AND SUBORDINATION AGREEMENT
CONTINUING GUARANTY AND SUBORDINATION AGREEMENT dated as of July 31, 1997,
made by AIR METHODS CORPORATION, a corporation organized and existing under the
laws of the State of Delaware having its chief executive office and principal
place of business at 0000 Xxxxx Xxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxx 00000 (the
"Guarantor") for the benefit of FINOVA CAPITAL CORPORATION, a corporation
organized and existing under the laws of the State of California, having an
office at 000 Xxxx Xxxxxxx Xxxx, Xxxxxxx, Xxx Xxxxxx 00000.
W I T N E S S E T H
WHEREAS, pursuant to and in accordance with the Secured Loan Agreement
dated as of July 31, 1997 (as at any time amended or supplemented, the "Loan
Agreement") between Mercy Air Service, Inc., a corporation organized and
existing under the laws of the State of California (the "Borrower") and the
Lender, the Lender has agreed to make a loan (the "Loan") to the Borrower;
WHEREAS, the Lender is only willing to make the Loan to the Borrower on the
condition that the Lender receives the guaranty of the Guarantor;
WHEREAS, the Guarantor owns 100% of the outstanding capital stock of the
Borrower and the Guarantor otherwise has a financial interest in the Borrower;
WHEREAS, in order to induce the Lender to make the Loan to the Borrower,
the Guarantor desires to guaranty the Obligations (as defined below) of the
NOW, THEREFORE, for the premises and other good and valuable consideration,
the sufficiency and receipt of which is hereby acknowledged, the parties hereto
agree as follows:
1.2 In this Agreement the following words and expressions, except where the
context otherwise requires, shall have the following meanings:
"EBITDA" for any period, with respect to the Guarantor, the sum of: (a)
Net Income, PLUS (b) taxes on or measured by net income or gain for such period,
PLUS (c) Interest Expense PLUS (d) depreciation and other non-cash charges
against income for such period MINUS (e) income or gain from extraordinary items
for such period all determined on a consolidated basis for the Guarantor and its
"EBITDA COVERAGE RATIO" the ratio of: (a) EBITDA for any given period to
(b) the sum of Interest Expense for such period and scheduled principal
repayments for such period under the Loan Agreement and with respect to any
other indebtedness of the Guarantor and its Subsidiaries.
"INTANGIBLE ASSETS" at a particular date, all assets of the Guarantor and
its Subsidiaries, determined on a consolidated basis at such date, that would be
classified as intangible assets in accordance with GAAP.
"INTEREST EXPENSE" for any period, all interest on any indebtedness of the
Guarantor and its Subsidiaries determined on a consolidated basis for such
"LEVERAGE RATIO" the ratio of Total Liabilities to Tangible Net Worth.
"NET INCOME" for any period, the consolidated net income (or deficit) of
the guarantor and its Subsidiaries taken as a whole, determined in accordance
"NET WORTH" at a particular date, all amounts which would be included under
shareholders' equity on a consolidated balance sheet of the Guarantor and its
Subsidiaries determined on a consolidated basis in accordance with GAAP as at
"SUBSIDIARIES" as to the Guarantor, a corporation of which shares of stock
having ordinary voting power to elect a majority of the board of directors or
other managers of such corporation are at any time owned, or the management of
which is otherwise controlled, directly or indirectly, through one or more
intermediaries, by the Guarantor.
"TANGIBLE NET WORTH" at a particular date, the excess, if any, of Net Worth
over Intangibles Assets as at such date.
"TOTAL LIABILITIES" at a particular date, determined on a consolidated
basis at such date in accordance with GAAP, all of the liabilities, debts,
claims and indebtedness, contingent, fixed or otherwise, however evidenced,
acquired, owing or arising, whether under written or oral agreement, operation
of law or otherwise of the Guarantor and its Subsidiaries.
"Working Capital Facility" any working capital credit facility to which the
Guarantor is a party during the Loan Term.
