<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-26762
PEDIATRIX MEDICAL GROUP, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 65-0271219
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1455 NORTHPARK DRIVE
FT. LAUDERDALE, FLORIDA 33326
53901-0449
(Address of principal executive offices)
(Zip Code)
(954) 384-0175
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
At November 1, 1996, the Registrant had 14,860,803 shares of $0.01 par value
common stock outstanding.
Page 1 of 13 pages
<PAGE> 2
PEDIATRIX MEDICAL GROUP, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets as of September 30, 1996 (Unaudited)
and December 31, 1995 ............................................................................................. 3
Condensed Consolidated Income Statements for the Three and Nine Months Ended
September 30, 1996 and 1995 (Unaudited) ........................................................................... 4
Condensed Consolidated Cash Flow Statements for the Nine Months Ended
September 30, 1996 and 1995 (Unaudited) ........................................................................... 5
Notes to Condensed Consolidated Financial Statements ............................................................... 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS ............................................................. 9
PART II - OTHER INFORMATION ......................................................................................... 12
SIGNATURES ......................................................................................................... 13
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PEDIATRIX MEDICAL GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
1996 DECEMBER 31,
(UNAUDITED) 1995
------------- ------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ........................... $ 37,962 $18,499
Investments in marketable securities ............... 38,230 27,718
Accounts receivable, net ........................... 20,885 12,096
Prepaid expenses ................................... 891 628
Other current assets ............................... 142 497
Income taxes receivable ............................. -- 330
-------- -------
Total current assets ........................... 98,110 59,768
Property and equipment, net ........................... 8,001 4,549
Other assets, net ..................................... 46,158 5,564
-------- -------
Total assets ................................... $152,269 $69,881
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses ............... $ 11,144 $ 4,347
Income taxes payable ............................... 1,137 --
Current portion of note payable ..................... 201 64
Deferred income taxes ............................... 5,005 1,909
-------- -------
Total current liabilities ....................... 17,487 6,320
Note payable ......................................... 2,799 751
-------- -------
Total liabilities ............................... 20,286 7,071
-------- -------
Contingencies .........................................
Stockholders' equity:
Preferred stock ..................................... -- --
Common stock ....................................... 148 131
Additional paid-in capital ......................... 115,660 55,620
Retained earnings ................................... 16,257 7,045
Unrealized gain (loss) on investments ............... (82) 14
-------- -------
Total stockholders' equity ..................... 131,983 62,810
-------- -------
Total liabilities and stockholders' equity ..... $152,269 $69,881
======== =======
</TABLE>
The accompanying notes are an integral part of
these financial statements
3
<PAGE> 4
PEDIATRIX MEDICAL GROUP, INC.
CONDENSED CONSOLIDATED INCOME STATEMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- ---------------------
1996 1995 1996 1995
------- ------- ------- -------
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<S> <C> <C> <C> <C>
Net patient service revenue ............................. $22,404 $12,478 $56,339 $30,495
------- ------- ------- -------
Operating expenses:
Salaries and benefits ................................. 14,526 8,212 36,863 20,805
Supplies and other operating expenses ................. 1,740 967 4,222 2,405
Depreciation and amortization ......................... 543 99 1,111 238
------- ------- ------- -------
Total operating expenses ......................... 16,809 9,278 42,196 23,448
------- ------- ------- -------
Income from operations ........................... 5,595 3,200 14,143 7,047
Investment income ....................................... 535 114 1,457 368
Interest expense ....................................... (80) (29) (142) (87)
------- ------- ------- -------
Income before income taxes ....................... 6,050 3,285 15,458 7,328
Income tax provision ................................... 2,485 1,314 6,246 2,932
------- ------- ------- -------
Net income ....................................... $ 3,565 $ 1,971 $ 9,212 $ 4,396
======= ======= ======= =======
Per share data (1995 pro forma):
Net income per common and common equivalent share:
Primary ............................................. $ .24 $ .22 $ .65 $ .47
======= ======= ======= =======
Fully diluted ....................................... $ .24 $ .17 $ .65 $ .38
======= ======= ======= =======
Weighted average shares used in computing net income
per common and common equivalent share:
Primary ............................................. 14,994 7,389 14,188 7,145
======= ======= ======= =======
Fully diluted ....................................... 15,047 11,879 14,215 11,689
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of
these financial statements
4
<PAGE> 5
PEDIATRIX MEDICAL GROUP, INC.
CONDENSED CONSOLIDATED CASH FLOW STATEMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------
1996 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Cash flows provided (used) by operating activities:
Net income ........................................................... $ 9,212 $ 4,396
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization ....................................... 1,111 238
Deferred income taxes ............................................... 3,096 913
Changes in assets and liabilities:
Accounts receivable ............................................... (8,789) (1,639)
Prepaid expenses and other current assets ......................... 92 (835)
Income taxes receivable/payable ................................... 2,053 (122)
Other assets ..................................................... 260 (1,696)
Accounts payable and accrued expenses ............................. 4,207 798
------- -------
Net cash provided by operating activities ....................... 11,242 2,053
------- -------
Cash flows provided (used) by investing activities:
Physician group acquisition payments ................................. (39,002) (3,096)
Purchase of investments ............................................... 27,851 --
Proceeds from sale of investments ..................................... (38,459) --
Purchase of property and equipment ................................... (3,825) (1,543)
------- -------
Net cash used by investing activities ........................... (53,435) (4,693)
------- -------
Cash flows provided (used) by financing activities:
Proceeds from mortgage loan ........................................... 3,000 --
Payments on notes payable ............................................. (815) (48)
Proceeds from issuance of common stock ............................... 59,516 39,734
Payments made to retire common stock ................................. (45) (132)
------- -------
Net cash provided by financing activities ....................... 61,656 39,554
------- -------
Net increase in cash and cash equivalents ............................... 19,463 39,968
Cash and cash equivalents at beginning of period ....................... 18,499 7,384
------- -------
Cash and cash equivalents at end of period ............................. $37,962 $44,352
======= =======
</TABLE>
The accompanying notes are an integral part of
these financial statements
5
<PAGE> 6
PEDIATRIX MEDICAL GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(UNAUDITED)
1. BASIS OF PRESENTATION:
The accompanying unaudited condensed consolidated financial statements
of Pediatrix Medical Group, Inc. (the "Company" or "Pediatrix")
presented herein do not include all disclosures required by generally
accepted accounting principles for complete financial statements. In
the opinion of management, these financial statements include all
adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the results of interim periods.
