Company. The Consultant also acknowledges that this Confidential Information
is among the Company's most important business assets and that the value of this
Confidential Information would be diminished or extinguished by disclosure.
AGREEMENT
In consideration of the mutual promises contained herein, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. EFFECTIVE DATE. The Consultant hereby resigns all positions which he
holds as an officer, director, and/or employee of the Company and terminates his
employment with the Company effective at the end of business on the first date
mentioned above (the "Effective Date"). On the Effective Date, this Agreement
shall become effective and shall supersede any other agreements between the
Consultant and the Company relating to the employment of the Consultant by the
Company, which shall thereafter be deemed terminated for all purposes.
2. CONSULTATION BY THE CONSULTANT.
(a) The Consultant shall be reasonably available, upon request, during the
period beginning on the Effective Date and ending on July 31, 2002 (the
"Consulting Period") to perform consultation services for the Company or its
affiliates from time to time on issues related to the air medical services
business. The scope of each assignment hereunder shall be subject to negotiation
between the parties at the time services are requested. Consultation services
hereunder may be provided in person, by telephone or in writing, depending on
the circumstances of the specific assignment, as mutually agreed upon by the
Company and the Consultant. Subject to specific requirements identified by the
Company, the Consultant shall determine the time and manner of providing such
services. The Consultant shall not be required under this Agreement to provide
his services exclusively to the Company and may provide his services to others,
provided the Consultant does not perform services for any third party which
conflict with his obligations under this Agreement.
(b) Consultant's services hereunder shall principally be provided at the
Company's facilities in Fontana, California. In no event shall Consultant be
required to relocate more than fifty (50) miles from the Company's executive
offices in Fontana, California without the prior written consent of the
Consultant other than a reasonable amount of travel related to the services to
be provided hereunder.
(c) The Consultant will be providing professional services as an
independent contractor and shall not be, or be deemed to be, an employee, agent
or partner of, or joint venturer with the Company. Neither party may represent
nor refer to the Consultant as an employee of the Company to any entity or third
party. Neither party shall have the power to bind nor obligate the other party,
nor shall either party hold itself out as having such authority. THE CONSULTANT
IS NOT ENTITLED TO WORKERS' COMPENSATION BENEFITS OR UNEMPLOY MENT INSURANCE
BENEFITS HEREUNDER AND SHALL NOT RECEIVE SUCH BENEFITS UNLESS SUCH BENEFITS ARE
PROVIDED BY THE CONSULTANT OR SOME PERSON OR ENTITY OTHER THAN THE COMPANY. THE
CONSULTANT AGREES TO PAY AND FILE ALL REPORTS WITH RESPECT TO LOCAL, STATE AND
FEDERAL TAXES, INCLUDING WITHHOLDING AND FICA TAXES, AND UNEMPLOYMENT AND
WORKERS' COMPENSATION INSURANCE, ON ANY MONEYS EARNED PURSUANT TO THIS
AGREEMENT.
3. CONSULTING FEE.
(a) The Consultant shall be paid the sum of $12,600 (the "Consulting Fee")
in consideration of the services to be provided by the Consultant hereunder and
the agreements of the Consultant set forth herein not to compete with the
Company. The Consulting Fee shall be payable in monthly installments of $210,
beginning the 31st day of August, 1997. The Consulting Fee shall be paid to
Consultant irrespective of the number of hours actually spent by the Consultant
in providing services hereunder; PROVIDED, HOWEVER, that the Company's
obligation to pay the Consulting Fee shall terminate upon termination of the
Consultant's services hereunder pursuant to Section 11, except to the extent
otherwise provided in Section 11.
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(b) In addition to the Consulting Fee, the Consultant shall be paid a fee
of $100 for each hour of services provided hereunder. The Consultant shall
submit an invoice at the end of each month during which services are rendered
hereunder which shall be payable within thirty (30) days of submission.
(c) The Company shall reimburse the Consultant, in accordance with the
Company's expense reimbursement policies, for reasonable out-of-pocket expenses
incurred in connection with the services provided pursuant to this Agreement;
provided that the Consultant presents to the Company an itemized accounting of
such expenses including reasonable supporting data.
4. STOCK OPTIONS. The Consultant shall be granted an option to purchase
100,000 shares of the Common Stock of Air Methods at the closing price on the
NASDAQ National Market on the Effective Date. The terms of the option will be
set forth in an option agreement in the form attached hereto as EXHIBIT A.
5. HEALTH BENEFITS. The Consultant may, at his election, continue to cover
himself and any eligible family members under the group health insurance
provided for Company employees (the "Group Plan"), at his expense, for such
period as the Consultant is entitled to continue coverage under the Consolidated
Omnibus Budget Reconciliation Act of 1985 or other applicable federal or state
law following termination of his employment with the Company. If the Consultant
and the Company agree upon consulting assignments hereunder which both parties
agree are likely to result in the Consultant providing five hundred (500) or
more hours of consulting services during a twelve (12) month period, then
Consultant may elect to be covered by the Group Plan, and may elect coverage for
his family members on the same basis as Company employees are permitted to cover
family members, in each case at the Company's expense, for such twelve (12)
month period if such coverage is permitted under the Group Plan; provided,
however, that coverage for family members shall be paid for by the Company only
to the same extent as such coverage is paid for family members of senior
management employees of the Company if such election is in effect at a point in
time when the Company's employees are provided group health insurance through an
Air Method's plan. During any period that the Consultant is eligible to be
covered at the Company's expense hereunder but for the fact that such coverage
is not permitted under the Group Plan, the Company shall pay the Consultant on a
monthly basis the amount the Company would have paid to cover the Consultant
and, if applicable, his family members, under the preceding provisions had such
coverage been permitted unless the Consultant is already covered under a
comparable plan at the expense of a third party.
6. COVENANT NOT TO COMPETE.
(a) In further consideration of the payments by the Company provided for
herein, the Consultant shall not, during the term of this Agreement and for a
period of twelve (12) months following the termination of Consultant's services
hereunder (but in no event less than five (5) years from the date hereof),
engage in any activity directly or indirectly related
-3-
to the air medical services business at any location in the United States where
the Company or its affiliates are conducting operations during the term of this
Agreement or at the time of termination; except that the Consultant may continue
to participate in the air medical services operation that has been conducted by
the Company in the State of Hawaii in the same manner that the Consultant has
participated in such operation prior hereto. As of the date hereof, the Company
conducts operations in the following counties of California: Imperial, Xxxx, Los
Angeles, Orange, Riverside, San Bernardino, San Diego, Santa Xxxxxxx and
Ventura; and the Company's parent, Air Methods Corporation, conducts operations
in the following locations: Bend, Oregon; Charlotte and Winston-Salem, North
Carolina; Fairfax and Roanoke, Virginia; Duluth and St. Xxxx, Minnesota;
Evansville, Indiana; Grand Junction, Greeley, and Aurora, Colorado; San Antonio
and Texarkana, Texas; Billings, Montana; Des Moines, Iowa; Farmington, New
Mexico; Marshfield, Wisconsin; Rockford, Illinois; Stanford, California; and
Salt Lake City, Utah.
(b) The Consultant shall not, for a period of twelve (12) months after
termination of the Consultant's services hereunder (but in no event less than
five (5) years from the date hereof), employ, engage or seek to employ or
engage, directly or indirectly, any individual or entity who is or was employed
or engaged by the Company or any of its affiliates until the expiration of six
(6) months following the termination of such person's or entity's employment or
engagement with the Company or any of its affiliates.
(c) In consideration of Consultant's agreement not to compete as provided
in this Section 6, the Company shall pay to Consultant the sum of $10,000,
payable as of the date first written above.
(d) Notwithstanding the foregoing, the provisions of this Section 6 shall
terminate and shall be of no further force or effect, if during the Consulting
Period, an Event of Default occurs as that term is defined in either or both of
(i) the Promissory Note of even date herewith delivered by Air Methods to the
Consultant or (ii) the Security Agreement of even date herewith among Air
Methods, the Company, and J. Xxxxxx Xxxxxxxxx, as collateral agent.
7. TRADE SECRETS AND CONFIDENTIAL INFORMATION. During the term of this
Agreement and for a period of five (5) years following the termination of
Consultant's services hereunder, the Consultant shall not, directly or
indirectly, use, disseminate, or disclose for any purpose other than at the
specific written request of the Company, any of the Company's Confidential
Information, unless such disclosure is compelled in a judicial or governmental
proceeding or is required by law; provided, however, that the Consultant shall
give the Company written notice of the Confidential Information to be so
disclosed or produced as far in advance of its disclosure or production as is
practicable and shall use his best efforts to obtain, to the greatest extent
practicable, an order or other reliable assurance that confidential treatment
will be accorded to such Confidential Information so required to be disclosed or
produced. All documents, records, notebooks, and similar repositories of records
containing information relating to any Confidential Information now in the
Consultant's possession or control, whether
-4-
prepared by him or by others, shall be left with the Company or returned to the
Company upon its request.
8. INJUNCTIVE RELIEF. Consultant agrees that any violation by him of the
agreements contained in Sections 6 and 7 are likely to cause irreparable damage
to the Company and the Consultant therefore agrees that if there is a breach or
threatened breach by Consultant of the provisions of said sections, the Company
shall be entitled to an injunction restraining Consultant from such breach.
Nothing herein shall be construed as prohibiting the Company from pursuing any
other remedies for such breach or threatened breach.
9. GENERAL RELEASE. Except as otherwise expressly stated in this Agreement,
including this Section 9, the undersigned parties, for themselves and their
heirs, successors, subrogees, executors, agents, officers, employees, directors,
administrators and assigns, do hereby voluntarily and knowingly release and
discharge each other, and their respective heirs, successors, subrogees,
assigns, agents, employees, stockholders, officers, and directors from any and
all claims, liabilities, demands, rights, damages, costs, attorneys' fees
(including, without limitation, any claim of entitlement for attorneys' fees
under any contract, statute or rule of law allowing the prevailing party or
plaintiff to recover attorneys' fees), expenses, and controversies of every kind
and description, without limitation, which either party has or may have under
the common law and/or any federal, state or local laws, regulations or
requirements, by reason of or arising out of the Consultant's prior employment
by the Company. This general release includes, by way of example and not
limitation, all claims under the Civil Rights Act of 1964, as amended, The
Employee Retirement Income Security Act of 1974, as amended, the Age
Discrimination in Employment Act, as amended, The Older Workers' Benefit
Protection Act, as amended, The Americans with Disabilities Act, as amended, and
all other state and federal statutes and regulations.
10. REPRESENTATIONS OF THE CONSULTANT. The Consultant represents and
warrants as follows:
(a) He has read this Agreement and agrees to the conditions and obligations
set forth herein and has been advised by the Company to consult with legal
counsel regarding this Agreement;
(b) He has voluntarily executed this Agreement after having had full
opportunity to consult with counsel and without being pressured or influenced by
any statement or representation of any person acting on behalf of the Company,
including the attorneys, officers, directors and employees of the Company;
(c) He has had at least twenty (20) days to consider all of the material
terms of this Agreement, including the mutual releases.