1.2 Capitalized terms not defined in Section 1.1 or elsewhere in this
Guaranty, shall have the meanings ascribed to such terms in the Loan Agreement.
2.1 The Guarantor does irrevocably and unconditionally guarantee to the
Lender: (a) the prompt payment when due, not merely the collection, of all
amounts payable to the Lender pursuant to: (i) the Loan Agreement; and (ii) the
other Loan Documents (as defined in the Loan Agreement) and (b) the performance
by the Borrower of all other obligations of the Borrower set forth in the Loan
Agreement and the Loan Documents (said obligations and indebtedness being
sometimes hereinafter referred to in the aggregate as the "Obligations").
Without limitation, the Obligations shall include all reasonable attorneys' fees
and expenses and the reasonable fees and expenses of expert witnesses incurred
by the Lender in enforcing any such Obligation or this Guaranty.
2.2 This Guaranty: (a) shall continue from the date of this Guaranty until
the Obligations have been fully satisfied; (b) is a continuing, indivisible and
cumulative Guaranty of each and every Obligation incurred by or owing from the
Borrower to the Lender either at the date hereof or at any time hereafter during
the term of this Guaranty however acquired and arising out of the Documents; and
(c) is a primary obligation of the Guarantor. No invalidity, irregularity or
unenforceability of all or any part of the Obligations hereby guaranteed shall
affect, impair or be a defense to this Guaranty. The liability of Guarantor
hereunder shall be absolute and unconditional and shall not be reduced by
reason, of any defense, set-off, recoupment or counterclaim of Borrower.
2.3 Nothing contained in this Guaranty shall require that the Lender
actually make the Loan to the Borrower.
3. RECOVERED PAYMENTS.
If a claim is ever made by a creditor, custodian, trustee, assignee,
debtor-in-possession or receiver of the Borrower (or by or on behalf of the
Borrower) in an insolvency proceeding or otherwise, upon the Lender for
repayment or recovery of any property or any amounts received by the Lender from
Borrower in payment or on account of any Obligations and the Lender returns any
such property or repays all or part of said amount by reason of (a) any
judgment, decree or order of any court or administrative body having
jurisdiction over the Lender or any of its property or (b) any settlement or
compromise of any such claim effected by the Lender with any such claimant
(including the Borrower) then and in such event the Guarantor agrees that any
such judgment, decree, order, settlement or compromise shall be binding upon the
Guarantor, notwithstanding any cancellation of any Loan Document or other
instrument evidencing any Obligations of the Borrower or any revocation or
termination of this Guaranty, and the Guarantor shall be and remain liable to
the Lender hereunder for the value of such property returned (valued as of the
date on which the Lender obtained repossession thereof) or amount so repaid or
recovered to the same extent as if such property or amount had never originally
been received by the Lender. The cause of action in favor of the Lender under
this paragraph shall accrue as of the date the Lender makes the payment or
returns the property contemplated hereunder, and shall survive any prior
termination or revocation of this Guaranty.
4. NO RELEASE OF GUARANTOR.
Without notice to or the consent of the Guarantor and without reducing,
limiting or terminating the liability of the Guarantor hereunder, the Lender, to
the extent permitted under the Loan Documents, (a) may amend, modify or
supplement the Loan Documents in accordance with the terms thereof; (b) may
renew, increase, extend or modify any such Obligations of the Borrower; (c) may
accept partial payment thereon, or settle, release, compound, compromise or
change the terms of payment of any principal and/or interest; (d) may collect on
or otherwise liquidate any claims held by the Lender in such manner as the
Lender may deem advisable; or (e) may extend or accelerate the times of payment,
renew any such Obligations, or enter into any other compromises, adjustments or
grant any indulgences to the Borrower.