The results of operations for the three and nine months ended
September 30, 1996 are not necessarily indicative of the results of
operations to be expected for the year ended December 31, 1996. The
interim condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-K filed
with the Securities and Exchange Commission on March 26, 1996.
2. BUSINESS ACQUISITIONS:
The Company completed the acquisition of six neonatology and pediatric
physician group practices during the first six months of 1996. Total
cash paid for these acquisitions approximated $31 million.
During the third quarter of 1996 the Company completed acquisitions of
three neonatology physician group practices in West Palm Beach,
Florida, Reno, Nevada and Spartanburg, South Carolina. Total cash
paid for these acquisitions approximated $8 million, adding a total of
six NICUs.
The Company has accounted for the transactions using the purchase
method of accounting and the excess of cost over fair value of net
assets acquired is being amortized on a straight-line basis over 25
years. The results of operations of the acquired companies have been
included in the consolidated financial statements from the dates of
acquisition.
The following unaudited pro forma information combines the
consolidated results of operations of the Company and the companies
acquired during 1996 as if the acquisitions had occurred on January 1,
1995:
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------------
1996 1995
------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
Net patient service revenue ............. $67,040 $51,271
Net income ............................. 10,556 5,308
Fully diluted net income per share ..... $ .74 $ .45
</TABLE>
The pro forma results do not necessarily represent results which would
have occurred if the acquisitions had taken place at the beginning of
the period, nor are they indicative of the results of future combined
operations.
6
<PAGE> 7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
3. ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996 DECEMBER 31, 1995
------------------ -----------------
(IN THOUSANDS)
<S> <C> <C>
Accounts payable ............................. $ 2,371 $ 786
Accrued salaries and bonuses ................. 2,157 779
Accrued payroll taxes and benefits ........... 1,813 726
Accrued professional liability coverage ....... 2,150 1,268
Other accrued expenses ....................... 2,653 788
------- ------
$11,144 $4,347
======= ======
</TABLE>
4. NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE:
As a result of the conversion of preferred stock, which was not
determined to be a common stock equivalent, into common stock in
connection with the initial public offering, the Company has presented
pro forma net income per common and common equivalent share for the
three and nine months ended September 30, 1995.
Pro forma net income per common and common equivalent share is
computed based upon the weighted average number of shares of common
stock and common stock equivalents, including the number of shares of
common stock issuable upon conversion of preferred stock, outstanding
during the period. Pursuant to the requirements of the Securities and
Exchange Commission (SEC), common stock issued by the Company during
the 12 months immediately preceding the initial filing of the
registration statement with the SEC, plus common stock equivalents
relating to the grant of common stock options during the same period,
have been included in the calculation of pro forma weighted average
number of common stock and common stock equivalents outstanding for
the three and nine months ending September 30, 1995, using the
treasury stock method and the initial public offering price of $20 per
share.
Net income per common and common equivalent share on a historical
basis, both primary and fully diluted are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ -----------------------
1996 1995 1996 1995
------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Income applicable to common stock:
Net income ......................... $ 3,565 $ 1,971 $ 9,212 $ 4,396
Less: preferred stock dividends ..... -- 333 -- 1,040
------- ------- ------- -------
Income applicable to common stock ..... 3,565 1,638 9,212 3,356
------- ------- ------- -------
Net income per share:
Primary ............................. $ .24 $ .22 $ .65 $ .47
------- ------- ------- -------
Fully diluted ....................... $ .24 $ .17 $ .65 $ .38
------- ------- ------- -------
Weighted average number of common
and common equivalent shares
outstanding:
Primary ............................. 14,994 7,389 14,188 7,145
------- ------- ------- -------
Fully diluted ....................... 15,047 11,879 14,215 11,689
------- ------- ------- -------
</TABLE>
7
<PAGE> 8
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
Primary income per common and common equivalent share is computed by
dividing net income available to common shareholders by the weighted
average number of common stock and common stock equivalents
outstanding during the period. The voting, redeemable, cumulative,
convertible preferred stock issued in October 1992 and converted into
common stock in September 1995 was determined not to be a common stock
equivalent. In computing primary income per common share for the
three and nine months ended September 30, 1995, the preferred stock
dividend reduces net income available to common shareholders. Fully
diluted income per common share is computed by dividing net income by
the weighted average number of common stock and common stock
equivalents outstanding during the period and, for the three and nine
months ended September 30, 1995, includes 4,571,063 shares of common
stock assumed to be issued upon the conversion of all shares of the
preferred stock.
5. NOTE PAYABLE:
During the third quarter, the Company received a $3,000,000 mortgage
loan from The First National Bank of Boston ("Bank of Boston"). The
loan has quarterly payments of $50,100, bears interest at prime,
currently 8.25%, and is secured by the Company's two buildings. The
loan matures in June 2003.
On June 27, 1996, the Company entered into a $30.0 million unsecured
revolving credit facility (the "Credit Facility") with Bank of Boston
and SunTrust Bank, which includes a $2.0 million amount reserved to
cover deductibles under the Company's malpractice insurance policies.
The Company intends to use amounts available under the Credit Facility
primarily for acquisitions. The Credit Facility matures on June 30,
1999. At the Company's option, the Credit Facility bears interest at
either LIBOR plus .875% or the prime rate announced by Bank Boston.
There is no balance currently outstanding under the Credit Facility.
6. CONTINGENCIES:
During the ordinary course of business, the Company has become a party
to pending and threatened legal actions and proceedings, most of which
involve claims of medical malpractice and are generally covered by
insurance. The Company believes that the outcome of such legal
actions and proceedings will not have a material adverse effect on the
Company's financial condition, results of operations or liquidity.
On May 14, 1996, the Company received the Internal Revenue Service's
("IRS") proposed adjustments to the Company's tax liability in
connection with its examination of the Company's 1992, 1993, and 1994
federal income tax returns. The IRS has challenged certain deductions
that, if disallowed, would result in additional taxes of approximately
$4.5 million, plus interest. The Company and its tax advisors have
prepared and submitted a response to the IRS. The Company and its tax
advisors believe that the tax returns are substantially correct as
filed and intend to vigorously contest the proposed adjustments. The
Company and its tax advisors also believe that the amounts that have
been provided for income taxes are adequate and that the ultimate
resolution of the examination will not result in a material adverse
effect on the Company's consolidated results of operations, financial
position or cash flows.