(d) He has been informed and understands that (i) to the extent that this
Agreement waives or releases any claim he might have under the Age
Discrimination in
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Employment Act, 29 U.S.C. ss. 621 ET SEQ., he may rescind his waiver and release
within seven (7) calendar days of the execution of this Agreement and (ii) any
such rescission must be in writing, and delivered to the Company or, if sent by
mail, post marked within the seven (7) day period, sent by certified mail,
return receipt requested and addressed as follows:
Chairman of the Board
Air Methods Corporation
0000 Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
(e) He has full and complete legal capacity to enter into this Agreement.
(f) He is not aware of any legal proceedings currently pending or
threatened against the Company arising from matters contemplated in this
Agreement.
11. TERMINATION.
(a) TERMINATION UPON EXPIRATION OF CONSULTING PERIOD. The Consultant's
services hereunder shall terminate at the end of the Consulting Period unless
sooner terminated as provided below.
(b) TERMINATION BY THE COMPANY WITHOUT CAUSE. Notwithstanding anything to
the contrary contained herein, the Company may, by delivering thirty (30) days'
prior written notice to the Consultant, terminate the Consultant's services
hereunder at any time without Cause (as hereinafter defined).
(c) TERMINATION BY THE CONSULTANT WITHOUT CAUSE. Notwithstanding anything
to the contrary contained herein, the Consultant may, by delivering prior
written notice to the Company, terminate the Consultant's services hereunder.
(d) TERMINATION BY THE COMPANY FOR CAUSE. The Company may terminate the
Consultant's services hereunder for Cause immediately upon written notice
stating the basis for such termination. "Cause" for termination of the
Consultant's services shall only be deemed to exist if the Consultant has (i)
materially breached this Agreement and if such breach continues or recurs more
than thirty (30) days after notice from the Company specifying the action which
constitutes the breach and demanding its discontinuance, (ii) exhibited willful
disobedience to the Board of Directors, or (iii) committed gross malfeasance in
performance of his duties hereunder or acts resulting in an indictment charging
the Consultant with the commission of a felony; provided that the commission of
acts resulting in such an indictment shall constitute Cause only if a majority
of the directors who are not also subject to any such indictment determine that
the Consultant's conduct has substantially adversely affected the Company or its
reputation.
-6-
(e) DISABILITY. In the event of disability of the Consultant during the
term hereof, the Company shall, during the continuance of his disability but
only for a maximum of ninety (90) days, pay to the Consultant his monthly
installments under the provision of Section 3. In addition, health benefits
shall be continued for the Consultant and his family on the same basis, and at
the same party's expense, as such benefits were being provided pursuant to
Section 5 immediately prior to such disability. As used herein, the term
"disability" shall mean the complete and total inability of the Consultant, due
to illness, physical or comprehensive mental impairment, to substantially
perform all of his duties as described herein for a consecutive period of ninety
(90) days or more.
(f) DEATH. In the event of the death of the Consultant, except with respect
to any benefits which have accrued and have not been paid to the Consultant
hereunder, the provisions of this Agreement shall terminate immediately. The
Consultant's estate shall have the right to receive compensation due to the
Consultant as of and to the date of his death and shall have the right to
receive an additional amount equal to $210. In addition, the Consultant's family
members may continue any health insurance coverage being provided pursuant to
Section 5 on the same basis as and to the same extent that family members of
deceased employees of the Company are entitled to continue such coverage.
(g) SEVERANCE. In the event that the Consultant's services are terminated
by the Company other than for Cause or death of the Consultant, the Consultant
shall be entitled to continue to receive the Consulting Fee in monthly
installments of $210 until the Consulting Fee has been paid in full, and, if the
Consultant was receiving health benefits under Section 5 at the Company's
expense at the time of such termination, the Consultant shall be entitled to
continue to receive benefits in accordance with Section 5 until the end of the
Consulting Period.
12. IRREVOCABILITY AND AMENDMENT. The obligations of the Company and the
Consultant hereunder are irrevocable. This Agreement may be terminated only
pursuant to Section 11 hereof and amended only pursuant to a written agreement
signed and executed by both the Consultant and the Company.
13. SUCCESSORS AND ASSIGNS. This Agreement and all rights and obligations
of the parties hereunder, and the releases contained herein, shall bind and
inure to the benefit of the heirs, agents, employees, stockholders, partners,
officers, directors, parents, subsidiaries, subrogees, affiliates,
representatives, successors (including, in the case of the Company, any
successor to the business of the Company, whether by merger, consolidation,
acquisition of assets or any other transaction) and assigns of the parties.
14. NONASSIGNABILITY. This Agreement and the rights, interests and
obligations thereunder may not be assigned or delegated by the parties.
-7-
15. ENTIRE AGREEMENT. This Agreement is the entire agreement between the
parties and no representations, warranties or other statements or promises have
been made by either party to the other in connection with this Agreement.
16. SEVERABILITY. If any provision of this Agreement is held to be illegal,
invalid or unenforceable, such provision(s) shall be fully severable. In lieu
thereof, there shall be added a provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible, and be legal, valid and
enforceable. In particular, it is the desire and intent of the parties that the
provisions of Sections 6 and 7 shall be enforced to the fullest extent
permissible under the laws of each jurisdiction in which enforcement is sought.
Accordingly, in the event that any of the provisions of Section 6 relating to
the geographic areas of restriction or the provisions of Section 6 or 7 relating
to the duration of such sections shall be deemed to exceed the maximum area or
period of time which a court of competent jurisdiction would deem enforceable,
the geographic areas and times shall, for the purposes of this Agreement, be
deemed to be the maximum areas or time periods which a court of competent
jurisdiction would deem valid and enforceable in any state in which such court
of competent jurisdiction shall be convened.
17. APPLICABLE LAW. This Agreement shall be interpreted and construed in
accordance with the laws of the State of California.
18. ENFORCEMENT EXPENSES. In any action for breach or enforcement of the
terms of this Agreement, the prevailing party shall be entitled to all costs of
enforcement including, without limitation, his/its attorneys' fees and costs.
[Remainder of Page Intentionally Left Blank]
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SIGNATURES
IN WITNESS WHEREOF, the Consultant and the Company have caused this
Agreement to be executed and delivered as of the first date mentioned above.
THE COMPANY:
MERCY AIR SERVICE, INC.
By:
-------------------------------------------
Xxxxx X. Xxxxxxxx, President
THE CONSULTANT:
----------------------------------------------
Xxxxx X. Xxxxx
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EXHIBIT G
OPTION AGREEMENT
(NON-INCENTIVE STOCK OPTION UNDER STOCK OPTION PLAN)
THIS AGREEMENT is made and entered into this day of July, 1997, by and
----
between AIR METHODS CORPORATION (the "Company") and (the
------------------
"Optionee") (together, the "Parties").
RECITALS:
I. On June 1, 1987, the Board of Directors of the Company adopted a Stock
Option Plan (the "Plan") and effective August 15, 1995, provides that Employees,
Non-Employee Directors and Consultants of the Company and its subsidiaries may
receive options to purchase Common Stock of the Company.
II. The Plan permits the granting of incentive stock options, which conform
to the requirements of Xxxxxxx 000 xx xxx Xxxxxx Xxxxxx Internal Revenue Code of
1986, as amended (the "Code"), and non-incentive stock options, which do not
qualify as incentive stock options under that Section.
III. The Optionee has been selected to receive a non-incentive stock option
pursuant to the Plan.
IV. The Optionee is desirous of obtaining the non-incentive stock option on
the terms and conditions herein contained.
AGREEMENT:
IT IS THEREFORE agreed by and between the Parties, for and in consideration
of the premises and the mutual covenants herein contained and for other good and
valuable consideration, as follows:
A. The Company hereby confirms and acknowledges that it has granted to the
Optionee, on July , 1997, an option to purchase 100,000 shares of Common
---
Stock of the Company (the "Option") upon the terms and conditions herein set
forth and subject to the terms and conditions of the Plan. The Option is granted
as a matter of separate agreement, and not in lieu of salary or any other
regular or special compensation for services.
B. The purchase price of the shares which may be purchased pursuant to the
Option is $ per share, which is, in the opinion of the Company, not less
-------
than the fair market value of the shares on the date the Option was granted as
specified in paragraph A.
C. Unless sooner terminated or modified under the provisions of this
Agreement, the Option shall continue and shall automatically expire at midnight
July , 2002, the fifth anniversary date of the original option grant.
----
D. The Option may be exercised by the Optionee to purchase the total number
of shares specified in paragraph A as follows:
One-third (1/3rd) of the total number of shares shall be
exercisable on the first anniversary of the date of
grant,
An additional one-third (1/3rd) of the total
number of shares shall become exercisable on
the second anniversary of the date of grant,
and
The remaining one-third (1/3rd) of the total
number of shares shall become exercisable
the third anniversary of the date of grant.
The Optionee need not exercise any part of the Option when it becomes
exercisable, but may accrue the fractional increments described above and
exercise them in any later period, prior to expiration of the Option.
E. If the Optionee's consulting services with the Company or a
participating subsidiary of the Company shall be terminated by the Company or a
participating subsidiary with "Cause" (as defined in the Consulting and
Non-Competition Agreement between Mercy Air Services, Inc. and Optionee dated
the date hereof), or by the Optionee, the Option, to the extent then exercisable
as provided in paragraph D, shall remain exercisable after the termination of
his consulting services for a period of three months. If the Optionee's
consulting services are terminated due to the Optionee's death or because the
Optionee is disabled within the meaning of Section 22(e)(3) of the Code, the
Option, to the extent then exercisable as provided in paragraph D, shall remain
exercisable after the termination of his consulting services for a period of
twelve months. If the Optionee's consulting services with the Company or a
participating subsidiary are terminated by the Company or a participating
subsidiary without Cause, the Option shall continue to vest in accordance with
paragraph D and shall remain exercisable until the expiration date set forth in
paragraph C. If the Option is not exercised during the applicable period, it
shall be deemed to have been forfeited and of no further force or effect.
F. The Option may not be exercised by anyone other than the Optionee during
his lifetime. In the event of the Optionee's death, the Option may be exercised
by the personal representative of the Optionee's estate or, if no personal
representative has been appointed, by the successor or successors in interest
determined under the Optionee's will or under the applicable laws of descent and
distribution. The Option may not be transferred, assigned, encumbered or
alienated in any way by the Optionee, and any attempt to do so shall render the
Option and any unexercised portion thereof, at the discretion of the Company,
null and void and unenforceable by the Optionee.
-2-
G. The Option may be exercised in whole or in part by delivering to the
Company written notice of exercise together with payment in full for the shares
being purchased upon such exercise.
H. The Company will, upon receipt of said notice and payment, issue or
cause to be issued to the Optionee (or to his personal representative or other
person entitled thereto) a stock certificate for the number of shares purchased
thereby. The Optionee may designate a member of the Optionee's immediate family
as a co-owner of the said shares.
