SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________
FORM 8-K
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Data of Report (Date of earliest event reported) April 25, 2000
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Commission file number 0-16079
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AIR METHODS CORPORATION
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(Exact name of Registrant as Specified in Its Charter)
Delaware 84-0915893
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(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
7301 South Peoria, Englewood, Colorado 80112
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (303) 792-7400
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Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report: N/A
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On April 25, 2000, Mercy Air Service, Inc. ("Mercy Air"), a wholly owned
subsidiary of Air Methods Corporation ("the Company" or "Air Methods"), acquired
through a newly formed company substantially all of the business assets of Area
Rescue Consortium of Hospitals, a Missouri non-profit organization, for
$11,268,000. The newly formed company, ARCH Air Medical Service, Inc. ("ARCH"),
will operate as a Missouri corporation and a wholly owned subsidiary of Mercy
Air. The purchase price was negotiated by the Company and the sellers, and the
purchase will be accounted for using the purchase method of accounting. The
purchase price also includes an earn-out provision under which the sellers will
receive 50% of all collections greater than 50% of charges on receivables older
than six months, up to a maximum of $1,500,000. Also on April 25, 2000, ARCH
acquired two fixed wing aircraft and related equipment and inventory from
SkyLife Aviation, LLC, a Missouri limited liability company ("SkyLife"), for
$1,699,000.
Funding for the acquisitions was provided primarily by the sale of five
helicopters and two fixed wing aircraft to C.I.T. Leasing Corporation ("CIT")
for $10.6 million. The aircraft will be leased back from CIT under an operating
lease with monthly lease payments due over ten years. ARCH also entered into a
$1,350,000 note payable to Firstar Bank, N.A., with interest at 8.01% and
monthly principal and interest payments over seven years. The remainder of the
cash payment was funded from Company treasuries.
Area Rescue Consortium of Hospitals has provided air medical transportation
services in the St. Louis metropolitan area and surrounding communities since
1987. ARCH will continue air medical transportation operations (including
medical care, aircraft operation and maintenance, communications and dispatch,
and medical billing and collections) as an independent provider. One of the
aircraft acquired from SkyLife will be used in ARCH's operations. The other
aircraft will be deployed as part of Mercy Air's operations in southern
California.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
The following exhibits are filed as part of this report:
2.1 Asset Purchase Agreement, dated March 23, 2000, among the Company,
Mercy Air, and Area Rescue Consortium of Hospitals
2.2 Aircraft Purchase Agreement, dated April 25, 2000, by and between
ARCH and SkyLife Aviation, LLC
10.1 Aircraft Lease Agreement, dated April 21, 2000, between ARCH and
C.I.T. Leasing Corporation
10.2 Loan Agreement, dated April 25, 2000, between ARCH and Firstar
Bank, N.A.
10.3 Revolving Credit Note, dated April 25, 2000, between ARCH and
Firstar Bank, N.A.
10.4 Term Loan Promissory Note, dated April 25, 2000, between ARCH and
Firstar Bank, N.A.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AIR METHODS CORPORATION
Date: May 9, 2000 By /s/ Aaron D. Todd
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On behalf of the Company, and as Principal
Financial and Accounting Officer
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ASSET PURCHASE AGREEMENT
DATED
MARCH 23, 2000
AMONG
AIR METHODS CORPORATION
MERCY AIR SERVICE, INC.
AND
AREA RESCUE CONSORTIUM OF HOSPITALS
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TABLE OF CONTENTS
PAGE
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ARTICLE I SALE AND PURCHASE OF CERTAIN ASSETS 1
1.1 Purchase and Sale 1
1.2 Excluded Assets 1
1.3 Excluded Liabilities 2
1.4 Purchase Price 3
1.5 Allocation of Purchase Price 4
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER 4
2.1 Due Organization 4
2.2 Subsidiaries 4
2.3 Due Authorization 4
2.4 Absence of Changes or Events 5
2.5 Personal Property 5
2.6 Compliance with Licenses, Permits, Laws and Other Instruments 6
(a) Licenses and Permits. 6
(b) Conflicts 6
(c) Government Consent 6
2.7 Contracts and Agreements 6
2.8 Claims and Proceedings 7
2.9 Taxes 7
2.10 Real Properties; Leases 7
2.11 Insurance 8
2.12 Books and Records 8
2.13 Financial Statements 8
2.14 Environmental Matters. 9
2.15 Brokers 10
2.16 Information Furnished 10
2.17 Federally Funded Programs 10
ARTICLE III BUYER'S AND AIR METHODS' REPRESENTATIONS
AND WARRANTIES 11
3.1 Due Organization 11
3.2 Due Authorization 11
3.3 Brokers 11
3.4 Federally Funded Programs 11
ARTICLE IV SURVIVAL OF REPRESENTATIONS AND WARRANTIES 12
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TABLE OF CONTENTS
(continued)
PAGE
ARTICLE V COLLECTION OF SELLER'S ACCOUNTS RECEIVABLE 12
5.1 Buyer's Agreement to Collect Accounts 12
5.2 Estimated Collectible Receivables 12
5.3 Remittance of Collected Receivables 12
5.4 Additional Payment on Uncollected Accounts 13
ARTICLE VI COVENANTS OF SELLER 13
6.1 Conduct of Business Pending Closing 13
6.2 Consents of Others 15
6.3 Further Assurances 15
6.4 Access to Records Before Closing 15
6.5 Access to Records After Closing 15
6.6 Employee Benefit Plan Not Assumed 15
6.7 Covenant Not to Compete 15
6.8 Accrued Vacation 16
6.9 Preferred Provider Contacts 16
6.10 Facilities 16
6.11 Buyer's Use of Name 16
ARTICLE VII CONDITIONS TO OBLIGATION OF PARTIES TO CONSUMMATE
CLOSING 16
7.1 Conditions to Buyer's Obligations 16
(a) Covenants, Representations and Warranties 17
(b) Consents 17
(c) Material Adverse Change 17
(d) Release of Third Party Interests in the Purchased Assets 17
(e) Preferred Provider Contracts. 17
(f) Litigation 17
(g) Consents. 18
(h) Hart-Scott-Rodino. 18
(i) Certificate of Officer 18
7.2 Conditions to Seller's Obligations 18
(a) Covenants, Representations and Warranties 18
(b) Consents 18
(c) Litigation 18
(d) Certificate of Officers 18
ARTICLE VIII CLOSING 19
8.1 Closing 19
8.2 Documents to be Delivered by Seller 19
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TABLE OF CONTENTS
(continued)
PAGE
(a) Conveyance Documents 19
(b) Special Warranty Deed 19
(c) Opinion 19
(d) Certificate 19
(e) Lien Releases 19
(f) Transfer of Records 19
8.3 Documents to be Delivered by Buyer 19
(a) Purchase Price 19
(b) Note 19
(c) Sublease 20
(d) Bill of Sale, Assignment and Assumption Agreement 20
(e) Certificate 20
(f) Opinion 20
ARTICLE IX TAXES, UTILITIES, ASSESSMENTS AND
OTHER ADJUSTMENTS 20
9.1 Payment of All Taxes Resulting from Sale of Assets by Seller 20
9.2 Payment in Lieu of Covenant Not to Compete 20
9.3 Payment for Telephone System 20
9.4 Payment for Equipment 20
ARTICLE X INDEMNIFICATION 20
10.1 Indemnification by Seller 20
10.2 Limitations on Indemnification Obligations of Seller 21
(a) Deductible 21
(b) General Liability Ceiling 21
(c) 22
(d) 22
(e) Time Limitations. 22
(f) Environmental/Remedial Action 22
10.3 Cooperation 23
(a) Notice 23
(b) Claims for Money Damages 23
10.4 Arbitration Provisions 23
10.5 Exclusive Remedy 24
10.6 Survival of Representations and Indemnification of Buyer
and Air Methods 24
ARTICLE XI TERMINATION 25
11.1 Termination of Agreement 25
11.2 Procedure Upon Termination 26
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TABLE OF CONTENTS
(continued)
PAGE
11.3 Liquidated Damages Upon Termination 27
ARTICLE XII CONFIDENTIALITY 27
12.1 Confidentiality Covenants 27
12.2 Disclosure Pursuant to Legal Process 28
12.3 Termination of Confidentiality Obligations 29
ARTICLE XIII MISCELLANEOUS 29
13.1 Modifications; Waiver 29
13.2 Notices 29
13.3 Counterparts 30
13.4 Expenses 30
13.5 Binding Effect; Assignment 30
13.6 No Strict Construction 30
13.7 Entire and Sole Agreement 30
13.8 Governing Law 30
13.9 Invalid Provisions. 30
13.10 Headings 31
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LIST OF EXHIBITS
EXHIBITS
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Exhibit A Bill of Sale, Assignment and Assumption Agreement
Exhibit B Form of Opinion of Buyer's Counsel
Exhibit C Form of Opinion of Seller's Counsel
Exhibit D Certificate of Seller
Exhibit E Certificate of Buyer
Exhibit F Form 8594
Exhibit G Form of Non-Compete Agreement
Exhibit H Form of Lease
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LIST OF SCHEDULES
SCHEDULES
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Schedule 1.1 (a) Purchased Assets
Schedule 1.1 (b) Assumed Liabilities
Schedule 1.1 (c) Contracts Purchased
Schedule 1.2 (b) Real Property at 18500 Edison Avenue
Schedule 1.2 (c) Current Assets
Schedule 1.2 (f) Prepaid Expenses
Schedule 1.2 (g) Insurance Policies
Schedule 1.2 (h) Contracts
Schedule 1.2 (m) Personal Property Retained
Schedule 1.4 (c) Fixed Wing Aircraft
Schedule 1.4 (c)(i) King Air Parts
Schedule 1.5 Allocation of Purchase Price
Schedule 2.2 Related Parties
Schedule 2.3 Authorizations
Schedule 2.4 Absence of Certain Charges
Schedule 2.5 (a) Title to Personal Property
Schedule 2.5 (c) Air Worthiness
Schedule 2.6 (a) Licenses and Permits
Schedule 2.6 (c) Government Consents
Schedule 2.7 (a) Contracts
Schedule 2.7 (b) Assumed Contracts
Schedule 2.8 Claims and Proceedings
Schedule 2.9 Taxes
Schedule 2.10 (a) Real Property
Schedule 2.10 (b) Leased property Insurance
Schedule 2.14 Underground/Above-Ground Storage Tanks
Schedule 2.15 Letter Agreement with Stifel, Nicolaus & Company,
Incorporated, dated as of February 1, 1999
Schedule 4.1 Employees
Schedule 5.1 Conduct of Business
Schedule 6.1 (g) Individuals to Execute Non-Compete
Schedule 6.1 (h) Compensation of Certain Employees
Schedule 6.7 Members
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is entered into as of March
23, 2000, among AIR METHODS CORPORATION, a Delaware corporation ("Air Methods"),
MERCY AIR SERVICE, INC., a California corporation ("Buyer"), a wholly owned
subsidiary of Air Methods, and AREA RESCUE CONSORTIUM OF HOSPITALS, a Missouri
non-profit corporation ("Seller").
RECITALS
A. Seller is engaged in the business of providing emergency air medical
transportation services in Missouri and adjoining states (the "Business"), and
owns and leases certain assets and properties which are used by or useful to
Seller in the conduct of its Business.
B. Buyer and Air Methods are engaged in the business of providing
emergency air medical transportation services in other regions of the United
States.
C. Buyer desires to purchase from Seller, and Seller desires to sell to
Buyer, certain of Seller's assets used in, or useful to and related to the
operation of the Business on the terms and conditions set forth in this
Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and of the mutual
representations, warranties, covenants, agreements, terms and conditions set
forth below, the receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
SALE AND PURCHASE OF CERTAIN ASSETS
1.1 PURCHASE AND SALE. On the terms and subject to the conditions and
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exceptions contained in this Agreement, Seller agrees to sell to Buyer and Buyer
agrees to purchase from Seller at the Closing (as defined herein), free and
clear of all liens, claims, and encumbrances, all of Seller's right, title, and
interest in and to the tangible and intangible assets identified on Schedule
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1.1(a), and to assume the liabilities listed in Schedule 1.1(b) and the
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contracts listed on Schedule 1.1(c), which, together with certain of the
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Excluded Assets as defined in Section 1.2, comprise the emergency, air medical,
critical care, helicopter business as operated by Seller prior to the Closing,
including the good will related to such business (the "Purchased Assets").
Buyer may assign its rights hereunder, but not its obligations, to a subsidiary
corporation and may assign its rights to purchase certain of the Purchased
Assets to a financial entity that will finance Buyer's purchase with a leasing
transaction.
1.2 EXCLUDED ASSETS. Notwithstanding anything to the contrary
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contained in Section 1.1 hereof, the parties expressly agree that Seller shall
retain and continue to own, and Buyer will not acquire, the following assets of
the Business (the "Excluded Assets") and shall remain the property of Seller
after the Closing:
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(a) Seller's interest in SkyLife Aviation, L.L.C., a Missouri
limited liability company ("Skylife");
(b) Seller's interest in the building (consisting of an office
facility and aircraft hangar), fixtures and leasehold interest located at 18500
Edison Avenue, Chesterfield, Missouri (Spirit of St. Louis Airport), as more
fully described in Schedule 1.2(b);
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(c) Seller's current assets, including all cash on hand and in any
bank account of Seller as of the Closing Date, billed and unbilled accounts
receivable, and amounts due from related Organizations of Seller, all as listed
and described in Schedule 1.2(c);
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(d) the books and records, medical records for flights prior to
Closing, minute books, stock records and corporate seal of Seller;
(e) the rights of membership in Seller;
(f) those rights relating to deposits and prepaid expenses of
Seller and claims for refunds and rights to offset in respect thereof listed in
Schedule 1.2(f);
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(g) all of Seller's insurance policies and rights thereunder,
except to the extent specified in Schedule 1.2(g);
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(h) Seller's Contracts listed in Schedule 1.2(h);
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(i) all personnel records and other records that Seller is
required by law to retain in its possession;
(j) all claims for refund of taxes and other governmental charges
of whatever nature;
(k) all rights in connection with and assets of the Employee Plans
of Seller;
(l) all rights of Seller under this Agreement, the Bill of Sale,
the Assignment and Assumption Agreement and the Escrow Agreement;
(m) personal property and assets expressly designated in Schedule
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1.2(m).
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1.3 EXCLUDED LIABILITIES. Notwithstanding anything to the contrary
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contained in this Agreement, Buyer will not assume or be liable for and Seller
will retain and remain solely responsible for all of Seller's debts, liabilities
and obligations of any nature whatsoever whether accrued, absolute or
contingent, whether known or unknown, whether due or to become due and whether
related to the Purchased Assets, the Business, or otherwise, and regardless of
when asserted, except Seller's obligation to perform, after the Closing Date,
the duties and responsibilities of Seller under the agreements specifically
identified on Schedule 1.1(b) entitled "Assigned Contracts."
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1.4 PURCHASE PRICE. On or prior to March 20, 2000, Seller shall notify
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Buyer in writing whether Seller elects to receive payment for the Purchased
Assets as set forth in Section 1.4(a) or Section 1.4(b) (the "Purchase Price
Notice"). If the Purchase Price Notice is not received by Buyer on or before
March 20, 2000, then the Buyer shall be deemed to have elected to receive
payment for the Purchased Assets as set forth in Section 1.4(b).
(a) The purchase price (the "Cash Purchase Price") for the
Purchased Assets shall be $12,000,000. The Cash Purchase Price shall be paid by
Buyer by the delivery at the Closing of cash or immediately available funds
pursuant to wire transfer instructions provided to Buyer by Seller prior to
Closing.
(b) The purchase price (the "Alternate Purchase Price") for the
Purchased Assets shall be $11,500,000 (the "Cash Portion") plus the Earnout
Payments (defined below), if any, as follows:
(i) At Closing, Buyer shall pay the Cash Portion to Seller in
cash or immediately available funds pursuant to wire transfer instructions
provided to Buyer by Seller prior to Closing.
(ii) In addition to the Cash Portion, Buyer shall make
additional payments (each an "Earnout Payment") to Seller (if any) equal to 50%
of Buyer's collections for future services which are six months old or older
over 50% of its standard charges, calculated as set forth in Section
1.4(b)(iii), beginning October 1, 2000 and at the end of each calendar quarter
thereafter; provided, however, that at such time as $1,500,000 has been paid
pursuant to this Section 1.4(b), Buyer shall have no further obligation to make
any additional Earnout Payments.
(iii) Following each calendar quarter beginning January 1,
2001, Buyer shall determine (i) the total revenue collected by it since the
Closing ("Revenues") for Charges (defined below) for services performed after
the Closing and more than six months prior to the end of the quarter (the
"Calculation Period") and (it) the total of the Charges during the Calculation
Period. Buyer shall pay to Seller, within ten ( 10) business days of the end
of such calendar quarter, 50% of all Revenues in excess of 50% of the Charges
for such period less the total of all Earnout Payments previously paid to Seller
during all prior periods.
(iv) As used in this Section 1.4(b), "Charges" means the
total standard charges for services performed during the Calculation Period
computed in the manner currently calculated by Mercy in its other operations.
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(c) Buyer agrees to purchase two fixed wing airplanes from
Skylife, more fully described in Schedule 1.4(c), all the spare parts relating
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to said aircraft owned by SkyLife and the equipment owned by Seller enumerated
in Schedule 1.2(m) relating to the aforesaid airplanes and owned by ARCH. The
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price for both airplanes shall be $1,650,000.00. The price for the parts shown
in Schedule 1.4(c)(i) shall be at book value exclusive of depreciation on or
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about the Closing Date, and the price for the equipment shall be $11,175.00.
This agreement will be expressed more fully in an aircraft purchase agreement
between Air Methods and SkyLife. The Cash Purchase Price provided for in
Section 1.4(a) shall be reduced by $500,000, and Air Methods shall deliver to
Seller at the Closing a promissory note (the "Note"), bearing interest at nine
and one quarter percent (9 %) per annum with principal payable in level monthly
installments of $13,888.89 over three years from the Closing Date.
(d) The term "Cash Purchase Price," as used in this Agreement
shall mean the purchase price provided for in Section 1.4(a) or 1.4(b) whichever
is selected by Seller, less the Note provided for in Section 1.4(c) and any
other adjustments provided for herein.
1.5 ALLOCATION OF PURCHASE PRICE. Buyer and Seller acknowledge that,
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under Section 1060 of the Internal Revenue Code of 1986, as amended ("Section
1060"), Buyer and Seller must report information regarding the allocation of the
purchase price to the United States Secretary of Treasury by attaching
Department of Treasury, Internal Revenue Service, Form 8594 to their federal
income tax returns for the tax period which includes the date of Closing. At or
prior to Closing, Buyer shall inform Seller of Buyer's proposed allocation of
the Purchase Price, which shall be reasonable under the circumstances, and Buyer
and Seller will attach to their federal income tax returns for the tax period
that includes the date of Closing, Form 8594 as completed consistent with
Buyer's allocation. Within forty-five (45) days after Closing, Buyer shall
prepare Form 8594 and deliver it to Seller for its review and approval in
accordance with the provisions of this section.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer that:
2.1 DUE ORGANIZATION. Seller is a non-profit public benefit
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corporation duly organized, validly existing, and in good standing under the
laws of the State of Missouri and has all requisite corporate power and
authority to carry on the critical care, air ambulance business as now conducted
and to own, lease and/or operate the Purchased Assets to be conveyed to Buyer
pursuant to Section 1.1 herein.
2.2 SUBSIDIARIES. Except as described in Schedule 2.2, Seller has no
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subsidiaries and does not conduct any operations, business, or activities other
than the Business and the operation of the Purchase Assets.
2.3 DUE AUTHORIZATION. Seller has all requisite power and authority to
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execute, deliver, and perform this Agreement and to perform the transactions
contemplated hereby. The execution, delivery, and performance by Seller of this
Agreement and the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action. This Agreement has been duly and
validly executed and delivered by Seller and constitutes the valid and binding
obligations of Seller enforceable against Seller in accordance with its terms.
Except as set forth on Schedule 2.3, the execution, delivery, and performance of
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this Agreement (as well as all other instruments, agreements, certificates, or
other documents contemplated hereby) by Seller does not (a) violate any federal,
state, county, or local law, rule, or regulation or any decree or judgment of
any court or governmental authority applicable to Seller, (b) violate or
conflict with, or permit the cancellation of, or constitute a default under, any
agreement to which Seller is a party, or by which Seller is bound, (c) permit
the acceleration of the maturity of any indebtedness of Seller secured by the
Purchased Assets, or the acceleration of any obligation affecting the Purchased
Assets, or (d) violate or conflict with any provision of the Articles of
Incorporation or Bylaws, or equivalent constitutive documents, of Seller.
2.4 ABSENCE OF CHANGES OR EVENTS. Except as set forth in Schedule 2.4,
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since December 31, 1999 (i) Seller has conducted the Business in a manner
consistent with the requirements of Section 6.1 below; (ii) neither Seller nor
the Purchased Assets have suffered any change, event, or condition which has had
or may have a Material Adverse Effect, as defined in this Section below, on the
Purchased Assets; (iii) Seller has not acquired or disposed of any of the
Purchased Assets other than in the ordinary course of business or as expressly
contemplated by the terms of this Agreement; and (iv) Seller has maintained its
inventory of parts at levels consistent with commercially reasonable practices.
As used in this Agreement, "Material Adverse Effect" means any material
adverse change in or effect on the Business or on the physical or operating
condition of any of the Purchased Assets, whether attributable to a single
circumstance or event or an aggregation of circumstances or events.
2.5 PERSONAL PROPERTY.
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(a) Seller has good title to (or valid leasehold or contractual
interests in) all personal property comprising the Purchased Assets, free and
clear of all liens, claims, charges, setoffs, encumbrances or restrictions of
every kind ("Lien") except as disclosed in Schedule 2.5(a). The documents of
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transfer to be executed and delivered by Seller at the Closing will be
sufficient to convey good and marketable title to the Purchased Assets to Buyer,
free and clear of all liens, claims, charges, set-offs, encumbrances, or
restrictions of every kind, other than those expressly assumed by Buyer pursuant
to Article I hereof or as may be imposed by Buyer.
(b) All machinery, equipment and tangible assets of Seller being
used in the operation of the Purchased Assets are usable by or useful to Seller
in the ordinary course of its business, and are in adequate operating condition
and repair to the extent necessary for the operation of the Business as
conducted as of the date hereof and as of the Closing Date.
(c) Except as set forth on Schedule 2.5(c), all helicopters and
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one spare engine (LTS 101 engine) have been maintained in an air-worthy
condition in accordance with the maintenance requirements of (i) the Federal
Aviation Administration (the "FAA") and (ii) the manufacturers of such
helicopters or such components or equipment (as the case may be). All aircraft
will be purchased "as is, where is" without warranty of merchantability, except
as provided herein.
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2.6 COMPLIANCE WITH LICENSES, PERMITS, LAWS AND OTHER INSTRUMENTS.
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(a) Licenses and Permits. Attached hereto as Schedule 2.6(a) is a
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list of all federal, state, county, and local governmental licenses,
certificates, and permits held or applied for by Seller which relate to the
conduct of the Business and which have a material effect on the Purchased
Assets, including, but not limited to, all FAA licenses and permits
("Authorizations"). Seller has complied in all respects with the terms and
conditions of all such Authorizations, and no violation of any such
Authorizations or the laws or rules governing the issuance or continued validity
thereof has occurred. No additional Authorizations are required from any
federal, state, county, or local government agency or body thereof in connection
with the operation of the Purchased Assets, the failure to obtain which could
reasonably be expected to have a Material Adverse Effect on the Purchased
Assets. Except as disclosed on Schedule 2.6(a), in the conduct of the Business
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and operation of the Purchased Assets, Seller has not been issued any citations,
notices or orders of non-compliance under any law, rule, regulation, ordinance,
order, judgment, or decree (with respect to the Purchased Assets) within two
years of the Closing Date.
(b) Conflicts. Neither the ownership nor use of the Purchased
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Assets conflicts with the rights of any other person, firm, or corporation,
violates or, with or without the giving of notice or the passage of time, or
both, will violate, conflict with or result in a default, right to accelerate or
loss of rights under, any terms or provisions of the Articles of Incorporation
or Bylaws, or equivalent constitutive documents, as presently in effect, of
Seller, or any lien, encumbrance, mortgage deed of trust, lease, license,
agreement, understanding, law, ordinance, rule or regulation, or any order,
judgment or decree to which Seller is a party or by which Seller may be bound or
affected.
(c) Government Consent. Seller is not aware of any proposed law,
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governmental taking, condemnation or other proceeding which would be applicable
to the Business or Purchased Assets and which might have a Material Adverse
Effect on the Business or the Purchased Assets either before or after the
Closing except as disclosed in Schedule 2.6(c). Except as set forth on Schedule
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2.6(c), no consent, qualification, order, approval, or authorization of, or
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filing with, any governmental authority, including, without limitation, any
filings or notices required by applicable bulk sales law, if any, is required in
connection with Seller's execution, delivery and performance of this Agreement
and the consummation of any transaction contemplated hereby.
2.7 CONTRACTS AND AGREEMENTS.
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(a) Attached hereto as Schedule 2.7(a) is a list and brief
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description of all written or oral contracts, commitments, leases, and other
agreements (including, without limitation, promissory notes, loan agreements,
and other evidences of indebtedness, guarantees, agreements with distributors,
suppliers, dealers, franchisors and customers, and service agreements) with
respect to the Purchased Assets to which Seller is a party or by which the
Purchased Assets are bound and pursuant to which the obligations thereunder of
either party thereto are, or are contemplated as being, $50,000.00 per annum or
more (collectively, the "Contracts"). The Contracts are valid and enforceable
and in full force and effect. Except as set forth on Schedule 2.7(a), Seller is
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not, and, to the best knowledge of Seller, no other party thereto is, in default
(and no event has occurred which, with the passage of time or the giving of
notice, or both, would constitute a default) under any of the Contracts, and has
not waived any right under any of the Contracts. Except as set forth on
Schedule 2.7(a), no consent, qualification order, approval or authorization of,
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or filing with, any person or governmental entity is required in connection with
Seller's execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby.
(b) Attached hereto as Schedule 2.7(b) is a list and brief
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description of all written or oral contracts, commitments, leases and other
agreements with respect to the Purchased Assets to which Seller is a party or is
bound, and which Buyer has agreed to assume the duties and responsibilities of
Seller thereunder pursuant to Section 1.3.
2.8 CLAIMS AND PROCEEDINGS. Except as set forth in Schedule 2.8,
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there are no claims, actions, suits, legal or administrative proceedings or
investigations ("Claims or Proceedings") pending or threatened, against or
relating to the Purchased Assets or the transactions contemplated by this
Agreement, and Seller neither knows of, nor has any reason to be aware of, any
basis for the same. In particular, and without limiting the generality of the
preceding sentence, there are no Claims or Proceedings, and no basis for any
Claim or Proceeding, arising out of the business of Seller prior to the Closing
with respect to patients for whom services were provided by Seller prior to
Closing, which Claims or Proceedings are or will be based upon any alleged
impropriety in charging, billing or receiving payment for the services rendered
by the Seller, except as disclosed in Schedule 2.8.
-------------
2.9 TAXES. Except as disclosed on Schedule 2.9, all federal, state,
----- ------------
local and foreign tax returns and reports of any of the entities comprising
Seller required by law to be filed on or before the Closing and which would
affect the Purchased Assets have been duly filed or duly extended to a date in
the future, and all federal, state, local, foreign and any other taxes
(including interest and penalties), assessments, fees and other governmental
charges with respect to the Purchased Assets and due on or prior to the Closing
have been paid.
2.10 REAL PROPERTIES; LEASES.
-------------------------
(a) Schedule 2.10(a) sets forth a list containing a description of
----------------
all interests in Real Property owned, leased or otherwise used or occupied by
Seller and which are part of the Purchased Assets (the "Real Property"). With
respect to all Real Property owned by Seller and which are part of the Purchased
Assets, (i) each parcel of such owned Real Property is owned in fee simple with
good and marketable title free and clear of all Liens, except as described in
Schedule 2.10(a) and those that do not materially adversely interfere with the
- ----------------
use of such Real Property as currently used, (ii) there are no leases,
subleases, licenses, concessions or other agreements (written or oral) granting
to any person the right to use or occupy such owned Real Property or any portion
thereof, and (iii) there are no outstanding options, rights of first offer or
rights of first refusal or any other agreements pursuant to which Seller would
be required to sell the owned Real Property or any portion thereof or interest
therein, or purchase any other real property. Seller has made available to
Buyer complete and accurate copies of all material documents and information of
Seller concerning such owned Real Property.
7
<PAGE>
(b) Attached hereto as Schedule 2.10(b) is a list setting forth
----------------
all leases under which Seller possesses or uses real property which is a part of
the Purchased Assets (the "Real Property Leases") and all leases under which
Seller possesses or uses items of tangible personal property that are material
to the conduct of Seller's business (the "Personal Property Leases"). True,
correct and complete copies of the Real Property Leases and Personal Property
Leases (collectively, the "Leases") have been delivered to Buyer, together with
the names and addresses of the lessors thereunder. The Leases are in full force
and effect and Seller is not in default. To the knowledge of Seller, (i) the
other parties to the Leases are not in default thereunder and (ii) no facts or
circumstances have occurred which, with the passage of time or the giving of
notice, or both, would constitute a default by Seller or the other parties,
under any of the Real Property Leases or the Personal Property Leases.
(c) To the knowledge of the officers of Seller: (i) all structures
and facilities on the real properties listed on Schedule 2.10(a) and Schedule
---------------- --------
2.10(b) are free of structural defects and are equipped in substantial
- ------
conformity with laws and governmental regulations applicable to Seller; (ii) the
zoning of each parcel of real property permits the presently existing
improvements and continuation of the business presently conducted thereon by
Seller; and (iii) no zoning changes, and no condemnation or similar proceedings,
are pending or threatened against any of the real properties listed on Schedule
--------
2.10(a)or Schedule 2.10(b).
- ------- -----------------
2.11 INSURANCE. Schedule 2.11 contains a listing of all policies of
--------- --------------
fire, general liability, worker's compensation, errors and omissions,
malpractice and other types of insurance maintained by or on behalf of Seller,
to provide insurance protection for the assets and business of Seller. Except
as set forth in Schedule 2.11 hereto, all of such policies are now in full force
-------------
and effect and those policies or other policies covering the same risks and in
substantially the same amounts have been in full force and effect continuously
for the past three (3) years, and provide coverage for the properties, assets,
and operations of Seller in the amounts and against the risks required (i) to
comply with all applicable laws and regulations and (ii) to conform to the
standard levels of insurance maintained in the industry in which Seller
operates. Seller has not received any notice of cancellation or material
amendment of any such policies, and, to the knowledge of Seller, all material
claims thereunder have been filed in a timely fashion. The activities and
operations of Seller have been conducted in a manner so as to conform in all
material respects to all applicable provisions of such insurance policies.
Seller shall maintain all such insurance policies in effect from the date hereof
until the Closing.
2.12 BOOKS AND RECORDS. The books of account of Seller as they relate
------------------
to the Purchased Assets are complete and correct in all respects, and there have
been no transactions involving the Purchased Assets which properly should have
been set forth therein and which have not been accurately so set forth in all
respects.
2.13 FINANCIAL STATEMENTS. Seller has delivered to Buyer balance
---------------------
sheets as of December 31, 1997 and 1998 and statements of operations and
statements of cash flows for the fiscal years then ended, audited, and a balance
sheet, statement of income and statement of cash flows for the nine months ended
September 30, 1999, all unaudited. Seller will deliver to Buyer, at least two
business days prior to the Closing, an audited balance sheet as of December 31,
1999, and statements of operations and cash flows for the fiscal year ended
December 31, 1999, which will reflect no material adverse change in Seller's
operations since September 30, 1999. All of such financial statements have been
prepared from the books and records of Seller in accordance with generally
accepted accounting principles ("GAAP") consistently applied, and maintained
throughout the periods indicated, and fairly present the financial condition of
Seller and results of operations as of their respective dates and for the
periods indicated.
8
<PAGE>
2.14 ENVIRONMENTAL MATTERS. As of the date of this Agreement, except
----------------------
as set forth in Schedule 2.14 and except as to matters described in this Section
-------------
2.14 which individually and in the aggregate would not have a Material Adverse
Effect:
(a) Seller has obtained all permits, licenses and other
authorizations which are required under the Environmental Laws and all other
applicable laws for the ownership, use and operation of each location owned,
operated or leased by Seller and acquired by Buyer hereunder (the "Property"),
all such permits, licenses and authorizations are in effect, no appeal nor any
other action is pending to revoke or modify in a manner adverse to Seller any
such permit, license or authorization, and Seller has complied and is in
compliance with all terms and conditions of all such permits, licenses and
authorizations.
(b) Seller and the Property have complied and are in compliance
with all Environmental Laws including, without limitation, all restrictions,
conditions, standards, limitations, prohibitions, requirements, obligations,
schedules and timetables contained in the Environmental Laws or contained in any
regulation, code, plan, order, decree, judgment, injunction, notice or demand
letter issued, entered, promulgated or approved thereunder.
(c) There is no civil, criminal or administrative action, suit,
demand, claim, hearing, notice of violation, investigation, proceeding, notice
or demand letter which would reasonably be expected to result in liability that
is existing or pending, or to the knowledge of Seller threatened, relating to
the Property .
(d) Neither Seller nor any other person has released, placed,
stored, buried or dumped or arranged for disposal of any Hazardous Substances or
any other substances produced by, or resulting from, any business, commercial or
industrial activities, operations or processes, on or beneath the Property
except for inventories of such substances to be used, and wastes generated
therefrom, in the ordinary course of business of Seller provided that such
excepted inventories and wastes, if any, were and are stored, handled and
disposed of in accordance with applicable laws and regulations and in a manner
such that there has been no release of any such substances into the environment
in violation of the Environmental Laws or in a manner that would give rise to
costs or liability under any Environmental Law.
(e) No releases have occurred at the Property which could result
in the assertion or creation of a Lien on the Property by any governmental body
or agency with respect thereto, nor has any such assertion of a Lien been made
by any governmental body or agency with respect thereto.
9
<PAGE>
(f) None of the following exists at the Property:
asbestos-containing material in any form or condition, materials or equipment
containing polychlorinated biphenyls, landfills, surface impoundments or
disposal areas.
(g) Any underground and above-ground storage tanks currently or
formerly owned or operated by Seller or located on or beneath the Property are
described on Schedule 2.14 and have been properly registered, constructed (or
--------------
upgraded), operated and (if now out of service) closed and removed in compliance
with all applicable laws and requirements.
(h) "Hazardous Substance" means any toxic or hazardous materials,
wastes or substances, defined as, or included in the definition of, "hazardous
substances," "hazardous wastes," hazardous materials" or "toxic substances"
under any Environmental Law, including, but not limited to, asbestos, buried
contaminants, regulated chemicals, flammable or explosive materials, radioactive
materials, polychlorinated biphenyls, petroleum and petroleum products.
(i) "Environmental Laws" means any statute, law, ordinance,
regulation, rule, judgment, decree or order of any governmental entity relating
to any matter of pollution, protection of the environment, environmental
regulation or control regarding Hazardous Substances.
2.15 BROKERS. Except as described on Schedule 2.15, Seller has not
------- -------------
engaged, or caused to be incurred, any liability for any brokerage or finders'
fees or agents' commissions or like payments to, any finder, broker, or sales
agent in connection with the origin, negotiation, execution, delivery, or
performance of this Agreement or the transactions contemplated hereby, and all
compensation of any kind payable to any such party shall be the sole
responsibility of Seller or the Members, and Buyer shall have no responsibility
therefor.
2.16 INFORMATION FURNISHED. No representation or warranty made by
----------------------
Seller in this Agreement, no written statement or document furnished by Seller
in connection with the negotiation of the transactions contemplated by this
Agreement, and no exhibit, certificate, schedule, document, list or instrument
prepared, made, or delivered, or to be prepared, made, or delivered, by or on
behalf of Seller pursuant hereto contains or will contain any untrue statement
of a material fact or omits or will omit to state a material fact necessary to
make the statements contained herein and therein not misleading.
2.17 FEDERALLY FUNDED PROGRAMS. Seller represents and warrants that it
-------------------------
is not, and at no time has been, excluded from participation in any federally
funded health care program, including Medicare or Medicaid. Seller agrees to
immediately notify Buyer of any threatened, proposed, or actual exclusion from
any federally funded health care program.
Seller represents and warrants that it has reviewed all applicable
statutes, regulations and rules pertaining to Medicaid and Medicare, including,
but not limited to, the Anti-Kickback Statutes (42 U.S.C. Section 1320 a - 7(b)
and the Federal False Claims Act (31 U.S.C. Section 3729) and represent that its
billing practices are in compliance with Medicaid/Medicare rules and
regulations. Seller also acknowledges that no part of its compensation is
related to the referral, purchasing, leasing, ordering or arranging for services
for which payment may be made in whole or in part under Medicare/Medicaid.
10
<PAGE>
ARTICLE III
BUYER'S AND AIR METHODS' REPRESENTATIONS AND WARRANTIES
Buyer and Air Methods represent and warrant to Seller as follows:
3.1 DUE ORGANIZATION. Air Methods is a corporation duly organized,
-----------------
validly existing and in good standing in the State of Delaware, and Buyer is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of California. Each has all requisite corporate power and
authority to enter into and perform this Agreement and the related agreements
referred to herein and, following the Closing, to operate and own or lease, as
the case may be, the Purchased Assets.
3.2 DUE AUTHORIZATION. The execution, delivery and performance of this
-----------------
Agreement has been duly authorized by all requisite corporate action of Buyer,
and this Agreement has been duly and validly executed and delivered by Buyer and
constitutes the valid and binding obligation of Buyer, enforceable against Buyer
in accordance with its terms. The execution, delivery, and performance of this
Agreement (as well as all other instruments, agreements, certificates or other
documents contemplated hereby) by Buyer, will not (a) violate any federal,
state, county, or local law, rule, or regulation or any decree or judgment of
any court or governmental authority applicable to Buyer or its property; (b)
violate or conflict with, or permit the cancellation of, or constitute a default
under any agreement to which Buyer is a party or by which it or its property is
bound, (c) permit the acceleration of the maturity of any indebtedness of, or
any indebtedness secured by the property of, Buyer; or (d) violate or conflict
with any provision of the Articles of Incorporation or Bylaws of Buyer.
3.3 BROKERS. Neither Buyer nor Air Methods has engaged, or caused to
-------
be incurred, any liability for any brokerage or finders' fees or agents'
commissions or like payments to any finder, broker or sales agent in connection
with the origin, negotiation, execution, delivery, or performance of this
Agreement or the transactions contemplated hereby and Seller shall have no
responsibility therefore.
3.4 FEDERALLY FUNDED PROGRAMS. Buyer and Air Methods represent and
---------------------------
warrant that either of them has not, and at no time has been, excluded from
participation in any federally funded health care program, including Medicare or
Medicaid. Buyer and Air Methods agree to immediately notify Seller of any
threatened, proposed, or actual exclusion from any federally funded health care
program.
Buyer and Air Methods represent and warrant that both of them have reviewed
all applicable statutes, regulations and rules pertaining to Medicaid and
Medicare, including, but not limited to, the Anti-Kickback Statutes (42 U.S.C.
Section 1320 a - 7(b) and the Federal False Claims Act (31 U.S.C. Section 3729))
and represent that its billing practices are in compliance with
Medicaid/Medicare rules and regulations. Each also acknowledges that no part of
its compensation is related to the referral, purchasing, leasing, ordering or
arranging for services for which payment may be made in whole or in part under
Medicare/Medicaid.
11
<PAGE>
ARTICLE IV
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The representations and warranties of the Seller set forth in this
Agreement or in the Disclosure Schedules or Closing Certificates delivered
pursuant hereto shall terminate on the first (1st) anniversary of the Closing
Date, except as follows: (i) the representations and warranties of the Seller
contained in Sections 2.10 and 2.14 shall survive the Closing for the statutory
limitations period under Missouri law that is applicable to written contracts
and (ii) the representations and warranties of the Seller contained in Section
2.9 survive the Closing for the statutory limitations period applicable, to the
filing of Tax Returns and payment of Income Taxes under the Internal Revenue
Code of 1986, as amended and in effect on the date of this Agreement. The
representations and warranties of the Buyer in Section 3 hereof shall survive
the Closing for the statutory limitations period under Missouri law that is
applicable to written contracts.
ARTICLE V
COLLECTION OF SELLER'S ACCOUNTS RECEIVABLE
5.1 BUYER'S AGREEMENT TO COLLECT ACCOUNTS. Buyer agrees to use
-----------------------------------------
commercially reasonable efforts to collect or cause to be collected, on behalf
of Seller, all of Seller's accounts receivable outstanding and unpaid at the
date of Closing that arose from the operation of its air medical transport
services prior to the Closing.
5.2 ESTIMATED COLLECTIBLE RECEIVABLES. With respect to the remaining
-----------------------------------
accounts receivable to be collected by Buyer pursuant to this Article V (the
"Accounts"), Buyer and Seller will agree upon the collectible percentage of the
Accounts based upon the historical collection percentage of gross charges that
are at least six months old. Such percentage shall be applied to the gross
charges less the amounts collected prior to Closing to determine the "Estimated
Collectible Receivables."
5.3 REMITTANCE OF COLLECTED RECEIVABLES. On a monthly basis beginning
------------------------------------
at the end of the month immediately following the Closing, Buyer shall remit,
within ten (10) business days after the end of each such month, all amounts
received by Buyer as payment for amounts due on the Accounts until the total
remitted to Seller equals the Estimated Collectible Receivables. Thereafter,
Buyer shall remit on a monthly basis within ten (10) business days after the end
of each such month, 50% of all amounts received as payment for amounts due on
the Accounts.
12
<PAGE>
5.4 ADDITIONAL PAYMENT ON UNCOLLECTED ACCOUNTS. In addition to the
----------------------------------------------
foregoing, until the earlier to occur of (a) the total remitted to Seller equals
the Estimated Collectible Receivables or (b) 24 months after the Closing, Buyer
shall pay to Seller, with each monthly payment, an amount equal to interest on
the unremitted balance of the Estimated Collectible Receivables at the rate of
10% per annum. Except that accounts receivable from Barnes-Jewish Hospital, St.
John's Mercy Medical Center and St. Louis Children's Hospital shall be excluded
from the Estimated Collectible Receivables for the purpose of calculating the
interest on the unremitted balance.
ARTICLE VI
COVENANTS OF SELLER
6.1 CONDUCT OF BUSINESS PENDING CLOSING. From the date hereof to the
-------------------------------------
Closing Date, Seller shall use its best efforts to, preserve substantially
intact its business organization and present relationships with its customers,
suppliers and employees. Seller will not take any action that could reasonably
be expected to have an adverse effect on Seller, or the transactions
contemplated by this Agreement, without the prior written consent of Buyer,
which consent shall not be unreasonably withheld, will not engage in any
practice, take any action, or enter into any transaction outside the ordinary
course of business as conducted prior to the date of this Agreement. Without
limiting the generality of the foregoing, without such consent,
(a) Seller shall not sell, lease, transfer, or assign any assets,
tangible or intangible, which comprise the Purchased Assets other than for a
fair consideration in the ordinary course of business.
(b) Seller will not enter into any agreement, contract, lease, (or
license or series of related agreements, contracts, leases and licenses) with
respect to the Purchased Assets outside the ordinary course of business,
(c) Seller will not accelerate, terminate or cancel any agreement,
contract, lease, or license (or series of related agreements, contracts, leases
and licenses) involving more than $5,000 with respect to the Purchased Assets to
which Seller is a party or by which it is bound.
(d) Seller will not impose any Lien upon any of the Purchased
Assets, tangible or intangible.
(e) [Intentionally left blank].
(f) [Intentionally left blank].
(g) Seller will not sell or consent to the sale of any of the
Purchased Assets outside the ordinary course of business.
(h) Seller will not increase the compensation or benefits payable
to employees listed in Schedule 6.1(h) without the consent of Buyer.
----------------
13
<PAGE>
(i) [Intentionally left blank].
(j) Seller will maintain insurance on the Purchased Assets
consistent with past practices and, unless comparable insurance is substituted
therefor or is not generally available to businesses of the type conducted by
Seller, not take any action to terminate or modify, or permit the lapse or
termination of. the present insurance policies and coverages of Seller as set
forth in Schedule 2.11.
--------------
(k) Seller will promptly notify Buyer of any lawsuit or other
legal proceeding that is commenced, or that is threatened, in writing, against
Seller and that (i) relates to or arises out of the Purchased Assets and, if
adversely determined against Seller, would be expected to have a Material
Adverse Effect on Seller, or (ii) relates to any of the Purchased Assets.
(l) [Intentionally left blank].
(m) Seller will maintain in good working order and condition,
ordinary wear and tear excepted, all of the Purchased Assets.
(n) Seller will maintain its inventories of parts, supplies and
other assets at substantially the same level as existed in December 1999.
(o) Seller will use its best reasonable efforts to obtain and
maintain all consents, assignments or approvals of, and licenses, permits and
franchises and rights to operate granted by, governmental authorities, the
absence or loss of which is expected to have a Material Adverse Effect on
Buyer's ability to operate the Business after Closing.
(p) Seller will not take any action which would be expected to
result in a violation of or in the noncompliance with any laws or regulations
applicable to Seller that would be expected to have a Material Adverse Effect on
the Closing.
(q) Seller will cooperate with Buyer and render to Buyer such
assistance as Buyer may reasonably request, at Buyer's sole expense, in
obtaining such governmental approvals as Buyer considers necessary or
appropriate.
(r) Seller will pay, when due, and prior to the imposition or
assessment of any interest, penalties or liens by reason of the nonpayment of,
taxes due or assessed against it with respect to the Purchased Assets, except
for any taxes being contested in good faith and for which reserves have been
established by the Seller.
(s) Seller shall give prompt notice to Buyer of any notice of
material default received by Seller subsequent to the date of this Agreement
under any material instrument, contract or agreement, or any material adverse
change in the Purchased Assets occurring prior to the Closing.
6.2 CONSENTS OF OTHERS. Prior to the Closing, Seller shall use its
--------------------
best efforts to obtain all authorizations, consents and permits required of the
Purchased Assets and Seller to permit consummation of the transactions
contemplated by this Agreement.
14
<PAGE>
6.3 FURTHER ASSURANCES. In case at any time after Closing any further
-------------------
action is necessary to complete the transfer of the Purchased Assets to Buyer,
or otherwise to carry out the purposes of this Agreement, the proper officers of
Seller shall take all such reasonable action without any further consideration
therefor.
6.4 ACCESS TO RECORDS BEFORE CLOSING. Prior to the Closing, Seller
------------------------------------
shall give, or cause to be given, to Buyer and its representatives full and
unrestricted access, upon reasonable notice, to Seller's assets, properties,
titles, operations, contracts, corporate minute and other books, records, files
and documents of Seller with respect to the Purchased Assets and to make copies
of all such materials allowed by law. Seller will provide Buyer opportunities
to meet with key employees of the Business, to visit facilities of the Business
and to otherwise conduct due diligence in respect of the Purchased Assets. All
materials copied by Buyer shall be returned to Seller if the Closing of the
transactions contemplated hereunder fails to occur, and shall be maintained in
confidence by Buyer prior to the Closing.
6.5 ACCESS TO RECORDS AFTER CLOSING. After the Closing Date, Buyer on
--------------------------------
the one hand and Seller on the other agree that they will give, or cause to be
given, to the other party, its successors and its representatives, during normal
business hours and at the requesting party's expense, such reasonable access to
the properties, titles, contracts, books, records, files and documents of Buyer
(to the extent Buyer's records are the records, materials and data transferred
to Buyer from Seller pursuant to this Agreement) or Seller, as the case may be,
as is reasonably necessary to allow the requesting party to obtain information
in the other party's possession with respect to any claims, demands, audits,
suits or matters of a similar nature made by or against the requesting party as
the previous or new owner and operator of the Purchased Assets, as the case may
be, and to make copies of such information to the extent reasonably necessary.
6.6 EMPLOYEE BENEFIT PLAN NOT ASSUMED. Seller agrees that Buyer shall
----------------------------------
not assume sponsorship of Seller's group health plan or any other benefit plan
that Seller maintains or sponsors. Buyer shall not, therefore, be a successor
employer of any former or current employee of Seller, whether or not such
employee is offered employment with Buyer, for purposes of compliance with the
Family and Medical Leave Act, the group health plan coverage rules of the
Consolidated Omnibus Reconciliation Act of 1985, as amended, or any similar
applicable state laws. Seller agrees that Buyer shall not assume any other
benefits plan that Seller may sponsor. Buyer will assume the group health
insurance contract that Seller has with United Healthcare.
6.7 COVENANT NOT TO COMPETE. For a period of ten (10) years from the
-------------------------
Closing or any of the Preferred Provider Contracts required by Section 6.9
herein are cancelled for cause, whichever occurs sooner, Seller agrees, and each
of the entities listed on Schedule 6.7, being the Members of ARCH (the
-------------
"Members") shall, at the Closing, agree that it and its controlled affiliates
will not, directly or indirectly, engage in the business of providing airborne
medical transportation services within 75 miles of any facility in the St. Louis
metropolitan area currently served by Seller or within 75 miles of any facility
in the St. Louis metropolitan area served by Buyer following the Closing.
15
<PAGE>
6.8 ACCRUED VACATION. With respect to any employees of Seller who
-----------------
become employees of Buyer after the Closing, Seller agrees that it will pay to
each employee an amount equal to the value of accrued vacation at the date of
Closing, or, at the employee's request, reduce the Purchase Price to Buyer by
such amount upon Buyer's agreement to honor the employee's accrued vacation time
after the Closing.
6.9 PREFERRED PROVIDER CONTRACTS. Seller shall use reasonable
------------------------------
commercial efforts to assist Buyer in obtaining preferred provider contracts
substantially in the form of Exhibits I and J with each of Barnes-Jewish
Hospital, St. Louis Children's Hospital and St. John's Mercy Medical Center.
6.10 FACILITIES.
----------
(a) Seller shall permit Buyer to use the office facilities of
Seller located at Spirit of St. Louis Airport ("Spirit Facility") for a rental
fee of $14.00 per square foot per year for office and maintenance space, if any,
plus all utility costs, $1,000/month for each fixed wing airplane and $750/month
for each helicopter stored in the hangar, for a period of time following the
Closing not beyond two days before the closing on the sale of the Spirit
Facility. Seller has informed Buyer that Seller has contracted to sell the
Spirit Facility, and Seller's Closing on the sale of the Spirit Facility which
shall take place on or about April 14, 2000. Seller shall obtain the permission
of the purchaser of the Spirit Facility for Buyer to use hangar space and to the
assignment to Buyer of Seller's rights with respect to the space for the
Communications Center for up to six months after Closing, it being understood
that Buyer requires use of such facilities only for so long as is necessary to
allow Buyer to move its operations to 2207 Scott Avenue.