7. SECONDARY PUBLIC OFFERING:
On August 2, 1996, the Company completed a secondary public offering
whereby it issued 1,755,000 shares of common stock resulting in net
cash proceeds to the Company of approximately $59.3 million.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1996 AS COMPARED TO THREE MONTHS
ENDED SEPTEMBER 30, 1995
The Company reported net patient service revenue of $22.4 million for
the three months ended September 30, 1996, as compared with $12.5 million for
the same period in 1995, a growth rate of 79.5%. This $9.9 million increase
was primarily attributable to new units at which the Company provides services
as a result of acquisitions. Same unit patient service revenue increased
$297,000 or 2.7% for the three months ended September 30, 1996, compared to the
same period in 1995. Same units are those units at which the Company provided
services for the entire period for which the percentage is calculated and the
entire prior comparable period. The same unit growth resulted from volume
increases as there were no general price increases during the periods.
Salaries and benefits increased $6.3 million, or 76.9% to $14.5
million for the three months ended September 30, 1996, as compared with $8.2
million for the same period in 1995. Of this $6.3 million increase, $5.0
million, or 79.4%, was attributable to hiring new physicians, primarily to
support new unit growth, and the remaining $1.3 million was primarily
attributable to increased support staff and resources added in the areas of
nursing, management and billing and reimbursement. Supplies and other
operating expenses increased $773,000, or 79.9% to $1.7 million for the three
months ended September 30, 1996, as compared with $967,000 for the same period
in 1995, primarily as a result of new units. Depreciation and amortization
expense increased by $444,000, or 448.5% to $543,000 for the three months ended
September 30, 1996, as compared with $99,000 for the same period in 1995,
primarily as a result of amortization of goodwill in connection with
acquisitions.
Income from operations increased approximately $2.4 million, or 74.8%,
to $5.6 million for the three months ended September 30, 1996, as compared with
$3.2 million for the same period in 1995. The increase in income from
operations was primarily due to increased volume, principally from
acquisitions.
The Company earned investment income of approximately $535,000 for the
three months ended September 30, 1996, as compared with $114,000 for the same
period in 1995. The increase in investment income resulted primarily from
additional funds available for investment due to proceeds from the initial and
secondary public offerings as well as cash flow from operations.
The effective income tax rate was approximately 41% and 40% for the
three month periods ended September 30, 1996 and 1995, respectively.
Net income increased 80.9% to $3.6 million for the three months ended
September 30, 1996, as compared with $2.0 million for the same period in 1995.
Net income as a percentage of net patient service revenue increased to 15.9%
for the three months ended September 30, 1996, compared to 15.8% for the same
period in 1995.
9
<PAGE> 10
NINE MONTHS ENDED SEPTEMBER 30, 1996 AS COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1995
The Company reported net patient service revenue of $56.3 million for
the nine months ended September 30, 1996, as compared with $30.5 million for
the same period in 1995, a growth rate of 84.7%. Of this $25.8 million
increase, $24.1 million, or 93.4%, was primarily attributable to new units at
which the Company provides services as a result of acquisitions.
Salaries and benefits increased $16.1 million, or 77.2% to $36.9
million for the nine months ended September 30, 1996, as compared with $20.8
million for the same period in 1995. Of this $16.1 million increase, $12.5
million, or 77.7%, was attributable to hiring new physicians, primarily to
support new unit growth, and the remaining $3.6 million was primarily
attributable to increased support staff and resources added in the areas of
nursing, management and billing and reimbursement. Supplies and other
operating expenses increased $1.8 million, or 75.6% to $4.2 million for the
nine months ended September 30, 1996, primarily as a result of new units.
Depreciation and amortization expense increased by $873,000 or 366.8% to $1.1
million for the nine months ended September 30, 1996, as compared with $238,000
for the same period in 1995, primarily as a result of amortization of goodwill
in connection with acquisitions.
Income from operations increased approximately $7.1 million, or 100.7%
to $14.1 million for the nine months ended September 30, 1996, as compared with
$7.0 million for the same period in 1995, representing an increase in the
operating margin from 23.1% to 25.1%. The increase in operating margin was
primarily due to increased volume, principally from acquisitions.
The Company earned investment income of approximately $1.5 million for
the nine months ended September 30, 1996, as compared with $368,000 for the
same period in 1995. The increase in investment income resulted primarily from
additional funds available for investment due to proceeds from the initial and
secondary public offerings as well as cash flow from operations.
The effective income tax rate was approximately 40% for both of the
nine month periods ended September 30, 1996 and 1995.
Net income increased 109.6% to $9.2 million for the nine months ended
September 30, 1996, as compared with $4.4 million for the same period in 1995.
Net income as a percentage of net patient service revenue increased to 16.4%
for the nine months ended September 30, 1996, compared to 14.4% for the same
period in 1995.
LIQUIDITY AND CAPITAL RESOURCES
Prior to its initial public offering (IPO), the Company generated
sufficient cash flow from operations to support its growth strategy, which
primarily consisted of marketing directly to hospital administrators. The
Company significantly increased its acquisition activities commencing with the
third quarter of 1995. During the first nine months of 1996, the Company
completed nine acquisitions of neonatology physician group practices, utilizing
approximately $39 million of net proceeds from the IPO.
On August 2, 1996, the Company completed a secondary public offering
whereby it issued 1,755,000 shares of Common Stock resulting in net cash
proceeds to the Company of approximately $59 million. As of September 30,
1996, the Company had approximately $76 million of cash, cash equivalents and
marketable securities.
As of September 30, 1996, the Company had working capital of
approximately $80.6 million, an increase of $27.2 million from the working
capital of $53.4 million available at December 31, 1995. The
10
<PAGE> 11
net increase is principally a result of net proceeds from the Company's
secondary offering and funds generated from operations, less expenditures
related to the acquisition of nine physician group practices and additions to
property and equipment.
On June 27, 1996, the Company entered into a $30.0 million unsecured
revolving credit facility (the "Credit Facility") with The First National Bank
of Boston ("Bank of Boston") and SunTrust Bank, which includes a $2.0 million
amount reserved to cover deductibles under the Company's malpractice insurance
policies. The Company intends to use amounts available under the Credit
Facility primarily for acquisitions. The Credit Facility matures on June 30,
1999. At the Company's option, the Credit Facility bears interest at either
LIBOR plus .875% or the prime rate announced by Bank of Boston. There is no
balance currently outstanding under the Credit Facility.