I. The Company may, in its discretion, file and maintain effective with the
Securities and Exchange Commission a Registration Statement on Form S-8 under
the Securities Act of 1933, as amended (the "Act"), covering the sale of the
optioned shares to Optionee upon exercise of the Option. If, at the time of
exercise, the Company does not have an effective Registration Statement on file
covering the sale of the optioned shares, the Optionee represents and agrees
that: (i) the Option shall not be exercisable unless the purchase of optioned
shares upon the exercise of the Option is pursuant to an applicable effective
registration statement under the Act, or unless in the opinion of counsel for
the Company, the proposed purchase of such optioned shares would be exempt from
the registration requirements of the Act, and from the qualification
requirements of any state securities law; (ii) upon exercise of the Option, he
will acquire the optioned shares for his own account for investment and not with
any intent or view to any distribution, resale or other disposition of the
optioned shares; (iii) he will not sell or transfer the optioned shares, unless
they are registered under the Act, except in a transaction that is exempt from
registration under the Act, and each certificate issued to represent any of the
optioned shares shall bear a legend calling attention to the foregoing
restrictions and agreements. The Company may require, as a condition of the
exercise of the Option, that the Optionee sign such further representations and
agreements as it reasonably determines to be necessary or appropriate to assure
and to evidence compliance with the requirements of the Act.
J. If the Company or its stockholders enter into an agreement to dispose of
all, or substantially all, of the assets or outstanding capital stock of the
Company by means of a sale or liquidation, or a merger or reorganization in
which the Company is not the surviving corporation, any unexercised portion of
the Option as of the day before the consummation of such sale, liquidation,
merger or reorganization shall for all purposes under this Agreement become
exercisable in full as of such date even though the anniversary dates, as
provided in paragraph D, have not yet occurred.
K. In consideration of the granting by the Company of the Option, the
Optionee hereby affirms that he has a present intention to remain in the service
of the Company or a participating subsidiary for the period that this Option
continues. This affirmation, however, shall confer no right on the Optionee to
continue as a consultant to the Company or a participating subsidiary, nor
interfere in any way with the right of the Company or a participating subsidiary
to discharge the Optionee at any time for any reason whatsoever, with or without
Cause.
-3-
L. The Optionee shall have no rights as a stockholder with respect to the
shares of Common Stock which may be purchased pursuant to the Option until such
shares are issued to the Optionee.
M. This Agreement is entered into and shall be governed by, construed and
enforced in accordance with the laws of the State of Colorado.
N. The terms and conditions contained in the Plan, as it may be amended
from time to time hereafter, are incorporated into and made a part of this
Agreement by reference, as if the same were set forth herein in full, and all
provisions of the Option are made subject to any and all terms of the Plan.
IN WITNESS WHEREOF, the parties have hereunto affixed their signatures in
acknowledgment and acceptance of the above terms and conditions on the date
first above mentioned.
AIR METHODS CORPORATION
By
------------------------------------------
OPTIONEE
--------------------------------------------
-4-
EXHIBIT H
July 31, 1997
Air Methods Corporation
0000 Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Ladies and Gentlemen:
We have acted as counsel to Xxxxx X. Xxxxx, J. Xxxxxx Xxxxxxxxx, Xxx X.
Xxxx, Xxxxx X. Xxxx and Xxxxxxx X. Xxxxx (collectively, the "Shareholders"), in
connection with the execution and delivery by the Shareholders of that certain
Stock Purchase Agreement dated as of July 11, 1996 (the "Agreement") among the
Shareholders and Air Methods Corporation, a Delaware corporation (the "Buyer").
As you know, that Agreement provides for the sale by the Shareholders to Buyer
and Buyer's purchase from the Shareholders of all of their respective shares of
common stock of Mercy Air Service, Inc., a California corporation (the "Company"
or "Mercy"). This opinion is being delivered pursuant to Section 9.9 of the
Agreement. Unless specifically defined herein or the context requires otherwise,
capitalized terms used herein shall have the meanings ascribed to them in the
Agreement.
In connection with the preparation of this opinion, we have examined such
documents and considered such questions of law as we have deemed necessary or
appropriate. We have assumed that there are no other documents or agreements
among the Shareholders and the Buyer which would expand or otherwise modify the
respective rights and obligations of the Shareholders and the Buyer as set forth
in the Agreement and the documents required or contemplated thereby, including a
Letter Agreement dated as of July 31, 1997 between the Shareholders and the
Buyer.
We have assumed the authenticity of all documents submitted to us as
originals, the conformity with originals of all documents submitted to us as
copies, and the genuineness of all signatures (other than signatures of the
Shareholders). We have also assumed the legal capacity of all natural persons
and that, with respect to all parties to agreements or instruments relevant
hereto (other than the Shareholders), such parties had the requisite power and
authority to execute, deliver and perform such agreements or instruments, that
such agreements or instruments have been duly authorized by all requisite
action, executed and delivered by such parties, and that such agreements or
instruments are the valid, binding and enforceable obligations of such parties.
As to questions of fact material to our opinions, we have relied upon the
representations of each party made in the Agreement and the other documents and
certificates delivered in connection therewith, certificates of the Shareholders
and certificates and advices of public officials.
Air Methods Corporation
July 31, 1997
Page Two
Whenever a statement herein is qualified by "known to us," "to our current
actual knowledge," or similar phrase, it is intended to indicate that, during
the course of our representation of the Shareholders, no information that would
give us current actual knowledge of the inaccuracy of such statement has come to
the attention of those attorneys in this firm who have rendered legal services
in connection with the transaction described in the introductory paragraph
hereof. However, except as otherwise expressly indicated, we have not undertaken
any independent investigation to determine the accuracy of such statement, and
any limited inquiry undertaken by us during the preparation of this opinion
letter should not be regarded as such an investigation; no inference as to our
knowledge of any matters bearing on the accuracy of any such statement should be
drawn from the fact of our representation of the Shareholders.
Based upon the foregoing, and subject to the additional assumptions,
exceptions, qualifications and limitations set forth below, we are of the
opinion that:
1. The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of California. The Company is duly
qualified to do business as a foreign corporation and is in good standing in
each other state in which the nature of its activities or of its properties
owned or leased makes such qualification necessary, except to the extent that
failure to so qualify would not have a material adverse effect on the Company.
2. The Company has the corporate power and authority to own its properties
and assets, to carry on its business as presently conducted, and to enter into
the Agreement and the other documents required or contemplated thereby and
perform its respective obligations thereunder.
3. The authorized capital stock of the Company consists of 10,000 shares of
common stock of the Company, without par value, and, to our actual knowledge,
based solely on the representations and warranties of the Shareholders contained
in the Agreement and factual certificates which they have delivered to us in
connection with our preparation of this opinion, as of the date hereof a total
of 83-2/3rds shares of common stock of the Company were issued and outstanding.
4. The Agreement, the Consulting and Non-Competition Agreements and the
Security Agreement have been duly executed and delivered by the Shareholders, to
the extent that they are parties thereto.
5. The Agreement and the Security Agreement are each a legal, valid and
binding obligation of the Shareholders enforceable against them in accordance
with their respective terms, except as the enforceability thereof may be subject
to or limited by (a) bankruptcy, insolvency, reorganization, arrangement,
moratorium, or other similar laws relating to or affecting the rights of
creditors, and (b) general equitable principles, regardless of whether the issue
of enforceability is considered in a proceeding in equity or at law.
6. To our knowledge, the execution and delivery by the Shareholders of the
Agreement, the Non-Competition and Consulting Agreements and the Security
Agreement, to the extent that they are parties thereto, and the other documents
required or contemplated thereby and the performance by the Shareholders of
their respective terms will not constitute a material breach of or constitute a
material default under any of the Material Contracts (as defined in the
Agreement).
7. To our actual knowledge, except as set forth on Schedule 5.15 to the
Purchase Agreement, there are no pending legal actions or proceedings in which
the Company is a named defendant and the outcome thereof is expected to be
materially adverse to the Company.
The foregoing opinions are subject to the following:
(a) Except as otherwise provided herein, we expressly do not comment
upon or render any opinion with respect to any documents referenced in the
Agreement;
(b) The opinions hereinabove set forth are further subject to the
following additional qualifications:
(i) The effect of provisions releasing or indemnifying a party
against liability for its own wrongful or negligent acts, or where
indemnification is contrary to public policy.
(ii) The effect of Section 1698 of the California Civil Code
which provides in part that provisions of any instrument or agreement
may only be waived in writing will not be enforced to the extent that
an oral agreement has been executed modifying provisions of such
instrument or agreement.
(iii) We express no opinion regarding the enforceability of the
choice of law provisions of Section 16.5, or of the arbitration
provisions of Section 16.10, of the Agreement.
(iv) The unenforceability in certain circumstances of provisions
waiving broadly or vaguely stated rights, statutory or other rights
representing public policy, or unknown future rights and of provisions
that rights or remedies are not exclusive.
(v) The unenforceability under certain circumstances of
provisions to the effect that failure to exercise or delay in
exercising any right or remedy will not operate as a waiver of that
right or remedy.
(vi) Limitations on the exercise of certain contractual rights
and remedies if the defaults are not material or the penalties bear no
reasonable relation to the damages suffered by the aggrieved party as
a result of the delinquencies or defaults.
We are members of the Bar of the State of California and, accordingly, do
not purport to be experts on or to be qualified to express any opinion herein
concerning, nor do we express any opinion herein concerning, any laws other than
the laws of the State of California and federal law.
The foregoing opinions are being furnished to you solely for your benefit
and may not be relied upon by any other person without our prior written
consent.
Very truly yours,
DRAFT-SUBJECT TO FINALIZATION
EXHIBIT I
July 31, 1997
Xxxxx X. Xxxxx
J. Xxxxxx Xxxxxxxxx
Xxx X. Xxxx
Xxxxx X. Xxxx
Xxxxxxx X. Xxxxx
c/o Mercy Air Service, Inc.
0000 Xxxxx Xxxxxx
Xxxxxxx, XX 00000
Gentlemen:
We have acted as counsel to Air Methods Corporation, a Delaware corporation
("Air Methods"), in connection with its purchase of the stock of Mercy Air
Service, Inc., a California corporation ("Mercy"), pursuant to the Stock
Purchase Agreement, dated as of July 11, 1997 (the "Agreement"), by and among
Air Methods and Xxxxx X. Xxxxx, J. Xxxxxx Xxxxxxxxx, Xxx X. Xxxx, Xxxxx X. Xxxx
and Xxxxxxx X. Xxxxx (collectively referred to as the "Sellers"). This opinion
is rendered pursuant to Section 10.8 of the Agreement and pursuant to Section
10.7 of the Asset Purchase agreement (as defined below). Unless otherwise
indicated, the capitalized terms used but not defined herein shall have the
meanings given to such terms in the Agreement.
In rendering the opinions set forth herein, we have examined the following
documents:
(a) The Agreement together with the exhibits and schedules thereto;
(b) The Asset Purchase Agreement between Helicopter Services, Inc., a
California corporation ("HSI"), and Air Methods, dated as of July 11,
1997 (the "Asset Purchase Agreement");
(c) The Xxxx of Sale and Assumption Agreement, dated the date hereof,
among HSI, Sellers and Air Methods (the "Xxxx of Sale");
c/o Mercy Air Service, Inc.
July 31, 1997
Page 2
(d) The Employment Agreement, dated the date hereof, between Xxxx X. Xxxxx
and Mercy (the "Xxxxx Employment Agreement");
(e) The Employment Agreement between Xxxxx X. Xxxxxxxx and Air Methods and
the Stock Option Agreement between Xxxxx X. Xxxxxxxx and Air Methods
(collectively referred to as the "Dolstein Employment Agreement");
(f) The Consulting and Non-Competition Agreements, dated the date hereof,
between each individual Seller and Mercy (the "Consulting
Agreements");
(g) The Stock Option Agreements, dated the date hereof, between each
individual Seller and Air Methods (the "Stock Option Agreements");
(h) The Notes; and
(i) The Security Agreement.