The Guarantor hereby waives: (a) notice of acceptance of this Guaranty and
of any Obligations of Borrower to which it may apply and of any other notice to
the Guarantor might otherwise be entitled; (b) notice of default by the Borrower
with respect to any Obligation guaranteed hereby; (c) any demand for payment
under this Guaranty; (d) the right to trial by jury as to any claim arising out
of or in connection with this Guaranty, and (e) all rights to be subrogated to
the Lender or any other party in regard to any amounts paid by the Guarantor
6. METHOD OF PAYMENT.
All amounts to be paid by the Guarantor hereunder shall be paid in
immediately available U.S. Dollars in favor of the Lender with such bank as the
Lender may designate in writing.
7. REPRESENTATIONS AND WARRANTIES.
The Guarantor hereby represents and warrants to the Lender as of the date
(a) the Guarantor is a corporation duly formed, validly existing and in
good standing under the laws of the State of Delaware and maintains its
principal place of business and its chief executive office at 0000 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxx, Xxxxxxxx 00000;
(b) the Guarantor has full power to carry on its business as it is now
being conducted and to enter into, legally bind itself by, and perform its
obligations under this Guaranty, and has complied with all material statutory
and other requirements relative to the business carried on by it; it is duly
qualified and in good standing in all of the jurisdictions in which the
character of the properties owned or leased by it or the business transacted by
it makes such qualification necessary and where the failure to so qualify would
preclude it from being able to fulfill its obligations with respect to this
(c) all necessary consents, resolutions and authorizations for the
Guarantor to enter into this Guaranty have been obtained, and no further
consents or authorizations are necessary for the performance by the Guarantor of
all its obligations pursuant to the provisions of all of the Loan Documents to
which it is a party; and
(d) the execution and delivery of, and the performance of the provisions
of, this Guaranty do not and will contravene or violate in any material respect
its Certificate of Incorporation or by-laws or any applicable law, regulation,
license or permit or result in a default under any contractual or other
restriction now existing and binding on the Guarantor or on any of its
properties or result in the creation of any Lien on any of such properties.
(e) this Guaranty constitutes the legal, valid and binding obligation of
the Guarantor enforceable in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency or other laws
affecting creditors' rights in general;
(f) the Guarantor has given to the Lender financial statements and tax
returns of the Guarantor and said statements have been prepared in accordance
with generally accepted accounting principles consistently applied and present
fairly and accurately the financial condition of the Guarantor as of said date
and as of the Closing Date (as defined in the Loan Agreement) there has been no
material, adverse change in the Guarantor's financial condition since the date
of such financial statements and tax returns;
(g) no written information given by or made by the Guarantor in relation to
this Guaranty or in connection with the Loan Documents or in any financial or
other statement given by the Borrower or the Guarantor pursuant hereto or
pursuant to any transaction contemplated hereby contains any material
misstatement of material fact or omits to state any fact which would be
materially adverse to the interests of the Lender or which would be necessary to
make any statement or representation or warranty contained herein or therein not
(h) on the date of this Guaranty, assuming the Lender has fulfilled its
obligations hereunder, the Guarantor has no defense, offset or counterclaim to
any action that may be instituted on this Guaranty;
(i) there are no outstanding judgments against the Guarantor and to the
Guarantor's best knowledge, no action, claim, suit or proceeding is pending or
threatened against or affecting the Guarantor or any of the Guarantor's
properties before any court, board of arbitration or administrative agency which
could or might result in the inability of the Guarantor to perform any
obligation hereunder or result in any material adverse change in the financial
condition of the Guarantor;