The Company constructed a new administrative building, which was
completed in the third quarter of 1996 at a total cost of approximately $2.3
million. The Company funded the construction of the new building with
available cash. During the third quarter, the Company received a $3.0 million
mortgage loan from Bank of Boston. The mortgage is secured by the Company's two
buildings.
The Company's annual capital expenditures have typically been for
computer hardware and software and for furniture, equipment and improvements at
the corporate headquarters. During the nine months ended September 30, 1996,
capital expenditures amounted to approximately $3.8 million, which included
$2.9 million for construction, furniture and equipment related to the new
building described above. For the remainder of 1996, the Company anticipates
capital expenditures of approximately $500,000. Capital expenditures during
1997 are not expected to exceed $2.0 million, principally for computer hardware
and software.
The Company anticipates that funds generated from operations together
with the net proceeds of its secondary offering, cash and marketable securities
on hand and funds available under the Credit Facility, will be sufficient to
meet its working capital requirements and finance any required capital
expenditures for at least the next twelve months.
11
<PAGE> 12
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
During the ordinary course of business, the Company has become a party
to pending and threatened legal actions and proceedings, most of which involve
claims of medical malpractice and are generally covered by insurance. The
Company believes that the outcome of such legal actions and proceedings will
not have a material adverse effect on the Company's financial condition,
results of operations or liquidity.
On May 14, 1996, the Company received the IRS's proposed adjustments
to the Company's tax liability in connection with its examination of the
Company's 1992, 1993 and 1994 federal income tax returns. The IRS has
challenged certain deductions that, if disallowed, would result in additional
taxes of approximately $4.5 million, plus interest. The Company and its tax
advisors have prepared and submitted a response to the IRS. The Company and
its tax advisors believe that the tax returns are substantially correct as
filed and intend to vigorously contest the proposed adjustments. The Company
and its tax advisors also believe that the amounts that have been provided for
income taxes are adequate and that the ultimate resolution of the examination
will not result in a material adverse effect on the Company's consolidated
results of operations, financial position or cash flows.
ITEM 2. CHANGES IN SECURITIES
See Note 7 of Notes to Condensed Consolidated Financial Statements.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
10.26 Lease Agreement between SunTrust Bank and PMG
Acquisition Corp.
11.1 Statement Re: Computation of Per Share Earnings
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None.
12
<PAGE> 13
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.
PEDIATRIX MEDICAL GROUP, INC.
Date: November 13, 1996 By: /s/ Roger J. Medel
------------------------------------
Roger J. Medel, President and Chief
Executive Officer (Principal
Executive Officer)
Date: November 13, 1996 By: /s/ Lawrence M. Mullen
------------------------------------
Lawrence M. Mullen, Chief Financial
Officer (Principal Financial and
Accounting Officer)
13
<PAGE> 1
Exhibit 10.26
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AIRCRAFT LEASE AGREEMENT
between
SUNTRUST BANK, CENTRAL FLORIDA, NATIONAL ASSOCIATION,
as Lessor,
and
PMG ACQUISITION CORP.
as Lessee
Dated as of September 5, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
PURCHASE; DELIVERY AND ACCEPTANCE; OWNERSHIP;
CANCELLATION OF EXISTING LEASE . . . . . . . . . . . . . . . . . . . . 12
Section 2.1. Purchase of Aircraft. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.2. Acceptance Procedure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.3. Ownership. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.4. Cancellation of Existing Lease. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE III
LEASE TERM . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.1. Lease Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE IV
RENT; OTHER ECONOMIC PROVISIONS . . . . . . . . . . . . . . . . . . . . 14
Section 4.1. Rent Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 4.2. Place and Manner of Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 4.3. Other Amounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 4.4. Net Lease. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 4.5. Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 4.6. LIBO Rate Not Ascertainable, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF LESSEE . . . . . . . . . . . . . . . . . . 16
Section 5.1. Organization and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 5.2. Corporate Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 5.3. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 5.4. Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 5.5. Actions Pending . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.6. Title to Properties and Assets; Liens, etc . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.7. Enforceability of Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.8. Governmental Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.9. Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.10. Perfection of Title. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.11. Warranty of Title. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE VI
WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 6.1. Warranty Disclaimer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 6.2. Quiet Enjoyment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 6.3. Lessor Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>
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ARTICLE VII
POSSESSION, ASSIGNMENT, USE AND
MAINTENANCE, INSPECTION AND RETURN OF AIRCRAFT . . . . . . . . . . . . . . . . 20
Section 7.1. Restriction on Lessee's Possession and Use. . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 7.2. Operation and Use, Maintenance, Registration. . . . . . . . . . . . . . . . . . . . . . . . 20
Section 7.3. Replacement, Removal of Parts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 7.4. Alterations, Modifications and Additions. . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 7.5. Inspection of Aircraft. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 7.6. Return of Aircraft and Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE VIII
RISK OF LOSS; REPLACEMENT; WAIVER AND INDEMNITY . . . . . . . . . . . . . . . . 24
Section 8.1. Casualty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 8.2. Casualty Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE IX
INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 9.1. Public Liability and Property Damage Insurance. . . . . . . . . . . . . . . . . . . . . . . 24
Section 9.2. Insurance Against Loss or Damage to the Aircraft and Engines. . . . . . . . . . . . . . . . 25
Section 9.3. Additional Insureds; Loss Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 9.4. Reports, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE X
DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 10.1. Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 10.2. Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 10.3. Additional Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 10.4. Proceeds of Sale; Deficiency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 10.5. Right to Perform Lessee's Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 10.6. Reference to Revolving Credit Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE XI
RETURN OF AIRCRAFT; OPTION CONDITION . . . . . . . . . . . . . . . . . . . 31
Section 11.1. After Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE XII
LEASE TERMINATION . . . . . . . . . . . . . . . . . . . . . . . 31
Section 12.1. Lessee's Options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 12.2. Election of Options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 12.3. Sale Option Procedures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 12.4. Appraisals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE XIII
GRANT OF SECURITY
INTEREST TO LESSOR AND FURTHER ASSURANCES . . . . . . . . . . . . . . . . . 33
Section 13.1. Grant of Security Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
</TABLE>
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<TABLE>
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Section 13.2. Retention of Proceeds in the Case of Default. . . . . . . . . . . . . . . . . . . . . . . . 34
Section 13.3. Attorney-in-Fact. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 13.4. Release of Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE XIV
EARLY TERMINATION . . . . . . . . . . . . . . . . . . . . . . . 35
Section 14.1. Early Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE XV
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 15.1. No Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 15.2. Survival of Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 15.3. APPLICABLE LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 15.4. Effect and Modification of Lease. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 15.5. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 15.6. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 15.7. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 15.8. Successors and Assigns, Benefit of Agreement. . . . . . . . . . . . . . . . . . . . . . . . 37
Section 15.9. Assignment by Lessor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 15.10. Assignment by Lessee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 15.11. JURY TRIAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 15.12. Section Headings; Table of Contents. . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 15.13. Final Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 15.14. Timeliness of Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 15.15. Payment of Expenses, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 15.16. Right of Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 15.17. Nature of Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 15.18. Recordation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 15.19. Truth in Leasing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
</TABLE>
EXHIBIT A AMORTIZATION SCHEDULE
EXHIBIT B RETURN CONDITIONS OF AIRCRAFT
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AIRCRAFT LEASE AGREEMENT
This AIRCRAFT LEASE AGREEMENT (as amended, modified, restated or
supplemented from time to time, this " Lease") dated as of September 5, 1996 is
between (a) PMG ACQUISITION CORP., a Florida corporation, as Lessee (the
"Lessee"), with its principal office and place of business at 1455 North Park
Drive, Ft. Lauderdale, Florida 33326, and (b) SUNTRUST BANK, CENTRAL FLORIDA,
NATIONAL ASSOCIATION, a national banking association, as Lessor ("Lessor"), with
its principal place of business at 200 South Orange Avenue, Orlando, Florida
32801.