The Agreement, the Asset Purchase Agreement, the Xxxx of Sale, the Stock Option
Agreements, the Dolstein Employment Agreement, the Notes and the Security
Agreement shall hereinafter be referred to collectively as the "Air Methods
Documents." The Xxxxx Employment Agreement, the Consulting Agreements, and the
Security Agreement shall hereinafter be referred to collectively as the "Mercy
Documents."
In addition, we have examined originals or copies, certified or otherwise
identified to our satisfaction, of the certificate of incorporation and the
bylaws of Air Methods, such certificates of public officials, officers and
representatives of Air Methods and such other persons, and such other documents,
and we have made such examinations of law, as we have deemed necessary or
appropriate to enable us to render the opinions expressed below. In all such
examinations, we have assumed the genuineness of all signatures on original or
certified documents and the conformity to the original or certified documents of
all documents submitted to us as conformed or photostatic copies.
As to certain matters of fact relating to the opinions expressed herein, we
have relied upon a certificate of an officer of Air Methods, a copy of which is
attached as EXHIBIT A hereto, and a certificate of an officer of Mercy, a copy
of which is attached as EXHIBIT B hereto
c/o Mercy Air Service, Inc.
July 31, 1997
Page 3
(the "Certificates"). We have assumed the accuracy of all information furnished
to us in the Certificates and have not independently verified the accuracy of
such information.
For purposes of these opinions, we have assumed that: (i) Mercy is and will
be, after giving effect to the transactions which are the subject of these
opinions, solvent; (ii) there is adequate consideration for the execution and
delivery of the Security Agreement; (iii) Mercy owns the Collateral (as defined
in the Security Agreement), and the value has been given within the meaning of
Section 9-203 of the Uniform Commercial Code ("UCC"); and (iv) Mercy main tains
its records concerning the Collateral and its chief executive office in the
State of California.
The following opinions are limited solely to applicable federal laws of the
United States of America, the laws of the State of Colorado, and the General
Corporation Law of the State of Delaware. While we are not licensed to practice
law in the State of Delaware, we have reviewed applicable provisions of the
General Corporation Law of the State of Delaware as we have deemed appropriate
in connection with the opinions expressed in paragraphs 1 and 2 below. Except as
described, we have neither examined nor do we express any opinion with respect
to Delaware law. With your consent, our opinions regarding the Documents are
given based on the application of the laws of the State of Colorado thereto even
though such Documents state that they are to be governed by the laws of
California. Specifically, with respect to the opinions in paragraphs 4 and 5, we
have assumed, with your consent and without investigation, that the California
UCC is identical to the Colorado UCC.
Based upon the foregoing and subject to the further assumptions,
exceptions, qualifications and limitations set forth herein, we are of the
opinion that:
1. Air Methods is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware and has the corporate
power and authority to own its property and carry on its business as now
conducted.
2. Air Methods has the corporate power and authority to execute, deliver
and perform its obligations under the Documents. The execution and delivery of
the Documents and the consummation by Air Methods of the transactions
contemplated thereby have been duly authorized by all necessary corporate action
on the part of Air Methods. Each of the Air Methods Documents has been duly
executed and delivered by Air Methods. Each of the Mercy Documents has been duly
executed and delivered by Mercy.
3. The Air Methods Documents constitute the legal, valid and binding
obligation of Air Methods, enforceable against it in accordance with their
terms. The Mercy
c/o Mercy Air Service, Inc.
July 31, 1997
Page 4
Documents constitute the legal, valid and binding obligation of Mercy,
enforceable against it in accordance with their terms.
4. The provisions of the Security Agreement are sufficient to create a
security interest on behalf of Sellers which has attached to the right, title
and interest of Mercy in those items and types of Collateral in which a security
interest may be created pursuant to Article 9 of the UCC.
5. The UCC-1 Financing Statement relating to the Collateral and listing Air
Methods and Mercy as the debtors and the Collateral Agent (as defined in the
Security Agreement), as agent for the Sellers, as the secured party (the
"Financing Statement"), is in adequate and legally sufficient form for filing
with the Secretary of State of California and sufficiently describes the
Collateral; provided, however, that we render no opinion with respect to such
description to the extent the Financing Statement includes terms which are not
defined in the UCC. Assuming that the Financing Statement is duly filed with the
Secretary of the State of California in accordance with the provisions of
Section 9-403(1) of the UCC, a security interest will be perfected in those
items and types of Collateral in which a security interest can be perfected and
maintained solely by filing financing statements in the Secretary of State's
office in California.
These opinions do not address any event which may occur subsequent to the
date hereof to the extent such event affects the validity or perfection of the
Sellers' security interest in the Collateral. We call your attention to the
necessity of filing continuation statements from time to time under the
applicable provisions of the UCC and to the fact that additional filings may be
required, among other things, upon the change of location of Mercy as provided
in Section 9-103(e) of the UCC or the change of the name or corporate structure
of Mercy as provided in Section 9-402(7) thereof.
The opinions expressed herein as to the validity, binding effect and
enforceability of the Documents and as to perfection of the security interest in
the Collateral are subject to the following limitations: (a) general principles
of equity (regardless of whether such enforceability is considered in a
proceeding at law or in equity); (b) the effect of applicable bankruptcy,
reorganization, insolvency, moratorium and similar laws and court decisions
relating to or affecting creditors' rights generally; (c) we have made no
investigation and express no opinion as to the applicability of any fraudulent
conveyance or similar law; (d) the remedies of specific performance and
injunctive and other forms of equitable relief are subject to certain equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought; (e) the UCC requires that a secured party exercise its rights in
good faith and in a commercially reasonable manner and a court may not strictly
enforce certain covenants therein if it concludes
c/o Mercy Air Service, Inc.
July 31, 1997
Page 5
that such enforcement would be unreasonable under the then existing
circumstances; (f) certain liabilities and duties imposed by Colorado law with
respect to foreclosure of a security interest, including the duty to exercise
reasonable care in the custody and preservation of collateral in a secured
party's possession or control and certain notice requirements, cannot be waived,
disclaimed or varied; (g) public policy considerations may limit the rights to
obtain indemnification or to limit a party's liability for its own negligence or
wrongful acts; (h) we express no opinion as to the enforceability of the choice
of law, severability, waiver or set off provisions contained in the Documents;
(i) to the extent that the Security Agreement purports to authorize the Secured
Parties to purchase any Collateral at a private sale thereof, such provision
would not be enforceable; (j) to the extent that the Security Agreement might be
deemed to provide that the Secured Parties may enter upon and take possession of
the Collateral by force amounting to a breach of the peace or public disturbance
without liability by reason of the manner of such entry and possession, such
provision would not be enforceable, and (k) we express no opinion as to the
enforceability of the provisions of the Security Agreement which purport to
authorize the Collateral Agent to sign and file documents in the name or on
behalf of Mercy without the signatures of the appropriate officers of Mercy.
To the extent the obligations of Air Methods may be dependent upon such
matters, we assume for purposes of these opinions that the Air Methods Documents
are within the capacity and power of, and have been duly authorized, executed
and delivered by the parties thereto other than Air Methods (and with respect to
the Security Agreement, other than Mercy) and constitute the legal, valid and
binding obligation of such parties enforceable against them in accordance with
their terms. To the extent the obligations of Mercy may be dependent upon such
matters, we assume for purposes of these opinions that the Mercy Documents are
within the capacity and power of, and have been duly authorized, executed and
delivered by the parties thereto other than Mercy (and with respect to the
Security Agreement, other than Air Methods) and constitute the legal, valid and
binding obligation of such parties enforceable against them in accordance with
their terms.
The opinions set forth herein are as of the date hereof and we disclaim any
under taking or obligation to advise you of any changes which may hereafter be
brought to our attention. These opinions are rendered only to the persons to
whom this letter is addressed and are solely for their benefit in connection
with the transactions contemplated by the Documents. These opinions may not be
relied upon by the addressees, or any of them, for any other purpose or relied
upon by any person other than such persons for any purpose without our prior
written consent.
Very truly yours,
XXXXX, XXXXXX & XXXXXX LLP
SCHEDULE 2.1
Ownership of the Shares/Allocation of Closing Date Cash Payment and Notes
SHAREHOLDER # OF SHARES HELD/1/ % OF SHARES HELD CASH PAYMENT DUE/2/ NOTE AMOUNT DUE/2/
----------- ----------------- ---------------- ----------------- ---------------
Xxxxx X. Xxxxx 16 2/3 20% $930,000.00 $300,000.00
J. Xxxxxx Xxxxxxxxx 16 2/3 20% $930,000.00 $300,000.00
Xxx X. Xxxx 16 2/3 20% $930,000.00 $300,000.00
Xxxxx X. Xxxx 16 2/3 20% $930,000.00 $300,000.00
Xxxxxxx X. Xxxxx 16 2/3 20% $930,000.00 $300,000.00
--------
1 Under California law, consent from the spouses and ex-spouses of certain of
the Shareholders may be required prior to the transfer of the Shares.
2 Represents the sum of the respective cash payments and Note amounts due
under the Stock Purchase Agreement and the Western Helicopter Asset
Purchase Agreement. This Schedule will be revised to include only the cash
payments and Note Amounts due as consideration for the sale of the Mercy
Shares, when the allocation of purchase price is determined.
SCHEDULE 2.2
Assumed Obligations
The Textron Debt and the guaranty thereunder (as defined in SCHEDULE 8.5 to
the Stock Purchase Agreement).
SCHEDULE 2.3
DETERMINATION OF PURCHASE PRICE ADJUSTMENTS
Reference is hereby made to (i) that certain Stock Purchase Agreement dated
as of July 11, 1997 (the "Stock Purchase Agreement"), by and among Air Methods
Corporation, a Delaware corporation ("Buyer"), and Xxxxx X. Xxxxx, J. Xxxxxx
Xxxxxxxxx, Xxx X. Xxxx, Xxxxx X. Xxxx and Xxxxxxx X. Xxxxx (each, a "Seller" and
collectively, the "Sellers"), who own all of the outstanding shares of common
stock Mercy Air Service, Inc., a California, corporation (the "Company"), and
(ii) that certain Asset Purchase Agreement dated as of July 11, 1997 (the "Asset
Purchase Agreement"), by and among Buyer, and Helicopter Services, Inc., a
California corporation ("HSI"), and the Sellers, who also are the owners of the
outstanding shares of common stock of HSI. The Company provides emergency
medical transportation services by helicopter and HSI provides helicopter
maintenance and repair services primarily to the Company.
