-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, EMZj+v4XxVJTgYrcC91/I0Kz1l4MyH85PxvKeCL9bJml3f+EMXCUTWPDniulQkZP U0fU1TeiS2tdp2oTUJOjnA== 0000932384-95-000048.txt : 19950705 0000932384-95-000048.hdr.sgml : 19950705 ACCESSION NUMBER: 0000932384-95-000048 CONFORMED SUBMISSION TYPE: 10-KT PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950627 DATE AS OF CHANGE: 19950703 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AIR METHODS CORP CENTRAL INDEX KEY: 0000816159 STANDARD INDUSTRIAL CLASSIFICATION: 4522 IRS NUMBER: 840915893 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-KT SEC ACT: 1934 Act SEC FILE NUMBER: 000-16079 FILM NUMBER: 95549691 BUSINESS ADDRESS: STREET 1: 7301 S PEORIA STREET 2: P O BOX 4114 CITY: ENGLEWOOD STATE: CO ZIP: 80112 BUSINESS PHONE: 3037927400 MAIL ADDRESS: STREET 1: 7301 S PEORIA CITY: ENGLEWOOD STATE: CO ZIP: 80112 FORMER COMPANY: FORMER CONFORMED NAME: CELL TECHNOLOGY INC /DE/ DATE OF NAME CHANGE: 19911128 10-KT 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ____________ FORM 10-K FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (MARK ONE) [ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended -------------------------------------- OR [X] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from July 1, 1994 to December 31, 1994 --------------- ------------------ COMMISSION FILE NUMBER 0-16079 ----------- AIR METHODS CORPORATION - - - ---------------------------------------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 84-0915893 - - - ----------------------------------------- ------------------- (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 7301 SOUTH PEORIA, ENGLEWOOD, COLORADO 80112 - - - ----------------------------------------- ------------------- (Address of principal executive offices) (Zip Code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (303) 792-7400 -------------- SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: Not Applicable SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: COMMON STOCK, $.06 PAR VALUE PER SHARE (the "Common Stock") - - - ----------------------------------------------------------------- (Title of Class) NASDAQ STOCK MARKET - - - ----------------------------------------------------------------- (Name of each exchange on which registered) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the voting stock held by non-affiliates of the Registrant as of June 15, 1995 was approximately $15,106,680/1/. The number of outstanding shares of Common Stock as of June 15, 1995, was 8,075,023. DOCUMENTS INCORPORATED BY REFERENCE: None. - - - -------------------- /1/ Excludes 1,360,943 shares of Common Stock held by directors, officers, and shareholders whose ownership exceeds five percent of the shares outstanding at June 15, 1995. Exclusion of shares held by any person should not be construed to indicate that such person possesses the power, direct or indirect, to direct or cause the direction of the management of policies of the Registrant, or that such person is controlled by or under common control with the Registrant. TABLE OF CONTENTS ----------------- To Form 10-K Page ---- PART I ITEM 1. BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . 1 General. . . . . . . . . . . . . . . . . . . . . . . . . 1 Operations . . . . . . . . . . . . . . . . . . . . . . . 1 Engineering, Maintenance, Testing, Repair, Completion Services and Backlog. . . . . . . . . . . . . . . . 4 Hazards and Insurance. . . . . . . . . . . . . . . . . . 4 Marketing and Sales Strategy . . . . . . . . . . . . . . 4 Competition. . . . . . . . . . . . . . . . . . . . . . . 5 Employees. . . . . . . . . . . . . . . . . . . . . . . . 5 Government Regulation. . . . . . . . . . . . . . . . . . 6 ITEM 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . 6 Facilities . . . . . . . . . . . . . . . . . . . . . . . 6 Equipment, Fuel and Parts. . . . . . . . . . . . . . . . 6 ITEM 3. LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . 7 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. . . . 7 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. . . . . . . . . . . . . . . . . . . . 8 ITEM 6. SELECTED FINANCIAL DATA. . . . . . . . . . . . . . . . . . 8 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. . . . . . . . . . . 10 Results of Operations. . . . . . . . . . . . . . . . . . 10 Liquidity and Capital Resources. . . . . . . . . . . . . 15 Outlook for 1995 . . . . . . . . . . . . . . . . . . . . 15 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. . . . . . . 16 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. . . . . . . . . . . 16 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT . . . 16 ITEM 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . 18 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . 23 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . 25 i PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. . . . . . . . . . . . . . . . . . . . . . .IV-1 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . .IV-4 ii PART I ITEM 1. BUSINESS GENERAL Air Methods Corporation, a Delaware corporation ("Air Methods" or the "Company"), was established in Colorado in 1982 and now serves the nation's hospitals as one of the largest providers of aeromedical emergency services and systems throughout North America. As of June 15, 1995, the Company operates a fleet of 31 aircraft consisting of 26 helicopters and 5 airplanes. The Company provides its services to 54 hospitals located in 14 states under 19 operating agreements with terms ranging from 3 to 7 years. The Company's larger competitors initiated their operations serving the energy production and exploration industry, unlike Air Methods which began and has remained exclusively in the aeromedical field. In addition, the Company is the largest aeromedical carrier in the United States which uses only pilots and equipment certified by the Federal Aviation Administration (the "FAA") for flight under instrument flight rules ("IFR") conditions. Air Methods has one of the lowest operating interruption ratios in the aeromedical transportation industry. The Company's headquarters in metropolitan Denver, Colorado includes a technologically advanced helicopter repair, maintenance, and testing shop, as well as an aircraft interior completion facility. In addition, the Company designs, installs and services proprietary medical interiors for third parties which allow the aircraft to operate as airborne intensive care units (ICU's). The Company has provided medical interiors and equipment for helicopters in Germany, the Middle East and Brazil and for airplanes in France, Canada and the United Kingdom. On November 12, 1991, the Company, then a research and development company doing business as Cell Technology, completed the acquisition of Air Methods Corporation, a Colorado corporation ("Air Methods-Colorado") incorporated in 1980. Air Methods-Colorado was merged into the Company, and the Company changed its name to "Air Methods Corporation." From its inception in 1982 until the completion of this transaction, the Company had been engaged in the development of biologic response modifiers ("BRMs"), naturally occurring substances designed to alter the body's immune system and its reaction to cancer and other diseases. At the time of its notification by the United States Food and Drug Administration in late 1990 of the required construction of a full-scale commercial production plant prior to initiating Phase III clinical trials, the Company had completed various multicenter Phase II clinical trials of its BRMs in primary adult brain cancer. Following this notification, the Company discontinued the internal development of its BRMs and out-licensed these development responsibilities to other pharmaceutical and biotechnology companies. References herein to Air Methods and the Company refer to Air Methods Corporation, a Delaware corporation formerly known as Cell Technology, Inc., including its predecessor corporation, Air Methods Corporation, a Colorado corporation, unless otherwise indicated by the context. Air Methods Corporation is located at 7301 South Peoria, Englewood, Colorado 80112; the telephone number is 303-792-7400. OPERATIONS The Company has played a significant role in pioneering the use of helicopters and airplanes equipped with patient life support systems to transport persons requiring intensive medical care from either the scene of an accident or general care hospitals to highly skilled trauma centers, tertiary care centers or university teaching hospitals. Since opening its first hospital-based aeromedical program in 1980, the Company has grown to become one of the largest providers of aeromedical emergency services and systems in the United States. The Company provides its hospital clients with dedicated helicopters and airplanes equipped with FAA-approved, sophisticated medical aircraft interiors which serve as airborne intensive care units for the patients being transported. The Company also supplies similarly configured backup helicopters and airplanes to its client hospitals for reserve operating purposes. 1 The Company conducts its operations exclusively using IFR- certified equipment and IFR-rated pilots, permitting a higher degree of operational flexibility, flight safety and navigational accuracy than is customarily available using more limited Visual Flight Rules ("VFR")-certified equipment and pilots without instrument ratings, which are used by many of the Company's competitors. In the past, the Company has provided Bell 222 training for FAA pilots. The Company also employs pilots and certified airframe and powerplant ("A&P") mechanics who are based at the client hospitals where aircraft are assigned. Client hospitals administer and manage their individual aeromedical programs, provide all necessary medical personnel and equipment and are responsible for all medically-related operations. However, the Company in all instances retains the ultimate authority regarding the operation and flight safety of its hospital-based and backup aircraft. The Company's aeromedical healthcare services are generally furnished to the contracting hospital under three- to seven-year contracts, which typically provide that the Company receives a fixed monthly fee and an hourly flight fee from the hospital, regardless of when, or if, the hospital is reimbursed for these services by its patients, their insurers, or the federal government. The aeromedical contracts generally provide for an annual adjustment of the monthly service fee and hourly flight fee in accordance with fluctuations in the cost of living index for all urban consumers and for the pass- through of increases in the Company's hull and operator liability insurance premiums to certain client hospitals. The majority of the contracts require that client hospitals pay for fuel utilized by the Company in providing aeromedical transport services to the hospital. The contracts also typically provide that the client hospital may terminate the contract if a material default by the Company occurs. Aeromedical contracts are generally awarded following a comprehensive Request for Proposal ("RFP") process initiated by the prospective client hospital. Normally, hospitals evaluate various features of the bidder including price, industry experience and reputation, maintenance and support capabilities, quality of pilots, and availability of specified aircraft equipment and medical interior configurations. The following table sets forth the name and location of each of the Company's aeromedical programs and the respective hospitals served thereby as of the date of this report:
Operating Program City and State Hospitals Served - - - --------------------------- ----------------- ---------------- Air Life Texarkana, AR St. Michael's Hospital Wadley Hospital Life Flight Stanford, CA Stanford University Hospital Santa Clara Valley Medical Center Lucille Salter Packard Children's Hospital at Stanford P/SL AirLife, a division Aurora, CO P/SL Aurora Presbyterian Hospital of HealthONE Presbyterian/St. Luke's Medical Center Swedish Medical Center St. Mary's Air Life Grand Junction, CO St. Mary's Hospital - The Regional Medical Center Air Life of Greeley Greeley, CO North Colorado Medical Center Lifeline Rockford, IL St. Anthony Medical Center Mercy Air Life Des Moines, IA Mercy Hospital Medical Center St. Luke's Life Link III Duluth, MN St. Luke's Hospital of Duluth 2 Operating Program City and State Hospitals Served - - - --------------------------- ----------------- ---------------- Life Link II St. Paul, MN Abbot Northwestern Hospital St. Paul - Ramsey Medical Center University of Minnesota Hospital & Clinic The Minneapolis Children's Medical Center Deacare Advanced Life Billings, MT Deaconess Medical Center Support Services Air Care 1 Farmington, NM San Juan Regional Medical Center MedCenter Air Charlotte, NC Carolinas Medical Center Air Care Winston-Salem, NC North Carolina Baptist Hospitals, Inc. Bowman Gray School of Medicine Wake Forest University Air Life of Oregon Bend, OR St. Charles Medical Center Baptist Air Life San Antonio, TX Baptist Medical Center Southeast Baptist Hospital Northeast Baptist Hospital North Central Baptist Hospital University Hospital Air Med Salt Lake City, UT University of Utah Hospital Inova Medical AirCare Falls Church, VA Fairfax Hospital Fair Oaks Hospital Mt. Vernon Hospital Jefferson Hospital Life-Guard 10 Roanoke, VA Roanoke Memorial Hospital Community Hospital Bedford Memorial Hospital Franklin Memorial Hospital Giles Memorial Hospital Gill Memorial Hospital Lonesome Pine Hospital Wythe Community Hospital Radford Community Hospital Southside Community Hospital Tazewell Community Hospital Spirit of Marshfield Marshfield, WI Saint Joseph's Hospital Holy Family Hospital Mercy Medical Center Sacred Heart Hospital Sacred Heart/Saint Mary's Hospital, Inc. Saint Elizabeth's Hospital Saint Jude Hospital St. Michael's Hospital Diversified Health Services
3 ENGINEERING, MAINTENANCE, TESTING, REPAIR, COMPLETION SERVICES AND BACKLOG At the Company's headquarters in Denver, the Company is able to perform non-destructive dynamic component testing, engine repair and component overhaul, as well as the design and installation of custom avionics and medical interior configurations. The Company maintains a sophisticated avionics engineering department, which is licensed and approved by the FAA, as well as a design engineering department with computer-aided design capabilities, an upholstery shop, an equipment fabrication department, a machine shop, a welding shop and an equipment research and development department. In addition to serving as one of the largest helicopter completion and service centers in North America for Bell Helicopter, the Company's principal airframe manufacturer, the Company operates a Eurocopter BK-117 service center and a repair station for turbine-jet engines manufactured by Allison, Pratt & Whitney, and Lycoming. The Company is also an approved installation and service center for Bendix-King, its primary avionics manufacturer. The Company is an FAA-certified repair station with airframe, accessory, radio, instrument and powerplant ratings, which give it the capacity to provide specialized services on the significant brands of equipment used in its operations or sent to the Company for servicing by third parties. The Company designs, produces and installs interior configurations according to the requirements and specifications of its hospital clients as well as other helicopter and airplane operators and manufacturers. The Company employs an FAA Designated Engineering Representative ("DER") who is authorized to approve various aircraft modifications which the Company may choose to manufacture from time to time as part of its ongoing business. The Company has the FAA authorization and capability to engineer, design and install all of the components necessary to transform an aircraft hull into an airborne ICU. The Company is authorized to make these aircraft modifications pursuant to various FAA-issued Supplemental Type Certificates ("STCs") and Parts Manufacturer Approvals ("PMAs"). The Company believes that its in-house repair, maintenance, testing and completion capabilities provide cost savings and decrease aircraft down time by avoiding the expense and operating risk of having maintenance and repair work performed by nonaffiliated vendors. The Company maintains a constant inventory of certain critical aircraft parts at each of its hospital bases. While most of the activities of the Company's headquarters are devoted to the support and expansion of the Company's aeromedical operations, the center also provides medical completion and specialty configuration services directly to aviation equipment manufacturers, as well as other helicopter operators in the United States and overseas. In the six months ended December 31, 1994, the Company recognized revenues of $684,000 from the sale of a medical interior to one of its hospital clients and the manufacture of an interior for a South American customer. As of December 31, 1994, the Company had agreements to design and install passenger oxygen systems for a regional airline and to refurbish a Bell 222 medical interior for one of its client hospitals for expected revenues of $920,000. The Company's backlog for medical interiors and other products as of December 31, 1993 was $475,000. HAZARDS AND INSURANCE The operation of helicopters and airplanes involves a substantial level of risk. Hazards, such as aircraft accidents, collisions and fire, are inherent in the furnishing of aviation services and may result in losses of life, equipment and revenues. The Company's safety record compares favorably with other operators. The Company maintains aircraft liability, aviation spares/equipment, all risks, hull, product/completed operations, hangar keeper's liability, property and casualty, and contractor's equipment insurance coverage. The Company has not experienced significant difficulty in obtaining insurance and has not incurred any losses in excess of its property and liability coverage. While the Company believes that its insurance coverage is adequate for its operations, there can be no assurance that such insurance coverage is now, or will be, adequate to cover any claims to which it may be subject. 4 MARKETING AND SALES STRATEGY For hospital providers, the demand for quality care continues while the nature of reimbursement moves increasingly from retrospective to prospective. The corresponding cost pressures are leading to mergers and affiliations in the health care delivery community and to increased consolidations of previously competing air medical transport programs. Within this environment, the Company intends to continue aggressively pursuing bid and contract negotiation opportunities in air medical services for individual hospitals and newly forming consortiums, competing primarily on the basis of safety, service, reputation and to a lesser degree, price. The Company believes that providing both helicopters and airplanes to hospital consortiums will drive further market expansion. Air Methods continues, on a world-wide basis, to actively pursue sales of its highly regarded state-of-the-art medical interiors and avionics packages. Lastly, efforts continue on the development of joint venture partnerships in foreign countries for the provision of air medical transport services. Subsequent to December 31, 1994, the Company entered into a ten-year franchise agreement with a Brazilian health care cooperative to provide expertise relating to the operation of air medical programs as well as technical and consulting services. The Company believes increased health care cost regulation will continue to result in the closing of hospitals which are experiencing declining in-patient revenues and decreasing profitability. As a result, greater emphasis will be placed upon hospitals offering the highest level of care, such as Level I trauma centers, tertiary care centers and university teaching hospitals. The Company believes the market for airborne emergency medical services ("EMS") is growing and will continue to grow, as a result of a number of factors, including, but not limited to: (1) the closing of urban and rural hospitals and the subsequent concentration of various hospital specialization centers (e.g., trauma, cardio-vascular, burn, neonatology, and organ transplantation) into regional centers; (2) the further concentration of major university teaching hospitals allowing for the possible accelerated development of specialized medicine and health care therapies in various regions throughout the country; and (3) the vertical integration of airplane and helicopter provider services designed to meet the increasingly sophisticated demands of those hospitals desiring to operate an integrated aeromedical program. There can be no assurance that these trends will continue or that a positive effect will result for aeromedical emergency services or the Company. COMPETITION The aeromedical services industry is competitive and is currently served by a variety of operators. The Company believes that, of the existing operators, there are only five companies which serve eight or more aeromedical programs: Rocky Mountain Helicopters, Inc.; OmniFlight, Inc.; Corporate Jets, Inc.; Petroleum Helicopters, Inc.; and the Company. Some of the Company's competitors have somewhat greater financial, technical and marketing resources than the Company. Competition in the aeromedical service industry is focused primarily on safety, pricing, quality of service and availability of aircraft equipment. Although the Company is the third largest provider of aeromedical transportation services in the United States, based on the number of EMS programs served and the revenues generated by these programs, it is the largest medically dedicated and exclusively IFR- certified provider in this industry in the U.S. EMPLOYEES As of the date of this report, the Company retained 227 full time and 13 part time employees, comprised of 120 pilots; 85 aviation machinists, A&P engineers and other manufacturing/maintenance positions; and 35 business and administrative personnel. All of the Company's pilots are IFR-rated and have completed an extensive ground school and flight training program at the commencement of their employment with the Company, as well as local area orientation and annual training provided by the Company. All of the Company's operating aircraft mechanics must possess FAA airframe and powerplant licenses. The Company's employees are not covered by any collective bargaining agreements and management believes that its relations with employees are satisfactory. The Company believes that the compensation arrangements offered to its employees are competitive with those of other providers of aviation services based on the individual qualifications of employees and are sufficient to attract and keep qualified personnel. 5 GOVERNMENT REGULATION The Company is subject to the Federal Aviation Act of 1958, as amended. All flight and maintenance operations of the Company are regulated and actively supervised by the U.S. Department of Transportation through the FAA. The Company holds a Part 135 Air Carrier Certificate from the FAA. The Company cannot predict the impact of new or changed laws or regulations on the demand for aeromedical services in the future or the costs of complying with such laws and regulations. ITEM 2. PROPERTIES FACILITIES The Company leases its headquarters, consisting of approximately 60,000 square feet of office and hangar space in metropolitan Denver, Colorado at the Centennial Airport. The Company's lease for the hangar space expires in December 1997 and in February 1998 for the office space. The approximate annual rent is $355,000. The Company has an option to extend these leases for an additional ten years upon six months' advance written notice. The Company believes that these facilities are in good condition and suitable for the Company's requirements. EQUIPMENT, FUEL AND PARTS As of December 31, 1994, the Company managed a fleet of 34 aircraft, consisting of 27 helicopters and 7 airplanes. Of these aircraft, the Company owns 19 helicopters and 2 airplanes and leases 4 helicopters and 2 airplanes. The Company operates 4 additional helicopters and 3 airplanes owned by client hospitals and other third parties in connection with existing aeromedical contracts. One helicopter owned by the Company has not yet been placed in service pending completion of its medical interior and avionics installations. One helicopter and one airplane owned and 2 airplanes leased by the Company are held for sale or sublease and are not currently used in the Company's operations. The composition of the Company's helicopter and airplane fleets as of December 31, 1994 is as follows: COMPANY OWNED AIRCRAFT/1/ (Dollar Amounts in thousands) ----------------------------- Net Book Type Number Cost Value ---- ------ ------- -------- Helicopters: Bell 206 L-1 1 $ 663 $ 551 Bell 206 L-3 5 4,347 3,745 Bell 222A 1 1,883 1,627 Bell 222UT 8 13,955 11,634 Bell 412 2 5,208 4,378 BK 117 1 5,906 5,648 --- ------- ------- 18 $31,962 $27,583 Airplanes: Cessna 421B 1 $ 251 $ 172 Held for Sale: Bell 412 1 5,129 4,481 Beech 55 1 57 34 --- ------- ------- 2 5,186 4,515 --- ------- ------- TOTALS: 21 $37,399 $32,270 === ======= ======= 6 COMPANY LEASED AIRCRAFT (Dollar amounts in thousands) ----------------------------- Remaining Total Remaining Term Rents Over Lease Type Number in Years Lease Life Payments ---- ------ --------- ---------- --------- Helicopters: Bell 206 L-3 1 3 $ 1,611 $ 209 Bell 412 2 7 9,759 7,185 Sikorsky S-76 1 4 2,100 770 -- ------ ------ 4 13,470 8,164 Held for Sale or Sublease: King Air 200 2 10 5,280 4,780 -- ------ ------ TOTALS 6 $18,750 $12,944 == ======= ======= ____________________ /1/ Includes aircraft acquired under capital leases. With respect to the Company's leased aircraft, the Company generally pays all insurance, taxes, and maintenance expenses. Helicopters are insured at replacement cost, which generally exceeds book value. The Company believes that helicopter accidents reimbursable by insurance will generally result in full reimbursement of any damages sustained. In the ordinary course of business, the Company may from time to time purchase and sell helicopters in order to best match its specific needs with its fleet. The Company has experienced no significant difficulties in obtaining required parts for its helicopters. Repair and replacement components are purchased primarily through Bell Helicopter, since Bell aircraft make up the majority of the Company's fleet. Bell Helicopter is a major helicopter manufacturer with extensive links to the defense industry, and the Company does not anticipate any interruption in Bell's manufacturing of replacement parts and components in the near future. Any termination of production by Bell Helicopter would require the Company to obtain spare parts from other suppliers, which are not currently in place. Raw materials for aeromedical interiors are widely available, and the same materials are routinely purchased from more than one supplier. ITEM 3. LEGAL PROCEEDINGS In November 1992, a former employee brought a lawsuit against the Company which is pending in the United States District Court for the District of Minnesota. This suit alleges that the Company wrongfully discharged the employee and seeks recovery of unspecified monetary damages for lost compensation, emotional distress and other losses, costs, attorneys' fees and related penalties. The Company intends to vigorously defend this action and believes that it has strong defenses. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the six months ended December 31, 1994. 7 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Since August 6, 1993, the Company's common stock has traded on the NASDAQ Stock Market under the trading symbol "AIRM". From June 2, 1992 to August 5, 1993, the Company's common stock traded on the American Stock Exchange Emerging Company Marketplace under the symbol "ARF.EC". Prior to June 2, 1992, the Company's common stock was traded on the NASDAQ over-the-counter system. The following table shows, for the periods indicated, the high and low sales prices for the Company's common stock. The quotations for the common stock, except for July 1, 1992 through August 5, 1993, represent prices between dealers and do not reflect adjustments for retail mark-ups, mark-downs or commissions, and may not represent actual transactions. SIX MONTHS ENDED DECEMBER 31, 1994 ---------------------------------- Common Stock High Low ------------ ---- --- First Quarter. . . . . . . . . $ 3 7/8 $ 1 7/8 Second Quarter . . . . . . . . 3 1 3/8 FISCAL 1994 (YEAR ENDED JUNE 30, 1994) -------------------------------------- Common Stock High Low ------------ ---- --- First Quarter. . . . . . . . . $ 9 1/2 $ 5 3/8 Second Quarter . . . . . . . . 14 1/8 8 1/4 Third Quarter. . . . . . . . . 12 3/4 5 3/8 Fourth Quarter . . . . . . . . 6 1 7/8 FISCAL 1993 (YEAR ENDED JUNE 30, 1993) -------------------------------------- Common Stock High Low ------------ ---- --- First Quarter. . . . . . . . . $ 6 1/2 $ 2 3/4 Second Quarter . . . . . . . . 4 1/2 2 1/8 Third Quarter. . . . . . . . . 6 3 7/8 Fourth Quarter . . . . . . . . 6 1/8 3 5/8 As of June 15, 1995, there were approximately 577 holders of record of the Company's common stock. The Company has not paid any cash dividends since its inception and intends to retain any future earnings to finance the growth of the Company's business rather than to pay dividends. Neither the declaration nor the payment of future cash dividends is restricted by the Company's credit or financing arrangements. ITEM 6. SELECTED FINANCIAL DATA The following tables present selected financial information of the Company which has been derived from the Company's audited financial statements. Prior to June 30, 1992, the statements reflected the Company's operations as a development stage biotechnology company. This selected financial data should be read in conjunction with the financial statements of the Company and notes thereto appearing in Item 8 of this report. 8
SELECTED FINANCIAL DATA OF THE COMPANY (Amounts in thousands except share and per share amounts) Two Months Six Months Ended Year Ended Ended Year Ended June 30, June 30, April 30, December 31, -------------------------------- ----------- ------------------ 1994 1994 1993 1992 1991 1991 1990 ------------ ------- -------- -------- ----------- ------ ------ STATEMENT OF OPERATIONS DATA: Revenue . . . . . . . . . . . . . $13,973 27,898 25,340 12,747 -- -- -- Operating expenses: Operating . . . . . . . . . . . 12,101 25,314 20,319 12,066 -- -- -- Research and development. . . . -- -- -- -- -- 2,315 3,605 General and administrative. . . 2,176 5,761 4,479 3,984 642 2,325 2,405 Restructuring and other non-recurring . . . . . . . . -- 3,010 -- -- 338 1,915 -- Other income (expense), net . . . (872) (888) (976) 704 87 857 1,269 Extraordinary gain (loss) . . . . -- (182) 173 -- -- -- -- -------- -------- -------- -------- ------- -------- -------- Net loss. . . . . . . . . . . . . $(1,176) (7,257) (261) (2,599) (893) (5,698) (4,741) ======== ======== ======== ======== ======= ======== ======== Loss per common share . . . . . . $ (.15) (1.03) (.08) (1.42) (.63) (4.03) (3.36) ======== ======== ======== ======== ======= ======== ======== Weighted average number of shares of Common Stock outstanding . . 8,023,225 7,056,445 3,453,111 1,829,456 1,420,148 1,413,775 1,409,504 ========= ========= ========= ========= ========= ========= ========= As of As of June 30, As of April 30, December 31, ------------------------------ ------------------ 1994 1994 1993 1992 1991 1990 ------------ ------ ------ ------ ------ ------ BALANCE SHEET DATA: Total assets. . . . . . . . . . $48,813 51,900 43,312 27,835 8,480 13,901 Long-term liabilities . . . . . 18,375 18,688 23,279 14,845 153 462 Stockholders' equity. . . . . . 18,710 19,818 14,181 5,893 6,605 12,840 ____________________ Includes results of the aeromedical operations for only the eight-month period from the completion of the acquisition, i.e., November 1, 1991, through June 30, 1992.