WHEREAS, Lessee has negotiated for the purchase and accepted delivery
of the Aircraft (as such term is defined hereinbelow); and
WHEREAS, subject to the terms and conditions of this Lease, Lessor has
agreed to take legal title to the Aircraft and reimburse Lessee for the
purchase price thereof; and
WHEREAS, Lessee desires to lease from Lessor and Lessor is willing to
lease to Lessee the Aircraft upon and subject to the term and conditions of
this Lease;
NOW THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. The following terms shall have the
following meanings for all purposes, and such meanings shall be equally
applicable both to the singular and plural forms of the terms defined.
Capitalized terms used herein and not otherwise defined shall have the meanings
assigned to such terms in the other Operative Documents. Any agreement,
document or instrument defined or referred to in this Lease shall include each
amendment, modification or supplement thereto including each waiver and consent
that may (pursuant to the Operative Documents) be effective from time to time,
except as otherwise expressly indicated. The definition of any person herein
shall include its successors and permitted assigns. Reference to exhibits
shall mean Exhibits attached to the Lease, except as otherwise indicated.
"Actual Knowledge" shall mean, as to any matter with respect to any
Person, the actual knowledge of such matter by a Responsible Officer of such
Person and shall include receipt of a notice of such matter by any such
Responsible Officer.
"Administrative Fee" shall mean a fee payable to Lessor, equal to 20
basis points of the Equipment Cost.
<PAGE> 6
"Affiliate(s)" of any Person shall mean any other Person that directly
or indirectly through one or more intermediaries controls, is controlled by, or
is under common control with, such Person. No Person shall be considered an
Affiliate of Lessor unless such Person directly or indirectly through one or
more intermediaries controls, is controlled by, or is under common control
with, Lessor solely in its capacity as Lessor under the Lease.
"Aircraft" shall mean the Learjet Inc. Model 60 Aircraft as described
in Exhibit A to the Lease Supplement.
"Airframe" means (A) the Learjet Inc. Model 60, Serial No. 075 (except
the Engines) delivered and leased under the Lease, identified by U.S.
registration number N9CU; and (B) except as otherwise provided in the Lease,
any and all Parts so long as the same shall be incorporated or installed in or
attached to the Airframe, or so long as title thereto shall remain vested in
Lessor in accordance with the terms of the Lease, after removal of the
Airframe.
"Amortization Schedule" shall mean the Amortization Schedule set forth
in Exhibit A to the Lease.
"Applicable Law" means all applicable laws, treaties, judgments,
decrees, injunctions, writs and orders of any court, governmental agency or
authority and rules, regulations, orders, directives, licenses and permits of
any governmental body, instrumentality, agency or authority.
"Applicable Margin" shall mean 0.90%.
"Applicable Percentage" shall be a percentage to be determined as of
the Closing Date by the Lessor. The percentage will be the ratio (expressed as
a percentage) of x:y where x is determined by calculating the maximum amount
possible which when added to the present value of the sum of Rent payments (and
certain other amounts generally included as lessee's minimum payments under the
Statement of Financial Accounting Standards No. 13) for the Lease Term will not
be greater than 89.95% of the Lease Balance as of the Closing Date and y is the
Lease Balance as of the Closing Date.
"Applicable Percentage Amount" shall mean the amount, to be determined
by the Lessor as of the Closing Date, equal to the product of the Lease Balance
as of the Closing Date and the Applicable Percentage.
"Appraisal" shall mean the appraisal of the Aircraft from an Appraiser
received pursuant to the terms of the Lease.
"Appraiser" shall mean AVSolutions, Inc. or such other qualified firm
of aircraft appraisers as shall be selected by the Lessor.
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<PAGE> 7
"Authority" shall mean any: (a) Federal, state, local or tribunal,
legislative body, governmental subdivision, administrative agency or other
governmental authority; or (b) arbitrator or panel of arbitrators, in the case
of each of clause (a) and (b) having or exercising jurisdiction over Lessee,
Lessor or the Aircraft.
"Base Date" means the Closing Date.
"Base Period" shall mean that period commencing on the Base Date and
ending on the Termination Date.
"Business Day" shall mean any day on which:
(a) Federal and state chartered banks in Florida are open
for commercial banking business; and
(b) solely with respect to determinations of Variable
Rent and Rent Periods, dealings in Dollars are carried on in the
London interbank market.