(b) Seller acknowledges that Buyer is incurring costs in
refurbishing, renovating, altering or constructing at the building at 2207 Scott
Avenue, St. Louis, Missouri 63103, and agrees to reimburse Buyer for such costs
in the event of termination of this Agreement.
6.11 BUYER'S USE OF NAME. Seller agrees that Buyer may use the words
---------------------
"ARCH Air Medical Services" in the name of the entity that Buyer forms to
operate the Business after Closing or in any trade name that it may adopt to
identify the Business.
ARTICLE VII
CONDITIONS TO OBLIGATION OF PARTIES TO CONSUMMATE CLOSING
7.1 CONDITIONS TO BUYER'S OBLIGATIONS. The obligation of Buyer to
------------------------------------
consummate the transactions contemplated by this Agreement is subject to
satisfaction on or prior to the Closing of the following conditions (any of
which may be waived by Buyer in writing):
(a) Covenants, Representations and Warranties. Seller shall have
------------------------------------------
performed in all material respects all obligations and agreements and complied
in all material respects with all covenants contained in this Agreement to be
performed and complied with by each of them prior to or at the Closing. The
representations and warranties of Seller set forth in Article II hereof shall be
accurate in all material respects at and as of the Closing with the same force
and effect as though made on and as of the Closing.
16
<PAGE>
(b) Consents. All statutory requirements for the valid
--------
consummation by Seller of the transactions contemplated by this Agreement shall
have been fulfilled and all authorizations, consents, waivers and approvals,
including, but not limited to, the giving of notice pursuant to Section 355.656
of the Missouri Revised Statutes to the Missouri Attorney General and the
passage of twenty (20) days as specified in such section without adverse action
thereon, and including those of all federal, state, local and foreign
governmental agencies and regulatory authorities required to be obtained (as
reasonably determined by Buyer) in order to permit Buyer to acquire the
Purchased Assets shall have been obtained in form and substance reasonably
satisfactory to Buyer. Seller shall have obtained any authorizations, consents,
waivers, approvals or other actions required in connection with the execution,
delivery and performance of this Agreement to prevent a material breach or
default by Seller under any contract to which such entity is a party or for the
continuation of any material agreement to which such entity is a party and which
relates to the Purchased Assets. All approvals of the Board of Directors of
Seller and its Members necessary for the consummation of this Agreement and the
transactions contemplated hereby shall have been obtained.
(c) Material Adverse Change. There has been no Material Adverse
-------------------------
Effect to the condition of the Purchased Assets since December 31, 1999.
(d) Release of Third Party Interests in the Purchased Assets. Any
--------------------------------------------------------
and all liens, encumbrances and/or security interests evidenced by financing
statements currently of record to perfect a security interest in the Purchased
Assets in accordance with the Uniform Commercial Code ("UCC") or duly recorded
on title certificates of aircraft pursuant to regulations of the Federal
Aviation Administration ("FAA") shall be released unless otherwise consented to
in writing by Buyer. if any such encumbrances shall be consented to by Buyer,
amendments to such security agreements and/or financing statements shall be
filed in the appropriate filing location for the purpose of eliminating any and
all references to blanket liens covering the Purchased Assets.
(e) Preferred Provider Contracts. Each of Barnes-Jewish Hospital,
----------------------------
St. Louis Children's Hospital and St. Johns Mercy Medical Center shall have
entered into ten (10) year service contracts with Buyer on terms reasonably
acceptable to Buyer.
(f) Litigation. No action, suit or proceeding shall have been
----------
instituted before, or by, any governmental body, to restrain, modify or prevent
the consummation of the transaction contemplated hereby, or to seek damages on a
discovery order in connection with such transaction, or that has or may be
expected to have, a Material Adverse Effect on the Purchased Assets or Buyer's
right to own, operate, or control the Purchased Assets.
(g) Consents. All consents required to be given by St. John's
--------
Regional Medical Center (Joplin, Missouri), Cardinal Glennon Children's
Hospital, Barnes-Jewish Hospital and St. Louis Children's Hospital to the
assignment or execution of their respective contracts with Seller to Buyer with
such amendments to such contracts as Buyer shall reasonably request, shall have
been obtained.
17
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(h) Hart-Scott-Rodino. All filings and notices required pursuant
-----------------
to the Hart-Scott-Rodino Act, if applicable, shall have been made or obtained.
(i) Certificate of Officer. A fully executed certificate in
------------------------
substantially the form set forth in Exhibit D attached hereto.
7.2 CONDITIONS TO SELLER'S OBLIGATIONS. The obligation of Seller to
-------------------------------------
consummate the transactions contemplated hereby is subject to satisfaction on or
prior to the Closing of the following conditions (any of which may be waived by
Seller in writing):
(a) Covenants, Representations and Warranties. Buyer shall have
-------------------------------------------
performed in all material respects all obligations and agreements and complied
in all material respects with all covenants contained in this Agreement to be
performed and complied with by Buyer prior to or at the Closing, The
representations and warranties of Buyer set forth in Article III hereof shall be
accurate in all material respects, at and as of the Closing, with the same force
and effect as though made on and as of the Closing.
(b) Consents. All statutory requirements for the valid
--------
consummation by Buyer of the transactions contemplated by this Agreement shall
have been fulfilled, and all authorizations, consents and approvals, or passage
of the statutory period of time with adverse action by the Missouri Attorney
General, including those of all federal, state, local and foreign governmental
agencies and regulatory authorities required to be obtained in order to permit
the consummation by Buyer of the transactions contemplated hereby shall have
been obtained.
(c) Litigation. No action, suit or proceeding shall have been
----------
instituted before, or by, any governmental body, to restrain, modify or prevent
the consummation of the transaction contemplated hereby, or to seek damages on a
discovery order in connection with such transaction.
(d) Certificate of Officers. A fully executed certificate in
-------------------------
substantially the form set forth in Exhibit E attached hereto.
18
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ARTICLE VIII
CLOSING
8.1 CLOSING. If all conditions to the obligations of Buyer and Seller
--------
to consummate the purchase and sale of the assets as set forth in Articles VI
and VII have been satisfied, the closing of the transactions contemplated hereby
(the "Closing") shall occur at the offices of Lashly & Baer, P.C., 714 Locust
Street, St. Louis, Missouri 63101 (or such other place as the parties may agree)
on March 31, 2000, or at such other date as the parties mutually agree (the
"Closing Date"), provided that Buyer may extend the Closing Date for up to 30
days if reasonably necessary to complete its arrangements for financing the
Purchase Price. Any move necessitated before Closing due to the provisions of
Section 6.10 and the inability of Buyer to Close on or before April 12, 2000,
shall be the sole cost of the Buyer. The parties agree to enter into a
Management and Operating Agreement, in form satisfactory to both parties, which
will facilitate Buyer's duty to obtain licenses and permits to operate the
helicopter business after Closing.
8.2 DOCUMENTS TO BE DELIVERED BY SELLER. The following documents shall
-----------------------------------
be delivered to Buyer at the Closing by Seller, as applicable:
(a) Conveyance Documents. Such deeds, bills of sales, assignments
--------------------
or other instruments of sale, transfer, assignment, conveyance and delivery in
form and substance reasonably satisfactory to counsel for Buyer, as are required
in order to transfer to Buyer good and marketable title to the Purchased Assets,
free and clear of all liens, charges, security interests and other encumbrances
except as provided herein, duly executed by Seller;
(b) Special Warranty Deed. A special warranty deed for all real
-----------------------
estate;
(c) Opinion. Opinion of Lashly & Baer, P.C., counsel to Seller,
-------
dated the Closing Date, substantially in the form attached hereto as Exhibit C;
(d) Certificate. A certificate substantially in the form
-----------
attached hereto as Exhibit D, dated as of the Closing Date and duly executed by
an executive officer of Seller;
(e) Lien Releases. UCC and FAA termination statements and other
--------------
applicable documentation necessary to release any encumbrances, liens, security
interests or any interest of any third party in the Purchased Assets to the
extent not relating to or arising from an Assumed Liability, duly executed by
the appropriate parties;
(f) Transfer of Records. All contracts, files, documents, data,
---------------------
records and information of Seller relating to the Purchased Assets.
8.3 DOCUMENTS TO BE DELIVERED BY BUYER. The following shall be
---------------------------------------
delivered to Seller at the Closing by Buyer:
(a) Purchase Price. The Cash Purchase Price or the Cash Portion
---------------
of the Alternate Purchase Price, as provided for in Section 1.4(a) or I .4(b),
as applicable, subject to adjustment as provided for in Sections 1.4(c) or
1.4(c), if applicable, paid in cash or by wire transfer of funds as provided in
Section 1.4;
- ------------
19
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(b) Note. The Note, if applicable, pursuant to Section 1.4(c);
---- --------------
(c) Sublease. An appropriate sublease agreement if applicable
--------
pursuant to Section 1.4(e);
(d) Bill of Sale, Assignment and Assumption Agreement. An
-------------------------------------------------------
Assumption Agreement in substantially the form attached hereto as Exhibit A,
dated as of the Closing Date and duly executed by Buyer;
(e) Certificate. A certificate executed by an executive officer of
-----------
Buyer, dated the Closing Date, in substantially the form attached as Exhibit E
hereto; and
(f) Opinion. An opinion of Davis, Graham & Stubbs LLP, counsel to
-------
Buyer, dated the Closing Date, in substantially the form attached hereto as
Exhibit D.
ARTICLE IX
TAXES, UTILITIES, ASSESSMENTS
AND OTHER ADJUSTMENTS
9.1 PAYMENT OF ALL TAXES RESULTING FROM SALE OF ASSETS BY BUYER. Buyer
-----------------------------------------------------------
shall pay in a timely manner all Taxes, if any, resulting from or payable in
connection with the sale of the Purchased Assets pursuant to this Agreement,
regardless of the person on whom imposed.
9.2 PAYMENT IN LIEU OF COVENANT NOT TO COMPETE. Seller shall pay Buyer
------------------------------------------
$101,000.00 as consideration for its inability to deliver a covenant not to
compete with respect to Cyril C. Woodrome.
9.3 PAYMENT FOR TELEPHONE SYSTEM. Seller shall pay Buyer $44,834.29 to
----------------------------
reimburse Buyer for the Lucent telephone system being purchased for the 2207
Scott Avenue facility.
9.4 PAYMENT FOR EQUIPMENT. Buyer shall pay Seller $11,175.00 for
----------------------
equipment relating to the two aircraft (King Air B100) being purchased from
SkyLife and $12,872.05 for equipment shown on Schedule 9.3.
--------------
ARTICLE X
INDEMNIFICATION
10.1 INDEMNIFICATION BY SELLER. Seller agrees that, notwithstanding
---------------------------
the Closing and regardless of any investigation made at any time by or on behalf
of Buyer or of any information Buyer may have in respect thereof, Seller will
indemnify and hold harmless Buyer and each officer, director and affiliate of
Buyer (collectively, the "Indemnified Parties") from and against any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties, costs
20
<PAGE>
and expenses (including court costs and reasonable attorneys' fees and expenses
incurred in investigating and preparing for any litigation or proceeding)
(collectively, the "Indemnifiable Costs"), which any of the Indemnified Parties
may sustain, or to which any of the Indemnified Parties may be subjected,
arising out of (A) any misrepresentation, breach or default by Seller or any
Member of or under any of the representations and warranties, covenants,
agreements or other provisions of this Agreement or any agreement or document
executed in connection herewith; (B) any failure by Seller to perform or observe
any term, provision, covenant, agreement or condition in this Agreement on the
part of Seller to be performed or observed; (C) any noncompliance with the
provisions of any applicable bulk sales law or regulation; or (D) any liability
or obligation of the Seller not expressly assumed by Buyer hereunder, whether or
not disclosed herein and including, but not limited to, any claim or claims made
against Buyer arising out of liabilities or asserted liabilities of Seller or
its affiliates which may be asserted against Buyer as purchaser of the Purchased
Assets.
10.2 LIMITATIONS ON INDEMNIFICATION OBLIGATIONS OF SELLER. The
---------------------------------------------------------
liability of the Seller to Buyer under Section 10.1 shall be subject to the
following limitations:
(a) Deductible. Seller shall not be liable for indemnity under
----------
Section 10.1 unless the aggregate amount of Indemnifiable Costs incurred by the
Indemnified Parties exceeds the sum of one hundred thousand dollars ($100,000)
(the "Deductible") prior to the expiration of the Applicable Limitations Period,
hereinafter defined. This Section shall not apply to Indemnifiable Costs
arising as a result of a breach of representations in Sections 2.9, 2.14 and
2.15.
(b) General Liability Ceiling. If the aggregate Indemnifiable
---------------------------
Costs incurred by the Indemnified Parties exceed the Deductible before
expiration of the Applicable Limitations, Seller shall indemnify the Indemnified
Parties for the amount of such excess up to but not in excess of the amount of
the Purchase Price less all debt on the Purchased Assets. Seller agrees, for a
period of one (1) year after the Closing Date, to make no distributions to the
Members of any portion of the Purchase Price (including any payment of any
liability of a Member or a liability of Seller guaranteed by a Member) up to
$3,000,000.00. For the period after one (1) year after the Closing Date until
two (2) years after the Closing Date, Seller shall maintain:
(i) a "tail" or similar insurance policy on the underground
storage tank insurance presently maintained by Seller, Policy 020568, with the
Missouri Petroleum Storage Tank Insurance Fund, plus an amount equal to the
deductible amount of said policy;
(ii) an amount sufficient to satisfy in full the requirements
of the letter agreement with Stifel, Nicolaus & Company, Incorporated, set forth
in Schedule 2.15;
--------------
(iii) an amount sufficient to pay principal and interest on
all indebtedness of ARCH, including any accounts payable and the line of credit
and building loan with Mercantile Bank of St. Louis, National Association, it
successors and assigns;
21
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(iv) an amount sufficient to pay all tax liabilities for the
years 1998, 1999 and 2000;
(v) an amount sufficient to satisfy all obligations to ARCH's
employees on the Closing Date for accrued vacation time, contractual
obligations, and all employee benefit plans of ARCH and SkyLife;
(vi) an amount sufficient to pay all premiums on the tail for
the professional policy listed in Schedule 1.2(g);
----------------
(vii) an amount sufficient to prosecute any litigation
pending, threatened or outstanding against ARCH as of the date one year after
the Closing Date; and
(viii) Two Hundred Fifty Thousand Dollars ($250,000.00).
(c) [Intentionally left blank].
(d) [Intentionally left blank].
(e) Time Limitations. Except as provided hereafter, the
-----------------
"Applicable Limitation Period" within which any claim for indemnification may be
brought by Buyer under Section 10.1 shall be the one (1) year, ending on the
first anniversary date of the Closing Date. Notwithstanding the preceding
sentence, the "Applicable Limitation Period" for claims for indemnification
arising from a material breach of a representation contained in Sections 2.9,
2.10 and 2.14 shall be a period of time equal to the statutory limitations
period that would apply to the facts or circumstances that gave rise to such
material breach and no claim for indemnification of Indemnifiable costs arising
out of any such material breach may be asserted against the Seller after the
expiration of the "Applicable Limitation Period" that would, under the
applicable statute, apply to such breach, except that in no event shall such
period extend beyond the second anniversary of the Closing Date.
(f) Environmental/Remedial Action. Seller shall be entitled to
------------------------------
control any remedial action and any proceeding relating to an environmental
matter arising under the provisions of Section 2.14 for which Seller is
obligated or agrees to indemnify Buyer. "Remedial action" shall include all
actions, including any capital expenditures, required or voluntarily undertaken
to: (a) clean up, remove, treat, or in any other way address any Hazardous
Substance or other substance; (b) prevent the release or threat of release, or
minimize the further release of any Hazardous Substance or other substance so it
does not migrate or endanger or threaten to endanger public health or welfare or
the environment; (c) perform pre-remedial studies and investigations or
post-remedial monitoring and care; or (d) bring all facilities and operations
conducted thereon into compliance with all environmental laws and environmental
governmental authorizations. Seller shall meet and consult with the designated
representatives of Buyer in so acting, and all actions by Seller shall be
reasonable under the circumstances.
22
<PAGE>
To be effective, any claim for indemnification by any Indemnified Party
must be made by a written notice (a "Notice of Claim") to the Seller, given in
accordance with the provisions of Section 10.2 hereof, accompanied by
documentation supporting the claim, by no later than the expiration of the
Applicable Limitation Period set forth above in this Section 10.2(e). If the
Indemnified Party asserting any such claim for indemnification hereunder has
made such a claim prior to the expiration of the Applicable Limitations Period,
then, subject to the Deductible and the applicable Liability Ceiling in this
Section 10.2, such Indemnified Party shall be entitled to recover the full
amount of the Indemnified Costs incurred by it even if that amount is not
finally determined until after such expiration.
10.3 COOPERATION.
-----------
(a) NOTICE. Buyer will give prompt written notice to Seller of
------
any assertion, claim or demand which Seller discovers or of which notice is
received after the Closing and which might give rise to a claim by Buyer against
Seller under Section 10.1 hereof, stating in reasonable detail the nature, basis
and amount thereof.
(b) CLAIMS FOR MONEY DAMAGES. In case of any claim for money
---------------------------
damages by a third party, any suit for money damages, any claim for money
damages by any governmental body, or any legal, administrative or arbitration
proceeding with respect to which Seller may have liability for money damages
under the indemnity agreements contained in Section 10.1, Seller shall be
entitled to participate therein, and to the extent desired, to assume the
defense thereof, and after notice from Seller of its election so to assume the
defense thereof, the Seller will not be liable to the Indemnified Party for any
legal or other expenses subsequently incurred by the Indemnified Party in
connection with the defense thereof, other than reasonable costs of
investigation, unless the Seller does not actually assume the defense thereof
following notice of such election. Buyer or Seller shall make available to the
other and its attorneys and accountants, at all reasonable times, all books and
records relating to such suit, claim or proceeding, and Buyer and Seller will
render to each other such assistance as may reasonably be required of each other
in order to insure proper and adequate defense of any such suit, claim or
proceeding. Buyer will not make any settlement of any claim which might give
rise to liability of Seller hereunder for money damages under the indemnity
agreement contained in Section 10. I hereof without the consent of the Seller,
which consent shall not be unreasonably withheld. If the Seller shall desire
and be able to effect a monetary compromise or settlement of any such claim
which settlement or monetary compromise shall fully and finally relieve Seller
of any liability in connection with such cause of action and claim and the
Indemnified Party shall refuse to consent to such compromise or settlement (to
the extent it relates to money damages), then the liability of Seller to the
Indemnified Party with respect to settlement of such claim shall be limited to
the amount so offered in compromise or settlement.
10.4 ARBITRATION PROVISIONS. If the parties have been unable to
-----------------------
resolve any dispute or controversy arising with respect to a claim of
indemnification hereunder, then such dispute or controversy shall be settled by
arbitration by a panel of one arbitrator (selected from a panel of independent
and disinterested persons, with at least ten years experience in significant
corporate, business or accounting matters, familiar with the purchase and sale
of business concerns) in accordance with the rules of the American Arbitration
Association. The expenses of the party that prevails in the arbitration,
including attorneys' fees and arbitration expenses, shall be paid by the losing
party. If each party prevails in part, the arbitrator will determine the
appropriate allocation of expenses among the parties. Judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof. The parties may pursue all other remedies with respect to any claim
not subject to arbitration.
23
<PAGE>
10.5 EXCLUSIVE REMEDY. Buyer hereby agrees that (i) the rights and
-----------------
remedies of Buyer and the Indemnified Parties contained in this Article X shall
be the sole and exclusive rights and remedies that they shall have against the
Seller or the Members for any breach of or inaccuracy in any of the
representations or warranties of Seller contained in this Agreement, in the
Seller's Disclosure Schedules and in the Seller's Closing Certificates, (ii)
Buyer, for itself and the Indemnified Parties, including its and their
respective successors and assigns, hereby waives and agrees that it or they will
not assert or seek to enforce any other rights or remedies, whether available
under statute or at common law, that Buyer would otherwise have against the
Seller by reason of or in respect of any such breach or inaccuracy in any of
such representations or warranties of the Seller (collectively, "Other
Remedies"), and (iii) except as provided in the next sentence, Buyer shall hold
harmless and indemnify the Seller and the Members and their respective heirs,
representatives, successors and assigns from and against any claims, demands,
actions, suits or other proceedings brought against any of them, and any
liabilities, damages, costs and expenses, including, without limitation,
reasonable attorneys' fees, incurred by the Seller or the Members or any of
their respective heirs, representatives, successors or assigns, arising out of
any attempt or any efforts (successful or unsuccessful) by any Indemnified Party
to assert or exercise any of the Other Remedies, Notwithstanding the foregoing,
the provisions of this Section 10 with respect to the exclusive rights and
remedies of the Buyer and the Indemnified Parties shall not apply to any breach
of representation or warranty of Seller contained in this Agreement (as the same
has been modified by the Disclosure Schedules attached hereto), if a court or
arbitrator having jurisdiction has found that Seller committed common law fraud
or that Seller committed a violation of the antifraud provisions of the Federal
Securities Laws in making such representation or warranty and such finding has
become final and is no longer appealable, provided, however, that limitations on
-----------------
and the exclusions from the amount of Seller's liability to Buyer, and the
Indemnified Parties contained in this Article X and the provisions establishing
an Applicable Limitations Period on the rights of the Buyer to assert
indemnification claims shall nevertheless continue to apply notwithstanding any
such finding or findings.
10.6 SURVIVAL OF REPRESENTATIONS AND INDEMNIFICATION OF BUYER AND AIR
------------------------------------------------------------------
METHODS. All representations, warranties, covenants and obligations in this
- ------
Agreement, and any certificate delivered by Buyer and Air Methods pursuant to
this Agreement shall survive the Closing and the consummation of the
transactions contemplated herein for two years from the date of Closing. The
right of indemnification, reimbursement or other remedy based upon such
representations, warranties, covenants and obligations shall not be affected by
any investigation conducted with respect to, or knowledge (either actual
awareness or where a prudent person could be expected to discover or otherwise
become aware of such fact or other matter in the course of conducting a
reasonably comprehensive investigation regarding the accuracy of any
representations or warranties contained in this Agreement) acquired about the
accuracy or inaccuracy of or compliance with any such representation.
24
<PAGE>
Buyer and Air Methods will indemnify and hold harmless Seller, its
officers, directors, Members and affiliate from and against any and all damages,
loses, claims, liability, expense (including costs of investigation and defense
and reasonable attorneys' fees) and expenses, whether or not involving a third
party claim arising from or in connection with:
(a) any breach of any representation or warranty made by Buyer in
this Agreement pursuant to this Agreement;
(b) any brokerage or finder's fees or commissions or similar
payments based upon any agreement or understanding made, or alleged to have been
made, by any person acting on its behalf in connection with any of the
transactions contemplated herein;
(c) any assumed liabilities; and
(d) any environmental liabilities arising as a result of Buyer's
use of the Purchased Assets after the Closing Date.
Buyer and Air Methods will have no liability (for indemnification or
otherwise) with respect to claims arising under this Section 10.6 until the
total damages with respect to such matters exceeds $10,000.00 and then only for
the amounts by which such damage exceeds $10,000.00. However this section will
not apply to claims under Section 10.6(b), (c) and (d).
ARTICLE XI
TERMINATION
11.1 TERMINATION OF AGREEMENT. This Agreement may, by written notice
--------------------------
given at or prior to Closing in the manner hereinafter provided, be terminated
or abandoned:
(a) By mutual consent of Buyer and Seller;
(b) By Seller if the Closing has not occurred on or before the
Closing Date due to a failure of any of the conditions specified in Section 7.2
or Buyer's material failure to make the deliveries required in Section 8.3 at
the Closing;
(c) By Seller if there has been a material default or breach by
Buyer with respect to the performance of any of Buyer's material covenants and
agreements contained herein, or with respect to the correctness of or due
compliance with any of Buyer's material representations and warranties contained
herein;
(d) By Buyer if the Closing has not occurred on or before the
Closing Date due to a failure of any of the conditions specified in Section 7.1,
(which shall include adverse action by the Missouri Attorney General); or
Seller's material failure to make the deliveries requested by Section 8.2 at the
Closing; or
(e) By Buyer if there has been a material default or breach by
Seller with respect to the performance of any of Seller's material covenants and
agreements contained herein, or with respect to the correctness of or due
compliance with any of Seller's material representations and warranties
contained herein.
25
<PAGE>
Notwithstanding the foregoing, if Buyer or Seller is in breach of any of
its respective material obligations under this Agreement, the Buyer or Seller
(as the case may be) shall not be entitled to exercise its termination right
under Section 11.1 (b), (c), (d) or (e) above during the continuance of such
breach.
11.2 PROCEDURE UPON TERMINATION. In the event of termination of this
----------------------------
Agreement by Buyer or Seller or by both Buyer and Seller pursuant to Section
11.1 hereof, written notice thereof shall forthwith be given to the other party
or parties hereto and the transactions contemplated herein shall be abandoned
without further action by Buyer, the Company or the Seller. In addition, if
this Agreement is terminated as provided herein:
(a) Each party will redeliver all documents, workpapers and other
material of any other party relating to the transactions contemplated hereby,
whether so obtained before or after the execution hereof, to the party
furnishing the same.
(b) All information of a confidential nature received by any party
hereto with respect to the business of any other party (other than information
which is a matter of public knowledge or which has heretofore been or is
hereafter published in any publication for public distribution or filed as
public information with any governmental authority) shall continue to be subject
to the provisions of Section 12.1 of this Agreement, which provisions shall
survive any such termination.
(c) Upon any termination of this Agreement pursuant to this
Section 11, the respective obligations of the parties hereto under this
Agreement (other than under Paragraphs 11,2(a) and (b) above) shall terminate
and no party shall have any liability whatsoever to any other party hereto by
reason of such termination, irrespective of the cause of such termination,
provided, however, that a termination of this Agreement by Buyer pursuant to
- ------------------
Paragraph 11.1 (d) due to a Material Seller Default, or by Seller pursuant to
Paragraph 11.1(c) due to a Material Buyer Default, shall not relieve Seller or
the Buyer (as the case may be) of its liability hereunder to the nondefaulting
party, and provided, further, that if, notwithstanding a Material Seller Default
-----------------
or a Material Buyer Default, the Buyer (in the case of a Material Seller
Default) closes, or Seller (in the case of a Material Buyer Default) close the
transactions contemplated hereby, such action by the non-defaulting party or
parties shall constitute a waiver of such Material Seller Default or Material
Buyer Default, as the case may be, and (ii) notwithstanding anything to the
contrary contained herein, in no event shall Seller be liable to Buyer by reason
of a material breach of this Agreement by Seller, and in no event shall Buyer be
liable to any or all of the Seller by reason of a material breach of this
Agreement by Buyer, for any consequential damages, special damages or lost
profits or lost business opportunities arising from such breach.
11.3 LIQUIDATED DAMAGES UPON TERMINATION.
--------------------------------------
(a) If the Seller terminates this Agreement pursuant to Section
11.1(b) or (c), then Seller shall be entitled to liquidated damages equal to
$360,000 (the "Seller Breakup Fee").
26
<PAGE>
(b) If the Buyer terminates this Agreement pursuant to Section
11.1(d) (except that adverse action by the Missouri Attorney General shall not
give rise to such entitlement to the Buyer Breakup Fee) or Section 11.1(e), then
Buyer shall be entitled to liquidated damages equal to $360,000 (the "Buyer
Breakup Fee").
(c) The Seller Breakup Fee or the Buyer Breakup Fee, as
applicable, shall be payable by the applicable party in cash by wire transfer of
immediately available funds within 20 business days following termination of the
Agreement in the manner described in Sections 11.2(a) and 11.2(b).
ARTICLE XII
CONFIDENTIALITY
12.1 CONFIDENTIALITY COVENANTS. Buyer and Seller each acknowledge that
-------------------------
they have previously each entered into confidentiality agreements which remain
valid and enforceable documents, and that they may have received access to
Confidential Information (as hereinafter defined) of the other in the course of
investigations and negotiations prior to Closing, and Members acknowledge that
they may have Confidential Information of Seller. Each party who receives any
Confidential Information (a "Receiving Party") from any other party hereto (the
"Disclosing Party"), may disclose any such Confidential Information to such
party's employees, attorneys, accountants, financial advisors or agents or
representatives that have a need to know such Information to facilitate or
assist with the consummation of the transactions contemplated hereby
(collectively, "Representatives"). Subject to the foregoing exception, and the
exception hereinafter set forth in Subsection 12.2 below (i) a Receiving Party
shall keep, and shall cause its Representatives to keep, all Confidential
Information received from a Disclosing Party hereunder strictly confidential and
shall not disclose, and shall cause its Representatives not to disclose, any
such Confidential Information to any third party, and (ii) any Receiving Party
and its Representatives shall not make any uses of Confidential Information
received from a Disclosing Party except to facilitate or assist with the
consummation of the transactions contemplated hereby. Confidential information
shall include any business, financial, technical or other information,
including, but not limited to, business plans, forecasts, marketing plans or
initiatives, customer, client and vendor lists, training materials developed by
the Disclosing Party, information regarding the identities, qualifications and
compensation being paid to key employees, information received from customers,
vendors or clients with the expectation, whether explicit or implicit, that such
information would be protected from disclosure or dissemination to third
parties, and other information the value of which to the Disclosing Party is
dependent on the non-disclosure of such information. Confidential Information
shall not include information that, although disclosed or made available by a
Disclosing Party or any of its Representatives to a Receiving Party or any of
its Representatives, (i) can be obtained by persons not subject to
confidentiality or use restrictions from public sources, including periodicals,
government and industry publications and other media that is readily accessible
to the public or competitors of the Disclosing Party, (ii) has been disclosed by
the Disclosing Party or any of its Representatives to any unaffiliated third
parties without the imposition of any restrictions or prohibitions on disclosure
or use thereof and has been, as a result, disclosed by that third party to other
third parties, or (iii) information that the Receiving Party can demonstrate
convincingly was in its possession prior to its disclosure to the Receiving
Party by the Disclosing Party or any of its Representatives, provided that the
--------
Receiving Party had not obtained possession of such Confidential information
from any one that the Receiving Party knew or should have known was subject to
restrictions on its right to disclose such information to the Receiving Party,
either pursuant to an agreement or by reason of his position or relationship
with the Disclosing Party.
27
<PAGE>
12.2 DISCLOSURE PURSUANT TO LEGAL PROCESS. If a Receiving Party is
----------------------------------------
required by subpoena or other legal process, or by laws applicable to it, to
disclose or produce any Confidential Information belonging to a Disclosing
Party, then, the Receiving Party shall (i) provide the Disclosing Party prompt
notice thereof and copies, if possible, and, if not, a description, of the
Confidential Information requested or required to be produced so that Disclosing
Party may seek an order to quash such subpoena or other legal process or an
appropriate protective order or may elect to waive compliance with the
provisions of this Section 12 as to any portion or all of such Confidential
Information (ii) consult with the Disclosing Party as to the advisability of
taking legally available steps to quash or narrow such request, and (iii)
provide such reasonable cooperation as the Disclosing Party may request in
connection with efforts by the Disclosing Party to quash the subpoena or other
legal process or to obtain a protective order with respect to the Confidential
Information being sought. If, in the absence of a protective order or the
receipt of a waiver hereunder, a Receiving Party is nonetheless, in the opinion
of his legal counsel, compelled to disclose or produce any such Confidential
Information of the Disclosing Party to any tribunal legally authorized to
request and entitled to receive such Confidential Information or to any
government agency with which the Receiving Party is required by law to file any
such Information or otherwise stand liable for contempt or suffer other censure
or penalty or liability, the Disclosing Party may disclose or produce such
Confidential Information to such tribunal or government agency, notwithstanding
the fact that such information may, as a result become available to the public,
without incurring liability hereunder to the Disclosing Party; provided,
---------
however, that the Receiving Party shall give the Disclosing Party written notice
- -------
of the Confidential Information to be so disclosed or produced as far in advance
of its disclosure or production as is practicable and shall use his best efforts
to obtain, to the greatest extent practicable, an order or other reliable
assurance that confidential treatment will be accorded to such Confidential
Information so required to be disclosed or produced. Notwithstanding the
foregoing, the parties agree that the Buyer may file a report on Form 8-K with
the Securities and Exchange Commission regarding the transactions contemplated
by this Agreement and file as exhibits thereto, this Agreement, and all
schedules and exhibits thereto without requesting confidential treatment for
such documents and that the Seller may file with the Missouri Attorney General
this Agreement and such other information as the Missouri Attorney General shall
reasonably request to comply with the provisions of Section 355.656 RSMo.
without requesting confidential treatment of such documents
12.3 TERMINATION OF CONFIDENTIAL OBLIGATIONS. The obligations of Buyer
---------------------------------------
under this Article XII shall terminate on the Closing of the transactions
contemplated hereby, but the obligations of Seller, shall survive the Closing
for a period of two (2) years thereafter with respect to Confidential
Information of Seller or Buyer. In the event of a termination of this
Agreement, the respective obligations of Seller with respect to Confidential
Information of Buyer and the obligations of Buyer with respect to Confidential
Information of Seller and the Seller shall survive for a period of five (5)
years from the date of such termination.
28
<PAGE>
ARTICLE XIII
MISCELLANEOUS
13.1 MODIFICATIONS; WAIVER. Any amendment, change or modification of
----------------------
this Agreement shall be void unless in writing and signed by all parties hereto.
No failure or delay by any party hereto in exercising any right, power or
privilege hereunder, and no course of dealing between or among any of the
parties, shall operate as a waiver of any such right, power or privilege. No
waiver of any default on any one occasion shall constitute a waiver of any
subsequent or other default. No single or partial exercise of any such right,
power or privilege shall preclude the further or full exercise thereof.
13.2 NOTICES. All notices and other communications hereunder shall be
-------
in writing and shall be deemed to have been duly given when personally
delivered, mailed by certified mail, return receipt requested, or via Federal
Express or similar overnight courier service, or by facsimile. Such notices or
other communications shall be sent to the following addresses, unless other
addresses are subsequently specified in writing:
Buyer: Mercy Air Service, Inc.
-----
1670 Miro Way
Rialto, CA 929376
Attention: President
Fax No.: (909)357-1009
Tel. No. (909)437-7009
with copies to: Air Methods Corporation
7301 S. Peoria
Englewood, CO 80112
Attention: President and CEO
Fax No.: (303)792-4780
Tel. No.: (303)792-7412
and to
Davis, Graham & Stubbs LLP
370 Seventeenth Street
Suite 4700
Denver, CO 80202
Attention: Lester R. Woodward, Esq.
Fax No. (303)893-1379
Tel. No.: (303)892-9400
Seller: Area Rescue Consortium of Hospitals
------
18500 Edison Avenue
Chesterfield, MO 63005
Attention: Robert F. Stumpf
Fax No.: (636)681-8049
Tel. No.: (636)681-8000
29
<PAGE>
with a copy to: Lashly & Baer, P.C.
714 Locust Street
St. Louis, MO 63101
Attention: Charles E. Valier
Fax No.: (314)621-6844
Tel. No.: (314)621-2939
13.3 COUNTERPARTS. This Agreement may be executed in multiple
------------
counterparts, each of which shall be deemed an original but all of which
counterparts collectively shall constitute one instrument. Signatures may be
exchanged by facsimile, with original signatures to follow. Each party hereto
agrees that it will be bound by its own signature and that it accepts the
facsimile signatures of the other parties hereto.
13.4 EXPENSES. Each of the parties hereto will bear all costs, charges
--------
and expenses incurred by such party in connection with this Agreement and the
consummation of the transactions contemplated herein.
13.5 BINDING EFFECT, ASSIGNMENT. This Agreement shall be binding upon
---------------------------
and inure to the benefit of Buyer, Air Methods and Seller, their respective
representatives, successors, and permitted assigns; provided, however, that no
party may assign his, her, or its rights or obligations under this Agreement
without the prior written consent of the other parties. Buyer may assign
certain rights with respect to the Purchased Assets to Buyer's lenders to
securitize certain assets being financed.
13.6 NO STRICT CONSTRUCTION. The language used in this Agreement shall
----------------------
be deemed to be the language chosen by the parties to express their mutual
intent, and no rule of strict construction shall be applied against any party
hereto.
13.7 ENTIRE AND SOLE AGREEMENT. This Agreement and the other schedules
-------------------------
and Agreements referred to herein, constitute the entire agreement between the
parties hereto and supersede all prior agreements, negotiations,
representations, warranties, statements, promises, information, arrangements and
understandings, whether oral or written, express or implied, with respect to the
subject matter hereof.
13.8 GOVERNING LAW. This Agreement and its validity, construction,
--------------
enforcement, and interpretation shall be governed by the substantive laws of the
State of Missouri.
13.9 INVALID PROVISIONS. If any provision of this Agreement is deemed
-------------------
or held to be illegal, invalid or unenforceable, this Agreement shall be
considered divisible and inoperative as to such provision to the extent it is
deemed to be illegal, invalid or unenforceable, and in all other respects this
Agreement shall remain in full force and effect, provided, however, that if any
provision of this Agreement is deemed or held to be illegal, invalid or
unenforceable there shall be added hereto with the mutual consent of the parties
a provision as similar as possible to such illegal, invalid or unenforceable
provision and be legal, valid and enforceable. Further, should any provision
contained in this Agreement ever be reformed or rewritten by any judicial body
of competent jurisdiction, such provision as so reformed or rewritten shall be
binding upon all parties hereto.
30
<PAGE>
13.10 HEADINGS. The descriptive section headings are for convenience
--------
of reference only and shall not control or affect the meaning or construction of
any provision of this Agreement.
* * * * *
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
31
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be duly executed as of the date and year first above written.
BUYER:
AIR METHODS CORPORATION
By: /s/ George W. Belsey
-----------------------
President
MERCY AIR SERVICE, INC.
By: /s/ David L. Dolstein
------------------------
President
SELLER:
AREA RESCUE CONSORTIUM OF HOSPITALS
By: /s/ James R. Kimmey, M.D.
-----------------------------
Chairman
32
<PAGE>
EXHIBIT A
Bill of Sale, Assignment and Assumption Agreement
<PAGE>
EXHIBIT B
Form of Opinion of Buyer's Counsel
<PAGE>
EXHIBIT C
Form of Opinion of Seller's Counsel
<PAGE>
EXHIBIT D
Certificate of Seller
<PAGE>
EXHIBIT E
Certificate of Buyer
<PAGE>
EXHIBIT F
Form 8594
<PAGE>
EXHIBIT G
Form of Non-Compete Agreement
<PAGE>
SCHEDULE 1.2(G) - Insurance Policies (cont'd)
EXHIBIT H
Form of Lease
<PAGE>
AIRCRAFT PURCHASE AGREEMENT
---------------------------
This Aircraft Purchase Agreement is made and entered into as of April
25, 2000, by and between SkyLife Aviation, L.L.C., a Missouri limited liability
company ("Seller") and ARCH Air Medical Service, Inc., a Missouri corporation
("Buyer").
RECITALS
Seller desires to sell to Buyer, and Buyer desires to purchase from
Seller, two used Beechcraft King Air airplanes described on Exhibit A hereto
(the "Airplane" or "Airplanes") on the terms and subject to the conditions, and
at a purchase price determined as set forth herein.
AGREEMENT
IT IS THEREFORE AGREED as follows:
Section 1. Sale of Aircraft.
- ---------- ------------------
Seller agrees to sell and Buyer agrees to purchase: one (1) 1979
Beech model B100 aircraft bearing manufacturer's serial number BE-64 and United
States Registration No. N4490M; and one (1) 1977 Beech model B100 aircraft
bearing manufacturer's serial number BE-27 and United States Registration No.
N8TGE, equipped per "Attachment A" (the "Aircraft").
Section 2. Purchase Price.
- ---------- ---------------
The purchase price for the Airplane shall be One Million Six Hundred
Fifty Thousand Dollars ($1,650,000.00) which shall be paid as provided herein.
Section 3. Closing.
- ---------- -------
At the Closing, the following deliveries shall be made:
(a) Deliveries by Seller. Seller shall deliver the Airplanes to
Buyer and Buyer shall accept such delivery at Seller's facility at Spirit of St.
Louis Airport in St. Louis, Missouri. Delivery of each Airplane shall be deemed
to occur upon delivery to Buyer of a duly executed U. S. Federal Aviation
Administration ("FAA") Bill of Sale conveying good title to the Airplane, free
and clear of any liens or encumbrances. Delivery of the Airplanes shall be
accompanied by delivery of all log books, flight manuals, maintenance records,
component cards and other records pertaining to the operation and maintenance of
the Airplanes that Seller has in its position. Seller shall also deliver a
signed release or other evidence of release of all liens presently outstanding
on the Airplanes.
<PAGE>
(b) Deliveries by Buyer. At the Closing, and concurrent with the
delivery of the Airplanes to Buyer, Buyer shall pay the purchase price to Seller
by wire transfer in immediately available funds to Seller's bank account
identified by Seller to Buyer in writing at least one day before the Closing.
Section 4. Representations and Warranties of Seller.
- ---------- --------------------------------------------
Seller represents and warrants to Buyer as follows:
(a) Airworthy Condition. The Airplanes have been maintained in
airworthy condition in accordance with maintenance requirements of the FAA and
the manufacturer of the Airplanes. Except for such representation and warranty,
Buyer agrees to accept the Aircraft in an "as is, where is" condition, and
Seller makes no warranty of merchantability of the Aircraft and/or its
equipment. Buyer understands that Seller is neither the manufacturer nor has
Seller been the sole owner of the Aircraft and makes no warranties whatsoever,
either expressed or implied, with regard to the Aircraft, accessories, log
books, fitness for any particular purpose, other than Seller's warranty that it
will deliver title to the Aircraft free and clear of all encumbrances.
(b) Good Title. Seller is the lawful owner of the Airplanes and
at the Closing, Seller's sale to the Buyer shall transfer good and lawful title
to the Airplanes, free and clear of all liens, encumbrances and charges, other
than liens for taxes not yet delinquent and any liens, charges or encumbrances
arising out of or in connection with any act or omission of Buyer or any person
claiming by or through or under Buyer.
(c) Legal Status; Authority. Seller is a limited liability
company, duly organized, validly existing and in good standing under the laws of
the State of Missouri. Seller has full power and authority to transfer its
right, title and interest in the Airplanes to Buyer. This Agreement has been
duly authorized, executed and delivered by Seller and constitutes the legal,
valid and binding obligation of Seller, enforceable against Seller in accordance
with its terms, subject to bankruptcy law and equitable principals. This
Agreement does not, and the performance of this Agreement will not, violate any
law or regulation, and will not result in any breach of any agreement to which
Seller is a party or by which the Airplanes are bound.
(d) To Seller's knowledge no federal or state approvals will be
necessary to transfer title to Buyer at the Closing other than such approvals
as will have been obtained on or prior to the date of Closing.
Section 5. Representations and Warranties of Buyer.
- ---------- -------------------------------------------
Buyer represents and warrants as follows:
Corporate Status; Authority. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of
California. Buyer has full corporate power and authority to enter into this
Agreement and this Agreement has been duly authorized, executed and delivered by
Buyer and constitutes a legal, valid and binding obligation of Buyer and
enforceable against Buyer in accordance with its terms, subject to bankruptcy
law and equitable principals. This Agreement does not, and the performance of
this Agreement will not, violate any law or regulation, and will not result in
any breach of any agreement to which Buyer is a party or by which the Airplanes
are bound.
- 2 -
<PAGE>
Section 6. Taxes.
- ----------- -----
(a) The Purchase Price for the Airplanes does not include any
transfer tax, duty or other similar fee. Buyer agrees to pay any transfer tax,
duty or other similar fee imposed upon or arising out of the sale of the
Airplanes (except with respect to income taxes on the net income of Seller), and
agrees to reimburse Seller and hold Seller harmless from and against any such
tax, duty or other similar sales fee paid or payable by Seller.
(b) Any and all taxes levied or assessed by any taxing authority
in respect to ownership of the Airplane, including, but not limited to, any and
all ad valorem property taxes, based upon ownership prior to the Closing Date
shall be paid by Seller and all such taxes assessed or levied based upon
ownership after the Closing Date shall be paid by Buyer. Nothing in this
subsection (b) shall limit the right of Buyer and Seller to contest in good
faith and by appropriate legal proceedings any such taxes levied or assessed by
any taxing authority in respect to ownership of the Airplane.
Section 7. Risk of Loss; Insurance.
- ---------- --------------------------
(a) Risk of Loss Prior to Closing. If any loss, damage, or
destruction of any kind occurs with respect to either Airplane prior to the
Closing, Seller may with the reasonable consent of the Buyer either (i)
terminate this Agreement [with respect to that Airplane], in which case, neither
party shall have any liability or other obligation to the other under this
Agreement, or (ii) repair or cause to be repaired the loss, damage or
destruction to the Airplane, in order to restore the Airplane to substantially
the same condition as existed immediately prior to such loss, damage or
destruction, prior to the time of delivery of the Airplane on the Closing and,
if such repairs cannot be completed prior to such time, Seller may delay the
Closing for up to and including 15 days, or, with Buyer's prior written consent,
for a longer period. In the event the Closing [with respect to the sale of the
damaged Airplane] is delayed longer than 15 days, and Buyer does not consent in
writing to such extension, Buyer and Seller each shall have the right to
terminate this Agreement [with respect to the sale of that Airplane] by giving
written notice of termination to the other and, upon Seller's receipt of such
written notice from Buyer, or upon Seller's giving of such written notice to
Buyer, neither party shall have any liability or obligation to the other under
this Agreement [with respect to the sale of that Airplane]. Seller shall be
responsible for and shall protect, defend, indemnify and hold harmless Buyer
from and against any and all losses, claims, liabilities, damages, taxes,
expenses, actions and causes of action, including but not limited to reasonable
attorney's fees, arising out of or in connection with the use, ownership or
operation of the Airplanes, prior to the Closing, including liability to third
parties for property damages, personal injury or death.
- 3 -
<PAGE>
(b) Risk of Loss Upon Closing. Exclusive care, custody and
control of the Airplanes, and all risk of loss, damage or destruction to the
Airplanes from any cause whatsoever, including risks of damage to or loss or
destruction of the Airplanes and liability to third parties for property
damages, personal injury or death (excluding any liability arising out of a
condition or defect existing in an Airplane at the time of delivery thereof to
Buyer hereunder, but warranted against in Section 4(a)) shall pass to and be
assumed by Buyer upon delivery of the Airplanes to Buyer hereunder. Upon
delivery of the Airplanes in accordance with the provisions of Section 3 and
effective as of the Closing, Buyer shall assume all responsibility in connection
with the Airplanes and all risks incident to ownership, maintenance, repair, use
and modification thereof and is responsible for and shall protect, defend,
indemnify and hold harmless Seller from and against any and all losses, claims,
liabilities, damages, taxes, expenses, actions and causes of action, including
but not limited to reasonable attorney's fees, arising out of the use, ownership
or operation of the Airplanes from and after the Closing, including damage to or
destruction or loss of the Airplanes and liability to third parties for property
damage, personal injury or death.
Section 8. Miscellaneous.
- ---------- -------------
(a) Assignment of Warranties. Effective as of the time of
delivery of the Airplane to, and acceptance thereof by, Buyer on the Closing
Date, Seller hereby assigns to Buyer, without representation, warranty or
recourse of any kind, any warranties, if any, to the extent assignable, of
manufacturers and maintenance and overhaul agencies related to the Airplanes and
will give notice of such assignment to any such manufacturers and maintenance
and overhaul agencies as Buyer may reasonably request.
(b) Notice. All notices required or permitted hereunder shall be
in writing and shall be either personally delivered or telecopied, telexed or
sent by a courier service or mailed by registered or certified mail (return
receipt requested), postage prepaid, addressed as follows:
Buyer: ARCH Air Medical Service, Inc.
c/o Mercy Air Service, Inc.
1670 Miro Way
Rialto, CA 929376
Attention: President
Fax No.: (909)357-1009
Tel. No.: (909)437-7009
with copies to: Air Methods Corporation
7301 S. Peoria
Englewood, CO 80112
Attention: President and CEO
Fax No.: (303)792-4780
Tel. No.: (303)792-7412
- 4 -
<PAGE>
and to
Davis, Graham & Stubbs LLP
370 17th Street, Suite 4700
Denver, CO 80202
Attention: Lester R. Woodward, Esq.
Fax No.: (303)893-1379
Tel. No.: (303)892-9400
Seller: SkyLife Aviation, L.L.C.
2207 Scott Avenue
St. Louis, MO 63103
Attention: Robert F. Stumpf
Fax No.: (314)621-6422
Tel. No.: (314)621-1030
with a copy to: Lashly & Baer, P.C.
714 Locust Street
St. Louis, MO 63101
Attention: Charles E. Valier
Fax No.: (314)621-6844
Tel. No.: (314)621-2939
or at such other address for a party hereto as such party gives to the other
from time to time through proper notice. Any such notice shall be effective and
shall be deemed to have been given when received at the addresses set forth
above, as such addresses are modified as set forth above.
(c) Assignment. This Agreement and the rights and obligations
created hereunder, shall not be assignable or delegable by either party without
the prior written consent of the other, which consent shall not be unreasonably
withheld.
(d) Nonwaiver; Remedies Cumulative. No covenant or condition of
this Agreement can be waived except by the written consent of the party to be
charged with such waiver. No waiver by Seller or Buyer of any event of default
hereunder shall in any way be, or be construed to be, a waiver of any other or
subsequent event of default. Forbearance or indulgence by Seller or Buyer in
any regard whatsoever shall not constitute a waiver of the covenant or condition
to be performed by Seller or Buyer to which such forbearance or indulgence may
relate, and until complete performance by Seller or Buyer of such covenant or
condition or the written waiver thereof by Seller or Buyer, Seller or Buyer
shall be entitled to invoke any remedy available to Seller or Buyer under this
Agreement or by law or in equity or otherwise despite such forbearance or
indulgence.
(e) Applicable Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Missouri.
- 5 -
<PAGE>
(f) Severability. Any provision of this Agreement which may be
prohibited or unenforceable in any jurisdiction shall be ineffective to the
extent of such prohibition or unenforceability in such jurisdiction only,
without invalidating the remaining provisions hereof in such jurisdiction and
without invalidating any of the provisions hereof in any other jurisdiction. To
the extent permitted by applicable law, the parties hereto hereby waive any
provisions of law which render any provisions hereof prohibited or unenforceable
in any respect.
(g) Further Assurances. Seller and Buyer will promptly, at any
time and from time to time, execute and deliver to each other such further
instruments and documents, and take such further action, as Seller or Buyer, as
the case may be, may from time to time reasonably request and which are
necessary to carry out this Agreement and to establish and protect the rights,
interests, and remedies created in favor of Seller or Buyer.