9 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Six months ended December 31, 1994 compared to 1993 In March, 1995, the Company announced a change in its fiscal year end from June 30 to December 31. The following table presents operating results for the six months ended December 31, 1993 to facilitate Management's Discussion and Analysis. All references to the six months ended December 31, 1993, in this section of Management's Discussion and Analysis are to the balances shown in this schedule. (Amounts in thousands) Revenue: Flight revenue. . . . . . . . . . . . . . . . . $12,320 Sales of medical interiors and products . . . . 2,078 Gain on disposition of assets . . . . . . . . . 922 Operating Expenses: Flight centers. . . . . . . . . . . . . . . . . 4,050 Aircraft operations . . . . . . . . . . . . . . 4,025 Aircraft rental . . . . . . . . . . . . . . . . 1,373 Cost of medical interiors and products sold . . 1,546 Depreciation and amortization . . . . . . . . . 982 General and administrative. . . . . . . . . . . 2,846 Other income (expense): Interest expense. . . . . . . . . . . . . . . . (608) Interest income . . . . . . . . . . . . . . . . 46 Other, net. . . . . . . . . . . . . . . . . . . 163 Net loss. . . . . . . . . . . . . . . . . . . . . (82) The Company reported a net loss of $1,176,000 for the six months ended December 31, 1994, compared to a net loss of $82,000 for the six months ended December 31, 1993. The six months ended December 31, 1994 included a loss of $683,000 incurred by the Company's Product Division, which manufactures and installs interiors and equipment for medical aircraft, and merger termination expenses of $305,000 related to the Company's proposed acquisition of Rocky Mountain Helicopters, Inc. ("RMHI"), as discussed below. Flight revenue increased $761,000 or 6.2% from $12,320,000 for the six months ended December 31, 1993, to $13,081,000 for the six months ended December 31, 1994. The increase was primarily attributable to revenues of $1,246,000 from contracts added in November 1993 and July 1994 and to annual increases in established contracts based on changes in the consumer price index. Flight hours were 6,500 and 6,800 for the six months ended December 31, 1994 and 1993, respectively. The decrease in flight hours is due mainly to the discontinuation of the Company's air charter operations and three fixed wing contracts during the six months ended December 31, 1994. Flight revenue is generally lower in the quarter ended December 31 than in other quarters of the same year due to the lower number of flight hours flown during the winter months because of weather restrictions at many bases. Flight center costs also increased 9.3% for the six months ended December 31, 1994 and were affected by the same factors as flight revenue. Sales of medical interiors decreased by $1,288,000 or 62.0% from $2,078,000 for the six months ended December 31, 1993, to $790,000 for the six months ended December 31, 1994. In 1994 the Company recognized revenue of $234,000 from the manufacture of a medical interior for a South American customer and $450,000 from the sale of a medical interior to one of the Company's client hospitals. In the comparable six-month period in 1993 the Company recognized revenue from the manufacture of five emergency medical interiors for Bell Helicopters, Inc. for use outside the United States. The cost of medical interiors also decreased by 37.7% for the six months ended December 31, 1994 as compared to the previous year because of the decrease in the number of interiors sold. 10 Aircraft operating expenses increased by 10.4% for the six months ended December 31, 1994, in comparison to the same period in 1993. The increase is primarily attributable to an increase of approximately 17.3% in hull and liability insurance rates as well as the addition of 3 aircraft with insured hull values totaling $11.3 million to the Company's fleet in May and June of 1994. This increase was partially offset by the elimination of operating expenses for 4 airplanes which were removed from the Company's fleet subsequent to December 31, 1993. Aircraft operating expenses consist of fuel, insurance, and maintenance costs and generally are a function of the size of the fleet, the type of aircraft flown, and the number of hours flown. Aircraft rental expense decreased by 27.6% for the six months ended December 31, 1994, as compared to 1993. Subsequent to December 31, 1993, the Company eliminated four leased aircraft from its fleet, resulting in a decrease of $208,000 in lease costs. Depreciation and amortization expense fluctuates with the size and value of the Company's fleet, as reflected by an increase of 29.5% for the six months ended December 31, 1994. The Company has increased its depreciable asset base by $7.9 million since December 31, 1993, as a result of the acquisition of additional aircraft and the manufacture and installation of medical interiors to service hospital contracts. The 23.5% decrease in general and administrative expenses for the six-month period ended December 31, 1994, reflects the effects of the Company's restructuring plan which was implemented in the quarters ended March 31 and June 30, 1994. The restructuring plan included a reduction in the administrative work force and a decreased reliance on outside contractors and other professional services, resulting in a decline in administrative expense of approximately $130,000 and $160,000, respectively, in the six months ended December 31, 1994. The Company also realized a reduction of $50,000 in telephone and communications expense due to a change in long-distance carriers. The increase of 17.9% in interest expense for the six months ended December 31, 1994 is due to interest incurred on a note to finance the acquisition of an aircraft which was placed into service late in May 1994. This increase was partially offset by the elimination of interest on notes which were retired when the two airplanes which were financed under these notes were sold in September and December 1994. Revenues for the six months ended December 31, 1994 included a gain of approximately $57,000 on the sale of one of the Company's aircraft and a gain of $131,000 on the sale of Golden Eagle Charters, Inc. ("Golden Eagle"), the Company's air charter subsidiary. These gains were offset by losses on the disposition of various other equipment. The Company completed the sale of all of the outstanding shares of common stock of Golden Eagle to a company on September 21, 1994, in exchange for $10,000 and the assumption of certain liabilities. The Company's decision to discontinue air charter operations was part of the restructuring plan approved in 1994 and was due to the significant losses incurred by this line of business. In the six months ended December 31, 1993, the Company recognized a $922,000 gain on the sale of two aircraft. The loss on early extinguishment of debt in the six months ended December 31, 1993, resulted from the retirement of a note secured by one of the aircraft sold; no comparable prepayment penalties were incurred in the six months ended December 31, 1994. Interest and dividend income increased 254.3% in the six-month period ended December 31, 1994 compared to the same period in the prior year due to interest earned on two promissory notes received as a portion of the proceeds from the sale of certain Company-owned aircraft in December 1993. Other income for the six months ended December 31, 1993, included revenue recognized on the outlicensing of a biologic response modifier, a naturally occurring substance designed to alter the body's immune system and its reaction to cancer and other diseases, developed by the Company when doing business as Cell Technology, Inc., a research and development company. The Company recognized no comparable revenue in 1994. During the quarter ended September 30, 1994, the Company discussed the feasibility of a business combination of the emergency air medical transport business of the Company and RMHI. The Company 11 ultimately declined to submit a final bid for the assets of RMHI. The expenses incurred as part of the due diligence process consist primarily of legal and professional fees and comprise the balance of the merger termination expense recognized in the six months ended December 31, 1994. 1994 compared to 1993 The Company reported a loss of $7,257,000 for the year ended June 30, 1994, as compared to a loss of $261,000 for the year ended June 30, 1993. The operating results for fiscal 1994 included a loss on the disposition of assets of $790,000, restructuring charges of $3,010,000, and other non-recurring charges and a loss on the early retirement of debt of $1,061,000. The net loss for the year, excluding the effect of these transactions, was $2,396,000. In the fourth quarter of 1994 the Company completed a restructuring plan for the Company's continuing air medical flight and manufacturing operations designed to reduce costs and improve operating efficiencies. The restructuring plan included the discontinuation of substantially all of the airplane charter operations of Golden Eagle, an 18% overall reduction in personnel, a reduction in officers' salaries, and the disposal of selected under- utilized aircraft. In addition, the Company canceled a proposed debt refinancing and public preferred stock offering. The reductions in personnel were primarily in the manufacturing and administrative functions and did not significantly affect the Company's maintenance and air medical flight capabilities. Restructuring charges totaled $3,010,000 for the year ended June 30, 1994 and, with the exception of approximately $614,000 in severance pay and $149,000 for certain placement fees for the proposed preferred stock offering, consisted of the write-off of previously recorded assets and other non-cash charges. Flight revenue increased $3,878,000 or 18.1% from $21,468,000 for the year ended June 30, 1993, to $25,346,000 for the year ended June 30, 1994, primarily as a result of the addition of three new hospital contracts which contributed revenues of $1,517,000 in fiscal 1994. In addition, revenue increased by $883,000 in fiscal 1994 under three contracts which had been added during the year ended June 30, 1993. Flight revenue under established hospital contracts was not significantly affected by changes in either pricing or volume of flight hours. The majority of the Company's contracts with its hospital customers is also subject to an annual increase based on the consumer price index. Flight center expenses, which include pilot and mechanic salaries, benefits, and training, also increased by 22.9% in 1994, and were affected by the same factors as flight revenue. These expenses generally vary with the number of customer bases and, to a lesser degree, with the number of aircraft operated by the Company. Aircraft operating expenses increased by 49.3% from 1993 to 1994 primarily because of the addition of 4 helicopters and 6 airplanes to the Company's fleet since the end of fiscal 1993 and the operation of 2 airplanes in the executive air charter service from September 1993 to April 1994, as well as an approximately 30% increase in hull and liability insurance rates. The increase in insurance rates is related to overall increases experienced by the aviation industry as a whole. Aircraft operating expenses consist of fuel, insurance, and maintenance costs and generally are a function of the size of the fleet, the type of aircraft flown, and the number of hours flown by the fleet. Depreciation and amortization expense also fluctuates with the size of the Company's fleet, as reflected by the 52.7% increase in 1994. The Company placed aircraft and related medical interiors totaling $10 million into service in the current fiscal year. Historically, the Company's flight operations have been seasonal. In the winter months the company's hospital customers have customarily experienced reduced acute and trauma in-patient hospital populations requiring emergency aeromedical transport. To a lesser extent, poorer weather reduces the level of flight operations from the hospitals served by the Company. 12 Sales of medical interiors decreased by $1,320,000 or 34.1% from $3,872,000 in fiscal year 1993 to $2,552,000 in fiscal 1994. In 1994 the Company sold five medical interiors to Bell Helicopter Textron, Inc. ("Bell") for aircraft for use outside the United States. In 1993 sales consisted of three medical interiors for Bell and one for the U.S. Army. The decrease in the cost of medical interiors over the same period mirrored the decrease in sales. The cost of medical interiors for fiscal year 1994 also included $653,000 of payments for work on a medical interior that the Company subcontracted to an outside vendor. The medical interior was for the Company's internal use, and therefore no corresponding revenue was recognized. The work done by the subcontractor was subsequently determined to be unsatisfactory and was reperformed by the Company. Operating expenses in the year ended June 30, 1994, also included net losses of $790,000 on the disposition of assets. Gains of $1,851,000 recognized on the disposition of four of the Company's aircraft were offset by valuation allowances of $2,641,000 established for seven aircraft designated for disposal as part of the Company's restructuring plan. There were no comparable gains or losses in fiscal 1993. The 28.6% increase in general and administrative expenses in 1994 reflected the additional support necessary for the Company's expanded operations as well as increased legal and professional fees incurred as the Company aggressively pursued new business opportunities including the acquisition of Golden Eagle Aviation and the proposed joint venture with Medica Movil, S.A. de C.V. In the first quarter of 1993, the Company began negotiations with Medica Movil, S.A. de C.V., the largest ground ambulance provider in Mexico, to form a joint venture to provide air medical services in Mexico under a membership capitation program. In the third quarter of 1994, concurrent with the previously mentioned restructuring plan, the Company initiated discussions concerning alternative financing arrangements for the joint venture. Though continued involvement in the joint venture is not assured, the Company does not expect any impact on its operations related to restructuring or termination of the joint venture. 1993 compared to 1992 Prior to the acquisition of Air Methods-Colorado by the Company in November 1991, the Company operated as a development-stage biotechnology research and development company engaged primarily in the development of anti-cancer products. Since the acquisition, the Company's operations have consisted predominantly of providing aeromedical emergency services and systems to hospitals throughout the United States and the related manufacture and sale of aircraft medical interiors and equipment to third parties. Due to this fundamental change in the Company's business, the Company does not believe that comparison of its operating results for the year ended June 30, 1993 with the year ended June 30, 1992, is meaningful. Accordingly, the following discussion compares the Company's results of operations for the year ended June 30, 1993 with the results of Air Methods - Colorado for the four months ended October 31, 1991, plus the results of the Company for the eight months ended June 30, 1992. The following table combines the various revenue, operating expenses and other income (expense) categories of the Company for the 8 months ended June 30, 1992 with that of Air Methods-Colorado for the 4 months ended October 31, 1991, which will facilitate management's discussion and analysis. All references to the year ended June 30, 1992, in this section of Management's Discussion & Analysis are to the combined balances shown on this schedule. 13
Company Air Methods-Colorado ------------------ -------------------- Eight Months Ended Four Months Ended June 30, 1992 October 31, 1991 Combined ------------------ -------------------- ------------ Revenue $12,747 $6,446 $19,193 Operating Expenses: Flight center. . . . . . . . . . . 3,819 1,958 5,777 Aircraft operations. . . . . . . . 4,520 1,520 6,040 Aircraft rental. . . . . . . . . . 1,978 797 2,775 Depreciation and amortization. . . 908 291 1,199 General and administrative . . . . 3,406 1,145 4,551 Cost of medical interiors and products sold. . . . . . . . . . 841 643 1,484 Other income (expense): Interest expense . . . . . . . . . (588) (378) (966) Interest income. . . . . . . . . . 169 -- 169 Other, net . . . . . . . . . . . . 962 -- 962
Operating revenues increased 32.0% for the year ended June 30, 1993 compared to the year ended June 30, 1992. The increase was primarily attributable to revenues of $2,672,000 generated from the initiation of three new hospital contracts correspondingly utilizing three new aircraft which were added in fiscal 1993. In addition, the Company realized an increase of $2,980,000 in revenues from the sale of medical interiors in 1993, principally due to the sale of three interiors to Bell Helicopter, Inc. and the sale of one interior to a subsidiary of E-Systems, Inc. pursuant to a proof of principle retrofit agreement on behalf of the U.S. Army regarding the UH-60Q Blackhawk helicopter. Flight center expenses increased 21.5% for the year ended June 30, 1993, compared to the year ended June 30, 1992. The increase was virtually the same as the revenue increase between the two years, and was primarily due to start-up and on-going expenses related to the initiation of the three new aeromedical programs discussed above. Aircraft operating expenses decreased 9.2% from 1992 to 1993. This decrease was primarily due to the comparatively high overhaul and replacement parts costs in the prior 1992 twelve month period. The cost of medical interiors and parts sold increased 117.5% from 1992 to 1993. These increases were primarily due to an increase in the number of airborne emergency medical interiors sold to third parties and to the sale of a correspondingly greater amount of medical interior parts and components to such parties. General and administrative expenses decreased 1.6% in 1993 as compared to 1992. The lack of increase even given the increase in revenues and overall operations, was primarily attributable to reductions in services and related costs resulting from utilization of services provided by third parties as well as other administrative cost cutting measures implemented by the Company during the fiscal year. Interest expense increased 12.0% in 1993 primarily because of new debt incurred to finance additional aircraft. The increase was mitigated substantially by the reduction in interest rates on the Company's long term debt to Textron Financial Services, Inc., an affiliate of the Company's principal aircraft supplier, Bell Helicopter ("Textron"), for the remaining life of the notes. 14 LIQUIDITY AND CAPITAL RESOURCES The Company had cash and cash equivalents of $696,000 and a working capital deficit of $1,892,000 as of December 31, 1994, as compared to cash and cash equivalents of $3,421,000 and a working capital deficit of $1,753,000 at June 30, 1994. The decrease in cash and cash equivalents in the six months ended December 31, 1994, is primarily due to the funding of regularly scheduled debt and lease payments as well as the retirement of two notes secured by the Company's two aircraft which were sold in September and December of 1994. In addition, the Company invested approximately $400,000 during the six months ended December 31, 1994, in the completion and installation of a medical interior for a helicopter placed in service in January 1995. In the year ended June 30, 1993, the Company used cash of $1,551,000 to fund its operations, while in fiscal year 1994, operations generated a positive cash flow of $1,039,000. During the six months ended December 31, 1994 the Company used $629,000 to fund its operations, including $177,000 to pay placement fees and severance pay accrued as part of the restructuring. In addition to cash flow from operations, the Company realized $6,825,000 from the issuance of common stock upon the exercise of warrants and options and $5,730,000 from a private placement of stock with institutions outside the United States during fiscal 1994. The Company's usual arrangements with its hospital clients have involved substantial capital commitments by the Company for the aircraft and related equipment required to furnish the emergency air medical transport services to the hospitals. The Company believes, however, that it may be advantageous to both its client hospitals and the Company from time to time for aircraft to be purchased by the hospitals, thus permitting reduced capital and long-term borrowing commitments by the Company. The Company has pursued and intends to continue to pursue this type of contracting arrangement whenever it appears beneficial to the parties to the arrangement. As of December 31, 1994, the Company had a note payable of $3,819,000 which was collateralized by a helicopter listed for sale and for which the maturity date had been extended in the past. In March 1995 the Company sold the underlying helicopter and paid off the note balance in full. In 1995 American Eurocopter Corporation cancelled purchase commitments which had previously obligated the Company to acquire four helicopters before December 1996. As of December 31, 1994, the Company holds unencumbered notes receivable of $2,521,000 and aircraft valued at $7.4 million. The Company believes that it could utilize a portion of these unencumbered assets as collateral for borrowing funds as an additional source of working capital if necessary. The Company also expects continued improvement in cash flows from operations in calendar 1995 as a result of new Products Division contracts and improvements in the air medical flight operations discussed below. The Company believes that these borrowing resources coupled with the expected improvement in operations will allow the Company to meet its obligations in the coming year without additional external financing. OUTLOOK FOR 1995 In December 1994, the Company was awarded the following contracts: the manufacture and installation of a medical interior and avionics system for a South American customer; the refurbishment of a medical interior for an existing hospital client; and the development and installation of a passenger oxygen system for a regional airline. In addition, as of December 1994, the Company had executed a Letter of Intent with a non-profit organization to manufacture and install a medical interior for a jet transport aircraft. Revenue from these four projects is expected to total approximately $3.2 million and to be recognized throughout 1995 and 1996. The Company continues to pursue an aggressive marketing strategy for its medical interiors and other products. When aeromedical contracts with certain hospitals have come due for renewal, the Company has successfully negotiated improved operating margins and expects to continue these efforts in 1995 as additional 15 contracts are renewed. As a result of the negotiations conducted in late 1994, the Company expects additional revenue of approximately $271,000 in calendar 1995 from these specific aeromedical contracts. With the new business announced for the Products Division, improved margins on certain hospital contracts and continued minimization of cost of administrative overhead, the Company expects increases in both cash flow and operating income in 1995. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See Consolidated Financial Statements attached hereto. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not Applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Summary information concerning the Company's current directors and officers is set forth below:
Name and Age of Director Director Term as Director Director/Officer Since Class expires in Position - - - -------------------------- -------- -------- ---------------- ------------------------------------------------- George W. Belsey, 55 1992 I 1997 Chairman of the Board, Chief Executive Officer, Interim Chief Financial Officer Roy L. Morgan, 59 1991 II 1995 Co-Founder and a Director Marius Burke, Jr., 57 Vice President, Director of Operations Maurice L. Martin, Jr., 47 Vice President, Air Medical Services Michael G. Prieto, 41 Vice President, Products Division Joseph E. Bernstein, 46 1994 III 1996 Director Ralph J. Bernstein, 37 1994 III 1996 Director Samuel H. Gray, 57 1991 II 1995 Director Lowell D. Miller, Ph.D., 62 1990 III 1996 Director Donald R. Segner, 69 1992 I 1997 Vice-Chairman of the Board Morad Tahbaz, 39 1994 II 1995 Director