The Stock Purchase Agreement provides for Sellers to sell to Buyer and for
Buyer to purchase from the Sellers, the outstanding shares of the Company (the
"Shares") and the Asset Purchase Agreement provides for HSI to sell to Buyer and
Buyer to purchase from HSI substantially all of the assets of HSI (the
"Purchased Assets"). This SCHEDULE 2.3, which has been incorporated into and
made an integral part of the Stock Purchase Agreement, sets forth the
provisions, agreed upon by the parties to that Agreement, for determining the
nature and amount of the adjustments, if any, that will be made to the Purchase
Price to be paid for the Shares (the "Share Purchase Price"). In addition, as a
matter of convenience and to avoid unnecessary duplication, the parties to the
Asset Purchase Agreement have agreed to include the purchase price adjustment
provisions applicable to the Purchase Price to be paid for the Purchased Assets
(the "Asset Purchase Price") into this SCHEDULE 2.3 and to incorporate the
provisions hereof applicable to the determination of such Adjustments.
Terms with initial capital letters contained in this SCHEDULE 2.3 shall
have the meanings given to them in the Stock Purchase Agreement or the Asset
Purchase Agreement, as applicable, unless such terms are otherwise defined
herein or the context indicates that a different meaning is intended by the
Parties.
A. DEFINITIONS.
For purposes of determining the Share Price Adjustments and the Asset Price
Adjustments pursuant to this SCHEDULE 2.3, the terms set forth below shall have
the following meanings:
"APPLICABLE BALANCE SHEETS" shall mean (i) the respective balance
sheets for the Company and HSI as of December 31, 1996 (the "1996 Balance
Sheets"), which shall be prepared from the financial books and records of
the Company and HSI, respectively, by KMPG Peat Marwick, independent public
accountants ("Peat Marwick") in connection with its preparation of an
audited combined balance sheet of the Company and HSI as of December 31,
1996, as contemplated by the Purchase Agreement, and (ii) balance sheets
for the Company and HSI, respectively, as of the Closing Date (the "Closing
Date Balance Sheets"). Except as otherwise provided below, neither the 1996
Balance Sheets nor the Closing Date Balance Sheets shall give effect to the
respective stock purchase and asset purchase transactions between the
parties that are contemplated by the Stock Purchase Agreement and the Asset
Purchase Agreement, respectively. Each of the 1996 Balance Sheets and the
Closing Date Balance Sheets shall be prepared in accordance with GAAP,
consistently applied on an accrual basis.
"ADJUSTED NET WORKING CAPITAL" with respect to either the Company or
HSI shall mean the amount by which the current assets of the Company or
HSI, as the
case may be, exceeds the current liabilities of the Company or HSI, as the
case may be, as of December 31, 1996 and as of the Closing Date, determined
from the 1996 Balance Sheets and the Closing Date Balance Sheets,
respectively, after making the following adjustments thereto:
(1) Eliminating the cash balances from each of the respective
Applicable Balance Sheets of the Company and HSI and the short-term
investment in the amount of $230,625 from HSI's 1996 Balance Sheet;
(2) Eliminating the accounts receivable balance on the Company's
1996 Balance Sheet and the Company's Closing Balance Sheet (so that
there shall be no adjustment made for changes in the Company's
accounts receivables between December 31, 1996 and the Closing Date);
(3) Excluding the current portion of long term debt of the
Company and HSI, respectively, from each of their respective
Applicable Balance Sheets;
(4) Deducting any "accrued overhead and parts replacement costs"
from the respective 1996 and Closing Balance Sheets of the Company and
HSI, respectively;
(5) Deducting, from the current liabilities on each of the
respective 1996 and Closing Date Balance Sheets of the Company and
HSI, all accounts payable and indebtedness of the Company and all
accounts payable and all indebtedness of HSI owed to their respective
shareholders or to affiliates of such shareholders;
(6) Deducting, from the assets on each of the respective 1996 and
Closing Date Balance Sheets of the Company and HSI, all accounts
receivable and other amounts due from any of the respective
shareholders of the Company or HSI or from any of their affiliates;
(7) Deducting, from the liabilities of HSI on each of its 1996
and Closing Date Balance Sheets, all liabilities of HSI that Buyer is
not assuming and HSI is retaining pursuant to the provisions of the
Asset Purchase Agreement;
(8) Deducting, from the assets of HSI on each of on each of its
1996 and Closing Date Balance Sheets, all Excluded Assets (as such
term is defined in the Asset Purchase Agreement);
(9) Adding to the assets of HSI on its Closing Date Balance
Sheet, as inventory, the helicopter engine described on SCHEDULE 1.7
to the Asset Purchase Agreement; and
(10) Adding to the respective assets of the Company or HSI, on
their respective Closing Date Balance Sheets, as receivables or as
offsets to accounts payable or other current liabilities, any credits
or discounts received or receivable from vendors, suppliers or service
providers that arose out of the operations of the Company or HSI,
respectively, conducted prior to the Closing.
"CLOSING DATE INDEBTEDNESS" shall mean the long-term indebtedness,
including the current portion thereof, if any, of the Company or HSI, as
the case may be, that is
outstanding as of the Closing Date, as reflected on its Closing Date
Balance Sheet, and shall include (i) any borrowings of the Company or of
HSI, if any, under any of the any of their respective revolving lines of
credit or revolving credit facilities outstanding as of the Closing Date,
even if such indebtedness would otherwise be required to be classified as
current debt or short-term debt under GAAP, and (ii) the outstanding
balance of the Textron Debt, as defined in SCHEDULE 8.5 of the Stock
Purchase Agreement, outstanding as of the Closing Date. "Closing Date
Indebtedness" shall not include any indebtedness due by the Company or HSI
to any of their respective shareholders or their affiliates.
"WRITTEN-OFF ACCOUNTS" shall mean the accounts receivable of the
Company or HSI that were uncollected and had been "written-off" by the
Company or HSI, as the case may be, as of or at any time prior to the
Closing Date.
B. CLOSING PURCHASE PRICE ADJUSTMENTS.
1. PREPARATION OF CLOSING DATE BALANCE SHEETS. Buyer shall arrange for Peat
Marwick to prepare, and issue review reports with respect to, the Closing Date
Balance Sheets for the Company and HSI. Such Balance Sheets and review reports
shall be issued to both Buyer and the Sellers by no later than ninety (90) days
after the Closing Date.
2. DETERMINATION OF ADJUSTED NET WORKING CAPITAL. Based on the respective
1996 Balance Sheets and the respective Closing Date Balance Sheets of the
Company and HSI, within the aforesaid ninety (90) days period immediately
following the Closing Date, Peat Marwick shall determine (i) the Adjusted Net
Working Capital of each of Company and of HSI as of December 31, 1996, and (ii)
the Adjusted Net Working Capital of each of Company and of HSI as of the Closing
Date.
3. DETERMINATION OF CLOSING DATE INDEBTEDNESS. Peat Marwick shall determine
the amount of the Closing Date Indebtedness From the Closing Date Balance Sheet
of the Company.
4. DETERMINATION OF CLOSING ADJUSTMENTS TO PURCHASE PRICE.
(a) NET WORKING CAPITAL ADJUSTMENT: Immediately following the
determination of the Adjusted Net Working Capital of the Company and HSI,
respectively, as of December 31, 1996 and the Adjusted Net Working Capital
of the Company and HSI, respectively, as of the Closing Date, the Share
Purchase Price and the Asset Purchase Price shall be adjusted as follows
(the "Net Working Capital Adjustments"):
(i) In the event that the Company's or HSI's Adjusted Net Working
Capital as of December 31, 1996 exceeds its respective Adjusted Net
Working Capital as of the Closing Date, then, the Share Purchase Price
(in the case of the Company), or the Asset Purchase Price (in the case
of HSI) shall be reduced by the amount of such excess, in the manner
described below (a "Downward Share Price Adjustment" and a "Downward
Share Price Adjustment," respectively).
(ii) If, on the other hand, the Company's or HSI's Adjusted Net
Working Capital as of the Closing Date exceeds its respective Adjusted
Net Working Capital as of December 31, 1996, then, the Share Purchase
Price (in the case of the Company), or the Asset Purchase Price (in
the case of HSI), shall be increased by the amount of such excess, in
the manner described below (an "Upward Share Price Adjustment" and an
"Upward Asset Price Adjustment," respectively).
(b) CLOSING DATE INDEBTEDNESS ADJUSTMENT. Immediately following the
determination of the Closing Date Indebtedness, the Share Purchase Price
shall be adjusted as follows (the "Closing Date Indebtedness Adjustment"):
(i) Subject to the any further adjustment required pursuant to
Subparagraph 4(b)(iii) below, if the Closing Date Indebtedness exceeds
$8,200,000, then, the Share Purchase Price shall be reduced by the
amount of such excess, in the manner described below (a "Downward
Share Price Adjustment").
(ii) Subject to the any further adjustment required pursuant to
Subparagraph 4(b)(iii) below, if, on the other hand, the sum of
$8,200,000 is determined to have exceeded the Closing Date
Indebtedness, then, the Share Purchase Price shall be increased by the
amount of such excess, in the manner described below (an "Upward Share
Price Adjustment").
(iii) If a Downward Share Price Adjustment is determined to be
required pursuant to Subparagraph 4(b)(i), that Adjustment shall be
(A) reduced to the extent that the Share Purchase Price was reduced at
Closing, or (B) increased to the extent that the Share Purchase Price
was increased at Closing, as the case may be, on the basis of the
estimate of Closing Date Indebtedness made pursuant to Subsection 2.3
of the Stock Purchase Agreement. If, on the other hand, an Upward
Share Price Adjustment is determined to be required pursuant to
Subparagraph 4(b)(ii), that Adjustment shall be (A) increased to the
extent that the Share Purchase Price was reduced at Closing, or (B)
decreased to the extent that the Share Purchase Price was increased at
Closing, as the case may be, on the basis of the estimate of Closing
Date Indebtedness made pursuant to Subsection 2.3 of the Stock
Purchase Agreement.
5. EFFECTUATION OF CLOSING PURCHASE PRICE ADJUSTMENTS. If any Upward or
Downward Share Price or Asset Price Adjustment (any of the foregoing, a "Closing
Price Adjustment") is required to be made to the Share Purchase Price or Asset
Purchase Price, either pursuant to Subsection 4(a) or Subsection pursuant to
Subsection 4(b) of this Section B, such Closing Price Adjustment or Adjustments
(as the case may be) shall be given effect as follows:
(a) If any Closing Price Adjustment is required pursuant to either
Paragraph 4(a) or Paragraph 4(b), but not pursuant to both of those
Subsections, then:
(i) UPWARD SHARE PRICE ADJUSTMENT. If such Closing Price
Adjustment is an Upward Share Price Adjustment pursuant to Subsection
4(a) or Subsection 4(b), the amount thereof shall be applied to
increase the respective principal amounts due under the notes issued
to the Sellers pursuant to the Stock Purchase Agreement (the "Seller
Notes"), with the amount of such Closing Price Adjustment to be
allocated among the Seller Notes in the same proportions as the then
outstanding principal amount of each such Note bears to the aggregate
sum of the respective then outstanding principal amounts of all of
such Notes, PROVIDED, HOWEVER, that the amount of any such Closing
Price Adjustment shall become due and payable (together with interest
thereon at the interest rate specified in such Notes) on the first
anniversary of the Closing Date together with the installments of
principal and interest already scheduled to be paid on such date under
such Notes.