(h) Headings. The titles of the sections of this Agreement have
been inserted for the convenience of the parties, and are not an aid in the
interpretation of this Agreement.
(i) Written Changes Only. This Agreement, including the Schedule
and Exhibits hereto, embodies the entire agreement and understanding between the
parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and understandings, written or oral, relating to such subject
matter. No term or provision of this Agreement may be changed or waived orally,
but only by an instrument in writing signed by the parties hereto.
(j) Broker. Buyer hereby represents to Seller that it has not
directly or indirectly employed or otherwise procured any broker in connection
with the purchase of the Airplane hereunder. Seller hereby represents to Buyer
that it has not directly or indirectly employed or otherwise procured any broker
other than Stifel, Nicolaus & Company, Incorporated in connection with the sale
of the Airplane, and Seller agrees that all compensation of any kind payable to
any such party is the sole responsibility of Seller.
Section 9. Counterparts.
- ----------- ------------
This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered (which delivery may be made by facsimile) shall be deemed
to be an original and all of which taken together shall constitute but one and
the same instrument.
- 6 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have set their hands and seals.
BUYER:
ARCH Air Medical Service, Inc.
By: /s/ David L. Dolstein
------------------------
Title: President
---------
SELLER:
SKYLIFE AVIATION, L.L.C.
By: /s/ James R. Kimmey, M.D.
-----------------------------
Title: Designated Officer
-------------------
- 7 -
<PAGE>
"ATTACHMENT A"
TO AIRCRAFT PURCHASE AGREEMENT
MADE AND ENTERED INTO AS APRIL ___, 2000
AIRCRAFT
--------
1979 Beech B100
S/N: BE-64 REG: N4490M
1979 Beech B100
S/N: BE-27 REG: N8THE
Both with aircraft medical interiors
- 8 -
<PAGE>
AIRCRAFT LEASE AGREEMENT
Dated as of April 25, 2000
between
C.I.T. LEASING CORPORATION
as Lessor
and
ARCH AIR MEDICAL SERVICE, INC.,
as Lessee
Air Methods 2000 Aircraft Lease Agreement
<PAGE>
AIRCRAFT LEASE AGREEMENT
------------------------
THIS AIRCRAFT LEASE AGREEMENT dated as of April 25, 2000 (this "Lease"),
-----
between C.I.T. LEASING CORPORATION, a Delaware corporation, together with its
successors and permitted assigns ("Lessor"), and ARCH AIR MEDICAL SERVICE, INC.,
------
a Missouri corporation, together with its successors and permitted assigns
("Lessee"), having its principal place of business at 7301 South Peoria Street,
------
Englewood, Colorado 80112.
WHEREAS, Lessor desires to purchase from Area Rescue Consortium of
Hospitals, a Missouri corporation, five (5) helicopters described as follows:
one Messerschmitt model BK 117 B-1 aircraft bearing manufacturer's serial number
7201 and United States Registration No. N211SL, one Messerschmitt model BK 117
B-1 aircraft bearing manufacturer's serial number 7207 and United States
Registration No. N122SL, one Eurocopter Deutschland GMBH model MBB-BK 117-B2
aircraft bearing manufacturer's serial number 7139 and United States
Registration No. N550SL, one Messerschmitt model BK 117 B-1 aircraft bearing
manufacturer's serial number 7158 and United States Registration No. N440SL, and
one Messerschmitt model BK 117 B-1 aircraft bearing manufacturer's serial number
7216 and United States Registration No. N330SL; and
WHEREAS, Lessor also desires to purchase from SkyLife Aviation, L.L.C.
(Area Rescue Consortium of Hospitals and SkyLife Aviation, L.L.C. are referred
to herein collectively as "Seller"), two (2) aircraft described as follows: one
------
Beech model B100 aircraft bearing manufacturer's serial number BE-27 and United
States Registration No. N87JE and one Beech model B100 aircraft bearing
manufacturer's serial number BE-64 and United States Registration No. N4490M
(collectively, together with the aircraft described in the preceding paragraph,
and as further defined below, the "Aircraft") and simultaneously with such
--------
purchase, Lessee desires to lease from Lessor and Lessor is willing to lease to
Lessee such Aircraft on the terms and conditions set forth in this Lease;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
Lessor and Lessee hereby agree as follows:
1. DEFINITIONS. Unless the context otherwise requires, the following
-----------
terms shall have the following meanings for all purposes of this Lease and shall
be equally applicable to both the singular and the plural forms of the terms
herein defined:
"Acceptance Date" shall mean any or all, as the context requires, of
----------------
the Delivery Date or Delivery Dates on which all of the applicable conditions
precedent set forth in Section 21 hereof have been satisfied, or waived in
-----------
writing by Lessor.
"Aeronautical Bill of Sale" shall mean the bill of sale for the
----------------------------
Aircraft on AC Form 8050-2 (for Aircraft registered in the United States) or
such other form as may be acceptable to the FAA for recordation of Lessor's
ownership interest in the Aircraft executed by Lessee in favor of Lessor and
dated the Delivery Date.
Air Methods 2000 Aircraft Lease Agreement
10679.108.107383.5
Page 1
<PAGE>
"Aeronautics Authority" shall mean, as the context requires, the
----------------------
United States Department of Transportation, the FAA and/or the Administrator of
the FAA, or any person, governmental department, bureau, commission or agency
succeeding to the functions of any of the foregoing.
"Affiliate" with respect to a specified Person shall mean any other
---------
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such Person. For the purposes of this definition,
"control" when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "controlling" and "controlled by" have meanings correlative to the
foregoing.
"Aircraft" shall mean each and every Airframe and the "Aircraft"
--------
described in the recitals above together with (a) the Engine or Engines, whether
or not installed on such Aircraft, (b) all Parts thereof, (c) spare parts or
ancillary equipment or devices acquired pursuant to the Purchase Agreement and
furnished with the Aircraft under this Lease or otherwise not constituting
Parts, (d) all Aircraft Documents, (e) all substitutions, replacements and
renewals of any and all thereof, (f) all capital improvements which may be made
to, installed on or incorporated into the Aircraft, including but not limited to
those improvements required pursuant to any Airworthiness Directive.
"Aircraft Cost" shall mean the aggregate cost of the Aircraft not to
--------------
exceed the amount set forth in the Lease Supplements executed and delivered
pursuant to this Lease and described therein as Aircraft Cost (not to exceed the
Maximum Aircraft Cost Amount).
"Aircraft Documents" shall mean the records and documentation
-------------------
pertaining to the Aircraft in Lessee's possession on each Delivery Date and all
other records and documentation pertaining to any Airframe, any Engines and any
Parts delivered with the Aircraft or created during the Lease Term in respect
thereof, all of which shall be maintained in the English language, including,
without limitation, all logs, manuals and data, and all inspection, modification
and overhaul records, and such other items which may be acquired or prepared by
Lessee relating to its use, operation and maintenance of the Aircraft during the
term of this Lease.
"Airframe" shall mean for each Aircraft, (a) the airframe described in
--------
Schedule A attached hereto and made a part hereof and any airframe which may
- -----------
from time to time be substituted or be a replacement for the airframe, and (b)
any and all Parts of whatever nature (except the Engines, propellers, rotors and
rotor hubs, as applicable) attached to or installed on such airframe for so long
as title thereto shall be vested in Lessor in accordance with this Lease.
"Airworthiness Directive" shall mean any Airworthiness Directive
------------------------
issued by the FAA and applicable to aircraft, engines and appliances and Parts
of the same type as the Aircraft, the Engines and the Parts.
"Basic Rent" shall have the meaning given to such term in Section 5(a)
---------- ------------
hereof and in the Lease Supplements executed and delivered pursuant to this
Lease.
Air Methods 2000 Aircraft Lease Agreement
10679.108.107383.5
Page 2
<PAGE>
"Basic Rent Factor" shall be the percentage (derived from the
-------------------
Reference Rate) set forth in the Lease Supplements executed and delivered
pursuant to this Lease which, when multiplied by the Aircraft Cost, result in
the Basic Rent.
"Basic Term" shall mean the number of monthly periods from and
-----------
including the Delivery Date of each Aircraft to and including the day
immediately preceding the tenth anniversary date of the first Delivery Date as
set forth in the first Lease Supplement.
"Business Day" shall mean any day other than a Saturday, Sunday or a
-------------
day on which banking institutions in New York, New York are authorized by law to
close.
"Casualty Loss Value" shall mean the amounts payable by Lessee in any
--------------------
Event of Loss and as otherwise provided in this Lease, which amounts are set
forth in the Lease Supplements executed and delivered pursuant to this Lease.
"Certificate of Acceptance" means the Certificate of Acceptance
---------------------------
substantially in the form attached hereto as Exhibit A, to be executed by Lessee
---------
for the purpose of acknowledging acceptance of each Aircraft (as the foregoing
may be amended, modified or supplemented as of the date hereof and from time to
time).
"Code" shall mean the Internal Revenue Code of 1986, as amended.
----
"Default" shall mean any event or condition which, with the lapse of
-------
time or the giving of notice or both, would constitute an Event of Default.
"Default Rate" shall mean interest at the rate per annum equal to
-------------
eighteen percent (18%), subject to the maximum rate permitted by Law.
"Delivery Date" for any Aircraft shall mean the date, which day shall
--------------
be a Business Day, specified in the Lease Supplement applicable to such Aircraft
to be executed pursuant to this Lease, on which (a) all applicable conditions
precedent set forth in Section 21 hereof have been satisfied or waived in
-----------
writing by Lessor for the delivery and sale of such Aircraft by the Lessee to
Lessor, and (b) such Aircraft is actually delivered to, and accepted by, Lessee
under this Lease.
"Early Purchase Option" shall have the meaning set forth in Section 7
---------------------- ---------
hereof.
"Early Purchase Option Price" shall have the meaning set forth in
------------------------------
Section 7 hereof.
- ----------
"Engine" shall mean with respect to any Aircraft, (a) the engine,
------
engines or rotor hub installed on such Airframe on the Delivery Date as
described in Schedule A attached hereto and made a part hereof, whether or not
----------
from time to time thereafter no longer installed on such Airframe or installed
on any other airframe or any other aircraft; or (b) any other engine or Power
Components, including, without limitation, any spare engine, which may from time
to time be substituted or be a replacement for such engine or any Part thereof
(including any rotor or propeller) in accordance with this Lease.
Air Methods 2000 Aircraft Lease Agreement
10679.108.107383.5
Page 3
<PAGE>
"Event of Default" shall mean any of the events referred to in Section
---------------- -------
23 hereof.
- --
"Event of Loss" shall mean any of the following events with respect to
-------------
the Aircraft, any Airframe or any Engine:
(a) loss of such property or the use thereof
(i) due to theft or disappearance of such property for a period in
excess of the earlier of
(A) the end of the prevailing Lease Term and
(B) forty-five (45) days (unless such loss constitutes an
Event of Loss under clause (b) below) or (ii) due to destruction, damage beyond
----------
repair or rendition of such property permanently unfit for normal use by Lessee
for any reason whatsoever;
(b) any loss or loss of use or damage to such property which results in an
insurance settlement with respect to such property on the basis of an actual or
constructive total loss;
(c) the condemnation, confiscation, conversion or seizure of, or
requisition of title to, such property, or requisition for use of such property
for a period in excess of the earlier of
(i) the end of the prevailing Lease Term, and
(ii) forty-five (45) days (or for such shorter period ending on the
date on which an insurance settlement with respect to such property on the basis
of an actual or constructive total loss shall occur);
(d) as a result of any rule, regulation, order or other action by the FAA
or other Governmental Authority having jurisdiction, the use of such property in
the normal course of air transportation of Persons shall have been prohibited
for a period of forty-five (45) days, unless Lessee, prior to the expiration of
such period, shall have undertaken or caused to be undertaken and shall
diligently carry forward or cause to be so carried forward all steps which are
necessary or desirable to permit the normal use of such property by Lessee or
any permitted assignee or sublessee, as the case may be, or, in any event, if
such use shall have been prohibited for a period of the earlier of (i) the end
of the prevailing Lease Term and (ii) three consecutive months.
"Expiration Date" shall mean the last day of the Lease Term or such
----------------
other date on which the Lease Term of this Lease may be terminated pursuant to
the terms hereof.
Air Methods 2000 Aircraft Lease Agreement
10679.108.107383.5
Page 4
<PAGE>
"FAA" shall mean, as the context requires, the United States Federal
---
Aviation Administration and/or the Administrator of the United States Federal
Aviation Administration, or any person, governmental department, bureau,
commission or agency succeeding to the functions of either of the foregoing.
"Fair Market Value" shall have the meaning set forth in Section 8(c)
------------------- ------------
hereof.
"Fair Rental Value" shall have the meaning set forth in Section
------------------- -------
8(c)hereof.
"GAAP" shall mean generally accepted accounting principles
----
consistently applied over the affected periods as in effect from time to time.
"Governmental Authority" shall mean and include (a) the FAA; (b) any
-----------------------
national, state, local or foreign government, or political subdivision thereof
or local jurisdiction therein; (c) any board, commission, department, division,
organ, instrumentality, court or agency of any entity described in (b) above,
however constituted; and (d) any association, organization, or institution of
which any entity described in (b) or (c) above is a member or to whose
jurisdiction any such entity is subject or in whose activities any such entity
is a participant but only (except for purposes of defining Law below) to the
extent that any of the preceding clauses (a), (b), (c) and (d) hereof have
jurisdiction over the Aircraft or its operations.
"Guarantor(s)" shall mean, collectively or individually, as the
------------
context requires, each guarantor from time to time of the obligations of Lessee
under the Lease Documents, including, without limitation, Air Methods
Corporation, a Delaware corporation, and MASI (and their respective successors
and assigns).
"Guaranty" shall mean the Corporate Guaranty Agreement, dated as of
--------
the date hereof, between the Guarantors and Lessor (as the foregoing may be
amended, modified or supplemented as of the date hereof and from time to time).
"Improvement" shall have the meaning set forth in Section 11 hereof.
----------- ----------
"Indemnified Party" shall have the meaning set forth in Section 18
------------------ ----------
hereof.
"Law" shall mean and include (a) any statute, decree, constitution,
---
regulation, order, judgment or other directive of any Governmental Authority;
(b) any treaty, pact, compact or other agreement to which any Governmental
Authority is a party; (c) any judicial or administrative interpretation or
application of any Law described in (a) or (b) above; and (d) any amendment or
revision of any Law described in (a), (b) or (c) above.
"Lease Documents" means this Lease, each Lease Supplement, the
----------------
Replacement Contract, the Purchase Agreement Assignments, the Guaranty, the Tax
Indemnity Agreement, any management and/or operating affecting the Aircraft, the
Purchase Documents, each and every sublease permitted by Lessor under this Lease
and all documents related to such subleases, and each other document executed by
Lessee hereunder or thereunder or in connection with the transactions
contemplated hereby or thereby (as any or all of the foregoing may be amended,
modified or supplemented as of the date hereof and from time to time).
Air Methods 2000 Aircraft Lease Agreement
10679.108.107383.5
Page 5
<PAGE>
"Lease Supplement" shall mean each and every Lease Supplement,
-----------------
substantially in the form of Exhibit B hereto, which shall be entered into
----------
between Lessor and Lessee for the purposes of (a) leasing the Aircraft, and (b)
setting forth the applicable terms of the Lease in effect with respect to the
applicable Acceptance Date and Aircraft, pursuant to the provisions of this
Lease. Each Lease Supplement shall (i) be consecutively numbered to correspond
to each Acceptance Date, and (ii) incorporate by reference all of the provisions
of this Lease Agreement, including, without limitation, any amendment thereto
entered into subsequent to the applicable Acceptance Date.
"Lease Term" shall mean the Basic Term and the Renewal Term (if any).
-----------
"Lessee Person" shall mean Lessee or other user or Person in
--------------
possession of any Aircraft, any Airframe, or any Engine, and any Affiliate,
successor or assign of any of the foregoing (other than Lessor or any Affiliate,
successor or assign of Lessor).
"Lessor Lien" means any Lien on an Airframe, any Engine or any Part
------------
arising as a result of (a) claims against or affecting Lessor or any of its
Affiliates that are not related to the transactions contemplated by the Lease
Documents, (b) any act or omission of Lessor or any of its Affiliates that is
not related to the transactions contemplated by the Lease Documents or which is
in violation of the terms hereof or (c) Taxes (including claims therefor) or
other claims imposed on Lessor or any of its Affiliates (including the
consolidated group of taxpayers of which Lessor is part) for which Lessee is not
obligated to indemnify Lessor or such Affiliate hereunder.
"Lien" shall mean any lien, mortgage, encumbrance, pledge, charge or
----
security interest of any kind.
"Life Limited Components" shall mean, with respect to any Part or
-------------------------
Engine, any such item the maintenance of which is required under Applicable Law
or by the Manufacturer thereof or another manufacturer (if other than of any
Airframe) in its maintenance manuals or otherwise based on the hours, cycles or
calendar time since the last overhaul or inspection, as appropriate, or other
date of determination relating to the maintenance of the Aircraft or such Part
or Engine in accordance with this Lease.
"Maintenance Program" shall mean the applicable Manufacturer's
--------------------
approved maintenance program (as approved by the FAA and Lessor) as in effect
from time to time for the Aircraft encompassing scheduled maintenance,
conditioned monitored maintenance and on-condition maintenance of any Airframe,
any Engine and any Parts. Upon request by Lessor, a copy of such Maintenance
Program shall be provided to Lessor.
"Manufacturer" shall mean, with respect to any Aircraft, the
------------
manufacturer of such Aircraft, together with its successors and assigns,
including, Eurocopter Deutschland GMBH and Beechcraft.
"MASI" shall mean Mercy Air Service, Inc., a California corporation.
----
Air Methods 2000 Aircraft Lease Agreement
10679.108.107383.5
Page 6
<PAGE>
"Maximum Aircraft Cost Amount" shall mean an aggregate amount that
-------------------------------
Lessor shall advance to purchase the Aircraft as set forth in the Lease
Supplements.
"Notice of Proposed Acceptance Date" shall mean a notice from Lessee
------------------------------------
to Lessor of the date, which shall be a Business Day, on which Lessee proposes
that Lessor fund a portion of Aircraft Cost pursuant to this Lease.
"Operative Documents" shall mean the Lease Documents, the Aeronautical
-------------------
Bills of Sale, the Warranty Bills of Sale, the Purchase Documents and such other
documents delivered in connection with this Lease and the Purchase Documents and
the transactions contemplated hereby and thereby (as any or all of the foregoing
may be further amended, modified or supplemented as of the date hereof and from
time to time).
"Parts" means any and all Power Components, avionics, appliances,
-----
units, components, parts, devices, instruments, appurtenances, accessories,
furnishings, seats, and other equipment of whatever nature (other than Engine or
engine and landing gear and temporary replacement parts that are duly replaced
with permanent Parts as provided in Section 11 hereof), which may from time to
----------
time be incorporated or installed in or attached to any Airframe of any Aircraft
or the Engines and spare parts delivered pursuant to the Purchase Agreement.
"Permitted Lien" means a Lien permitted by the provisions of Section
--------------- -------
14 hereof.
- --
"Person" means any individual, corporation, partnership, joint
------
venture, association, joint stock company, trust, trustee(s) of a trust,
unincorporated organization, or government or Governmental Authority, agency or
political subdivision thereof.
"Power Components" shall have the meaning set forth in Section
----------------- -------
4(c) hereof.
- ---
"Prior Lease Documents" shall mean that certain Aircraft Lease
-----------------------
Agreement, dated as of August 25, 1999, between Lessor and Air Methods
Corporation, together with each other Lease Document as therein defined (as any
or all of the foregoing may be further amended, modified or supplemented as of
the date hereof and from time to time).
"Process Agent" shall have the meaning set forth in Section 29 hereof.
------------- ----------
"Purchase Agreement" shall mean, individually or collectively, as the
-------------------
context requires, (i) the Asset Purchase Agreement, dated as of March 23, 2000,
among Seller, MASI and Lessee relating to certain the rotary wing Aircraft and
(ii) the Aircraft Purchase Agreement, dated as of April 25, 2000, between Sky
Life relating to the fixed wing Aircraft (as the same may hereafter be amended,
modified or supplemented from time to time expressly in relation to the Aircraft
to the extent permitted by the Purchase Agreement Assignment and this Lease).
Air Methods 2000 Aircraft Lease Agreement
10679.108.107383.5
Page 7
<PAGE>
"Purchase Agreement Assignment(s)" shall mean collectively or
----------------------------------
individually, as the context requires, (i) the Purchase Agreement Assignment of
even date herewith, between the Lessee, as assignor, and the Lessor, as
assignee, and consented to by MASI and Seller relating to the Asset Purchase
Agreement described therein and relating to the rotary wing Aircraft, and (ii)
the Purchase Agreement Assignment of even date herewith, between the Lessee, as
assignor, and the Lessor, as assignee, and consented to by Sky Life relating to
the Aircraft Purchase Agreement described therein and relating to the fix wing
Aircraft, (as either or both of the same may be amended, modified or
supplemented from time to time).
"Purchase Documents" shall mean the Purchase Agreements, the Purchase
-------------------
Agreement Assignments and consent related thereto, and each other document
executed by Seller, MASI or a Lessee Person pursuant to this Lease or such other
documents and the transactions contemplated hereby and thereby (as the same may
be amended, modified or supplemented from time to time) relating to the
purchase of the Aircraft .
"Purchase Option Price" shall have the meaning set forth in Section
----------------------- -------
8(b) hereof.
- ---
"Reference Rate" shall mean the relevant "Treasury Rate" as of the
---------------
date of determination which is the rate per annum equal to the yield for each of
the U.S. Treasury Securities that matures nearest to the thirty-sixth (36th)
monthly anniversary of the applicable Delivery Date determined as at the close
of business on the first Business Day immediately preceding the date of
determination under this Lease, as reported in The Wall Street Journal under the
-----------------------
heading "Treasury Bonds, Notes & Bills" (and the subheading of "Ask Yld." under
"Govt. Bonds & Notes") or if such report is unavailable, on page 119 ("U.S.
Treasury and Money Markets") of the information ordinarily provided by Telerate
Systems Incorporated. Such rate shall be set forth in each Lease Supplement as
applicable.
"Renewal Term" for the Aircraft shall mean twelve (12) monthly periods
------------
from and including the expiration date of the Basic Term to and including the
day immediately preceding the eleventh (11th) anniversary of the Delivery Date.
"Renewal Term Rent" shall mean the Rent determined under Section 8(b)
------------------ ------------
hereof and payable during the Renewal Term.
"Rent" shall mean Basic Rent, Renewal Term Rent, if any, and
----
Supplemental Payments.
"Rent Payment Date" shall mean the first day in each of the Rental
-------------------
Periods.
"Rental Period" shall mean each of the consecutive monthly periods
--------------
throughout the Lease Term as in effect under this Lease, the first such period
commencing on and including the Delivery Date and ending on the date immediately
preceding the first monthly anniversary date of the Delivery Date thereafter,
and each of the remaining monthly periods commencing on and including each
monthly anniversary date of the Delivery Date and ending on the date immediately
preceding the next succeeding monthly anniversary date of the Delivery Date.
"Replacement" has the meaning set forth in Section 11 hereof.
----------- -----------
Air Methods 2000 Aircraft Lease Agreement
10679.108.107383.5
Page 8
<PAGE>
"Replacement Contract" shall mean that certain Assignment, Notice and
---------------------
Acceptance of Replacement Property Contract, of even date herewith, among
Lessor, Lessee and Bank One Exchange Corporation (as the same may be amended,
modified or supplemented from time to time).
"Required Alteration" has the meaning set forth in Section 11 hereof.
-------------------- ----------
"Sky Life" shall mean SkyLife Aviation, L.L.C., a Missouri limited
---------
liability company and an affiliate of Seller.
"Supplemental Payments" shall mean all amounts, liabilities and
----------------------
obligations which Lessee assumes or agrees to pay hereunder to Lessor or others,
including, without limitation, payments of Casualty Loss Value and indemnities,
but excluding Basic Rent or Renewal Term Rent.
"Tax" shall have the meaning set forth in Section 17 hereof.
--- -----------
"Tax Indemnitee" shall mean and include Lessor and any Affiliate
---------------
thereof and any of their respective officers, directors, successors, assigns,
agents and servants.
"Tax Indemnity Agreement" shall mean the Tax Indemnity Agreement of
-------------------------
even date herewith, between Lessor and Lessee (as the same may be amended,
modified or supplemented from time to time).
"Taxing Authority" shall mean any federal, state or local government,
-----------------
political subdivision, or taxing authority in the United States of America, any
government or taxing authority of or in any country or other taxing jurisdiction
outside the United States of America, or any international taxing authority.
"Transaction Fee" shall mean an amount equal to the sum set forth in
----------------
the first Lease Supplement which shall be paid by the Lessee to the Lessor on or
before the Delivery Date.
"Warranty Bill of Sale" shall mean each Warranty Bill of Sale,
------------------------
substantially in the form of Exhibit C hereto relating to each Aircraft dated
---------
each Acceptance Date by Seller in favor of Lessor.
2. AGREEMENT FOR PURCHASE AND LEASE OF AIRCRAFT; MAXIMUM FUNDING;
--------------------------------------------------------------------
FUNDING PROCEDURES.
- --------------------
(a) Lessor shall, subject to the satisfaction or waiver of the
terms and conditions of this Lease and the other Lease Documents, advance funds
to Seller on account of Lessee as provided in this Lease, to pay Aircraft Cost
up to the Maximum Aircraft Cost Amount. Lessor shall have no obligation to
advance funds in respect of the Aircraft Cost under this Section 2 or otherwise
---------
in excess of the Maximum Aircraft Cost Amount.
Air Methods 2000 Aircraft Lease Agreement
10679.108.107383.5
Page 9
<PAGE>
(b) Lessor, subject to satisfaction or waiver of the conditions
set forth in Section 21 hereof, including, without limitation, the satisfaction
----------
of the conditions in the Asset Purchase Agreement referred to in clause (i) of
the definition of Purchase Agreement, and the concurrent acceptance hereunder by
Lessee of the Aircraft, hereby agrees to accept delivery on the Delivery Date of
the Aircraft from the Lessee and to lease the Aircraft simultaneously back to
Lessee hereunder; and Lessee hereby agrees, expressly for the direct benefit of
Lessor to lease on such Delivery Date from Lessor hereunder, the Aircraft, which
shall have been accepted by Lessee hereunder as evidenced by the execution by
Lessor and Lessee of the Lease Supplement leasing the Aircraft hereunder;
provided, however, that Lessor and Lessee shall have no further obligation
- -------- -------
hereunder with respect to the Aircraft if the Delivery Date shall not have
occurred on or before the date hereof unless mutually agreed by Lessor and
Lessee in writing.
(c) Lessee agrees, on Lessor's request, to give a Notice of
Proposed Acceptance Date (which shall be a Business Day) of each Acceptance Date
three (3) Business Days prior to each proposed Acceptance Date.
(d) The Delivery Date shall not extend beyond the date hereof and
relating final funding under this Lease shall not extend beyond April 30, 2000,
unless mutually agreed to by Lessor and Lessee in writing.
3. TERM. The Basic Term for the Aircraft shall commence on the
----
Delivery Date, and, unless sooner terminated in accordance with the provisions
of this Lease, shall end on the last day of the Basic Term. If Lessee elects to
renew this Lease pursuant to Section 8(b) hereof, the Renewal Term shall
-------------
commence on the last day of the Basic Term and end on the last day of the
Renewal Term.
4. RETURN OF AIRCRAFT.
--------------------
(a) Return. If Lessor shall rightfully demand possession of the
------
Aircraft pursuant to the terms of this Lease or Lessee shall otherwise be
obligated hereunder to return the Aircraft to Lessor, Lessee shall, at its own
expense, return the Aircraft equipped with the Engine or Engines duly installed
thereon by delivering the same to Lessor at any airport in the continental
United States as designated by Lessor. At the time of such return (i) all
Airworthiness Directives and Manufacturer's mandatory service bulletins relating
to the Aircraft shall have been performed, (ii) the Aircraft shall be owned by
Lessor, free and clear of all Liens (other than any Lessor Lien), and shall be
duly registered with the FAA, (iii) each fuel and oil tank shall contain the
same quantity of fuel and oil as was contained in the fuel and oil tanks when
the Aircraft was delivered to Lessee on the Delivery Date, or in the case of any
differences in any such quantities, an appropriate adjustment shall be made by
payment at the then current market price of fuel or oil, as the case may be, and
(iv) the Aircraft shall be in the condition required by Section 4(c) hereof.
------------
Until the Aircraft is returned to Lessor as provided in this Section 4(a), all
------------
of the provisions of this Lease shall continue in full force and effect and
Lessee shall pay all the costs and expenses in connection with or incidental to
the return of the Aircraft, including without limitation, Rent for the Aircraft
as provided in Section 5 hereof.
----------
Air Methods 2000 Aircraft Lease Agreement
10679.108.107383.5
Page 10
<PAGE>
(b) Manuals. Upon the return of the Aircraft, in accordance
-------
with this Section 4, Lessee shall deliver to Lessor all Aircraft Documents
----------
required to be maintained with respect thereto under applicable rules and
regulations of the FAA and any other Governmental Authority having jurisdiction.
In the event any Aircraft Documents are missing or incomplete for operations
during the Lease Term, Lessor shall have the right to cause such documents to be
reconstructed at the expense of Lessee.
(c) Condition. At the time of such return: (i) the Aircraft
---------
shall have had any distinctive marking of Lessee removed in a workmanlike manner
at the expense of Lessee; (ii) the Aircraft shall be fully equipped and have
installed thereon the Engine or Engines and any and all other Parts as were
installed or incorporated in or attached to the Aircraft as of the applicable
Acceptance Date (or such replacements therefor permitted by or required pursuant
to the terms hereof); (iii) the Aircraft shall be duly certified as an airworthy
aircraft by the FAA and shall be returned with a valid certificate of
airworthiness issued under 14 C.F.R. Part 91 (including 91.401 et. seq. and 14
C.F.R. Part 135 (including 135.411 et seq.), as applicable, or its equivalent;
(iv) the Aircraft shall be in the condition and repair required to be maintained
by Section 10 hereof, free of all corrosion and free and clear of all Liens and
----------
the rights of any third parties; and (v) Lessee shall return the aircraft on (A)
a Computerized Maintenance Program approved by Lessor (CMP) or (B) any other
standardized form of record keeping in accordance with accepted industry
standard approved by Lessor, the applicable manufacturer's guidelines, if any,
and regulations of applicable Governmental Authorities and of applicable Laws,
in each case fully paid up to the return date with all transfer fees, if any, to
be paid by the Lessee.
At the time of such return, (i) Lessee shall have completed within
thirty (30) days prior to the return, the next required inspection, or portion
thereof not previously completed, (A) on each Airframe if such inspection is due
within the next ninety (90) days, and if not in compliance with the recommended
maintenance program for the applicable Engine, the next anticipated periodic
inspection on such Engine and (B) on all power transmitting components then
recommended within the next ninety (90) days by the applicable manufacturers,
including, without limitation, on gear boxes, transmissions, propellers, drive
shafts, rotor shafts, rotor hubs and rotor blades (collectively, the "Power
-----
Components") and (ii) each Aircraft with all material component parts shall have
- -----------
one half or more of the available operating hours and/or, as applicable, one
half or more of the stated calendar time and cycles remaining until the next
maintenance visit, overhaul or replacement (as applicable) as stated in the Code
of Federal Regulations applicable to the FAA, and Manufacturer approved
Maintenance Program under the auspices of 14 C.F.R. 91.409 et. seq. and
135.411 et. seq., as applicable, or its equivalent.
Air Methods 2000 Aircraft Lease Agreement
10679.108.107383.5
Page 11
<PAGE>
In the event that any Engine, Power Components or Aircraft does not
meet the conditions set forth in the immediately preceding paragraph, Lessee
shall pay Lessor an amount equal to the sum of (i) for such Engine, the product
of: the then current estimated cost of the next mid-life inspection (including
in such estimated cost, all required replacement of the Life Limited Components)
multiplied by a fraction the numerator of which shall be the of (A) the actual
number of hours of operation since the previous mid-life inspection, minus (B)
fifty percent (50%) of total operating hours anticipated between mid-life
inspections, and the denominator of which shall be the total operating hours
anticipated between mid-life inspections, plus (ii) for such Engine, the product
of: the then current estimated cost of the next anticipated major overhaul
(including in such estimated cost, all required replacement of Life Limited
Components and as specified by the Manufacturer and the engine manufacturer for
such Engine and Power Components) multiplied by a fraction the numerator of
which shall be the remainder of (A) the actual number of hours of operation
since the previous major overhaul minus (B) fifty percent (50%) of the total
operating hours anticipated between major overhauls and the denominator of which
shall be the total operating hours anticipated between major overhauls, plus
(iii) the product of: the current estimated cost of the next scheduled major
Airframe inspection (including in such estimated cost, all required replacement
of Life Limited Components) multiplied by a fraction the numerator of which
shall be the remainder of (A) the actual number of respective operating hours or
months of operation since the previous major Airframe inspection, minus (B)
fifty percent (50%) of the respective total operating hours or months of
operation allowable between scheduled major Airframe inspection, and the
denominator of which shall be the respective total operating hours or months of
operation allowable between scheduled major Airframe inspections. All of the
foregoing shall be considered Supplemental Payments and shall be due upon
presentation to Lessee of an invoice setting forth in reasonable detail the
calculation of such amounts due including the names of all sources used for the
required cost estimates. Should the sum of amounts calculated under the
foregoing clauses (i), (ii) and (iii) result in an amount equal to or less than
$0.00, Lessee shall have no payment obligation under this Section 4(c). Unless
------------
both Lessor with Lessee agree to alternative source(s), the Manufacturer of any
Engine, as specified by Lessor, shall be used as the source for all cost and
Engine mid-life and overhaul estimates. Prior to the return of the Aircraft to
Lessor, a ground evaluation and acceptance flight shall, if requested by Lessor,
be conducted by Lessor or Lessor's designee with Lessee retaining operational
control of the Aircraft during the acceptance flight, in accordance with
procedures of the Manufacturer of the Aircraft designed for this purpose in
order to determine whether or not the Aircraft is in the condition required by
this Lease. All reasonable costs and expenses of any ground evaluation and
acceptance flight shall be borne solely by Lessee.
(d) Overhaul. Immediately prior to the return of the
--------
Aircraft at the expiration or termination of this Lease, Lessee, upon written
request of Lessor received at least thirty (30) days in advance of such
expiration or termination date, will arrange for each Airframe and Engine to be
inspected and/or overhauled. Such inspection and/or overhaul shall be of the
type customarily performed by a corporate operator similar to Lessee with
similar airframes and engines and, except to the extent such costs are the
responsibility of Lessee under paragraph (c)of this Section 4, Lessor shall pay
------------- ---------
the actual costs in connection with such inspections and/or overhaul.
(e) Condition of Interior and Airframe Exterior. Lessee
------------------------------------------------
agrees that on the return of the Aircraft, the interior and exterior shall be in
all respects clean and free of all items of personal property not belonging to
Lessor (subject to ordinary wear, tear and use of the Aircraft). Lessor shall
have the right to inspect the Aircraft upon or subsequent to the expiration of
the prevailing Lease Term, and to require that Lessee take, at Lessee's expense,
all steps necessary to comply with the requirements of this Section 4(e).
-------------
Air Methods 2000 Aircraft Lease Agreement
10679.108.107383.5
Page 12
<PAGE>
(f) Injunctive Relief. The provisions of this Section 4 are
------------------ ---------
of the essence of this Lease, and upon application to any court of equity having
jurisdiction in the premises, Lessor shall be entitled to a decree against
Lessee requiring specific performance of the covenants of Lessee set forth in
this Section 4. For the avoidance of doubt, nothing in this Section 4(f)shall
---------- ------------
be deemed a waiver by Lessee of its right to defend or object to any claim.
(g) Survival. The provisions of Section 4(a) through
-------- -------------
(f)hereof and all of the obligations of Lessee thereunder shall survive the
expiration or earlier termination of this Lease, the prevailing Lease Term, and
the return of the Aircraft.
5. RENT.
----
(a) Rent. (i) Lessee covenants and agrees to pay to Lessor
----
the Rent as calculated under this Lease and as set forth in the Lease
Supplements or other agreement executed and delivered pursuant to this Lease
throughout the Lease Term, payable in consecutive installments, in advance, on
each Rent Payment Date during the Lease Term.
(i) With respect to the Basic Term, the Basic Rent
Factor shall be multiplied by the Aircraft Cost to determine the Basic Rent due
on the applicable Rent Payment Date, and such factor shall be adjusted upward or
downward and fixed on the applicable Acceptance Date as provided and evidenced
in the Lease Supplements. Such Aircraft Cost shall be determined in the
aggregate or with respect to each Aircraft in such manner as Lessor shall
determine appropriate in consultation with Lessee based on the actual Delivery
Dates of each Aircraft.
(ii) Renewal Rent (if applicable) shall be computed
pursuant to Section 8(b) hereof and paid in accordance with this Lease on the
-------------
applicable Rent Payment Dates.
(b) Supplemental Payments. (a) Lessee also agrees to pay to
----------------------
Lessor or to whosoever shall be entitled thereto all Supplemental Payments
promptly as the same shall become due and owing, and in the event of any failure
on the part of Lessee so to pay any such Supplemental Payment hereunder Lessor
shall have all rights, powers and remedies provided for herein or by law or
equity or otherwise in the case of nonpayment of Rent. Lessee also shall pay to
Lessor or to whosoever may be entitled thereto, on demand, as Supplemental
Payment to the extent permitted by applicable Law, interest at the Default Rate
as provided in Section 26 hereof.
-----------
(c) Method of Payment. If the date that any payment of Basic
-----------------
Rent is due is not a Business Day the payment of Basic Rent otherwise payable on
such date shall be payable on the next succeeding Business Day (unless that day
falls in the next calendar month, in which case such payment shall be made on
the first preceding Business Day). All payments of Rent required to be made by
Lessee to Lessor hereunder shall be made in same day funds in lawful money of
the United States, and shall be paid by Lessee by 12:00 noon (New York time) to
the account at the place of payment set forth on Schedule B attached hereto (or
----------
such other account at such other location as Lessor may designate in writing to
Lessee for such purpose). Time is of the essence in connection with the payment
of Rent
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<PAGE>
6. NET LEASE; LESSOR'S TITLE. (a) This Lease is a net lease and
--------------------------
Lessee acknowledges and agrees that Lessee's obligations hereunder, including,
without limitation, its obligations to pay all Rent payable hereunder, shall be
absolute and unconditional under any and all circumstances and shall be paid
without notice or demand and without any abatement, reduction, diminution,
setoff, withholding, defense, counterclaim or recoupment whatsoever, including,
without limitation, any of the foregoing due or alleged to be due to, or by
reason of, any past, present or future claims which Lessee may have against
Lessor, the Manufacturer or the manufacturer of any Engine or Part thereof, or
any other Person for any reason whatsoever; nor, except as otherwise expressly
provided herein, shall this Lease terminate, or the obligations of Lessee be
otherwise affected, by reason of any defect in the Aircraft or any such Part,
the condition, design, operation or fitness for use thereof, any damage to, or
any loss or destruction of, the Aircraft or any Part, unit or component thereof,
any Liens or rights of others with respect to the Aircraft or any such Part, any
prohibition or interruption of or other restriction against Lessee's use,
operation or possession of the Aircraft or any such Part, for any reason
whatsoever, or any interference with such use, operation or possession by any
Person or entity, or by reason of any failure by Lessor to perform any of its
obligations herein contained, or by reason of any other indebtedness or
liability, howsoever and whenever arising, of Lessor, or of Lessee to any other
Person, or by reason of any insolvency, bankruptcy or similar proceedings by or
against Lessor, or Lessee, or for any other reason whatsoever, whether similar
or dissimilar to any of the foregoing, any present or future law to the contrary
notwithstanding; it being the intention of the parties hereto that the Rent
payable by Lessee hereunder shall continue to be payable in all events and in
the manner and at the times herein provided, without notice or demand, unless
the obligation to pay the same shall be terminated pursuant to the express
provisions of this Lease. Lessee hereby waives, to the extent permitted by
applicable Law, any and all rights which it may now have or which at any time
hereafter may be conferred upon it, by statute or otherwise, to terminate,
cancel, quit or surrender this Lease except in accordance with the express terms
hereof. Without limiting any of Lessee's rights under the next sentence, each
payment of Rent made by Lessee to Lessor shall be final and Lessee will not seek
to recover any part of such payment from Lessor for any reason whatsoever,
except for gross negligence or manifest error. Nothing in this Section 6 shall
---------
be construed to prevent Lessee, after complying with the terms hereof, from
pursuing any claim it may have against Lessor or any other Person in such court
of law or otherwise as Lessee may deem appropriate.
(b) Title to the Aircraft shall at all times remain in Lessor and
at no time during the Lease Term shall title be vested in Lessee. Lessee shall
acquire no right, title or interest in or to the Aircraft, except the right to
use the same.
7. EARLY PURCHASE OPTIONS.
------------------------
Provided that this Lease has not been terminated and that no Default
or Event of Default shall have occurred and be continuing, Lessee shall have the
option (the "Early Purchase Option") on the Rent Payment Dates set forth in the
---------------------
Lease Supplements to purchase the Aircraft in accordance with this Section 7.
---------
If Lessee wishes to purchase all (but not less than all) of the Aircraft under
this Section 7, it shall deliver to Lessor written notice of its intent to
----------
Air Methods 2000 Aircraft Lease Agreement
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<PAGE>
purchase the Aircraft (such purchase to be on an "as-is", "where-is" and "with
all faults" basis, without any warranty whatsoever except with respect to title
and freedom from Lessor Liens) not less than ninety (90) nor more than three
hundred and sixty (360) days prior to the Rent Payment Date on which Lessee
proposes to purchase the Aircraft. The purchase price (the "Early Purchase
--------------
Option Price") for the Aircraft shall be equal to the amount derived from the
- --------------
percentages of Aircraft Cost set forth in the Lease Supplements (which shall in
all events be greater than 10% of Aircraft Cost). After delivery of such
notice, Lessee shall on or before the proposed purchase date deliver to Lessor,
in cash or other funds immediately available, the Early Purchase Option Price
plus applicable Taxes and other sums due under the Lease. If Lessee purchases
the Aircraft pursuant to the terms of this Section 7, upon receipt by Lessor of
---------
the Early Purchase Price and all other amounts owed by Lessee hereunder, Lessor
shall deliver to Lessee a bill of sale transferring title to the Aircraft from
Lessor to Lessee without representation or warranty (as contemplated above)
other than a warranty that since the Delivery Date, Lessor has not assigned,
sold or transferred in whole or in part its title to the Aircraft and that such
title is free and clear of all Lessor Liens. If Lessee fails or elects not to
deliver its notice to exercise its Early Purchase Option as required by this
Section 7(a), Lessee shall deemed to have waived such option and the Lease shall
- ------------
continue in full force and effect.
8. END OF LEASE RENEWAL ANDPURCHASE OPTION.
--------------------------------------------
(a) Purchase Option. Provided that this Lease has not been
----------------
terminated and that no Default or Event of Default shall have occurred and be
continuing, on the last day of the Basic Term, Lessee shall have the option to
purchase all (but not less than all) the Aircraft for a price (the "Purchase
--------
Option Price") equal to the Fair Market Value as determined in Section
- -------------- -------
8(c)hereof. If Lessee wishes to purchase the Aircraft on the last day of the
- ----------
Basic Term, it shall deliver to Lessor written notice of its intent to purchase
the Aircraft (such purchase to be on an "as-is", "where-is" and "with all
faults" basis, without any warranty whatsoever except with respect to title and
freedom from Lessor Liens) not less than ninety (90) days, nor more than three
hundred sixty (360) days prior to the last day of the Basic Term. If Lessee
elects to purchase the Aircraft, Lessee shall deliver to Lessor the Purchase
Option Price, in cash (plus applicable Taxes and other sums due under the
Lease), on or before the last day of the Basic Term. Upon receipt of the
Purchase Option Price, Lessor shall deliver to Lessee a bill of sale
transferring title to the Aircraft from Lessor to Lessee without representation
or warranty (as contemplated above) other than a warranty that since the
Acceptance Date, Lessor has not assigned, sold or transfer-red in whole or in
part its title to the Aircraft, and that such title is free and clear of all
Lessor Liens. If Lessee fails to deliver the Purchase Option Price to Lessor on
the last day of the Basic Term, Lessee shall be deemed to have waived its right
to exercise this purchase option.
(b) Renewal Option. Provided that this Lease has not been
---------------
terminated and that no Default or Event of Default shall have occurred and be
continuing, on the last day of the Basic Term, Lessee shall have the option to
renew this Lease with respect to the Aircraft for the Renewal Term at a rent
equal to the "Fair Rental Value" determined under Section 8(c)hereof which rent
------------
shall be confirmed in writing in a Lease Supplement or an amendment to this
Lease executed and delivered by Lessor and Lessee on or before the last day of
the Basic Term. If Lessee wishes to renew this Lease on the last day of the
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<PAGE>
Basic Term, (i) Lessee shall deliver to Lessor written notice of its intent to
renew this Lease not less than one hundred eighty (180) days prior to the last
day of the Basic Term, and (ii) all terms of the Lease Documents shall continue
in effect without change except (A) Lessee shall pay the Renewal Rent, in
advance, commencing on the last day of the Basic Term and throughout the Renewal
Term and (B) the Casualty Loss Values shall be and remain equal to the Casualty
Loss Value in effect on and as of the last day of the Basic Term. If Lessee
fails to comply with the requirements of this Section 8(b), Lessee shall be
------------
deemed to have waived its right to exercise this renewal option.
(c) Determination of Fair Market Value and Fair Rental Value.
----------------------------------------------------------------
(i) "Fair Market Value" or "Fair Rental Value", as the case
------------------- -----------------
may be, shall be determined on the basis of and shall be equal in amount to the
value which would obtain in an arm's-length transaction between an informed and
willing buyer-user or lessee-user (other than a used aircraft dealer) and an
informed and willing seller or lessor under no compulsion to sell or lease, on
the assumptions that: the Aircraft (A) is being sold free and clear of all
Liens; (B) the Aircraft has been maintained in accordance with Section 10 of
----------
this Lease; and (C) the Aircraft is in the condition required upon the return of
the Aircraft under Section 4 of this Lease. In such determination, costs of
----------
return to the location designated by Lessor shall not be a deduction from such
value(s).
(ii) If the Lessor and Lessee have not agreed upon a
determination of the Fair Market Value or Fair Rental Value of the Aircraft
within thirty (30) days after one of the parties has requested such
determination, that determination shall be made by a certified independent
appraiser approved by both Lessor and Lessee, such approvals not to be
unreasonably withheld; and failing such approval in good faith within forty-five
(45) days, by Lessor alone may select such an appraiser. The appraiser shall be
furnished with a letter of instruction concerning the preparation of the
appraisal, together with a copy of this Lease and the Supplements hereto and, to
the extent available and relevant, related Lease Documents, purchase orders
and/or invoices. The appraiser shall be instructed to make such determination
within thirty (30) days following appointment. The determination made by the
appraiser shall be final and binding on both Lessor and Lessee. The Lessee
shall pay the fees and expenses of any appraisal.
9. USE OF AIRCRAFT; COMPLIANCE WITH LAWS. Lessee agrees that the
------------------------------------------
Aircraft will be used and operated only (a) in its original configuration set
forth in the Lease Supplements for which Lessee is duly authorized by the
Aeronautics Authority, (b) in the manner set forth in, and in accordance with,
the terms, conditions and provisions of the insurance policy or policies
providing the coverages specified in Section 16 hereof, (c) in the United States
----------
and (d) on Lessee's request, in other countries which are approved in writing by
Lessor prior to entry into such country. In no event shall Lessee use and
operate the Aircraft, or permit the Aircraft to be used and operated, for any
purpose for which the Aircraft is not designed or reasonably suitable, or in any
fashion that may subject the Aircraft to any Liens, other than Permitted Liens,
or in any area excluded from coverage by any such insurance policy or policies.
Lessee further agrees that, unless the Lessee shall have received the prior
written consent of the Lessor, the Aircraft will be used and operated solely in
the conduct of Lessee's and its Affiliates' business and in compliance with all
applicable Laws of any federal, state, local or foreign government or
Air Methods 2000 Aircraft Lease Agreement
10679.108.107383.5
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<PAGE>
Governmental Authority having jurisdiction with respect to the use, operation,
maintenance, condition, airworthiness and occupancy of the Aircraft, and the use
of any premises or facilities by the Aircraft, including without limitation,
those of the Aeronautics Authority. Lessee will not load, use, operate, hangar
or store the Aircraft, or permit the loading, using, operating, hangaring or
storing of the Aircraft, negligently, abusively, improperly or in violation of
this Lease or so as to void any of the insurance coverages respecting the
Aircraft. Lessee shall procure and maintain in effect all licenses,
certificates, permits, approvals and consents required by any Governmental
Authority (including, without limitation, the Aeronautics Authority) in
connection with the delivery, use, operation, maintenance, condition,
airworthiness and occupancy of the Aircraft, and the use of any premises or
facilities by the Aircraft. Except as otherwise expressly permitted by the
terms of this Lease, the Aircraft will at all times be and remain in the
possession and control of Lessee. Lessee will keep the Aircraft adequately
protected at all times when not in use, and Lessee will not remove or permit the
Aircraft to be removed from its home airport as specified in Schedule B attached
----------
hereto for periods in excess of thirty (30) days without first giving Lessor
written notice designating the contemplated location of the Aircraft and
obtaining Lessor's written approval thereof (which consent shall not be
unreasonably withheld or delayed) and Lessee will not permanently remove the
Aircraft, or permit the Aircraft to be permanently removed, from such home
airport without Lessor's prior written consent, which consent shall not be
unreasonably withheld, conditioned or delayed. The Aircraft shall be operated
only by duly licensed pilot operators currently certificated and qualified to
operate the Aircraft by the Aeronautics Authority and by any other authority
having jurisdiction therefor, and authorized by the terms of (in accordance with
the provisions and requirements of) the insurance policy or policies providing
the coverages specified in Section 16 hereof.