"Casualty" shall mean any of the following events in respect of the
Aircraft: (a) the loss of the Aircraft or the use thereof due to theft,
disappearance, destruction, damage beyond repair or the rendering of the
Aircraft permanently unfit for normal use for any reason whatsoever; (b) any
damage to the Aircraft which results in an insurance settlement with respect to
the Aircraft on the basis of a total loss; (c) the permanent condemnation,
confiscation or seizure of, or requisition of title to or use of, the Aircraft,
other than as a result of Lessor's breach of its obligations under Section 6.2
of the Lease; (d) as a result of any rule, regulation, order or other action by
any Authority, the use of the Aircraft in the normal course of business shall
have been prohibited, directly or indirectly, for a period of six consecutive
months or until the end of the Lease Term, if earlier, or in any event, if use
of the Aircraft shall have been prohibited, directly or indirectly, for a
period of six consecutive months or until the end of the Lease Term, if
earlier; or (e) the operation or location of the Aircraft, while under
requisition for use by any Authority, in any area excluded from coverage by any
insurance policy then in effect with respect to the Aircraft required by the
terms of Article IX of the Lease, if Lessee shall be unable to obtain indemnity
in lieu thereof from such Authority; provided that for the purpose of the
foregoing clause (e), if the Aircraft shall be returned to Lessee prior to the
Casualty Settlement Date in such condition that a Casualty would not otherwise
be deemed to exist with respect thereto, then such event shall, at the option
of Lessee, not constitute a Casualty.
"Casualty Amount" shall mean, with respect to any Casualty, an amount
equal to the Lease Balance on the Casualty Settlement Date.
3
<PAGE> 8
"Casualty Date" shall mean the date of occurrence of any Casualty.
"Casualty Notice" shall have the meaning provided in Section 8.1 of
the Lease.
"Casualty Proceeds" shall have the meaning provided in Section 8.2 of
the Lease.
"Casualty Settlement Date" shall have the meaning provided in Section
8.1 of the Lease.
"Charges" shall mean (a) delivery and other similar costs with respect
to the Aircraft and (b) applicable sales, use or similar taxes imposed upon the
Aircraft which Lessor may agree to pay.
"Closing Date" shall mean the date on which (i) the Aircraft is
delivered to, and accepted by, the Lessor and Lessee pursuant to Section 2.2
hereinbelow, and (ii) the transaction contemplated by the Operative Documents
shall be consummated.
"Default Rate" shall mean that rate of interest that is 2% per annum
above Lessor's Prime Rate.
"Dollar" and the sign "$" mean lawful money of the United States.
"Engine" means: (A) each of the two Pratt & Whitney PW-305 Turbofan
Engines listed by manufacturer's numbers PCE 305269 and PCE 305265, whether or
not from time to time installed on the Airframe or installed on any other
aircraft; and (B) except as otherwise provided in Section 7.4 of the Lease, any
and all Parts (other than Engines or engines) incorporated or installed in or
attached thereto or any and all parts removed therefrom so long as title
thereto shall remain vested in Lessor in accordance with the terms of Section
7.4 of the Lease after removal from such Engine. The term "Engines" means, as
of any date of determination, all Engines then leased under the Lease and all
such Engines shall meet the noise standards for Stage 3 compliant aircraft
established by the FAA in FAR Part 36, Appendix C (14 C.F.R. Part 36, Appendix
C).
"Equipment Cost" shall mean, as of the Closing Date, the actual
purchase price of the Aircraft as specified in the Lease Supplement.
"Event of Default" shall have the meaning provided in Section 8.1 of
the Lease.
"Existing Lease" shall mean that certain Aircraft Lease Agreement
(Short Term), dated September 3, 1996, pursuant to which the Lessee agreed to
lease the Aircraft from the Lessor on a short term basis.
4
<PAGE> 9
"FAA" and "Federal Aviation Administration" mean the United States
Federal Aviation Administration, the Administrator thereof and any agency or
governmental instrumentality succeeding to their functions.
"Fair Market Value" shall mean, with respect to the Aircraft as of any
date, the price which a purchaser would pay to purchase the Aircraft in an
arm's-length transaction between a willing buyer and a willing seller, neither
of them being under any compulsion to buy or sell. In making any determination
of Fair Market Value the Appraiser may assume the Aircraft has been maintained
in accordance with the requirements of the Lease and that the Aircraft is in
the condition in which it is required to be hereunder as of the date for which
such determination is made. The Appraiser shall use such reasonable methods of
appraisal as are chosen by Lessor.
"FAR" means the Federal Aviation Regulations promulgated by the FAA.
"Federal Aviation Act" means Title 49 of the United States Code,
Subtitle VII -- Aviation Programs, as amended or supplemented, or any
subsequent legislation that supersedes such statute or any part thereof.
"Fixed Purchase Price Option" shall have the meaning provided under
Section 12.1.(a) of the Lease.
"Fixed Rent" shall mean, for each Payment Date during the Base Period,
that portion of the installment of Rent payable on such Payment Date set forth
in the Amortization Schedule.
"Guarantee" shall mean the Guarantee executed and delivered by a
Guarantor, as amended, modified or supplemented from time to time.
"Guarantor" shall mean Pediatrix Medical Group, Inc., a Florida
corporation.
"Incipient Default" shall mean an event or condition which, with the
giving of notice or the passage of time or both, would constitute an Event of
Default under the Lease or any other Operative Document.
"Indebtedness" of any Person shall mean, without duplication (i) all
obligations of such Person which in accordance with GAAP would be shown on the
balance sheet of such Person as a liability (including, without limitation,
obligations for borrowed money and for the deferred purchase price of property
or services, obligations evidenced by bonds, debentures, notes or other similar
instruments, and contingent reimbursement obligations under undrawn letters of
credit); (ii) all capitalized lease obligations; (iii) all guaranteed
indebtedness of such Person; (iv) Indebtedness of others secured by any Lien
upon property owned by such Person,
5
<PAGE> 10
whether or not assumed; and (v) obligations or other liabilities under currency
contracts, interest rate hedging contracts, or similar agreements or
combinations thereof.
"Indemnitee(s)" shall mean Lessor, any Affiliate and any assignee,
officer, director, employee, attorney or agent of Lessor.
"Initial Transaction Costs" shall mean the following costs:
(i) legal fees and expenses of Akerman, Senterfitt &
Eidson, P.A., and any local or special counsel, incurred by Lessor in
connection with the negotiation, execution and delivery of the
Operative Documents, and the transactions contemplated thereby;
(ii) the fees and expenses of the Appraiser in connection
with the Appraisal; and
(iii) the Administrative Fee.