(ii) UPWARD ASSET PRICE ADJUSTMENT. If such Closing Price
Adjustment is an Upward Asset Price Adjustment pursuant to Subsection
4(a), the amount thereof shall be paid in cash by Buyer to HSI or, if
the amount thereof exceeds $50,000, then, at Buyer's option, by
issuing to HSI a secured promissory note of Buyer (the "Buyer Note")
that shall be (A) substantially similar in form to the notes issued to
the Sellers pursuant to the Stock Purchase Agreement (the "Seller
Notes"), (B) payable by Buyer in twelve (12) equal consecutive monthly
installments of principal and interest (which shall accrue on such
principal sum at the same rate at which interest accrues under the
Shareholder Notes issued pursuant to Stock Purchase Agreement) and (C)
secured by a security interest, that Buyer shall cause to be granted
by the Company in its accounts receivable to HSI pursuant to a
security agreement in a form substantially similar to the
Security Agreement entered into by the Company pursuant to the Stock
Purchase Agreement, or in such other assets as Buyer and HSI may
agree, that shall be junior in priority only to the the security
interest in such accounts receivable that secures the Seller Notes and
up to $700,000 of indebtednes owed to the Company's revolving credit
lender.
(iii) DOWNWARD SHARE PRICE ADJUSTMENT. If such Closing Price
Adjustment is, instead, a Downward Share Price Adjustment pursuant to
Subsection 4(a) or Subsection 4(b), the amount thereof shall be
allocated among the Seller Notes in the same proportions as the then
principal amount of each such Note bears to the aggregate sum of the
respective principal amounts of all of the Notes and the amount
allocated to each such Note shall be credited against and to that
extent shall decrease the respective amounts of the installments of
principal that will come due thereafter under such Notes in the order
in which such installments would otherwise become due and payable.
(iv) DOWNWARD ASSET PRICE ADJUSTMENT. If such Closing Purchase
Price Adjustment is, instead, a Downward Asset Price Ajustment
pursuant to Subsection 4(a), the amount thereof shall be payable by
HSI to Buyer either in cash or, at HSI's option, by the issuance of an
HSI promissory note (the "HSI Note") that shall be (i) payable in
twelve (12) consecutive equal monthly payments of principal and
interest (which shall accrue at the same rate as the rate set forth in
the Seller Notes) and (ii) shall be secured by a written agreement of
each of HSI's shareholders that shall extend to Buyer the right to
set-off up to an amount equal to 20% of any unpaid principal balance
of the HSI Note, together with accured and unpaid interest thereon, in
the event of a payment default under such note by HSI, against amounts
that Buyer would otherwise be obligated to pay to such shareholder
under his Seller Note.
(b) If there are Share Price Adjustments required pursuant to both
Paragraphs 4(a) and 4(b) of this SECTION B, then:
(i) If those Adjustments are both Upward Share Price Adjustments
or both Downward Share Price Adjustments, they shall be added to each
other to determine the aggregate amount of the Share Price Adjustment
(either upward or downward) and such Adjustment shall be given effect
and paid:
(A) in the manner set forth in Paragraph 5(a)(i), if the
Adjustments are both Upward Share Price Adjustments; or
(B) in the manner set forth in Paragraph 5(a)(iii), if the
adjustments are both Downward Share Price Adjustments.
(ii) If those Share Price Adjustments include both an Upward and
a Downward Adjustment, those Share Price Adjustments shall be netted
against each other as follows:
(A) if the amount of a Downward Share Price Adjustment
exceeds the amount of the Upward Share Price Adjustment, then,
the amount of such excess shall be applied to decrease the
respective principal amounts of the Seller Notes in the
proportions and in the manner set forth in Paragraph 5(a)(iii)
above; or
(B) if the amount of the Upward Share Price Adjustment
exceeds the amount of the Downward Share Price Adjustment, then,
the amount of such excess shall be applied to increase the
respective principal amounts of the Seller Notes in the
proportions, and such increase shall be paid in the manner, set
forth in Paragraph 5(a)(i) hereof.
All such adjustments to the Seller Notes shall be deemed made on the date of
original issuance thereof, with the effect that interest shall accrue on the
adjusted amount from the date of original issuance. Any Noteholder may submit,
and on the request of Buyer each Noteholder shall submit, his originally-signed
Seller Note to the Buyer, in exchange for which Buyer shall issue to such
Noteholder a new Seller Note of like tenor, except that the new Seller Note
shall give effect to the Share Price Adjustment provided for herein as if such
adjustment had occurred on the Closing Date; PROVIDED, HOWEVER, that the failure
of any Noteholder to submit, or the failure or refusal of the Buyer to accept,
the original Seller Note of any Noteholder for exchange in the manner
hereinabove provided shall not affect the Share Price Adjustment, which shall
nevertheless become effective retroactively to the Closing Date and, in such
event, the original Seller Note shall thereafter represent the right to receive
the principal amount stated thereon plus any Upward Share Price Adjustment or
minus any Downward Share Price Adjustment, as the case may be, on the terms set
forth herein.
6. ISSUANCE OF REPORT. Promptly following the determination of the Share
Price Adjustments and the Asset Price Adjustments, Peat Marwick shall issue
written reports to Buyer, Sellers and HSI (the "Share Price Adjustment Report"
and the "Asset Price Adjustment Report"), setting forth its determinations of
(i) the Adjusted Net Working Capital of the Company and the Adjusted Net Working
Capital of HSI, respectively, as of December 31, 1996, (ii) the Adjusted Net
Working Capital of the Company and the Adjusted Net Working Capital of HSI,
respectively, as of the Closing Date, (iii) the Closing Date Indebtedness, (iv)
the Net Working Capital Adjustments for each of the Company and HSI, and (v) the
Closing Date Indebtedness Adjustment. Such Report shall contain detail
sufficient to enable the parties to determine the nature and amount of each of
the adjustments made by Peat Marwick in determining the Share Price and the
Asset Price Adjustments and such Price Adjustment Reports shall be accompanied
by copies of the 1996 Balance Sheets and the Closing Date Balance Sheets for
each of the Company and HSI, together with Peat Marwick's review reports with
respect to such Closing Date Balance Sheets. The fees and reasonable
out-of-pocket expenses of Peat Marwick in connection with the preparation of the
Closing Date Balance Sheet and each of the foregoing determinations shall be
paid by Buyer.
7. RESOLUTION OF DISPUTES. Buyer, Sellers and HSI shall each have thirty
(30) days following delivery of the Price Adjustment Reports (the "Objection
Period") to deliver a written statement to the other parties of any objections
that such party has to either of the 1996 Balance Sheets or either of the
Closing Date Balance Sheets or any of the determinations contained in the Price
Adjustment Reports (an "Objection Statement"). The failure of any party to
deliver to the other parties hereto, prior to the expiration of the Objection
Period, such a written Objection Statement which identifies, with reasonable
particularity, the items in the 1996 Balance Sheets or in the Closing Date
Balance Sheets or in such Reports to which such party objects and the changes or
adjustments that such party proposes be made thereto, shall constitute such
party's acceptance of the 1996 Balance Sheets, the Closing Date Balance Sheets
and each of the determinations contained in the Price Adjustment Reports. If a
party has delivered such an Objection Statement to the other parties within the
Objection Period, then, the parties shall attempt to resolve their difference by
mutual agreement within the succeeding twenty (20) days. If the parties are
unable to do so, the matters that remain in dispute (which shall consist solely
of the items as to which any party objected in such party's Objection Statement
and were not resolved by agreement of the parties) shall be submitted, for
binding resolution, to a firm of independent certified public accountants (the
"Review Accountants"), that shall be selected by agreement of the parties, or
(ii) if such agreement cannot be reached within a period of ten (10) business
days, then, by lot from among the five "Big Six" accounting firms other than
Peat Marwick. The determination of the Review Accountant with respect to the
matters in dispute shall be final and binding on, and non-appealable by, the
parties hereto. The fees and expenses of the Review Accountants and the
reasonable accountants and attorneys fees and disbursement and other reasonably
incurred out-of-pocket expenses of the prevailing party shall be paid or
reimbursed, as the case may be, by the non-prevailing party with respect to such
dispute.
C. POST-CLOSING ADJUSTMENTS TO PURCHASE PRICE.
As an inducement to Sellers to enter into the Stock Purchase Agreement and
to sell the Shares to Buyer, the Buyer and Sellers have agreed that the Share
Purchase Price (as the same may have been theretofore adjusted pursuant to the
provisions of Section 2.3 of the Stock Purchase Agreement or Section B of this
SCHEDULE 2.3), shall be subject to the following possible additional adjustment
(the "Post Closing Adjustment"):
1. EXCLUSIVE LICENSE ADJUSTMENT. The County of San Diego has issued a
Request For Proposals (an "RFP") pursuant to which the County intends to award a
contract for the provision of helicopter medical transport services in that
County beginning in 1998 and the Company is in the process of preparing such a
proposal in response to the RFP. If, within eighteen (18) months following the
Closing Date, the Company is awarded that contract by the County of San Diego
(the "San Diego County Contract"), the Share Purchase Price shall be increased
by $500,000 (the "Post Closing Share Price Adjustment") by increasing the then
remaining principal amount of each of the Seller Notes by an amount that bears
the same ratio to $500,000 as the original principal amount of each such Note
bears to the aggregate sum of the respective original principal amounts of all
of the Notes.
2. EFFECTUATION OF POST-CLOSING ADJUSTMENT. If a Post-Closing Share Price
Adjustment is required to be made pursuant to Subsection 1 of this Section C,
each Noteholder may submit his originally-signed Seller Note to the Buyer in
exchange for which Buyer shall issue to such Noteholder a new Seller Note of
like tenor, except that such new Seller Note shall give effect the Post Closing
Share Price Adjustment provided for in this SECTION C as if such adjustment had
become effective on the date the San Diego County Contract was awarded to the
Company; PROVIDED, HOWEVER, that the failure or refusal of the Buyer to accept
the Seller Note of any Noteholder for exchange in the manner hereinabove
provided shall not affect the Post-Closing Share Price Adjustment, which shall
nevertheless become effective retroactively to the date the San Diego County
Contract was granted to the Company and, in such event, the originally-signed
Seller Note shall thereafter represent the right to receive the principal amount
stated thereon plus the amount of the increase in the principal amount thereof
arising from such Post-Closing Share Price Adjustment.
SCHEDULE 4.3
Seller Conflicts
Under California law, consent from the spouses and ex-spouses of certain of the
Shareholders may be required prior to the transfer of the Shares.
SCHEDULE 5.2
Securities
Pursuant to the terms of the Company's Articles of Incorporation, each
Shareholder has a preemptive right to purchase such Shareholder's pro rata share
(based on such Shareholder's percentage ownership of all of the outstanding
shares) of any shares of capital stock that may be issued by Mercy Air Service,
Inc.
SCHEDULE 5.4
Company Conflicts
1. Consent will be required from the Federal Aviation Administration for the
sale of the Shares to Air Methods Corporation.
2. Consent will be required from the County of Orange, California for the
transfer of the License issued by the County to the Company on January 1,
1997.
3. Consent will be required from the County of San Diego Department of Health
Services for the transfer of the Ambulance/Transport Permit # A-96-033
issued by the County to the Company.
4. Consent will be required from the County of Xxxx, California for the
transfer of the Xxxx County Ambulance Service Operation Permit issued by
the County to the Company on October 1, 1994 and renewed on February 29,
1996.