MR. GEORGE W. BELSEY was elected Chief Executive Officer effective June 1, 1994, and has served as Chairman of the Company's Board of Directors since April 1994, having been appointed a director of the Company in December 1992. From February 1992 to June 1994, Mr. Belsey served as Executive Vice President, Professional Affairs, and the Chief Operating Officer of the American Hospital Association, a large national trade association and advocacy group for hospitals and health care organizations, where he was responsible for the Association's activities relating to hospital operations, including medical staff affairs, nursing, health manpower, quality of care programs and hospital governance. Prior to joining the American Hospital Association, Mr. Belsey served as Chief Executive Officer and Executive Director of the University of Utah Hospital and Clinics, Salt Lake City, Utah (one of the Company's hospital customers) from March 1989 to February 1992 and was Chief Operating Officer from December 1983 to March 1989. He is a former Vice President of Northwestern Memorial Hospital, Chicago, and has held administrative positions at Rush-Presbyterian-St. Luke's Medical Center, Chicago, and MacNeal Memorial Hospital, Berwyn, IL. He received his Bachelor's Degree in Economics from DePauw University in Greencastle, Indiana, and holds a Master's Degree in Business Administration from George Washington University, Washington, D.C. MR. ROY L. MORGAN is one of the three founders of Air Methods- Colorado, and was the President, Chief Executive Officer and a director from the inception of Air Methods-Colorado in July 1980 until November 1991. In November 1991, he became President and a director of the Company. In December 1994, Mr. Morgan retired as President of the Company. Prior to his service with Air Methods-Colorado, Mr. Morgan was employed as a helicopter pilot for Public Service Company of Colorado (1969-80), as director of operations and chief pilot for Key Aviation (1964-69), and as 16 quality control supervisor on the Atlas missile program for Convair Astronautics (1960-64). Mr. Morgan began his career at Boeing Airplane Company, involved in B-52 experimental development (1957-60). Mr. Morgan holds a number of pilot certificates including Airline Transport Pilot for Airplane Multi-Engine Land, Commercial Helicopter - Instrument Rated, Commercial Airplane for Land and Sea, and Glider, as well as Flight Instructor for all of the above. He has more than 18,850 flight hours, 12,000 of them in helicopters. Mr. Morgan has a Bachelor of Science Degree in Aviation Management from Metropolitan State College in Denver, Colorado. MR. MARIUS BURKE, JR. was elected Vice President and Director of Operations of the Company in November 1989. Prior to that time he served in various managerial positions with Air Methods-Colorado, including Director of Operations (September 1988 through November 1991) and Area Manager (August 1985 through August 1988). He was formerly a pilot for Key Airlines (1982-85), an area manager for the Air Med program at the University of Utah (1985-88), President of Estate Builders, Inc., a real estate investment and development corporation (1975 to present), Manager of Flying and Chief Pilot for Air America (1963-75), and a flight officer for the United States Marine Corps in jets and helicopters (1958-63). Mr. Burke holds Airline Transport Pilot certificates for both airplanes and helicopters and is a Certified Flight Instructor for airplanes, helicopters, and instruments. He has for many years been a designated FAA Flight Examiner and has a total of 20,250 flight hours, 12,950 of them in helicopters. Mr. Burke has an M.B.A. and a B.S. in Engineering and Aeronautical Operations from San Jose State University. MR. MAURICE L. MARTIN, JR. currently serves the Company as Vice President of the Air Medical Services Division. He served previously in several executive positions with Air Methods-Colorado including Director of Operations (August 1985 through August 1988), Area Manager (June 1984 through August 1985) and pilot (June 1982 to June 1984). Mr. Martin has 16 years of aviation management experience and eight years' experience in medical aircraft transport management. Prior to joining Air Methods-Colorado, Mr. Martin was a commercial helicopter pilot (1979-82), an instructor pilot and standardization officer of the 102nd Air Rescue and Recovery Squadron in New York (1975-79), and an aircraft commander in the United States Air Force (1971-75). Mr. Martin holds pilot certificates including Airline Transport Pilot for Helicopters and Certified Flight Instructor for Helicopters. He has served as a designated FAA Flight Examiner and has over 4,100 flight hours, mostly in helicopters. Mr. Martin has a Bachelor of Science Degree in International Affairs from the United States Air Force Academy (1970) and a Master's Degree in Theology from Covenant Theological Seminary in St. Louis, Missouri (1982). MR. MICHAEL G. PRIETO was named Vice President of Engineering & Manufacturing of the Company in January 1994 and subsequently Vice President of the Products Division in June 1994. From 1988 to 1994, Mr. Prieto served in various roles with General Dynamics/Lockheed Corp but primarily as Manager of Manufacturing Engineering for the F-16 Fighter program. From 1977 to 1988, he was employed by John Deere Co. with management roles in Engineering, Manufacturing, and Marketing. Mr. Prieto attended the University of Missouri and received a Bachelor of Science degree in 1977. Mr. Prieto is a member of the American Society of Mechanical Engineers, the Society of Manufacturing Engineers, the American Production and Inventory Control Society, the American Management Association, and the National Management Association. MR. JOSEPH E. BERNSTEIN became a Director of the Company in February, 1994. Mr. Bernstein is a co-founder and General Partner of Americas Partners, an investment and venture capital firm, and a Managing Director of Americas Tower Partners, the developer of Americas Tower, a one million square foot, 50-story office tower in New York City. Since 1981, he has been a principal of The New York Land Company, working on real estate development and acquisitions. Previously, he worked on corporate and international tax matters at Cahill/Gordon & Reindel (1975-1978) and Rosenman & Colin (1978-1981). He started his own international tax practice, Bernstein & Carter, in 1981 and has published a number of articles on corporate and international tax law. Mr. Bernstein is the brother of Ralph Bernstein, also a director of the Company. Mr. Bernstein holds a Bachelor of Arts Degree in Economics and a Bachelor of Science Degree in Agricultural Business Management from the University of California at Davis, a Juris Doctor from the University of California at Davis School of Law, a Master's Degree in Finance from the University of California at Los Angeles Graduate School of Management, and a Master of Laws' Degree in Taxation from the New York University Graduate School of Law. MR. RALPH J. BERNSTEIN became a Director of the Company in February, 1994. Mr. Bernstein is a co-founder and General Partner of Americas Partners, an investment and venture capital firm, and a Managing Director of Americas Tower Partners, a real estate development firm, where he was primarily responsible for the development of Americas Tower, a one million square foot, 50-story office tower in New York City. Mr. Bernstein is co-founder of The New York Land Company and, since 1981, was responsible for the acquisition, renovation, development and financing of several million square feet of commercial space. From 1979 to 1982, Mr. Bernstein was employed by Agricor, Inc. and Noga Realty, Inc., both subsidiaries of Compagnie Noga S.A., a large multinational trading firm. Mr. Bernstein is the brother of Joseph Bernstein, also a director of the Company. Mr. Bernstein holds a Bachelor of Arts Degree in Economics from the University of California at Davis. 17 MR. SAMUEL H. GRAY was appointed as a director of the Company in March 1991. Since 1989, he has been Chief Executive Officer of The Morris Consulting Group, Inc., a health care industry consulting firm. From 1983 to 1989, Mr. Gray served as President and Chief Executive Officer of Kalipharma, Inc., a multisource pharmaceutical company. From 1975 to 1983, Mr. Gray served as Executive Vice President of Sales and Marketing for G.D. Searle and Company, Inc. ("Searle") where he was responsible for pharmaceutical marketing, the consumer products division of Searle, and Searle-Canada, Ltd. In addition, his responsibilities included distribution, customer service, clinical research management, licensing and acquisitions, public relations and worldwide strategic marketing planning. He has served on the boards of directors of Searle; Searle Canada, Ltd.; Kalipharma; Kali-Duphar, Inc.; and the National Association of Pharmaceutical Manufacturers. He is a past member of the National Wholesale Druggist Association's Industry Advisory Committee and has served on the Advisory Board of Pharmaceutical Executive magazine. In 1959, Mr. Gray received a Bachelor of Science Degree from the University of Florida. DR. LOWELL D. MILLER was named a director of the Company in June 1990. Since 1989, Dr. Miller has been involved with various scientific endeavors including a pharmaceutical consulting business. From 1973 to 1989, Dr. Miller was employed by Marion Laboratories, Inc. ("Marion"), serving as Senior Vice President - Research and Development (1987 - 1989), Vice President - Research and Development (1977-1987), and Director of Scientific Affairs (1973-1977). Until his retirement in late 1989, Dr. Miller was responsible for all research, development and process development functions, new product opportunities and management of clinical trials and regulatory affairs, and served as Marion's Chief Scientist. He also served as a member of Marion's Board of Directors from November 1981 to November 1982 and as an Advisory Director from November 1982 to November 1983. The University of Missouri has awarded Dr. Miller a Bachelor of Science degree in 1957 as well as a Master's Degree in Biochemistry in 1958 and Biochemistry Doctorate Degree in 1960. MR. DONALD R. SEGNER was appointed a director of the Company in February, 1992. He was re-elected as a director in February 1995 and has served the Board as Vice-Chairman since April, 1994. He currently heads his own aviation advisory and consultant service company specializing in all aspects of aviation including airports, airplanes, aircraft certification and the Federal Aviation Administration. He has served as a pilot in the U.S. Marine Corps, a test pilot for Lockheed Aircraft, and a manager of several departments for Lockheed Aircraft. From 1981 through 1986, he was a government appointee by President Reagan in the FAA. Following the destruction of Korean Airlines Flight 007, Mr. Segner was assigned by the White House to head the investigation and acted as Chief Delegate for the United States at the CIAO Council (United Nations) on this matter. He headed the U.S. Delegation to negotiate an agreement to improve and implement safety along the North Pacific air routes among the governments of the U.S., Japan and the U.S.S.R. He has received numerous awards for his contributions to aviation, including the FAA Administrator's Award, the FAA Superior Achievement Medal and the Distinguished Flying Cross for valor in combat in the Korean war. Mr. Segner attended the University of Pacific in Stockton, California and the U.S. Naval Test Pilot School in Patuxent River, Maryland, as an undergraduate. His graduate education includes attendance at the U.S. Naval Post Graduate School, Monterey, California, as well as University of Southern California's Graduate School of Business (Lockheed Management Institute). MR. MORAD TAHBAZ was elected to the Board of Directors in February, 1994. He is a co-founder and General Partner of Americas Partners, an investment and venture capital firm. Mr. Tahbaz serves as a Managing Director of Americas Tower Partners, the developer of Americas Tower, a one million square foot, 50-story office tower in New York City. Since 1983, Mr. Tahbaz has also served as Senior Vice President of The New York Land Company, a real estate acquisitions and development firm. From 1980 to 1982, he was the Project Manager for Colonial Seaboard, Inc., a residential development company in New Jersey. Mr. Tahbaz received his Bachelor's Degree in Philosophy and Fine Arts from Colgate University and attended the Institute for Architecture and Urban Studies in New York City. He holds a Master's Degree in Business Administration from Columbia University Graduate School of Business. Mr. Tahbaz lectured on real estate development and finance at the Columbia Graduate School of Business from 1984 to 1988. COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934 In March, 1995, the Company announced the change in its fiscal year end from June 30 to December 31. As a result, the next Form 5 filing obligation for the Company's executive officers and directors will arise with respect to fiscal 1995. However, based upon inquiries of its executive officers and directors, the Company is aware of the following Form 4 reports for the transition period which were not timely filed: one late report covering one transaction for each of Messrs. Burke and Martin. ITEM 11. EXECUTIVE COMPENSATION The following table sets forth the cash compensation paid by the Company to the persons serving as Chief Executive Officer of the Company during 1994 and the other executive officers of the Company other than the 18 Chief Executive Officer whose annual salary and bonus exceeded $100,000 during that period. In view of the Company's new December 31 fiscal year end and to facilitate comparability, the table reflects compensation received during the calendar years ended December 31, 1992, 1993 and 1994.
Long Term Compensation Awards Annual Compensation Other ------------------------- -------------------------- Annual Restricted Options/ All Other Name and Principal Position Year Salary($) Bonus($) Compensation($) Stock SARs(#) Compensation($) - - - --------------------------- ---- --------- -------- ------------------- ------------- ----------- ------------------- George W. Belsey 1994 96,250 -- 8,050 -- 250,000 -- Chairman and Chief 1993 -- -- -- -- -- -- Executive Officer 1992 -- -- -- -- -- -- Marius Burke, Jr. 1994 100,594 -- -- -- -- 2,236 Vice President 1993 73,491 -- -- 24,473 89,266 1,638 Director of Operations 1992 89,396 -- -- -- -- 1,970 Roy L. Morgan 1994 155,880 -- -- -- 200,000 3,441 Director and Co-Founder 1993 133,376 -- -- 48,122 251,666 3,095 1992 167,043 -- -- -- -- 3,973 Maurice L. Martin, Jr. 1994 131,909 -- -- -- -- 2,277 Vice-President 1993 113,153 -- -- 25,781 172,916 1,785 Air Medical Services 1992 124,526 -- -- -- -- 2,767 Michael G. Prieto 1994 116,545 -- -- -- 25,000 22,417 Vice-President 1993 -- -- -- -- -- -- Products Division 1992 -- -- -- -- -- -- W. Terrance Schreier 1994 66,116 -- -- -- -- 288,918 Prior Chairman and Chief 1993 139,997 -- -- 48,122 331,666 2,431 Executive Officer 1992 166,868 -- 38,750 -- -- 1,604 ____________________ Personal automobile or other transportation benefits provided to each of the named executive officers during the reporting periods do not exceed the disclosure thresholds established by the SEC and are thus not reported. Reflects shares of restricted Common Stock issued to the named executive officers under the Company's Restricted Stock Plan, except as otherwise noted, valued at the closing market price of such shares on the date they were issued. The Company issued a total of 102,907 shares of Common Stock under the Restricted Stock Plan, all of which vested or were forfeited on the one year anniversary of the January 9, 1993 grant date. No dividends were paid on these restricted shares. The restrictions on all shares issued under the Restricted Stock Plan have been lifted. Consists only of options to purchase the common stock of the Company. Consists of employer matching contributions for the named executive officers under the Company's 401(k) Plan, except as otherwise noted. Mr. Belsey was a nonemployee director of the Company until June 1, 1994 when he was elected Chief Executive Officer of the Company. Mr. Belsey's annual salary as Chief Executive Officer is $165,000. Stock compensation to Mr. Belsey as a nonemployee director of the Company pursuant to the Company's Nonemployee Director Equity Compensation Plan. Includes 16,666 options which are deemed to have been regranted by virtue of the Stock Option Committee's action on July 29, 1993 to reprice these, and other out-of-the-money options previously issued to employees and officers of the Company under the Employee Option Plan, to $5.50 per share, the fair market value of the Company's Common Stock on July 29, 1993. Includes severance payments, pursuant to contractual obligations of the Company, upon the resignation of Mr. Schreier ($287,500) in 1994. See footnote 11 and accompanying figures. Reflects compensation consisting of salary restoration payments for salary compensation foregone in earlier years and bonus payments by Cell Technology, Inc. for the completion of the merger with Air Methods - Colorado. 19 Reflects various relocation expenses borne by the Company in connection with the commencement of Mr. Prieto's employment with the Company. Includes 8,333 options repriced in 1993 as discussed at footnote 8. Issued upon the cancellation of 240,000 options issued in 1993.
STOCK OPTIONS The following tables present for calendar year 1994 certain information regarding stock options granted to or held by the named executive officers.
OPTION/SAR GRANTS IN LAST YEAR ---------------------------------- Individual Grants -------------------------- Potential Realized Value at % of Total Assumed Annual Rates of Options/SARs Stock Price Appreciation for Granted to Exercise or Market Price Option Term Options/SARs Employees in Base Price on Grant Expiration ----------------------------- Name Granted (#) 1994 ($/Sh) Date ($/Sh) Date 5% ($) 10% ($) - - - -------------------- ------------ ------------ ----------- ------------ ---------- ------------- ------------ George W. Belsey 250,000 50.1% 3.00 3.00 6/1/99 207,211 457,883 Roy L. Morgan 200,000 40.1 1.75 1.75 12/31/99 96,699 167,094 Michael G. Prieto 25,000 5.0 11.375 11.375 1/4/99 78,568 135,763 ____________________ Calculated based upon the closing market price of the Common Stock on the Option grant date. Exercisable as to 1/5 of the option shares on the 6/1/94 grant date, and an additional 1/5 on each subsequent anniversary of the grant date until fully vested. Exercisable in full as of the 12/31/94 grant date. Exercisable as to 1/3 of the option shares on each anniversary of the 1/4/94 grant date.
AGGREGATED OPTION/SAR EXERCISES IN LAST YEAR AND YEAR END OPTIONS/SAR VALUES ---------------------------------------------------------------------------- Value of Unexercised In- Number of Unexercised the-Money Options/SARs at Shares Acquired Options/SARs at Year End (#) Year End ($) Exercisable/ Name on Exercise (#) Value Realized ($) Exercisable/Unexercisable Unexercisable - - - ------------------------ --------------- ------------------ ----------------------------- -------------------------- George Belsey 2,222 7,499 52,222/202,222 -0-/-0- Marius Burke, Jr. -- -- 83,310/ 23,955 -0-/-0- Roy L. Morgan -- -- 200,000/-0- -0-/-0- Maurice L. Martin, Jr. -- -- 118,749/ 54,167 -0-/-0- Michael G. Prieto -- -- -0-/ 25,000 -0-/-0- W. Terrance Schreier 15,453 74,138 -0-/-0- -0-/-0- ____________________ Consists of options only. Reported option exercises include options for 2,645 shares exercised by Mr. Schreier's wife as to which options and shares Mr. Schreier disclaims beneficial ownership.
EMPLOYMENT AGREEMENTS In June 1994, the Company entered into an Employment Agreement with Mr. Belsey for an initial term of five years, subject to successive one-year extensions by written agreement of both parties. The Agreement may be terminated by either party without cause upon 30 days' written notice and provides for a severance 20 payment equal to one year's base salary in the event of termination by the Company without cause. For a period of one year following the termination of employment with the Company, Mr. Belsey may not engage in any business which competes with the Company anywhere in the United States. In November 1993, the Company entered into an Employment Agreement with Mr. Prieto for an initial term of one year to be effective December 1, 1993 and renewable each December 1. The Agreement may be terminated by either party without cause upon 90 days written notice and is terminable by the Company with no notice for cause. Mr. Prieto would continue to receive compensation and benefits for the duration of his then-current term of employment in the event of disability; otherwise, there is no provision for severance beyond the initial one-year term. In November 1991, the Company entered into individual Employment Agreements with Messrs. Martin and Burke for initial terms of two years. Because the Agreements are subject to a continuous renewal clause, the remaining term on any date for the Agreements is two years. The Agreements may be terminated by either party without cause upon 90 days' written notice and provide for a severance payment equal to two years' base salary in the event of termination by the Company without cause. For a period of two years following the termination of employment with the Company, neither Mr. Martin nor Mr. Burke may engage in any business which competes with the Company anywhere in the United States. The Employment Agreement between the Company and Mr. Schreier terminated on May 12, 1994 upon the resignation of Mr. Schreier from his position at the Company. DIRECTOR COMPENSATION It is the Company's policy to pay its nonemployee directors an annual retainer of $8,000, plus $800 per Board meeting attended, $500 per teleconference Board meeting and $500 per Board committee meeting attended ($750, if Chairman of the committee). Effective July 1, 1993, each nonemployee director may elect to receive shares of Common Stock in lieu of cash payments pursuant to the Company's Equity Compensation Plan for Nonemployee Directors, discussed below. The Company also reimburses its nonemployee directors for their reasonable expenses incurred in attending Board and committee meetings. Messrs. Joseph Bernstein, Ralph Bernstein and Morad Tahbaz have voluntarily waived all director fees to date and have received no compensation for their services as directors apart from customary reimbursement of out-of-pocket expenses. Nonemployee Director Stock Option Plan. The Company has adopted -------------------------------------- compensation and incentive benefit plans to enhance its ability to continue to attract, retain and motivate qualified persons to serve as nonemployee directors of the Company. The Nonemployee Director Stock Option Plan ("Director Option Plan") provides for the issuance of up to 300,000 shares of the Company's Common Stock, under options which are exercisable in full upon issuance and do not terminate prematurely after an option recipient ceases to be a director of the Company. Pursuant to the Director Option Plan, on the last day of each fiscal year each nonemployee director in office on such date who has served on the Board for the entire preceding fiscal year will receive a five- year option to purchase 5,000 shares of Common Stock, exercisable at the then-current fair market value of the Company's Common Stock. Equity Compensation Plan for Nonemployee Directors. In -------------------------------------------------- February and March 1993, respectively, the Company's Board of Directors and stockholders approved the Air Methods Corporation Equity Compensation Plan for Nonemployee Directors (the "Director Equity Plan"). The Director Equity Plan authorizes the issuance of up to 150,000 shares of Common Stock to nonemployee directors of the Company. The Director Equity Plan enables the Company to conserve cash with respect to nonemployee directors who have elected to participate. The Director Equity Plan is administered by the Board of Directors, and provides that each nonemployee director may elect to receive his annual retainer for a particular fiscal year of the Company in 21 Common Stock rather than cash. The number of shares of Common Stock issued to a Nonemployee Director making such election is equal to the then-current annual director retainer paid by the Company (currently $8,000) divided by 95% of the fair market value of the Company's Common Stock on the first day of the fiscal year. The Common Stock will be forfeited and returned to the Company, however, if the Nonemployee Director does not remain a director of the Company through the end of the fiscal year or fails to attend at least 75% of all Board meetings and applicable Board committee meetings held during such year. Common Stock issued under the Director Equity Plan in lieu of the annual retainer is not transferable until after the forfeiture provisions lapse, other than by will or the laws of descent and distribution in the event of the director's death or pursuant to a qualified domestic relations order as defined by the Code, Title I of ERISA or the rules thereunder. In addition, Nonemployee Directors also may elect to receive their meeting fees in Common Stock rather than cash. The number of shares issued to a Nonemployee Director making such an election is equal to the then-current meeting fee -- currently $800 per Board meeting attended, $500 per teleconference Board meeting and $500 per Board committee meeting attended ($750 if Chairman of the committee) - - - -- divided by 95% of the fair market value of the Company's Common Stock on the date of the meeting in question. Common Stock issued in lieu of meeting fees is not forfeitable. Board members who are also officers do not receive any separate compensation or fees for attending Board or committee meetings, although they may receive option grants under the Company's Employee Stock Option Plan. On November 30, 1994 the Company entered into a Consulting and Non-Competition Agreement with Roy L. Morgan ("Agreement"). The Employment Agreement between the Company and Mr. Morgan previously in effect terminated on December 31, 1994, at which time his resignation as President of the Company became effective. Mr. Morgan continues as a director of the Company. Under the terms of the Agreement, Mr. Morgan will remain a consultant to the Company through July 1, 1999, and is subject to a global non-competition restriction for the term of the Agreement. In consideration of Mr. Morgan's consulting services and non-compete agreement, Mr. Morgan received $7,500 on January 1, 1995, and will receive a semi-annual payment of $37,263 commencing July 1, 1995 for the term of the Agreement. In addition, and in connection with the cancellation of his previously issued employee options, Mr. Morgan was granted replacement options for 200,000 shares exercisable at $1.75 per share, the fair market value of the Common Stock on the option grant date. During fiscal year 1994, the Company paid approximately $27,000 to Donald R. Segner in consideration of aviation consulting services provided by Mr. Segner to the Company during the fiscal year, independent of his service to the Company as a director. Mr. Segner initially provided these consulting services on retainer, pursuant to a Consulting Agreement entered into with the Company in October 1993. Effective October 1994, and in connection with the Company's recent restructuring, Mr. Segner and the Company have terminated the Consulting Agreement. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The Compensation Committee of the Board of Directors of the Company during early calendar year 1994 consisted of Messrs. Miller (Chairman), Gray, Schreier (then Chief Executive Officer of the Company) and Belsey. Following Mr. Schreier's resignation from the Company and Mr. Belsey's appointment as Chief Executive Officer, the membership of the Compensation Committee was revised so that it now consists of Messrs. Miller (Chairman), Gray and J. Bernstein In December 1993, Americas Partners, a New York general partnership composed of Joseph Bernstein, Ralph Bernstein and Morad Tahbaz, each currently a director of the Company, co-guaranteed a $2,500,000 short-term credit extended to the Company by Swiss Bank Corporation, New York branch. In consideration of this co-guaranty, the Company granted Americas Partners warrants to purchase 50,000 shares of Common Stock at an exercise price of $10.625 per share (later reduced to $6.00 per share), exercisable for a term of five years 22 from the warrant issuance date. The warrant was reissued in May 1995 to reduce the exercise price to $3.00 per share in consideration of the events discussed below. In February 1994, Americas Partners agreed to make a bridge loan of $250,000 to Air Medica Movil, S.A. de C.V. ("AMM"), an air medical transportation joint venture in Mexico City, Mexico to which the Company is a party. The loan was convertible at any time into ten percent of the post-conversion outstanding shares of AMM and was non- recourse as to the Company. Americas Partners had an option to provide or arrange for the balance of up to $2,000,000 of third party financing for the venture on terms satisfactory to the venture and to the partnership. In consideration of this loan, the Company granted Americas Partners five-year warrants to purchase 150,000 shares of Common Stock at an exercise price of $6.00 per share. In May, 1995, the warrant was reissued to reduce the exercise price to $3.00 per share in consideration of the assignment by Americas Partners of the note and all other rights relating to AMM to the Company. Ralph Bernstein and Morad Tahbaz were elected directors of the Company in connection with the establishment of a Finance Committee and a Marketing and New Business Committee of the Company's Board of Directors, and the approval of the original financing commitment for AMM. Mr. Tahbaz has also been designated to serve as director of AMM. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth, as of June 15, 1995, the beneficial ownership of the Company's issued and outstanding Common Stock: (i) by each person who owns of record (or is known by the Company to own beneficially) more than 5% of the Common Stock or as to which he has the right to acquire within 60 days of June 15, 1995, (ii) by each director of the Company and certain executive officers of the Company; and (iii) by all directors and officers as a group (thirteen persons). 23 Percentage of Name and Address No. of Shares Common Stock/1/ - - - ------------------------ ---------------- --------------- Americas Tower Partners 1,155,000/2/ 14.4 520 Madison Avenue New York, NY 10022 George W. Belsey 112,203/3/ 1.4 7301 South Peoria Englewood, CO 80112 Joseph E. Bernstein 1,385,000/4/ 17.2 520 Madison Avenue New York, NY 10022 Ralph J. Bernstein 1,355,000/5/ 16.8 520 Madison Avenue New York, NY 10022 Marius Burke, Jr. 85,775/6/ 1.0 7301 South Peoria Englewood, CO 80112 Samuel H. Gray 41,839/7/ /*/ 95 Madison Avenue Morristown, NJ 07960 Maurice L. Martin, Jr. 163,433/8/ 2.0 7301 South Peoria Englewood, CO 80112 Lowell D. Miller, Ph.D. 54,488/9/ /*/ 16940 Stonehaven Belton, MO 64012 Roy L. Morgan 397,220/10/ 4.9 7301 South Peoria Englewood, CO 80112 Michael G. Prieto 12,333/11/ /*/ 7301 South Peoria Englewood, CO 80112 W. Terrance Schreier 175 /*/ c/o 7301 South Peoria Englewood, CO 80112 Donald R. Segner 16,916/12/ /*/ 290 Arch Street Laguna Beach, CA 92651 Morad Tahbaz 200,000/13/ 2.5 520 Madison Avenue New York, NY 10022 All Directors and Officers 2,202,672/14/ 24.7 as a group (thirteen persons) ____________________ /*/ Less than one percent (1%) of the 8,075,023 shares of Common Stock outstanding on June 15, 1995. /1/ Does not give effect to the potential exercise of outstanding options and warrants except as described in the notes below. 24 /2/ These shares are beneficially owned by Americas Tower Partners, Joseph Bernstein, Ralph Bernstein and a number of corporations and partnerships controlled by Joseph and Ralph Bernstein. /3/ Includes 104,444 shares which may be purchased within 60 days upon the exercise of stock options at $3.00 and $3.50 per share. /4/ Includes 1,155,000 shares held by Americas Tower Partners, a partnership controlled by Mr. J. Bernstein, 200,000 shares issuable upon the exercise of warrants at an exercise price of $3.00 per share, owned by Americas Partners, of which Mr. J. Bernstein is a general partner, and 30,000 shares owned of record by the J.B. Trust of which J. Bernstein's children are sole beneficiaries, as to which shares Mr. J. Bernstein holds shared voting and investment power. /5/ Includes 1,155,000 shares held by Americas Tower Partners, a partnership controlled by Mr. R. Bernstein, and 200,000 shares issuable upon the exercise of warrants at an exercise price of $3.00 per share, owned by Americas Partners, of which Mr. R. Bernstein is a general partner. /6/ Includes 341 shares held by Mr. Burke's wife, as to which shares Mr. Burke disclaims beneficial ownership, and 77,288 shares which may be purchased within 60 days upon the exercise of stock options at various prices ranging from $3.00 to $12.125 per share. /7/ Includes 3,229 shares and options exercisable within 60 days to purchase 6,667 shares at $6.25 per share owned by The Morris Consulting Group, Inc., of which Mr. Gray is Chief Executive Officer and a 50% stockholder, and options to purchase 21,666 shares at prices ranging from $3.00 to $9.375 per share. /8/ Includes 160,833 shares which may be purchased within 60 days upon the exercise of stock options at prices ranging from $3.00 to $7.00 per share. /9/ Includes 500 shares owned by Mr. Miller's wife, as to which he disclaims beneficial ownership, and 45,832 shares which may be purchased within 60 days upon the exercise of stock options at various prices ranging from $3.00 to $13.50 per share. /10/ Includes 95,548 shares owned by Mr. Morgan's wife, as to which he disclaims beneficial ownership, and 200,000 shares which may be purchased within 60 days upon the exercise of stock options at $1.75 per share. /11/ Includes 8,333 shares which may be purchased within 60 days upon the exercise of stock options at $11.375 per share. /12/ Includes 16,666 shares which may be purchased within 60 days upon the exercise of stock options at prices ranging from $3.00 to $9.00 per share, and 250 shares held in trust as to which Mr. Segner holds shared voting and investment power. /13/ Consists of warrants to purchase 200,000 shares at an exercise price of $3.00 per share, owned by Americas Partners, of which Mr. Tahbaz is a general partner. /14/ Includes 841,729 shares which may be purchased within 60 days upon the exercise of outstanding stock options or warrants. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS See discussion at Item 11, "Compensation Committee Interlocks and Insider Participation." 25 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) Documents filed as part of the report: 1. Financial Statements included in Item 8 of this report: Independent Auditors' Report. Consolidated Balance Sheets, December 31, 1994 and June 30, 1994. Consolidated Statements of Operations for the six months ended December 31, 1994 and years ended June 30, 1994, 1993 and 1992. Consolidated Statements of Stockholders' Equity for the six months ended December 31, 1994 and years ended June 30, 1994, 1993 and 1992. Consolidated Statements of Cash Flows for the six months ended December 31, 1994 and years ended June 30, 1994, 1993 and 1992. Notes to Financial Statements. 2. Financial Statement Schedules included in Item 8 of this report: All supporting schedules have been omitted because the information required is included in the financial statements or notes thereto or have been omitted as not applicable or not required. 3. Exhibits: Exhibit Number Description of Exhibits - - - ------- ----------------------- 3.1 Certificate of Incorporation/1/ 3.2 Amendments to Certificate of Incorporation/2/ 3.3 By-Laws as Amended/12/ 4.1 Specimen Stock Certificate/2/ 4.2 Warrant Agreement, and First and Second Amendment to Warrant Agreement, and form of Warrant Certificate/3/ 4.3 Third Amendment to Warrant Agreement/10/ 4.4 Warrant Agreement, dated February 2, 1993, between the Company and Sands Brothers & Co., Ltd. ("Sands Brothers") covering Warrants issued to Sands Brothers/3/ 4.5 Form of Sands Brothers Warrant/3/ 4.6 Warrant Agreement, dated April 6, 1993, between the Company and C.C.R.I. Corporation/10/ 4.7 Warrant Agreement dated February 14, 1994, between the Company and CCRI Corporation/11/ 4.8 Form of Reissued Warrant Agreement, dated May 3, 1995 between the Company and Americas Partners, concerning warrants originally issued December 28, 1993 IV-1 4.9 Form of Reissued Warrant Agreement, dated May 3, 1995 between the Company and Americas Partners, concerning warrants originally issued February 21, 1994 10.1 Air Methods Corporation Employee Stock Option Plan, as amended/13/ 10.2 Nonemployee Director Stock Option Plan, as amended/10/ 10.3 Restricted Stock Bonus Plan, as amended/10/ 10.4 Equity Compensation Plan for Nonemployee Directors, adopted March 12, 1993/4/ 10.5 Amended and Restated Warrant Agreement, dated as of October 10, 1990, by and between the Company and Fritzsche Pambianchi & Associates, Inc./7/ 10.6 Option Agreement, dated June 12, 1990, between the Company and Lowell D. Miller/8/ 10.7 Option Agreement, dated December 28, 1990, between the Company and Lowell D. Miller/8/ 10.8 Option Agreement, dated July 18, 1991, between the Company and Lowell D. Miller/10/ 10.9 Form of Option Agreement between the Company and Alfred Bjorseth10 10.10 Form of Option Agreement between the Company and Marlis E. Smith/10/ 10.11 Warrant Agreements, dated April 29, 1993, between the Company and Bart Gutekunst/10/ 10.12 Warrant Agreement, dated April 28, 1993, between the Company and Gerald Grayson/10/ 10.13 Exchange Agreement and Plan of Reorganization, dated November 12, 1991, by and among the Company and the shareholders of Air Methods-Colorado (excluding schedules)/9/ 10.14 Form of Consulting Agreement, dated November 30, 1994, between the Company and Roy L. Morgan 10.15 Employment Agreement, dated November 12, 1991, between the Company and Maurice L. Martin, Jr./2/ 10.16 Employment Agreement, dated June 1, 1994, between the Company and George Belsey/12/ 10.17 Employment Agreement, dated November 30, 1993, between the Company and Michael Prieto/12/ 10.18 Employment Agreement, dated November 12, 1991, between the Company and Marius Burke, Jr./2/ 10.19 Research, Clinical Development and Option Agreement, dated February 12, 1992, between the Company and Oncotech, Inc./2/ 10.20 Research and Licensing Agreement, dated December 6, 1993, between the Company and Phylomed/12/ 10.21 Equipment Leases, and Warrant Agreements, dated July 25, 1992, between the Company and Ventana Leasing, Inc. or Praktikerfinans AB/2/ IV-2 10.22 Exchange Agreement, dated September 10, 1993 by and among the Company and the shareholders of Golden Eagle Aviation, Inc./5/ 10.23 Stock Purchase Agreement, dated September 21, 1994 by and between the Company and Centennial Express Airlines, Inc. 23 Consent of KPMG Peat Marwick, LLP 27 Financial Data Schedule (b) Reports on Form 8-K: No reports on Form 8-K were filed by the Company during the six- month transition period ended December 31, 1994. ____________________ /1/ Filed as an exhibit to the Company's Registration Statement on Form S-1 (Registration No. 33-15007), as declared effective on August 27, 1987, and incorporated herein by reference. /2/ Filed as an exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1992, and incorporated herein by reference. /3/ Filed as an exhibit to the Company's Registration Statement on Form S-3 (Registration No. 33-59690), as declared effective on April 23, 1993, and incorporated herein by reference. /4/ Filed as an exhibit to the Company's Registration Statement on Form S-8 (Registration No. 33-65370), filed with the Commission on July 1, 1993, and incorporated herein by reference. /5/ Filed as an exhibit to the Company's current Report on Form 8-K dated September 10, 1993, and incorporated herein by reference. /6/ Filed as an exhibit to the Company's Registration Statement on Form S-1 (Registration No. 33-27883), as declared effective on June 13, 1989, and incorporated herein by reference. /7/ Filed as an exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended April 30, 1991, and incorporated herein by reference. /8/ Filed as an exhibit to Post-Effective Amendment No. 4 to the Company's Registration Statement on Form S-1 (Registration No. 33-27883) filed with the Commission on August 12, 1991, and incorporated herein by reference. /9/ Filed as an exhibit to the Company's Current Report on Form 8-K dated November 12, 1991, and incorporated herein by reference. /10/ Filed as an exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1993, and incorporated herein by reference. /11/ Filed as an exhibit to the Company's Registration Statement on Form S-3 (Registration No. 33-75744) filed with the Commission on February 25, 1994 and incorporated herein by reference. /12/ Filed as an exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1994, and incorporated herein by reference. /13/ Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995, and incorporated herein by reference. IV-3 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AIR METHODS CORPORATION Date: June 26, 1995 By: /s/ George W. Belsey -------------------------------- George W. Belsey Chairman of the Board Chief Executive Officer Pursuant to the requirements of the Securities Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the date indicated. George W. Belsey Chairman of the Board June 26, 1995 - - - ----------------------- Chief Executive Officer George W. Belsey Interim Principal Financial and Accounting Officer Director June 26, 1995 - - - ----------------------- Roy L. Morgan Joseph E. Bernstein Director June 26, 1995 - - - ----------------------- Joseph E. Bernstein Ralph J. Bernstein Director June 26, 1995 - - - ----------------------- Ralph J. Bernstein Samuel H. Gray Director June 26, 1995 - - - ----------------------- Samuel H. Gray Lowell D. Miller, Ph.D. Director June 26, 1995 - - - ----------------------- Lowell D. Miller, Ph.D. Donald R. Segner Vice-Chairman of the Board June 26, 1995 - - - ----------------------- Donald R. Segner Morad Tahbaz Director June 26, 1995 - - - ----------------------- Morad Tahbaz IV-4 AIR METHODS CORPORATION AND SUBSIDIARY TABLE OF CONTENTS - - - ----------------------------------------------------------------- Independent Auditors' Report . . . . . . . . . . . . . . . . . . . F-1 CONSOLIDATED FINANCIAL STATEMENTS - - - --------------------------------- CONSOLIDATED BALANCE SHEETS, December 31, 1994 and June 30, 1994 . . . . . . . . . . . . . F-2 CONSOLIDATED STATEMENTS OF OPERATIONS, Six Months Ended December 31, 1994 and Years Ended June 30, 1994, 1993, and 1992 . . . . . . . . . . . . . F-4 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY, Six Months Ended December 31, 1994 and Years Ended June 30, 1994, 1993, and 1992 . . . . . . . . . . . . . F-5 CONSOLIDATED STATEMENTS OF CASH FLOWS, Six Months Ended December 31, 1994 and Years Ended June 30, 1994, 1993, and 1992 . . . . . . . . . . . . . F-6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, December 31, 1994 and June 30, 1994 . . . . . . . . . . . . . F-8 All supporting schedules are omitted because they are inapplicable, not required, or the information is presented in the consolidated financial statements or notes thereto. Independent Auditors' Report ---------------------------- BOARD OF DIRECTORS AND STOCKHOLDERS AIR METHODS CORPORATION We have audited the accompanying consolidated financial statements of Air Methods Corporation and subsidiary as listed in the accompanying table of contents. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Air Methods Corporation and subsidiary as of December 31, 1994 and June 30, 1994, and the results of their operations and their cash flows for the six months ended December 31, 1994 and each of the years in the three-year period ended June 30, 1994, in conformity with generally accepted accounting principles. KPMG PEAT MARWICK LLP KPMG Peat Marwick LLP Denver, Colorado June 8, 1995 F-1 AIR METHODS CORPORATION AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1994 AND JUNE 30, 1994 (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) - - - ----------------------------------------------------------------------
December 31, June 30, Assets 1994 1994 - - - ------ ------------ ------- Current assets: Cash and cash equivalents $ 696 3,421 Short-term investments -- 20 Current installments of notes receivable 324 309 Receivables (note 5): Trade 900 978 Insurance proceeds 49 -- Employees and other 65 72 ------ ------ 1,014 1,050 Inventories (note 5) 1,522 1,329 Work-in-process on medical interior contracts 240 174 Assets held for sale (notes 4 and 5) 4,529 5,065 Prepaid insurance 1,221 -- Other prepaid expenses 290 273 ------ ------ Total current assets 9,836 11,641 ------ ------ Equipment and leasehold improvements (notes 2, 5, and 6): Flight and ground support equipment 36,900 36,232 Furniture and office equipment 1,161 1,145 ------ ------ 38,061 37,377 Less accumulated depreciation and amortization (4,667) (3,484) ------ ------ Net property and equipment 33,394 33,893 ------ ------ Excess of cost over the fair value of net assets acquired, net of accumulated amortization of $308 and $259 at December 31, 1994 and June 30, 1994, respectively (notes 2, 3, and 4) 2,119 2,168 Notes receivable, less current installments 2,197 2,361 Patent application costs and other assets, net of accumulated amortization of $424 and $383 at December 31, 1994 and June 30, 1994, respectively (note 5) 1,267 1,837 ------ ------ Total assets $48,813 $51,900 ====== ====== (Continued)
F-2 AIR METHODS CORPORATION AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS, CONTINUED (AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS) - - - ----------------------------------------------------------------------
December 31, June 30, Liabilities and Stockholders' Equity 1994 1994 - - - ------------------------------------ ------------ ------- Current liabilities: Notes payable (note 5) $ 2,278 1,054 Current installments of long-term debt (note 5) 4,870 5,921 Current installments of obligations under capital leases (note 6) 722 706 Accounts payable 746 915 Accrued overhaul and parts replacement costs 804 809 Deferred revenue 10 1,011 Accrued restructuring expenses (note 4) 114 291 Other accrued liabilities 2,184 2,687 -------- -------- Total current liabilities 11,728 13,394 -------- -------- Long-term debt, less current installments (note 5) 7,569 8,110 Obligations under capital leases, less current installments (note 6) 5,302 5,672 Accrued overhaul and parts replacement costs 4,559 3,961 Other liabilities 945 945 -------- -------- Total liabilities 30,103 32,082 -------- -------- Stockholders' equity (notes 2, 3, and 7): Preferred stock, $1 par value. Authorized 5,000,000 shares, none issued and outstanding -- -- Common stock, $.06 par value. Authorized 16,000,000 shares; issued 8,051,765 and 8,041,518 shares at December 31, 1994 and June 30, 1994, respectively 482 482 Additional paid-in capital 49,572 49,504 Accumulated deficit (31,343) (30,167) -------- -------- 18,711 19,819 Treasury stock, 25,606 shares at December 31, 1994 and June 30, 1994 (1) (1) -------- -------- Total stockholders' equity 18,710 19,818 -------- -------- Commitments and contingencies (notes 6 and 13) Total liabilities and stockholders' equity $48,813 $51,900 ======= ======= See accompanying notes to consolidated financial statements.
F-3 AIR METHODS CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS (AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS) - - - ----------------------------------------------------------------------
Six Months Ended Year Ended June 30, December 31, --------------------------------------------- 1994 1994 1993 1992 ------------ ------ ------ ------ Revenue: Flight revenue (note 8) $13,081 $25,346 21,468 11,855 Sales of medical interiors and products 709 2,552 3,872 892 Gain on disposition of assets (note 3) 102 -- -- -- -------- ------- ------- ------- 13,973 27,898 25,340 12,747 Operating expenses: Flight centers 4,427 8,626 7,017 3,819 Aircraft operations 4,445 8,188 5,483 4,520 Aircraft rental (note 6) 994 2,915 3,153 1,978 Cost of medical interiors and products sold 963 2,599 3,228 841 Depreciation and amortization 1,272 2,196 1,438 908 General and administrative 2,176 5,761 4,479 3,984 Loss on disposition of assets -- 790 -- -- Restructuring and other non-recurring expenses (note 4) -- 3,010 -- -- -------- ------- ------- ------- 14,277 34,085 24,798 16,050 -------- ------- ------- ------- Operating income (loss) (304) (6,187) 542 (3,303) Other income (expense): Interest expense (717) (1,246) (1,082) (613) Interest and dividend income 163 188 121 355 Merger termination expense (note 11) (305) -- (272) -- Other, net (note 11) (13) 170 257 962 -------- -------- -------- -------- Loss before extraordinary item (1,176) (7,075) (434) (2,599) Extraordinary item -- gain (loss) on early extinguishment of debt (notes 5 and 6) -- (182) 173 -- -------- -------- -------- -------- Net loss $(1,176) (7,257) (261) (2,599) ======== ======== ======== ======== Loss per common share before extraordinary item $(.15) (1.00) (.13) (1.42) Gain (loss) on early extinguishment of debt per common share -- (.03) .05 -- -------- -------- -------- -------- Loss per common share $(.15) (1.03) (.08) (1.42) ====== ====== ====== ====== Weighted average number of common shares outstanding 8,023,225 7,056,445 3,453,111 1,829,456 ========== ========== ========== ========== See accompanying notes to consolidated financial statements.
F-4 AIR METHODS CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY SIX MONTHS ENDED DECEMBER 31, 1994 AND YEARS ENDED JUNE 30, 1994, 1993 AND 1992 (AMOUNTS IN THOUSANDS EXCEPT SHARE AMOUNTS) - - - ----------------------------------------------------------------------
Common Stock Treasury Stock Additional Total stock- ----------------- ----------------- paid-in Accumulated holders' Shares Amount Shares Amount capital deficit equity ------ ------ ------ ------ ---------- ----------- ------------ BALANCES AT JULY 1, 1991 1,420,149 $ 85 -- $ -- 26,570 (20,050) 6,605 Issuance of common shares for options exercised and services rendered 20,937 1 -- -- 124 -- 125 Amortization of deferred compensation expense (note 7) -- -- -- -- 26 -- 26 Payment for fractional shares resulting from reverse stock split (840) -- -- -- (2) -- (2) Issuance of common shares in business combination (note 2) 692,730 42 93,843 (6) 1,702 -- 1,738 Net loss -- -- -- -- -- (2,599) (2,599) ---------- ----- ------- ----- ------- -------- ------- BALANCES AT JUNE 30, 1992 2,132,976 128 93,843 (6) 28,420 (22,649) 5,893 Issuance of common shares for options exercised and services rendered 5,030 -- -- -- 53 -- 53 Issuance of common shares in private offering, net of syndication costs of $1,470 (note 7) 2,386,839 144 -- -- 5,547 -- 5,691 Issuance of common shares under the Restricted Stock Plan (note 7) 102,907 6 -- -- (6) -- -- Amortization of deferred compensation expense (note 7) -- -- -- -- 191 -- 191 Retirement of unvested shares and options forfeited under the Restricted Stock Plan (note 7) (1,770) -- -- -- (1) -- (1) Issuance of common shares for warrants exercised, net of solicitation costs of $250 (note 7) 636,148 38 -- -- 2,577 -- 2,615 Net loss -- -- -- -- -- (261) (261) ---------- ----- -------- ----- ------- -------- ------- BALANCES AT JUNE 30, 1993 5,262,130 316 93,843 (6) 36,781 (22,910) 14,181 Issuance of common shares for options exercised and services rendered 533,798 18 -- -- 1,306 -- 1,324 Issuance of common shares for warrants exercised, net of solicitation costs of $429 (note 7) 1,272,626 90 -- -- 5,411 -- 5,501 Issuance of common shares in private offering (note 7) 1,011,190 61 -- -- 5,669 -- 5,730 Issuance of common shares in acquisition (note 3) 55,617 3 -- -- 437 -- 440 Amortization of deferred compensation expense (note 7) -- -- -- -- 218 -- 218 Retirement of unvested shares and options forfeited under the Restricted Stock Plan (note 7) -- -- -- -- (8) -- (8) In-kind tax withholding elected by employees under the Restricted Stock Plan (note 7) -- -- 25,606 (1) (310) -- (311) Cancellation of treasury shares (93,843) (6) (93,843) 6 -- -- -- Net loss -- -- -- -- -- (7,257) (7,257) ---------- ----- -------- ----- ------- -------- ------- BALANCES AT JUNE 30, 1994 8,041,518 482 25,606 (1) 49,504 (30,167) 19,818 Issuance of common shares for options exercised and services rendered 10,247 -- -- -- 60 -- 60 Amortization of deferred compensation expense (note 7) -- -- -- -- 10 -- 10 Retirement of unvested shares and options forfeited under the Restricted Stock Plan (note 7) -- -- -- -- (2) -- (2) Net loss -- -- -- -- -- (1,176) (1,176) ---------- ----- -------- ----- ------- -------- ------- BALANCES AT DECEMBER 31, 1994 8,051,765 $482 25,606 $ (1) 49,572 (31,343) 18,710 ========== ===== ======== ===== ======= ======== ======= See accompanying notes to consolidated financial statements.