-----------
10. MAINTENANCE OF AIRCRAFT. Lessee, at its sole cost and expense,
-------------------------
shall cause the Aircraft to be maintained under the Maintenance Program, and
shall service, repair, maintain and overhaul the Aircraft so as to (a) keep the
Aircraft in as good operating condition as when inspected by Lessee on the
Delivery Date, ordinary wear and tear from proper use thereof excepted, and (b)
keep the Aircraft in such operating condition and state of maintenance as shall
be in accordance with prevailing industry standards for an aircraft of the same
type as the Aircraft and in accordance with the Aeronautics Authority and
Manufacturer approved maintenance program, but in no event less than such
operating condition and state of maintenance as may be necessary to satisfy the
safety, maintenance and airworthiness requirements of the Aeronautics Authority
and any other Governmental Authority, state or federal, foreign or domestic,
having jurisdiction with respect thereto. Lessee covenants that in no event
shall the Maintenance Program with respect to the Aircraft be inferior to, or of
less quality than, its maintenance program with respect to any other aircraft of
similar type owned or leased by Lessee. Lessee shall, at its cost and expense,
comply with all applicable service, maintenance, repair and overhaul
regulations, Airworthiness Directives and instructions of any Aeronautics
Authority and all appropriate maintenance, service, repair and overhaul manuals
and mandatory service bulletins published by the Manufacturer of the Airframes,
Engines, accessories, equipment and Parts installed on the Aircraft; provided
--------
that any mandatory service bulletins shall be performed at the next scheduled
inspection to be performed on the Aircraft (such scheduled inspection not to
exceed twelve (12) months from the previous scheduled inspection). All service,
inspection, overhauls, maintenance, directives, repairs and improvements with
Air Methods 2000 Aircraft Lease Agreement
10679.108.107383.5
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<PAGE>
respect to or affecting the Aircraft shall be made and performed only by
appropriately licensed, certificated and qualified personnel, in accordance with
applicable standards of any Aeronautics Authority or any other such Governmental
Authority having jurisdiction with respect thereto. At its own cost and
expense, Lessee shall maintain in English all Aircraft Documents and other
materials required by any Aeronautics Authority or by any other Governmental
Authority to be maintained in respect of the Aircraft. Lessee agrees that the
Aircraft will not be maintained, used or operated in violation of any applicable
Law of any government or Governmental Authority having jurisdiction or in
violation of any airworthiness certificate, license or regulations relating to
the Aircraft issued by any such authority.
11. REPLACEMENT OF PARTS; ALTERATIONS; MODIFICATIONS; AND ADDITIONS.
------------------------------------------------------------------
Lessee may, at its own cost and expense, remove in the ordinary course of
maintenance, service, repair, overhaul or testing, any Part or Engine, provided,
---------
however, that Lessee will, at its own cost and expense, replace such Part or
- -------
Engine or cause such Part or Engine to be replaced, as promptly as practicable.
Lessee may, if essential to its operations, use or install temporary parts,
accessories, devices or other equipment on or in the Aircraft consistent with
its normal operations and applicable Law, provided that such temporary items
--------
shall be replaced with a Part or Engine in compliance with this Lease as soon as
possible. Any such Part, Engine, equipment or appliance shall immediately be
and become the property of Lessor and part of the Aircraft and subject to the
terms of this Lease. In case any part of the Aircraft is required to be altered
or modified, or any equipment or appliance is required to be altered, added,
replaced or modified on any Airframes or any Engine or in either case in order
to comply with the Laws or Governmental Authority having jurisdiction over the
Aircraft (a "Required Alteration") pursuant to Sections 9 or 10 hereof, Lessee
------------------- ----------------
agrees to make such Required Alteration at its own expense. Any such Required
Alteration shall immediately be and become the property of Lessor and part of
the Aircraft and subject to the terms of this Lease. All Parts or Engines
incorporated or installed in or attached to any Airframe or any Engine in
connection with servicing, repairing, maintaining and overhauling the Aircraft
pursuant to the requirements hereof (a "Replacement") shall be considered
-----------
accessions to such Airframe or the Engine or Enginess, as the case may be, and
shall immediately, without further act, be and become the property of Lessor and
part of the Aircraft and subject to the terms of this Lease. Lessee shall
purchase any Part or Engine to be replaced, altered or modified pursuant to this
Section 11 in the name of Lessor. Such Part or Engines shall have a value and
- -----------
utility, useful life, maintenance status (assuming maintenance is then in
compliance with this Lease) and good operating condition at least equal to the
Parts or Engine(s) being replaced (without regard to temporary Parts or Engines
referred to above) and be free and clear of all Liens (other than Permitted
Liens). Lessee shall, upon the reasonable request by Lessor, deliver to Lessor
a legal opinion in form and substance satisfactory to Lessor stating that title
and ownership to such Required Alteration or Replacement have been duly conveyed
to Lessor under applicable Law and any security interest of Lessor therein has
been perfected under applicable Law. Lessee may, without the prior written
consent of Lessor, affix or install any Part on any Airframe or any Engine or
install any Engine on such Airframe, or make any improvement or addition thereto
other than a Required Alteration or Replacement (an "Improvement"); provided
----------- --------
that such Improvement is readily removable without causing material damage
(Lessee shall repair at its expense any damage caused by such removal) to such
Airframe or such Engine prior to the return of the Aircraft to Lessor or
impairing the value, utility or condition which such Airframe or Engine would
have had if such Improvement had not been so affixed or installed. Lessee may
at any time during the Lease Term remove such removable Improvement at its own
expense without causing at any time during the term material damage to any
Airframe or any Engine; provided that Lessee shall repair any damage caused by
--------
Air Methods 2000 Aircraft Lease Agreement
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<PAGE>
such removal, and upon such removal title thereto shall, without further act,
vest in Lessee free and clear of all Lessor Liens. In addition, Lessee may,
without the prior written consent of Lessor, remove any Part that Lessee in the
proper conduct of its business determines to be obsolete or no longer suitable
or appropriate for use on any Airframe or any Engine; provided that no such
--------
removal materially impairs the value, utility, useful life or condition which
such Airframe or Engine would have had if such removal had not been made and
Lessee shall repair any damage caused by such removal. Lessee shall not modify
the Aircraft (including any Airframe and any Engine) without the prior written
consent of Lessor.
12. REGISTRATION; DELIVERY; RECORDATION; INSIGNIA AND INSPECTION.
-----------------------------------------------------------------
(a) Lessee shall cause the Aircraft to be registered and shall
maintain the registration of the Aircraft with the Aeronautics Authority
pursuant to all applicable Laws in the United States in the name of Lessor as
owner and shall not register or permit the registration of the Aircraft in any
other name or under the laws of any other country. Lessee shall promptly
provide Lessor with evidence of such registration, filing and recordation.
Lessee agrees promptly to furnish Lessor such information as may be required to
file any reports required to be filed by Lessor with any Governmental Authority
as a result of Lessor's ownership of the Aircraft.
(b) Upon the sale of the Aircraft to Lessor by Lessee, on or prior
to the Delivery Date, Lessor may accept title to the Aircraft and the Bill of
Sale therefor from the Lessee. On the Delivery Date, Lessor and Lessee shall
inspect the Aircraft and Lessee shall execute the Certificate of Acceptance
evidencing Lessee's acceptance of the Aircraft and accept delivery of the
Aircraft at the location set forth in the Lease Supplement applicable to the
Delivery Date. On the Delivery Date, the Aircraft shall be registered with the
FAA in the name of Lessor, as owner.
(c) Lessee agrees, at its own cost and expense, to place such
insignia, plates or other identifications on any Airframe and, if practicable,
on any Engines indicating Lessor's title thereto and Lessor's interest therein,
as Lessor may from time to time reasonably request; and in any event Lessee will
cause to be affixed to and maintained on the Airframes, in a location adjacent
to and not less prominent than the airworthiness certificate for the Aircraft is
required to be displayed under FAA regulations, and on such Engine, a plate
bearing the following legend in English:
"PROPERTY OF AND LEASED FROM C.I.T. LEASING CORPORATION".
Except as above provided, Lessee will not allow the name of any Person to be
placed on any Airframe or on any Engine as a designation that might be
interpreted as a claim of ownership; provided, however, that the Lessee may
-------- -------
cause any Airframe to be lettered or otherwise marked in an appropriate manner
for convenience of identification of the interest of the Lessee therein.
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<PAGE>
(d) At all reasonable times upon notice, Lessor shall, at Lessor's
cost, have the right to inspect the Aircraft and the Aircraft Documents of
Lessee pertaining thereto where located, which shall be at the home base airport
for the Aircraft. Lessor shall not however have any duty to make such
inspection and shall not incur any liability or obligation by reason of not
making any such inspection.
13. ASSIGNMENT AND SUBLEASING.
---------------------------
(a) By Lessee. Lessee shall not assign this Lease or any rights
----------
in or to the Aircraft or sublease or otherwise relinquish possession of any
Airframe or any Engine or install any Engine, or permit any Engine to be
installed, on any airframe other than such Airframe without the prior written
consent of Lessor, which consent shall not be unreasonably withheld, conditioned
or delayed; provided, however, that Lessee may, without the prior consent of
-------- -------
Lessor deliver any Airframe or any Engine to the Manufacturer or any other
applicable manufacturer thereof for testing or other similar purposes or to any
approved maintenance provider for service, repair, maintenance or overhaul work
on such Airframe or Engine or for alterations or modifications in or additions
to such Airframe or Engine to the extent required or permitted by the terms
hereof. Any attempted assignment or sublease not otherwise expressly permitted
hereby shall be void and of no effect, unless Lessor first shall have consented
thereto in writing. Lessor's consent to an assignment in any one or more
instances shall not impose any obligation upon Lessor to consent to any other or
further assignments. Lessor's consent to an assignment shall not release Lessee
from any obligations with respect to this Lease unless expressly so stated in
the written consent. Any sublease or assignment permitted by Lessor shall be
evidenced by documentation which shall be in form and substance reasonably
satisfactory to Lessor. Any administrative, credit, appraisal, legal or other
processing costs incurred by Lessor in connection with any sublease or
assignment or proposed sublease or assignment, including, without limitation,
costs to determine the creditworthiness and acceptability of any sublessee,
assignee and sublease or assignment, and legal fees and expenses incurred by
Lessor, shall be for the account of Lessee and payable on demand by Lessor as a
Supplemental Payment. Each such sublease and assignment and all rights and
benefits thereof, including, without limitation, any rents, casualty values and
other proceeds and products thereof, shall be fully assignable to Lessor without
consent of the sublessee or assignee.
(b) By Lessor. All rights of Lessor hereunder may be assigned,
----------
pledged, mortgaged, transferred or otherwise disposed of, either in whole or in
part (but subject always to the rights of Lessee under this Lease) to any
Person; provided that such assignment, pledge, mortgage, transfer or disposition
--------
shall in no way impair Lessee's rights and interests in the Aircraft and this
Lease. Lessor shall give Lessee notice of any such assignment, and Lessee shall
acknowledge receipt thereof in writing, and Lessee shall execute and deliver
such further documents and instruments in connection with such assignment as
shall be reasonably requested by Lessor.
14. LIENS. Lessee will not directly or indirectly create, incur,
-----
assume or suffer to exist any Lien on or with respect to the Aircraft, Airframe,
any Engine, or any Part thereof Lessor's title thereto, or any interest therein,
except (i) the respective rights of Lessor and Lessee as provided in this Lease,
(ii) the rights of Persons under agreements and arrangements to the extent
permitted by the terms of Sections 11 and 13, (iii) Lessor Liens, (iv) Liens for
------------------
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Taxes being contested by Lessee in good faith by appropriate proceedings in
accordance with Section 17(e) hereof, and (v) materialmen's, mechanics',
--------------
workmen's, repairmen's, employee's, storage or other like Liens arising in the
ordinary course of business, for amounts the payment of which is either not yet
delinquent or being contested by Lessee in good faith by appropriate proceedings
and where, in Lessor's opinion, there is no danger of the sale, forfeiture or
loss of the Aircraft, Airframe or any Engine or any Part, unit or component
thereof. Lessee, at its own expense, will promptly pay, satisfy and otherwise
take such actions as may be necessary to keep the Aircraft, all Airframes and
Engines free and clear of, and to duly discharge or eliminate or bond in a
manner satisfactory to Lessor, any such Lien not excepted above if the same
shall arise at any time. Lessee will notify Lessor in writing promptly upon
becoming aware of any tax or other Lien that shall attach to the Aircraft,
Airframe or any Engine, and of the full particulars thereof.
15. LOSS, DAMAGE OR DESTRUCTION.
------------------------------
(a) Risk of Loss, Damage or Destruction. Lessee hereby assumes
--------------------------------------
all risk of loss, damage, theft, taking, destruction, confiscation, requisition
or commandeering, partial or complete, of or to the Aircraft, however caused or
occasioned, such risk to be borne by Lessee with respect to the Aircraft from
and including the Delivery Date, and continuing until the Aircraft has been
returned to Lessor in accordance with the provisions of Section 4 hereof.
---------
Lessee agrees that no occurrence specified in the preceding sentence shall
impair, in whole or in part, any obligation of Lessee under this Lease,
including, without limitation, the obligation to pay Rent.
(b) Payment of Casualty Loss Value Upon an Event of Loss. If an
------------------------------------------------------
Event of Loss occurs with respect to the Aircraft or any Airframe at any time
after the date hereof and until the Aircraft shall have been returned to the
Lessor in accordance with Section 4 hereof, Lessee shall promptly give Lessor
---------
written notice thereof and shall, not later than the earlier of the date (a)
three (3) days following the date of receipt of proceeds of insurance with
respect to such Event of Loss and (b) on such date designated by Lessee
occurring on or before the date ninety (90) days after the date of such Event of
Loss, either (x) substitute an airframe for such Airframe in accordance with the
provisions of the succeeding paragraph of this Section 15(b)and substitute an
-------------
engine for the Engine, if any, with respect to which such Event of Loss occurred
on the date of substitution of said airframe pursuant to the terms of this
Lease, provided, that, notwithstanding anything herein to the contrary, Lessee
-------- ----
must either (A) substitute an airframe in accordance with this Section 15 for
----------
such Airframe on or prior to the last day of the calendar year on which such
Event of Loss occurs or (B) agree to indemnify Lessor for all costs, losses and
expenses (including but not limited to the loss of any tax benefits) incurred
directly or indirectly by Lessor in connection with the substitution of such
Airframe after the last day of the calendar year on which such Event of Loss
occurs, or (y) pay to Lessor on the Rent Payment Date next following the date of
such Event of Loss (i) all past-due Rent, and (ii) the Casualty Loss Value of
the Aircraft. Upon payment in full of the amount specified in Section 15(b)(y)
----------------
above, plus all Supplemental Payments then due and payable by Lessee hereunder,
(1) the obligation of Lessee to pay Basic Rent hereunder shall terminate, (2)
the prevailing Lease Term shall end, and (3) Lessor will transfer to Lessee,
without recourse, representation or warranty (except as set forth in Section 19
----------
hereof with respect to title and Lessor Liens), all of Lessor's right, title and
interest in and such Airframe and Engine (if any) with respect to which such
Event of Loss occurred, as well as all Lessor's right, title and interest in and
to any Engine constituting part of the Aircraft but not installed thereon when
such Event of Loss occurred.
Air Methods 2000 Aircraft Lease Agreement
10679.108.107383.5
Page 21
<PAGE>
In the event of a substitution of an airframe pursuant to the preceding
paragraph, Lessee shall purchase in the name of Lessor or cause to be conveyed
to Lessor, as replacement for such Airframe, title to an identical type of
airframe, free and clear of all Liens other than any Permitted Liens and having
a value, utility and remaining useful life at least equal to, and being in as
good operating condition as, such Airframe, assuming that such Airframe was of
the value, utility and remaining useful life and in the condition and state of
repair required by the terms hereof immediately prior to the occurrence of such
Event of Loss, and if such Event of Loss also occurred with respect to any
Engine, Lessee shall duly convey or cause to be conveyed to Lessor, in
replacement for such Engine with respect to which such Event of Loss occurred,
title to one engine with respect to which such Event of Loss has occurred of the
same or an improved make, model and manufacturer suitable for installation and
use on the Airframe, free and clear of all Liens other than any Permitted Liens,
having a value and utility at least equal to, and being in as good operating
condition as, the Engine with respect to which such Event of Loss occurred,
assuming that the Engine was in the condition and state of repair required by
the terms hereof immediately prior to the occurrence of such Event of Loss. In
either case, as applicable, prior to or at the time of any such conveyance,
Lessee, at its own expense, will promptly (i) furnish Lessor with a bill of sale
in form and substance satisfactory to Lessor, with respect to such replacement
airframe or engine, as the case may be, (ii) cause supplements or amendments
hereto, in form and substance satisfactory to Lessor, subjecting such
replacement airframe or engine, as the case may be, to this Lease, to be duly
executed by Lessee, (iii) furnish Lessor with such evidence of the condition of
such replacement airframe or engine, as the case may be, and of compliance with
the insurance provisions of Section 16 hereof with respect to the replacement
----------
airframe or engine as Lessor may reasonably request, (iv) deliver to Lessor a
legal opinion in form and substance satisfactory to Lessor stating that the
title and ownership to such replacement airframe or engine have been conveyed to
Lessor under applicable Law and any security interest is protected under
applicable Law, and (v) take such other action as Lessor may reasonably request
in order that such replacement airframe or engine, as the case may be, be duly
and properly titled in Lessor and leased hereunder to the same extent as the
Airframe or the Engine replaced hereby. Upon full compliance by Lessee with the
terms of this paragraph, Lessor will transfer to Lessee without recourse,
representation or warranty, express or implied, of any nature whatsoever (except
as set forth in Section 19 hereof with respect to the title and Lessor Liens),
----------
and on an "as-is, where-is" basis, all of Lessor's right, title and interest in
and to the Airframe, Engine with respect to which such Event of Loss occurred,
and such Airframe or Engine shall thereafter no longer be an "Airframe" or an
"Engine" (as the case may be) as defined herein. Thenceforth, for all purposes
hereof, such replacement airframe or such replacement engine shall be deemed the
"Airframe" or an "Engine" (as the case may be) as defined herein and part of the
same Aircraft as was the Airframe or the Engine.
(c) Event of Loss with Respect to any Engine. Upon each
-----------------------------------------------
occurrence of an Event of Loss with respect to any Engine only and not to any
Airframe, Lessee shall give Lessor prompt written notice thereof and shall, as
promptly as possible and in any event within thirty (30) days after the
occurrence of such Event of Loss, duly convey or cause to be conveyed to Lessor,
as replacement for such Engine, title to another engine of the same or an
improved make, model and manufacture as the Engine with respect to which such
Air Methods 2000 Aircraft Lease Agreement
10679.108.107383.5
Page 22
<PAGE>
Event of Loss occurred, free and clear of all Liens other than any Permitted
Liens, and having a value and utility at least equal to, and being in as good
operating condition as the Engine with respect to which such Event of Loss
occurred, assuming that such Engine was in the condition and repair required by
the terms hereof immediately prior to the occurrence of such Event of Loss; and,
upon such conveyance, Lessee, at its own expense, will promptly (i) furnish
Lessor with a bill of sale, in form and substance satisfactory to Lessor, with
respect to such replacement engine, (ii) cause a supplement hereto, in form and
substance satisfactory to Lessor, subjecting such replacement engine to this
Lease, to be duly executed by Lessee, (iii) furnish Lessor with such evidence of
the condition of such replacement engine, and of compliance with the insurance
provisions of Section 16 hereof with respect to such replacement engine as
-----------
Lessor may reasonably request and, (iv) furnish Lessor with a legal opinion, in
form and substance satisfactory to Lessor, stating that title and ownership have
been duly conveyed to Lessor under applicable Law and as to such other matters
of applicable Law as Lessor may reasonably request, and (v) take such other
action as Lessor may reasonably request in order that title to such replacement
engine is duly conveyed to Lessor and that such replacement engine has been
validly subjected to this Lease to the same extent as the Engine replaced
thereby. Upon full compliance by Lessee with the terms of this paragraph (c),
Lessor will transfer to Lessee without recourse, representation or warranty,
express or implied, of any nature whatsoever (except as to title and freedom
from Lessor Liens) and on an "as-is, where-is" basis, Lessor's title to the
Engine with respect to which such Event of Loss occurred, and such Engine shall
thereafter no longer be an "Engine" as defined herein. Thenceforth, for all
purposes hereof, such replacement engine shall be deemed an "Engine" as defined
herein and part of the Aircraft.
(d) Application of Other Payments Upon Event of Loss. Any payments
------------------------------------------------
(including, without limitation, insurance proceeds) received at any time by
Lessor or by Lessee from any insurer, Governmental Authority or other party or
insurer (except Lessee) as a result of the occurrence of an Event of Loss will
be applied as follows: (i) (except as provided in Section 16 hereof) any such
----------
payments received at any time by Lessee shall be promptly paid to Lessor for
application pursuant to the following provisions of this Section 15(d); (ii) if
-------------
any such payments are received with respect to any Airframe (or the Airframe and
any Engine then installed thereon) that has been or is being replaced pursuant
to Section 15(b), so much of such payments as shall not exceed the cost of any
--------------
replacement Airframe, Engine to be purchased pursuant to Section 15(b)hereof
-------------
shall be applied for payment of (or to reimburse Lessee for its payment of) such
replacement Airframe, Engine; (iii) if any such payments are received with
respect to any Airframe (or the Airframe and any Engine then installed thereon)
that have not or are not being replaced pursuant to Section 15(b)so much of such
-------------
payments as shall not exceed the amount of the Casualty Loss Value required to
be paid by Lessee pursuant to Section 15(b)hereof shall be applied in reduction
-------------
of Lessee's obligation to pay such amounts, if not already paid by Lessee, or,
if already paid by Lessee, shall be applied to reimburse Lessee for its payment
of such amounts unless an Event of Default shall have occurred and be
continuing; (iv) if any such payments are received with respect to any Engine
that has been or is being replaced pursuant to Section 15(c), so much of such
payments as shall not exceed the cost of any replacement Engine or Engines to be
purchased pursuant to Section 15(c)hereof shall be applied for payment of (or to
-------------
Page 23
<PAGE>
reimburse Lessee for its payment of) such replacement Engine or Engines, unless
an Event of Default shall have occurred and be continuing; and (v) the balance,
if any, of such payments remaining thereafter shall be paid to Lessee, unless an
Event of Default shall have occurred and be continuing.
Air Methods 2000 Aircraft Lease Agreement
10679.108.107383.5
Page 24
<PAGE>
16. INSURANCE.
---------
(a) Public Liability and Property Damage Liability Insurance.
-------------------------------------------------------------
Lessee, at its own expense, shall maintain in effect comprehensive third party
aircraft liability insurance against bodily injury and property damage losses
arising from ground, flight and taxiing exposures, including, but not limited
to, passenger legal liability, cargo liability (with a sublimit of $300,000),
contractual liability and products liability insurance, during the Lease Term in
an amount not less than $30,000,000 for any one accident, or series of accidents
arising out of any one occurrence, with respect to the Aircraft and Items of
Equipment. Such policy shall include war and allied risks in accordance with
standard market practice. Any such liability insurance policy may be subject to
a deductible in an amount not to exceed the greater of $50,000 or five percent
(5%) of the insured hull value per occurrence or such lesser amount as shall be
equivalent to the industry standard for aircraft of the same type operated by
businesses similarly situated to Lessee. All such policies shall be maintained
in effect with insurers and/or reinsurers of recognized reputation and
responsibility, reasonably satisfactory to Lessor but in no event having a
rating in Best's Insurance Guide and Key Ratings of less than "A, VIII". Any
policies of insurance carried in accordance with this Section 16 and any
----------
policies taken out in substitution or replacement for any of such policies
shall: (i) name Lessor (including its successors, assigns, officers, directors,
agents and employees for purposes of this Section 16) and any other Indemnified
----------
Party (each sometimes called an "additional insured" in this Section 16),
------------------- ----------
together with any of their respective successors and assigns, as additional
insureds; (ii) provide that in respect of the interests of Lessor and any
Indemnified Party such policies of insurance shall insure Lessor and such
Indemnified Party regardless of any breach or violation of any warranty,
declarations or conditions contained in such policies by Lessee; (iii) provide
that if the insurers cancel such insurance for any reason whatever, or the same
is allowed to lapse for nonpayment of premium, or if there is any material
change in policy terms and conditions, such cancellation, lapse or change shall
not be effective until thirty (30) days after receipt by Lessor and any
Indemnified Parties of written notice from such insurers of such cancellation,
lapse or change (ten (10) days for non-payment of premiums and with respect to
war risk insurance, such shorter period of seven (7) days or as shall be
customary on the London market for such insurance in such area of the world);
(iv) provide that any additional insured, including Lessor nor any Indemnified
Party, shall have any responsibility for any premiums, commissions or calls in
connection with such insurance; (v) waive any right of the insurer to any
setoff, counterclaim or other deduction, whether by attachment or otherwise, in
respect of any liability of Lessor or any additional insured; (vi) provide that
the issuer shall waive any rights of subrogation against Lessor or any other
additional insured to the extent that Lessee has waived its rights in this
Agreement; (vii) include at a minimum the geographic limits, if any, of all
territories over which the Aircraft will be operated; (viii) provide that any
reinsurance policy required under this Agreement shall, to the extent
applicable, contain a standard "cut through clause" for the benefit of Lessor
and the other additional insureds; and (ix) provide that all payments shall be
made in United States Dollars. Each liability policy shall (A) be primary
without right of contribution from any other insurance which is carried by
Lessor and (B) expressly provide that all of the provisions thereof, except the
limits of liability, shall operate in the same manner as if there were a
separate policy covering each insured.
Air Methods 2000 Aircraft Lease Agreement
10679.108.107383.5
Page 25
<PAGE>
(b) Insurance Against Loss or Damage to the Aircraft. Lessee, at
-------------------------------------------------
its own expense, shall maintain in effect with insurers and/or reinsurers of
recognized reputation and responsibility reasonably satisfactory to Lessor but
in no event having a rating in Best's Insurance Guide and Key Ratings of less
than "A, VIII": (i) all-risk ground and flight aircraft hull insurance covering
the Aircraft (including taxiing exposures); (ii) all-risk coverage with respect
to Engines (including any spare engine), Parts or Landing Gear while removed
from the Aircraft; and (iii) war risk and hijacking (including
political/non-political hijacking and acts of terrorism) coverages, including,
but not limited to, coverage against government confiscation, expropriations,
nationalization or seizure, including the government of registry (if other than
the United States). All such insurance shall be in full force and effect
throughout any geographical areas at any time over which the Aircraft will be
operated, shall be payable in Dollars in the United States and shall be in the
amount of the applicable Casualty Loss Value (based on the Aircraft Cost for
each set forth in the applicable Schedule to this Lease) which is the agreed
value between Lessor and Lessee. Any hull insurance carried in accordance with
this Section 16 shall not contain any provision for self-insured amounts or a
-----------
deductible, provided that such insurance may be subject to a deductible which
does not exceed $50,000 per occurrence. Each Engine, after removal, shall be
insured for not less than of the greater of (C) the applicable Casualty Loss
Value which is the agreed value between Lessor and Lessee and (D) the amount
necessary to obtain a replacement Engine meeting the requirement of Section
-------
15(c) hereof under a ground risks policy reasonably acceptable to Lessor. Any
- ----
policies carried in accordance with this Section 16: (1) shall be primary
----------
without right of contribution from any other insurance which is carried by each
additional insured, including Lessor or any Indemnified Party, with respect to
the Aircraft; (2) shall provide that if such insurance is canceled or materially
changed for any reason whatsoever, or the same is allowed to lapse for
non-payment of premium, such cancellation, change or lapse shall not be
effective as to each additional insured, including Lessor or any Indemnified
Party, for thirty (30) days (ten (10) days for non-payment of premiums and, with
respect to war risk insurance, seven (7) days or such shorter period as shall be
customary on the London market for such insurance in such area of the world)
after receipt by Lessor and any Indemnified Party of written notice from such
insurers of such cancellation or lapse or material change in policy terms and
conditions; (3) shall provide that partial losses of less than $50,000 shall be
adjusted by and payable to Lessee (so long as no Default or Event of Default has
occurred and is continuing hereunder), but that in the event of a greater loss
than $50,000 the entire insurance shall be adjusted by Lessee and Lessor and
payable as provided below; (4) shall provide that in respect of the interest of
each additional insured, including Lessor or any Indemnified Party, in such
policies the insurance shall insure Lessor or such Indemnified Party regardless
of any breach or violation of any warranties, declarations or conditions
contained in such policies by Lessee or any other Person; (5) shall waive any
rights of set off, counterclaim or deduction, whether by attachment or
otherwise, and all rights of subrogation against Lessor, and any Indemnified
Party, together with their respective successors, assignors, agents, officers,
employees and servants; (6) shall provide that neither Lessor nor any additional
insured or other Indemnified Party shall have any liability for any premiums,
commission or calls in connection with such insurance; (7) to the extent of
reinsurance, if applicable, includes a cut-through provision permitting
additional insured including Lessor and any Indemnified Party to file claims and
to obtain payment directly from the reinsurers under the reinsurance policies;
and (8) subject to clause (3) above, shall name Lessor as sole loss payee for
----------
the account of all interests with respect to all insurance proceeds up to the
amount of the Casualty Loss Value.
Air Methods 2000 Aircraft Lease Agreement
10679.108.107383.5
Page 26
<PAGE>
Lessor is not under any duty or obligation to verify the existence or
adequacy of any insurance.
Lessee may obtain or maintain additional hull insurance on the
Aircraft, over and above the Casualty Loss Value hereunder, provided that it
does not adversely affect the coverage required to be maintained hereunder; and
Lessee shall be the sole loss payee with respect to such insurance.
(c) Application of Proceeds in an Event of Loss of Aircraft. All
--------------------------------------------------------
insurance payments received from policies maintained by Lessee as the result of
the occurrence of an Event of Loss shall be applied as follows: If such
payments are received with respect to any Airframe and the Engines installed
thereon, Lessor and Lessee shall proceed diligently and cooperate fully with
each other in the recovery of any and all proceeds of insurance applicable
thereto, and such insurance proceeds shall be paid to Lessor in an amount equal
to the Casualty Loss Value.
(d) Application of Proceeds in the Absence of an Event of Loss.
-------------------------------------------------------------
As between Lessor and Lessee, insurance payments with respect to any property
damage to the Aircraft or any Part thereof not constituting an Event of Loss
with respect thereto will be applied in payment repairs or for replacement
property in accordance with the terms of Sections 10 and 11 hereof, if not
------------------
already paid by Lessee (or to reimburse Lessee for such repairs or replacements
already paid by Lessee), and any balance remaining after compliance with such
Sections with respect to such loss shall be paid to Lessee or as otherwise
directed by Lessee. Any amount which is payable to Lessee under this Section 16
----------
shall not be paid to Lessee if at the time of such payment a Default or an Event
of Default shall have occurred and be continuing, but shall be held by Lessor as
security for the obligations of Lessee under this Lease and such amount shall be
paid to Lessee at such time as there no longer exists any Default or Event of
Default.
(e) Reports, Etc. Lessee's insurance underwriters shall be
--------------
required to advise Lessor in writing promptly of any default in the payment of
any premium and of any other act or omission on the part of Lessee which might
invalidate or render unenforceable, in whole or in part, any insurance on the
Aircraft. Not less than two (2) Business Days prior to the Delivery Date, and
thereafter on or prior to each renewal or replacement by Lessee of the insurance
required hereby, Lessee will furnish to Lessor one or more original certificates
each executed and delivered by an insurance underwriters appointed by Lessee and
approved by Lessor (which approval shall not be unreasonably withheld) and other
proper evidence of endorsement of Lessor on the insurance policies required to
be maintained under this Section 16, which together shall describe in reasonable
----------
detail insurance carried on the Aircraft and shall certify that the insurance
then maintained on the Aircraft complies with the terms of this Lease. Lessee
will cause each such approved insurance underwriters to agree to advise Lessor
in writing at least thirty (30) days (seven (7) days or such lesser period as
may from time to time be applicable in the case of any war risk and allied
perils coverage) prior to the non-renewal, termination or cancellation by the
underwriters for any reason (including, without limitation, failure to pay the
premium therefor) of any such insurance or as soon as possible in respect of
"non-renewal" or automatic termination for war risk. Not less than five (5)
Business Days before the expiration or termination date of any insurance
required hereunder, Lessee will provide Lessor with telexed or telecopied
confirmation from Lessee's insurance brokers certifying that renewal
certificates of insurance evidencing the renewal or replacement of such
insurance pursuant to the provisions of this Section 16 will be issued on the
----------
termination date of the prior certificate of insurance coverage. Within seven
(7) days after such renewal, Lessee will furnish to Lessor a certificate of such
insurance coverage from such insurance broker.
Air Methods 2000 Aircraft Lease Agreement
10679.108.107383.5
Page 27
<PAGE>
(f) Lessor's Additional Insurance. Lessor, at its option and at
-------------------------------
its sole expense, may obtain insurance with respect to the Aircraft; provided,
--------
that no such insurance shall have the effect of suspending, impairing,
defeating, invalidating or rendering unenforceable or reducing, in whole or in
part, the coverage of or the proceeds payable under any insurance required to be
provided and maintained by Lessee pursuant to this Section 16. Lessee shall
----------
have no right to any proceeds of any insurance policies maintained by Lessor.
(g) Lessee's Additional Insurance. Lessee, at its option and at
-------------------------------
its sole expense, may obtain additional insurance with respect to the Aircraft;
provided, that no such insurance shall have the effect of suspending, impairing,
- --------
defeating, invalidating or rendering unenforceable or reducing, in whole or in
part, the coverage of or the proceeds payable under any insurance required to be
provided and maintained pursuant to this Section 16. Lessor shall have no right
----------
to any proceeds of any insurance policies maintained by Lessee except as
provided in the Lease Documents.
17. GENERAL TAX INDEMNIFICATION.
-----------------------------
(a) Lessee agrees that all payments by Lessee in connection with
the transactions contemplated by this Lease shall be free of all withholdings of
any nature whatsoever (including, without limitation, withholding taxes,
monetary transfer fees, or similar taxes and charges), and in the event any
withholding is required, Lessee shall pay the same together with such additional
amount as is required so that each such payment shall be, under any
circumstances and in any event, in the amount as set forth or referred to
herein. Lessee shall pay, and shall hold each Tax Indemnitee harmless from
liability for, any and all sales, use, business, gross or net income, personal
property, license, documentation, transfer, fuel, leasing, occupational, value
added, excess profits, excise, gross or net receipts, franchise, stamp,
environmental and other taxes, levies, imposts, withholdings, charges, fees,
assessments or duties of any nature, together with any penalties, fines,
additions to tax or interest thereon imposed by any Federal, state or local
government or taxing authority in the United States, or by any foreign country
or any taxing authority or subdivision thereof ("Taxes"), upon or with respect
-----
to, based upon or measured by the Aircraft or any Part thereof or interest
therein, or the manufacture, purchase, financing, refinancing, ownership,
delivery, leasing, subleasing, registration, possession, use, location,
operation (including, without limitation, landing and take-off), return,
replacement, storage, transfer of title, acceptance or other disposition
thereof, or the rentals, receipts or earnings arising therefrom (including,
without limitation, the Rent) or otherwise with respect to or in connection with
the transactions contemplated by this Lease or the other Operative Documents,
and any out-of-pocket costs and expenses attributable to any of the foregoing
incurred by any Tax Indemnitee; provided, however, that Lessee shall have not
-------- -------
such obligation with respect to (i) Taxes (other than sales, use, rental, value
added and similar taxes) imposed by the Federal government of the United States
upon or with respect to, based on or measured by, the net income of any Tax
Indemnitee; (ii) Taxes which are net income, capital, net worth, franchise, or
Air Methods 2000 Aircraft Lease Agreement
10679.108.107383.5
Page 28
<PAGE>
similar conduct of business taxes which are imposed on any Tax Indemnitee by any
state or local taxing authority in the United States; (iii) Taxes imposed as a
result of a voluntary transfer or other disposition by Lessor of the Aircraft or
any Part thereof or interest therein, unless such transfer or other disposition
occurs by reason of exercise of Lessor's remedies under this Lease after
occurrence of a Default or an Event of Default; (iv) Taxes imposed as a direct
and primary result of any Tax Indemnitee's gross negligence or willful
misconduct; and (v) Taxes imposed as a result of Lessor's failure to file any
Tax report or return in a timely or proper manner (provided Lessee has complied
with Section 17(b)hereof).
--------------
(b) Reports. In case of any report or return to be made with
-------
respect to any obligation of Lessee under this Section 17 or arising out of this
----------
Section 17, Lessee will either (i) make such report or return in such manner as
- -----------
will show the ownership in Lessor of the Aircraft, and send a copy of such
report or return to the relevant Tax Indemnitee or (ii) notify such Tax
Indemnitee of such requirement and make such report or return in such manner as
shall be satisfactory to such Tax Indemnitee. Lessee shall, at its expense,
duly file all required reports and returns respecting all Taxes paid or
indemnified against by Lessee pursuant to Section 17(a)to the extent Lessee is
-------------
permitted to do so; provided, however, that if the same must be filed by an Tax
-------- -------
Indemnitee, Lessee will advise such Tax Indemnitee of the necessity of filing
the same and, in sufficient time before the same are due, furnish such Tax
Indemnitee with a completed copy thereof and funds in the amount required to be
submitted, together with any additional information and records relating thereto
as such Tax Indemnitee may reasonably request. Lessee shall hold such Tax
Indemnitee harmless from and against any liabilities, obligations, losses,
damages, penalties, claims, actions, suits and costs arising out of any
insufficiency or inaccuracy in any information in such report or return filed or
supplied by Lessee. Lessee shall make available to such Tax Indemnitee such
other information and records as are maintained by Lessee regarding the
location, operation or use of the Aircraft. If any Tax Indemnitee reasonably
requests additional information relating to any Part or the operation, use or
location thereof, Lessee shall make available such other information and records
as it maintains in the course of its business.
(c) After-Tax Nature of Indemnity. (i) Lessee agrees that, with
------------------------------
respect to any indemnity payment under this Lease, including, without
limitation, this Section 18, such indemnity payment shall include any amount
-----------
necessary to hold each Tax Indemnitee harmless on an after-tax basis from all
Taxes required to be paid by such Tax Indemnitee with respect to such indemnity
payment under the laws of any Federal, state or local government or taxing
authority in the United States, or under the laws of any taxing authority or
subdivision of a foreign country.
(ii) For purposes of this Section 17(c), calculations made on
-------------
an after-tax basis shall be made assuming the maximum statutory rates applicable
to the recipient for the relevant year, after taking into account deductions
attributable to the imposition of other taxes (such as state and local taxes),
which would similarly be calculated on the basis of the maximum statutory rates
for which such deduction was available for the applicable year.
(d) Payment of Taxes and Indemnities. Lessee shall, to the extent
--------------------------------
permissible, pay all Taxes directly and shall reimburse each Tax Indemnitee for
all Taxes paid or payable by such Tax Indemnitee within ten (10) days of receipt
of written notice that reimbursement for such amount is due. Lessee shall pay
all indemnities and other amounts due hereunder within five (5) days of receipt
of written notice that reimbursement for such amount is due.
Air Methods 2000 Aircraft Lease Agreement
10679.108.107383.5
Page 29
<PAGE>
(e) Contest. If a written claim is made against any Tax
-------
Indemnitee for any Taxes for which Lessee is responsible under Section
-------
17(a)hereof, such Tax Indemnitee shall promptly notify Lessee; provided, that,
- ---- --------
the failure to provide such notice shall not affect Lessee's obligations
hereunder to such Tax Indemnitee unless such failure shall preclude the contest
of such claim. If reasonably requested by Lessee in writing within 30 days
after such notification, and upon determination that the amount of the claim
exceeds $25,000 and that the action to be taken will not, in the sole opinion of
Lessor, result in any material danger of sale, forfeiture or loss of, or the
creation of any Lien on the Aircraft or any interest therein (or in the event of
such material danger of sale, forfeiture, loss or lien, Lessee shall have not
obtained a bond satisfactory to Lessor in Lessor's sole discretion), such Tax
Indemnitee shall upon receipt of an indemnity reasonably satisfactory to it at
the sole expense of Lessee (including, without limitation, all reasonable costs,
expenses, losses, legal and accountant's fees and disbursements, penalties and
interest) in good faith contest the validity, applicability or amount of such
Taxes by in such Tax Indemnitee's sole discretion (i) resisting payment thereof;
(ii) not paying the same except under protest, if protest is necessary and
proper; and (iii) if payment is made, using reasonable efforts to obtain a
refund thereof in appropriate administrative or judicial proceedings; provided,
--------
however, that such Tax Indemnitee shall not be required to take any action to
- -------
contest a claim unless (x) Lessee provides an opinion of tax counsel of
nationally recognized standing selected by Lessee and reasonably satisfactory to
such Tax Indemnitee, to the effect that there is a reasonable basis under the
standard set forth in ABA Formal Opinion 85-352 or any successor thereto in law
and fact for contesting such proposed adjustment (which opinion shall be
obtained at Lessee's sole cost and expense), (y) in the event that the subject
matter of the contest is of a continuing nature and has previously been decided
adversely pursuant to the contest provisions of this Section 17(e)by the highest
-------------
court to which an appeal was taken, there has been a change in the law
(including, without limitation, amendments to statutes or regulations,
administrative rulings and court decisions) after such claim shall have been so
previously decided and such Tax Indemnitee shall have received an opinion of
independent tax counsel selected by such Tax Indemnitee, which opinion shall be
obtained at Lessee's sole expense, to the effect that, as a result of such
change it is (at least) as likely as not that the position which such Tax
Indemnitee or Lessee, as the case may be, will assert in any contest of such Tax
would prevail, and (z) prior to the commencement of any contest, Lessee shall
have delivered to such Tax Indemnitee a written acknowledgment of its obligation
to fully indemnify Lessor to the extent the contest is not successful. Any
contest required pursuant to the preceding sentence shall, at the option of such
Tax Indemnitee, be conducted by such Tax Indemnitee or Lessee in the name of
Lessee or such Tax Indemnitee. If any contest involves payment of the Tax in
question, Lessee shall either make such payment directly to the appropriate
authority or advance to such Tax Indemnitee sufficient funds (on an
interest-free basis) to make such payment.
If a Tax Indemnitee shall obtain an actual refund or credit of all or
any part of any Taxes paid by Lessee, such Tax Indemnitee shall pay to Lessee
the amount of such refund or credit (taking into account any tax savings
resulting therefrom), net of expenses not already paid or reimbursed by Lessee,
and any interest fairly attributable thereto plus an amount equal to the Tax
savings realized by such Tax Indemnitee as a result of any payment to Lessee
pursuant to this paragraph; provided, however, that such amount shall not be
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payable before Lessee makes all payments and indemnities to such Tax Indemnitee
then due hereunder; and, provided further, however, that the aggregate amount of
-------- ------- -------
all payments with respect to any Taxes made by such Tax Indemnitee pursuant to
this sentence shall not exceed the aggregate amount of all payments made by
Lessee to such Tax Indemnitee pursuant to this Section 17 with respect to such
----------
Taxes.
Notwithstanding anything to the contrary herein, (x) if a Default or
Event of Default shall have occurred and be continuing, Lessee shall not be
entitled, and no Tax Indemnitee shall be obligated, to commence or to continue
any contest hereunder and (y) in no event shall a Tax Indemnitee be required to
appeal an adverse judicial decision to the United States Supreme Court.
Lessee shall not be deemed to be in default under any of the
indemnification provisions of this Section 17 while it or a Tax Indemnitee
-----------
diligently prosecutes such contest pursuant to this Section 17(e).
--------------
Nothing contained in this Section 17(e)shall require any Tax
--------------
Indemnitee to contest or permit Lessee to contest a claim which it would
otherwise be required to contest pursuant to this Section 17(e) if such Tax
Indemnitee shall waive payment by Lessee of any amount that might otherwise be
payable by Lessee under Section 17(a)by way of indemnity in respect of such
--------------
claim.
(f) Affiliated Group. The terms "Lessor" and "Tax Indemnitee" for
----------------
purposes of this Section 17 shall include the affiliated group of corporations
----------
and each member thereof (within the meaning of Section 1504 of the Code) of
which Lessor or a Tax Indemnitee is or shall become a member if such group shall
file a consolidated United States Federal income tax return.
(g) Survival. The provisions of this Section 17 shall survive the
-------- ----------
expiration or termination of this Lease.
18. GENERAL INDEMNITIES. (a) Lessee hereby assumes liability for, and
-------------------
does hereby agree, whether or not any of the transactions contemplated hereby
are consummated, to indemnify, protect, save, defend, and hold harmless each of
Lessor and its respective officers, directors, stockholders, successors,
assigns, agents and servants (but excluding the Manufacturer), (each such party
being herein, for purposes of this Section 18, called an "Indemnified Party") on
-----------------
an after-tax basis from and against any and all obligations, fees, liabilities,
losses, damages, penalties, claims, demands, actions, suits, judgments, costs
and expenses, including legal expenses, of every kind and nature whatsoever
("Loss") imposed on, incurred by, or asserted against any Indemnified Party, in
- ------
any way relating to or arising out of (a) the manufacture, construction,
ordering, purchase, acceptance or rejection, ownership, titling or retitling,
registration or re-registration, delivery, leasing, releasing, possession, use,
operation, maintenance, storage, removal, return, sale or other disposition of
the Aircraft, or any portion thereof (including without limitation any Airframe
and any Engine) and, including, without limitation, any of such as may arise
from (i) loss or damage to any property or death or injury to any person, (ii)
patent or latent defects in the Aircraft (whether or not discoverable by Lessee
or any Indemnified Party), (iii) any claims based on strict liability in tort,
and (iv) any claims based on patent, trademark or copyright infringement, or (b)
this Lease, the Operative Documents or any failure on the part of Lessee to
perform or comply with any of the terms of this Lease or the other Operative
Documents to which it is a party.
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(b) Notwithstanding the preceding paragraph (a), Lessee shall not
be obligated to make any payment by way of indemnity to any Indemnified Party in
respect of (i) any Loss of such Indemnified Party which results from or arises
out of the gross negligence or willful misconduct of such Indemnified Party,
(ii) any Loss arising out of and relating to the period after the return of the
Aircraft in accordance with the terms of this Lease, (iii) any Loss which arises
from the creation or existence of Lessor Liens, (iv) any Loss which relates to
any sale, pledge, mortgage, assignment, transfer or other disposition (whether
voluntary or involuntary) by such Indemnified Party of any interest of such
Indemnified Party in the Aircraft, any Airframe, any Engine or any Part other
than a transfer or disposition in connection with an Event of Default under
Section 23 hereof, the exercise of remedies pursuant to Section 24 hereof or a
- ----------- ----------
transfer or disposition pursuant to Section 8 hereof effected solely by Lessor,
---------
(v) any Tax (it being understood that Section 17 hereof and the Tax Indemnity
Agreement provide for Lessee's liability with respect to Taxes), and (vi) any
Loss which constitutes expenses that such Indemnified Party shall have expressly
agreed in this Lease or any agreement relating hereto or thereto by which such
Indemnified Party is expressly bound to bear without right of reimbursement.
(c) Lessee shall give each Indemnified Party prompt notice of any
occurrence, event or condition known to Lessee as a consequence of which any
Indemnified Party may be entitled to indemnification hereunder. Lessee shall
forthwith upon demand of any such Indemnified Party reimburse such Indemnified
Party for amounts expended by it in connection with any of the foregoing or pay
such amounts directly. If any Indemnified Party shall obtain a repayment of any
indemnified amount paid by Lessee, such Indemnified Party shall promptly pay to
Lessee the amount of such repayment together with the amount of any interest
received by such Indemnified Party on account of such repayment.
(d) Subject to the provisions of Section 18(c)hereof, Lessee shall
-------------
pay directly to each Indemnified Party all amounts due under this Section 18
----------
within five (5) days of the receipt of written notice by Lessee from such
Indemnified Party that such payment is due.
(e) On the Expiration Date, Lessee shall be subrogated to an
Indemnified Party's rights in any matter with respect to which Lessee has
actually reimbursed such Indemnified Party for amounts expended by it or has
actually paid such amounts directly pursuant to this Section 18. In case any
----------
action, suit or proceeding is brought against any Indemnified Party in
connection with any claim indemnified against hereunder, such Indemnified Party
will, promptly after receipt of notice of the commencement of such action, suit
or proceeding, notify Lessee thereof, enclosing a copy of all papers served upon
such Indemnified Party. Lessee may, and upon such Indemnified Party's request
will, at Lessee's expense, resist and defend such action, suit or proceeding, or
cause the same to be resisted or defended by counsel selected by Lessee and
reasonably satisfactory to such Indemnified Party and in the event of any
failure by Lessee to do so, Lessee shall pay all costs and expenses (including,
without limitation, reasonable attorney's fees and expenses) incurred by such
Indemnified Party in connection with such action, suit or proceeding. Lessor
agrees that no claim which is indemnifiable hereunder shall be compromised or
settled without the prior written consent of Lessee, which consent shall not be
unreasonably withheld.
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(f) Lessee agrees that, with respect to any payment or indemnity
hereunder, such payment or indemnity shall include any amount necessary to hold
the Indemnitee harmless on an after-tax basis from all Taxes required to be paid
by such Indemnified Party with respect to such payment or indemnity under the
laws of any Federal, state or local government or Taxing Authority in the United
States, or under the laws of any Taxing Authority or governmental subdivision of
a foreign country. For purposes of this Section 18(f), calculations made on an
-------------
after-tax basis shall be made assuming the maximum statutory rates applicable to
the recipient for the relevant year, after taking into account deductions
attributable to the imposition of other taxes (such as state and local taxes),
which would similarly be calculated on the basis of the maximum statutory rates
for which such deduction was available for the applicable year.
(g) The indemnities contained in this Section 18 shall continue in
----------
full force and effect notwithstanding the expiration or other termination of
this Lease, and are expressly made for the benefit of and shall be enforceable
by each Indemnified Party.