(j) the Guarantor is not (I) in default under any agreement to which the
Guarantor is a party or by which the Guarantor or any of its property is bound,
and (II) in default of any kind in respect of any financial commitment or
(including obligations under guarantees) which in either of the cases described
in the preceding clauses (I) and (II) could have a material adverse effect on
the ability of the Guarantor to perform the Guarantor's obligations under this
(k) the Guarantor has made an independent investigation of all matters
which are in any manner relevant to this Guaranty, the Borrower, and the
(l) no representations have been made by the Lender to the Guarantor
concerning the Aircraft or any of the transactions relative thereto, or any
other matter except as expressly set forth herein and no representations have
been relied upon by the Guarantor in entering into this Guaranty; and
(m) the Guarantor is the owner of 100% of the outstanding capital stock of
8. UNDERTAKINGS AND COVENANTS.
8.1 The Guarantor shall provide to the Lender:
(a) as soon as available, but in any event within 60 days after the close
of each of the first three (3) quarters of each fiscal year of the Guarantor:
(i) a consolidated balance sheet of the Guarantor as at the end of
such quarter setting forth in comparative form the figures for the end of
the corresponding period of the preceding fiscal year; and
(ii) consolidated statements of income, cash flow and stockholders'
equity of the Guarantor for such quarterly period, setting forth in
comparative form in each case the amount for the corresponding period of
the preceding year; and
(b) as soon as available and in any event within 90 days after the close of
each fiscal year of the Guarantor:
(i) a consolidated balance sheet of the Guarantor as of the end of
such fiscal year setting forth in comparative form the figures for the end
of the preceding fiscal year; and
(ii) a consolidated statements of income, cash flow and stockholders'
equity of the Guarantor for such fiscal year setting forth in each case in
comparative form the corresponding figures for the preceding year.
The financial statements referred to in clause (b) above shall be audited by
certified public accountants acceptable to the Lender. The financial statements
referred to in clauses (a) and (b) above: (I) shall be prepared in accordance
with GAAP and (II) shall be accompanied by a certificate executed by the chief
financial officer of the Guarantor certifying that the Guarantor and the
Borrower have complied with all covenants contained in the Loan Documents and
that no Events of Default have occurred and are continuing.
8.2 The Guarantor shall provide to the Lender:
(a) copies of all documents filed by the Guarantor with the SEC, within
three (3) Banking Days of such filing;
(b) a copy of the Guarantor's federal income tax return on IRS Form 1040
within three (3) Banking Days of the filing thereof with the Internal Revenue
(c) any further information as the Lender may from time to time reasonably
deem necessary to assess the financial condition of the Guarantor.
8.3 The Guarantor shall, promptly upon request, provide the Lender and its
accountants, attorneys and agents reasonable access to the Guarantor's books and
records and a reasonable opportunity to make copies and to take extracts
therefrom. If any such information is stored on any disk, tape or other medium
for the storage of electronic data, then, at the Lender's request, the Guarantor
shall cause a printout to be made therefrom; provided, however, that so long as
no Default or Event of Default has occurred and is continuing, the Lender shall
not exercise its rights under this Section 8.3 more frequently than on a
8.4 The Guarantor shall: (a) take all actions reasonably requested by the
Lender to insure that this agreement will at all times be the legal, valid and
binding obligation of the Guarantor, enforceable in accordance with its terms
and (b) promptly notify the Lender if the Guarantor changes its address.
8.5 The Guarantor shall at all times during the Loan Term own 100% of the
outstanding capital stock of the Borrower.
8.6 Throughout the Loan Term,
(a) The Guarantor shall not permit the Leverage Ratio to be less than the
lesser of: (i) 3.30 to 1 or (ii) the existing Leverage Ratio under any Working
(b) The Guarantor shall not permit the EBITDA Coverage Ratio to be less
than 1.0 calculated on a rolling four quarter basis.
8.7 During the Loan Term, the Guarantor shall not: (a) enter into any
merger, reorganization or consolidation (other than a merger, reorganization or
consolidation in which the Guarantor is the surviving corporation); (b) wind up,
liquidate or dissolve or (c) agree to do any of the foregoing.