F-5 AIR METHODS CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (AMOUNTS IN THOUSANDS) - - - ----------------------------------------------------------------------
Six Months Ended Year Ended June 30, December 31, ------------------------------- 1994 1994 1993 1992 ------------- ------ ------ ------ Cash flows from operating activities: Net loss $(1,176) (7,257) (261) (2,599) Adjustments to reconcile net loss to net cash provided (used) by operating activities: Provision for restructuring and other non-recurring expenses -- 2,218 -- -- Depreciation and amortization expense 1,272 2,196 1,438 908 Common stock and options issued for services and in connection with employee stock compensation agreements, net of forfeitures 69 (94) 243 149 Loss (gain) on retirement and sale of equipment (102) 790 (12) (321) Loss (gain) on early extinguishment of debt -- 182 (173) -- Changes in operating assets and liabilities, net of acquisitions: Decrease (increase) in receivables 36 2,043 (1,121) (678) Increase in inventories (193) (53) (1,166) (182) Decrease (increase) in prepaid expenses and other current assets 844 (180) 295 (360) Increase in work-in-process on medical interior contracts (66) (153) (81) (87) Decrease in accounts payable, other accrued liabilities, and accrued restructuring expenses (716) (189) (376) (2,069) Increase (decrease) in accrued overhaul and parts replacement costs 404 860 (432) 237 Increase (decrease) in deferred revenue and other liabilities (1,001) 676 95 414 -------- -------- ------- ------- Net cash provided (used) by operating activities (629) 1,039 (1,551) (4,588) -------- -------- ------- ------- Cash flows from investing activities: Net cash used in acquisition of Golden Eagle Aviation, Inc. -- (451) -- -- Acquisition of equipment and leasehold improvements (981) (16,101) (6,561) (3,104) Proceeds from retirement and sale of equipment 790 618 2,093 725 Decrease (increase) in notes receivable, patent application costs, and other assets 425 (307) (654) (190) Proceeds from sale or maturity of short-term investments 21 504 1,378 4,129 Purchase of short-term investments -- -- (472) (3,991) Payments for acquisition costs -- -- -- (482) -------- -------- ------- ------- Net cash provided (used) by investing activities 255 (15,737) (4,216) (2,913) -------- -------- ------- ------- Cash flows from financing activities: Proceeds from issuance of common stock -- 12,898 10,026 591 Payments for syndication and solicitation costs -- (1,252) (1,720) -- Net borrowings (repayments) under short-term notes payable (856) (117) (268) 486 Proceeds from long-term debt -- 7,851 4,049 1,876 Payments of long-term debt (1,141) (4,007) (2,318) (357) Payments of capital lease obligations (354) (1,882) (473) (488) -------- -------- ------- ------- Net cash provided (used) by financing activities (2,351) 13,491 9,296 2,108 -------- -------- ------- ------- Increase (decrease) in cash and cash equivalents (2,725) (1,207) 3,529 (5,393) Cash and cash equivalents at beginning of period $ 3,421 4,628 1,099 6,492 -------- -------- ------- ------- Cash and cash equivalents at end of period $ 696 3,421 4,628 1,099 ======== ======== ======= ======= Interest paid in cash during the period $ 718 1,243 1,158 645 ======== ======== ======= ======= (Continued)
F-6 AIR METHODS CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED - - - ---------------------------------------------------------------------- Noncash investing and financing transactions: On November 12, 1991, the Company issued 598,887 restricted shares of its common stock for all the outstanding common shares of Air Methods Corporation, a Colorado corporation. The transaction consisted of the following: Year ended June 30, 1992 ------------- (Amounts in thousands) Issuance of stock in exchange for net assets of Air Methods $ 2,220 ======== Net assets acquired: Equipment and leasehold improvements $15,762 Receivables 648 Inventories 446 Goodwill 2,422 Accounts payable and accrued liabilities (3,173) Accrued overhaul and parts replacement costs (4,459) Debt (9,600) Other, net 174 -------- Net assets acquired $ 2,220 ======== On September 10, 1993, the Company issued 25,908 restricted shares of its common stock for all the outstanding common shares of Golden Eagle Charters, Inc. ("Golden Eagle"). On the same date, in a related transaction, the Company issued 29,709 restricted shares of its common stock for the transfer to the Company of an interest in a jet airplane. The transaction consisted of the following: Year ended June 30, 1994 ------------- (Amounts in thousands) Issuance of stock in exchange for net assets of Golden Eagle $ 440 ======= Net assets acquired: Equipment and leasehold improvements $1,923 Receivables 105 Goodwill 1,193 Accounts payable and other liabilities (2,781) ------- Net assets acquired $ 440 ======= Capital lease obligations of $19,000, $7,085,000, and $1,479,000 were assumed to acquire equipment during the years ended June 30, 1994, 1993 and 1992, respectively. Notes receivable of $2,790,000 were received as partial consideration for the sale of two aircraft during the year ended June 30, 1994. Short-term notes payable of $2,347,000 were assumed to finance the Company's annual hull and liability, workers' compensation, and directors' and officers' insurance policies during the six months ended December 31, 1994. See accompanying notes to consolidated financial statements. F-7 AIR METHODS CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1994 AND JUNE 30, 1994 - - - ---------------------------------------------------------------------- (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Financial Statement Presentation The accompanying consolidated financial statements consist of the accounts of Air Methods Corporation, a Delaware corporation ("Air Methods" or "the Company"). As discussed more fully in note 3, in September 1994 the Company sold all of the outstanding shares of common stock of Golden Eagle Charters, Inc. ("Golden Eagle"), formerly a wholly owned subsidiary of the Company. During fiscal year 1993, Cell Technology Biosciences, Inc., another wholly owned subsidiary, was dissolved. All significant intercompany balances and transactions have been eliminated in consolidation. As discussed more fully in note 2, on November 12, 1991, Cell Technology, Inc. acquired all of the outstanding common shares of Air Methods Corporation, a Colorado corporation (AMC). On November 13, 1991, AMC was merged into the Company and the Company changed its name to Air Methods Corporation. Cash and Cash Equivalents For purposes of the consolidated statements of cash flows, the Company considers all highly liquid instruments with original maturities of three months or less to be cash equivalents. Cash equivalents of $565,000 and $2,427,000 at December 31, 1994 and June 30, 1994, respectively, consist of short-term money market funds. Short-Term Investments Short-term investments, which consisted of certificates of deposit, had maturities of greater than 90 days but less than one year and were recorded at cost, which approximated market value. Inventories Inventories are comprised primarily of expendable aircraft parts which are recorded at the lower of cost (average cost) or market. Work-in-Process on Medical Interior Contracts Work-in-process on medical interior contracts represents costs of the installation of medical equipment and modification of aircraft for third parties. Revenue relating to fixed fee contracts is recognized using the completed contract method of accounting. F-8 AIR METHODS CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED - - - ---------------------------------------------------------------------- A contract is considered complete when all costs except insignificant items have been incurred and the installation is operating according to specification. If the modified aircraft is leased by the Company in its operations, the revenue is deferred and recognized over the term of the lease. Certain medical interior contracts provide for reimbursement of all costs plus an incremental amount. Revenue on these contracts is recorded as costs are incurred. In addition, when the total cost to complete a medical interior under a fixed fee contract can be reasonably estimated, revenue is recorded as costs are incurred. Assets Held for Sale Assets held for sale consist primarily of aircraft designated for disposal within one year and are valued at the lower of cost or estimated net realizable value. Net realizable value is determined primarily by individual market studies; estimated carrying costs of the assets prior to disposal are included in the calculation of net realizable value. Depreciation is discontinued when an asset is designated for disposal. Debt collateralized by assets held for sale is classified in the financial statements as current. Equipment and Leasehold Improvements Hangar, equipment, and leasehold improvements are recorded at cost. Maintenance and repairs are expensed when incurred. Major modifications and costs incurred to place aircraft in service are capitalized. Improvements to helicopters and airplanes leased under operating leases are included in flight and ground support equipment in the accompanying financial statements. Depreciation is computed using the straight-line method over the following useful lives: Residual Description Lives value ---------------------------------------- ----------- -------- Hangar 40 years 10% Helicopters, including medical equipment 8-25 years 25% Airplanes, including medical equipment 8-20 years 0-10% Ground support equipment 5-10 years 0-10% Furniture and office equipment 3-10 years -- Leasehold improvements to hangar and office space are amortized using the straight-line method over the terms of the leases. F-9 AIR METHODS CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED - - - ---------------------------------------------------------------------- Excess of Costs Over the Fair Value of Net Assets Acquired Excess of cost over the fair value of net assets acquired, or goodwill, is being amortized using the straight-line method over 25 years. Periodically the Company evaluates the recoverability of goodwill based upon undiscounted earnings projections. Events that may indicate a need to assess recoverability include significant changes in business conditions, continuing losses, or a forecasted inability to achieve at least break-even results over an extended period. Should an impairment in value be indicated, the carrying value of goodwill will be adjusted accordingly. Fleet Integration Costs Costs related to the integration of new types of aircraft into the Company's fleet are deferred and amortized over a period of five years. Such costs are included in other assets in the accompanying financial statements. Patent Application Costs The Company capitalizes legal costs associated with patent applications. At such time as patents are granted, these costs will be amortized over the estimated useful economic life of the patents. Costs relating to unsuccessful patent applications are charged to operations. Engine and Airframe Overhaul Costs The Company uses the accrual method of accounting for major engine and airframe overhauls whereby the cost of the next overhaul is estimated and accrued based on usage of the aircraft over the period between overhauls. Revenue Recognition and Uncollectible Receivables Fixed fee revenue under the Company's operating agreements with hospitals is recognized monthly over the term of the agreements. Revenue relating to emergency flights is recognized upon completion of the services. Uncollectible trade receivables are charged to operations using the allowance method. The allowance for uncollectible receivables was not significant at December 31, 1994 and June 30, 1994. F-10 AIR METHODS CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED - - - ---------------------------------------------------------------------- Income Taxes The Company accounts for income taxes using the asset and liability method of Statement of Financial Accounting Standard No. 109, Accounting for Income Taxes (Statement 109). Deferred tax assets and liabilities are recognized for the future income tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities of a change in rates is recognized in income in the period that includes the enactment date. Loss Per Share Loss per common share is calculated using the weighted average number of common shares outstanding for each period. Outstanding common stock options and common stock purchase warrants have not been included in the calculations since the effect would be antidilutive. Share and per share amounts for all periods presented reflect a one-for-six reverse stock split completed in fiscal 1992. (2) BUSINESS COMBINATION On November 12, 1991, the Company issued 598,887 restricted shares of its common stock in exchange for all of the outstanding common shares of AMC. The combination was accounted for using the purchase method of accounting. The restricted shares of the Company's common stock were valued at $2,220,000 by the Company's Board of Directors, and such amount was allocated to the assets acquired net of liabilities assumed based on their respective estimated fair values. Such amount was based on the market value of the shares, as determined by an independent appraisal, which was discounted to reflect the restricted nature of the stock. The application of the purchase price was as follows (amounts in thousands): Composition of purchase price: Stockholders' deficit of AMC at date of acquisition $(5,492) Adjustments to record the net assets of AMC at fair value: Flight equipment 5,290 Excess of cost over the fair value of net assets acquired 2,422 ------- 7,712 ------- Total purchase price $ 2,220 ======= F-11 AIR METHODS CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED - - - ---------------------------------------------------------------------- (3) ACQUISITION AND SALE OF SUBSIDIARY On September 10, 1993, the Company entered into an Exchange Agreement (the "Agreement") with Golden Eagle and Golden Eagle's shareholders (the "Shareholders") whereby the Company issued an aggregate of 25,908 shares of its Common Stock valued at approximately $188,000 to the Shareholders in exchange for all of the issued and outstanding shares of Golden Eagle. On the same date, in a related transaction contemplated by the Agreement, the Company issued an aggregate of 29,709 shares of its restricted common stock, valued at approximately $252,000 to shareholders and related parties of Golden Eagle, in exchange for the transfer to the Company of an interest in a jet airplane. In connection with the agreement, the Company assumed approximately $2,781,000 in debt and other liabilities of Golden Eagle and the Shareholders for an aggregate consideration of $3,221,000. The application of the purchase price was as follows (amounts in thousands): Composition of purchase price: Stockholders' deficit of Golden Eagle at date of acquisition $ (753) Excess of cost over the fair value of net assets acquired 1,193 ------- Total purchase price $ 440 ======= The transaction was accounted for using the purchase method of accounting. Accordingly, the results of operations of Golden Eagle have been included with those of the Company since the effective date of the Agreement. As discussed more fully in note 4, in the third quarter of fiscal 1994, the Company discontinued substantially all of the unprofitable airplane charter operations of Golden Eagle and wrote off the balance of goodwill related to the purchase of Golden Eagle as part of the restructuring. Losses from Golden Eagle's charter operations from the date of acquisition through June 30, 1994 totaled $677,000. On September 21, 1994, the Company sold all of the outstanding shares of common stock of Golden Eagle to a company in exchange for $10,000 and the assumption of certain liabilities of Golden Eagle. The Company recorded a gain of $126,000 on the sale. (4) BUSINESS RESTRUCTURING During the third and fourth quarters of fiscal 1994, the Company implemented a restructuring plan for the Company's continuing air medical flight and manufacturing operations designed to reduce costs and improve operating efficiencies. The restructuring plan included the discontinuation of substantially all of the airplane charter operations of Golden Eagle, a reduction in the Company's work force, and the disposal of selected assets. Also included in the restructuring was the cancellation of F-12 AIR METHODS CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED - - - ---------------------------------------------------------------------- a proposed debt refinancing and public preferred stock offering in the third quarter of 1994. With the exception of severance pay related to the reduction in the work force and certain placement fees for the proposed preferred stock offering, the restructuring expenses consisted of non-cash charges including the write-off of previously recorded assets. Valuation allowances established for assets designated for disposal are classified with other gains and losses on the disposition of assets in the accompanying financial statements. The restructuring and other non-recurring charges for the year ended June 30, 1994, consist of the following (amounts in thousands): Write-off of costs associated with proposed debt refinancing $ 335 Write-off of costs associated with proposed public preferred stock offering 571 Write-off of goodwill related to the acquisition of Golden Eagle 1,459 Severance pay 614 Other 31 ------ $3,010 ====== Accrued restructuring expenses as of December 31, 1994, consist of severance pay. (5) NOTES PAYABLE AND LONG-TERM DEBT Notes payable consist of the following at December 31, 1994 and June 30, 1994 (amounts in thousands):
December 30, June 30, 1994 1994 ------------ -------- Borrowings under a note with a company with interest at prime rate (6% at December 31, 1994), due upon delivery of two helicopters. Subsequent to December 31, 1994, the note was cancelled. See further discussion in Note 13. $ 267 534 Borrowings under a $2 million line of credit with interest at prime rate (8.5% at December 31, 1994), collateralized by certain receivables and inventories 500 505 Borrowings under an unsecured note with a company with interest at 5.73%, due in monthly installments of principal and interest through June 1, 1995 1,249 -- Borrowings under an unsecured note with a company with interest at 7.25%, due in monthly installments of principal and interest through July 1, 1995 128 -- Other 134 15 ----- ----- $2,278 1,054 ===== =====
F-13 AIR METHODS CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED - - - ---------------------------------------------------------------------- Long-term debt consists of the following at December 31, 1994 and June 30, 1994 (amounts in thousands):
1994 1993 ------ ------ Notes payable to one lender with interest at 9.94%, due in monthly payments of principal and interest through August 2001, collateralized by equipment, receivables, inventories, and other intangible assets $ 4,893 5,145 Notes payable to one lender with interest at 8.5%, due in monthly payments of principal and interest through September 2000, collateralized by flight equipment 2,505 3,770 Note payable to a company with interest at 9.25%, due in monthly payments of principal and interest through December 2001, collateralized by a hangar 253 266 Note payable to a company with monthly interest payments at prime rate plus 1% (9.5% at December 31, 1994). Paid in full on March 16, 1995 3,819 3,819 Note payable to a company with interest at 11%, due in monthly payments of principal and interest through February 29, 2002, collateralized by equipment, receivables and inventories 594 620 Note payable to a company with interest at 10%, due in monthly payments of principal and interest through May 2000, collateralized by flight equipment 334 357 Unsecured 13% note payable to a stockholder, due in monthly payments of principal and interest through December 1996 15 17 Other 26 37 -------- ------- 12,439 14,031 Less current installments (4,870) (5,921) -------- ------- $ 7,569 $ 8,110 ======= =======
All debt collateralized by assets held for sale is classified as current. F-14 AIR METHODS CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED - - - ---------------------------------------------------------------------- Aggregate maturities of long-term debt are as follows (amounts in thousands): Year ending December 31: 1995 $ 4,870 1996 1,154 1997 1,292 1998 1,389 1999 1,528 Thereafter 2,206 $12,439 In the six months ended December 31, 1994 and the year ended June 30, 1994, the Company retired debt totaling $1,048,000 and $2,056,000 respectively, prior to the scheduled maturities. In 1993, the Company retired debt totaling $642,000 prior to the scheduled maturities and recognized gains of $173,000 on the early extinguishment of the debt. Total interest expense incurred by the Company on notes, long- term debt, and capital leases during the six months ended December 31, 1994 was $930,000, of which $213,000 was capitalized. (6) LEASES The Company leases hangar and office space under noncancelable operating leases and leases certain equipment and aircraft under operating and capital leases. As of December 31, 1994, future minimum lease payments under capital and operating leases are as follows (amounts in thousands): Capital Operating leases leases ------- --------- Year ending December 31: 1995 $ 1,154 2,387 1996 1,119 2,203 1997 1,119 2,201 1998 1,119 1,775 1999 714 1,517 Thereafter 2,628 4,382 ------- ------- Total minimum lease payments 7,853 $14,465 ======= Less amounts representing interest (1,829) ------- Present value of minimum capital lease payments 6,024 ------- Less current installments (722) ------- $5,302 ======= F-15 AIR METHODS CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED - - - ---------------------------------------------------------------------- Rent expense relating to operating leases totaled $1,234,000, $3,434,000, $3,462,000, and $2,195,000 for the six months ended December 31, 1994 and years ended June 30, 1994, 1993 and 1992, respectively. On July 25, 1992, the Company entered into two equipment leases with Ventana Leasing, Inc. ("Ventana") for the lease of two helicopters. A former director of the Company is a 50% owner of Ventana. In December 1993 the Company retired one of the Ventana capital lease obligations for a total of $1,167,000 and recorded a loss of $182,000 on the early extinguishment of this obligation. The remaining capital lease with Ventana is for a term of seven years at an annual cost to the Company of approximately $301,000. Lease payments are fixed for the first five years of the lease term, after which Ventana may increase the lease payments within certain limits to account for any increases in Ventana's debt servicing costs on the leased aircraft. The lease provides that the Company will pay Ventana $337,500 upon termination of the lease to purchase the aircraft. In September 1992, the Company entered into an additional equipment lease with Ventana covering certain telephone and computer equipment. The lease has a three- year term at an annual cost to the Company of approximately $50,000, and provides that the Company will purchase the leased equipment at the end of the lease term. At December 31, 1994 and June 30, 1994, leased property held under capital leases included in equipment, net of accumulated depreciation, totaled $10,359,000 and $10,598,000, respectively. (7) STOCKHOLDERS' EQUITY (a) Warrants In connection with various offerings of common stock and other transactions by the Company, the following warrants to purchase the Company's common stock were issued and are outstanding as of December 31, 1994: F-16 AIR METHODS CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED - - - ---------------------------------------------------------------------- Number of Exercise price warrants per share Expiration Date --------- -------------- ------------------- 6,250 $ 10.50 March 13, 1995 30,000 4.00 March 12, 1996 67,938 5.10 Various, 1997 4,000 3.00 February 2, 1998 126,592 4.00 February 2, 1998 20,000 4.13 March 12, 1998 75,000 4.50 April 6, 1998 50,000 6.00 December 29, 1998 150,000 6.88 February 14, 1999 150,000 6.00 February 21, 1999 ------- 679,780 ======= In June 1993, 840,368 warrants were exercised at $3.41 per warrant to purchase 636,148 common shares for total proceeds of $2,865,000. (b) Stock Option Plans The Company has a Stock Option Plan (the Plan) which, as amended in October 1993 and February 1995, provides for the granting of incentive stock options (ISOs) and nonincentive stock options (non-ISOs), stock appreciation rights, and supplemental stock bonuses. Under the Plan, 1,500,000 shares of common stock are reserved for options. The Company also grants non-ISOs outside of the Plan. Generally, the options granted under the Plan have an exercise price equal to the fair market value on the date of grant, become exercisable in three equal installments beginning one year from the date of grant, and expire five years from the date of grant. The Nonemployee Director Stock Option Plan was adopted by the Board of Directors in May 1991 and approved by the shareholders in October 1991. The Plan authorizes the grant of nonstatutory stock options to purchase an aggregate of 300,000 shares of common stock to nonemployee directors of the Company. Each nonemployee director completing one fiscal year of service will receive a five-year option to purchase 5,000 shares, exercisable at the then current fair market value of the Company's common stock. At December 31, 1994, options issued to a consulting group to purchase 6,667 shares of common stock at an exercise price of $6.25 per share were F-17 AIR METHODS CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED - - - ---------------------------------------------------------------------- outstanding. A director of the Company is the chief executive officer and a 50% owner of the consulting group. The following is a summary of option activity, including options granted and outstanding outside of the Plan, during the six months ended December 31, 1994 and the years ended June 30, 1994, 1993 and 1992:
ISOs Non-ISOs Total -------- ---------- --------- Outstanding at June 30, 1991 120,885 153,751 274,636 Granted 118,613 93,333 211,946 Canceled (35,864) -- (35,864) Exercised (4,708) -- (4,708) --------- --------- --------- Outstanding at June 30, 1992 198,926 247,084 446,010 Granted 113,474 90,864 204,338 Canceled (11,702) (2,916) (14,618) --------- --------- --------- Outstanding at June 30, 1993 300,698 335,032 635,730 Granted 854,349 87,666 942,015 Canceled (445,064) (72,496) (517,560) Exercised (62,141) (2,222) (64,363) --------- --------- --------- Outstanding at June 30, 1994 647,842 347,980 995,822 Granted 65,773 142,857 208,630 Canceled (275,691) -- (275,691) Exercised (41) (4,348) (4,389) --------- --------- --------- Outstanding at December 31, 1994 437,883 486,489 924,372 ========= ========= ========= Exercise prices $1.75 to 12.13 1.75 to 13.50 ============= =============
(c) Restricted Stock Plan Effective December 3, 1992, the Company established a restricted stock plan authorizing the issuance of up to 300,000 shares of common stock to employees. Under this plan, participating employees elected to reduce their compensation by 2% to 20% for the period from January 9, 1993 to F-18 AIR METHODS CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED - - - ---------------------------------------------------------------------- January 8, 1994. For each $3 by which employees reduced their compensation, the Company issued one share of stock and one option to purchase one share of stock for $3. The Company issued 101,137 shares under this plan to employees and recorded deferred compensation for the value of the options issued and for the excess of the market value of the shares issued on the effective date over the face value of $3 per share. The shares issued under the plan vested over one year; the associated options vest over three years. The Company recorded $10,000, $218,000 and $191,000 of compensation expense under the plan for the six months ended December 31, 1994 and the years ended June 30, 1994 and 1993, respectively. Remaining unamortized deferred compensation was $8,000 and $21,000 as of December 31, 1994 and June 30, 1994, respectively. In January 1994 employees who received shares under this compensation plan were allowed to elect to have the Company retain sufficient shares to provide for the payment of their withholding taxes. The Company withheld a number of shares equivalent in value to the taxes owed from the shares issued to employees and placed these shares in treasury stock. (d) Nonemployee Compensation Plan In February 1993, the Board of Directors adopted the Air Methods Corporation Equity Compensation Plan for Nonemployee Directors which was subsequently approved by the Company's stockholders on March 12, 1993. Under this compensation plan, 150,000 shares of common stock are reserved for issuance to non-employee directors. (e) Private Placement In February 1993, the Company completed a private placement of 2,386,839 shares of common stock at $3 per share. In the year ended June 30, 1994, 1,176,086 of the warrants issued in tandem with the shares of common stock in this private offering were exercised to purchase 1,272,626 shares of common stock. In February 1994, the Company completed a private placement of 1,011,190 shares of common stock at $5.66 per share with institutions outside of the United States. F-19 AIR METHODS CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED - - - ---------------------------------------------------------------------- (f) Stock Repurchase Plan On August 5, 1994, the Board of Directors approved a stock repurchase plan authorizing the repurchase of up to 10% of the outstanding shares of the Company's common stock to be used to meet the Company's common stock requirements for its employee benefit plans and other purposes. Repurchases may be made from time to time in the open market or in privately negotiated transactions. The plan authorizes, but does not require, the Company to repurchase shares. Actual repurchases in any period are subject to approval by the Finance Committee of the Board of Directors and will depend on market conditions and other factors. As of December 31, 1994, no shares had been repurchased under this plan. (8) REVENUE The Company has operating agreements and leases with various hospitals and hospital systems to provide services and aircraft for periods ranging from 1 to 7 years. The agreements provide for revenue from monthly fixed fees and flight fees based upon the utilization of aircraft in providing emergency medical services. The fixed-fee portion of the agreements and leases provide for the following revenue for years subsequent to December 31, 1994 (amounts in thousands): Year ending December 31: 1995 $16,970 1996 12,689 1997 10,036 1998 6,854 1999 4,976 Thereafter 2,045 ------- $53,570 ======= (9) INCOME TAXES For income tax purposes, the Company has net operating loss carryforwards at December 31, 1994 of approximately $31,600,000 which will expire in varying amounts through the year 2008. Alternative minimum tax (AMT) loss carryforwards available to offset future AMT taxable income approximate net operating loss carryforwards for regular federal income tax purposes. F-20 AIR METHODS CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED - - - ---------------------------------------------------------------------- As a result of the acquisition of AMC and other issuances of stock, the utilization of a portion the aforementioned net operating loss carryforwards will be limited annually by the provisions of Section 382 of the Internal Revenue Code. Any future tax benefits recognized through utilization of AMC's net operating loss carryforwards as of the acquisition date will be applied to reduce the excess of cost over the fair value of net assets acquired. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 1994 are as follows (amounts in thousands): Deferred tax assets: Overhaul and parts replacement cost, principally due to the accrual method $ 1,877 Assets held for sale, principally due to differences in bases 235 Accrued restructuring expenses and valuation allowances 433 Net operating loss carryforwards 11,062 Other 246 ------- Total gross deferred tax assets 13,853 Less valuation allowance (9,656) ------- Net deferred tax assets 4,197 ------- Deferred tax liabilities: Equipment and leasehold improvements, principally due to differences in bases and depreciation methods (4,090) Other (107) ------- Total deferred tax liabilities (4,197) ------- Net deferred tax liability $ -- ======= (10) RETIREMENT PLAN The Company has a defined contribution retirement plan whereby qualified employees may contribute up to 12% of their annual salaries. The Company contributes an amount equal to 1% of the employees' annual salary and will match 20% of the employees' contributions up to 6% of their annual salaries. Company contributions totaled approximately $70,000, $156,000, $126,000, and $41,000 for the six months ended December 31, 1994 and for each of the years in the three-year period ended June 30, 1994, respectively. F-21 AIR METHODS CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED - - - ---------------------------------------------------------------------- (11) PROPOSED BUSINESS COMBINATIONS In January 1991, the Company entered into a definitive agreement to purchase all of the outstanding stock of Pioneer Pharmaceuticals, Inc. ("PPI") from Essex Chemical Corporation ("Essex"), a subsidiary of Dow Chemical. On July 1, 1991, the Company notified Essex of its termination of the agreement to purchase PPI. During the year ended June 30, 1992, the Company received $576,000 from Essex as a settlement of certain disputes arising out of the purchase agreement; this amount is included in other income in the accompanying consolidated financial statements. In April 1992, the Company agreed in principle to acquire American Air Ambulance, Inc. (AAA). In October 1992, the agreement was allowed to expire. Costs totaling $272,000 relating to the proposed acquisition were charged to merger termination expense in the third quarter of fiscal 1993. During the six months ended December 31, 1994, the Company discussed the feasibility of a business combination of the emergency air medical transport business of the Company with Rocky Mountain Helicopters, Inc. ("RMHI"), which was then operating as a debtor-in-possession under Chapter 11 of the U.S. Bankruptcy Code. In November 1994, the cash portion of the Company's bid for the aeromedical assets of RMHI was exceeded in a bid placed by another party and the Company declined to submit a final bid. The expenses incurred as part of the due diligence process consist primarily of legal and professional fees and comprise the balance of the $305,000 merger termination expense recognized in the six months ended December 31, 1994. (12) RELATED PARTY TRANSACTIONS During the year ended June 30, 1993, the Company contracted with a placement agent, which is partially owned by one of the Company's former directors, to provide services relating to the solicitation for the exercise of public warrants. Fees paid to this agent were $917,000 for the fiscal year ended June 30, 1993. During the year ended June 30, 1994, the Company issued five-year warrants to purchase 50,000 shares of common stock to Americas Partners in connection with the guarantee of a $2,500,000 note. The general partners of Americas Partners are directors of the company. The note was paid in full in the third quarter of 1994. In February 1994 warrants to purchase an additional 150,000 shares were issued to Americas Partners in connection with a commitment from Americas Partners to contribute funds to cover start-up costs for a Joint Venture in Mexico. The commitment was paid to the Company in full subsequent to June 30, 1994. The exercise price of all of the Americas Partners warrants is $3 per share. F-22 AIR METHODS CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED - - - ---------------------------------------------------------------------- (13) COMMITMENTS AND CONTINGENCIES In November 1992, a former employee brought a lawsuit against the Company which is pending in the U.S. District Court for the District of Minnesota. This suit alleges that the Company wrongfully discharged the employee and seeks recovery of unspecified monetary damages for lost compensation, emotional distress and other losses, costs, attorneys' fees and related penalties. The Company intends to vigorously defend this action and believes that it has strong defenses. Management of the Company believes the ultimate outcome of this action will not have a material adverse impact on the Company's financial position or results of operations. Subsequent to December 31, 1994, one of the Company's suppliers cancelled contracts which had required the Company to acquire four helicopters prior to December 1996. (14) PRIOR YEAR TRANSITION PERIOD (UNAUDITED) In March, 1995 the Company announced a change in its fiscal year end from June 30 to December 31. Unaudited operating results for the six months ended December 31, 1993 are presented for comparative purposes and are as follows (amounts in thousands except share and per share amounts): Revenue $15,320 Operating expenses 14,822 ------- Operating income 498 Other expense, net (399) ------- Income before extraordinary item 99 Extraordinary item - loss on early extinguishment of debt (181) ------- Net loss $ (82) ======= Income per common share before extraordinary item $ .02 Loss on early extinguishment of debt per common share (.03) ------- Loss per common share $ (.01) ======= Weighted average number of common shares outstanding 6,116,271 ========= F-23 EX-4 2 EXH. 4.8 AIR METHODS CORPORATION REISSUED WARRANT AGREEMENT THIS REISSUED WARRANT AGREEMENT is made and entered into this 3rd day of May, 1995, by and between AIR METHODS CORPORATION (the "Company") and AMERICAS PARTNERS ("AP") (together, the "Parties"). RECITALS -------- A. The Company executed a promissory note on December 28, 1993 in favor of Swiss Bank Corporation, New York Branch (the "Bank"), in the principal amount of $2,500,000, with interest on the outstanding principal balance at the Eurodollar rate (as defined in the promissory note) plus one and one-half percent per annum, such principal and interest due and payable in full on March 28, 1994 (the "Note"). B. To induce the Bank to loan to the Company the funds represented by the Note, AP and its affiliate, Americas Tower Partners ("ATP"), executed a guaranty and security agreement as of December 28, 1993 in favor of the Bank, guaranteeing the payment of all of the Company's obligations to the Bank under the Note (the "Guaranty"). C. To induce AP and ATP to execute the Guaranty, the Company granted AP warrants to purchase 50,000 shares of common stock of the Company, par value $.06 per share ("Common Stock"), at an exercise price of $10.625 per share, the closing price of the Common Stock on December 28, 1993, as quoted on the Nasdaq National Market (the "Original Warrant"). D. In partial consideration of the agreement of AP on February 18, 1994 to grant a bridge loan of up to $250,000, and conditionally an additional $250,000, to Air Medica Movil, S.A. de C.V., the Company's air medical transportation joint venture in Mexico City, Mexico, the Company's Board of Directors on February 21, 1994 voted to reduce the exercise price of the original warrants from $10.625 per share to $6.00 per share, the average of the high and low quoted prices of the Common Stock on the Nasdaq National Market on February 18, 1994, subject to AP's surrender and the subsequent cancellation of the Original Warrant. E. In partial consideration of the assignment by AP to the Company of the $250,000 promissory note issued by Air Medica Movil, S.A. de C.V. to AP in consideration of the aforesaid bridge loan, the Company's Board of Directors, on May 3, 1995, voted to reduce the exercise price of the original warrants from $6.00 per share to $3.00 per share, the closing price of the Common Stock on the Nasdaq National Market on May 3, 1995. F. AP is desirous of obtaining the warrants on the terms and conditions herein contained. IT IS THEREFORE agreed by and between the parties, for and in consideration of the premises and the mutual covenants herein contained and for other good and valuable consideration, as follows: Section 1. Grant of the Warrants. The Company hereby --------------------- confirms and acknowledges that it has granted to AP, on December 28, 1993, warrants to purchase 50,000 shares of Common Stock (the "Warrant") upon the terms and conditions herein set forth (the shares of Common Stock issuable upon exercise of the Warrant being hereinafter referred to as the "Warrant Shares"). 1.1 Warrant Price. The purchase price of the shares of ------------- Common Stock which may be purchased pursuant to the Warrant is $3.00 per share, subject to adjustment pursuant to Section 7 hereof (the "Warrant Price"). 1.2 Exercise Period. The Warrant shall be exercisable in --------------- full as of December 28, 1993 and shall continue to be exercisable for five years from such date. The Warrant shall automatically expire at midnight Mountain Time on December 28, 1998. If the Warrant is not exercised prior to its expiration, it shall be deemed to have been forfeited and of no further force or effect. Section 2. Form of Warrant. --------------- 2.1 Warrant Certificate. The text of the Warrant shall be ------------------- substantially as set forth in Exhibit A, attached hereto. The Warrant Price and the number of Warrant Shares issuable upon exercise of the Warrant are subject to adjustment upon the occurrence of certain events, all as hereinafter provided. The Warrant shall be executed on behalf of the Company by its Chairman and Chief Executive Officer, its President, or one of its Executive Vice Presidents, under its corporate seal reproduced thereon, attested by its Secretary or an Assistant Secretary. 2.2 Signatories. Warrants bearing the manual or facsimile ----------- signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any one of them shall have ceased to hold such offices prior to the delivery of such Warrants or did not hold such offices on the date of this Agreement. 2.3 Securities Law Legend. The Warrants and, upon exercise --------------------- of the Warrants, in part or in whole, certificates -2- representing the Warrant Shares (unless such shares have been previously registered under the Act), shall bear a legend substantially similar to the following: The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended (the "Act"), and may not be offered or sold except (i) pursuant to an effective registration statement under the Act, (ii) to the extent applicable, pursuant to Rule 144 under the Act (or any similar rule under such Act relating to the disposition of securities), or (iii) upon the delivery by the holder to the Company of an opinion of counsel, reasonably satisfactory to counsel to the Company, stating that an exemption from registration under such Act is available. Section 3. Exercise of the Warrant. ----------------------- 3.1 Surrender and Payment. A Warrant may be exercised upon --------------------- surrender to the Company at its office in Englewood, Colorado of the certificate or certificates evidencing the Warrants to be exercised, together with the form of election to purchase included therein duly filled in and signed, and upon payment to the Company of the applicable Warrant Price (as defined in and determined in accordance with the provisions of Sections 1.1 and 7 hereof), for the number of Warrant Shares in respect of which such Warrants are then exercised. Payment of the applicable aggregate Warrant Price shall be made in cash or by certified or cashier's check. 3.2 Issuance of Warrant Shares. Subject to Section 6 -------------------------- hereof, upon surrender of Warrants and payment of the applicable Warrant Price as aforesaid, the Company shall issue and cause to be delivered with all reasonable dispatch to or upon the written order of a holder of a Warrant ("Holder") in such name or names as the Holder may designate, a certificate or certificates for the number of full Warrant Shares so purchased upon the exercise of such Warrants. Such certificate or certificates shall be deemed to have been issued and any person so designated to be named therein shall be deemed to have become a holder of record of such Warrant Shares as of the date of the surrender of such Warrants and payment of the applicable Warrant Price, as aforesaid; provided, however, that if, at the date of the -------- ------- surrender of such Warrants and payment of the applicable Warrant Price, the transfer books for the Warrant Shares or other class of stock purchasable upon the exercise of such Warrants shall be closed, the certificates for the Warrant Shares or for the shares of such other class of stock in respect of which such Warrants are then exercised shall be issuable as of the date on which such books shall next be opened (whether before or after the fifth anniversary of the date hereof) and until such date the Company shall be -3- under no duty to deliver any certificate for such Warrant Shares or for shares of such other class of stock; provided, further, that the -------- ------- transfer books of record, unless otherwise required by law, shall not be closed at any one time for a period longer than 20 days. The rights of purchase represented by the Warrants shall be exercisable, at the election of the Holders thereof, either in whole or from time to time in part and, in the event that a certificate evidencing Warrants is exercised in respect of less than all of the Warrant Shares purchasable on such exercise at any time prior to the date of expiration of the Warrants, a new certificate evidencing the remaining Warrant or Warrants will be issued. 3.3 Payment of Taxes. The Company will pay all documentary ---------------- stamp taxes, if any, attributable to the initial issuance of Warrant Shares upon the exercise of Warrants; provided, however, that the -------- ------- Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issue or delivery of any Warrants or certificates for Warrant Shares in a name other than that of the Holder of Warrants in respect of which such Warrant Shares are issued, and in such case the Company shall not be required to issue or deliver any certificate for shares of Common Stock until the person requesting the same has paid to the Company the amount of such tax or has established to the Company's satisfaction that such tax has been paid. 3.4 Fractional Interests. The Company shall not be -------------------- required to issue fractional Warrant Shares on the exercise of Warrants. If any fraction of a Warrant Share would, except for the provisions of this Section 3.4, be issuable on the exercise of any Warrant (or specified portion thereof), the Company shall calculate and pay an amount in cash equal to the then current market price per share of Common Stock multiplied by such fraction. Section 4. Transfer of Warrant. Subject to the terms of ------------------- Section 6 hereof, the Warrant shall be transferable upon surrender of the Warrant certificate, with the form of assignment attached thereto duly executed by the Holder, to the Company at its office in the State of Colorado. Upon such surrender, the Company shall cause a Warrant certificate containing terms identical to those of the surrendered Warrant certificate to be issued in the name of the transferee or transferees. If any Warrant certificate is assigned in respect of less than all the shares covered thereby, the Holder shall be entitled to receive a new Warrant Certificate covering the number of shares not so assigned. Section 5. Representations of the Company. The Company ------------------------------ represents and warrants to AP that: 5.1 Authority. The Company has, and at all times that this --------- Agreement is in force will have, all requisite right, -4- power and authority to enter into, execute, deliver and perform this Agreement and the Warrant, and the officers of the Company executing and delivering this Agreement and the Warrant are duly authorized to do so. This Agreement and the Warrant have been duly and validly executed, issued and delivered and constitute the legal, valid and binding obligations of Company, enforceable against the Company in accordance with their respective terms. 5.2 No Violation. The execution, delivery and performance ------------ by the Company of this Agreement and the Warrant do not and will not, after the lapse of time, the giving of notice or otherwise, constitute a violation of any applicable provision contained in the charter, bylaws or organizational documents of the Company or contained in any material agreement, instrument or document to which the Company is a party or by which it is bound. 5.3 Reservation of Shares. The issuance and sale of the --------------------- shares of Common Stock initially to be reserved for issuance on exercise of the Warrants have been duly and validly authorized. There have been reserved, and the Company shall at all times keep reserved, out of its authorized Common Stock, a number of shares of Common Stock sufficient to provide for the exercise of the right of purchase represented by the outstanding Warrants. The transfer agent for the Common Stock and every subsequent transfer agent for any shares of the Company's capital stock issuable upon the exercise of the Warrants will be irrevocably authorized and directed at all times to reserve such number of authorized shares as shall be requisite to provide for the exercise of the rights of purchase represented by the outstanding Warrants. Such shares, when so issued upon such exercise in accordance with the terms of the Warrant, will be validly issued, fully paid and nonassessable. Section 6. Representations of AP. AP represents and agrees --------------------- that: 6.1 It is acquiring the Warrants and the Warrant Shares for its own account, for investment and not with an intent or view to or for sale in connection with any "distribution" thereof within the meaning of the Securities Act of 1933, as amended (the "Act"), and its general partners have such knowledge, skill, sophistication and experience in business and financial matters, based on actual participation, that they are capable of evaluating the merits and risks of an investment in the Warrants and the Warrant Shares and the suitability thereof as an investment. 6.2 The Warrant Shares may not be offered, sold or otherwise transferred by AP except (a) pursuant to an effective registration statement under the Act, (b) to the extent applicable, pursuant to Rule 144 under the Act (or any similar rule under the Act relating to the disposition of securities), or (c) unless in the opinion of counsel for the Company, or in the opinion of counsel, reasonably satisfactory to counsel to the -5- Company, the proposed offer, sale or other transfer of such Warrant Shares would be exempt from the registration requirements of the Act, and from the qualification requirements of any applicable state securities law. 6.3 Absent such registration under the Act, each certificate issued to represent any of the Warrant Shares shall bear the legend provided for in Section 2.3. The Company may require, as a condition of the exercise of the Warrant, that AP sign such further representations and agreements as it reasonably determines to be necessary or appropriate to assure and to evidence compliance with the requirements of the Act. Section 7. Adjustment of Warrant Price and Number of ----------------------------------------- Warrant Shares. The number and kind of securities purchasable upon - - - -------------- the exercise of the Warrant and the Warrant Price shall be subject to adjustment from time to time upon the happening of certain events, as hereinafter defined. 7.1 Mechanical Adjustments. The Warrant Price and the ---------------------- number and kind of securities purchasable upon the exercise of the Warrant shall be subject to adjustment from time to time as follows: a. Dividends, Subdivision and Combination. In case -------------------------------------- the Company shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, the Warrant Price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination or reclassification shall be proportionately adjusted so that the Holder of each Warrant exercised after such date shall be entitled to receive the aggregate number and kind of Warrant Shares which, if the Warrants had been exercised by such Holder immediately prior to such date, he would have owned upon such exercise and been entitled to receive upon such dividend, subdivision, combination or reclassification. b. Reclassification, Consolidation, Merger, etc. In --------------------------------------------- case of any reclassification or change of the outstanding shares of Common Stock (other than a change in par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), or in the case of any consolidation of the Company with, or merger of the Company into, another corporation (other than a consolidation or merger in which the Company is the surviving corporation and which does not result in any reclassification or change of the outstanding shares of Common Stock, except a change as a result of a subdivision or combination of such shares or a change in par -6- value, as aforesaid), or in the case of a sale or conveyance to another corporation of the property of the Company as an entirety, the Holder of each Warrant shall thereafter have the right to purchase (at a price equal to the product of (x) the number of shares of Common Stock issuable upon exercise of his Warrants and (y) the Warrant Price in effect immediately prior to the record date for such reclassification, change, consolidation, merger, sale or conveyance) the kind and number of shares of stock and other securities and property receivable upon such reclassification, change, consolidation, merger, sale or conveyance which, if the Warrants had been exercised by such Holder immediately prior to the record date for such event, such Holder would have owned upon such exercise and been entitled to receive in such reclassification, change, consolidation, merger, sale or conveyance. c. Subscription rights for Shares of Common Stock or ------------------------------------------------- Other Securities. In the case the Company or an affiliate of the - - - ---------------- Company shall at any time after the date hereof and prior to the exercise of the Warrant, issue any rights to subscribe for shares of Common Stock or any other securities of the Company or of such affiliate to all the shareholders of the Company, the Holders of the unexercised Warrants shall be entitled, upon the exercise of such Warrants, in addition to the shares of Common Stock or other securities receivable upon the exercise of the Warrants, to receive such rights, at the time such rights are distributed to the other shareholders of the Company, and to exercise such rights prior to the same expiration date applicable to the other shareholders of the Company. d. Anything in this Section 7 to the contrary notwithstanding, the Company shall not be required, except as hereinafter provided, to make any adjustment of the Warrant Price in any case in which the amount by which such Warrant Price would be reduced in accordance with the foregoing provisions would be less than $0.10, but in such case any adjustment that would otherwise be required then to be made will be carried forward and made at the time and together with the next subsequent adjustment which, together with any and all such adjustments so carried forward, shall amount to not less than $0.10. In the event of any subdivision or combination of shares of Common Stock said amount (as theretofore decreased or increased) shall be proportionately decreased or increased. 7.2 Related Adjustment Matters. -------------------------- a. Upon each adjustment of the Warrant Price pursuant to Section 7.1a hereof, the number of applicable Warrant Shares thereafter purchasable upon the exercise of each Warrant shall be determined by multiplying such Warrant Price in effect immediately prior to such adjustment by the number of such Warrant Shares purchasable immediately prior to such adjustment upon exercise of each Warrant and dividing the product so obtained by such Warrant Price in effect after such adjustment. -7- b. Irrespective of any adjustments of the Warrant Price or the number or kind of securities issuable upon exercise of Warrants, Warrant certificates theretofore or thereafter issued may continue to express the same Warrant Price and number of Warrant Shares as are stated in similar Warrants previously issued. c. The Company may retain the independent public accounting firm regularly retained by the Company, or another firm of independent public accountants selected by the Company's Board of Directors, to make any computation required under this Section 7. d. Whenever there is an adjustment in the Warrant Price or in the number or kind of securities issuable upon exercise of each Warrant, or both, as provided in this Section 7, the Company shall promptly cause a certificate (the "Certificate") signed by the Chairman and Chief Executive Officer, the President, or an Executive Vice President of the Company and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the Company, stating that the Warrant Price and the number of Warrant Shares issuable upon exercise of each Warrant have been adjusted, setting forth the appropriate adjusted Warrant Price and the adjusted number of Warrant Shares issuable upon exercise of each Warrant, and showing in reasonable detail the computation and the facts upon which such adjustments are based to be sent to each registered Holder of Warrants. If the foregoing adjustments shall result in a fractional share, the fraction shall be disregarded, and the Company shall have no obligation to make any cash or other payment with respect to such a fractional share. Section 8. Registration of the Warrant Shares. ---------------------------------- 8.1 S-3 Registration. The Company has registered the ---------------- shares issuable upon exercise of this Warrant with the Securities and Exchange Commission (the "Commission") by their inclusion in a Registration Statement on Form S-3 (the "S-3"), to permit AP's public resale of any shares obtained upon exercise of the Warrant. The Company shall use its best efforts to maintain the effectiveness of the S-3, and to register or qualify the Warrant Shares under such state securities laws as AP may reasonably request and maintain such registrations or qualifications, until all of the Warrants have been exercised or until they expire pursuant to Section 1.2 hereof and to list the Warrant Shares on any securities exchange on which the Common Stock is then listed. 8.2 Removal of Legends. The legend relating to the ------------------ Securities Act and state securities laws endorsed on the certificates evidencing the Warrants and Warrant Shares pursuant to Section 2.3 hereof shall be removed, and the Company shall issue a certificate or instrument without such legend to the -8- Holder of such security, if such security is registered under the Act and qualified under applicable state securities laws or if such Holder provides the Company with an opinion of counsel for such Holder (which opinion shall be reasonably satisfactory to counsel to the Company) to the effect that a public sale, transfer or assignment of such security may be made without registration under the Act and under applicable state securities laws. Section 9. No Stockholder Rights. Subject to the --------------------- provisions of Section 3.2 hereof, AP shall have no rights as a stockholder with respect to the shares of Common Stock which may be purchased pursuant to the Warrant until such shares are deemed to have been issued to AP under Section 3.2. Section 10. Applicable Law. THIS AGREEMENT IS ENTERED INTO -------------- AND SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE. Section 11. Notices. Any notice to be given to the Company ------- under the terms of this Agreement shall be addressed to the Company in care of its Secretary at its office in Englewood, Colorado and any notice to be given to Holder shall be sent to the address given beneath Holder's signature hereto, or at such other address as either party may hereafter designate, in writing, to the other. Any such notice shall have been deemed duly given when properly deposited in the United States mail. Section 12. Entire Agreement. This Agreement constitutes ---------------- the entire agreement between the Parties regarding the Warrant and supersedes all prior agreements and understandings, oral and written, relating thereto. No modification of this Agreement shall be valid unless made in writing and signed by the party against which enforcement of the modification is sought. Section 13. Successors; Merger of the Company. This --------------------------------- Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns. The Company will not merge or consolidate with or into any other corporation unless the corporation resulting from such merger or consolidation (if not the Company) shall expressly assume, by supplemental agreement reasonably satisfactory in form and substance to and delivered to the Holders, the due and punctual performance and observance of each and every covenant and condition of this Agreement to be performed and observed by the Company. Section 14. Survival. All representations, warranties and -------- covenants made by the Parties shall survive the execution and delivery of this Agreement. -9- Section 15. Captions. The captions of the Sections and -------- subsections of this Agreement have been inserted for convenience of reference only and shall have no substantive effect. Section 16. Fees. Except as otherwise provided in this ---- Agreement, any and all fees, costs and expenses, of whatever kind and nature, including attorney's fees and expenses, incurred by the Holders in connection with the defense or prosecution of any actions or proceedings arising out of or in connection with this Agreement shall be borne and paid by the Company. Section 17. Cancellation. AP acknowledges and agrees ------------ that the Original Warrant has been cancelled and that the rights of AP hereunder are granted in substitution and replacement of all rights of AP under the Original Warrant. Section 18. Counterparts. This Agreement may be executed ------------ in any number of counterparts, which shall collectively constitute one agreement. IN WITNESS WHEREOF, the parties have hereunto affixed their signatures in acknowledgment and acceptance of the above terms and conditions on May 3, 1995. AIR METHODS CORPORATION By: ------------------------------------ George W. Belsey, Chairman and Chief Executive Officer AMERICAS PARTNERS By: ------------------------------------- Joseph E. Bernstein General Partner 520 Madison Avenue New York, New York 10022 -10- EX-4 3 EXH. 4.9 AIR METHODS CORPORATION REISSUED WARRANT AGREEMENT THIS REISSUED WARRANT AGREEMENT is made and entered into this 3rd day of May, 1995, by and between AIR METHODS CORPORATION (the "Company") and AMERICAS PARTNERS ("AP") (together, the "Parties"). RECITALS -------- A. In February 1994, the Company has requested that AP extend a bridge loan credit of up to $500,000 to Air Medica Movil, S.A. de C.V. ("AMM"), the Company's air medical transportation joint venture in Mexico City, Mexico. B. To induce AP to loan to AMM these funds, the Company and its Board of Directors have voted to grant to AP warrants to purchase up to 150,000 shares of common stock of the Company, par value $.06 per share ("Common Stock"), on terms identical to the warrant for 50,000 shares issued by the Company to AP on December 28, 1993. C. In partial consideration of the assignment by AP to the Company of a $250,000 promissory note issued by AMM to AP to evidence a $250,000 bridge loan from AP to AMM pursuant to the aforeissued loan credit, the Board of Directors of the Company, on May 3, 1995, voted to reduce the exercise price of the original warrants from $6.00 per share to $3.00 per share, the closing price of the Common Stock on the Nasdaq National Market on May 3, 1995. D. AP is desirous of obtaining the warrants on these terms and conditions, as herein contained. IT IS THEREFORE agreed by and between the parties, for and in consideration of the premises and the mutual covenants herein contained and for other good and valuable consideration, as follows: Section 1. Grant of the Warrants. The Company hereby --------------------- confirms and acknowledges that it granted to AP, on February 21, 1994, warrants to purchase 150,000 shares of Common Stock (the "Warrant") upon the terms and conditions herein set forth (the shares of Common Stock issuable upon exercise of the Warrant being hereinafter referred to as the "Warrant Shares"). 