19. NO WARRANTIES. LESSOR NOT BEING THE MANUFACTURER OR VENDOR OF THE
--------------
AIRCRAFT, ANY AIRFRAME OR ANY ENGINE OR ANY PART, MAKES NO REPRESENTATION OR
WARRANTY, EITHER EXPRESS OR IMPLIED, AS TO ANY MATTER WHATSOEVER, INCLUDING,
WITHOUT LIMITATION, THE DESIGN OR CONDITION OF THE AIRCRAFT, ANY AIRFRAME OR ANY
ENGINE, ITS MERCHANTABILITY, DURABILITY, SUITABILITY OR ITS FITNESS FOR ANY
PARTICULAR PURPOSE, THE QUALITY OF THE MATERIAL OR WORKMANSHIP OF THE AIRCRAFT,
AIRFRAME OR ANY ENGINE, OR THE CONFORMITY OF THE AIRCRAFT, ANY AIRFRAME OR ANY
ENGINE TO THE PROVISIONS AND SPECIFICATIONS OF ANY PURCHASE ORDER RELATING
THERETO, AND LESSOR HEREBY DISCLAIMS ANY SUCH REPRESENTATION OR WARRANTY (WHICH
DISCLAIMER LESSEE HEREBY ACKNOWLEDGES). WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, LESSOR SHALL NOT BE LIABLE OR RESPONSIBLE FOR ANY DEFECTS, EITHER
PATENT OR LATENT (WHETHER OR NOT DISCOVERABLE BY LESSEE), IN THE AIRCRAFT, ANY
AIRFRAME OR ANY ENGINE, OR FOR ANY DIRECT OR INDIRECT DAMAGE TO PERSONS OR
PROPERTY RESULTING THEREFROM, OR FOR LESSEE'S LOSS OF USE OF THE AIRCRAFT,
AIRFRAME OR ANY ENGINE OR FOR ANY INTERRUPTION IN LESSEE'S BUSINESS CAUSED BY
LESSEE'S INABILITY TO USE THE AIRCRAFT, AIRFRAME OR ANY ENGINE FOR ANY REASON
WHATSOEVER. NOTWITHSTANDING THE FOREGOING, Lessor represents, warrants and
covenants to Lessee that (i) it has full power and authority to enter into and
perform this Lease and the other Lease Documents to which it is a party, (ii)
the execution, delivery and performance of this Lease and the other Lease
Documents to which it is a party have been duly authorized by all necessary
action on the part of Lessor, do not require any stockholder approval or
approval or consent of any trustee or holders of any debt or other obligations
of Lessor, and do not contravene any provision of any applicable Law,
governmental rule, regulation or order, the by-laws or other constituent
documents of Lessor or any indenture, mortgage, contract or other material
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<PAGE>
agreement or instrument to which Lessor is a party or by which it or any of its
assets may be bound or affected, (iii) this Lease constitutes the valid and
legally binding obligation of Lessor enforceable against Lessor in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency or other similar laws affecting creditors' rights
generally and general principles of equity (regardless of whether enforceability
is considered in a proceeding at law or in equity), (iv) on the Delivery Date it
will have such good and marketable title to the Aircraft as it receives from the
Manufacturer free and clear of all Lessor Liens and (v) so long as Lessee
performs each and every covenant to be performed by it hereunder, Lessor or
anyone claiming by or through Lessor shall not interfere with Lessee's quiet
enjoyment and use of the Aircraft. So long and only so long as no Event of
Default shall have occurred and be continuing, and so long and only so long as
the Aircraft shall be subject to this Lease and Lessee shall be entitled to
possession of the Aircraft hereunder, (i) Lessor authorizes Lessee, at Lessee's
expense, to assert for Lessor's account, all rights and powers of Lessor under
any manufacturer's, vendor's or dealer's warranty with respect to the Aircraft,
any Airframe, any Engine, and any part thereof, and (ii) Lessor hereby, to the
extent permitted by any such manufacturer's, vendor's or dealer's warranty,
assigns such warranty to Lessee, and Lessee may in its own name seek to enforce
the same against any manufacturer, vendor or dealer; provided, however, that
-------- -------
Lessee shall indemnify, protect, save, defend and hold harmless Lessor from and
against any and all claims, and all costs, expenses, damages, losses and
liabilities incurred or suffered by Lessor in connection therewith, as a result
of, or incident to, any action by Lessee pursuant to the foregoing authorization
or assignment.
20. FINANCIAL INFORMATION; NOTICE
----------------------- ------
(a) From the date of execution of this Lease and during the Lease
Term, Lessee agrees to furnish to Lessor such information as Lessor may
reasonably request at any time concerning the Lessee and its affairs, including,
without limitation, (i) all reports and filings made with any Governmental
Authority pursuant to the Securities Act of 1933, as amended, and the Securities
and Exchange Act of 1934, as amended, (ii) within ninety (90) days after the end
of each fiscal quarter, all consolidated quarterly unaudited financial
statements of Lessee and its subsidiaries (including balance sheets and
statements of cash flows) prepared by Lessee in accordance with GAAP and
certified by Lessee's chief financial officer as fairly presenting the financial
condition of Lessee and its subsidiaries as of the end of such quarterly period,
and (iii) all audited consolidated financial statements of Air Methods
Corporation ("Air Methods"), the ultimate parent of Lessee as at such end of
------------
each fiscal year certified by Air Methods' independent public accountants of
recognized standing (all of the foregoing to be in form, substance and scope,
and with satisfactory unqualified opinions of Air Methods' accountants, as
Lessor may reasonably require).
(b) Lessee shall promptly, and in any event within ten (10) days, give
Lessor notice of any Default or Event of Default and actions Lessee intends to
take in relation thereto.
21. CONDITIONS PRECEDENT. The obligation of Lessor to purchase from
---------------------
Lessee and lease the Aircraft to Lessee is subject to the following conditions
precedent having been complied with to the satisfaction of, or waived in writing
by, Lessor on or before the applicable Acceptance Date (each document,
instrument, certificate, opinion or other paper referred to below to be in form
and substance reasonably satisfactory to Lessor):
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(a) The following documents set forth in this Section 21(a)shall
-------------
(x) have been duly authorized, executed and delivered by the respective party or
parties thereto on the Delivery Date; (y) an executed copy of each of the
following documents shall have been delivered to Lessor on the Delivery Date;
and (z) be in full force and effect on all Acceptance Dates:
(i) a certified copy of the Purchase Agreement and related
documents;
(ii) this Lease;
(iii)of the Assignment of Purchase Agreement together with the
related consent executed by the Seller and MASI;
(iv) a legal opinion of each of (A) special FAA counsel to
Lessor, and (B) counsel to Lessee;
(v) a Lease Supplement appropriately completed (and Lessor shall
possess the "original" thereof);
(vi) the Tax Indemnity Agreement;
(vii) Aeronautical Bills of Sale executed by the Lessee in favor
of Lessor with respect to each Aircraft;
(viii) FAA form Applications for Registration executed by Lessor
with respect to each Aircraft;
(ix) the Warranty Bill of Sale executed by the Seller;
(x) the Certificate of Acceptance and all acceptance documents
relating to each Aircraft to be executed and delivered in connection with the
Purchase Agreement;
(xi) UCC-1 Financing Statements executed by Lessee in favor of
the Lessor and filed in the appropriate jurisdictions with appropriate agencies
in the State of Delaware, the State of Missouri, the State of Illinois, the
State of Colorado and other states reasonably requested by Lessor;
(xii) to the extent requested by Lessor, evidence of the
acceptance by CT Corporation, New York, New York, of its appointment as agent to
receive service of process in New York on behalf of Lessee;
(xiii) such agreements regarding the payment of proceeds
constituting the Aircraft Cost as Lessor may request;
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<PAGE>
(xiv) an amendment to the Prior Lease Documents providing for
cross defaults to the Lease Documents (as defined herein) and certain technical
corrections in form and substance satisfactory to Lessor and Lessee; and
(xv) such other documentation as Lessor may reasonably require.
(b) Lessor shall have received the following:
(i) on the Delivery Date, evidence satisfactory to Lessor
confirming that this Lease has been duly filed with the FAA;
(ii) on each Acceptance Date, copies of all necessary consents or
approvals from any Governmental Authority or such other Person as to the
transactions contemplated by this Lease;
(iii) on each Acceptance Date, evidence that Lessee has obtained
such licenses, operator's certificates or other documents from each appropriate
Governmental Authority as may be required to operate the Aircraft under
applicable Law, including, without limitation, approval by the FAA of Lessee's
Maintenance Program for the Aircraft;
(iv) on the Delivery Date, a copy of the Articles of
Incorporation of Lessee, Seller and MASI and a copy of resolutions of the Board
of Directors of Lessee, Seller and MASI duly authorizing the execution, delivery
and performance by Lessee, Seller and MASI of each of the Lease Documents, to
which it or they may be a party, and each other document required to be executed
and delivered by Lessee, in accordance with any provisions under the Lease
Documents;
(v) on the first Delivery Date, a certificate signed by a duly
authorized officer of Lessee certifying that (i) the copies of the Articles of
Incorporation of Lessee, and (ii) the resolutions of the Board of Directors of
Lessee, are true and correct as of the such date, and such certificate shall be
in form and substance acceptable to Lessor, executed by Lessee;
(vi) on each Acceptance Date, a certificate signed by a duly
authorized officer of Lessee, dated such Acceptance Date, to the effect that (i)
the representations and warranties of Lessee contained in Section 22 hereof are
----------
true and correct on and as of such date as though made on and as of such date,
and all authorizations and approvals of, giving of notice to, and filings and
recordings with, all Governmental Authorities and authorities which may be
conditions to the validity or enforceability of this Lease, or Lessee's
performance of the terms thereof have been duly accomplished; and (ii) no
Default or Event of Default has occurred and is continuing or would result from
the lease of the Aircraft hereunder;
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(vii) on the first Delivery Date and each other Acceptance Date
as Lessor may request, a current certificate of existence of Lessee;
(viii) On each Acceptance Date, a Lease Supplement applicable to
such date (and Lessor shall possess the "original" thereof);
(ix) on each Acceptance Date, (A) the Basic Rent payable under
this Lease shall have been paid when due on the applicable Rent Payment Date and
(B) all transaction costs due and owing pursuant to Section 34 hereof shall have
----------
been paid in full; and
(x) on the first Delivery Date, the Transaction Fee (which fee
has been paid);
(xi) on each Acceptance Date, a Notice of Proposed Acceptance
Date appropriately completed;
(xii) on each Acceptance, such other documents and evidence with
respect to Lessee as Lessor or its counsel may request in order to establish the
consummation of the transactions contemplated by this Lease, the taking of all
corporate proceedings in connection therewith and compliance with the conditions
herein or therein set forth;
(c) On each Acceptance Date, the following statements shall be
correct, and Lessor shall have received evidence reasonable satisfactory to it
to the effect that:
(i) Lessor has good and legal title to the Aircraft free and
clear of all Liens other than Permitted Liens;
(ii) the Aircraft has been duly certified by the Aeronautics
Authority as to type and airworthiness;
(iii) the Aircraft has been duly registered with the FAA in the
name of Lessor as owner;
(iv) the representations and warranties of Lessee contained
herein shall be true and correct on and as of the Acceptance Date as though made
on and as of the Acceptance Date;
(v) all authorizations and approvals of, giving of notice to, and
filings and recordings with, all regulatory bodies and authorities which may be
conditions to the validity or enforceability of this Lease or Lessee's
performance of the terms hereof have been duly accomplished;
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(vi) no event shall have occurred and be continuing which
constitutes a Default or an Event of Default under this Lease;
(vii) there shall not have occurred, on or after the date hereof
and on or prior to the Acceptance Date, any amendment or proposed amendment
having an effective date or proposed effective date on or prior to any
Acceptance Date to any Law which would cause Lessor to have tax liability
greater than assumed in any tax or other indemnity agreement between Lessor and
Lessee set forth in this Lease or otherwise;
(viii) there has not occurred in Lessor's reasonable judgment,
any material adverse change in the business, assets, property, prospects or
condition (financial or otherwise) of Lessee since the date of this Lease;
(ix) the Aircraft shall have both (x) a distress value on such
Acceptance Date, and (y) an anticipated residual value on the Expiration Date
satisfactory to Lessor in its sole discretion.
(d) On the Delivery Date, Lessor shall have received the following
items in a in form and substance reasonable satisfactory to it:
(i) An appraisal and other evidence of the fair market value or
the distress value with respect to the Aircraft, satisfactory to Lessor;
(ii) (A) A duly executed independent insurance and/or reinsurance
broker's report, together with (B) certificates of insurance and/or reinsurance
from such broker and (C) loss payable endorsements, each satisfactory to Lessor,
as to the due compliance with the terms of Section 16 hereof relating to
-----------
liability, hull all-risk and hull war insurance with respect to the Aircraft.
(iii) All approvals and consents of any trustee or holder of any
indebtedness or obligation of Lessee which are required in connection with any
of the transactions contemplated by the Operative Documents shall have been duly
obtained and evidence thereof shall have been delivered to Lessor; all
appropriate action, if any, required to have been taken in connection with any
of the transactions contemplated by the Operative Documents by the Aeronautics
Authority and each other Governmental Authority having jurisdiction shall have
been taken, and Lessee shall have furnished to Lessor copies of all governmental
approvals required for the execution, delivery and performance of this Lease,
any other Operative Documents to which Lessee is a party and the transactions
contemplated hereby and thereby;
(iv) Confirmation that no change shall have occurred after the
date of this Lease in applicable Law and no change in circumstances shall have
occurred and no fact or condition shall exist which, in the reasonable opinion
of Lessor, would make it illegal under applicable Law for Lessor to lease the
Aircraft to Lessee; and
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(v) All closing conditions, if any, set forth in the other
Operative Documents shall have been satisfied.
(e) On each Acceptance Date, Lessor shall have received a fully
executed Warranty Bill of Sale from Lessee, reasonably satisfactory to Lessor.
22. LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS. Lessee
------------------------------------------------------
covenants, agrees, represents, warrants and covenants to Lessor as of each
Acceptance Date and Rent Payment (except representations relating solely to an
earlier date) that:
(a) Lessee is a corporation duly organized, validly existing and
in good standing under the Laws of the State of Missouri, and is registered,
licensed or otherwise certificated or duly authorized by all appropriate
authorities of the United States to engage in air transportation and is duly
qualified or otherwise authorized to do business in all jurisdictions in which
it intends to operate the Aircraft, except for jurisdictions where failure to so
qualify or obtain authorization would not in the aggregate have a material
adverse effect on the business of Lessee and would not involve any danger of the
sale, forfeiture or loss of the Aircraft or impairment of the value thereof.
Lessee also represents, warrants and covenants that as of the Delivery Date it
operates, and it will throughout the Lease Term continue to operate, the
Aircraft in accordance with the rules and regulations of the FAA.
(b) Lessee has full power and authority to enter into and perform
this Lease and the other Lease Documents to which it is a party, including the
documents executed or to be executed by Lessee in connection with the Purchase
Documents and the execution, delivery and performance of this Lease, the
Purchase Documents and the other Lease Documents (i) have been duly authorized
by all necessary action on the part of Lessee, (ii) do not require any
stockholder approval or approval or consent of any trustee or holders of any
debt or other obligations of Lessee except such as have been duly obtained and
(iii) do not contravene any provision of any Law, the by-laws or other
constituent documents of Lessee or any indenture, mortgage, contract or other
material agreement or instrument to which Lessee is a party or by which it or
any of its assets may be bound or affected.
(c) Neither the making nor performance by Lessee of this Lease and
each other Lease Document, including the documents executed or to be executed by
Lessee in connection with the Purchase Documents nor the consummation of any of
the transactions by Lessee contemplated hereby or thereby, requires the consent
or approval of, the giving of notice to, the registration or filing for
recordation with, or the taking of any other action in respect of, any
Governmental Authority.
(d) Each of this Lease, each Purchase Documents and each other
Lease Document, including the documents executed or to be executed by Lessee in
connection with the leasing of the Aircraft constitutes or, when so executed,
will constitute the valid and legally binding obligation of Lessee enforceable
against Lessee in accordance with the terms thereof, except as such
enforceability may be limited by applicable bankruptcy, insolvency or other
similar laws affecting creditors' rights generally and general principles of
equity (regardless of whether enforceability is considered in a proceeding at
law or in equity).
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(e) There are no suits or proceedings pending or, to the knowledge
of Lessee, threatened in any court or before any regulatory commission, board or
other administrative or governmental agency against or affecting Lessee which
relate to the transactions contemplated hereby and which, if adversely
determined, would have a material adverse effect on (i) the financial condition
or business of Lessee, (ii) its obligations under this Lease, or (iii) its
obligations under any of the Operative Documents. Neither Lessee nor any of its
Affiliates is in material default with respect to any order of any Governmental
Authority.
(f) In reliance upon the opinion of McAfee & Taft delivered
pursuant to Section 21 hereof (such reliance limited solely to matters relating
----------
to filings and recordings with the Aeronautics Authority), except for the
registration of the Aircraft and the filing of this Lease with the FAA and the
filing of Uniform Commercial Code financing statements in Delaware, Illinois,
Missouri and Colorado, no further filing or recording of any document and no
other action is necessary or advisable, whether in the United States or
elsewhere, in order to establish and perfect under United States Federal and New
York State Law, Lessor's title to and interest in the Aircraft as against Lessee
and any third parties claiming against or through Lessee, including trustees,
custodians and other representatives or similar officials, under any bankruptcy
or liquidation law or regulations, or otherwise.
(g) The Aircraft (i) is not principally for use in any nation with
which under United States Law, regulation or stated policy Lessee is prohibited
from doing business, (ii) is not to be used principally in any nation which
engages in armed conflict, declared or otherwise, and (iii) is not currently,
and will not be in the future, used in violation of the organizational documents
of Lessee.
(h) The obligations of Lessee to pay Rent hereunder will be a
direct and unconditional general obligation of Lessee, and will rank in right of
payment at least pari passu with all unsecured and unsubordinated debt of
---- -----
Lessee, whether now or hereafter outstanding, subject to any bankruptcy,
insolvency, reorganization or similar law.
(i) On the Delivery Date, Lessee has, and on each other Acceptance
Date, Lessee will have, no material liabilities, contingent or otherwise,
including liabilities for taxes or any unusual forward or long-term commitments,
other than payments due to Lessor under this Lease, and there are no unrealized
or anticipated losses from any unfavorable commitments of Lessee which may
materially and adversely affect the financial condition of Lessee.
(j) There is no fact peculiar to Lessee which Lessee has not
disclosed to Lessor in writing which materially and adversely affects or, so far
as Lessee can reasonably foresee, would materially and adversely affect the
Aircraft or the property, business, prospects, corporate structure, ownership of
Lessee, profits or condition (financial or otherwise) of Lessee or would impair
the ability of Lessee to perform its obligations under this Lease and the other
Operative Documents.
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(l) The Aircraft will on the Delivery Date and thereafter during
the Lease Term be covered by the insurance required by Section 16 hereof.
----------
(m) No Default or Event of Default under this Lease has occurred
and is continuing or will occur immediately after giving effect to the execution
and delivery of this Lease on the Delivery Date or any other Lease Document or
Purchase Document on any Acceptance Date. Lessee is not on the Delivery Date,
and will not on any other Acceptance Date be, in violation in any material
respect of any term of its organizational documents, or other material agreement
or instrument to which it is a party or by which it is bound. Lessee is on the
Delivery Date, and will be on each other Acceptance Date, in compliance with all
Laws to which it is subject, the failure to comply with which would have a
material and adverse effect on its operations or condition, financial or
otherwise, or would impair the ability of Lessee to perform its obligations
under this Lease or any other Operative Document to which Lessee is a party, and
has obtained all applicable licenses, permits, franchises and other governmental
authorizations material to the conduct of its business.
(n) On all Acceptance Dates, (i) withholding of any Tax will not
be required upon any payments by Lessee to Lessor hereunder, and (ii) there is
no Tax imposed by virtue of the execution or delivery of any of the Operative
Documents. On all Acceptance Dates, Lessor will not be obligated to collect
sales tax on any payments made by Lessee to Lessor hereunder.
(o) Lessee's chief executive office (as defined in the Uniform
Commercial Code as in effect in the applicable jurisdiction) and principal place
of business, and the place where its records concerning the Aircraft and its
interest therein and all documents relating thereto are kept is correctly set
forth in Schedule B hereto.
-----------
(p) All tax returns required to be filed by Lessee in any
jurisdiction have in fact been filed, and Lessee has paid or caused to be paid
all taxes, assessments, fees and other governmental charges which have become
due pursuant to such returns or pursuant to any assessment received by it, and
Lessee does not have any knowledge of any actual or proposed deficiency or
additional assessment in conjunction therewith which either in any case or in
the aggregate would be materially adverse to Lessee; and the charges, accruals
and reserves on the books of Lessee in respect of federal, state, local or
foreign taxes for all such years, and for the current fiscal year, make adequate
provision for all unpaid tax liabilities for such periods.
(q) Lessee has not, directly or indirectly, used the services of
any broker, agent or finder in regard to any of the transactions contemplated
hereby; and no broker's or finder's fees or commissions or management or
advisory fees are, will or may become payable arising out of any actions or
omissions to act on Lessee's part in connection with the transactions
contemplated by this Lease or any other Operative Document to which Lessee is a
party.
(r) The Maintenance Program maintained by Lessee for the Aircraft
and the Engines shall remain in full force and effect and complies with and
shall, at all times during the Lease Term, continue to comply with all
applicable Aeronautics Authority requirements applicable to the Aircraft.
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(s) Lessee is not in default in the performance of any of its
obligations (i) for the payment of indebtedness for borrowed money in a
principal amount in excess of One Hundred Thousand Dollars ($100,000) or of any
interest or premium thereon or (ii) for the payment of rent under any lease
agreement for the lease of real, personal or mixed property where the monthly
rental exceeds Ten Thousand Dollars ($10,000) or where the aggregate rentals
over the term thereof exceed One Hundred Thousand Dollars ($100,000) or (iii)
for any secured debt in excess of Two Hundred Fifty Thousand Dollars ($250,000)
in the aggregate.
(t) No indemnity claim affecting to the Aircraft or basis therefor
exists under the Purchase Agreement and each representation and warranty
thereunder is, to Lessee's knowledge, true and correct in all material respects.
23. EVENTS OF DEFAULT. Any of the following events shall constitute an
-----------------
Event of Default (whether any such event shall be voluntary or involuntary, or
come about or be effected by operation of Law or pursuant to or in compliance
with any judgment, decree or order of any Governmental Authority):
(a) Failure of Lessee to pay within ten (10) days of the due date
therefor, any sum, including installments of Rent, owed by Lessee at any time to
Lessor under this Lease; Lessor shall use reasonable efforts to give Lessee
written notice of any payments which may become past due; provided that, the
-------- ----
failure by Lessor to provide such notice to Lessee shall in no event be deemed a
waiver by Lessor of any of its rights hereunder; or
(b) Lessee shall fail to observe or perform any of the covenants
or agreements of Lessee set forth in Sections 12 or 13(a)hereof or under the
--------------------
Purchase Agreement, and such failure shall continue unremedied for ten (10) days
after the occurrence thereof; or
(c) Lessee shall fail to procure and maintain any insurance
required by Section 16 hereof or shall operate the Aircraft outside the scope of
----------
the insurance coverage maintained with respect to the Aircraft; or
(d) Lessee or either Guarantor shall fail to perform or observe
any other covenant, condition, or agreement to be performed or observed by it
under this Lease, the Lease Documents or in any agreement or certificate
furnished to Lessor or an other assignee or lender in connection herewith, and
such failure shall continue unremedied for thirty (30) days after written notice
by Lessor to Lessee, specifying such failure and demanding the same to be
remedied; or
(e) Lessee or either Guarantor shall become insolvent or bankrupt
or make a general assignment for the benefit of creditors or consent to the
appointment of a trustee or receiver; or a trustee or a receiver shall be
appointed for Lessee or for a substantial part of its property without its
consent and shall not be dismissed for a period of sixty (60) days; or any
petition for the relief, reorganization or arrangement of Lessee or either
Guarantor or any other petition in bankruptcy or for the liquidation, insolvency
or dissolution of Lessee shall be filed by or against Lessee and, if filed
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against Lessee, shall be consented to or be pending and not dismissed for a
period of sixty (60) days; or an order for relief under any bankruptcy or
insolvency law shall be entered by any court or Governmental Authority of
competent jurisdiction with respect to Lessee or either Guarantor, as the case
may be; or any execution or writ or process shall be issued under any action or
proceeding against Lessee whereby the Aircraft, any Airframe or any Engine may
be taken or restrained; or
(f) Lessee's or either Guarantor's legal existence shall cease; or
Lessee shall, without Lessor's prior written consent, sell, transfer or dispose
of, or pledge or otherwise encumber, all or substantially all of its assets or
property, or Lessee or either Guarantor shall consolidate or merge with any
other entity, provided, however, that an Event of Default shall not have
-------- -------
occurred if (i) Lessee is the surviving corporation of any such consolidation or
merger or (ii) the parties to any such merger or consolidation include only
Lessee and its Affiliate(s); or
(g) any representation, warranty, statement or certification made
by Lessee or either Guarantor under any Purchase Document, Lease Document or in
the Certificate of Acceptance to which such Person is a party or in any document
or certificate furnished to Lessor, or any other assignee in connection herewith
or pursuant hereto, shall prove to be untrue or incorrect when made in any
material respect, or shall be breached in any material respect; or
(h) the Lease or the Guaranty shall cease to be a valid and
effective agreement enforceable in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, or other
similar laws affecting creditors' rights generally and general principles of
equity (regardless of whether enforceability is considered in a proceeding at
law or in equity); or
(i) (i) any material default or Event of Default shall have
occurred under any Prior Lease Document; or (ii) any default or event of default
shall occur pursuant to the terms of any lease or other financing arrangement
between (A) Lessor, any direct or indirect subsidiary of Lessor or any Affiliate
of Lessor and (B) Lessee or any direct or indirect subsidiary of Lessee; or
(j) Lessee shall be in default or breach of any obligation
described in Section 22(s) above and such default shall continue for ten (10)
--------------
days after the occurrence of such default or breach; or
(k) there shall be a Material Adverse Change in the business,
assets or prospects of Lessee or either Guarantor or any direct or indirect
Subsidiary of Lessee or either Guarantor after the date hereof. For purposes of
this section, "Material Adverse Change" means, in the sole and absolute
discretion of Lessor, which discretion shall be exercised in a reasonable
manner, a material adverse change in (i) the business, operations, prospects,
properties, assets or condition (financial or otherwise) of Lessee taken on an
individual basis or taken as a whole (together with its Subsidiaries) or (ii)
the ability of any Lessee Person to perform its obligations under any Lease
Document to which it is a party or of Lessor to enforce any obligation arising
pursuant to the Lease Documents.
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24. REMEDIES UPON DEFAULT. Upon the occurrence of any Event of Default
---------------------
and at any time thereafter so long as the same shall be continuing, Lessor may
exercise one or more of the following remedies with respect to the Aircraft or
any part thereof (including, without limitation, any Airframe or any Engine) as
Lessor in its sole discretion shall elect:
(a) Lessor, at its option, may cause Lessee, upon the written
demand of Lessor and at Lessee's expense, to return promptly, and Lessee shall
return promptly, the Aircraft to Lessor or at its direction in the manner and
condition required by, and otherwise in accordance with all the provisions of,
Section 4 hereof, as if such Aircraft were being returned at the end of the
- ---------
Lease Term or, if Lessee does not so deliver such Aircraft, Lessor may terminate
this Lease, without prejudice to any other remedies of Lessor hereunder.
Whether or not this Lease has been so terminated, Lessor at its option shall to
the fullest extent permitted by applicable Law, (i) have the right to enter the
premises of Lessee or any other party to take immediate possession of the
Aircraft or any part thereof and remove all or any part of the Aircraft or any
part thereof by summary proceedings or otherwise, (ii) not be liable, in
conversion or otherwise, for the taking of any personal property of Lessee which
is in or attached to the Aircraft, any Airframe, any Engine or Part which is
repossessed; provided, however, that Lessor shall return to Lessee all personal
-------- -------
property of Lessee or its passengers which was on the Aircraft at the time
Lessor re-takes possession of the Aircraft; (iii) not be liable or responsible,
in any manner, for any inadvertent damage injury to any of Lessee's property in
repossessing and holding the Aircraft, any Airframe, any Engine or Part, except
for that caused by or in connection with Lessor's gross negligence or willful
acts; (iv) have the right to maintain possession of and dispose of the Aircraft,
any Airframe, any Engine or Part on any premises owned by Lessee or under
Lessee's control; (v) have the right to obtain a key to any premises at which
the Aircraft, any Airframe, any Engine or Part may be located from the landlord
or owner thereof; or (vi) cause Lessee, at Lessee's expense, to store, maintain,
surrender and deliver possession of the Aircraft in the same manner as provided
in Section 4 hereof, all without liability to Lessee for or by reason of such
----------
entry or taking of possession, whether for the restoration of damage to property
caused by such taking or otherwise except damages caused by gross negligence or
willful misconduct of the Lessor or its agents;
(b) Lessor may sell the Aircraft or any Part thereof at public or
private sale, as Lessor may determine, free and clear of any rights of Lessee,
in which event Lessee's obligation to pay Basic Rent hereunder with respect to
the Aircraft for all Rental Periods commencing after the date of such sale shall
terminate and in the event that the net sales proceeds is less than the Casualty
Loss Value as of the next preceding Rent Payment Date and any Basic Rent due as
of the date of such sale, Lessee shall pay Lessor the difference;
(c) Lessor may hold, keep idle or lease to others the Aircraft or
any Part thereof, as Lessor in its sole discretion may determine, free and clear
of any rights of Lessee in which event Lessee's obligation to pay Basic Rent for
any Rental Periods commencing after Lessee shall have been deprived of
possession pursuant to this Section 24 shall be reduced by the net proceeds, if
----------
any, received by Lessor from leasing the Aircraft or any Part thereof to any
Person other than Lessee for the same Rental Periods or any portion thereof;
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(d) If reasonably required by Lessor, Lessee, at its sole expense,
shall assemble and make the Aircraft, any Airframe, any Engine or Part available
at a place designated by Lessor in accordance with Section 4 hereof. Lessee
---------
hereby agrees that, in the event of the return to or repossession by Lessor of
the Aircraft, any Airframe, any Engine or Part, any rights in any warranty
(express or implied) heretofore assigned to Lessee or otherwise held by Lessee
shall without further act, notice or writing be assigned or reassigned to
Lessor, if assignable. Lessee shall be liable to Lessor for all reasonable
expenses, disbursements, costs and fees incurred in (i) repossessing, storing,
preserving, shipping, maintaining, repairing and refurbishing the Aircraft, any
Airframe, any Engine or Part to the condition required by Section 4 hereof and
---------
(ii) preparing the Aircraft, any Airframe, any Engine or Part for sale or lease,
advertising the sale or lease of the Aircraft, any Airframe, any Engine or Part
and selling or releasing the Aircraft, any Airframe, any Engine or Part. Lessor
is hereby authorized and instructed, at its option, to make reasonable
expenditures which Lessor considers advisable to repair and restore the
Aircraft, any Airframe, any Engine or Part to the condition required by Section
-------
4 hereof, all at Lessee's sole expense;
(e) Lessee shall be liable, except as otherwise provided above,
for any and all unpaid Rent and Casualty Loss Value hereunder before or during
the exercise of any of the foregoing remedies and for all legal and arbitration
fees (including reasonable attorneys' fees incurred in any and all judicial and
other governmental proceedings or arbitration proceedings, including appellate
proceedings, whether such proceedings arise before or after entry of final
judgment or arbitration award) and other reasonable costs and expenses incurred
by Lessor by reason of the occurrence of any Event of Default or the exercise of
Lessor's remedies with respect thereto, including all reasonable costs and
expenses incurred in connection with the return of the Aircraft in accordance
with Section 4 hereof or in placing the Aircraft in the condition required by
----------
said Section. At any sale pursuant to this Section 24, Lessee or any of its
----------
Affiliates may bid for and purchase the Aircraft. Except as otherwise expressly
provided above, no remedy referred to in this Section 24 is intended to be
exclusive, but each shall be cumulative (except that nothing hereunder shall
entitle Lessor to duplicative remedies) and in addition to any other remedy
referred to above or otherwise available to Lessor at law or in equity; and the
exercise or beginning of exercise by Lessor of any one or more of such remedies
shall not constitute the exclusive election of such remedies and shall not
preclude the simultaneous or later exercise by Lessor of any or all of such
other remedies. No express or implied waiver by Lessor of any Event of Default
shall in any way be, or be construed to be, a waiver of any future or subsequent
Event of Default.
(f) Lessor may exercise any other right or remedy which may be
available to it under any Operative Document or under the New York Uniform
Commercial Code or other applicable Law, or proceed by appropriate court action
to enforce the terms hereof to recover damages for the breach hereof.
25. LESSOR'S RIGHT TO PERFORM FOR LESSEE. If Lessee at any time shall
-------------------------------------
fail to pay to any Person any sum which Lessee is required to pay hereunder or
shall fail to do or perform any other thing Lessee is required to do or perform
hereunder, Lessor at its option may pay such sum or do or perform such thing,
and Lessee shall reimburse Lessor on demand for the amount of such payment and
for the cost and expense which may be incurred by Lessor for such acts or
performance, together with interest from the date of demand until paid accrued
at the Default Rate.
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26. LATE CHARGES. If any installment of Rent or other sum owing under
-------------
this Lease shall not be paid within ten (10) days of the date when due, Lessee
shall pay Lessor interest on such amount at the Default Rate. Such late charge
is in addition to and not in lieu of other rights and remedies of Lessor.
27. FURTHER ASSURANCES. Lessee will promptly and duly execute and
-------------------
deliver to Lessor such other documents and assurances, including, without
limitation, such amendments to this Lease as may be reasonably required by
Lessor, and Uniform Commercial Code financing statements and continuation
statements, and will take such further action as Lessor may from time to time
reasonably request in order to carry out more effectively the intent and
purposes of this Lease and to establish and protect the rights and remedies
created or intended to be created in favor of Lessor.
28. NOTICES. All notices provided for or required under the terms and
-------
provisions hereof shall be in writing, and any such notice shall be deemed given
when personally delivered or if deposited in the United States mails, with
proper postage prepaid, for first class registered mail, return receipt
requested, when received or when sent by telecopy with electronic confirmation,
addressed if to Lessor or Lessee, at their respective addresses as set forth on
Schedule B hereof or at such other address as either of them shall, from time to
- ----------
time, designate in writing to the other.
29. GOVERNING LAW AND CONSENT TO JURISDICTION. THIS LEASE SHALL IN ALL
-----------------------------------------
RESPECT BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF NEW YORK, UNITED STATES OF AMERICA, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS
PROVISIONS THEREOF. Lessee hereby irrevocably consents that any legal action or
proceeding against it or any of its assets with respect to this Lease may be
brought in any jurisdiction where Lessee or any of its assets may be found, or
in any court of the State of New York or any Federal court of the United States
of America located in New York, New York, United States of America, or both, as
Lessor may elect, and by execution and delivery of this Lease, Lessee hereby
irrevocably submits to and accepts with regard to any such action or proceeding,
for itself and in respect of its assets, generally and unconditionally, the
jurisdiction of the aforesaid courts. Lessee hereby designates, appoints and
empowers CT Corporation System at its principal office at 1633 Broadway, New
York, New York 10019, as its authorized agent for service of process in the
State of New York in any suit or proceeding with respect to this Lease and the
other Operative Documents to which Lessee is a party (such agent being
hereinafter called the "Process Agent"); provided however, that if the Process
------------- -------- -------
Agent shall at any time cease to be the Process Agent, Lessee shall forthwith
designate a successor Process Agent and shall give prompt. notice of such
designation to Lessor. A copy of any such process served on such agent shall be
promptly forwarded by air courier by the person commencing such proceeding to
Lessee at its address set forth in Schedule B hereof, but the failure of Lessee
----------
to receive such copies shall not affect in any way the service of such process
as aforesaid. Lessee further irrevocably consents to the service of process out
of any of the aforementioned courts in any such action or proceeding by the
mailing of copies thereof by registered or certified first class mail, postage
prepaid, to Lessee at its address set forth in Schedule B hereof. The
-----------
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foregoing, however, shall not limit the rights of Lessor to serve process in any
other manner permitted by Law or to bring any legal action or proceeding or to
obtain execution of judgment in any jurisdiction. Lessee further agrees that
final judgment against Lessee in any action or proceeding in connection with
this Lease shall be conclusive and may be enforced in any other jurisdiction
within or outside the United States of America by suit on the judgment, a
certified or exemplified copy of which shall be conclusive evidence of the fact
and the amount of Lessee's indebtedness. Lessee hereby irrevocably waives, to
the fullest extent permitted by Law, any objection which Lessee may now or
hereafter have to the laying of venue of any suit, action or proceeding arising
out of or relating to this Lease brought in the State of New York, and hereby
further irrevocably waives any claim that any such suit, action or proceeding
brought in the State of New York has been brought in an inconvenient forum.
30. MISCELLANEOUS. Any provision of this Lease which is prohibited or
-------------
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating or
diminishing Lessor's rights under the remaining provisions hereof, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. To the extent
permitted by applicable Law, Lessee hereby waives any provision of law which
renders any provision of this Lease prohibited or unenforceable in any respect.
No term or provision of this Lease may be amended, altered, waived, discharged
or terminated orally, but only by an instrument in writing signed by a duly
authorized officer or the party against which the enforcement of the amendment,
alteration, waiver, discharge or termination is sought. A waiver on any one
occasion shall not be construed as a waiver on a future occasion. All of the
covenants, conditions and obligations contained in this Lease shall be binding
upon and shall inure to the benefit of the respective successors and assigns of
Lessor and (subject to the restrictions of Section 13(a)hereof) Lessee. This
-------------
Lease, each Lease Supplement, the Certificate of Acceptance, and each related
instrument, document, agreement and certificate collectively constitute the
entire agreement of Lessor and Lessee with respect to the acquisition and
leasing of the Aircraft, and cancel and supersede any and all prior oral or
written understandings with respect thereto. This Lease may be executed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto were upon the same instrument. To the extent, if
any, that this Lease or any Lease Supplement constitutes chattel paper (as such
term is defined in the Uniform Commercial Code as in effect in any applicable
jurisdiction) no security interest in this Lease or any Lease Supplement may be
created through the transfer of possession of any counterpart other than the
counterpart which has been marked "Original" on the face or signature page
--------
thereof.
31. EFFECT OF THIS LEASE. This Lease shall become binding and
-----------------------
effective when it shall have been executed by each of Lessor and Lessee.
32. SURVIVAL. The representations, warranties, covenants, agreements
--------
and indemnities of Lessee set forth in this Lease, and Lessee's obligations
hereunder, shall survive the expiration or other termination of this Lease to
the extent required for full performance and satisfaction thereof.
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33. BROKERS. Each party agrees to indemnify and hold the other
-------
harmless from and against any and all claims, suits, damages, costs and expenses
(including, but not limited to reasonable attorney's fees) asserted by any
agent, broker or other third party for any commission or compensation of any
nature whatsoever based upon the lease of the Aircraft, if such claim, damage,
cost or expense arises out of any action or alleged action by the indemnifying
party, its employees or agents. It is understood and agreed between the parties
that this Lease has been concluded by direct negotiation without any
intermediaries or agents. Lessee hereby represents and warrants that he has not
been paid, agreed to pay or caused to be paid directly or indirectly in any
form, any commission, percentage, contingent fee, brokerage or other similar
payments of any kind, in connection with the establishment or operation of this
Lease, to any employee of Lessor or to any person or entity in the United States
or elsewhere.
34. TRANSACTION COSTS. (a) Whether or not the transactions
------------------
contemplated hereby are consummated, Lessee shall pay all costs and expenses
incurred in connection with the preparation, execution and delivery of this
Lease and any other documents delivered in connection herewith after the
Delivery Date, including without limitation, the reasonable fees, expenses and
disbursements of counsel, except as otherwise expressly set forth herein. In
addition, Lessee shall be solely responsible for all costs, including reasonable
attorneys' fees and expenses, incurred in registering an executed counterpart of
this Lease and other documents and instruments which are required by Lessor to
be filed with the FAA.
(b) Without limiting the provisions of Section 17 and 18 hereof,
-----------------
Lessee shall pay for all sales tax imposed upon or arising out of the sale or
delivery of the Aircraft under the Purchase Agreement, regardless of who is
responsible therefor at law; provided, however, Lessor will cooperate with any
-------- -------
requests made by Lessee that are not adverse to Lessor's interests to minimize
such sales tax.
(c) Each of Lessor and Lessee hereby agrees to pay the reasonable
costs and expenses of the other party incurred in connection with the entering
into or giving or withholding of any future waiver, supplement or amendment or
other action with respect to the Lease or any other document delivered in
connection herewith that it may request, except in the case of an Event of
Default in which case all of such costs shall be at the expense of Lessee.
35. INTENT.
------
(a) Lessor and Lessee intend that for United States Federal income
tax purposes (i) this Lease shall constitute a true lease and not a loan,
conditional sale agreement or financing agreement; and, (ii) Lessor shall be
considered the owner and Lessee shall be considered the lessee for all purposes.
Neither Lessor nor Lessee shall file any tax return, report or form with any
taxing authority that is inconsistent with the foregoing intent unless clearly
required to do so under Law.
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(b) The parties agree that this Lease is a "Finance Lease" as
defined in Uniform Commercial Code Article 2A -- Leases ("Article 2A"). Lessee
acknowledges: (a) that the Seller is the "Supplier" (as defined in Article 2A)
and the Lessee has selected the Aircraft and the Seller, as Supplier, without
any assistance from or consultation with Lessor; (b) that Lessee has been
informed in writing in this Lease, before signing this Lease, that Lessee is
entitled under Article 2A to the promises and warranties, including those of any
third party, provided to Lessor by the Lessee in connection with or as part of
the contract by which Lessor acquired the Aircraft. To the extent permitted by
applicable Law, Lessee hereby waives any and all rights and remedies conferred
upon a lessee under Article 2A and any rights now or hereafter conferred by
statute or otherwise which may limit or modify any of Lessor's rights or
remedies under Section 24 of this Lease; provided, however, that such waiver
----------- -------- -------
shall not preclude Lessee from asserting any claim of Lessee against Lessor in a
separate cause of action; and provided further, that such waiver shall not
-------- -------
affect Lessor's obligations of good faith, diligence, reasonableness and care.
(c) If, notwithstanding the express intent of the parties, a court of
competent jurisdiction determines that this Agreement is not a true lease, but
rather one intended as security, then solely in that event and for the expressly
limited purposes thereof, Lessee shall be deemed to have hereby granted Lessor a
first priority, perfected security interest in this Lease, the Aircraft and all
accessions thereto, substitutions and replacements therefor, and all products
and proceeds (including insurance proceeds) thereof; to secure the prompt
payment and performance as and when due of all obligations and indebtedness of
Lessee (or any Affiliate of Lessee) to Lessor, now existing or hereafter
created. For the purposes of this paragraph, this Lease or a photocopy hereof
may be filed as a financing statement under the Uniform Commercial Code.
36. TIME IS OF THE ESSENCE. Time and strict and punctual performance
------------------------
are of the essence with respect to each provision of this Lease.
37. DISCLAIMER OF CONSEQUENTIAL DAMAGES. LESSEE AGREES THAT IT SHALL
-------------------------------------
NOT BE ENTITLED TO RECOVER, AND HEREBY DISCLAIMS AND WAIVES ANY RIGHT THAT IT
MAY OTHERWISE HAVE TO RECOVER, CONSEQUENTIAL DAMAGES AS A RESULT OF ANY BREACH
OR ALLEGED BREACH BY LESSOR OF ANY OF THE AGREEMENTS, REPRESENTATIONS OR
WARRANTIES OF LESSOR CONTAINED IN THIS LEASE.
38. WAIVER OF JURY TRIAL. THE LESSEE AND THE LESSOR HEREBY WAIVE TRIAL
--------------------
BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH THEY ARE BOTH PARTIES INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR
OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS LEASE
OR THE RELATIONSHIP ESTABLISHED HEREUNDER.
39. TRUTH-IN-LEASING CLAUSE. (a) LESSEE HAS REVIEWED THE AIRCRAFT'S
------------------------
MAINTENANCE AND OPERATING LOGS SINCE ITS DATE OF MANUFACTURE AND HAS FOUND THAT
THE AIRCRAFT) HAS BEEN MAINTAINED AND INSPECTED UNDER PART 91 (AND PART 135 OF
THE FEDERAL AVIATION REGULATIONS SINCE INCEPTION OF OPERATIONS. LESSEE
CERTIFIES THAT THE AIRCRAFT PRESENTLY COMPLIES WITH THE APPLICABLE MAINTENANCE
AND INSPECTION REQUIREMENTS OF PART 91 (AND PART 135) OF THE FEDERAL AVIATION
REGULATIONS.
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(b) LESSEE CERTIFIES THAT LESSEE, AND NOT LESSOR, IS RESPONSIBLE
FOR OPERATIONAL CONTROL OF THE AIRCRAFT UNDER THIS AGREEMENT DURING THE LEASE
TERM. LESSEE FURTHER CERTIFIES THAT LESSEE UNDERSTANDS ITS RESPONSIBILITY FOR
COMPLIANCE WITH APPLICABLE FEDERAL AVIATION REGULATIONS.
(c) LESSEE CERTIFIES THAT THE AIRCRAFT WILL BE MAINTAINED AND
INSPECTED UNDER PART 91 (AND PART 135) OF THE FEDERAL AVIATION REGULATIONS FOR
OPERATIONS TO BE CONDUCTED UNDER THIS LEASE. LESSEE UNDERSTANDS THAT AN
EXPLANATION OF FACTORS BEARING ON OPERATIONAL CONTROL AND PERTINENT FEDERAL
AVIATION REGULATIONS CAN BE OBTAINED FROM THE NEAREST FAA FLIGHT STANDARDS
DISTRICT OFFICE, GENERAL AVIATION DISTRICT OFFICE, OR AIR CARRIER DISTRICT
OFFICE.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Aircraft Lease
Agreement to be duly executed by their duly authorized representatives as of the
date first written above.
LESSOR:
C.I.T. LEASING CORPORATION
By: /s/ Mark Saylor
---------------------------
Name: Mark Saylor
Title: Vice President
LESSEE:
ARCH AIR MEDICAL SERVICE, INC.
By: /s/ Aaron D. Todd
----------------------------
Name: Aaron D. Todd
Title: Chief Financial Officer
Air Methods 2000 Aircraft Lease Agreement
10679.108.107383.5
<PAGE>
SCHEDULE A
TO
AIRCRAFT LEASE AGREEMENT
DESCRIPTION OF AIRCRAFT
SEE ATTACHED ANNEXES I-1 THROUGH I-7 CORRESPONDING TO THE AIRCRAFT SUBJECT TO
------------------------
THE LEASE
Air Methods 2000 Aircraft Lease Agreement
10679.108.107383.3
<PAGE>
SCHEDULE B
TO
AIRCRAFT LEASE AGREEMENT
ADDRESSES AND PAYMENT INFORMATION
Location of Payment of Rent:
- -------------------------------
Bank of America
Remittance Banking
CIT Equipment Finance
1000 West Temple Street
Los Angeles, California 90012
ABA Number: 121000358
Account Number: 1233-5-18855
For Credit to: C.I.T. Leasing Corporation
or at such other place as Lessor shall designate to
Lessee in writing
Home of Aircraft:
- ------------------
<TABLE>
<CAPTION>
AIRCRAFT TYPE SERIAL NO. AIRCRAFT DELIVERY LOCATION BY AIRCRAFT
- ------------- ---------- --------------------------------------------------------
<C> <C> <S>
1. BK 117 B-1 7139 Joplin Medflight; St John's Hospital; 2727 McClellan
Blvd.; Joplin, MO (non-airport location)
- ------------- ---------- --------------------------------------------------------
2. BK 117 B-1 7158 ARCH Air Medical Services; 18500 Edison Ave;
Chesterfield, MO-Spirit of St. Louis Airport
- ------------- ---------- --------------------------------------------------------
3. BK 117 B-1 7201 ARCH Air Medical Services; 10125 Airport Rd.; Sparta
Airport; Sparta IL-Sparta Municipal Airport (non-airport
location)
- ------------- ---------- --------------------------------------------------------
4. BK 117 B-1 7207 ARCH Air Medical Services; 2207 Scott Ave; St Louis,
MO (non-airport location)
- ------------- ---------- --------------------------------------------------------
5. BK 117 B-1 7216 ARCH Air Medical Services; 2207 Scott Ave; St Louis,
MO (non-airport location)
- ------------- ---------- --------------------------------------------------------
6. B-100 64 ARCH Air Medical Services; 18500 Edison Ave;
Chesterfield, MO-Spirit of St. Louis Airport
- ------------- ---------- --------------------------------------------------------
7. B-100 27 ARCH Air Medical Services; 18500 Edison Ave;
Chesterfield, MO-Spirit of St. Louis Airport
- ------------- ---------- --------------------------------------------------------
</TABLE>
Continue next page--
Air Methods 2000 Aircraft Lease Agreement
10679.108.107383.5
<PAGE>
Notice Address of Lessor:
- ---------------------------
The C.I.T. Leasing Corporation
1540 Fountainhead Parkway
Tempe, Arizona 85282
Attention: Vice President, Credit
---------
Telecopier: (480)858-1496
with a copy to:
The CIT Group/Equipment Financing, Inc.
650 CIT Drive
Livingston, New Jersey 07039
Attention: Chief Credit Officer
---------
Telecopier: (201)740-5005
Address of Lessee:
- -------------------
ARCH Air Medical Service, Inc.
7301 South Peoria Street
Englewood, Colorado 80112
Attention: Chief Financial Officer
---------
Telecopier: 790-4780
Address of Agent for Service of
- ------------------------------------
Process for Lessee in New York:
- -----------------------------------
CT CORPORATION
1633 Broadway
New York, New York 10019
Attention: Timothy Carlson
Air Methods 2000 Aircraft Lease Agreement
10679.108.107383.3
<PAGE>
TABLE OF CONTENTS
Page
----
1. DEFINITIONS 1
-----------
2. AGREEMENT FOR PURCHASE AND LEASE OF AIRCRAFT; MAXIMUM FUNDING;
-----------------------------------------------------------------
FUNDING PROCEDURES 9
- ------------------
3. TERM 10
----
4. RETURN OF AIRCRAFT 10
--------------------
5. RENT 13
----
6. NET LEASE; LESSOR'S TITLE 14
----------------------------
7. EARLY BUYOUT OPTIONS 14
----------------------
8. END OF LEASE RENEWAL ANDPURCHASE OPTION 15
--------------------------------------------
9. USE OF AIRCRAFT; COMPLIANCE WITH LAWS 16
------------------------------------------
10. MAINTENANCE OF AIRCRAFT 17
-------------------------
11. REPLACEMENT OF PARTS; ALTERATIONS; MODIFICATIONS; AND ADDITIONS 18
----------------------------------------------------------------
12. REGISTRATION; DELIVERY; RECORDATION; INSIGNIA AND INSPECTION 19
----------------------------------------------------------------
13. ASSIGNMENT AND SUBLEASING 20
---------------------------
14. LIENS 21
-----
15. LOSS, DAMAGE OR DESTRUCTION 21
------------------------------
16. INSURANCE 24
---------
17. GENERAL TAX INDEMNIFICATION 27
-----------------------------
18. GENERAL INDEMNITIES 30
--------------------
19. NO WARRANTIES 32
--------------
20. FINANCIAL INFORMATION 33
----------------------
21. CONDITIONS PRECEDENT 34
---------------------
22. LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS 38
------------------------------------------------------
23. EVENTS OF DEFAULT 41
-------------------
24. REMEDIES UPON DEFAULT 43
-----------------------
25. LESSOR'S RIGHT TO PERFORM FOR LESSEE 45
-----------------------------------------
26. LATE CHARGES 45
-------------
27. FURTHER ASSURANCES 45
-------------------
28. NOTICES 45
-------
29. GOVERNING LAW AND CONSENT TO JURISDICT 45
-------------------------------------------
Air Methods 2000 Aircraft Lease Agreement
10679.108.107383.5
<PAGE>
30. MISCELLANEOUS 46
-------------
31. EFFECT OF THIS LEASE 47
-----------------------
32. SURVIVAL 47
--------
33. BROKERS 47
-------
34. TRANSACTION COSTS 47
------------------
35. INTENT 48
------
36. TIME IS OF THE ESSENCE 48
--------------------------
37. DISCLAIMER OF CONSEQUENTIAL DAMAGES 48
--------------------------------------
38. WAIVER OF JURY TRIAL 49
-----------------------
39. TRUTH-IN-LEASING CLAUSE 49
------------------------
Air Methods 2000 Aircraft Lease Agreement
10679.108.107383.5
<PAGE>
LOAN AGREEMENT
--------------
THIS LOAN AGREEMENT (this "Agreement") is made and entered into as of the
25th day of April, 2000, by and between ARCH AIR MEDICAL SERVICE, INC., a
Missouri corporation ("Borrower"), and FIRSTAR BANK, N.A., a national banking
association ("Lender").