All rights that the Guarantor may at any time have against Borrower, or any
collateral securing the Obligation (including rights of subrogation,
exoneration, reimbursement and contribution) and all obligations that Borrower
may at any time have to Guarantor, arising by virtue of Guarantor's obligations
under this Guaranty or any payment or performance made or completed pursuant to
the terms hereof are expressly subordinated to the prior payment, observance and
performance in full of the Obligations. The Guarantor shall not enforce any of
the rights, or attempt to obtain payment or performance of any of the
obligations, subordinated pursuant to this Section 9, until the Obligations have
been paid, observed and performed in full, except that such prohibition shall
not apply to routine acts, such as the giving of notices and the filing of
continuation statements, necessary to preserve any such rights. If any amount
shall be paid to or recovered by the Guarantor (whether directly or by way of
setoff, recoupment or counterclaim) on account of any right or obligation
subordinated pursuant to this Section 9, such amount shall be held in trust by
the Guarantor for the benefit of the Lender, not commingled with any of the
Guarantor's other funds and forthwith paid over to the Lender, in the exact form
received, together with any necessary endorsements, to be applied and credited
against, or held as security for, the Obligations and the obligations of the
Guarantor under this Guaranty.
10. RIGHTS OF THE LENDER.
10.1 In any right of action which shall accrue to the Lender by reason of
this Guaranty, the Lender at its election may proceed: (a) against the Guarantor
together with the Borrower, (b) against the Guarantor and Borrower separately or
(c) against the Guarantor, only, without having first commenced any action or
having obtained any judgment against Borrower. No failure to perfect or enforce
any rights in and to any collateral which has been or may be furnished to secure
any Obligation or this Guaranty shall be a defense hereunder. No alleged failure
by the Lender to dispose of or otherwise deal with the Aircraft in a
commercially reasonable manner or otherwise shall terminate the Guarantor's
10.2 No exercise, delay in exercising or omission to exercise any of the
rights, powers, and remedies of the Lender shall be deemed a waiver thereof, and
every such right, power and remedy may be exercised subsequently or repeatedly.
The Lender may assign any and all of its rights with respect to the
Borrower or the Guarantor including, but not limited to, the right to receive
payment of any Obligation to third parties from time to time and the Guarantor
hereby consents to any such assignment, and waives notice thereof.
In the event that the Lender retains counsel and/or expert witnesses in
connection with any effort to enforce this Guaranty, or if the Lender brings any
action or suit in any court of record to enforce any or all liabilities of the
Guarantor hereunder, the Guarantor shall be liable for and shall reimburse the
Lender for any and all fees and disbursements of counsel and expert witnesses
retained by the Lender. Service of process in any such action or suit may be
made upon the Guarantor by mailing a copy of the summons and other court papers
to the Guarantor at the address set forth in the preamble hereof or to any other
address specified by the Guarantor in writing to the Lender prior to default
hereunder, and sent by certified mail, return receipt requested.
13. MODIFICATIONS AND AMENDMENTS.
This Guaranty is and shall be binding upon the Guarantor and their
successors and assigns and cannot be modified, nor may any provision hereof be
waived, orally. No waiver of any of the Lender's rights hereunder and no
modification or amendment of any provision of this Guaranty shall be made or
discharged except by a written instrument signed by an authorized representative
of the Lender and the Guarantor.