1.1 Warrant Price. The purchase price of the shares of ------------- Common Stock which may be purchased pursuant to the Warrant is $3.00 per share, subject to adjustment pursuant to Section 7 hereof (the "Warrant Price"). 1.2 Exercise Period. The Warrant shall be exercisable in --------------- full as of the date hereof and shall be exercisable for a period of five years from February 21, 1994. The Warrant shall automatically expire at midnight Mountain Time on February 21, 1999. If the Warrant is not exercised prior to its expiration, it shall be deemed to have been forfeited and of no further force or effect. Section 2. Form of Warrant. --------------- 2.1 Warrant Certificate. The text of the Warrant shall be ------------------- substantially as set forth in Exhibit A, attached hereto. The Warrant Price and the number of Warrant Shares issuable upon exercise of the Warrant are subject to adjustment upon the occurrence of certain events, all as hereinafter provided. The Warrant shall be executed on behalf of the Company by its Chairman and Chief Executive Officer, its President, or one of its Executive Vice Presidents, under its corporate seal reproduced thereon, attested by its Secretary or an Assistant Secretary. 2.2 Signatories. Warrants bearing the manual or facsimile ----------- signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any one of them shall have ceased to hold such offices prior to the delivery of such Warrants or did not hold such offices on the date of this Agreement. 2.3 Securities Law Legend. The Warrants and, upon exercise --------------------- of the Warrants, in part or in whole, certificates representing the Warrant Shares (unless such shares have been previously registered under the Act), shall bear a legend substantially similar to the following: The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended (the "Act"), and may not be offered or sold except (i) pursuant to an effective registration statement under the Act, (ii) to the extent applicable, pursuant to Rule 144 under the Act (or any similar rule under such Act relating to the disposition of securities), or (iii) upon the delivery by the holder to the Company of an opinion of counsel, reasonably satisfactory to counsel to the Company, stating that an exemption from registration under such Act is available. Section 3. Exercise of the Warrant. ----------------------- 3.1 Surrender and Payment. A Warrant may be exercised upon --------------------- surrender to the Company at its office in Englewood, Colorado of the certificate or certificates evidencing -2- the Warrants to be exercised, together with the form of election to purchase included therein duly filled in and signed, and upon payment to the Company of the applicable Warrant Price (as defined in and determined in accordance with the provisions of Sections 1.1 and 7 hereof), for the number of Warrant Shares in respect of which such Warrants are then exercised. Payment of the applicable aggregate Warrant Price shall be made in cash or by certified or cashier's check. 3.2 Issuance of Warrant Shares. Subject to Section 6 -------------------------- hereof, upon surrender of Warrants and payment of the applicable Warrant Price as aforesaid, the Company shall issue and cause to be delivered with all reasonable dispatch to or upon the written order of a holder of a Warrant ("Holder") in such name or names as the Holder may designate, a certificate or certificates for the number of full Warrant Shares so purchased upon the exercise of such Warrants. Such certificate or certificates shall be deemed to have been issued and any person so designated to be named therein shall be deemed to have become a holder of record of such Warrant Shares as of the date of the surrender of such Warrants and payment of the applicable Warrant Price, as aforesaid; provided, however, that if, at the date of the -------- ------- surrender of such Warrants and payment of the applicable Warrant Price, the transfer books for the Warrant Shares or other class of stock purchasable upon the exercise of such Warrants shall be closed, the certificates for the Warrant Shares or for the shares of such other class of stock in respect of which such Warrants are then exercised shall be issuable as of the date on which such books shall next be opened (whether before or after the fifth anniversary of the date hereof) and until such date the Company shall be under no duty to deliver any certificate for such Warrant Shares or for shares of such other class of stock; provided, further, that the transfer books of -------- ------- record, unless otherwise required by law, shall not be closed at any one time for a period longer than 20 days. The rights of purchase represented by the Warrants shall be exercisable, at the election of the Holders thereof, either in whole or from time to time in part and, in the event that a certificate evidencing Warrants is exercised in respect of less than all of the Warrant Shares purchasable on such exercise at any time prior to the date of expiration of the Warrants, a new certificate evidencing the remaining Warrant or Warrants will be issued. 3.3 Payment of Taxes. The Company will pay all documentary ---------------- stamp taxes, if any, attributable to the initial issuance of Warrant Shares upon the exercise of Warrants; provided, however, that the -------- ------- Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issue or delivery of any Warrants or certificates for Warrant Shares in a name other than that of the Holder of Warrants in respect of which such Warrant Shares are issued, and in such case the Company shall not be required to issue or deliver any certificate for shares of Common Stock until the person requesting the same has paid to the Company the amount of -3- such tax or has established to the Company's satisfaction that such tax has been paid. 3.4 Fractional Interests. The Company shall not be -------------------- required to issue fractional Warrant Shares on the exercise of Warrants. If any fraction of a Warrant Share would, except for the provisions of this Section 3.4, be issuable on the exercise of any Warrant (or specified portion thereof), the Company shall calculate and pay an amount in cash equal to the then current market price per share of Common Stock multiplied by such fraction. Section 4. Transfer of Warrant. Subject to the terms of ------------------- Section 6 hereof, the Warrant shall be transferable upon surrender of the Warrant certificate, with the form of assignment attached thereto duly executed by the Holder, to the Company at its office in the State of Colorado. Upon such surrender, the Company shall cause a Warrant certificate containing terms identical to those of the surrendered Warrant certificate to be issued in the name of the transferee or transferees. If any Warrant certificate is assigned in respect of less than all the shares covered thereby, the Holder shall be entitled to receive a new Warrant Certificate covering the number of shares not so assigned. Section 5. Representations of the Company. The Company ------------------------------ represents and warrants to AP that: 5.1 Authority. The Company has, and at all times that this --------- Agreement is in force will have, all requisite right, power and authority to enter into, execute, deliver and perform this Agreement and the Warrant, and the officers of the Company executing and delivering this Agreement and the Warrant are duly authorized to do so. This Agreement and the Warrant have been duly and validly executed, issued and delivered and constitute the legal, valid and binding obligations of Company, enforceable against the Company in accordance with their respective terms. 5.2 No Violation. The execution, delivery and performance ------------ by the Company of this Agreement and the Warrant do not and will not, after the lapse of time, the giving of notice or otherwise, constitute a violation of any applicable provision contained in the charter, bylaws or organizational documents of the Company or contained in any material agreement, instrument or document to which the Company is a party or by which it is bound. 5.3 Reservation of Shares. The issuance and sale of the --------------------- shares of Common Stock initially to be reserved for issuance on exercise of the Warrants have been duly and validly authorized. There have been reserved, and the Company shall at all times keep reserved, out of its authorized Common Stock, a number of shares of Common Stock sufficient to provide for the exercise of the right of purchase represented by the outstanding Warrants. The transfer agent for the Common Stock and every -4- subsequent transfer agent for any shares of the Company's capital stock issuable upon the exercise of the Warrants will be irrevocably authorized and directed at all times to reserve such number of authorized shares as shall be requisite to provide for the exercise of the rights of purchase represented by the outstanding Warrants. Such shares, when so issued upon such exercise in accordance with the terms of the Warrant, will be validly issued, fully paid and nonassessable. Section 6. Representations of AP. AP represents and agrees --------------------- that: 6.1 It is acquiring the Warrants and the Warrant Shares for its own account, for investment and not with an intent or view to or for sale in connection with any "distribution" thereof within the meaning of the Securities Act of 1933, as amended (the "Act"), and its general partners have such knowledge, skill, sophistication and experience in business and financial matters, based on actual participation, that they are capable of evaluating the merits and risks of an investment in the Warrants and the Warrant Shares and the suitability thereof as an investment. 6.2 The Warrant Shares may not be offered, sold or otherwise transferred by AP except (a) pursuant to an effective registration statement under the Act, (b) to the extent applicable, pursuant to Rule 144 under the Act (or any similar rule under the Act relating to the disposition of securities), or (c) unless in the opinion of counsel for the Company, or in the opinion of counsel, reasonably satisfactory to counsel to the Company, the proposed offer, sale or other transfer of such Warrant Shares would be exempt from the registration requirements of the Act, and from the qualification requirements of any applicable state securities law. 6.3 Absent such registration under the Act, each certificate issued to represent any of the Warrant Shares shall bear the legend provided for in Section 2.3. The Company may require, as a condition of the exercise of the Warrant, that AP sign such further representations and agreements as it reasonably determines to be necessary or appropriate to assure and to evidence compliance with the requirements of the Act. Section 7. Adjustment of Warrant Price and Number of ----------------------------------------- Warrant Shares. The number and kind of securities purchasable upon - - - -------------- the exercise of the Warrant and the Warrant Price shall be subject to adjustment from time to time upon the happening of certain events, as hereinafter defined. 7.1 Mechanical Adjustments. The Warrant Price and the ---------------------- number and kind of securities purchasable upon the exercise -5- of the Warrant shall be subject to adjustment from time to time as follows: a. Dividends, Subdivision and Combination. In case -------------------------------------- the Company shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, the Warrant Price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination or reclassification shall be proportionately adjusted so that the Holder of each Warrant exercised after such date shall be entitled to receive the aggregate number and kind of Warrant Shares which, if the Warrants had been exercised by such Holder immediately prior to such date, he would have owned upon such exercise and been entitled to receive upon such dividend, subdivision, combination or reclassification. b. Reclassification, Consolidation, Merger, etc. In --------------------------------------------- case of any reclassification or change of the outstanding shares of Common Stock (other than a change in par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), or in the case of any consolidation of the Company with, or merger of the Company into, another corporation (other than a consolidation or merger in which the Company is the surviving corporation and which does not result in any reclassification or change of the outstanding shares of Common Stock, except a change as a result of a subdivision or combination of such shares or a change in par value, as aforesaid), or in the case of a sale or conveyance to another corporation of the property of the Company as an entirety, the Holder of each Warrant shall thereafter have the right to purchase (at a price equal to the product of (x) the number of shares of Common Stock issuable upon exercise of his Warrants and (y) the Warrant Price in effect immediately prior to the record date for such reclassification, change, consolidation, merger, sale or conveyance) the kind and number of shares of stock and other securities and property receivable upon such reclassification, change, consolidation, merger, sale or conveyance which, if the Warrants had been exercised by such Holder immediately prior to the record date for such event, such Holder would have owned upon such exercise and been entitled to receive in such reclassification, change, consolidation, merger, sale or conveyance. c. Subscription rights for Shares of Common Stock or ------------------------------------------------- Other Securities. In the case the Company or an affiliate of the - - - ---------------- Company shall at any time after the date hereof and prior to the exercise of the Warrant, issue any rights to subscribe for shares of Common Stock or any other securities of the Company or of such affiliate to all the shareholders of the Company, the Holders of the unexercised Warrants shall be -6- entitled, upon the exercise of such Warrants, in addition to the shares of Common Stock or other securities receivable upon the exercise of the Warrants, to receive such rights, at the time such rights are distributed to the other shareholders of the Company, and to exercise such rights prior to the same expiration date applicable to the other shareholders of the Company. d. Anything in this Section 7 to the contrary notwithstanding, the Company shall not be required, except as hereinafter provided, to make any adjustment of the Warrant Price in any case in which the amount by which such Warrant Price would be reduced in accordance with the foregoing provisions would be less than $0.10, but in such case any adjustment that would otherwise be required then to be made will be carried forward and made at the time and together with the next subsequent adjustment which, together with any and all such adjustments so carried forward, shall amount to not less than $0.10. In the event of any subdivision or combination of shares of Common Stock said amount (as theretofore decreased or increased) shall be proportionately decreased or increased. 7.2 Related Adjustment Matters. -------------------------- a. Upon each adjustment of the Warrant Price pursuant to Section 7.1a hereof, the number of applicable Warrant Shares thereafter purchasable upon the exercise of each Warrant shall be determined by multiplying such Warrant Price in effect immediately prior to such adjustment by the number of such Warrant Shares purchasable immediately prior to such adjustment upon exercise of each Warrant and dividing the product so obtained by such Warrant Price in effect after such adjustment. b. Irrespective of any adjustments of the Warrant Price or the number or kind of securities issuable upon exercise of Warrants, Warrant certificates theretofore or thereafter issued may continue to express the same Warrant Price and number of Warrant Shares as are stated in similar Warrants previously issued. c. The Company may retain the independent public accounting firm regularly retained by the Company, or another firm of independent public accountants selected by the Company's Board of Directors, to make any computation required under this Section 7. d. Whenever there is an adjustment in the Warrant Price or in the number or kind of securities issuable upon exercise of each Warrant, or both, as provided in this Section 7, the Company shall promptly cause a certificate (the "Certificate") signed by the Chairman and Chief Executive Officer, the President, or an Executive Vice President of the Company and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the Company, stating that the Warrant Price and the number of Warrant Shares issuable upon -7- exercise of each Warrant have been adjusted, setting forth the appropriate adjusted Warrant Price and the adjusted number of Warrant Shares issuable upon exercise of each Warrant, and showing in reasonable detail the computation and the facts upon which such adjustments are based to be sent to each registered Holder of Warrants. If the foregoing adjustments shall result in a fractional share, the fraction shall be disregarded, and the Company shall have no obligation to make any cash or other payment with respect to such a fractional share. Section 8. Registration of the Warrant Shares. ---------------------------------- 8.1 S-3 Registration. The Company has registered the ---------------- shares issuable upon exercise of this Warrant with the Securities and Exchange Commission (the "Commission") by their inclusion in a Registration Statement on Form S-3 (the "S-3"), to permit AP's public resale of any shares obtained upon exercise of the Warrant. The Company shall use its best efforts to maintain the effectiveness of the S-3, and to register or qualify the Warrant Shares under such state securities laws as AP may reasonably request and maintain such registrations or qualifications, until all of the Warrants have been exercised or until they expire pursuant to Section 1.2 hereof and to list the Warrant Shares on any securities exchange on which the Common Stock is then listed. 8.2 Removal of Legends. The legend relating to the ------------------ Securities Act and state securities laws endorsed on the certificates evidencing the Warrants and Warrant Shares pursuant to Section 2.3 hereof shall be removed, and the Company shall issue a certificate or instrument without such legend to the Holder of such security, if such security is registered under the Act and qualified under applicable state securities laws or if such Holder provides the Company with an opinion of counsel for such Holder (which opinion shall be reasonably satisfactory to counsel to the Company) to the effect that a public sale, transfer or assignment of such security may be made without registration under the Act and under applicable state securities laws. Section 9. No Stockholder Rights. Subject to the --------------------- provisions of Section 3.2 hereof, AP shall have no rights as a stockholder with respect to the shares of Common Stock which may be purchased pursuant to the Warrant until such shares are deemed to have been issued to AP under Section 3.2. Section 10. Applicable Law. THIS AGREEMENT IS ENTERED INTO -------------- AND SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE. Section 11. Notices. Any notice to be given to the Company ------- under the terms of this Agreement shall be addressed to the Company in care of its Secretary at its office in Englewood, -8- Colorado and any notice to be given to Holder shall be sent to the address given beneath Holder's signature hereto, or at such other address as either party may hereafter designate, in writing, to the other. Any such notice shall have been deemed duly given when properly deposited in the United States mail. Section 12. Entire Agreement. This Agreement constitutes ---------------- the entire agreement between the Parties regarding the Warrant and supersedes all prior agreements and understandings, oral and written, relating thereto. No modification of this Agreement shall be valid unless made in writing and signed by the party against which enforcement of the modification is sought. Section 13. Successors; Merger of the Company. This --------------------------------- Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns. The Company will not merge or consolidate with or into any other corporation unless the corporation resulting from such merger or consolidation (if not the Company) shall expressly assume, by supplemental agreement reasonably satisfactory in form and substance to and delivered to the Holders, the due and punctual performance and observance of each and every covenant and condition of this Agreement to be performed and observed by the Company. Section 14. Survival. All representations, warranties and -------- covenants made by the Parties shall survive the execution and delivery of this Agreement. Section 15. Captions. The captions of the Sections and -------- subsections of this Agreement have been inserted for convenience of reference only and shall have no substantive effect. Section 16. Fees. Except as otherwise provided in this ---- Agreement, any and all fees, costs and expenses, of whatever kind and nature, including attorney's fees and expenses, incurred by the Holders in connection with the defense or prosecution of any actions or proceedings arising out of or in connection with this Agreement shall be borne and paid by the Company. Section 17. Counterparts. This Agreement may be executed ------------ in any number of counterparts, which shall collectively constitute one agreement. -9- IN WITNESS WHEREOF, the parties have hereunto affixed their signatures in acknowledgment and acceptance of the above terms and conditions as of May 3, 1995. AIR METHODS CORPORATION By: ------------------------------------- George W. Belsey, Chairman and Chief Executive Officer AMERICAS PARTNERS By: ------------------------------------- Joseph E. Bernstein General Partner 520 Madison Avenue New York, New York 10022 -10- EX-10 4 EXH. 10.14 CONSULTING AND NON-COMPETITION AGREEMENT This Consulting and Non-Competition Agreement (this "Agreement") is entered into this 30th day of November, 1994 between Air Methods Corporation, a Delaware corporation, with its principal place of business at 7301 South Peoria, Englewood, Colorado 80112 (the "Company") and Roy L. Morgan (the "Consultant"). RECITALS A. The Consultant has been employed by the Company since 1991 as its President. The Consultant was the founder of the Company's predecessor, Air Methods Corporation, a Colorado corporation, and he was employed as its President and Chief Executive Officer from July 1, 1980 through 1991. The Consultant also serves as a director of the Company. B. The Consultant has proposed to resign as an officer and employee of the Company and the Board of Directors of the Company has authorized the acceptance of such resignation. C. The Company desires to continue to consult with and receive advice from the Consultant and to have the Consultant's agreement not to compete with the Company. The Consultant has agreed to provide such consulting services to the Company, subject to and upon the terms and conditions set forth in this Agreement, and has agreed not to compte with the Company during the term of this Agreement. The Company and the Consultant have also agreed that this Agreement shall supersede and replace the Employment Agreement dated November 12, 1991 (the "Employment Agreement") under which the Consultant is currently employed by the Company. D. The Consultant currently holds options to purchase up to 251,666 shares of the Common Stock of the Company and, as of the date hereof, such options are exercisable as to 163,889 of such shares. It is therefore agreed as follows: 1. Effective Date. The Consultant hereby resigns all -------------- positions which he holds as an officer and employee of the Company and terminates his employment by the Company effective at the end of business December 31, 1994 (the "Effective Date"). On the Effective Date, this Agreement shall become effective and shall supersede the Employment Agreement, which shall thereafter be deemed terminated for all purposes. 2. Consultation by the Consultant. The Consultant shall ------------------------------ not be obligated to provide services to the Company as an employee after the Effective Date, except that he shall be reasonably available during the period beginning on the Effective Date and ending on July 1, 1999 (the "Consulting Period") for general consultation on matters of Company business and policy. The Consultant agrees to provide up to 10 hours of consultation per month under this Agreement, subject to his other commitments, including vacations and travel. In addition, the Consultant shall be reasonably available from time to time during the Consulting Period to perform specific consultation assignments. Such specific assignments, including the scope thereof and appropriate additional compensation therefor, shall be subject to negotiation in each instance with the Chairman of the Board or other appropriate officer of the Company. Consultation services hereunder may be provided in person or by telephone or in writing, shall be provided by the Consultant at times and under circumstances which will not unreasonably conflict with other activities of the Consultant, and shall not require substantial time commitments by the Consultant in excess of 10 hours per month except upon his agreement. 3. Base Consulting Fee. The Consultant shall be paid the ------------------- sum of up to $342,867 (the "Base Fee") in consideration of the services to be provided by the Consultant hereunder and the agreements of the Consultant set forth herein not to compete with the Company, in accordance with the following schedule of installments: January 1, 1995 $ 7,500 July 1, 1995 37,263 January 1, 1996 37,263 July 1, 1996 37,263 January 1, 1997 37,263 July 1, 1997 37,263 January 1, 1998 37,263 July 1, 1998 37,263 January 1, 1999 37,263 July 1, 1999 37,263 --------------- -------- TOTAL $342,867 The Base Fee shall be paid, irrespective of the number of hours actually spent by the Consultant in providing services hereunder, provided however, that the Company's obligation to pay the Base Fee shall terminate upon the death of the Consultant or the payment of the last installment hereunder, whichever first occurs. 4. Stock Options. The Consultant shall be granted an ------------- option to purchase Two Hundred Thousand (200,000) shares of the Common Stock of the Company at the closing price on the Nasdaq National Market on December 30, 1994. The terms of the option will be set forth in an option agreement in the form attached hereto as Exhibit A. Concurrently with such option grant, the Consultant shall - - - --------- surrender all outstanding options to purchase shares of the Company's Common Stock granted to him prior to the -2- date hereof, whether granted under the Company's Employee Stock Option Plan, or outside of said Plan, and whether such options are presently exercisable or not. The Consultant shall surrender to the Company all agreements evidencing such options, and the parties hereby agree that all such options shall be null and void after December 31, 1994. 5. Health Benefits. The Consultant may, at his election, --------------- continue to be covered by the group health insurance provided for Company employees (the "Group Plan"), at the Consultant's expense, so long as such coverage is permitted under the Company's health insurance policies, including any coverage to which he is entitled under federal or state law following termination of his employment. The time period that the Consultant continues to participate in the Group Plan after the Effective Date will be applied against the Consultant's eligibility period for continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985. 6. Covenant Not to Compete. In further consideration of ----------------------- the payment by the Company provided for herein, the Consultant shall not, anywhere in the world, engage in any activity directly related to the air medical services business during the Consulting Period. 7. Trade Secrets and Confidential Information. During the ------------------------------------------ Consulting Period, the Consultant shall not, directly or indirectly, use, disseminate, or disclose for any purpose other than at the specific written request of the Company, any of the Company's confidential information or trade secrets, unless such disclosure is compelled in a judicial proceeding. All documents, records, notebooks, and similar repositories of records containing information relating to any trade secret or confidential information now in the Consultant's possession or control, whether prepared by him or by others, shall be left with the Company or returned to the Company upon its request. 8. Injunctive Relief. Consultant agrees that any ----------------- violation by him of the agreements contained in Sections 6 and 7 are likely to cause irreparable damage to the Company, and therefore agrees that if there is a breach or threatened breach by Consultant of the provisions of said sections, the Company shall be entitled to an injunction restraining Consultant from such breach. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies for such breach or threatened breach. 9. General Release. Except as otherwise expressly stated --------------- in this Agreement, including this Section 9, the parties, for themselves and their heirs, successors, subrogees, executors, agents, officers, employees, directors, administrators and assigns, do hereby voluntarily and knowingly release and discharge each other, and their respective heirs, successors, subrogees, assigns, agents, employees, stockholders, officers, -3- and directors from any and all claims, liabilities, demands, rights, damages, costs, attorneys' fees (including, without limitation, any claim of entitlement for attorneys' fees under any contract, statute or rule of law allowing the prevailing party or plaintiff to recover attorneys' fees), expenses, and controversies of every kind and description, without limitation, which either party has or may have under the common law and/or any federal, state or local laws, regulations or requirements, by reason of or arising out of Consultant's employment by the Company and all other matters which now or in the future could be raised between them. It is understood and agreed by the parties that these releases apply to claims of every nature and kind, known or unknown, suspected or unsuspected. The parties acknowledge that they may discover facts different from or in addition to those which they now know to be or believe to be true with respect to the Agreement and the facts which underlie it, and agree that this Agreement and the Releases contained in it shall be and remain effective in all respects, notwithstanding such different or additional facts or their discovery. This general release includes, by way of example and not limitation, all claims under the Civil Rights Act of 1964 as amended, The Employee Retirement Income Security Act of 1974 as amended, the Age Discrimination in Employment Act as amended, The Older Workers' Benefit Protection Act as amended, The Americans with Disabilities Act as amended, and all other state and federal statutes and regulations. 10. Officer Indemnification. The Company agrees that the ----------------------- Consultant shall continue to be entitled to indemnification by the Company against liabilities arising out of claims based upon action taken or omitted by the Consultant in his capacity as an officer of the Company or while serving as such or by reason of the fact that he was an officer of the Company, to the full extent permitted under Section 145 of the Delaware General Corporation Law or under the Certificate of Incorporation or Bylaws of the Company, or resolutions adopted by its Board of Directors. 