WITNESSETH:
----------
WHEREAS, Borrower has applied for (a) a revolving credit loan from Lender
in an aggregate principal amount of up to $1,500,000.00 and (b) a term loan from
Lender in the original principal amount of $1,350,000.00; and
WHEREAS, Lender is willing to make said revolving credit loan and said term
loan to Borrower upon, and subject to, the terms, provisions and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower and Lender hereby mutually covenant and agree as follows:
SECTION 1. DEFINITIONS.
- -----------------------
1.01 Definitions. In addition to the terms defined elsewhere in this
-----------
Agreement or in any Exhibit or Schedule hereto, when used in this Agreement, the
following terms shall have the following meanings (such meanings shall be
equally applicable to the singular and plural forms of the terms used, as the
context requires):
Account Debtor shall mean any Person who is and/or may become obligated to
---------------
Borrower under or on account of any of the Accounts.
Accounts shall mean all trade accounts receivable of Borrower which have
--------
been invoiced by Borrower.
Acquisition shall mean any transaction or series of related transactions,
-----------
consummated on or after the date of this Agreement, by which Borrower or any
Subsidiary directly or indirectly (a) acquires all or substantially all of the
assets comprising one or more business units of any other Person, whether
through purchase of assets, merger or otherwise or (b) acquires (in one
transaction or as the most recent transaction in a series of transactions) at
least (i) a majority (in number of votes) of the stock and/or other securities
of a corporation having ordinary voting power for the election of directors
(other than stock and/or other securities having such power only by reason of
the happening of a contingency), (ii) a majority (by percentage of voting power)
of the outstanding partnership interests of a partnership, (iii) a majority (by
percentage of voting power) of the outstanding membership interests of a limited
liability company or (iv) a majority of the ownership interests in any
organization or entity other than a corporation or partnership.
Affiliate shall mean any Person (a) which directly or indirectly through
---------
one or more intermediaries controls, is controlled by or is under common control
with Borrower or any Subsidiary, (b) which directly or indirectly through one or
more intermediaries beneficially owns or holds or has the power to direct the
voting power of Five Percent (5%) or more of any class of capital stock or other
equity interests of Borrower or any Subsidiary, (c) which has Five Percent (5%)
or more of any class of its capital stock or other equity interests beneficially
owned or held, directly or indirectly, by Borrower or any Subsidiary or (d) who
is a director, officer or employee of Borrower or any Subsidiary. For purposes
of this definition, "control" shall mean the power to direct the management and
policies of a Person, directly or indirectly, whether through the ownership of
voting securities, by contract or otherwise.
Assignment of Leases and Rents shall mean that certain Assignment of Leases
------------------------------
and Rents dated the date hereof and executed by Borrower in favor of Lender, as
the same may from time to time be amended, modified, extended, renewed or
restated.
<PAGE>
Attorneys' Fees shall mean the reasonable value of the services (and costs,
---------------
charges and expenses related thereto) of the attorneys (and all paralegals,
accountants and other staff employed by such attorneys) employed by Lender
(including, without limitation, attorneys and paralegals who are employees of
Lender or any affiliate of Lender) from time to time (a) in connection with the
negotiation, preparation, execution, delivery, amendment, modification,
extension, renewal, administration and/or enforcement of this Agreement and/or
any of the other Transaction Documents, (b) in connection with the preparation,
negotiation or execution of any waiver or consent with respect to this Agreement
or any of the other Transaction Documents, (c) in connection with any Default or
Event of Default under this Agreement, (d) to represent Lender in any
litigation, contest, dispute, suit or proceeding, or to commence, defend or
intervene in any litigation, contest, dispute, suit or proceeding, or to file
any petition, complaint, answer, motion or other pleading or to take any other
action in or with respect to any litigation, contest, dispute, suit or
proceeding (whether instituted by Lender, Borrower or any other Person and
whether in bankruptcy or otherwise) in any way or respect relating to this
Agreement or any of the other Transaction Documents, Borrower, any other
Obligor, any Subsidiary, any Collateral or any Third Party Collateral, (e) to
protect, collect, lease, sell, take possession of or liquidate any Collateral or
any Third Party Collateral, (f) to attempt to enforce any security interest in
or other Lien upon any Collateral or any Third Party Collateral or to give any
advice with respect to such enforcement and/or (g) to enforce any of the rights
or remedies of Lender to collect any of the Borrower's Obligations and/or any
Guarantee thereof.
Borrower's Obligations shall mean any and all present and future
-----------------------
indebtedness (principal, interest, fees, collection costs and expenses, and
other amounts), liabilities and obligations (including, without limitation,
guaranty obligations, letter of credit reimbursement obligations and indemnity
obligations) of Borrower to Lender evidenced by or arising under this Agreement,
the Notes, any of the other Transaction Documents and/or any other agreement,
document or instrument heretofore, now or hereafter executed and delivered by
Borrower to Lender, in each case whether now existing or hereafter arising,
absolute or contingent, joint and/or several, secured or unsecured, direct or
indirect, expressed or implied in law, contractual or tortious, liquidated or
unliquidated, at law or in equity, or otherwise, and whether created directly or
acquired by Lender by assignment or otherwise, and any and all costs of
collection and/or Attorneys' Fees incurred or to be incurred in connection
therewith.
Borrowing Base shall have the meaning ascribed thereto in Section 2.01(b).
---------------
Borrowing Base Certificate shall have the meaning ascribed thereto in
----------------------------
Section 2.01(c).
Borrowing Notice shall have the meaning ascribed thereto in Section 2.02.
-----------------
Business Day shall mean any day except a Saturday, Sunday or legal holiday
-------------
observed by Lender.
Capital Expenditure shall mean any expenditure which, in accordance with
--------------------
GAAP, is required to be capitalized on the balance sheet of the Person making
the same.
Capitalized Lease shall mean any lease of Property, whether real and/or
------------------
personal, by a Person as lessee which in accordance with GAAP is required to be
capitalized on the balance sheet of such Person.
Capitalized Lease Obligations of any Person shall mean, as of the date of
-------------------------------
any determination thereof, the amount at which the aggregate rental obligations
due and to become due under all Capitalized Leases under which such Person is a
lessee would be reflected as a liability on a balance sheet of such Person in
accordance with GAAP.
CERCLA shall mean the Comprehensive Environmental Response, Compensation
------
and Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986, 42 U.S.C. 9601 et seq., and as the same may from
-- ---
time to time be further amended.
-2-
<PAGE>
Change of Control Event shall mean each and every issue, sale, transfer or
------------------------
other disposition, directly or indirectly, of shares of capital stock of
Borrower which, after giving effect thereto, results in the Principal
Shareholder legally or beneficially owning or controlling in the aggregate less
than Fifty-One Percent (51%) (by number of votes) of the Voting Stock of
Borrower.
Code shall mean the Internal Revenue Code of 1986, as amended, and any
----
successor statute of similar import, together with the regulations thereunder,
in each case as in effect from time to time. References to sections of the Code
shall be construed to also refer to any successor sections.
Collateral shall mean any Property or assets of Borrower which now or at
----------
any time hereafter secure the payment or performance of any of the Borrower's
Obligations.
Consolidated Debt shall mean, as of the date of any determination thereof,
------------------
all Debt of Borrower and its Subsidiaries as of such date, determined on a
consolidated basis and in accordance with GAAP.
Consolidated Debt to Consolidated EBITDAR Ratio shall mean, as of the last
------------------------------------------------
day of any fiscal quarter of Borrower, the ratio of (a) the sum of (i)
Consolidated Debt as of such day plus (ii) an amount equal to six (6) times
----
Consolidated Operating Lease Expense for the four (4) consecutive fiscal quarter
period of Borrower ending on such day to (b) Consolidated EBITDAR for the four
(4) consecutive fiscal quarter period of Borrower ending on such day.
Consolidated EBITDA shall mean, for the period in question, the sum of (a)
--------------------
Consolidated Net Income during such period plus (b) to the extent deducted in
----
determining Consolidated Net Income, the sum of (i) Consolidated Interest
Expense during such period, plus (ii) all provisions for any Federal, state,
----
local and/or foreign income taxes made by Borrower and its Subsidiaries during
such period (whether paid or deferred), plus (iii) all depreciation and
----
amortization expenses of Borrower and its Subsidiaries during such period, plus
----
(iv) any extraordinary losses during such period plus (v) any losses from the
----
sale or other disposition of Property other than in the ordinary course of
business during such period minus (c) to the extent added in determining such
-----
Consolidated Net Income, the sum of (i) any extraordinary gains during such
period plus (ii) any gains from the sale or other disposition of Property other
----
than in the ordinary course of business during such period, all determined on a
consolidated basis and in accordance with GAAP.
Consolidated EBITDAR shall mean, for the period in question, the sum of (a)
--------------------
Consolidated EBITDA during such period plus (b) to the extent deducted in
----
determining such Consolidated EBITDA, Consolidated Operating Lease Expense
during such period, all determined on a consolidated basis and in accordance
with GAAP.
Consolidated Fixed Charge Coverage Ratio shall mean, for the period in
--------------------------------------------
question, the ratio of (a) Consolidated EBITDAR during such period to (b)
Consolidated Fixed Charges during such period, all determined on a consolidated
basis and in accordance with GAAP.
Consolidated Fixed Charges shall mean, for the period in question, the sum
---------------------------
of (a) the aggregate amount of all principal payments made or required to be
made by Borrower and its Subsidiaries on all Debt during such period (including
the principal portion of payments in respect of Capitalized Leases but excluding
principal payments on the Revolving Credit Loans), plus (b) Consolidated
----
Interest Expense during such period, plus (c) Consolidated Operating Lease
----
Expense during such period, plus (d) all Capital Expenditures made by Borrower
----
and its Subsidiaries during such period (net of any Debt incurred by Borrower or
such Subsidiary (other than Revolving Credit Loans) to finance such Capital
Expenditure) plus (e) all provisions for any Federal, state, local and/or
----
foreign income taxes made by Borrower and its Subsidiaries during such period
(whether paid or deferred), all determined on a consolidated basis and in
accordance with GAAP.
Consolidated Interest Expense shall mean, for the period in question,
-------------------------------
without duplication, all gross interest expense of Borrower and its Subsidiaries
(including, without limitation, all commissions, discounts and/or related
amortization and other fees and charges owed by Borrower and its Subsidiaries
with respect to letters of credit, the net costs associated with interest swap
obligations of Borrower and its Subsidiaries, capitalized interest expense, the
interest portion of Capitalized Lease Obligations and the interest portion of
any deferred payment obligation) during such period, all determined on a
consolidated basis and in accordance with GAAP.
-3-
<PAGE>
Consolidated Net Income shall mean the after-tax net income (or loss) of
-------------------------
Borrower and its Subsidiaries for the period in question, determined on a
consolidated basis and in accordance with GAAP.
Consolidated Net Worth shall mean, as of the date of any determination
------------------------
thereof, the amount of the capital stock accounts (net of treasury stock, at
cost) of Borrower and its Subsidiaries as of such date plus (or minus in the
---- -----
case of a deficit) the surplus and retained earnings of Borrower and its
Subsidiaries as of such date, all determined on a consolidated basis and in
accordance with GAAP.
Consolidated Operating Lease Expense shall mean, for the period in
---------------------------------------
question, the aggregate amount of all Operating Lease Expenses of Borrower and
its Subsidiaries during such period, all determined on a consolidated basis and
in accordance with GAAP.
Consolidated Total Liabilities shall mean, as of the date of any
--------------------------------
determination thereof, all liabilities of Borrower and its Subsidiaries as of
-----
such date, determined on a consolidated basis and in accordance with GAAP.
Default shall mean any event or condition the occurrence of which would,
-------
with the lapse of time or the giving of notice or both, become an Event of
Default as defined in Section 6 hereof.
Debt of any Person shall mean, as of the date of determination thereof, the
----
sum of (a) all Indebtedness of such Person for borrowed money or which has been
incurred in connection with the purchase or other acquisition of Property or
assets (other than unsecured trade accounts payable incurred in the ordinary
course of business) plus (b) all Capitalized Lease Obligations of such Person
----
plus (c) all Guarantees by such Person of Debt of others plus (d) the aggregate
undrawn face amount of all letters of credit issued for the account of and/or
upon the application of such Person together with all unreimbursed drawings with
respect thereto.
Distribution in respect of any corporation or other entity shall mean: (a)
------------
dividends or other distributions on or in respect of any of the capital stock or
other equity interests of such corporation or other entity; and (b) the
redemption, repurchase or other acquisition of any capital stock or other equity
interests of such corporation or other entity or of any warrants, rights or
other options to purchase any such capital stock or other equity interests.
Eligible Accounts shall mean all Accounts other than: (a) Accounts which
------------------
remain unpaid for more than one hundred-twenty (120) days after their invoice
dates and Accounts which are not due and payable within one hundred-twenty (120)
days after their invoice dates; (b) Accounts owing by a single Account Debtor,
including a currently scheduled Account, if Ten Percent (10%) or more of the
balance owing by said Account Debtor upon said Accounts is ineligible pursuant
to clause (a) above; (c) Accounts with respect to which the Account Debtor is a
shareholder or partner of Borrower or an Affiliate; (d) Accounts with respect to
which payment by the Account Debtor is or may be conditional and Accounts
commonly known as bill and hold Accounts or Accounts of a similar or like
arrangement; (e) Accounts with respect to which the Account Debtor is not a
resident or citizen of or otherwise located in the continental United States of
America, unless such Accounts are backed in full by an irrevocable letter of
credit in form and substance satisfactory to Lender issued by a domestic
commercial bank acceptable to Lender; (f) Accounts with respect to which the
Account Debtor is the United States of America, any state of the United States
or any other governmental body or any department, agency or instrumentality of
any of the foregoing; (g) Accounts with respect to which Borrower is or may
become liable to the Account Debtor for goods sold or services rendered by such
Account Debtor to Borrower, but only to the extent of Borrower's then aggregate
liability to such Account Debtor (i.e. the excess of the aggregate face amount
-4-
<PAGE>
of Accounts of such Account Debtor over the aggregate liability of Borrower to
such Account Debtor shall constitute an Eligible Account unless otherwise
excepted under this definition of Eligible Accounts); (h) Accounts with respect
to which the goods giving rise thereto have not been shipped and delivered to
and accepted as satisfactory by the Account Debtor thereof or with respect to
which the services performed giving rise thereto have not been completed and
accepted as satisfactory by the Account Debtor thereof; (i) Accounts which are
not invoiced (and dated as of such date) and sent to the Account Debtor thereof
concurrently with or not later than five (5) days after the shipment and
delivery to said Account Debtor of the goods giving rise thereto or the
performance of the services giving rise thereto; (j) Accounts with respect to
which possession and/or control of the goods sold giving rise thereto is held,
maintained or retained by Borrower (or by any agent or custodian of Borrower)
for the account of or subject to further and/or future direction from the
Account Debtor thereof; (k) Accounts arising from a consignment sale, a "sale
on approval" or a "sale or return"; (l) Accounts as to which Lender, at any time
or times hereafter, determines, in good faith, that the prospects of payment or
performance by the Account Debtor is or will be impaired in any material
respect; (m) Accounts of an Account Debtor to the extent, but only to the
extent, that the same exceed a credit limit determined by Lender in its good
faith discretion, at any time or times hereafter; (n) Accounts which are subject
to any dispute, offset, counterclaim, discount (except for prompt payment
discounts that do not exceed Two Percent (2%) of the invoice amount) or other
claim or defense on the part of the Account Debtor or to any claim on the part
of the Account Debtor contesting or denying liability under such Account; (o)
Accounts with respect to which the Account Debtor is located in the State of New
Jersey, the State of Minnesota or the State of West Virginia; provided, however,
that such restriction shall not apply if Borrower (i) has filed and has
effective (A) in respect of Account Debtors located in the State of New Jersey,
a Notice of Business Activities Report with the State of New Jersey Division of
Taxation for the then current year, (B) in respect of Account Debtors located in
the State of Minnesota, a Minnesota Business Activity Report with the Minnesota
Department of Revenue for the then current year or (C) in respect of Account
Debtors located in the State of West Virginia, a West Virginia Business Activity
Report with the West Virginia Department of Tax and Revenue for the then current
year, as applicable, or (ii) is otherwise exempt from such reporting
requirements under the laws of such State(s); and (p) Accounts which are not
subject to a first priority perfected security interest in favor of Lender.
Environmental Claim shall mean any administrative, regulatory or judicial
--------------------
action, judgment, order, consent decree, suit, demand, demand letter, claim,
Lien, notice of non-compliance or violation, investigation or other proceeding
arising (a) pursuant to any Environmental Law or governmental or regulatory
approval issued under any such Environmental Law, (b) from the presence, use,
generation, storage, treatment, Release, threatened Release, disposal,
remediation or other existence of any Hazardous Substance, (c) from any removal,
remedial, corrective or other response action pursuant to an Environmental Law
or the order of any governmental or regulatory authority or agency, (d) from any
third party seeking damages, contribution, indemnification, cost recovery,
compensation, injunctive or other relief in connection with a Hazardous
Substance or arising from alleged injury or threat of injury to health, safety,
natural resources or the environment or (e) from any Lien against any Property
owned, leased or operated by Borrower or any Subsidiary in favor of any
governmental or regulatory authority or agency in connection with a Release,
threatened Release or disposal of a Hazardous Substance.
Environmental Law shall mean any Federal, state, local, foreign or other
------------------
statute, law, rule, regulation, order, consent decree, judgment, permit,
license, code, covenant, deed restriction, common law, treaty, convention,
ordinance or other requirement relating to public health, safety or the
environment, including, without limitation, those relating to Releases,
discharges or emissions to air, water, land or groundwater, to the withdrawal or
use of groundwater, to the use and handling of polychlorinated biphenyls or
asbestos, to the disposal, treatment, storage or management of hazardous or
solid waste, Hazardous Substances or crude oil, or any fraction thereof, to
exposure to toxic or hazardous materials, to the handling, transportation,
discharge or release of gaseous or liquid Hazardous Substances and any rule,
regulation, order, notice or demand issued pursuant to such law, statute or
ordinance, in each case applicable to any of the Property owned, leased or
operated by Borrower or any Subsidiary or the operation, construction or
modification of any such Property, including, without limitation, the following:
CERCLA, the Solid Waste Disposal Act, as amended by the Resource Conservation
and Recovery Act of 1976 and the Hazardous and Solid Waste Amendments of 1984,
the Hazardous Materials Transportation Act, as amended, the Federal Water
-5-
<PAGE>
Pollution Control Act, as amended by the Clean Water Act of 1976, the Safe
Drinking Water Control Act, the Clean Air Act of 1966, as amended, the Toxic
Substances Control Act of 1976, the Occupational Safety and Health Act of 1970,
as amended, the Emergency Planning and Community Right-to-Know Act of 1986, the
National Environmental Policy Act of 1975, the Oil Pollution Act of 1990 and any
similar or implementing state or local law, and any state or local statute and
any further amendments to these laws providing for financial responsibility for
cleanup or other actions with respect to the Release or threatened Release of
Hazardous Substances or crude oil, or any fraction thereof and all rules,
regulations, guidance documents and publication promulgated thereunder.
ERISA shall mean the Employee Retirement Income Security Act of 1974, as
-----
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA shall be construed to also refer to any successor sections.
ERISA Affiliate shall mean any corporation, trade or business that is,
----------------
along with Borrower or any Subsidiary, a member of a controlled group of
corporations or a controlled group of trades or businesses, as described in
Sections 414(b) and 414(c), respectively, of the Code or Section 4001 of ERISA.
Event of Default shall have the meaning ascribed thereto in Section 6.
------------------
GAAP shall mean, at any time, generally accepted accounting principles at
----
such time in the United States.
Guarantee by any Person shall mean any obligation (other than endorsements
---------
of negotiable instruments for deposit or collection in the ordinary course of
business), contingent or otherwise, of such Person guaranteeing, or in effect
guaranteeing, any Indebtedness, liability, dividend or other obligation of any
other Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, all obligations incurred through an
agreement, contingent or otherwise, by such Person: (a) to purchase such
Indebtedness or obligation or any Property constituting security therefor, (b)
to advance or supply funds (i) for the purchase or payment of such Indebtedness
or obligation, (ii) to maintain working capital or other balance sheet condition
or otherwise to advance or make available funds for the purchase or payment of
such Indebtedness or obligation, (iii) to lease property or to purchase
securities or other property or services primarily for the purpose of assuring
the owner of such Indebtedness or obligation of the ability of the primary
obligor to make payment of the Indebtedness or obligation or (iv) otherwise to
assure the owner of the Indebtedness or obligation of the primary obligor
against loss in respect thereof. For the purposes of all computations made
under this Agreement, a Guarantee in respect of any Indebtedness for borrowed
money shall be deemed to be Indebtedness equal to the then outstanding principal
amount of such Indebtedness for borrowed money which has been guaranteed or such
lesser amount to which the maximum exposure of the guarantor shall have been
specifically limited, and a Guarantee in respect of any other obligation or
liability or any dividend shall be deemed to be Indebtedness equal to the
maximum aggregate amount of such obligation, liability or dividend or such
lesser amount to which the maximum exposure of the guarantor shall have been
specifically limited. Guarantee when used as a verb shall have a correlative
---------
meaning.
Guarantors shall mean Air Methods Corporation and Mercy Air Services, Inc.
----------
and Guarantor shall mean any one of the foregoing.
---------
Guaranty shall mean that certain Unlimited Continuing Guaranty dated the
--------
date hereof and executed by the Guarantors in favor of Lender with respect to
the indebtedness of Borrower to Lender, as the same may from time to time be
amended, modified, extended or renewed.
Hazardous Substance shall mean any hazardous or toxic material, substance
--------------------
or waste, pollutant or contaminant which is regulated under any Environmental
Law or any other statute, law, ordinance, rule or regulation of any local,
state, regional, Federal or international body, instrumentality, authority,
agency or official having jurisdiction over any of the Property owned, leased or
operated by Borrower or any Subsidiary or its use, including, without
limitation, any material, substance or waste which is: (a) defined as a
-6-
<PAGE>
hazardous substance under Section 311 of the Federal Water Pollution Control Act
(33 U.S.C. 1317), as amended; (b) regulated as a hazardous waste under Section
1004 or Section 3001 of the Federal Solid Waste Disposal Act, as amended by the
Resource Conservation and Recovery Act (42 U.S.C. 6901 et seq.), as amended;
-- ---
(c) defined as a hazardous substance under Section 101 of the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. 9601 et
seq.), as amended; or (d) defined or regulated as a hazardous substance or
hazardous waste under any rules or regulations promulgated under any of the
foregoing statutes.
Illinois Mortgage shall mean that certain Leasehold Mortgage and Security
------------------
Agreement dated the date hereof and executed by Borrower in favor of Lender, as
the same may from time to time be amended, modified, extended, renewed or
restated.
Indebtedness shall mean, with respect to any Person, without duplication,
------------
all indebtedness, liabilities and obligations of such Person which in accordance
with GAAP are required to be classified upon a balance sheet of such Person as
liabilities of such Person, and in any event shall include all (a) obligations
of such Person for borrowed money or which have been incurred in connection with
the purchase or other acquisition of Property or assets, (b) obligations secured
by any Lien on, or payable out of the proceeds of or production from, any
Property or assets owned by such Person, whether or not such Person has assumed
or become liable for the payment of such obligations, (c) indebtedness,
liabilities and obligations of third parties, including joint ventures and
partnerships of which such Person is a venturer or general partner, recourse to
which may be had against such Person, (d) obligations created or arising under
any conditional sale or other title retention agreement with respect to Property
acquired by such Person, notwithstanding the fact that the rights and remedies
of the seller, lender or lessor under such agreement in the event of default are
limited to repossession or sale of such Property, (e) Capitalized Lease
Obligations of such Person, (f) indebtedness, liabilities and obligations of
such Person under Guarantees and (g) the aggregate undrawn face amount of all
letters of credit issued for the account of and/or upon the application of such
Person together with all unreimbursed drawings with respect thereto.
Intangible Assets shall mean all patents, trademarks, service marks,
------------------
copyrights, trade names, goodwill (including any amounts, however designated,
representing the cost of acquisition of business and investments in excess of
the book value thereof), unamortized debt discount and expense, unamortized
deferred charges, deferred research and development costs, any write-up of asset
value after the date of this Agreement, non-competition covenants, signing
bonuses, prepaid expenses and other forms of prepaid assets, deferred taxes,
officer or employee advances, intercompany accounts, investments in and
receivables due from affiliates, deposits for insurance, utilities and the like,
and any other assets treated as intangible assets under GAAP.
Inventory shall mean all inventory of Borrower.
---------
Investment shall mean any investment by Borrower or any Subsidiary in any
----------
Person, whether payment therefor is made in cash or capital stock of Borrower or
any Subsidiary, and whether such investment is by acquisition of stock or
Indebtedness, or by loan, advance, transfer of property out of the ordinary
course of business, capital contribution, equity or profit sharing interest,
extension of credit on terms other than those normal in the ordinary course of
business or otherwise.
Lender's Revolving Credit Commitment shall mean the sum of $
---------------------------------------
1,500,000.00.
Lien shall mean any interest in any Property securing an obligation owed
----
to, or a claim by, a Person other than the owner of the Property, whether such
interest is based on common law, statute or contract, including, without
limitation, any security interest, mortgage, deed of trust, pledge,
hypothecation, judgment lien or other lien or encumbrance of any kind or nature
whatsoever, any conditional sale or trust receipt, any lease, consignment or
bailment for security purposes and any Capitalized Lease. The term "Lien" shall
include reservations, exceptions, encroachments, easements, rights-of-way,
covenants, conditions, restrictions, leases and other title exceptions and
encumbrances affecting Property.
Loan shall mean each Revolving Credit Loan and the Term Loan and Loans
---- -----
shall mean any or all of the foregoing.
-7-
<PAGE>
Material Adverse Effect shall mean (a) a material adverse effect on the
-------------------------
Properties, assets, liabilities, business, operations, prospects, income or
condition (financial or otherwise) of Borrower, any other Obligor and/or any
Subsidiary, (b) material impairment of the ability of Borrower and/or any other
Obligor to perform any of its obligations under this Agreement, the Notes or any
of the other Transaction Documents or (c) material impairment of the
enforceability of the rights of, or benefits available to, Lender under this
Agreement, the Notes or any of the other Transaction Documents.
Missouri Deed of Trust shall mean that certain Deed of Trust and Security
------------------------
Agreement dated the date hereof and executed by Borrower for the benefit of
Lender, as the same may from time to time be amended, modified, extended,
renewed or restated.
Moody's shall mean Moody's Investors Service, Inc.
-------
Multi-Employer Plan shall mean a "multi-employer plan" as defined in
--------------------
Section 4001(a)(3) of ERISA which is maintained for employees of Borrower, any
Subsidiary or any ERISA Affiliate or to which Borrower, any Subsidiary or any
ERISA Affiliate has contributed in the past or currently contributes.
Notes shall mean the Revolving Credit Note and the Term Loan Note.
-----
Obligor shall mean Borrower, each Guarantor and each other Person who is or
-------
shall at any time hereafter become primarily or secondarily liable on any of the
Borrower's Obligations or who grants Lender a Lien upon any of the Property or
assets of such Person as security for any of the Borrower's Obligations.
Occupational Safety and Health Laws shall mean the Occupational Safety and
------------------------------------
Health Act of 1970, as amended, and any other Federal, state or local statute,
law, ordinance, code, rule, regulation, order or decree regulating, relating to
or imposing liability or standards of conduct concerning employee health and/or
safety, as now or at any time hereafter in effect.
Operating Lease shall mean any lease of Property, whether real and/or
----------------
personal, by a Person as lessee which is not a Capitalized Lease.
Operating Lease Expenses shall mean with respect to any Person, for the
--------------------------
period in question, the aggregate amount of rental and other expenses incurred
by such Person in respect of Operating Leases during such period, all determined
in accordance with GAAP.
Parent shall mean Air Methods Corporation, a Delaware corporation.
------
PBGC shall mean the Pension Benefit Guaranty Corporation and any entity
----
succeeding to any or all of its functions under ERISA.
Pension Plan shall mean a "pension plan," as such term is defined in
-------------
Section 3(2) of ERISA, which is established or maintained by Borrower, any
Subsidiary or any ERISA Affiliate, other than a Multi-Employer Plan.
Permitted Liens shall mean any of the following:
----------------
(a) Liens in favor of Lender;
(b) Liens on Property or assets of a Subsidiary to secure
obligations of such Subsidiary to Borrower;
-8-
<PAGE>
(c) Liens for property taxes and assessments or governmental
charges or levies and Liens securing claims or demands of mechanics and
materialmen, provided payment thereof is not at the time required by Section
5.01(d) and/or 5.01(e);
(d) Liens (other than any Liens imposed by ERISA) incidental to
the conduct of business or the ownership of Properties (including Liens in
connection with worker's compensation, unemployment insurance and other like
laws, warehousemen's and attorneys' liens and statutory landlords' liens) and
Liens to secure the performance of bids, tenders or trade contracts, or to
secure statutory obligations, surety or appeal bonds or other Liens of like
general nature incurred in the ordinary course of business and not in connection
with the borrowing of money or the purchase or other acquisition of Property;
provided in each case the obligation secured is not overdue or, if overdue, is
being contested in good faith by appropriate actions or proceedings being
diligently conducted and for which adequate reserves in accordance with GAAP
have been set aside;
(e) minor survey exceptions or minor encumbrances, easements or
reservations, or rights of others for rights-of-way, utilities and other similar
purposes, or zoning or other restrictions as to the use of real properties,
which are necessary or desirable for the conduct of the activities of Borrower
and its Subsidiaries or which customarily exist on properties of corporations
engaged in similar activities and similarly situated and which do not in any
event materially impair the use of such real properties in the operation of the
business of the Borrower and its Subsidiaries;
(f) Liens existing as of the date of this Agreement and listed on
Schedule 4.12 attached hereto; and
- --------------
(g) purchase money Liens granted to a Person financing a Capital
Expenditure so long as (i) the Lien granted is limited to the specific fixed
assets acquired and the proceeds thereof, (ii) the aggregate principal amount of
Debt secured by the Lien is not more than the acquisition cost of the specific
fixed assets on which the Lien is granted and (iii) the transaction does not
violate any other provision of this Agreement.
Person shall mean any individual, sole proprietorship, partnership, joint
------
venture, limited liability company, trust, unincorporated organization,
association, corporation, institution, entity or government (whether national,
Federal, state, county, city, municipal or otherwise, including, without
limitation, any instrumentality, division, agency, body or department thereof).
Prime Rate shall mean the interest rate announced from time to time by
-----------
Lender as its "prime rate" (which rate shall fluctuate as and when said prime
rate shall change). Borrower acknowledges that such "prime rate" is a reference
rate and does not necessarily represent the lowest or best rate offered by
Lender to its customers.
Principal Shareholder shall mean Mercy Air Service, Inc.
----------------------
Property shall mean any interest in any kind of property or asset, whether
--------
real, personal or mixed, or tangible or intangible. Properties shall mean the
----------
plural of Property. For purposes of this Agreement, Borrower and each
Subsidiary shall be deemed to be the owner of any Property which it has acquired
or holds subject to a conditional sale agreement, financing lease or other
arrangement pursuant to which title to the Property has been retained by or
vested in some other Person for security purposes.
Rate of Dilution of Borrower's Accounts shall mean the value of all
------------------
non-cash credits to Borrower's Accounts (including, without limitation, bad debt
expense) during the twelve (12) month period immediately preceding the date of
calculation divided by Borrower's sales during said period. The Rate of
Dilution shall be calculated by Lender in connection with each of its collateral
examinations of the Borrower's Accounts (which calculation shall be conclusive
in the absence of manifest error), and the Rate of Dilution as so calculated by
Lender shall be and remain the applicable Rate of Dilution until the next
collateral examination is performed by Lender. If the Rate of Dilution at the
time of any calculation thereof has increased or decreased from the prior
calculation thereof, then Lender shall adjust the advance rate for Accounts used
in the Borrowing Base accordingly.
-9-
<PAGE>
RCRA shall mean the Solid Waste Disposal Act, as amended by the Resource
----
Conservation and Recovery Act of 1976 and Hazardous and Solid Waste Amendments
of 1984, 42 U.S.C. 6901 et seq., and any future amendments.
-- ---
Release shall mean any spilling, leaking, pumping, pouring, emitting,
-------
emptying, discharging, injecting, escaping, leaching, dumping or disposing into
the environment, including, without limitation, the abandonment or discarding of
barrels, drums, containers, tanks and/or other receptacles containing (or
containing traces of) any Hazardous Substance.
Reportable Event shall have the meaning given to such term in ERISA.
-----------------
Restricted Investment shall mean any Investment, or any expenditure or any
----------------------
incurrence of any liability to make any expenditure for an Investment, other
than:
(a) loans and/or advances by any Subsidiary to Borrower which are
subordinated in writing to the payment of the Borrower's Obligations in form and
substance satisfactory to Lender;
(b) direct obligations of the United States of America or any
instrumentality or agency thereof, the payment of which is unconditionally
guaranteed by the United States of America or any instrumentality or agency
thereof (all of which Investments must mature within twelve (12) months from the
time of acquisition thereof);
(c) Investments in readily marketable commercial paper which, at
the time of acquisition thereof by Borrower or any Subsidiary, is rated A-1 or
better by S&P and P-1 or better by Moody's and which matures within 270 days
from the date of acquisition thereof, provided that the issuer of such
commercial paper shall, at the time of acquisition of such commercial paper,
have a senior long-term debt rating of at least A by S&P and Moody's;
(d) negotiable certificates of deposit or negotiable bankers
acceptances issued by Lender or any other bank or trust company organized under
the laws of the United States of America or any state thereof, which bank or
trust company (other than Lender to which such restrictions shall not apply) is
a member of both the Federal Deposit Insurance Corporation and the Federal
Reserve System and has a Thomson BankWatch Global Issuer Rating of "B" or better
(all of which Investments must mature within twelve (12) months from the time of
acquisition thereof);
(e) repurchase agreements, which shall be collateralized for at
least 102% of face value, issued by Lender or any other bank or trust company
organized under the laws of the United States or any state thereof, which bank
or trust company (other than Lender to which such restrictions shall not apply)
is a member of both the Federal Deposit Insurance Corporation and the Federal
Reserve System and has a Thomson BankWatch Global Issuer Rating of "B" or better
(all of which Investments must mature within twelve (12) months from the time of
acquisition thereof);
(f) Investments existing as of the date hereof as described in
Schedule 4.18 attached hereto, and any future retained earnings in respect
- --------------
thereof; and
(g) loans or advances in the usual and ordinary course of business
to officers and/or employees of Borrower or a Subsidiary for business expenses
in the aggregate principal amount of up to $25,000 at any one time outstanding.
-10-
<PAGE>
Revolving Credit Loan and Revolving Credit Loans shall have the respective
---------------------- ----------------------
meanings ascribed thereto in Section 2.01(a).
Revolving Credit Note shall have the meaning ascribed thereto in Section
-----------------------
2.02.
Revolving Credit Period shall mean the period commencing on the date of
-------------------------
this Agreement and ending April 25, 2001.
S&P shall mean Standard and Poor's Ratings Group.
---
Security Agreement shall mean that certain Security Agreement dated the
-------------------
date hereof and executed by Borrower in favor of Lender, as the same may from
time to time be amended, modified, extended, or restated.
Subordinated Indebtedness shall mean, as of the date of any determination
--------------------------
thereof, the aggregate principal amount of all Indebtedness of Borrower
outstanding as of such date which is subordinated in writing (either by its
terms or pursuant to a subordination agreement) to the payment and priority of
all of the Borrower's Obligations in form and substance satisfactory to Lender.
Subsidiary shall mean any corporation or other entity of which more than
----------
Fifty Percent (50%) of the issued and outstanding capital stock or other equity
interests entitled to vote for the election of directors or other persons
performing similar functions (other than by reason of default in the payment of
dividends) is at the time owned directly or indirectly by Borrower or any
Subsidiary.
Term Loan shall have the meaning ascribed thereto in Section 2.03.
----------
Term Loan Note shall have the meaning ascribed thereto in Section 2.03.
----------------
Third Party Collateral shall mean any Property or assets of any Obligor
------------------------
other than Borrower which now or at any time hereafter secure the payment or
performance of any of the Borrower's Obligations or any Guarantee thereof.
Total Revolving Credit Outstandings shall mean, as of any date, the
--------------------------------------
aggregate principal amount of all Revolving Credit Loans outstanding as of such
date.
Transaction Documents shall mean this Agreement, the Notes, the Security
----------------------
Agreement, the Guaranty, the Illinois Mortgage, the Missouri Deed of Trust, the
Assignment of Leases and Rents and all other agreements, documents and
instruments heretofore, now or hereafter delivered to Lender with respect to or
in connection with or pursuant to this Agreement, any Loans made hereunder or
any of the other Borrower's Obligations, and executed by or on behalf of
Borrower and/or any other Obligor, all as the same may from time to time be
amended, modified, extended, renewed or restated.
Unused Availability shall mean, as of any date, the sum of (a) the lesser
--------------------
of (i) the amount of Lender's Revolving Credit Commitment as of such date or
(ii) the Borrowing Base as of such date minus (b) the Total Revolving Credit
-----
Outstandings as of such date.
Voting Stock shall mean, with respect to any corporation, any shares of
-------------
stock of such corporation whose holders are entitled under ordinary
circumstances to vote for the election of directors of such corporation
(irrespective of whether at the time stock of any other class or classes shall
have or might have voting power by reason of the happening of any contingency).
Welfare Plan shall mean a "welfare plan" as such term is defined in Section
------------
3(1) of ERISA, which is established or maintained by Borrower, any Subsidiary or
any ERISA Affiliate, other than a Multi-Employer Plan.
-11-
<PAGE>
1.02 Accounting Terms and Determinations. Except as otherwise specified in
-----------------------------------
this Agreement, all accounting terms used in this Agreement shall be
interpreted, all accounting determinations under this Agreement shall be made
and all financial statements required to be delivered under this Agreement shall
be prepared in accordance with GAAP as in effect from time to time, applied on a
basis consistent (except for changes approved by Lender and by Borrower's
independent certified public accountants) with the most recent audited financial
statements of Borrower delivered to Lender.
SECTION2. THE LOANS.
- ---------------------
2.01 Revolving Credit Loans.
------------------------
(a) Subject to the terms and conditions of this Agreement, during the
Revolving Credit Period of this Agreement, and so long as no Default or Event of
Default under this Agreement has occurred and is continuing, Lender hereby
agrees to make such loans (individually, a "Revolving Credit Loan" and
collectively, the "Revolving Credit Loans") to Borrower as Borrower may from
time to time request pursuant to Section 2.02. The aggregate principal amount
of Revolving Credit Loans which Lender shall be required to have outstanding
under this Agreement at any one time shall not exceed the lesser of (i) the
Lender's Revolving Credit Commitment or (ii) the Borrowing Base. Subject to the
terms and conditions of this Agreement, Borrower may borrow, repay and reborrow
such sums from Lender, provided, however, that in no event may the Total
Revolving Credit Outstandings on any given day exceed the lesser of (A) the
Lender's Revolving Credit Commitment as of such day or (B) the Borrowing Base as
of such day. All Revolving Credit Loans not paid prior to the last day of the
Revolving Credit Period, together with all accrued and unpaid interest thereon,
shall be due and payable on the last day of the Revolving Credit Period.
Notwithstanding anything herein to the contrary, for a period of thirty (30)
consecutive days during the Revolving Credit Period, Borrower agrees to pay the
principal balance of all outstanding Revolving Credit Loans, together with all
accrued and unpaid interest thereon, to $0 and maintain such $0 balance
throughout such thirty (30) day period.
(b) For purposes of this Agreement, the "Borrowing Base" shall mean an
amount equal to Eighty Percent (80%) of the face amount of all then existing
Eligible Accounts (less maximum discounts, credits and allowances which may be
taken by or granted to Account Debtors in connection therewith and/or
adjustments for reserves and allowances deemed appropriate by Lender in its good
faith discretion);
Notwithstanding any provision contained in this Section 2.01(b) to the
contrary, Lender may at any time and from time to time, in its sole and absolute
discretion, loan to Borrower more than the above stated percentage of Eligible
Accounts without notice to Borrower; provided, however, that no such
over-advance shall establish a custom or course of dealing or entitle Borrower
to any subsequent over-advance under the same or different circumstances.
Lender reserves the right at any time and from time to time in its good
faith discretion to increase or decrease the percentage advance rates on
Eligible Accounts specified in this Section 2.01(b) upon seven (7) days' prior
written notice to Borrower.
(c) Borrower shall deliver to Lender on the tenth (10) Business Day of
each month hereafter (calculated as of the close of business on the last day of
the preceding month) (or at such other intervals as Lender shall require from
time to time), a borrowing base certificate in the form of Exhibit A attached
---------
hereto and incorporated herein by reference (or in such other form as Lender
shall require from time to time) (each, a "Borrowing Base Certificate") setting
forth:
(i) the Borrowing Base and its components as of the end of the
immediately preceding Business Day;
(ii) the sum of the Total Revolving Credit Outstandings as of the end
of the immediately preceding Business Day; and
-12-
<PAGE>
(iii) the difference, if any, between the Borrowing Base and the sum
of the Total Revolving Credit Outstandings as of the end of the immediately
preceding Business Day.
The Borrowing Base shown in such Borrowing Base Certificate (subject to
adjustment for collections of Accounts received by Lender since the date of such
Borrowing Base Certificate) shall be and remain the Borrowing Base hereunder
until the next Borrowing Base Certificate is delivered to Lender, at which time
the Borrowing Base shall be the amount shown in such subsequent Borrowing Base
Certificate. Each Borrowing Base Certificate shall be certified as to truth and
accuracy by the president, the chief financial officer or the chief accounting
officer of Borrower.
(d) If at any time the Total Revolving Credit Outstandings are greater
than the Borrowing Base as shown on the most recent Borrowing Base Certificate,
Borrower shall be automatically required (without demand or notice of any kind
by Lender, all of which are hereby expressly waived by Borrower) to immediately
repay the Revolving Credit Loans in an amount sufficient to reduce the amount of
the Total Revolving Credit Outstandings to the amount of the Borrowing Base.
2.02 Procedure for Borrowing. Subject to the terms and conditions of
-------------------------
this Agreement, Lender shall cause the Revolving Credit Loans to be made to
Borrower at any time and from time to time during the Revolving Credit Period of
this Agreement upon timely prior oral or written notice ("Borrowing Notice") to
Lender specifying (a) the desired amount of the Revolving Credit Loan and (b)
the date on which the Revolving Credit Loan proceeds are to be made available to
Borrower, which must be a Business Day. Each Borrowing Notice must be received
by Lender not later than 12:00 noon (St. Louis time) on the Business Day on
which a Revolving Credit Loan is to be made. Subject to the terms and
conditions of this Agreement, provided that Lender has received the Borrowing
Notice, Lender shall (unless Lender determines that any applicable condition
specified in Section 3 has not been satisfied) make such Revolving Credit Loan
to Borrower by crediting the amount of such Revolving Credit Loan to an account
of Borrower at Lender, not later than 2:30 p.m. (St. Louis time) on the Business
Day specified in said Borrowing Notice. Borrower hereby authorizes Lender to
rely on telephonic, telegraphic, telecopy, telex or written instructions of any
individual identifying himself or herself as one of the individuals listed on
Schedule 2.02 attached hereto (or any other individual from time to time
- --------------
authorized to act on behalf of Borrower pursuant to a resolution adopted by the
Board of Directors of Borrower and certified by the Secretary of Borrower and
delivered to Lender) with respect to any request to make a Revolving Credit Loan
or a repayment hereunder, and on any signature which Lender believes to be
genuine, and Borrower shall be bound thereby in the same manner as if such
person were actually authorized or such signature were genuine. Borrower also
hereby agrees to indemnify Lender and hold Lender harmless from and against any
and all claims, demands, damages, liabilities, losses, costs and expenses
(including, without limitation, reasonable attorneys' fees and expenses)
relating to or arising out of or in connection with the acceptance of
instructions for making Revolving Credit Loans or repayments hereunder. The
Revolving Credit Loans shall be evidenced by a Revolving Credit Note of Borrower
dated the date hereof and payable to the order of Lender in the original
principal amount of $1,500,000.00 in the form attached hereto as Exhibit B and
---------
incorporated herein by reference (as the same may from time to time be amended,
modified, extended or renewed, the "Revolving Credit Note").
2.03 Term Loan. Lender hereby agrees to make Borrower a term loan on
----------
the date hereof in the original principal amount of $1,350,000.00 (the "Term
Loan"). The Term Loan shall be evidenced by a Term Loan Promissory Note of
Borrower dated the date hereof and payable to the order of Lender in the
original principal amount of $1,350,000.00 in the form attached hereto as
Exhibit C and incorporated herein by reference (as the same may from time to
- ----------
time be amended, modified, extended, renewed or restated, the "Term Loan Note").
The Term Loan Note shall mature on April 25, 2007 (on which date all unpaid
principal and all accrued and unpaid interest shall become due and payable).
Principal on the Term Loan Note shall be payable as provided in the Term Loan
Note.
-13-
<PAGE>
Any provision of this Agreement or the Term Loan Note to the contrary
notwithstanding, the unpaid principal balance of the Term Loan plus accrued
interest thereon shall be immediately due and payable upon acceleration of
Borrower's Obligations as provided in Section 6 hereof or in the event of
termination of this Agreement.
2.04 Interest Rates. So long as no Event of Default under this
---------------
Agreement has been declared by Lender and is continuing, (a) each Revolving
Credit Loan shall bear interest prior to maturity at a rate per annum equal to
the Prime Rate (fluctuating as and when the Prime Rate shall change) and (b) the
Term Loan shall bear interest prior to maturity at a rate per annum equal to
Eight and 01/100 Percent (8.01%). So long as any Event of Default under this
Agreement has been declared by Lender and is continuing, (a) each Revolving
Credit Loan shall bear interest prior to maturity at a rate per annum equal to
Three Percent (3%) over and above the Prime Rate (fluctuating as and when the
Prime Rate shall change) and (b) the Term Loan shall bear interest prior to
maturity at a rate per annum equal to Eleven and 01/100 Percent (11.01%). From
and after the maturity of the Revolving Credit Note, whether by reason of
acceleration or otherwise, each Revolving Credit Loan shall bear interest
payable on demand until paid at a rate per annum equal to Three Percent (3%)
over and above the Prime Rate (fluctuating as and when the Prime Rate shall
change). From and after the maturity of the Term Loan Note, the Term Loan shall
bear interest payable on demand until paid at a rate per annum equal to Eleven
and 01/100 Percent (11.01%). Interest shall be computed with respect to all
Loans on an actual day, 360-day year basis.
2.05 Interest Payments. Borrower shall pay Lender on the first (1st)
------------------
day of each month, commencing with the first (1st) day of the first (1st) month
following the date each Revolving Credit Loan was made, all accrued and unpaid
interest on each Revolving Credit Loan. Notwithstanding any provision contained
in this Agreement to the contrary, all accrued and unpaid interest on the
Revolving Credit Loans shall also be paid at the maturity of the Revolving
Credit Note, whether by reason of acceleration or otherwise. Borrower shall pay
Lender interest on the Term Loan as provided in the Term Loan Note.
Notwithstanding any provision contained in this Agreement to the contrary, all
accrued and unpaid interest on the Term Loan shall also be paid at the maturity
of the Term Loan Note, whether by reason of acceleration or otherwise. In the
event any payment of interest shall become due on a day which is not a Business
Day, such interest payment shall be due and payable on the next succeeding
Business Day.
2.06 Prepayment. Subject to the provisions of Section 2.10 and 2.07 of
----------
this Agreement, (a) Borrower shall have the right to prepay all at any time or
any portion from time to time of the unpaid principal of any Revolving Credit
Loan prior to maturity, without penalty or premium, and (b) Borrower shall have
the right to prepay all at any time or any portion from time to time of the
unpaid principal balance of the Term Loan prior to maturity, provided that (i)
partial prepayments shall be applied to installments of principal of the Term
Loan in the inverse order of their stated maturities, (ii) on each prepayment
date, Borrower shall pay to the order of Lender all accrued and unpaid interest
on the principal portion of the Term Loan being prepaid to and including the
date of such prepayment, and (iii) Borrower shall pay the Prepayment Fee and
other amounts, if any, under Section 2.07.
2.07 Prepayment Fee. Borrower hereby agrees to pay Lender, upon
---------------
prepayment of all or part of the principal amount of the Term Loan before final
maturity, a prepayment fee ("Prepayment Fee") in an amount equal to the product
of (A) the amount of principal of each installment so prepaid, each respectively
multiplied by (B) the product of (1) a rate of interest equal to the difference
(not less than zero) between the rate of interest then applicable to the Term
Loan and the yield-to-maturity of U.S. Treasury securities selected by Bank, as
reported in the Wall Street Journal, Midwest Edition, or any similar publication
-------------------
or newspaper selected by Bank, on the Business Day before the date of such
prepayment, having an original maturity closest to, but not later than, the
respective due date of the applicable installment of principal being prepaid,
multiplied by (2) the number of days from and including the date of such
prepayment to but not including the respective due date of the applicable
installment of principal being prepaid divided by three hundred sixty (360).
All determinations, estimates, assumptions, allocations and the like required
for the determination of such Prepayment Fees shall be made by Bank in good
faith, and Bank's determination shall be final, binding and conclusive upon
Borrower. If Borrower fails to pay any Prepayment Fee when due, the amount of
such Prepayment Fee shall thereafter bear interest until paid at the default
rate applicable to the Term Loan specified in this Agreement (computed on the
basis of a 360-day year, actual days elapsed).