5. Consent will be required from the Riverside County Health Services Agency,
Department of Public Health, for the transfer of the Ambulance Operator
Permit issued by the County to the Company on July 1, 1996
6. Consent will be required from the San Bernardino County Department of
Public Health for the transfer of the EMS Aircraft Service Permit issued by
the County to the Company and effective July 1, 1996. (This Permit expired
on June 30, 1997. See SCHEDULE 5.13.)
7. Consent will be required from California State Bank pursuant to the
Company's line of credit with such bank.
8. Consent will be required from First Security Bank of Utah, N.A. (as
assignee of Mitsui & Co.) pursuant to Section 21 of that certain helicopter
lease dated January 30, 1994.
9. Consent will be required from Sky Harbor Hangars pursuant to Section 11 of
that certain Aviation Sublease Agreement dated August 1, 1996.
SCHEDULE 5.5
Financial Statement Exceptions
None.
SCHEDULE 5.6
Certain Changes
(c) The Company has entered into the following contracts since December 31,
1996:
1. Lease Agreement, between the Company and the City of Banning,
dated March 1, 1997.
2. Patient Transport Agreement, between the Company and California
Speedway Corporation, dated May 24, 1997.
(d) The Company is currently one of two providers of emergency air ambulance
services to San Diego County. Effective January 1, 1998, the provider(s) of
such services will be determined by a bidding process.
SCHEDULE 5.7
Tangible Assets
See attached list.
DESCRIPTION DATE ACQUIRED NET BOOK VALUE
Xxxxxx Mav Radio 04/19/89 0
Motorola 8SE Statn 09/16/89 0
Motorola 800 MNZ RDO 12/05/90 0
ACS-PA100F Siren. Sys 01/15/91 57
Motorola DSP Base 06/05/91 333
II Xxxxxx Apollo MDL 12/18/91 239
Sperry RT220 Radio 08/31/92 637
Aircraft Base Station 04/21/92 446
Telephone Coupler 06/03/92 724
VHS AM Base Station 05/27/92 1,554
Telephone System 06/01/92 407
Xxxxxx Messenger 03/25/92 92
Spectra Radio 02/28/94 1,342
800 MZ Radio-C-XXXX 01/31/96 4,942
Dispatch Console 01/16/96 54,928
--------------------------------------- ------------ -------------
65,701
1982 Xxxx 412 Copter 04/21/89 776,513
Xxxx 412 Helicopter 12/31/91 2,327,733
Xxxx 222-415MA 12/30/93 1,330,100
Xxxx 222-416MA 12/30/93 1,143,790
Xxxx 222-403MA 04/13/94 1,199,612
Xxxx 222-408MA 06/05/94 1,060,490
416MA Heli Modificat 05/11/94 375,237
415MA Heli Modificat 03/31/94 9,443
Med Tadio-415MA 02/21/95 36,470
Lock Box-415MA 04/30/95 12,834
Patient Handler-416M 12/27/95 23,362
--------------------------------------- ------------ -------------
8,295,584
Anaheim Concrete 06/28/94 7,571
Anaheim Electrical 07/26/94 1,340
STA 4 Helipad Anaheim 09/08/94 16,598
--------------------------------------- ------------ -------------
25,509
STA 3 03/01/97 13,521.32
(not included in total)
1990 Ford Tempo 09/17/91 0
1990 Ford Van 09/17/91 0
'93 Mercury 03/26/96 5,816
DESCRIPTION DATE ACQUIRED NET BOOK VALUE
'94 Dutchman RV 03/07/96 8,295
--------------------------------------- ------------ -------------
14,111
1988 Skyline MBL HME 01/27/89 24,630
Utility and Phone Line (Disposed of 3/31/97) 02/14/89 5,103
--------------------------------------- ------------ -------------
29,733
Tandy 1000 Computer 06/30/89 0
80286 Comptr W/40MB 02/01/90 0
25MMZ Computer 11/18/91 0
HP Laser Printer 09/17/91 0
A/R Billing Software 03/18/92 0
RISL System 6000 03/18/92 0
Alpha Micro 1200 07/07/93 300
486DX PC 04/29/93 236
MT932BA Modem 04/29/93 109
ML393 Printer 04/29/93 157
Accounting Software 04/29/93 234
486DX Computer 01/27/94 928
486 Colorbook 01/05/94 877
PC Notebook 03/15/94 748
COMPAQ 02/08/94 483
486 Colorbook (MD) 03/30/94 1,087
Notebook (SD) 04/12/94 1,793
Alpha Micro 1500 08/25/94 450
Unitex 484 Computer 12/15/94 436
(5) Toshiba Laptop 05/26/95 5,693
(3) Optogust Monitor 05/31/95 1,980
402 CDW Computer 12/31/95 1,122
Starion Computer 04/19/96 1,237
Compaq Computer 05/31/96 1,431
RISC 0000 Xxxx Xxxxx 06/11/96 1,149
(2) Pentium Computer 03/19/96 2,640
HP Laserjet 5 Printer 09/18/96 957
--------------------------------------- ------------ -------------
24,047
2-Lifepak 5 Monitors 01/18/89 0
2-Lifepak 5 Defibtrs 01/18/89 0
2-Lifestat 100BP 01/18/89 0
2
DESCRIPTION DATE ACQUIRED NET BOOK VALUE
Uni-Vent MOL 706 02/07/89 0
2-Med Tech Trans PMP 04/25/89 0
Hellcor Oximeter 05/23/89 0
LSP Autovent 3000 04/24/91 64
40MIN Pulse Oximeter 04/29/91 44
MINIMED Infusion System 04/22/91 161
Defib W/Monitor 04/23/91 307
Defib W/Monitor 04/23/91 307
2-Blood Pressure EQP 04/23/91 162
Battery Charger 04/23/91 50
Helio Med Package 05/01/91 215,285
Battery Charger 09/18/91 85
Minimed Infusion System 01/21/92 628
LSP Autovent 3000 03/19/92 354
Infusion System 09/16/93 1,022
LSP Autovent 3000 08/16/93 564
LSP Autovent 03/30/94 840
IVAC Infus Pump 04/01/94 1,514
Defib W/ Monitor 04/25/94 3,511
Propaq 106 EL 09/16/94 4,503
Propaq 106 EL 09/20/94 4,503
(2) ASIC Infus Pump 09/16/94 2,896
Aspirator/Oximeter 06/09/94 540
(2) Propaq CO2 Sensor 03/29/95 12,076
(2) ASIC Infus PMP 03/31/95 4,249
Patient Simulator 06/15/95 798
S/D Life PAC N30249 12/11/95 4,274
(2) Autovent Ventil 01/01/96 2,276
(2) Monitors W/Defib 01/01/96 7,979
(2) Port Infus Pumps 01/01/96 3,926
Upgrade Propaq Monit 03/18/96 3,446
LOX Converter 02/21/96 1,689
Monitor W/Defib 08/29/96 4,174
--------------------------------------- ------------ -------------
282,227
XXX XXX 00/00/00 000
Xxxxx 0000 Xxxxxx 06/02/93 1,075
HP Fax-200 02/08/93 118
--------------------------------------- ------------ -------------
1,493
3
DESCRIPTION DATE ACQUIRED NET BOOK VALUE
A/C Unit 08/25/93 401
(2) Press Transducer 06/28/94 686
Mango Air Condition 08/28/95 741
--------------------------------------- ------------ -------------
1,828
=============
TOTALS 8,740,233
4
SCHEDULE 5.8
Intangible Personal Property
The Company's trade name, "Mercy Air Service, Inc." is not registered with the
United States Patent and Trademark Office.
The Company holds licenses to use the following computer software:
a. AeroMed Software Dispatch Module v2.2, Network Version, Flight
Management Module v2.2, Network Version, Continuing Education Module v2.2,
Network Version, and sample data relating to the foregoing.
b. The following modules and programs from RECORDATA WEST, Inc.: Basic
Billing Level 4, Basic Analysis Module, Graphic Analysis Module, Electronic
Claims Submission-- Medicare, Async Modem, Multi-Company Module, and Auto Xxxx
Processor Feature.
c. Certain accounting and payroll software from Data Management Technigies,
Inc.
d. EasyLoan
x. Xxxxxx Directory
f. Pro CD Phone Books
g. Perfect Works
h. Word Perfect
i. Quattro Pro for Windows
j. Quicken
k. Microsoft Office
l. Microsoft Office 95
m. Microsoft Works for Windows
n. Microsoft Windows 95
x. Xxxx XxXxxxx TripMaker
p. EZ Page
q. Message Flash
x. Xxxxxx AntiVirus
SCHEDULE 5.9
Leases
1. REAL PROPERTY LEASED BY THE COMPANY:
(a) Lease dated August 28, 1996 by and between H.S.T.D.-I Partnership and
the Company for premises located at 0000 Xxxxx Xxxxxx, Xxxxxxx,
Xxxxxxxxxx 00000.
(b) Heliport Lease dated December 20, 1996 by and between the City of
Adelanto and the Company for a heliport located on the grounds of Fire
Station #322, at 00000 Xxxxxx Xxxx, Xxxxxxxx, Xxxxxxxxxx 00000.
(c) Heliport Lease dated March 1, 1997 by and between the City of Banning
and the Company for a heliport located on the grounds of Banning
Municipal Airport, at 000 X. Xxxxxxxx, Xxxxxxx, Xxxxxxxxxx.
(d) Helicopter Base Station Lease dated June 16, 1996 by and between North
Net Fire Training Center and the Company for a helicopter base station
at 0000 X. Xxxxxxxxxx Xxx., Xxxxxxx, Xxxxxxxxxx 00000.
(e) Office and Helicopter Parking Space Rental Agreement dated October 3,
1996 by and between Western Flight, Inc. and the Company for office
space at 0000 Xxxxxxx Xxxxxxx Xx., Xxxxxxxx, Xxxxxxxxxx 00000 and
helicopter parking space adjacent thereto.
(f) Agreement dated January 1, 1996 by and between Palomar Pomerado Health
System and the Company for a helicopter station at 000 Xxxx Xxxxxx
Xxxxxxx, Xxxxxxxxx, Xxxxxxxxxx.
(g) Sublease Agreement dated March 11, 1996 by and between Cruiseair
Aviation, Inc. and the Company for premises at Xxxxxx Airport, Ramona,
California.
(h) Aviation Sublease Agreement dated August 1, 1996 by and between Sky
Harbor Hangars and the Company for rental of Hangar 1 at 545 Xxxxxx
Street, Bldg. G, Xxxxxxxxx Field, El Cajon, California.
(i) Sublease Agreement dated April 20, 1994 by and between the City of
Rancho Cucamonga and the Company for an ambulance base station at Fire
Station Number 174, 11297 Jersey Boulevard, Rancho Cucamonga,
California.
2. PERSONAL PROPERTY LEASED BY THE COMPANY:
(a) Helicopter lease (s/n 47523) dated 1/30/94 from First Security Bank of
Utah, N.A. (as assignee of Mitsui & Co.).
(b) Helicopter lease (Xxxx Model 222B Aircraft, s/n 47134) dated March 7,
1994 from H.A.S. Corporation dba Western Pennsylvania Helicopter.
(c) Postage machine (Model E500, S/N 0064564) lease from Pitney Xxxxx
dated August, 1996.