11. Representations of the Consultant. The Consultant --------------------------------- represents and warrants as follows: (a) He has read this Agreement and agrees to the conditions and obligations set forth in it and has been advised by the Company to consult with legal counsel regarding this Agreement; (b) He has voluntarily executed this Agreement after having had full opportunity to consult with counsel and without being pressured or influenced by any statement or representation of any person acting on behalf of the Company, including the attorneys, officers, directors and employees of the Company; -4- (c) He has had at least twenty-one days to consider all the material terms of this Agreement, including the mutual releases. (d) He has been informed and understands that (1) to the extent that this Agreement waives or releases any claim he might have under the Age Discrimination in Employment Act, 29 U.S.C. Section 621 et seq., he may rescind his waiver and release within -- ---- seven calendar days of the execution of this Agreement and (2) any such rescission must be in writing, and delivered to the Company or, if sent by mail, post marked within the seventh (7) day period sent by certified mail, return receipt request and addressed as follows: Chairman of the Board Air Methods Corporation 7301 South Peoria Englewood, Colorado 80112 (e) He has full and complete legal capacity to enter into this Agreement. (f) He is not aware of any legal proceedings currently pending or threatened in writing (except for writings known to directors of the Company) against the Company arising from matters herein released. 12. Irrevocability and Amendment. The obligations of the ---------------------------- Company and the Consultant hereunder are irrevocable. This Agreement may be amended or terminated only pursuant to a written agreement executed by both the Consultant and the Company. 13. Successors and Assigns. This Agreement and all rights ---------------------- and obligations of the parties hereunder, and the releases contained herein, shall bind and inure to the benefit of the heirs, agents, employees, stockholders, partners, officers, directors, parents, subsidiaries, subrogees, affiliates, representatives, successors (including, in the case of the Company, any successor to the business of the Company, whether by merger, consolidation, acquisition of assets or any other transaction) and assigns of the Parties. 14. Nonassignability. This Agreement and the rights, ---------------- interest and obligations thereunder may not be assigned or delegated by the Parties. 15. Entire Agreement. This Agreement is the entire ---------------- agreement between the Parties and no representations, warranties or other statements or promises have been made by either party to the other in connection with this Agreement. 16. Severability. If any provision of this Agreement is ------------ held to be illegal, invalid or unenforceable, such -5- provision(s) shall be fully severable. In lieu thereof, there shall be added a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible, and be legal, valid and enforceable. 17. Applicable Law. This Agreement shall be interpreted -------------- and construed in accordance with the laws of the state of Colorado. 18. Enforcement Expenses. In any action for breach or -------------------- enforcement of the terms of this Agreement, the prevailing party shall be entitled to all costs of enforcement including, without limitation, his/its attorneys' fees and costs. IN WITNESS WHEREOF, the Consultant and the Company have caused this Consulting and Non-Competition Agreement to be executed and delivered this 30th day of November, 1994. __________________________________ Roy L. Morgan AIR METHODS CORPORATION By:_______________________________ Chairman of the Board -6- EX-10 5 EXH. 10.23 ______________________________________________________________________ STOCK PURCHASE AGREEMENT DATED AS OF September ___, 1994 BETWEEN AIR METHODS CORPORATION ("SELLER") AND CENTENNIAL EXPRESS AIRLINES, INC. ("PURCHASER") ______________________________________________________________________ Table of Contents ----------------- Page ---- 1. SALE OF THE SHARES. . . . . . . . . . . . . . . . . . . . . . 1 1.1 Sale of Shares . . . . . . . . . . . . . . . . . . . . 1 1.2 Consideration for the Shares . . . . . . . . . . . . . 1 2. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2.1 Closing Date . . . . . . . . . . . . . . . . . . . . . 1 2.2 Seller's Deliveries at Closing . . . . . . . . . . . . 2 2.3 Certificate of Seller and Purchaser. . . . . . . . . . 2 3. REPRESENTATIONS AND WARRANTIES OF SELLER. . . . . . . . . . . 2 3.1 Authority. . . . . . . . . . . . . . . . . . . . . . . 2 3.2 Title to Shares. . . . . . . . . . . . . . . . . . . . 2 3.3 No Brokers . . . . . . . . . . . . . . . . . . . . . . 3 4. DISCLAIMER OF REPRESENTATIONS AND WARRANTIES ABOUT GOLDEN EAGLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 4.1 Organization, Good Standing and Qualification. . . . . 3 4.2 Books and Records. . . . . . . . . . . . . . . . . . . 3 4.3 Liabilities. . . . . . . . . . . . . . . . . . . . . . 3 4.4 FAA Certificate. . . . . . . . . . . . . . . . . . . . 4 5. REPRESENTATIONS AND WARRANTIES OF PURCHASER . . . . . . . . . 4 5.1 Organization, Good Standing and Corporate Authority. . 4 5.2 No Brokers . . . . . . . . . . . . . . . . . . . . . . 4 6. REPRESENTATIONS AND WARRANTIES - GENERAL. . . . . . . . . . . 4 6.1 Survival of Representations and Warranties . . . . . . 4 7. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . 5 7.1 Pre-Closing Covenants. . . . . . . . . . . . . . . . . 5 7.2 Payment of Expenses. . . . . . . . . . . . . . . . . . 5 8. CONDITIONS PRECEDENT TO CLOSING . . . . . . . . . . . . . . . 5 8.1 Conditions Precedent to Purchaser's Obligation to Close. . . . . . . . . . . . . . . . . . . . . . . . . 5 8.2 Conditions Precedent to Seller's Obligation to Close . 7 9. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 7 9.1 Termination of Agreement . . . . . . . . . . . . . . . 7 9.2 Waivers. . . . . . . . . . . . . . . . . . . . . . . . 8 9.3 Notices. . . . . . . . . . . . . . . . . . . . . . . . 9 9.4 Entire Agreement; Modification . . . . . . . . . . . . 9 9.5 Non-Assignability; Third Party Beneficiaries . . . . . 9 9.6 Binding Effect . . . . . . . . . . . . . . . . . . . . 9 9.7 Section Headings . . . . . . . . . . . . . . . . . . . 9 9.8 Governing Law. . . . . . . . . . . . . . . . . . . . . 9 9.9 Further Assurances . . . . . . . . . . . . . . . . . . 10 9.10 Severability . . . . . . . . . . . . . . . . . . . . . 10 9.11 Counterparts . . . . . . . . . . . . . . . . . . . . . 10 -i- STOCK PURCHASE AGREEMENT THIS STOCK PURCHASE AGREEMENT (this "Agreement") is entered into as of the ______ day of September 1994, by and between Air Methods Corporation, a Delaware corporation ("Seller"), and Centennial Express Airlines, Inc. ("Purchaser"). RECITALS A. Seller owns all the shares of issued and outstanding common stock (the "Shares") of Golden Eagle Charters, Inc., a Colorado corporation, doing business as Golden Eagle Aviation, Inc. ("Golden Eagle"). B. Seller desires to sell, and Purchaser desires to purchase, the Shares on the terms and conditions set forth herein. AGREEMENT NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein set forth, the parties hereto, intending legally to be bound hereby, agree as follows: 1. SALE OF THE SHARES 1.1 Sale of Shares. On the terms and subject to the -------------- conditions set forth in this Agreement, on the Closing Date (as defined below) Seller shall sell the Shares to Purchaser and shall deliver to Purchaser all certificates representing the Shares endorsed in blank or accompanied by stock powers executed in blank. 1.2 Consideration for the Shares. On the terms and ---------------------------- subject to the conditions of this Agreement, on the Closing Date Purchaser shall pay to Seller in cash, certified check, bank check or by wire transfer, as the aggregate consideration for the Shares, $10,000 (the "Purchase Price") . 2. CLOSING 2.1 Closing Date. Consummation of the sale and purchase ------------ of the Shares (the "Closing") shall take place at the offices of Davis, Graham& Stubbs, 370 17th Street, Suite 4700, Denver, Colorado 80202, at 10:00 a.m., Mountain Time, on September ___, 1994, or on such other date as the parties may mutually agree in writing. The actual date and time of the Closing is herein called the "Closing Date." 2.2 Seller's Deliveries at Closing. Seller shall deliver ------------------------------ to Purchaser at Closing, the following documents: Seller's contract for sale; all books, records, corporate documents, trade name certificates, check books, and accounting records; all documents relating to Golden Eagle's Part 135 Air Carrier Certificate from the Federal Aviation Administration ("FAA"); all applicable FAA approved operation specifications; all applicable FAA approved operations and training manuals; all applicable FAA approved maintenance manuals; all reference material and library material referenced in any FAA approved manual; all records as required by FAR Part 135.63 regarding pilot training and experience, passenger manifests, etc.; international airman's information manuals; all international operations certificates and certificates of authorization; a list of all current employees of Golden Eagle; insurance policies; stock certificates; asset lists; accounting records; customer lists; and, all documents relating to Golden Eagle's ownership of the airplane described in paragraph 4.4, including but not limited to logbooks, maintenance records, and operations manuals. 2.3 Certificate of Seller and Purchaser. At the closing ----------------------------------- Seller and Purchaser shall execute certificates in conformance with the certificate attached hereto as Exhibit 2.3 that the representations contained in this agreement are true. 3. REPRESENTATIONS AND WARRANTIES OF SELLER Seller hereby represents and warrants to Purchaser as follows: 3.1 Authority. (i) Seller is a corporation duly --------- organized, validly existing and in good standing under the laws of the State of Delaware; (ii) Seller has full authority to execute and deliver this Agreement and to perform its obligations hereunder; and (iii) this Agreement constitutes a valid and binding obligation of Seller, enforceable in accordance with its terms. 3.2 Title to Shares. (i) Seller is the lawful owner and --------------- the holder of record of the Shares; (ii) delivery to Purchaser of certificates representing the Shares pursuant to the provisions of this Agreement will transfer to Purchaser valid title thereto; (iii) the Shares to be delivered to Purchaser on the Closing Date pursuant to the terms and conditions hereof have not been pledged as collateral security for any obligations of Seller, and are free and clear of all liens, restrictions, charges, encumbrances, mortgages, security interests and claims of any kind securing obligations of Seller; and (iv) Seller has no legal obligation, absolute or contingent, to any other person or firm to sell the Shares, to effect any merger, consolidation or other reorganization of Golden Eagle or to enter into any agreement which would affect Seller's title or right to deliver the Shares on the Closing Date. -2- 3.3 No Brokers. Seller has not entered into any ---------- agreement, arrangement or understanding with any person or firm which will result in any obligation of Purchaser or Golden Eagle to pay any finder's fee, brokerage commission or similar payment in connection with the transactions contemplated hereby. 4. DISCLAIMER OF REPRESENTATIONS AND WARRANTIES ABOUT GOLDEN EAGLE Seller acquired the Shares from the previous owners of the Shares on September 10, 1993 and the Seller therefore has limited knowledge of events occurring prior to that date and is unwilling to represent or warrant to the Purchaser the status of Golden Eagle except in limited respects. The Seller disclaims any representations or warranties about Golden Eagle except as specifically set forth in Section 3 and in this Section 4. Seller represents and warrants to the Purchaser as follows: 4.1 Organization, Good Standing and Qualification. --------------------------------------------- Golden Eagle is a corporation duly organized, validly existing and in good standing under the laws of the State of Colorado, has all requisite power to own, lease and operate all of its properties and assets and to carry on its business as it is now being conducted. The copies of the Articles of Incorporation and the Bylaws of Golden Eagle, both as amended to date, which have been delivered to Purchaser prior to the date hereof, are true, complete and correct. 4.2 Books and Records. To the knowledge of Seller, ----------------- except as disclosed on Schedule 4.2, all books of account, minute books, stock certificate books, stock transfer ledgers and other corporate records of, and records maintained pursuant to the requirements of governmental authorities by, Golden Eagle are complete and correctly and accurately present and reflect in all material respects all assets of Golden Eagle, all the transactions entered into by Golden Eagle or to which Golden Eagle is a party or any other matter which should be set forth in such books and records. 4.3 Liabilities. To the knowledge of Seller, there are ----------- no outstanding liabilities, claims, potential claims, unliened claims, lawsuits, settlement agreements, tax deficiencies, unpaid fees, or other obligations of Golden Eagle ("liabilities") that have arisen since September 10, 1993 that do not appear in the books and records of Golden Eagle as disclosed to Purchaser. Seller further confirms representations and warranties made to Seller by Marlis E. Smith, Inc., Smith Aviation, Inc., and Marlis E. Smith (the "Prior Shareholders") in that certain Stock Purchase Agreement dated September 10, 1993, under which Seller acquired the Shares from the Prior Shareholders. However, Seller shall have no liability respecting representations concerning any events occurring prior to September 10, 1993, including any liability arising out of a Notice of Deficiency dated March 16, 1994 (the "Tax Notice") -3- issued by the Colorado Department of Revenue asserting certain tax deficiencies against Golden Eagle, all arising out of events occurring prior to September 10, 1993. Purchaser and Seller agree that Seller will, at Purchaser's request and legal expense, undertake any and all actions, including but not limited to making demands for payment from or filing suit against the Prior Shareholders to recover damages for breaches of representations and warranties made by the Prior Shareholders for matters arising prior to September 10, 1993. Purchaser shall have the right to choose legal counsel for any collection efforts made against the Prior Shareholders pursuant to this provision. Seller agrees to cooperate fully with any collection efforts made pursuant to this provision. Seller shall have the right to review, at its expense, any demand letters, complaints, or other pleadings prepared on Seller's behalf pursuant to this provision. 4.4 FAA Certificate. As of the Closing Date Golden Eagle --------------- shall have a valid Part 135 Certificate of Operation from the Federal Aviation Administration. As of the Closing Date Seller shall have no knowledge of any reason why the Part 135 Certificate of Operation may not or will not remain in full force and effect. 5. REPRESENTATIONS AND WARRANTIES OF PURCHASER Purchaser hereby represents and warrants to Seller as follows: 5.1 Organization, Good Standing and Corporate Authority. --------------------------------------------------- Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of Colorado. Purchaser has the full corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder; the execution, delivery and performance of this Agreement by Purchaser and the consummation of the transactions contemplated hereby have been duly authorized by all requisite corporate action of Purchaser; and this Agreement constitutes a valid and binding obligation of Purchaser, enforceable in accordance with its terms. 5.2 No Brokers. Purchaser has not entered into any ---------- agreement, arrangement or understanding with any person or firm which will result in any obligation of Seller to pay any finder's fee, brokerage commission or similar payment in connection with the transactions contemplated hereby. 6. REPRESENTATIONS AND WARRANTIES - GENERAL 6.1 Survival of Representations and Warranties. All ------------------------------------------ statements contained in any certificate or instrument delivered by or on behalf of any party at the Closing pursuant to this Agreement or in connection with the transactions contemplated hereby shall be deemed to be representations and warranties of that party hereunder. All representations and warranties of any -4- party contained in this Agreement (or deemed to have been made hereunder) shall survive the Closing Date notwithstanding any investigation at any time made by or on behalf of the other party. Notwithstanding the foregoing, the parties' representations and warranties contained in this Agreement shall terminate twelve (12) months after the Closing Date. 7. COVENANTS 7.1 Pre-Closing Covenants. --------------------- (a) Access to and Information Concerning Properties ----------------------------------------------- and Records, Etc. Seller shall give Purchaser and Purchaser's - - - ----------------- counsel, accountants, engineers and other advisors, agents, consultants and representatives, full access, during normal business hours throughout the period prior to the Closing Date, to all of the properties, books, contracts, commitments, records and responsible employees of Golden Eagle, and will promptly furnish to Purchaser during such period all such information concerning Golden Eagle as Purchaser reasonably may request. (b) No-Shop Clause. From the date hereof until the -------------- Closing Date, Seller will not enter into or conduct negotiations with parties other than Purchaser with respect to the sale of the Shares or the assets of Golden Eagle, or any other form of business combination transaction involving Golden Eagle or the Shares. 7.2 Payment of Expenses. Each of the parties shall pay ------------------- its own fees and expenses incident to the negotiation and execution of this Agreement and the consummation of the transactions contemplated hereby including, but not limited to, counsel and accountant's fees. 8. CONDITIONS PRECEDENT TO CLOSING 8.1 Conditions Precedent to Purchaser's Obligation to ------------------------------------------------- Close. The obligation of Purchaser under this Agreement to proceed - - - ----- with the Closing on the Closing Date shall at all times be subject to the following conditions precedent, any of which may be waived by Purchaser in writing: (a) Accuracy of Representations and Warranties. The ------------------------------------------ representations and warranties of Seller contained herein shall be true and correct in all material respects on and as of the Closing Date with the same effect as if made on and as of such date. (b) Performance of Agreements. Seller shall have ------------------------- performed all obligations and agreements and complied with all covenants and conditions contained in this Agreement to be performed or complied with by it at or prior to the Closing Date, -5- including the delivery of certificates evidencing the Shares, properly endorsed with signatures guaranteed. (c) Seller's Certificate. Seller shall have -------------------- furnished Purchaser with a certificate, dated the Closing Date, signed by the chief executive officer of Seller, stating that the representations and warranties contained in Section 3 are true and correct on the Closing Date in all material respects as if then made, and that Seller has fulfilled the conditions specified in Sections 8.1(a) and (b) above. (d) No Litigation. No litigation shall have been ------------- instituted before any court or governmental body, or instituted by any governmental agency, to restrain or prevent the carrying out of the transactions contemplated by this Agreement or which might affect Purchaser's right to own, operate and control the assets, properties and business of Golden Eagle on or after the Closing Date. (e) Regulatory Approvals; Other Approvals and ----------------------------------------- Consents. All regulatory approvals of any governmental agency - - - -------- required for the transactions contemplated hereby shall have been obtained. Golden Eagle also shall have obtained all other requisite approvals and consents pursuant to contracts or permits relative to the transactions contemplated by this Agreement, including, but not limited to, obtaining all necessary approvals from the FAA and DOT. (f) Payment and Satisfaction of Intercompany Debt. --------------------------------------------- The 1977 Beechcraft King Air E90 aircraft, serial number LW235, registration number N776DC (the "King Air"), owned by Golden Eagle, shall have been transferred to Seller in partial satisfaction of Golden Eagle's intercompany debt to the Seller and Seller shall have contributed to Golden Eagle an amount equal to the intercompany debt attributable to the King Air to discharge such debt. (g) Agreement to Convey Hangar. Golden Eagle and -------------------------- Seller shall have executed an agreement (the "Agreement to Convey"), substantially in the form of Exhibit __ hereto, pursuant to which Golden Eagle shall convey to Seller the hangar at Centennial Airport that is owned by Golden Eagle (the "Hangar"), and Purchaser, as the owner of Golden Eagle from and after the date hereof agrees to cause Golden Eagle to take such further actions and execute and deliver such other documents as may be necessary to effectuate the transactions contemplated in the Agreement to Convey. The conveyance of the Hangar to Seller is in partial satisfaction of Golden Eagle's intercompany debt to the Seller and Seller shall have contributed to Golden Eagle an amount equal to the intercompany debt attributable to the Hangar to discharge such debt. Seller shall make a capital contribution to Golden Eagle equal to the amount of intercompany debt, if any, remaining after the transfer of the King Air and the Hangar to Seller. Seller shall indemnify and hold harmless Purchaser and -6- Golden Eagle from any costs or expenses, including taxes, incurred by Purchaser or Golden Eagle as a result of the conveyance of the Hangar to Seller. (h) Agreement for Purchase of Aircraft. Purchaser ---------------------------------- and Seller shall have entered into an Agreement, substantially in the form of Exhibit __ hereto providing for the sale by Seller to Purchaser of the Beechcraft King Air E90 aircraft, serial number LW235, registration number N776DC, and Purchaser shall have paid to Seller the deposit provided for in said Agreement. 8.2 Conditions Precedent to Seller's Obligation to Close. ---------------------------------------------------- The obligation of Seller under this Agreement to proceed with the Closing on the Closing Date shall at all times be subject to the following conditions precedent, any of which may be waived by Seller in writing: (a) Accuracy of Representations and Warranties. The ------------------------------------------ representations and warranties of Purchaser contained herein shall be true and correct in all material respects on and as of the Closing Date with the same effect as if made on and as of such date. (b) Performance of Agreements. Purchaser shall have ------------------------- performed all obligations and agreements and complied with all covenants and conditions contained in this Agreement to be performed or complied with by it at or prior to the Closing Date. (c) Purchaser's Certificate. Purchaser shall have ----------------------- furnished Seller with a certificate, dated the Closing Date, stating that the representations and warranties contained in Section 5 are true and correct on the Closing Date in all material respects as if then made, and that Purchaser has fulfilled the conditions specified in Sections 8.2(a) and (b) above. (d) Agreement for Sale of Aircraft. Purchaser and ------------------------------ Seller shall have entered into an Agreement, substantially in the form of Exhibit __ hereto providing for the sale by Seller to Purchaser of the Beechcraft King Air E90 aircraft, serial number LW235, registration number N776DC, and Purchaser shall have paid to Seller the deposit provided for in said Agreement. 9. MISCELLANEOUS 9.1 Termination of Agreement. This Agreement may be ------------------------ terminated at any time on or prior to the Closing Date: (a) by mutual written consent of Purchaser and Seller; -7- (b) by Purchaser, if there has been a material breach by Seller of any of its representations, warranties or covenants set forth herein, or a failure of any condition to which the obligations of Purchaser are subject; (c) by Seller, if there has been a material breach by Purchaser of any of its representations, warranties or covenants set forth herein, or a failure of any condition to which the obligations of Seller are subject; or (d) at midnight on September 15, 1994 if the Closing shall not have occurred on or before that date, unless the parties otherwise agree. (e) Upon notice by Purchaser to Seller that any one or more of the representations of Seller in Section 4 are not true or that any of the various inspections by Purchaser as allowed by this agreement have revealed a condition which is unsatisfactory to Purchaser. However, Seller shall have 7 days to cure the subject of the notice to the satisfaction of Purchaser. Should the 7 day cure period terminate at a date beyond the Closing Date or the contract termination date of September 15, 1994, the Closing Date and/or contract termination date shall be extended to and including the 7th day of the cure period, or the first business day after the cure period if the end of the cure period falls on a weekend or holiday. In the event of the termination of this Agreement pursuant to Section 9.1(a), this Agreement shall terminate without any liability or further obligation of either party to the other. Any termination pursuant to Section 9.1(b), (c) or (d) shall not relieve either party of any liability for any misrepresentation or breach of a representation, warranty or covenant. In the event of the termination of this Agreement, all documents, records, notebooks and similar repositories of records containing information relating to any trade secrets or confidential information of any party which are then in the possession or control of another party, whether prepared by such other party or by others, shall be returned to the party which owns such trade secrets or confidential information, and no such information or trade secrets shall be used, disseminated or disclosed by such other party for any purpose whatsoever. 9.2 Waivers. Any party may by written notice to the ------- other (a) extend the time for the performance of any of the obligations or other actions of the other; (b) waive any inaccuracies in the representations and warranties of the other contained in this Agreement or in any document delivered pursuant to this Agreement; (c) waive compliance with any of the covenants of the other contained in this Agreement; or (d) waive performance of any of the obligations of the other. No action taken pursuant to this Agreement, including, without limitation, any investigation by or on behalf of any party, shall be deemed to constitute a waiver by the party taking such action of -8- compliance with any representations, warranties, covenants or agreements contained herein. The waiver by any party hereto of the breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach. 9.3 Notices. Any notice, request or other communication ------- required or allowed under this Agreement shall be in writing and shall be deemed given (a) upon personal delivery, (b) on report of successful transmission by facsimile machine, (c) on the first business day after delivery to a courier service which guarantees next business-day delivery, under circumstances in which such guaranty is applicable, or (d) on the earlier of delivery or three business days after mailing by United States certified mail, postage and fees prepaid, to the appropriate party at the address set forth below or to such other address as the party so notifies the other in writing. (a) If to Seller: 7301 South Peoria, Englewood, Colorado 80112, Attn: George Belsey (Phone: 303-790-0587, Fax: 303-790-4780); with a copy to Lester R. Woodward, Esq., Davis, Graham & Stubbs, 370 Seventeenth Street, Suite 4700, Denver, Colorado 80202 (Phone: 303-892-7392, Fax: 303-892-7400). (b) If to Purchaser: Centennial Express Airlines, Inc., ____________________________________; with a copy to Mark A. Pottinger, Esq., Bench, Pottinger & Van Nest, 1433 Seventeenth Street, Suite 7, Denver, Colorado 80202 (Phone: 303-293-8507, Fax: 303-293- 8244) 9.4 Entire Agreement; Modification. This Agreement ------------------------------ constitutes the entire agreement between the parties and supersedes all prior agreements and understandings, oral and written, between the parties hereto with respect to the subject matter hereof. No modification of this Agreement shall be valid unless made in writing and signed by the parties hereto. 9.5 Non-Assignability; Third Party Beneficiaries. This -------------------------------------------- Agreement shall be assignable by any party hereto only with the prior written consent of the other party. This Agreement shall not benefit or create any right or cause of action in or on behalf of any person other than the parties. 9.6 Binding Effect. This Agreement shall inure to the -------------- benefit of and be binding upon the parties hereto and their respective successors, heirs, legal representatives and permitted assigns. 9.7 Section Headings. The Section headings contained in ---------------- this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. 9.8 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN ------------- ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE -9- STATE OF COLORADO WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS THAT WOULD OTHERWISE PROVIDE FOR THE APPLICATION OF THE SUBSTANTIVE LAWS OF ANOTHER JURISDICTION. 9.9 Further Assurances. Both before and after the ------------------ Closing, the parties agree to cooperate with each other in effectuating this Agreement and to execute and deliver such further documents or instruments and take such further actions as shall reasonably be requested in connection therewith. 9.10 Severability. If any provision in this Agreement ------------ shall for any reason be determined to be invalid or unenforceable, the remaining provisions of this Agreement shall nevertheless continue to be valid and enforceable as though the invalid or unenforceable provision had not been a part hereof. 9.11 Counterparts. This Agreement may be executed in any ------------ number of counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written. PURCHASER: CENTENNIAL EXPRESS AIRLINES, INC. By: ------------------------------------- Name and Title: SELLER: AIR METHODS CORPORATION By: ------------------------------------- George Belsey, Chairman of the the Board and Chief Executive Officer -10- EX-23 6 EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS ------------------------------- The Board of Directors Air Methods Corporation: We consent to incorporation by reference in the registration statements on Form S-8 (No. 33-24980, No. 33-46691, No. 33-55750, No. 33-65370 and No. 33-75742) and Form S-3 (No. 33-59690 and No. 33-75744) of Air Methods Corporations of our report dated August 12, 1994 relating to the consolidated balance sheets of Air Methods Corporation and subsidiary as of June 30, 1994 and 1993, and the related consolidated statements of operations, stockholders' equity, and cash flows and related schedules for each of the years in the three-year period ended June 30, 1994, which report appears in the June 30, 1994 annual report on Form 10-K of Air Methods Corporation. KPMG PEAT MARWICK LLP KPMG PEAT MARWICK LLP Denver, Colorado June 26, 1995 EX-27 7 FDS 12/94
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S AUDITED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDING DECEMBER 31, 1994, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1000 6-MOS DEC-31-1994 DEC-31-1994 696 0 1375 (37) 1762 9836 38061 (4667) 48813 11728 0 481 0 0 49572 48813 790 13973 963 14277 (318) 0 554 1176 0 (1176) 0 0 0 (1176) (.15) 0 Net non-operating income and merger termination expense Net of interest income of 163
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