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<PAGE>
2.08 Method of Making Interest and Other Payments; Application of
------------------------------------------------------------------
Payments. Lender may, at its option, deem interest and other amounts payable
under this Agreement (including any principal portion of the Term Loan which is
then due and payable but excluding the principal balance of the Revolving Credit
Loans) to be paid by causing a Revolving Credit Loan to be made to Borrower in
such amount(s). Solely for the purpose of calculating interest earned by
Lender, payment by or for the account of Borrower shall be applied by the Lender
on account of the Borrower's Obligations on the second (2nd) Business Day after
a deposit of funds is made in the amount of that payment in Lender's operating
account at Lender. Deposits received after 12:00 noon. (St. Louis time) shall
be deemed to have been received or deposited on the following Business Day.
2.09 Late Fees. If Borrower fails to make any payment of any principal
---------
of or interest on any Loan within ten (10) days after the date the same shall
become due and payable, whether by reason of maturity, acceleration or
otherwise, in addition to all of the other rights and remedies of Lender under
this Agreement and at law or in equity, Borrower shall pay Lender on demand with
respect to each such late payment a late fee in an amount equal to the greater
of $100.00 or Five Percent (5%) of the amount of each such late payment.
2.10 Early Termination and Early Termination Fee. Borrower may elect
---------------------------------------------
to terminate this Agreement at any time. Borrower hereby agrees that in the
event that Lender or Borrower elects to terminate this Agreement (including,
without limitation, any termination by Lender as a result of the occurrence of
an Event of Default under this Agreement), Borrower will pay to Lender the total
of the following: (a) any amount of interest accrued through the date of
termination with respect to the outstanding Borrower's Obligations; and (b) the
outstanding Borrower's Obligations.
2.11 General Provisions as to Payments. Borrower shall make each
-------------------------------------
payment of principal of, and interest on, the Loans and of fees and all other
amounts payable under this Agreement not later than 12:00 noon (St. Louis time)
on the date when due, in Federal or other funds immediately available in St.
Louis, Missouri, to Lender at its address referred to in Section 7.07. Payments
received after 12:00 noon. (St. Louis time) shall be deemed to have been
received on the following Business Day. Whenever any payment of principal of,
or interest on, the Loans or of fees shall be due on a day which is not a
Business Day, the date for payment thereof shall be extended to the next
succeeding Business Day. If the date for any payment of principal is extended
by operation of law or otherwise, interest thereon, at the then applicable rate,
shall be payable for such extended time.
SECTION3. PRECONDITIONS TO LOANS.
- -----------------------------------
3.01 Initial Loan. Notwithstanding any provision contained in this
-------------
Agreement to the contrary, Lender shall have no obligation to make the initial
Loan under this Agreement unless Lender shall have first received:
(a) this Agreement and the Notes, each executed by a duly authorized
officer of Borrower;
(b) the Security Agreement (which must be in form and substance
satisfactory to Lender) and such Uniform Commercial Code financing statements
and other documents as Lender may require in connection therewith, each executed
by a duly authorized officer of Borrower;
(c) the Missouri Deed of Trust (which must be in form and substance
satisfactory to Lender) and such Uniform Commercial Code financing statements
and other documents as Lender may require in connection therewith, each executed
by a duly authorized officer of Borrower;
(d) the Assignment of Leases and Rents (which must be in form and
substance satisfactory to Lender) and such Uniform Commercial Code financing
statements and other documents as Lender may require in connection therewith,
each executed by a duly authorized officer of Borrower;
(e) a title commitment for an ALTA Loan Policy (Form 1970) for the real
property covered by the Missouri Deed of Trust in an amount acceptable to the
Lender, with all standard exceptions deleted, no other exceptions unless
previously approved by the Lender and with such affirmative coverages as the
Lender shall require, including, without limitation, a zoning endorsement, a
comprehensive endorsement, a future advance endorsement, a survey endorsement,
an access endorsement, a separate tax parcel, and a last dollar endorsement;
-15-
<PAGE>
(f) copies of all recorded plats and title exceptions affecting the
real property covered by the Missouri Deed of Trust;
(g) an appraisal of the real property covered by the Missouri Deed of
Trust in form and substance satisfactory to the Lender prepared by an appraiser
selected by the Lender;
(h) such environmental assessments of the real property covered by the
Missouri Deed of Trust as shall be required by the Lender, including, without
limitation, appropriate environmental inspections, tests and record searches,
and a report thereof by an environmental engineer or other Person satisfactory
to the Lender stating there is no evidence of hazardous or toxic materials on or
affecting any such real property together with a reliance letter acceptable to
the Lender;
(i) the Illinois Mortgage (which must be in form and substance
satisfactory to Lender) and such Uniform Commercial Code financing statements
and other documents as Lender may require in connection therewith, each executed
by a duly authorized officer of Borrower;
(j) a title commitment for an ALTA Loan Policy (Form 1970) for the real
property covered by the Illinois Mortgage in an amount acceptable to the Lender,
with all standard exceptions deleted, no other exceptions unless previously
approved by the Lender and with such affirmative coverages as the Lender shall
require, including, without limitation, a zoning endorsement, a comprehensive
endorsement, a future advance endorsement, a survey endorsement, an access
endorsement, a separate tax parcel, and a last dollar endorsement;
(k) copies of all recorded plats and title exceptions affecting the
real property covered by the Illinois Mortgage;
(l) an appraisal of the real property covered by the Illinois Mortgage
in form and substance satisfactory to the Lender prepared by an appraiser
selected by the Lender;
(m) such environmental assessments of the real property covered by the
Illinois Mortgage as shall be required by the Lender, including, without
limitation, appropriate environmental inspections, tests and record searches,
and a report thereof by an environmental engineer or other Person satisfactory
to the Lender stating there is no evidence of hazardous or toxic materials on or
affecting any such real property together with a reliance letter acceptable to
the Lender;
(n) a landlord estoppel letter (which must be in form and substance
satisfactory to the Lender), duly executed by the owner of the real property
covered by the Illinois Mortgage;
(o) the Guaranty (which must be in form and substance satisfactory to
Lender), duly executed by each of the Guarantors;
(p) a copy of resolutions of the Board of Directors of Borrower, duly
adopted, which authorize the execution, delivery and performance of this
Agreement, the Notes and the other Transaction Documents executed by Borrower,
certified by the Secretary of Borrower;
(q) a copy of the Articles of Incorporation of Borrower, including any
amendments thereto, certified by the Secretary of State of the State of
Missouri;
(r) a copy of the By-Laws of Borrower, including any amendments
thereto, certified by the Secretary of Borrower;
-16-
<PAGE>
(s) an incumbency certificate, executed by the Secretary of Borrower,
which shall identify by name and title and bear the signatures of all of the
officers of Borrower executing any of the Transaction Documents;
(t) certificates of corporate good standing of Borrower issued by the
Secretaries of State of the States of Missouri and Illinois;
(u) a copy of the Certificate of Incorporation of Air Methods
Corporation, including any amendments thereto, certified by the Secretary of
State of the State of Delaware;
(v) a copy of the By-Laws of Air Methods Corporation, including any
amendments thereto, certified by the Secretary of Air Methods Corporation;
(w) an incumbency certificate, executed by the Secretary of Air Methods
Corporation, which shall identify by name and title and bear the signatures of
all of the officers of Air Methods Corporation executing any of the Transaction
Documents;
(x) certificates of corporate good standing of Air Methods Corporation
issued by the Secretaries of State of the States of Missouri and Delaware;
(y) a copy of the Articles of Incorporation of Mercy Air Service, Inc.,
including any amendments thereto, certified by the Secretary of State of the
State of California;
(z) a copy of the By-Laws of Mercy Air Service, Inc., including any
amendments thereto, certified by the Secretary of Mercy Air Service, Inc.;
(aa) an incumbency certificate, executed by the Secretary of Mercy Air
Service, Inc., which shall identify by name and title and bear the signatures of
all of the officers of Mercy Air Service, Inc. executing any of the Transaction
Documents;
(bb) certificates of corporate good standing of Mercy Air Service, Inc.
issued by the Secretaries of State of the States of Missouri and California;
(cc) an opinion of counsel of Davis, Graham & Stubbs LLP, outside
counsel to Borrower and the Guarantors, in form and substance satisfactory to
Lender and Lender's counsel;
(dd) the initial Borrowing Base Certificate required by Section
2.01(c);
(ee) the Borrowing Notice required by Section 2.02;
(ff) evidence of the proper filing of UCC-1 Financing Statements
perfecting first priority security interests in favor of Lender in all of the
Collateral and all of the Third Party Collateral;
(gg) UCC-3 Termination Statements for all UCC-1 Financing Statements
filed of record against Borrower other than UCC-1 Financing Statements relating
to Permitted Liens;
(hh) evidence satisfactory to Lender of the insurance required by this
Agreement and the other Transaction Documents together with loss payable
endorsements in form and substance satisfactory to Lender, duly executed by the
insurance company;
(ii) copies of all financial statements and other Exhibits and
Schedules required by this Agreement and the other Transaction Documents;
-17-
<PAGE>
(jj) a letter of direction from Borrower with respect to the
disbursement of the proceeds of the initial Loans under this Agreement;
(kk) such mortgagee, bailee, landlord or warehousemen's waivers as
Lender may deem necessary regarding locations at which Collateral is or will be
stored or otherwise located;
(ll) evidence satisfactory to the Lender that Borrower has consummated
the acquisition of the assets of Area Rescue Consortium of Hospitals pursuant to
that certain Asset Purchase Agreement dated March 23, 2000, by and among Area
Rescue Consortium of Hospitals, as seller, Air Methods Corporation and Mercy Air
Service, Inc., as buyers, and assigned by buyers to Borrower pursuant to that
certain Assignment Agreement dated April 18, 2000 by and among such seller and
buyers (the "ARCH Acquisition Agreement"), the terms and provisions (including
the purchase price) of which ARCH Acquisition Agreement must be acceptable to
the Lender, which evidence shall include (i) a certificate of all "buyer"
parties to the ARCH Acquisition Agreement that all of the conditions to such
parties' obligations thereunder which are required to be satisfied as of or
prior to closing have been satisfied or effectively waived and (ii) a
certificate of all "seller" parties to the ARCH Acquisition Agreement that all
of the conditions to such parties' obligations thereunder which are required to
be satisfied as of or prior to closing have been satisfied or effectively
waived; and
(mm) such other agreements, documents, instruments and certificates as
Lender may reasonably request.
Any one or more of the conditions set forth above which have not been
satisfied by Borrower on or prior to the date of disbursement of the initial
Loan hereunder shall not be deemed permanently waived by Lender unless Lender
shall waive the same in a writing which expressly states that the waiver is
permanent, and in all cases in which the waiver is not stated to be permanent
Lender may at any time subsequent thereto insist upon compliance and
satisfaction of any such condition as a condition to any subsequent Loan
hereunder and failure to Borrower to comply with any such condition within three
(3) Business Day's written notice from Lender to Borrower shall constitute an
Event of Default under this Agreement.
3.02 All Loans. Notwithstanding any provision contained in this
----------
Agreement to the contrary, Lender shall have no obligation to make any Loan
under this Agreement unless:
(a) Lender shall have received a current Borrowing Base Certificate as
required by Section 2.01(c);
(b) if such Loan is a Revolving Credit Loan, Lender shall have received
a Borrowing Notice for such Revolving Credit Loan as required by Section 2.02;
(c) both immediately before and immediately after giving effect to such
Loan, no Default or Event of Default under this Agreement shall have occurred
and be continuing;
(d) no material adverse change in the Properties, assets, liabilities,
business, operations, prospects, income or condition (financial or otherwise) of
Borrower, any other Obligor and/or any Subsidiary shall have occurred since the
date of this Agreement and be continuing; and
(e) all of the representations and warranties made by Borrower in this
Agreement and/or in any other Transaction Document shall be true and correct in
all material respects on and as of the date of such Loan as if made on and as of
the date of such Loan (and for purposes of this Section 3.02(e), the
representations and warranties made by Borrower in Section 4.04 shall be deemed
to refer to the most recent financial statements of Borrower delivered to Lender
pursuant to Section 5.01(a)).
Each request for a Loan by Borrower under this Agreement shall be deemed to
be a representation and warranty by Borrower on the date of such Loan as to the
facts specified in clauses (c), (d) and (e) of this Section 3.02.
-18-
<PAGE>
SECTION 4. REPRESENTATIONS AND WARRANTIES.
- -------------------------------------------
Borrower hereby represents and warrants to Lender that:
4.01 Corporate Existence and Power. Borrower and each Subsidiary: (a)
-----------------------------
is duly incorporated, validly existing and in good standing under the laws of
the jurisdiction of its incorporation; (b) has all requisite corporate powers
required to carry on its business as now conducted; (c) has all requisite
governmental and regulatory licenses, authorizations, consents and approvals
required to carry on its business as now conducted, except such licenses,
authorizations, consents and approvals the failure to have could not reasonably
be expected to have a Material Adverse Effect; and (d) is qualified to transact
business as a foreign corporation in, and is in good standing under the laws of,
all states in which it is required by applicable law to maintain such
qualification and good standing except for those states in which the failure to
qualify or maintain good standing could not reasonably be expected to have a
Material Adverse Effect.
4.02 Corporate Authorization. The execution, delivery and performance
------------------------
by Borrower of this Agreement, the Notes and the other Transaction Documents to
which Borrower is a party are within the corporate powers of Borrower and have
been duly authorized by all necessary corporate action.
4.03 Binding Effect. This Agreement, the Notes and the other
---------------
Transaction Documents to which Borrower is a party have been duly executed and
delivered by Borrower and constitute the legal, valid and binding obligations of
Borrower enforceable in accordance with their respective terms, except as such
enforceability may be limited by bankruptcy, insolvency or other similar laws
affecting creditors' rights generally and by general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
4.04 Financial Statements. Borrower has furnished Lender with such
---------------------
financial statements of Parent and Area Rescue Consortium of Hospitals as Lender
has requested. Borrower represents and warrants to Lender that (a) such
financial statements with respect to Parent fairly present the condition of
Parent and its Subsidiaries as of the dates thereof, (b) there has been no
material adverse change in the condition or operation, financial or otherwise,
of Parent or any of its Subsidiaries since the last date of any such financial
statements, (c) neither Parent nor any of its Subsidiaries had any direct or
contingent liabilities which were not disclosed on said financial statements or
the notes thereto (to the extent such disclosure is required by GAAP); and (d)
Borrower has no knowledge of any facts, circumstances or omissions that make or
may make the financial statements furnished with respect to Area Rescue
Consortium of Hospitals untrue, incorrect or misleading in any material respect.
4.05 Litigation. Except as disclosed on Schedule 4.05 attached hereto,
---------- -------------
there is no action or proceeding pending or, to the knowledge of Borrower,
threatened against or affecting Borrower or any Subsidiary before any court,
arbitrator or any governmental, regulatory or administrative body,
instrumentality, authority, agency or official which, if determined adversely
against Borrower or any Subsidiary, could reasonably be expected to have a
Material Adverse Effect. Neither Borrower nor any Subsidiary is in default with
respect to any order, writ, injunction, decision or decree of any court,
arbitrator or any governmental, regulatory or administrative body,
instrumentality, authority, agency or official, a default under which could
reasonably be expected to have a Material Adverse Effect. There are no
outstanding judgments against Borrower or any Subsidiary.
-19-
<PAGE>
4.06 Pension and Welfare Plans. Each Pension Plan and Welfare Plan
----------------------------
complies in all material respects with ERISA and all other applicable statutes
and governmental and regulatory rules and regulations; no Reportable Event has
occurred and is continuing with respect to any Pension Plan; neither Borrower
nor any Subsidiary nor any ERISA Affiliate has withdrawn from any Multi-Employer
Plan in a "complete withdrawal" or a "partial withdrawal" as defined in Sections
4203 or 4205 of ERISA, respectively; neither Borrower nor any Subsidiary nor any
ERISA Affiliate has entered into an agreement pursuant to Section 4204 of ERISA;
neither Borrower nor any Subsidiary nor any ERISA Affiliate has in the past
contributed to or currently contributes to a Multi-Employer Plan; neither
Borrower nor any Subsidiary nor any ERISA Affiliate has any withdrawal liability
with respect to a Multi-Employer Plan; no steps have been instituted by Borrower
or any Subsidiary or any ERISA Affiliate to terminate any Pension Plan; no
condition exists or event or transaction has occurred in connection with any
Pension Plan, Multi-Employer Plan or Welfare Plan which could result in the
incurrence by Borrower or any Subsidiary or any ERISA Affiliate of any material
liability, fine or penalty; and neither Borrower nor any Subsidiary nor any
ERISA Affiliate is a "contributing sponsor" as defined in Section 4001(a)(13) of
ERISA of a "single-employer plan" as defined in Section 4001(a)(15) of ERISA
which has two or more contributing sponsors at least two of whom are not under
common control. Except as disclosed on the consolidated financial statements of
Borrower and its Subsidiaries delivered by Borrower to Lender, neither Borrower
nor any Subsidiary nor any ERISA Affiliate has any liability with respect to any
Welfare Plan.
4.07 Tax Returns and Payment. Borrower and each Subsidiary has filed
-------------------------
all Federal, state, local and other income and other tax returns which are
required to be filed and has paid all taxes which have become due pursuant to
such returns and all other taxes, assessments, fees and other governmental
charges upon Borrower or such Subsidiary, as the case may be, and/or upon their
respective Properties, assets, income and franchises which have become due and
payable by Borrower or such Subsidiary, as the case may be, except those wherein
the amount, applicability or validity are being contested by Borrower or such
Subsidiary, as the case may be, by appropriate proceedings being diligently
conducted in good faith and in respect of which adequate reserves in accordance
with GAAP have been established. There is no asserted or assessed (or to
Borrower's knowledge, proposed) tax deficiency against Borrower or any
Subsidiary which, if determined adversely against Borrower or any Subsidiary,
could reasonably be expected to have a Material Adverse Effect.
4.08 Subsidiaries. Borrower has no Subsidiaries other than as
------------
identified on Schedule 4.08 attached hereto, as the same may from time to time
-------------
be amended, modified or supplemented as provided herein. Schedule 4.08 attached
-------------
hereto correctly sets forth, for each Subsidiary, the number of shares of each
class of common and preferred stock authorized for such Subsidiary, the number
of outstanding and the percentage of the outstanding shares of each such class
owned, directly or indirectly, by Borrower or one or more of its Subsidiaries.
All of the issued and outstanding capital stock of each Subsidiary is duly
authorized, validly issued and fully paid and nonassessable. Except as
disclosed on Schedule 4.08 attached hereto, neither Borrower nor any Subsidiary,
-------------
individually or collectively, owns or holds, directly or indirectly, any capital
stock or equity security of, or any equity interest in, any corporation or
business other than Borrower's Subsidiaries. Borrower may at any time amend,
modify or supplement Schedule 4.08 by notifying Lender in writing of any changes
-------------
thereto, including any formation, acquisition, merger or liquidation of any
Subsidiary or any change in the capitalization of any Subsidiary, in each case,
in accordance with the terms of this Agreement, and thereby the representations
and warranties contained in this Section 4.08 shall be amended accordingly so
long as such amendment, modification or supplement is made within thirty (30)
days after the occurrence of any such changes in the facts stated therein and
that such changes reflect transactions that are permitted under this Agreement.
4.09 Compliance With Other Instruments; None Burdensome. Neither
-------------------------------------------------------
Borrower nor any Subsidiary is a party to any contract or agreement or subject
to any charter or other corporate restriction which could reasonably be expected
to have a Material Adverse Effect and which is not disclosed on Borrower's
financial statements heretofore submitted to Lender; none of the execution and
delivery by Borrower of the Transaction Documents, the consummation of the
transactions therein contemplated or the compliance with the provisions thereof
will violate any law, rule, regulation, order, writ, judgment, injunction,
decree or award binding on Borrower, or any of the provisions of the Certificate
or Articles of Incorporation or By-Laws of Borrower or any of the provisions of
any indenture, agreement, document, instrument or undertaking to which Borrower
is a party or subject, or by which Borrower or any Property of Borrower is
bound, or conflict with or constitute a default thereunder or result in the
creation or imposition of any Lien pursuant to the terms of any such indenture,
agreement, document, instrument or undertaking (other than in favor of Lender
pursuant to the Transaction Documents). No order, consent, approval, license,
authorization or validation of, or filing, recording or registration with, or
exemption by, any governmental, regulatory, administrative or public body or
authority, or any subdivision thereof, or any other Person is required to
authorize, or is required in connection with, the execution, delivery or
performance of, or the legality, validity, binding effect or enforceability of,
any of the Transaction Documents.
-20-
<PAGE>
4.10 Other Debt, Guarantees and Capitalized Leases. Except as
--------------------------------------------------
disclosed on Schedule 4.10 attached hereto, neither Borrower nor any Subsidiary
-------------
is a borrower, guarantor or obligor with respect to, or a lessee under, any
Debt, Guarantees or Capitalized Leases. Borrower may at any time amend, modify
or supplement Schedule 4.10 by notifying Lender in writing of any changes
--------------
thereto, and thereby the representations and warranties contained in this
Section 4.10 shall be amended accordingly so long as such amendment,
modification or supplement is made within thirty (30) days after the occurrence
of any such changes in the facts stated therein and that such changes reflect
transactions that are permitted under this Agreement.
4.11 Labor Matters. Neither Borrower nor any Subsidiary is a party to
-------------
any labor dispute which could reasonably be expected to have a Material Adverse
Effect. There are no strikes or walkouts relating to any labor contract to
which Borrower or any Subsidiary is subject. Hours worked and payments made to
the employees of Borrower and its Subsidiaries have not been in violation of (a)
the Fair Labor Standards Act or (b) any other applicable law dealing with such
matters, the violation of which could reasonably be expected to have a Material
Adverse Effect. All payments due from Borrower or any Subsidiary, or for which
any claim may be made against any of them, in respect of wages, employee health
and welfare insurance and/or other benefits have been paid or accrued as a
liability on their respective books.
4.12 Title to Property. Borrower and each Subsidiary is the sole and
-------------------
absolute owner of, or has the legal right to use and occupy, all Property it
claims to own or which is necessary for Borrower or such Subsidiary to conduct
its business, and all of such Property is free and clear of all Liens other than
Permitted Liens. Borrower and each Subsidiary enjoys peaceful and undisturbed
possession in all material respects under all leases under which it is operating
as a lessee.
4.13 Regulation U. Borrower is not engaged principally, or as one of
-------------
its important activities, in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulation U of The
Board of Governors of the Federal Reserve System, as amended) and no part of the
proceeds of any Loan will be used, whether directly or indirectly, and whether
immediately, incidentally or ultimately (a) to purchase or carry margin stock or
to extend credit to others for the purpose of purchasing or carrying margin
stock, or to refund or repay indebtedness originally incurred for such purpose
or (b) for any purpose which entails a violation of, or which is inconsistent
with, the provisions of any of the Regulations of The Board of Governors of the
Federal Reserve System, including, without limitation, Regulations G, U, T or X
thereof, as amended. If requested by Lender, Borrower shall furnish to Lender a
statement in conformity with the requirements of Federal Reserve Form U-1
referred to in Regulation U.
4.14 Multi-Employer Pension Plan Amendments Act of 1980. Borrower and
---------------------------------------------------
each Subsidiary is in compliance with the Multi-Employer Pension Plan Amendments
Act of 1980, as amended ("MEPPAA"), and has no liability for pension
contributions pursuant to MEPPAA.
4.15 Investment Company Act of 1940; Public Utility Holding Company Act
------------------------------------------------------------------
of 1935. Borrower is not an "investment company" as that term is defined in,
- --------
and is not otherwise subject to regulation under, the Investment Company Act of
1940, as amended. Borrower is not a "holding company" as that term is defined
in, and is not otherwise subject to regulation under, the Public Utility Holding
Company Act of 1935, as amended.
4.16 Patents, Trademarks, Copyrights, Licenses, Etc. Except as
--------------------------------------------------
disclosed on Schedule 4.16 attached hereto, neither Borrower nor any Subsidiary
-------------
has any patents, patent applications, patent rights, trademarks, trademark
applications, trademark rights, copyrights, licenses or other intellectual
property which are material to the business of Borrower or any Subsidiary.
Borrower may at any time amend, modify or supplement Schedule 4.16 by notifying
-------------
Lender in writing of any changes thereto, and thereby the representations and
warranties contained in the first sentence of this Section 4.16 shall be amended
accordingly so long as such amendment, modification or supplement is made within
thirty (30) days after the occurrence of any such changes in the facts stated
therein and that such changes reflect transactions that are permitted under this
Agreement. Borrower and each Subsidiary possesses all necessary patents, patent
rights, trademarks, trademark rights, trade names, trade name rights,
copyrights, licenses and other intellectual property to conduct its business
without conflict with any patent, patent right, trademark, trademark right,
trade name, copyright, license or other intellectual property of any other
Person.
-21-
<PAGE>
4.17 Environmental and Safety and Health Matters. Except as disclosed
--------------------------------------------
on Schedule 4.17 attached hereto: (a) the operations of Borrower and each
--------------
Subsidiary comply with all applicable Environmental Laws and all applicable
Occupational Safety and Health Laws, the violation or noncompliance with which
could reasonably be expected to have a Material Adverse Effect; (b) none of the
operations of Borrower or any Subsidiary are subject to any Environmental Claim
or any judicial, governmental, regulatory or administrative proceeding alleging
the violation of any Occupational Safety and Health Law, which, if determined
adversely against Borrower or any Subsidiary, could reasonably be expected to
have a Material Adverse Effect; (c) none of the operations of Borrower or any
Subsidiary is the subject of any Federal or state investigation evaluating
whether any remedial action is needed to respond to any Release of Hazardous
Substances or any unsafe or unhealthful condition at any premises owned, leased
or operated by Borrower or such Subsidiary, which, if determined adversely to
Borrower or any Subsidiary, could reasonably be expected to have a Material
Adverse Effect; (d) neither Borrower nor any Subsidiary has filed any notice
under any Environmental Law or Occupational Safety and Health Law indicating or
reporting (i) any past or present spillage, leakage or Release into the
environment of, or treatment, storage or disposal of, any Hazardous Substance or
(ii) any unsafe or unhealthful condition at any premises owned, leased or
operated by Borrower or such Subsidiary; and (e) neither Borrower nor any
Subsidiary has any material contingent liability in connection with (i) any
spillage, disposal or Release into the environment of, or otherwise with respect
to, any Hazardous Substances or (ii) any unsafe or unhealthful condition at any
premises owned, leased or operated by Borrower or such Subsidiary.
4.18 Investments. Neither Borrower nor any Subsidiary has any
-----------
Restricted Investments.
4.19 No Default. No Default or Event of Default under this Agreement
-----------
has occurred and is continuing. There is no existing default or event of
default under or with respect to any indenture, contract, agreement, lease or
other instrument to which Borrower or any Subsidiary is a party or by which any
Property of Borrower or any Subsidiary is bound or affected, a default under
which could reasonably be expected to have a Material Adverse Effect. Borrower
and each Subsidiary has and is in full compliance with and in good standing with
respect to all governmental and regulatory permits, licenses, certificates,
consents and franchises necessary to continue to conduct its business as
previously conducted by it and to own or lease and operate its Properties as now
owned or leased by it, the failure to have or noncompliance with which could
reasonably be expected to have a Material Adverse Effect, and, to the best of
Borrower's knowledge, none of said permits, certificates, consents or franchises
contain any term, provision, condition or limitation more burdensome than such
as are generally applicable to Persons engaged in the same or similar business
as Borrower or such Subsidiary, as the case may be. Neither Borrower nor any
Subsidiary of Borrower is in violation of any applicable statute, law, rule,
regulation or ordinance of the United States of America, of any state, city,
town, municipality, county or of any other jurisdiction, or of any agency
thereof, a violation of which could reasonably be expected to have a Material
Adverse Effect.
4.20 Government Contracts. Neither Borrower nor any Subsidiary is a
---------------------
party to or bound by any supply or purchase agreements with the Federal
government or any state or local government or any agency thereof, the
termination or cancellation of which could reasonably be expected to have a
Material Adverse Effect.
4.21 Purchase and Other Commitments and Outstanding Bids. No material
-----------------------------------------------------
purchase or other commitment of Borrower or any Subsidiary is in excess of the
normal, ordinary and usual requirements of its business, or was made at any
price in excess of the then current market price, or, to the best of Borrower's
knowledge, contains terms and conditions more onerous than those usual and
customary in the applicable industry. There is no material outstanding bid,
sales proposal, contract or unfilled order of Borrower or any Subsidiary which
(a) will, or could if accepted, require Borrower or any Subsidiary to supply
goods or services at a cost to Borrower or any Subsidiary in excess of the
revenues to be received therefor or (b) quotes prices which do not include a
markup over reasonably estimated costs consistent with past markups on similar
business based on market conditions current at that time.
-22-
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4.22 Disclosure. Neither this Agreement nor any of the Exhibits or
----------
Schedules hereto nor any certificate or other data furnished to Lender in
writing by or on behalf of Borrower or any Subsidiary in connection with the
transactions contemplated by this Agreement contains any untrue or incorrect
statement of a material fact or omits to state a material fact necessary to make
the statements contained herein or therein not misleading. To the best
knowledge of Borrower, there is no fact peculiar to Borrower or any Subsidiary
which presently has a Material Adverse Effect or in the future (so far as
Borrower can now foresee) could reasonably be expected to have a Material
Adverse Effect, which has not heretofore been disclosed in writing by Borrower
to Lender.
SECTION5. COVENANTS.
- --------------------
5.01 Affirmative Covenants of Borrower. Borrower covenants and agrees
----------------------------------
that, so long as Lender has any obligation to make any Loan under this
Agreement, any Letter of Credit remains outstanding or any of the Borrower's
Obligations remain unpaid:
(a) Information. Borrower will deliver or cause to be delivered to
-----------
Lender:
(i) as soon as available and in any event within ninety (90) days
after the end of each fiscal year of Parent, consolidated and consolidating
balance sheets of Parent and its Subsidiaries as of the end of such fiscal year
and the related consolidated and consolidating statements of income, retained
earnings and cash flows for such fiscal year, setting forth in each case, in
comparative form, the figures for the previous fiscal year, all such financial
statements to be prepared in accordance with GAAP consistently applied and
reported on by and accompanied by the unqualified opinion of KPMG LLP or other
independent certified public accountants selected by Parent and reasonably
acceptable to Lender;
(ii) as soon as available and in any event within forty-five (45)
days after the end of each fiscal quarter of each fiscal year of Parent,
consolidated and consolidating balance sheets of Parent and its Subsidiaries as
of the end of such fiscal month and the related consolidated and consolidating
statements of income, retained earnings and cash flows for such fiscal quarter
and for the portion of Parent's fiscal year ended at the end of such fiscal
quarter, setting forth in each case in comparative form, the figures for the
corresponding fiscal quarter and the corresponding portion of Parent's previous
fiscal year, all in reasonable detail and satisfactory in form to Lender and
certified (subject to normal year-end adjustments and footnote disclosures) as
to fairness of presentation, GAAP and consistency by the President or the chief
financial officer of Parent;
(iii) as soon as available and in any event within forty-five (45)
days after the end of each fiscal quarter of each fiscal year of Borrower,
consolidated and consolidating balance sheets of Borrower and its Subsidiaries
as of the end of such fiscal month and the related consolidated and
consolidating statements of income, retained earnings and cash flows for such
fiscal quarter and for the portion of Borrower's fiscal year ended at the end of
such fiscal quarter, setting forth in each case in comparative form, the figures
for the corresponding fiscal quarter and the corresponding portion of Borrower's
previous fiscal year, all in reasonable detail and satisfactory in form to
Lender and certified (subject to normal year-end adjustments and footnote
disclosures) as to fairness of presentation, GAAP and consistency by the
President or the chief financial officer of Borrower;
(iv) simultaneously with the delivery of each set of financial
statements referred to in Sections 5.01(a)(i), (ii) and (iii) above, a
certificate of the chief financial officer of Parent and Borrower (or such other
officer of Parent and Borrower as shall be reasonably acceptable to Lender) in
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the form attached hereto as Exhibit D and incorporated herein by reference,
---------
accompanied by supporting financial work sheets where appropriate, (A)
evidencing Parent's and Borrower's compliance with the financial covenants
contained in Section 5.01(o) of this Agreement and the financial covenants
contained in the Guaranty, (B) stating whether there exists on the date of such
certificate any Default or Event of Default and, if any Default or Event of
Default then exists, setting forth the details thereof and the action which
Parent or Borrower is taking or proposes to take with respect thereto and (C)
certifying that all of the representations and warranties made by Parent,
Borrower and/or any other Obligor in this Agreement and/or in any other
Transaction Document are true and correct in all material respects on and as of
the date of such certificate as if made on and as of the date of such
certificate;
(v) promptly upon receipt thereof, any reports (including, without
limitation, any management letters and/or reports) submitted to Parent, Borrower
or any Subsidiary (other than reports previously delivered pursuant to Sections
5.01(a)(i), (ii) and (iii) above) by independent accountants in connection with
any annual, interim or special audit made by them of the books of Parent,
Borrower or any Subsidiary;
(vi) within fifteen (15) days after the end of each fiscal month of
Borrower, (A) an Accounts Trial Balance of Borrower indicating which Accounts
are current, up to 30, 30 to 60, 60 to 90, 90 to 120 and 120 days or more past
the invoice date and including, if requested by Lender, a listing of the names
and addresses of all applicable Account Debtors and (B) upon request of Lender,
a summary of accounts payable of Borrower showing which accounts payable are
current, up to 30, 30 to 60, 60 to 90 and 90 days or more past due and
including, if requested by Lender, a listing of the names and addresses of
applicable creditors, all in form and detail reasonably satisfactory to Lender
and certified as being true, correct and complete in all material respects by
the President or the chief financial officer of Borrower;
(vii) at such intervals as Lender may request, such information and
reports regarding Borrower's Inventory as Lender may from time to time request,
all in form and detail reasonably satisfactory to Lender and certified as being
true, correct and complete by the President or the chief financial officer of
Borrower;
(viii) as soon as available and in any event within thirty (30) days
after the beginning of each fiscal year of Parent, consolidated and
consolidating balance sheet, income statement and cash flow projections for
Parent and its Subsidiaries for such fiscal year on a month-by-month basis, all
in form and detail reasonably acceptable to Lender; and
(ix) as soon as available and in any event within thirty (30) days
after the beginning of each fiscal year of Borrower, consolidated and
consolidating balance sheet, income statement and cash flow projections for
Borrower and its Subsidiaries for such fiscal year on a month-by-month basis,
all in form and detail reasonably acceptable to Lender; and
(x) with reasonable promptness, such further information regarding
the business, affairs and financial condition of Borrower or any Subsidiary as
Lender may from time to time reasonably request.
Lender is hereby authorized to deliver a copy of any financial statement or
other information made available by Parent, Borrower or any Subsidiary to any
regulatory authority having jurisdiction over Lender, pursuant to any request
therefor.
(b) Payment of Indebtedness. Borrower will, and it will cause each
-------------------------
Subsidiary to, (i) pay and discharge any and all Indebtedness payable or
Guaranteed by Borrower or such Subsidiary, as the case may be, and any interest
or premium thereon, when due (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise) in accordance with the agreement,
document or instrument relating to such Indebtedness or Guarantee and (ii)
faithfully perform, observe and discharge all covenants, conditions and
obligations which are imposed upon Borrower or such Subsidiary, as the case may
be, by any and all agreements, documents, instruments and indentures evidencing,
securing or otherwise relating to such Indebtedness or Guarantee.
-24-
<PAGE>
(c) Maintenance of Books and Records; Consultations and Inspections.
------------------------------------------------------------------
Borrower will, and it will cause each Subsidiary to, maintain books and records
sufficient to permit the preparation of financial statements in accordance with
GAAP and in which true, correct and complete entries shall be made of all
dealings and transactions in relation to its business and activities. Borrower
will, and it will cause each Subsidiary to, permit Lender (and any Person
appointed by Lender to whom Borrower does not reasonably object) to discuss the
affairs, finances and accounts of Borrower and each Subsidiary with the officers
of Borrower and each Subsidiary and their independent public accountants, all at
such reasonable times and as often as Lender may from time to time reasonably
request. Borrower will also permit, and will cause each Subsidiary to permit,
inspection of its Properties, books and records by the Lender during normal
business hours and at other reasonable times. Borrower will reimburse Lender
upon demand for all reasonable costs and expenses incurred by Lender in
connection with any such inspection conducted by Lender while any Default or
Event of Default under this Agreement has occurred and is continuing. Borrower
irrevocably authorizes Lender to communicate directly with its independent
public accountants and irrevocably authorizes and directs such accountants to
disclose to Lender any and all information with respect to the business and
financial condition of Borrower and each Subsidiary as Lender may from time to
time reasonably request in writing.
(d) Payment of Taxes. Borrower will, and it will cause each Subsidiary
----------------
to, duly file all Federal, state and local income tax returns and all other tax
returns and reports of Borrower or such Subsidiary, as the case may be, which
are required to be filed and duly pay and discharge promptly all taxes,
assessments and other governmental charges imposed upon it or any of its
Property; provided, however, that neither Borrower nor any Subsidiary shall be
required to pay any such tax, assessment or other governmental charge the
payment of which is being contested in good faith and by appropriate proceedings
being diligently conducted and for which adequate reserves in accordance with
GAAP have been provided, except that Borrower or such Subsidiary, as the case
may be, shall pay or cause to be paid all such taxes, assessments and
governmental charges forthwith upon the commencement of proceedings to foreclose
any Lien which is attached as security therefor, unless such foreclosure is
stayed by the filing of an appropriate bond in a manner reasonably satisfactory
to Lender.
(e) Payment of Claims. Borrower will, and it will cause each
-------------------
Subsidiary to, promptly pay and discharge (i) all trade accounts payable in
accordance with its usual and customary business practices as in effect on the
date of this Agreement (but in no event later than thirty (30) days after the
due date thereof) and (ii) all claims for work, labor or materials which if
unpaid might become a Lien upon any of its Property or assets; provided,
however, that neither Borrower nor any Subsidiary shall be required to pay any
such account payable or claim the payment of which is being contested in good
faith and by appropriate proceedings being diligently conducted and for which
adequate reserves in accordance with GAAP have been provided, except that
Borrower or such Subsidiary, as the case may be, shall pay or cause to be paid
all such accounts payable and claims forthwith upon the commencement of
proceedings to foreclose any Lien which is attached as security therefor, unless
such foreclosure is stayed by the filing of an appropriate bond in a manner
reasonably satisfactory to Lender.
(f) Corporate Existence. Borrower will, and it will cause each
--------------------
Subsidiary to, do all things necessary to (i) preserve and keep in full force
and effect at all times its corporate existence and all permits, licenses,
franchises and other rights material to its business and (ii) be duly qualified
to do business and be in good standing in all jurisdictions where the nature of
its business or its ownership of Property requires such qualification except for
those jurisdictions in which the failure to qualify or be in good standing could
not reasonably be expected to have a Material Adverse Effect.
(g) Maintenance of Property. Borrower will, and it will cause each
-------------------------
Subsidiary to, at all times, preserve and maintain all of the Property used or
useful in the conduct of its business in good condition, working order and
repair, ordinary wear and tear excepted.
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<PAGE>
(h) Compliance with Laws, Regulations, Etc. Borrower will, and it will
---------------------------------------
cause each Subsidiary to, comply with any and all laws, ordinances and
governmental and regulatory rules and regulations to which Borrower or such
Subsidiary, as the case may be, is subject (including, without limitation, all
Occupational Safety and Health Laws and all Environmental Laws) and obtain any
and all licenses, permits, franchises and other governmental and regulatory
authorizations necessary to the ownership of its Properties or to the conduct of
its business, which violation or failure to obtain could reasonably be expected
to have a Material Adverse Effect.
(i) Environmental Matters. Borrower shall give Lender prompt written
----------------------
notice of (i) any Environmental Claim or any other action or investigation with
respect to the existence or potential existence of any Hazardous Substances
instituted or threatened with respect to Borrower or any Subsidiary or any of
the Properties or facilities owned, leased or operated by Borrower or any
Subsidiary which, if determined adversely to Borrower or any Subsidiary, could
reasonably be expected to have a Material Adverse Effect and (ii) any condition
or occurrence on any of the Properties or facilities owned, leased or operated
by Borrower or any Subsidiary which constitutes a violation of any Environmental
Laws or which gives rise to a reporting obligation or requires removal or
remediation under any Environmental Laws. Within thirty (30) days after the
giving of any such notice, Borrower shall deliver to Lender Borrower's plan
with respect to removal or remediation and Borrower agrees to take all action
which is reasonably necessary in connection with such action, investigation,
condition or occurrence in accordance with such plan with due diligence and to
complete such removal or remediation as promptly as possible and in all events
within the time required by any Environmental Laws or any other applicable law,
rule or regulation. Borrower shall promptly provide Lender with copies of all
documentation relating thereto, and such other information with respect to
environmental matters as Lender may request from time to time.
(j) ERISA Compliance. If Borrower, any Subsidiary or any ERISA
-----------------
Affiliate shall have any Pension Plan, Borrower, such Subsidiary or such ERISA
Affiliate, as the case may be, shall comply with all requirements of ERISA
relating to such Pension Plan. Without limiting the generality of the
foregoing, Borrower will not, and it will not cause or permit any Subsidiary or
any ERISA Affiliate to:
(i) permit any Pension Plan maintained by Borrower, any Subsidiary or
any ERISA Affiliate to engage in any nonexempt "prohibited transaction," as such
term is defined in Section 4975 of the Code;
(ii) permit any Pension Plan maintained by Borrower, any
Subsidiary or any ERISA Affiliate to incur any "accumulated funding deficiency",
as such term is defined in Section 302 of ERISA, 29 U.S.C. 1082, whether or
not waived;
(iii) terminate any Pension Plan in a manner which could result in
the imposition of a Lien on any Property of Borrower, any Subsidiary or any
ERISA Affiliate pursuant to Section 4068 of ERISA, 29 U.S.C. 1368; or
(iv) take any action which would constitute a complete or partial
withdrawal from a Multi-Employer Plan within the meaning of Sections 4203 or
4205 of Title IV of ERISA.
Notwithstanding any provision contained in this Section 5.01(j) to the
contrary, an act by Borrower or any Subsidiary shall not be deemed to constitute
a violation of this Section 5.01(j) unless the Lender determines in good faith
that said action, individually or cumulatively with other acts of Borrower and
its Subsidiaries, has or could reasonably be expected to have a Material Adverse
Effect.
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<PAGE>
(k) Notices. Borrower will notify Lender in writing of any of the
-------
following within three (3) Business Days after any officer of Borrower has
actual knowledge thereof, describing the same and, if applicable, the steps
being taken by the Person(s) affected with respect thereto:
(i) the occurrence of any Default or Event of Default under this
Agreement;
(ii) the occurrence of any default or event of default by
Borrower, any other Obligor or any Subsidiary under any note, indenture, loan
agreement, mortgage, deed of trust, security agreement, lease or other similar
agreement, document or instrument to which Borrower, any other Obligor or any
Subsidiary, as the case may be, is a party or by which it is bound or to which
it is subject;
(iii) the institution of any litigation, arbitration proceeding or
governmental or regulatory proceeding affecting Borrower, any other Obligor or
any Subsidiary, whether or not considered to be covered by insurance, in which
the prayer or claim for relief seeks recovery of an amount in excess of
$100,000.00 (or, if no dollar amount is specified in the prayer or claim for
relief, in which there is a reasonable likelihood of recovery of an amount in
excess of $100,000.00) or any form of equitable relief;
(iv) the entry of any judgment or decree against Borrower, any
other Obligor or any Subsidiary;
(v) the occurrence of a Reportable Event with respect to any
Pension Plan; the filing of a notice of intent to terminate a Pension Plan by
Borrower, any ERISA Affiliate or any Subsidiary; the institution of proceedings
to terminate a Pension Plan by the PBGC or any other Person; the withdrawal in a
"complete withdrawal" or a "partial withdrawal" as defined in Sections 4203 and
4205, respectively, of ERISA by Borrower, any ERISA Affiliate or any Subsidiary
from any Multi-Employer Plan; or the incurrence of any material increase in the
contingent liability of Borrower or any Subsidiary with respect to any "employee
welfare benefit plan" as defined in Section 3(1) of ERISA which covers retired
employees and their beneficiaries;
(vi) the occurrence of any material adverse change in the
Properties, assets, liabilities, business, operations, prospects, income or
condition (financial or otherwise) of Borrower, any other Obligor or any
Subsidiary;
(vii) any change in the name of Borrower, any other Obligor or any
Subsidiary;
(viii) any proposed opening, closing or other change of any place
of business of Borrower, any other Obligor or any Subsidiary;
(ix) any material change in Borrower's or any Subsidiary's line(s)
of business;
(x) the occurrence of any Change of Control Event; and
(xi) any notices required to be provided pursuant to other
provisions of this Agreement and notice of the occurrence of such other events
as Lender may from time to time reasonably specify.
(l) Insurance. Borrower will, and it will cause each Subsidiary to,
---------
insure all of its Property of the character usually insured by corporations
engaged in the same or similar businesses similarly situated, against loss or
damage of the kind customarily insured against by such corporations, unless
higher limits or coverage are reasonably required in writing by Lender, and
carry adequate liability insurance and other insurance of a kind and in an
amount generally carried by corporations engaged in the same or similar
businesses similarly situated, unless higher limits or coverage are reasonably
required in writing by Lender. All insurance required by this Section 5.01(l)
shall be with insurers rated A-XI or better by A.M Best Company (or accorded a
similar rating by another nationally or internationally recognized insurance
rating agency of similar standing if A.M. Best Company is not then in the
business of rating insurers or rating foreign insurers) or such other insurers
as may from time to time be reasonably acceptable to Lender. All such insurance
may be subject to reasonable deductible amounts. UNLESS BORROWER PROVIDES
EVIDENCE OF THE INSURANCE COVERAGE REQUIRED UNDER THIS AGREEMENT AND THE OTHER
TRANSACTION DOCUMENTS, LENDER MAY PURCHASE INSURANCE AT BORROWER'S EXPENSE TO
PROTECT LENDER'S INTEREST IN THE COLLATERAL. THIS INSURANCE MAY, BUT NEED NOT,
PROTECT BORROWER'S INTERESTS. THE COVERAGE THAT LENDER PURCHASES MAY NOT PAY
ANY CLAIM THAT BORROWER MAY MAKE OR ANY CLAIM THAT IS MADE AGAINST BORROWER IN
CONNECTION WITH THE COLLATERAL. BORROWER MAY LATER CANCEL ANY INSURANCE
PURCHASED BY LENDER, BUT ONLY AFTER PROVIDING EVIDENCE THAT BORROWER HAS
OBTAINED INSURANCE AS REQUIRED BY THIS AGREEMENT AND THE OTHER TRANSACTION
DOCUMENTS. IF LENDER PURCHASES INSURANCE FOR THE COLLATERAL, BORROWER WILL BE
RESPONSIBLE FOR THE COSTS OF THAT INSURANCE, INCLUDING THE INSURANCE PREMIUM,
INTEREST AND ANY OTHER CHARGES LENDER MAY IMPOSE IN CONNECTION WITH THE
PLACEMENT OF INSURANCE, UNTIL THE EFFECTIVE DATE OF THE CANCELLATION OR
EXPIRATION OF THE INSURANCE. THE COSTS OF THE INSURANCE MAY BE ADDED TO THE
BORROWER'S OBLIGATIONS. THE COSTS OF THE INSURANCE MAY BE MORE THAN THE COST OF
INSURANCE BORROWER MAY BE ABLE TO OBTAIN ON ITS OWN.
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<PAGE>
(m) Further Assurances. Borrower will execute and deliver to Lender,
-------------------
at any time and from time to time, any and all further agreements, documents and
instruments, and take any and all further actions which may be required under
applicable law, or which Lender may from time to time reasonably request, in
order to effectuate the transactions contemplated by this Agreement and the
other Transaction Documents.
(n) Accountant. Borrower will give Lender prompt notice of any change
----------
of Borrower's independent certified public accountants and a statement of the
reasons for such change. Borrower shall at all times utilize independent
certified public accountants reasonably acceptable to Lender.
(o) Financial Covenants.
--------------------
(i) Maximum Consolidated Debt to Consolidated EBITDAR Ratio.
-------------------------------------------------------------
Borrower will have a Consolidated Debt to Consolidated EBITDAR Ratio of (A) not
more than 5.0 to 1.0 as of December 31, 2000 with respect to the fiscal year (or
short period) of Borrower ending December 31, 2000 and (B) not more than the
ratio set forth below as of the last day of the fiscal quarter period of
Borrower ending on the applicable date set forth below:
Date Ratio
---- -----
March 31, 2001 4.0 to 1.0
June 30, 2001 4.0 to 1.0
September 30, 2001 4.0 to 1.0
December 31, 2001 4.0 to 1.0
March 31, 2002 3.0 to 1.0
June 30, 2002 3.0 to 1.0
September 30, 2002 3.0 to 1.0
December 30, 2002 3.0 to 1.0
Each March 31, June 30,
September 30 and December 31
thereafter 2.5 to 1.0
(ii) Minimum Consolidated Fixed Charges Coverage Ratio. Borrower
--------------------------------------------------
will have a Consolidated Fixed Charges Coverage Ratio of (A) at least 1.25 to
1.0 for the fiscal year (or short period) of Borrower ending December 31, 2000
and (B) at least 1.25 for each period of four (4) consecutive fiscal quarters of
Borrower commencing with the four (4) consecutive fiscal quarter period ending
March 31, 2001.
5.02 Negative Covenants of Borrower. Borrower covenants and agrees
---------------------------------
that, so long as Lender has any obligation to make any Revolving Credit under
this Agreement, any Letter of Credit remains outstanding or any of the
Borrower's Obligations remain unpaid, unless the prior written consent of Lender
is obtained:
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(a) Limitation on Indebtedness. Borrower will not, and it will not
----------------------------
cause or permit any Subsidiary to, incur or be obligated on any Indebtedness,
either directly or indirectly, by way of Guarantee, suretyship or otherwise,
other than:
(i) the Borrower's Obligations;
(ii) unsecured trade accounts payable and other normal accruals
incurred in the ordinary course of business which are not more than thirty (30)
days past due (provided, however, that neither Borrower nor any Subsidiary shall
be required to pay any such account payable or other accrual the payment of
which is being contested in good faith and by appropriate proceedings being
diligently conducted and for which adequate reserves in accordance with GAAP
have been provided, except that Borrower or such Subsidiary, as the case may be,
shall pay or cause to be paid all such accounts payable and accruals forthwith
upon the commencement of proceedings to foreclose any Lien which is attached as
security therefor, unless such foreclosure is stayed by the filing of an
appropriate bond in a manner reasonably satisfactory to Lender);
(iii) Indebtedness existing as of the date of this Agreement and
listed on Schedule 4.10 attached hereto (without giving effect to any amendments
-------------
to Schedule 4.10 after the date of this Agreement);
(iv) Subordinated Indebtedness;
(v) purchase money Indebtedness incurred solely with respect to
and in the amount of a Permitted Lien under subsection (g) of the definition of
"Permitted Lien"; and
(vi) other Indebtedness not otherwise permitted by this Section
5.02(a) in an amount not to exceed $25,000.00 in the aggregate at any one time
outstanding for Borrower and all of its Subsidiaries on a combined basis.