SCHEDULE 5.11
Title Exceptions
1. All of the Company's inventory, equipment, documents, books and records are
covered by, and subject to a lien under, a UCC-1 Financing Statement filed by
California State Bank as Secured Party. The UCC-1 Financing Statement was filed
on 3/11/96 and expires on 3/11/2001.
In addition, the following Company assets and leased personal property are
subject to a UCC-1 Financing Statement in favor of the secured parties named
below:
2. Xxxx Helicopter Model 222UT (S/N 47526), together with engines and
equipment
Secured Party: Air Methods Corporation
Filing Date: 1/14/94
Expiration Date: 1/14/99
3. Xxxx Helicopter Model 222U (S/N 47568), together with engines and equipment
Secured Party: Air Methods Corporation
Filing Date: 1/14/94
Expiration Date: 1/14/99
4. Xxxx Helicopter Model 222UT (S/N 47523), together with equipment and
avionics
Secured Party: Mitsui & Co. (Canada) Ltd.
Filing Date: 4/13/94
Expiration Date: 4/13/99
5. Xxxx Helicopter Model 412SP (S/N 36009), together with engines and
equipment
Secured Party: Textron Financial Corporation
Filing Date: 3/4/96
Expiration Date: 3/5/2001
6. Xxxx Helicopter Model 222UT (S/N 47514), together with all equipment and
avionics
Secured Party: Mitsui & Co. (Canada), Ltd.
Filing Date: 3/22/96
Expiration Date: 3/22/2001
7. 1st Source Bank has a security interest in the three helicopters with S/N
33060, S/N 47135 and S/N 47156.
SCHEDULE 5.12
Material Company Contracts
1. Agreement with the Department of the Youth Authority, Xxxxx X. Xxxxx Youth
Training School (a division of the State of California), dated July 1, 1996.
2. Agreement with the Department of Corrections, Ironwood State Prison and
Chuckawalla Valley State Prison (a division of the State of California), dated
February 28, 1996.
3. Agreement with the County of Xxxx, a political subdivision of the State of
California, dated July 9, 1996. This Agreement expires on June 30, 1997, and
will be replaced by a new Agreement dated July 1, 1997, a copy of which has been
provided.
4. Agreement with the County of San Diego, a political subdivision of the State
of California, dated December 12, 1995.
5. Agreement for Provision of Medical Director with the Regents of the
University of California, on behalf of the University of California at San Diego
Medical Center, dated January 1, 1996.
6. Agreement for Postgraduate Training in Emergency Medical with the Regents of
the University of California, on behalf of the University of California at San
Diego Medical Center, dated January 1, 1996.
7. Agreement with the Regents of the University of California, on behalf of the
University of California at San Diego Medical Center, dated January 1, 1996.
Under this Agreement, the Company shall respond to requests for air medical
transportation within San Diego and Imperial Counties. The Regents shall provide
the Company with, among other things, access to its telecommunications equipment
and with certain medical equipment.
8. Line of Credit Agreement with California State Bank, dated March 1, 1996.
9. Promissory Note in the principal amount of $3,565,153.80 issued by the
Company to Xxxx Helicopter Textron Inc., dated November 26, 1990.
10. Security Agreement between the Company and Xxxx Helicopter Textron Inc.,
dated November 26, 1990.
11. Financing Agreement with Premium Financing Specialists.
12. Exclusive Supply Agreement between the Company and Air Liquide America
Corporation dated January 1, 1996.
SCHEDULE 5.13
Compliance with Laws
The Department of Public Health of San Bernardino County, which exercises local
regulatory authority over medical transportation providers that operate within
that county, has requested additional information regarding the Company's
compliance with that agency's liability insurance requirements. The Company
believes it is in compliance with those requirements and that the County's
questions stem from a misreading of the certificates of insurance furnished to
that Department. The Company has arranged for its insurance brokerage firm to
issue a new certificate that sets out, in greater detail, the liability
insurance coverage that it has and expects this matter to be resolved within the
next two weeks.
SCHEDULE 5.14
Labor and Employment Agreements; Benefit Plans
DIRECTORS AND OFFICERS OF THE COMPANY:
Directors: Xxxxx X. Xxxxx, J. Xxxxxx Xxxxxxxxx, Xxx X. Xxxx, Xxxxx X. Xxxx
and Xxxxxxx X. Xxxxx
Officers: Chief Executive Officer: Xxxxx Xxxxxxxx
President: Xxxxxxx X. Xxxxx
Vice-President: Xxxxx X. Xxxxx
Secretary: Xxx X. Xxxx
EMPLOYEES AND CONSULTANTS OF THE COMPANY WHOSE ANNUAL CASH COMPENSATION EXCEEDS
$60,000:
Xxxxx Xxxxxxxx
Xxxx Xxxxx
Xxxxxxx X. Xxxxx
Xxx Xxx
Xxxxxx Xxxxxxx
Xxxxxxx Xxxxx
Xxxxx Xxxxxx
Xxx Xxxxxx
Xxxxxxx Xxxx
Xxxxx Xxxxxxxxx
Xxxxx Xxxxxx
Xxxxx X. Xxxxx, J. Xxxxxx Xxxxxxxxx, Xxx X. Xxxx and Xxxxx X. Xxxx each
received $36,000 in W-2 income from the Company.
EMPLOYMENT CONTRACTS
Xxxxx Xxxxxxxx is employed by the Company pursuant to that certain
Employment, Non-Competition and Profit Participation Agreement, dated
December 30, 1994, between Xxxxx Xxxxxxxx and the Company.
NO VIOLATION OF EMPLOYMENT LAWS; NO STRIKES
None.
EMPLOYEE PLANS
1. Medical Insurance: The Company provides all full time regular employees
the option of enrolling in one of two health insurance plans: Blue Xxxxxxx'
Access+ HMO and Blue Xxxxxxx' Preferred Plan (90/70). The Administrator of both
plans is Blue Shield of Xxxxxxxxxx, Xxx Xxxxx Xxxxx, Xxx Xxxxxxxxx, Xxxxxxxxxx
00000.
2. Dental Insurance: The Company provides all full time regular employees
the option of enrolling in the 490 Monterey Dental Plan. The Administrator of
the plan is California Dental Health Plan, 00000 Xxxxxxxx Xxxx, Xxxxxx,
Xxxxxxxxxx 00000.
3. Life Insurance: The Company provides all full time employees life
insurance with a death benefit of $35,000. Certain medically qualified employees
are eligible for an additional $15,000 death benefit. The Administrator is
California Physician's Insurance Corp., X.X. Xxx 0000, Xxx Xxxxxxxxx, Xxxxxxxxxx
00000.
4. Pension/Retirement: The Company provides a 401(k) plan (the Company does
not match employee contributions). The Administrator is The Senex Group, 00000
Xxxxxxx Xxxx., Xxxxx 000, Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000.
5. Other Benefits: The Company provides holiday pay, vacation pay, and pay
for "well days."
SCHEDULE 5.15
Litigation
None.
SCHEDULE 5.16
Environmental Matters
None.
SCHEDULE 5.18
Related Party Transactions
The Company leases premises at 0000 Xxxxx Xxx., Xxxxxxx, Xxxxxxxxxx pursuant to
a Lease dated August 28, 1996 by and between H.S.T.D.-I Partnership and the
Company. H.S.T.D.-I Partnership is owned by the Shareholders.
Xxxxx Xxxxxxxx is employed by the Company pursuant to that certain Employment,
Non-Competition and Profit Participation Agreement, dated December 30,
1994, between Xxxxx Xxxxxxxx and the Company.
The Company has made loans to, and received loans from, its Shareholders and
certain affiliates of the Shareholders. These loans will be paid or canceled as
set forth in the Stock Purchase Agreement.
SCHEDULE 5.19
Taxes and Tax Returns
(a) None.
(b) None.
(c) None.
SCHEDULE 5.20
Insurance
1. Worker's compensation insurance policy with Liberty Mutual, through U.S.
Aviation Underwriters, Inc. (Policy No. WC7-A21-968143-016), a copy of
which is attached.
2. "Combination Aircraft Liability and Physical Damage and Airport Commercial
General Liability Policy" with U.S. Aviation Underwriters, Inc. (Policy
Number SIHL 1-7986).
3. Professional Liability Insurance with Admiral Insurance Company.
4. Commercial Property Insurance with Commercial Union Insurance Company
(Policy No. CTK311497).
5. Auto Insurance with Commercial Union Insurance Company (Policy No.
CTK311506).
SCHEDULE 5.21
Bank Accounts
1. California State Bank, West Covina, California
o Money Market Account #892 520275
o General/Payroll Account #892 520208
Each of the Sellers and Xxxxx Xxxxxxxx are authorized to draw on
the account.
SCHEDULE 5.22
Brokers
None.
SCHEDULE 7.2
Permitted Dividends
The Company shall be permitted to pay dividends to the Sellers in a manner and
amount sufficient to allow the Sellers to timely pay the monthly payments under
the Textron Debt. The amount of each such monthly payment is approximately
$31,227.33.
SCHEDULE 8.5
Textron Debt
The Textron Debt is the debt evidenced by that certain Promissory Note in the
principal amount of $2,415,207.00, made, jointly and severally, by Xxxxx X.
Xxxxx, Xxx X. Xxxx, Xxxxxxx X. Xxxxx, J. Xxxxxx Xxxxxxxxx and Xxxxx X. Xxxx, on
March 8, 1996, and held by Textron Financial Corporation, a Delaware
corporation. The Promissory Note is secured by a Guaranty made on March 8, 1996
by Mercy Air Service, Inc., in favor of Textron Financial Corporation, and by a
Pledge and Security Agreement executed by Mercy Air Service, Inc. in favor of
Textron Financial Corporation. The collateral under the Security Agreement is a
Xxxx Model 412SP Helicopter, S/N 36009, and all parts and engines thereto. The
remaining unpaid balance of the Promissory Note, as of June 3, 1997, was
approximately $2,221,022.44.
SCHEDULE 8.6
Short-Term Investments
Cash in a business money-market account at California State Bank, account number
892521328.
SCHEDULE 8.7
Indebtedness of Company to Shareholders
As of July 31, 1997, the Company owes the Shareholders the following amounts
under loans made by the Shareholders to the Company:
SHAREHOLDER AMOUNT DUE TO SHAREHOLDER FROM COMPANY
Xxxxx X. Xxxxx $284,120.98
J. Xxxxxx Xxxxxxxxx $284,120.98
Xxx X. Xxxx $ 84,299.75
Xxxxx X. Xxxx $284,120.98
Xxxxxxx X. Xxxxx $ 0.00
-----------
Total $936,662.69
SCHEDULE 8.8
Stock Options
Xxxxx X. Xxxxx 100,000 shares
J. Xxxxxx Xxxxxxxxx 100,000 shares
Xxx X. Xxxx 100,000 shares
Xxxxx X. Xxxx 100,000 shares
Xxxxxxx X. Xxxxx 100,000 shares
SCHEDULE 16.1
Mailing Addresses of the Parties
Notices to Sellers shall be mailed to:
With a copy to:
Xxx Xxxxxxx
Xxxxxxxxx Xxxxx Xxxxxxx & Xxxxx
000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Notice to Buyer shall be mailed to:
Air Methods Corporation
0000 Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attn.: Chairman of the Board