"Insolvency Event" shall mean, with respect to any Person, any event
pursuant to which such Person makes an assignment for the benefit of creditors,
files a petition in bankruptcy, petitions or applies to any tribunal for the
appointment of a custodian, receiver or any trustee for it or for a substantial
part of its property, commences any proceeding under any bankruptcy,
reorganization, arrangement, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction, whether now or hereafter in effect,
consents or acquiesces in the filing of any such petition, application,
proceeding or appointment of or taking possession by the custodian, receiver,
liquidator, assignee, trustee or sequestrator (or other similar official) of
such Person or any substantial part of its property, or admits its inability to
pay its debts generally as they become due, or authorizes any of the foregoing
to be done or taken on behalf of such Person.
"Interest Rate" shall mean the LIBO Rate plus the Applicable Margin.
"Lease" shall mean that certain Aircraft Lease Agreement, dated as of
September 5, 1996, by and between Lessor and Lessee, as amended, modified or
supplemented from time to time.
"Lease Balance" shall mean, as of any determination date, the
aggregate Equipment Cost and Charges of the Aircraft actually advanced by
Lessor, minus all amounts of Fixed Rent and Reduction Amounts actually paid to
the date of determination. In no event shall the Lease Balance exceed
$10,500,000.00.
"Lease Supplement" shall mean the Lease Supplement No. 1 by and
between Lessor and Lessee dated the Closing Date.
6
<PAGE> 11
"Lease Term" shall have the meaning provided in Section 3.1 of the
Lease.
"Leased Equipment" shall mean all of Lessee's right, title and
interest in and to each of the following, whether now existing or hereafter
arising or acquired, and wherever located:
(a) the Aircraft;
(b) all contracts necessary to purchase and operate the
Aircraft, including all warranties, certificates of title,
registrations and similar documentation;
(c) any rebate, offset, buyback or other similar rights
under a purchase order, invoice or purchase agreement with the
manufacturer of the Aircraft;
(d) all books, manuals, logs, records, writings, data
bases, information and other property relating to, used or useful in
connection with, evidencing, embodying or incorporating any of the
foregoing;
(e) any permitted subleases of the Aircraft; and
(f) all products, accessions and proceeds of and from any
and all of the foregoing Leased Equipment (including proceeds which
constitute property of the types described in clauses (a), (b), (c),
(d) and (e) above and, to the extent not otherwise included, all
payments under insurance (whether or not Lessor is the loss payee
thereof), or any indemnity, warranty or guaranty, payable by reason
of loss or damage to or otherwise with respect to any of the
foregoing Leased Equipment ).
"Lessee" shall have the meanings provided in the preamble to the
Lease.
"Lessor" shall have the meaning provided in the preamble to the Lease.
"Lessor Liens" shall mean Liens or other conveyances resulting from
(i) any act of or claim against or affecting Lessor (or any Person claiming by,
through or under Lessor), not related to transactions contemplated by or
expressly permitted by this Lease, (ii) acts or omissions of Lessor not related
to the transactions contemplated by this Lease; (iii) claims for Taxes for
which Lessee is not responsible to indemnify Lessor under this Lease and (iv)
claims arising out of the transfer by Lessor of all or part of its interest in
the Aircraft or this Lease, in each case arising out of any event or condition
not related to the exercise of Lessor's rights or the performance of its duties
expressly provided under any Operative Document.
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"LIBO Rate" means, relative to any Rent Period with respect to the
Lease Balance, the rate per annum determined by Lessor to be the offered rate
per annum at which deposits in United States Dollars appears on the Telerate
System Page 3750 (or any successor page), determined as of 11:00 a.m. (London
time) two Business Days prior to the beginning of such Rent Period for delivery
on the first day of such Rent Period, and in an amount approximately equal to
the amount of the Lease Balance and for a period approximately equal to three
months.
"Lien" shall mean: (a) any interest in property securing an obligation
owed to, or claimed by, a Person other than the owner of the property, whether
such interest is based on common law, statute or contract, and including,
without limitation, any judgment lien, security interest, mortgage,
encumbrance, pledge, conditional sale, right of distraint or trust receipt or a
lease, consignment or bailment for security purposes; or (b) any reservation,
exception, encroachment, easement, right-of-way, covenant, condition,
restriction, lease or other title exception or defect, cloud on title or
encumbrance affecting property.
"Manufacturer" shall mean Learjet, Inc., the manufacturer of the
Aircraft.
"Officer's Certificate" shall mean a certificate executed on behalf of
any entity by its President, one of its Vice Presidents, its Chief Financial
Officer, its Treasurer, its Assistant Treasurer, its Controller or its
Secretary.
"Operative Document(s)" shall mean the Lease, the Lease Supplement,
the Guarantee, permitted subleases of the Aircraft and each UCC financing
statement filed or to be filed from time to time with respect to the security
interests created pursuant to the Lease.
"Opinion of Counsel" shall mean an opinion of counsel to Lessee in
form and content acceptable to Lessor.
"Option Exercise Amount" shall mean the sum of (i) all accrued and
unpaid Rent payable on or before the Termination Date, (ii) the Lease Balance
(after giving effect to any payments pursuant to clause (i) above, specifically
applied in reduction of the Lease Balance), and (iii) all other fees and
expenses and other amounts then due and payable pursuant to any of the
Operative Documents.
"Part(s)" shall mean all appliances, parts, instruments,
appurtenances, accessories, furnishings and other equipment of whatever nature
that may from time to time be incorporated or installed in or attached to the
Aircraft.
"Payment Date" shall mean the last day of each Rent Period.
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"Permitted Contest" shall mean actions taken by a Person to contest in
good faith, by appropriate proceedings initiated timely and diligently
prosecuted, the legality, validity or applicability of: (a) any law,
regulation, rule, judgment, order, or other legal provision or judicial or
administrative requirements; (b) any term or condition of, or any revocation or
amendment of, or other proceeding relating to, any authorization or other
consent, approval or other action by any Authority; or (c) any Lien; provided
that the initiation, prosecution and continuation of such contest would not and
does not: (i) result in, or materially increase the risk of, the imposition of
any criminal liability on any Indemnitee; (ii) materially and adversely affect
the security interests created by the Lease or the right, title or interest of
Lessor in or to the Aircraft or the right of Lessor to receive payment of Rent
or the Lease Balance or any interest therein; or (iii) materially and adversely
affect the Fair Market Value, utility or remaining useful life of the Aircraft
or any interest therein or the continued economic operation thereof; and
provided further that in any event adequate reserves in accordance with GAAP
are maintained against any adverse determination of such contest.