(b) Limitation on Liens. Borrower will not, and will not cause or
---------------------
permit any Subsidiary to, create, incur or assume, or suffer to be incurred or
to exist, any Lien on any of its or their Property or assets, whether now owned
or hereafter acquired, or upon any income or profits therefrom, except for
Permitted Liens.
(c) Consolidation, Merger, Sale of Assets, Etc.
------------------------------------------------
(i) Borrower will not, and it will not cause or permit any Subsidiary
to, directly or indirectly merge or consolidate with or into any other Person or
permit any other Person to merge into or with or consolidate with it.
(ii) Borrower will not, and will not cause or permit any Subsidiary
to, (A) sell, assign, lease, transfer, abandon or otherwise dispose of any of
its Property (including, without limitation, any shares of capital stock of a
Subsidiary owned by Borrower or another Subsidiary) or (B) issue, sell or
otherwise dispose of any shares of capital stock of any Subsidiary, except for
(1) sales of Inventory in the ordinary course of business (which does not
include a transfer of Inventory in partial or total satisfaction of any
Indebtedness), (2) sales of fixed assets which are obsolete, worn-out or
otherwise not used or useable in the ordinary course of its business, so long as
the net proceeds thereof are used solely to purchase replacement fixed assets or
assets of comparable quality or to pay or prepay (y) in the case of assets sales
by Borrower, Debt secured by Permitted Liens encumbering the assets being sold
or the Borrower's Obligations and (z) in the case of asset sales by a
Subsidiary, Debt of such Subsidiary and (3) other sales of fixed assets which
are not used or useable in the ordinary course of its business, so long as the
gross sale proceeds from all such asset sales by Borrower and all of its
Subsidiaries on a combined basis does not exceed $100,000.00 in the aggregate in
any fiscal year.
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(d) Sale and Leaseback Transactions. Borrower will not, and it will not
---------------------------------
cause or permit any Subsidiary to, enter into any arrangement, directly or
indirectly, whereby Borrower or such Subsidiary shall in one or more related
transactions sell, transfer or otherwise dispose of any Property owned by
Borrower or such Subsidiary to any Person and then rent or lease, as lessee,
such Property or any part thereof for a period or periods which in the aggregate
would exceed twelve (12) months from the date of commencement of the lease term.
(e) Sale or Discount of Accounts. Borrower will not, and it will not
-------------------------------
cause or permit any Subsidiary to, sell or discount (other than prompt payment
discounts granted in the ordinary course of business) any of its notes or
accounts receivable or chattel paper.
(f) Transactions with Affiliates. Borrower will not, and it will not
------------------------------
cause or permit any Subsidiary to, enter into or be a party to any transaction
or arrangement with any Affiliate (including, without limitation, the purchase
from, sale to or exchange of Property with, or the rendering of any service by
or for, any Affiliate), except in the ordinary course of business and pursuant
to the reasonable requirements of Borrower's or such Subsidiary's business and
upon fair and reasonable terms no less favorable to Borrower or such Subsidiary
than would be obtained in a comparable arm's-length transaction with a Person
not an Affiliate.
(g) Changes in Nature of Business. Borrower will not, and it will not
------------------------------
cause or permit any Subsidiary to, engage in any business if, as a result, the
general nature of the business which would then be engaged in by Borrower and
its Subsidiaries, considered as a whole, would be substantially changed from the
general nature of the business engaged in by Borrower and its Subsidiaries as of
the date of this Agreement, which is the business of emergency air medical
transportation services.
(h) Fiscal Year. Borrower will not, and it will not cause or permit
------------
any Subsidiary to, change its fiscal year.
(i) Stock Redemptions and Distributions. Borrower will not, and it
--------------------------------------
will not cause or permit any Subsidiary to, declare or incur any liability to
make any Distribution in respect of the capital stock of Borrower or the capital
stock of such Subsidiary, as the case may be, except that (i) each wholly-owned
Subsidiary shall be permitted to declare and pay cash dividends on their
respective capital stock and (ii) so long as no Default or Event of Default
under this Agreement has occurred and is continuing or is created by or would
result from the payment of such dividends, during each fiscal year, Borrower
shall be permitted to declare and pay cash dividends on its capital stock in an
aggregate amount not to exceed Borrower's after-tax net income for the
immediately preceding fiscal year of Borrower.
(j) Pension Plans. Borrower will not, and it will not cause or permit
--------------
any Subsidiary to, (a) permit any condition to exist in connection with any
Pension Plan which might constitute grounds for the PBGC to institute
proceedings to have such Pension Plan terminated or a trustee appointed to
administer such Pension Plan or (b) engage in, or permit to exist or occur, any
other condition, event or transaction with respect to any Pension Plan which
could result in the incurrence by Borrower, any Subsidiary or any ERISA
Affiliate of any material liability, fine or penalty.
(k) Subordinated Indebtedness. Borrower will not make any payment of
--------------------------
principal, interest or other amount on or with respect to any of its
Subordinated Indebtedness to the extent prohibited by the subordination
provisions governing the same.
(l) Restricted Investments; Acquisitions. Borrower will not, and it
--------------------------------------
will not cause or permit any Subsidiary to, directly or indirectly, make any
Restricted Investments. Borrower will not, and it will not cause or permit any
Subsidiary to, directly or indirectly, make any Acquisitions.
(m) Subsidiaries. Borrower will not, and it will not cause or permit
------------
any Subsidiary to, create, form or acquire any Subsidiary. If Borrower or any
Subsidiary creates, forms or acquires any Subsidiary on or after the date of
this Agreement, Borrower or such Subsidiary, as the case may be, will,
contemporaneously with the creation, formation or acquisition of such
Subsidiary, (i) grant Lender a first priority perfected security interest in and
lien on all of the issued and outstanding shares of capital stock of such
Subsidiary and (ii) cause such Subsidiary to (A) guaranty the payment and
performance of all of the Borrower's Obligations and (B) secure said guaranty
with a first priority perfected security interest in and lien on all of the
accounts, inventory, documents, instruments, chattel paper, general intangibles,
goods, machinery, equipment, investment property, other tangible and intangible
personal property and books and records of such Subsidiary and the proceeds
thereof, all pursuant to documentation (including, without limitation, an
amendment to this Agreement if requested by Lender) in form and substance
reasonably satisfactory to Lender.
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(n) Limitations on Restrictive Agreements. Borrower will not, and it
----------------------------------------
will not cause or permit any Subsidiary to, enter into, or permit to exist, any
agreement with any Person which prohibits or limits the ability of Borrower or
such Subsidiary, as the case may be, to (i) pay dividends or make other
distributions or prepay any Indebtedness owed to Borrower and/or any Subsidiary,
(ii) make loans or advances to Borrower and/or any Subsidiary, (iii) transfer
any of its Properties to Borrower and/or any Subsidiary (other than with respect
to Property subject to Liens permitted by clauses (g) or (h) of the definition
of Permitted Liens) or (iv) create, incur, assume or suffer to exist any Lien
upon any of its Property or revenues, whether now owned or hereafter acquired
(other than with respect to Property subject to Liens permitted by clauses (g)
or (h) of the definition of Permitted Liens); provided that the foregoing shall
not apply to restrictions in effect on the date of this Agreement contained in
agreements governing Debt outstanding on the date of this Agreement and listed
on Schedule 5.02(q) attached hereto and, if such Debt is renewed, extended or
-----------------
refinanced, restrictions in the agreements governing the renewed, extended or
refinanced Debt (and successive renewals, extensions and refinancings thereof)
if such restrictions are no more restrictive in any material respect than those
contained in the agreements governing the Debt being renewed, extended or
refinanced.
5.03 Use of Proceeds. Borrower covenants and agrees that (a) the
-----------------
proceeds of the Loans will be used solely for the working capital and general
corporate purposes of Borrower, (b) no part of the proceeds of any Loan will be
used in violation of any applicable law, rule or regulation and (c) no part of
the proceeds of any Loan will be used, whether directly or indirectly, and
whether immediately, incidentally or ultimately (i) to purchase or carry margin
stock or to extend credit to others for the purpose of purchasing or carrying
margin stock, or to refund or repay indebtedness originally incurred for such
purpose or (ii) for any purpose which entails a violation of, or which is
inconsistent with, the provisions of any of the Regulations of The Board of
Governors of the Federal Reserve System, including, without limitation,
Regulations U, T or X thereof, as amended.
SECTION6. EVENTS OF DEFAULT.
- ------------------------------
If any of the following (each of the following herein sometimes called an
"Event of Default") shall occur and be continuing:
6.01 Borrower shall fail to pay any of the Borrower's Obligations
constituting principal as and when the same shall become due and payable,
whether by reason of demand, maturity, acceleration or otherwise;
6.02 Borrower shall fail to pay any of the Borrower's Obligations
constituting interest, fees or other amounts (other than principal) within five
(5) Business Days after the date the same shall first become due and payable,
whether by reason of demand, maturity, acceleration or otherwise; or
6.03 Any representation or warranty of Borrower made in this Agreement,
in any other Transaction Document to which Borrower is a party or in any
certificate, agreement, instrument or statement furnished or made or delivered
pursuant hereto or thereto or in connection herewith or therewith, shall prove
to have been untrue or incorrect in any material respect when made or effected;
6.04 Borrower shall fail to perform or observe any term, covenant or
provision contained in Section 2.01(d), Section 5.01(c), Section 5.01(f),
Section 5.01(k), Section 5.01(l), Section 5.01(m), Section 5.01(o), Section 5.02
or Section 5.03;
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<PAGE>
6.05 Borrower shall fail to perform or observe any other term, covenant
or provision contained in this Agreement (other than those specified in Sections
6.01, 6.02 or 6.03 above) and any such failure shall remain unremedied for
fifteen (15) days after the earlier of (a) written notice of default is given to
Borrower by Lender or (b) any officer of Borrower obtaining knowledge of such
default;
6.06 This Agreement or any of the other Transaction Documents shall at
any time for any reason (other than the termination of this Agreement or such
other Transaction Document, as the case may be, in accordance with its terms)
cease to be in full force and effect or shall be declared to be null and void by
a court of competent jurisdiction, or if the validity or enforceability thereof
shall be contested or denied by Borrower and/or any other Obligor, or if the
transactions completed hereunder or thereunder shall be contested by Borrower
and/or any other Obligor or if Borrower and/or any other Obligor shall deny that
it has any further liability or obligation hereunder or thereunder;
6.07 Borrower, any other Obligor or any Subsidiary shall (a)
voluntarily commence any proceeding or file any petition seeking relief under
Title 11 of the United States Code or any other Federal, state or foreign
bankruptcy, insolvency, receivership, liquidation or similar law, (b) consent to
the institution of, or fail to contravene in a timely and appropriate manner,
any such proceeding or the filing of any such petition, (c) apply for or consent
to the appointment of a receiver, trustee, custodian, sequestrator or similar
official of itself or of a substantial part of its Property or assets, (d) file
an answer admitting the material allegations of a petition filed against itself
in any such proceeding, (e) make a general assignment for the benefit of
creditors, (f) become unable, admit in writing its inability or fail generally
to pay its debts as they become due or (g) take any corporate or other action
for the purpose of effecting any of the foregoing;
6.08 An involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking (a) relief
in respect of Borrower, any other Obligor or any Subsidiary, or of a substantial
part of the Property or assets of Borrower, any other Obligor or any Subsidiary,
under Title 11 of the United States Code or any other Federal, state or foreign
bankruptcy, insolvency, receivership, liquidation or similar law, (b) the
appointment of a receiver, trustee, custodian, sequestrator or similar official
of Borrower, any other Obligor or any Subsidiary or of a substantial part of the
Property or assets of Borrower, any other Obligor or any Subsidiary or (c) the
winding-up or liquidation of Borrower, any other Obligor or any Subsidiary; and
such proceeding or petition shall continue undismissed for thirty (30)
consecutive days or an order or decree approving or ordering any of the
foregoing shall continue unstayed and in effect for thirty (30) consecutive
days;
6.09 Any "Event of Default" (as defined therein) shall occur under or
within the meaning of the Security Agreement;
6.10 Any "Event of Default" (as defined therein) shall occur under or
within the meaning of the Missouri Deed of Trust;
6.11 Any "Event of Default" (as defined therein) shall occur under or
within the meaning of the Assignment of Leases and Rents;
6.12 Any "Event of Default" (as defined therein) shall occur under or
within the meaning of the Illinois Mortgage;
6.13 Any default or event of default shall occur under or within the
meaning of the Guaranty;
6.14 The Guaranty shall at any time for any reason cease to be in full
force and effect or shall be declared to be null and void by a court of
competent jurisdiction, or if the validity or enforceability thereof shall be
contested or denied by any of the Guarantors, or if any of the Guarantors shall
deny that it, he or she has any further liability or obligation thereunder or if
any of the Guarantors shall fail to comply with or observe any of the terms,
provisions or conditions contained in the Guaranty;
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6.15 Borrower, any other Obligor or any Subsidiary shall be declared by
Lender to be in default on, or pursuant to the terms of, (a) any other present
or future obligation to, or agreement with or in favor of, Lender, including,
without limitation, any other loan, line of credit, revolving credit, guaranty
or letter of credit reimbursement obligation, or (b) any other present or future
agreement purporting to convey to Lender a Lien upon any Property of Borrower,
such other Obligor or such Subsidiary, as the case may be;
6.16 The occurrence of any default or event of default under or within
the meaning of any agreement, document or instrument evidencing, securing,
guaranteeing the payment of or otherwise relating to any Debt of Borrower, any
other Obligor or any Subsidiary (other than the Borrower's Obligations) having
an aggregate outstanding principal balance in excess of $25,000.00 which is not
cured or waived in writing within any applicable cure or grace period (if any);
6.17 Borrower, any other Obligor or any Subsidiary shall have a
judgment entered against it by a court having jurisdiction in the premises and
such judgment shall not be appealed in good faith (and execution of such
judgment stayed during such appeal) or satisfied by Borrower, such other Obligor
or such Subsidiary, as the case may be, within thirty (30) days after the entry
of such judgment;
6.18 The occurrence of a Reportable Event with respect to any Pension
Plan; the filing of a notice of intent to terminate a Pension Plan by Borrower,
any ERISA Affiliate or any Subsidiary; the institution of proceedings to
terminate a Pension Plan by the PBGC or any other Person; the withdrawal in a
"complete withdrawal" or a "partial withdrawal" as defined in Sections 4203 and
4205, respectively, of ERISA by Borrower, any ERISA Affiliate or any Subsidiary
from any Multi-Employer Plan; or the incurrence of any material increase in the
contingent liability of Borrower or any Subsidiary with respect to any "employee
welfare benefit plan" as defined in Section 3(1) of ERISA which covers retired
employees and their beneficiaries;
6.19 The institution by Borrower, any ERISA Affiliate or any Subsidiary
of steps to terminate any Pension Plan if, in order to effectuate such
termination, Borrower, such ERISA Affiliate or such Subsidiary, as the case may
be, would be required to make a contribution to such Pension Plan, or would
incur a liability or obligation to such Pension Plan, in excess of $25,000.00;
or the institution by the PBGC of steps to terminate any Pension Plan; or
6.20 The occurrence of any Change of Control Event;
THEN, and in each such event (other than an event described in Sections
6.07 or 6.08), Lender may declare that its obligation to make Loans under this
Agreement has terminated, whereupon such obligation of Lender shall be
immediately and forthwith terminated, and Lender may further declare the entire
outstanding principal balance of and all accrued and unpaid interest on the
Notes and all of the other Borrower's Obligations to be forthwith due and
payable, whereupon all of the unpaid principal balance of and all accrued and
unpaid interest on the Notes and all of such other Borrower's Obligations shall
become and be immediately due and payable, without presentment, demand, protest
or further notice of any kind, all of which are hereby expressly waived by
Borrower, and Lender may exercise any and all other rights and remedies which it
may have under any of the other Transaction Documents or under applicable law;
provided, however, that upon the occurrence of any event described in Sections
6.07 or 6.08, Lender's obligation to make Loans under this Agreement shall
automatically terminate and the entire outstanding principal balance of and all
accrued and unpaid interest on the Notes and all of the other Borrower's
Obligations shall automatically become immediately due and payable, without
presentment, demand, protest or further notice of any kind, all of which are
hereby expressly waived by Borrower, and Lender may exercise any and all other
rights and remedies which it may have under any of the other Transaction
Documents or under applicable law. If any Default or Event of Default under
this Agreement has occurred and is continuing, in addition to all of Lender's
other rights and remedies under this Agreement and the other Transaction
Documents and at law or in equity, Lender shall have the right, in its sole and
absolute discretion, to (a) reduce the amount of the Lender's Revolving Credit
Commitment, (b) create reserves and/or allowances against Unused Availability
and/or Eligible Accounts and/or (c) reduce the advance rates against Eligible
Accounts set forth in the definition of the Borrowing Base.
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SECTION7. GENERAL.
- ------------------
7.01 No Waiver. No failure or delay by Lender in exercising any right,
---------
remedy, power or privilege under this Agreement or under any other Transaction
Document shall operate as a waiver thereof; nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, remedy, power or privilege. The rights and remedies
provided in this Agreement and in the other Transaction Documents are cumulative
and not exclusive of any rights or remedies provided by law. Nothing contained
in this Agreement shall in any way affect the right of Lender to exercise any
statutory or common law right of banker's lien or set-off.
7.02 Right of Set-Off. Upon the occurrence and during the continuance
-----------------
of any Event of Default, Lender is hereby authorized at any time and from time
to time, without notice to Borrower (any such notice being expressly waived by
Borrower) and to the fullest extent permitted by law, to set-off and apply any
and all deposits (general or special, time or demand, provisional or final) at
any time held by Lender and any and all other indebtedness at any time owing by
Lender to or for the credit or account of Borrower against any and all of the
Borrower's Obligations irrespective of whether or not Lender shall have made any
demand hereunder or under any of the other Transaction Documents and although
such obligations may be contingent or unmatured. Lender agrees to promptly
notify Borrower after any such set-off and application made by Lender, provided,
however, that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of Lender under this Section 7.02 are
in addition to any other rights and remedies (including, without limitation,
other rights of set-off) which Lender may have. Nothing contained in this
Agreement or any other Transaction Document shall impair the right of Lender to
exercise any right of set-off or counterclaim it may have against Borrower and
to apply the amount subject to such exercise to the payment of indebtedness of
Borrower unrelated to this Agreement or the other Transaction Documents.
7.03 Cost and Expenses. Borrower agrees, whether or not any Loan is
-------------------
made under this Agreement, to pay Lender upon demand for (a) all out-of-pocket
costs and expenses and all Attorneys' Fees incurred by Lender in connection with
the preparation, documentation, negotiation, execution and/or administration of
this Agreement, the Notes and/or any of the other Transaction Documents, (b) all
recording, filing and search fees and expenses incurred by Lender in connection
with this Agreement and the other Transaction Documents, (c) all out-of-pocket
costs and expenses and all Attorneys' Fees incurred by Lender in connection with
the (i) the preparation, documentation, negotiation and execution of any
amendment, modification, extension, renewal or restatement of this Agreement,
the Notes and/or any of the other Transaction Documents, (ii) the preparation of
any waiver or consent under this Agreement and/or under any other Transaction
Document or (iii) any Default or Event of Default or alleged Default or Event of
Default hereunder, (d) if an Event of Default occurs, all out-of-pocket costs
and expenses and all Attorneys' Fees incurred by Lender in connection with such
Event of Default and collection and other enforcement proceedings resulting
therefrom and (e) all other Attorneys' Fees incurred by Lender relating to or
arising out of or in connection with this Agreement and/or any other Transaction
Document. Borrower further agrees to pay or reimburse Lender for any stamp or
other taxes which may be payable with respect to the execution, delivery,
recording and/or filing of this Agreement, the Notes or any of the other
Transaction Documents. All of the obligations of Borrower under this Section
7.03 shall survive the satisfaction and payment of the Borrower's Obligations
and the termination of this Agreement.
7.04 Environmental Indemnity. Borrower hereby agrees to defend and
------------------------
indemnify Lender and hold Lender harmless from and against any and all losses,
liabilities, damages, injuries, claims, costs and expenses of any and every kind
whatsoever (including, without limitation, court costs and reasonable attorneys'
fees and expenses) which at any time or from time to time may be paid, incurred
or suffered by, or asserted against, Lender for, with respect to or as a direct
or indirect result of the violation by Borrower or any Subsidiary of any
Environmental Laws; or with respect to, or as a direct or indirect result of the
presence on or under, or the Release from, properties owned, leased or operated
by Borrower and/or any Subsidiary in the conduct of their respective businesses
into or upon any land, the atmosphere or any watercourse, body of water or
wetland, of any Hazardous Substances or any other hazardous or toxic waste,
substance or constituent or other substance (including, without limitation, any
losses, liabilities, damages, injuries, costs, expenses or claims asserted or
arising under the Environmental Laws); and the provisions of and undertakings
and indemnification set out in this Section 7.04 shall survive the satisfaction
and payment of the Borrower's Obligations and the termination of this Agreement.
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7.05 General Indemnity. In addition to the payment of expenses
------------------
pursuant to Section 7.03, whether or not the transactions contemplated hereby
shall be consummated, Borrower hereby agrees to defend, indemnify, pay and hold
Lender and any holder(s) of the Notes, and the officers, directors, employees,
agents and affiliates of Lender and such holder(s) (collectively, the
"Indemnitees") harmless from and against any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses and disbursements of any kind or nature whatsoever (including,
without limitation, the reasonable fees and disbursements of counsel for such
Indemnitees in connection with any investigative, administrative or judicial
proceeding commenced or threatened, whether or not such Indemnitees shall be
designated a party thereto), that may be imposed on, incurred by or asserted
against the Indemnitees, in any manner relating to or arising out of this
Agreement, any of the other Transaction Documents or any other agreement,
document or instrument executed and delivered by Borrower or any other Obligor
in connection herewith or therewith, the statements contained in any commitment
letters delivered by Lender, Lender's agreement to make the Loans under this
Agreement or the use or intended use of the proceeds of any Loan under this
Agreement (collectively, the "indemnified liabilities"); provided that Borrower
--------
shall have no obligation to an Indemnitee hereunder with respect to indemnified
liabilities arising from the gross negligence or willful misconduct of that
Indemnitee as determined by a court of competent jurisdiction in a final
nonappealable order. To the extent that the undertaking to indemnify, pay and
hold harmless set forth in the preceding sentence may be unenforceable because
it is violative of any law or public policy, Borrower shall contribute the
maximum portion that it is permitted to pay and satisfy under applicable law to
the payment and satisfaction of all indemnified liabilities incurred by the
Indemnitees or any of them. The provisions of the undertakings and
indemnification set out in this Section 7.05 shall survive satisfaction and
payment of the Borrower's Obligations and the termination of this Agreement.
7.06 Authority to Act. Lender shall be entitled to act on any notices
-----------------
and instructions (telephonic or written) believed by Lender in good faith to
have been sent or delivered by any person authorized to act on behalf of
Borrower pursuant hereto, regardless of whether such notice or instruction was
in fact delivered by a person authorized to act on behalf of Borrower, and
Borrower hereby agrees to defend and indemnify Lender and hold Lender harmless
from and against any and all losses and expenses, if any, ensuing from any such
action.
7.07 Notices. Any notice, request, demand, consent, confirmation or
-------
other communication under this Agreement shall be in writing and delivered in
person or sent by telecopy or registered or certified mail, return receipt
requested and postage prepaid, to the applicable party at its address or
telecopy number set forth on the signature page(s) of this Agreement, or at such
other address or telecopy number as any party hereto may designate as its
address for communications under this Agreement by notice so given. Such
notices shall be deemed effective on the day on which delivered or sent if
delivered in person or sent by telecopy, or on the third (3rd) Business Day
after the day on which mailed, if sent by registered or certified mail.
7.08 Consent to Jurisdiction; Waiver of Jury Trial. BORROWER HEREBY
------------------------------------------------
IRREVOCABLY (A) SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY MISSOURI STATE
COURT SITTING IN THE CITY OR COUNTY OF ST. LOUIS, MISSOURI OR ANY UNITED STATES
OF AMERICA COURT SITTING IN THE EASTERN DISTRICT OF MISSOURI, AS LENDER MAY
ELECT, IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT, (B) AGREES THAT ALL CLAIMS IN
RESPECT TO SUCH SUIT, ACTION OR PROCEEDING MAY BE HELD AND DETERMINED IN ANY OF
SUCH COURTS, (C) WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION
WHICH BORROWER MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH
SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT, (D) WAIVES ANY CLAIM THAT
SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM AND (E) WAIVES ALL RIGHTS OF ANY OTHER JURISDICTION WHICH
BORROWER MAY NOW OR HEREAFTER HAVE BY REASON OF ITS PRESENT OR SUBSEQUENT
DOMICILES. BORROWER AUTHORIZES THE SERVICE OF PROCESS UPON BORROWER BY
REGISTERED MAIL SENT TO BORROWER AT ITS ADDRESS REFERENCED IN SECTION 7.07.
BORROWER AND LENDER HEREBY IRREVOCABLY WAIVE THE RIGHT TO TRIAL BY JURY WITH
RESPECT TO ANY ACTION IN WHICH BORROWER AND LENDER ARE PARTIES RELATING TO OR
ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER
TRANSACTION DOCUMENTS.
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7.09 Governing Law. This Agreement shall be governed by and construed
--------------
in accordance with the substantive laws of the State of Missouri (without
reference to conflict of law principles).
7.10 Amendments and Waivers. Any provision of this Agreement may be
------------------------
amended or waived if, but only if, such amendment or waiver is in writing and is
signed by Borrower and Lender.
7.11 References; Headings for Convenience. Unless otherwise specified
-------------------------------------
herein, all references herein to Section numbers refer to Section numbers of
this Agreement, all references herein to Exhibits "A", "B", "C" and "D" refer to
--------
annexed Exhibits "A", "B", "C" and "D" which are hereby incorporated herein by
--------
reference and all references herein to Schedules 2.02, 4.05, 4.08, 4.10, 4.12,
---------
4.16, 4.17 and 4.18 refer to annexed Schedules 2.02, 4.05, 4.08, 4.10, 4.12,
---------
4.16, 4.17 and 4.18 which are hereby incorporated herein by reference. The
Section headings are furnished for the convenience of the parties and are not to
be considered in the construction or interpretation of this Agreement.
7.12 Successors and Assigns. The provisions of this Agreement shall be
----------------------
binding upon and inure to the benefit of Borrower and Lender and their
respective successors and assigns, except that Borrower may not assign or
otherwise transfer any of its rights or delegate any of its obligations under
this Agreement.
7.13 NO ORAL AGREEMENTS; ENTIRE AGREEMENT. ORAL AGREEMENTS OR
----------------------------------------
COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT
OF A DEBT, INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT, ARE NOT ENFORCEABLE.
TO PROTECT BORROWER AND LENDER FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY
AGREEMENTS REACHED BY BORROWER AND LENDER COVERING SUCH MATTERS ARE CONTAINED IN
THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS, WHICH AGREEMENT AND OTHER
TRANSACTION DOCUMENTS ARE A COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENTS
BETWEEN BORROWER AND LENDER, EXCEPT AS BORROWER AND LENDER MAY LATER AGREE IN
WRITING TO MODIFY THEM. This Agreement embodies the entire agreement and
understanding between the parties hereto and supersedes all prior agreements and
understandings (oral or written) relating to the subject matter hereof.
7.14 Severability. In the event any one or more of the provisions
------------
contained in this Agreement should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby.
7.15 Counterparts. This Agreement may be executed in any number of
------------
counterparts (including telecopy counterparts), each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
7.16 Resurrection of the Borrower's Obligations. To the extent that
---------------------------------------------
Lender receives any payment on account of any of the Borrower's Obligations, and
any such payment(s) or any part thereof are subsequently invalidated, declared
to be fraudulent or preferential, set aside, subordinated and/or required to be
repaid to a trustee, receiver or any other Person under any bankruptcy act,
state or Federal law, common law or equitable cause, then, to the extent of such
payment(s) received, the Borrower's Obligations or part thereof intended to be
satisfied and any and all Liens upon or pertaining to any Property or assets of
Borrower and theretofore created and/or existing in favor of Lender as security
for the payment of such Borrower's Obligations shall be revived and continue in
full force and effect, as if such payment(s) had not been received by Lender and
applied on account of the Borrower's Obligations.
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7.17 Independence of Covenants. All of the covenants contained in this
-------------------------
Agreement and the other Transaction Documents shall be given independent effect
so that if a particular action, event or condition is prohibited by any one of
such covenants, the fact that it would be permitted by an exception to, or
otherwise be in compliance within the provisions of, another covenant shall not
avoid the occurrence of a Default or Event of Default if such action is taken,
such event occurs or such condition exists.
7.18 Subsidiary Reference. Any reference in this Agreement to a
---------------------
Subsidiary of Borrower, and any financial definition, ratio, restriction or
other provision of this Agreement which is stated to be applicable to Borrower
and its Subsidiaries or which is to be determined on a "consolidated" or
"consolidating" basis, shall apply only to the extent Borrower has any
Subsidiaries and, where applicable, to the extent any such Subsidiaries are
consolidated with Borrower for financial reporting purposes in accordance with
GAAP.
7.19 Compliance with Usury Laws. It is the intent of Borrower and
-----------------------------
Lender in the execution and performance of this Agreement, the Notes and the
other Transaction Documents to contract in strict compliance with any and all
applicable usury laws, including conflicts of law concepts, governing the Loans.
In furtherance thereof, Lender and Borrower stipulate and agree that none of the
terms and provisions contained in this Agreement, the Notes or any of the other
Transaction Documents shall ever be construed to create a contract to pay, as
consideration for the use, forbearance or detention of money, interest at a rate
in excess of the highest rate permitted by applicable law (the "Highest Lawful
Rate") and that for purposes hereof "interest" shall include the aggregate of
all charges which constitute interest under such laws that are contracted for,
charged or received under this Agreement, the Notes or any of the other
Transaction Documents; and in the event that, notwithstanding the foregoing,
under any circumstances the aggregate amounts taken, reserved, charged, received
or paid on the Loans include amounts which by applicable law are deemed interest
which would exceed the Highest Lawful Rate, then such excess shall be deemed to
be a mistake and Lender shall credit the same on the principal balance of the
Loans hereunder (or if all of the Borrower's Obligations shall have been paid in
full, refund said excess to Borrower). In the event of demand for payment of
the Notes and/or any of the other Borrower's Obligations by Lender, or in the
event of any required or permitted prepayment, then such consideration that
constitutes interest may never include more than the Highest Lawful Rate and any
excess interest, if any, provided for in this Agreement, the Notes or otherwise
shall be canceled automatically as of the date of such acceleration or
prepayment and, if theretofore paid, shall be credited against the principal
balance of the Loans hereunder (or, if all of the Borrower's Obligations shall
have been repaid in full, refunded to Borrower). The provisions of the section
shall control over all other provisions of this Agreement, the Notes and/or the
other Transaction Documents which may be in apparent conflict herewith.
[Signatures appear on page 40]
-37-
<PAGE>
[Signatures appear on the following page]
-38-
<PAGE>
IN WITNESS WHEREOF, Borrower and Lender have executed this Loan Agreement
as of the date first set forth above.
ARCH AIR MEDICAL SERVICE, INC.
By /s/ Aaron D. Todd
----------------------------------
Title: CFO
--------------------------
Address:
2207 Scott Avenue
St. Louis, Missouri 63103
Telecopy number: (303) 790-4780
---------------
FIRSTAR BANK, N.A.
By /s/ L. Alec Blanc III
-------------------------
Title: Vice President
---------------
Address:
One Firstar Plaza
St. Louis, Missouri 63101
Attention: Service Industries Group
Telecopy number: (314) 418-8394
-39-
<PAGE>
SCHEDULE 2.02
-------------
Authorized Individuals
----------------------
George Belsey
David Dolstein
Aaron Todd
-40-
<PAGE>
SCHEDULE 4.05
-------------
Litigation
----------
NONE.
-41-
<PAGE>
SCHEDULE 4.08
-------------
Subsidiaries
------------
NONE.
-42-
<PAGE>
SCHEDULE 4.10
-------------
Other Debt, Guarantees and Capitalized Leases
---------------------------------------------
NONE.
-43-
<PAGE>
SCHEDULE 4.12
-------------
Existing Liens
--------------
Those certain liens being granted on or about the date of this Agreement to
C.I.T. Leasing Corporation on seven aircraft being purchased by Borrower from
Area Rescue Consortium of Hospitals.
-44-
<PAGE>
SCHEDULE 4.16
-------------
Patents, Trademarks, Copyrights and Licenses
--------------------------------------------
NONE.
-45-
<PAGE>
SCHEDULE 4.17
-------------
Environmental and Health and Safety Matters
-------------------------------------------
NONE.
-46-
<PAGE>
SCHEDULE 4.18
-------------
Existing Investments
--------------------
NONE.
-47-
<PAGE>
EXHIBIT A
---------
Form of Borrowing Base Certificate
----------------------------------
This Borrowing Base Certificate is delivered pursuant to Section 2.01(c) of
that certain Loan Agreement dated as of April 25, 2000, by and between ARCH Air
Medical Service, Inc., a Missouri corporation, and Firstar Bank, N.A., a
national banking association ("Lender"), as the same may from time to time be
amended, modified, extended, renewed or restated (the "Loan Agreement"). All
capitalized terms used and not otherwise defined herein shall have the
respective meanings ascribed to them in the Loan Agreement.
Borrower hereby represents and warrants to the Lender that the following
information is true, correct and complete in all material respects as of,:
1. Total Accounts of the Borrower $
--------------
2. Ineligible Accounts of the Borrower:
(a) Accounts which remain unpaid for more than
120 days after their original invoice dates and
Accounts which are not due and payable within
120 days after their invoice dates $
--------------
(b) 10% Cross-Aging $
--------------
(c) Affiliate Accounts $
--------------
(d) Contra Accounts $
--------------
(e) Government Accounts $
--------------
(f) Other $
--------------
(g) Total Ineligible Accounts [Sum of Items 2(a), 2(b)
2(c), 2(d), 2(e) and 2(f)] $
--------------
3. Eligible Accounts of the Subsidiaries of Borrower
[Sum of Item 1 minus Item 2(g)] $
--------------
4. Borrowing Base [80% of Item 3] $
--------------
5. Revolving Credit Commitment of Lender
$1,500,000.00
--------------
6. Borrower's Maximum Revolving Credit Availability
(Lesser of Item 4 or Item 5) $
--------------
7. Total Revolving Credit Outstandings $
--------------
8. Unused Revolving Credit Availability [Item 6 minus Item 7]
$
--------------
[Negative amount requires mandatory repayment] $
--------------
If Item 8 above is negative, this Certificate is accompanied by the
mandatory repayment required by Section 2.01(d) of the Loan Agreement.
-48-
<PAGE>
This Borrowing Base Certificate is dated the day of , .
------- ---------- -----
ARCH AIR MEDICAL SERVICE, INC.
By
-------------------------------
Title:
-------------------------------
-49-
<PAGE>
---------
EXHIBIT B
---------
Form of Revolving Credit Note
-----------------------------
-50-
<PAGE>
EXHIBIT C
---------
Form of Term Loan Note
----------------------
-51-
<PAGE>
EXHIBIT D
---------
_________________, 20___
Firstar Bank, N.A.
One Firstar Plaza
St. Louis, Missouri 63101
Attn.: Service Industries Group
Ladies and Gentlemen:
Reference is hereby made to that certain Loan Agreement dated ___________,
2000, by and between you and the undersigned, as the same may from time to time
amended, modified, extended, renewed or restated (the "Loan Agreement"). All
capitalized terms used and not otherwise defined herein shall have the
respective meanings ascribed to them in the Loan Agreement.
Parent and Borrower hereby certifies to Lender that as of the date hereof:
(a) except as set forth below, all of the representations and
warranties made by Parent, Borrower and/or any other Obligor in the Loan
Agreement and/or in any other Transaction Document are true and correct in all
material respects on and as of the date hereof as if made on and as of the date
hereof:
Exceptions: ___________________________________________________________________
________________________________________________________________________________
___________________________________________________________;
(b) except as set forth below, no Default or Event of Default under or
within the meaning of the Loan Agreement has occurred and is continuing:
Exceptions: ___________________________________________________________________
________________________________________________________________________________
___________________________________________________________;
(c) the financial statements of Parent, Borrower and respective
Subsidiaries delivered to you with this letter are true, correct and complete
and have been prepared in accordance with GAAP consistently applied (subject, in
the case of any interim financial statements, to normal year-end adjustments and
absence of footnote disclosures); and
(d) Schedule 1 to this letter is a determination of Borrower's
compliance with the financial covenants set forth in Section 5.01(o) of the Loan
Agreement as of _________, ____, in each case calculated in accordance with the
Loan Agreement.
-52-
<PAGE>
(e) Schedule 2 to this letter is a determination of Parent's compliance
with the financial covenants set forth in the Guaranty as of ________________,
__________, in each case calculated in accordance with the Guaranty.
Very truly yours,
ARCH AIR MEDICAL SERVICE, INC.
By
--------------------------------
Title:
--------------------------------
AIR METHODS CORPORATION
By
--------------------------------
Title:
--------------------------------
-53-
<PAGE>
SCHEDULE 1
----------
Borrower
Financial Covenant Information
as of , 2000
--------------------------
Financial Covenant Actual Required
- ------------------- ------ --------
-54-
<PAGE>
SCHEDULE 2
----------
Parent
Financial Covenant Information
as of , 2000
--------------------------
Financial Covenant Actual Required
- ------------------- ------ --------
-55-
<PAGE>
REVOLVING CREDIT NOTE
$1,500,000.00 St. Louis, Missouri
April 25, 2000
FOR VALUE RECEIVED, on the last day of the Revolving Credit Period, the
undersigned, ARCH AIR MEDICAL SERVICE, INC., a Missouri corporation
("Borrower"), hereby promises to pay to the order of FIRSTAR BANK, N.A., a
national banking association ("Lender"), the principal sum of One Million Five
Hundred Thousand Dollars ($1,500,000.00), or such lesser sum as may then
constitute the aggregate unpaid principal amount of all Revolving Credit Loans
made by Lender to Borrower pursuant to the Loan Agreement referred to below.
The aggregate principal amount of Revolving Credit Loans which Lender shall be
committed to have outstanding under this Note at any one time shall not exceed
One Million Five Hundred Thousand Dollars ($1,500,000.00), which amount may be
borrowed, paid, reborrowed and repaid, in whole or in part, subject to the terms
and conditions of this Note and of the Loan Agreement referred to below.
Borrower further promises to pay to the order of Lender interest on the
unpaid principal balance from time to time outstanding under this Note prior to
maturity as follows: (a) so long as no Event of Default has been declared by
Lender and is continuing, at a rate per annum equal to the Prime Rate, which
rate of interest shall fluctuate as and when said Prime Rate shall change and
(b) from and after the declaration of an Event of Default by Lender and so long
as such Event of Default has not been waived in writing by Lender, at a rate per
annum equal to Three Percent (3%) over and above the Prime Rate, fluctuating as
aforesaid. Said interest shall be payable monthly on the first (1st) day of
each month commencing May 1, 2000, and at the maturity of this Note, whether by
reason of acceleration or otherwise. From and after the maturity of this Note,
whether by reason of acceleration or otherwise, interest shall accrue and be
payable on demand on the entire outstanding principal balance of this Note at a
rate per annum equal to Three Percent (3%) over and above the Prime Rate,
fluctuating as aforesaid. All payments received by Lender under this Note shall
be allocated among the principal, interest, collection costs and expenses and
other amounts due under this Note in such order and manner as Lender shall
elect. The amount of interest accruing under this Note shall be computed on an
actual day, 360-day year basis.
All payments of principal and interest under this Note shall be made in
lawful currency of the United States in Federal or other immediately available
funds at the office of Lender situated at One Firstar Plaza, St. Louis, Missouri
63101, or at such other place as the holder of this Note may from time to time
designate in writing.
Lender shall record the date and amount of each Revolving Credit Loan made
by it to Borrower and the date and amount of each payment of principal made by
Borrower with respect thereto, and may, if Lender so elects in connection with
any transfer or enforcement of this Note, endorse on the schedules forming a
part of this Note appropriate notations to evidence the foregoing information
with respect to each such Revolving Credit Loan then outstanding; provided,
however, that the obligation of Borrower to repay each Revolving Credit Loan
made to Borrower hereunder shall be absolute and unconditional, notwithstanding
any failure of Lender to make any such recordation or endorsement or any mistake
by Lender in connection with any such recordation or endorsement. Lender is
hereby irrevocably authorized by Borrower to so endorse this Note and to attach
to and make a part of this Note a continuation of any such schedule as and when
required. The books and records of Lender (including, without limitation, the
schedules attached to this Note) showing the account between Lender and Borrower
shall be admissible in evidence in any action or proceeding and shall constitute
prima facie proof of the items therein set forth in the absence of manifest
error.
Subject to the terms of the Loan Agreement referred to below, Borrower
shall have the right to prepay all at any time or any portion from time to time
of the unpaid principal of this Note prior to maturity, without penalty or
premium.
This Note is the Revolving Credit Note referred to in that certain Loan
Agreement dated the date hereof by and between Borrower and Lender (as the same
may from time to time be amended, modified, extended or renewed, the "Loan
Agreement"). The Loan Agreement, among other things, contains provisions for
acceleration of the maturity of this Note upon the occurrence of certain stated
events and also for prepayments on account of the principal of this Note and
interest on this Note prior to the maturity of this Note upon the terms and
conditions specified therein. All capitalized terms used and not otherwise
defined in this Note shall have the respective meanings ascribed to them in the
Loan Agreement.
<PAGE>
This Note is secured by, among other things, that certain Security
Agreement dated the date hereof and executed by Borrower in favor of Lender (as
the same may from time to time be amended, modified, extended, renewed or
restated, the "Security Agreement"), that certain Deed of Trust and Security
Agreement dated the date hereof and executed by Borrower for the benefit of
Lender (as the same may from time to time be amended, modified, extended,
renewed or restated, the "Missouri Deed of Trust "), that certain Assignment of
Leases and Rents dated the date hereof and executed by Borrower for the benefit
of Lender (as the same may from time to time be amended, modified, extended,
renewed or restated, the "Assignment of Leases and Rents") and that certain
Mortgage and Security Agreement dated the date hereof and executed by Borrower
in favor of Lender (as the same may from time to time be amended, modified,
extended, renewed or restated, the "Illinois Mortgage"), to which Security
Agreement, Missouri Deed of Trust, Assignment of Leases and Rents and Illinois
Mortgage reference is hereby made for a description of the security and a
statement of the terms and conditions upon which this Note is secured.
If Borrower shall fail to make any payment of any principal of or interest
on this Note as and when the same shall become due and payable, or if any Event
of Default shall occur under or within the meaning of the Loan Agreement, then
Lender's obligation to make additional Revolving Credit Loans under this Note
may be terminated in the manner and with the effect as provided in the Loan
Agreement and the entire outstanding principal balance of this Note and all
accrued and unpaid interest thereon may be declared to be immediately due and
payable in the manner and with the effect as provided in the Loan Agreement.
In the event that any payment of any principal of or interest on this Note
is not paid when due, whether by reason of maturity, acceleration or otherwise,
and this Note is placed in the hands of an attorney or attorneys for collection
or for foreclosure of the Security Agreement, the Missouri Deed of Trust the
Assignment of Leases and Rents and/or the Illinois Mortgage, or if this Note is
placed in the hands of an attorney or attorneys for representation of Lender in
connection with bankruptcy or insolvency proceedings relating hereto, Borrower
promises to pay to the order of Lender, in addition to all other amounts
otherwise due hereon, the costs and expenses of such collection, foreclosure and
representation, including, without limitation, reasonable attorneys' fees and
expenses (whether or not litigation shall be commenced in aid thereof). All
parties hereto severally waive presentment for payment, demand for payment,
protest, notice of protest and notice of dishonor.
This Note shall be governed by and construed in accordance with the
substantive laws of the State of Missouri (without reference to conflict of law
principles).
ARCH AIR MEDICAL SERVICE, INC.
By /s/ Aaron D. Todd
--------------------
Title: CFO
--------------------
-2-
<PAGE>
TERM LOAN PROMISSORY NOTE
$1,350,000.00 St. Louis, Missouri
April 25, 2000
FOR VALUE RECEIVED, the undersigned, ARCH AIR MEDICAL SERVICE, INC., a
Missouri corporation ("Borrower"), hereby promises to pay to the order of
FIRSTAR BANK, N.A., a national banking association ("Lender"), the principal sum
of One Million Three Hundred Fifty Thousand Dollars ($1,350,000.00) bearing
interest from the date hereof to maturity on the principal balance from time to
time outstanding hereon at the rate of Eight and 01/100 Percent (8.01%) per
annum, both principal and interest being due and payable in Eighty-Four (84)
consecutive monthly installments as follows: Eighty-Three (83) equal
consecutive monthly installments of principal and interest in the amount of
Twenty-One Thousand, Forty-Eight and 12/100 Dollars ($21,048.12) each, due and
payable on the first (1st) day of each month commencing June 1, 2000, with the
Eighty-Fourth (84th) and final installment in the amount of the then outstanding
principal balance of this Note, plus all accrued and unpaid interest hereon due
and payable on April 25, 2007. From and after the declaration of an Event of
Default (as defined in the Loan Agreement referred to below) by Lender and so
long as such Event of Default has not been waived in writing by Lender, interest
shall accrue and be payable monthly on the outstanding principal balance of this
Note at a rate per annum equal to Eleven and 01/100 Percent (11.01%). From and
after the maturity of this Note, whether by reason of acceleration or otherwise,
interest shall accrue and be payable on demand on the entire outstanding
principal balance of this Note at a rate per annum equal to Eleven and 01/100
Percent (11.01%). All payments received by Lender under this Note shall be
allocated among the principal, interest, collection costs and expenses and other
amounts due under this Note in such order and manner as Lender shall elect. The
amount of interest accruing under this Note shall be computed on an actual day,
360-day year basis.
All payments of principal and interest under this Note shall be made in
lawful currency of the United States in Federal or other immediately available
funds at the office of Lender situated at One Firstar Plaza, St. Louis, Missouri
63101, or at such other place as the holder of this Note may from time to time
designate in writing.
Subject to the terms of the Loan Agreement referred to below, Borrower
shall have the right to prepay all at any time or any portion from time to time
of the unpaid principal of this Note prior to maturity, provided that: (i)
partial prepayments shall be applied to the payment of the installments of
principal of this Note in the inverse order of their stated maturities; (ii) on
each prepayment date, Borrower shall pay to the order of Lender all accrued and
unpaid interest on the principal portion of this Note being prepaid to and
including the date of such prepayment and (iii) on each prepayment date,
Borrower shall pay Lender the Prepayment Fee under the Loan Agreement.
This Note is the Term Loan Note referred to in that certain Loan Agreement
dated the date hereof by and between Borrower and Lender (as the same may from
time to time be amended, modified, extended, renewed or restated, the "Loan
Agreement"). The Loan Agreement, among other things, contains provisions for
acceleration of the maturity of this Note upon the occurrence of certain stated
events and also for prepayments on account of the principal of this Note and
interest on this Note prior to the maturity of this Note upon the terms and
conditions specified therein. All capitalized terms used and not otherwise
defined in this Note shall have the respective meanings ascribed to them in the
Loan Agreement.
Notwithstanding any provision contained in the Loan Agreement or in this
Note to the contrary, the entire outstanding principal balance of this Note
together with all accrued and unpaid interest thereon shall be immediately due
and payable in the event that the Loan Agreement is terminated by Borrower or
Lender or otherwise ceases to be in full force and effect for any reason.
This Note is secured by, among other things, that certain Security
Agreement dated the date hereof and executed by Borrower in favor of Lender (as
the same may from time to time be amended, modified, extended, renewed or
restated, the "Security Agreement"), that certain Deed of Trust and Security
Agreement dated the date hereof and executed by Borrower for the benefit of
Lender (as the same may from time to time be amended, modified, extended,
renewed or restated, the "Missouri Deed of Trust "), that certain Assignment of
Leases and Rents dated the date hereof and executed by Borrower for the benefit
of Lender (as the same may from time to time be amended, modified, extended,
renewed or restated, the "Assignment of Leases and Rents") and that certain
Mortgage and Security Agreement dated the date hereof and executed by Borrower
in favor of Lender (as the same may from time to time be amended, modified,
extended, renewed or restated, the "Illinois Mortgage"), to which Security
Agreement, Missouri Deed of Trust, Assignment of Leases and Rents and Illinois
Mortgage reference is hereby made for a description of the security and a
statement of the terms and conditions upon which this Note is secured.
If Borrower shall fail to make any payment of any principal or interest due
under this Note as and when the same shall become due and payable, or if any
Event of Default shall occur under or within the meaning of the Loan Agreement,
then the entire outstanding principal balance of this Note and all accrued and
unpaid interest thereon may be declared to be immediately due and payable in the
manner and with the effect as provided in the Loan Agreement.
In the event that any payment of any principal or interest due under this
Note is not paid when due, whether by reason of maturity, acceleration or
otherwise, and this Note is placed in the hands of an attorney or attorneys for
collection or for foreclosure of the Security Agreement, the Missouri Deed of
Trust, the Assignment of Leases and Rents and/or the Illinois Mortgage, or if
this Note is placed in the hands of an attorney or attorneys for representation
of Lender in connection with bankruptcy or insolvency proceedings relating
hereto, Borrower promises to pay to the order of Lender, in addition to all
other amounts otherwise due hereon, the costs and expenses of such collection,
foreclosure and representation, including, without limitation, reasonable
attorneys' fees and expenses (whether or not litigation shall be commenced in
aid thereof). All parties hereto severally waive presentment for payment,
demand for payment, notice of dishonor, protest and notice of protest.
This Note shall be governed by and construed in accordance with the
substantive laws of the State of Missouri (without reference to conflict of law
principles).
ARCH AIR MEDICAL SERVICE, INC.
By /s/ Aaron D. Todd
------------------------
Title: CFO
------------------------
-2-
<PAGE>