14. GOVERNING LAW.
THIS GUARANTY SHALL BE DEEMED TO HAVE BEEN MADE IN AND SHALL BE GOVERNED
AND INTERPRETED BY THE LAWS OF THE STATE OF ARIZONA WITH RESPECT TO AGREEMENTS
MADE BY RESIDENTS OF SUCH STATE TO BE WHOLLY PERFORMED THEREIN, AND THE RIGHTS
AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH
SUCH LAWS, EXCEPT TO THE EXTENT THAT THE LAW OF SOME OTHER JURISDICTION MAY BE
MANDATORILY APPLICABLE TO PROCEEDINGS TAKEN FOR THE ENFORCEMENT OF THE RIGHTS OF
THE LENDER HEREUNDER; PROVIDED, HOWEVER, THAT ANY REMEDIES HEREIN PROVIDED WHICH
SHALL BE VALID UNDER THE LAWS OF THE JURISDICTION WHERE PROCEEDINGS FOR THE
ENFORCEMENT HEREOF SHALL BE TAKEN SHALL NOT BE AFFECTED BY ANY INVALIDITY
THEREOF UNDER THE LAWS OF THE STATE OF ARIZONA. If any provision of this
Guaranty or of any other agreement between the parties hereto shall be held
invalid or inapplicable to any circumstance or in any jurisdiction, such
invalidity or inapplicability shall not affect any other provision hereof or of
any other agreement between the parties hereto which can be given effect without
regard to the invalid provision, nor to the same provision to the extent valid
or enforceable in any other jurisdiction, nor shall any such inapplicability to
any circumstance affect the applicability of such terms to any other or
different or subsequent circumstance, all of such terms, conditions or
provisions are deemed severable. In construing any provision of this Guaranty,
no account shall be taken of the identity of the party who prepared this
Guaranty and no presumption shall arise as a result thereof.
The Guarantor and the Lender hereby agree that all actions or proceedings
initiated by the Guarantor and arising directly or indirectly out of this
Guaranty shall be litigated exclusively in either the Superior Court of Arizona,
Mariposa County or the United States District Court for the District of Arizona
(the "Arizona Courts") and that any action or proceeding initiated by the Lender
and arising directly or indirectly out of this Guaranty may be litigated in the
Arizona Courts or in any jurisdiction in which the Guarantor or any of its
assets are located, in the Lender's discretion. The Guarantor and the Lender
hereby expressly submit and consent in advance to the jurisdiction and venue in
any action or proceeding commenced by the Lender or the Guarantor in any of the
Arizona Courts, agree that jurisdiction and venue is proper in the Arizona
Courts, and hereby waive personal service of the summons and complaint, or other
process or papers issued therein, and agree that such service of the summons and
complaint may be made by registered mail, return receipt requested, addressed to
the Guarantor or the Lender at their respective addresses set forth in the
preamble hereof. The Guarantor and the Lender waive any claim that Phoenix,
Arizona or the District of Arizona is an inconvenient forum or an improper forum
based on lack of venue. Should the Guarantor, after being so served, fail to
appear or answer any summons, complaint, process or paper so served within 30
days after the mailing thereof, the Guarantor and the Lender acknowledges that
as a result thereof, an order and/or judgment may be entered by the Lender or
the Guarantor against the other as demanded or pleaded for in such summons,
complaint, process or papers. The choice of forum set forth herein shall not be
deemed to preclude the enforcement by the Lender or the Guarantor of any
judgment in any other appropriate jurisdiction.
16. ENTIRE AGREEMENT.
This Guaranty contains the entire and only agreement between the Guarantor
and the Lender with respect to the guaranty of any Obligations of the Borrower
and any representation, promise, condition or understanding in connection
therewith which is not expressed in this Guaranty shall not be binding on the
Lender or upon the Guarantor. All prior understandings and agreements concerning
this Guaranty, have been superseded by and are fully set forth herein.
This Guaranty may be executed in any number of counterparts, and each of
such counterparts shall for all purposes be deemed to be an original, and all
such counterparts shall together constitute but one and the same Guaranty.
This Guaranty is intended to and shall be deemed to be delivered by the
Guarantor to the Lender and accepted by the Lender in Arizona.
Captions and paragraph headings used herein are for convenience only and
are not part of this Guaranty and shall not be used in construing it.
IN WITNESS WHEREOF, the undersigned have caused this instrument to be duly
executed as of the day and year first above written.
GUARANTOR: AIR METHODS CORPORATION
By: /s/ Xxxxx X. Xxxx
Name: Xxxxx X. Xxxx
FINOVA CAPITAL CORPORATION
By: /s/ Xxxxxx Xxxxxxxx
Name: Xxxxxx Xxxxxxxx
Title: Vice President