"Permitted Lessor Liens" shall mean Lessor Liens: (a) for Taxes of
Lessor either not yet due or being challenged by a Permitted Contest; (b)
arising out of judgments or awards against Lessor with respect to which at the
time an appeal or proceeding for review is being prosecuted by a Permitted
Contest; and (c) arising out of Liens arising voluntarily in the ordinary
course of business of Lessor for amounts the payment of which is either not
delinquent or is being contested by a Permitted Contest.
"Permitted Liens" shall mean: (i) any rights in favor of Lessor under
the Operative Documents; (ii) any Lien, (including, without limitation, Liens
of carriers, warehousemen, mechanics or materialmen) in favor of any Person
securing payment of the price of goods or services provided in the ordinary
course of business for amounts the payment of which is not overdue or is being
contested pursuant to a Permitted Contest; (iii) any Lessor Lien; (iv) any Lien
for current taxes, assessments or other governmental charges which are not
delinquent or the validity of which is being contested by a Permitted Contest;
and (v) attachments, judgments and other similar Liens arising in connection
with court proceedings, provided the execution or other enforcement of such
Liens is effectively stayed and the claims secured hereby are being contested
pursuant to a Permitted Contest.
"Person" shall mean any individual, partnership, corporation, trust,
unincorporated association or joint venture, a government or any department or
agency thereof or any other legal entity.
"Prime Rate" shall mean the interest rate (not necessarily the best or
lowest rate) announced by SunTrust Banks of Florida, Inc. ("SunTrust") from
time to time as its prime rate (which rate is only a benchmark, is purely
discretionary, and is not necessarily
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the best or lowest rate charged borrowing customers of any subsidiary of
SunTrust), with any change in the Prime Rate to be effective on the day any
such change in the Prime Rate is announced by SunTrust.
"Proceeds" shall have the meaning provided in Section 12.1.(b) of the
Lease.
"Purchase Option Exercise Amount" shall mean the sum of (i) all
accrued and unpaid Rent payable on or before the Termination Date, (ii) the
Lease Balance (after giving effect to any payments pursuant to clause (i) above
specifically applied in reduction of the Lease Balance), and (iii) all other
fees and expenses and other amounts then due and payable pursuant to any of the
Operative Documents.
"Reduction Amounts" shall mean amounts paid by Lessee to Lessor for
the purchase of the Aircraft pursuant to Section 8.1 or 12.1 of the Lease,
provided, that "Reduction Amounts" shall not include any Rent or any costs,
expenses or taxes to be paid by Lessee in connection with any such purchase,
sale or transfer.
"Rent" shall mean, with respect to the Lease or the Lease Supplement
(as the context may require) all installments of Fixed Rent and Variable Rent
due and payable by Lessee on each Payment Date during the Lease Term.
"Rent Period" shall mean, during the Base Period with respect to the
Lease Supplement, (i) the period commencing on (and including) the Base Date
and ending on (but excluding) the Payment Date, which numerically corresponds
to such date three months thereafter, (ii) the period commencing on (and
including) the Payment Date and ending on (but excluding) the date which
numerically corresponds to such date three months thereafter, with each such
period ending on the date which numerically corresponds to the date on which
such period commenced, provided, however, that (x) if any Rent Period would
otherwise expire on a day which is not a Business Day but is a day of the month
after which no further Business Day occurs in such month, such Rent Period
shall expire on the next preceding Business Day and (y) no Rent Period may end
later than the last day of the Lease Term.
"Responsible Officer" of any Person shall mean: (i) in the case of any
business corporation, the chairman of the board of directors of such
corporation if such chairman is an officer of such corporation, the president,
any vice president or any assistant vice president of such corporation, the
secretary or any assistant secretary of such corporation or the treasurer or
any assistant treasurer of such corporation; (ii) in the case of any
partnership, a general partner (if such general partner is an individual), or a
Responsible Officer of a corporate general partner, of such partnership or the
general manager of such partnership or any assistant general manager of such
partnership;
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and (iii) in the case of any commercial bank or trust company, the chairman or
vice chairman of the board of directors or trustees of such bank or trust
company, the chairman or vice chairman of the executive committee of the board
of directors or trustees of such bank or trust company, the president, any vice
president, the secretary, any assistant secretary, the treasurer, any assistant
treasurer, the cashier, any assistant cashier, any trust officer or any
assistant trust officer of such bank or trust company, the controller or any
assistant controller of such bank or trust company, any executive or senior or
assistant or second vice president of such bank or trust company or any other
individual who is employed by such bank or trust company and customarily
performs functions similar to those performed by any of the other officers of
such bank or trust company referred to herein.
"Revolving Credit Agreement" shall mean that certain Pediatrix Medical
Group First Amended and Restated Credit Agreement, dated as of June 27, 1996,
among the Guarantor, the Banks listed therein and First National Bank of
Boston, as Agent, as amended, restated, replaced, refinanced, supplemented,
waived and otherwise in effect from time to time, including any similar
successor agreement or agreements or arrangement or arrangements providing for
revolving or working capital indebtedness, whether or not secured; provided,
that if at any time there shall exist no such arrangement or agreement, the
term "Revolving Credit Agreement" shall be deemed to refer to the last such
agreement or arrangement to have been in effect, exclusive of any modification
to the terms of such agreement or arrangement that were made in contemplation
of the termination thereof.
"Sale Option" shall have the meaning provided under Section 12.1.(b)
of the Lease.
"Subsidiary" shall mean, with respect to any Person, any corporation,
association, partnership, joint venture or other business entity more than 50%
(by number of votes) of the stock of any class or classes (or equivalent
interests) of which is at the time owned by such Person or by one or more
Subsidiaries of such Person, if the holders of the stock of such class or
classes (or equivalent interests) (a) are ordinarily, in the absence of
contingencies, entitled to vote for the election of a majority of the directors
(or Persons performing similar functions) of such business entity, even though
the right so to vote has been suspended by the happening of such a contingency,
or (b) at the time entitled, as such holders, to vote for the election of a
majority of the directors (or Persons performing similar functions) of such
business entity, whether or not the right so to vote exists by reason of a
happening of a contingency.
"Taxes" shall mean any present or future taxes, levies,
imposts, duties, fees, assessments, deductions, withholdings or other charges
of whatever nature, including without limitation, income, receipts, excise,
property, sales, transfer, license,
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payroll, withholding, social security and franchise taxes now or hereafter
imposed or levied by the United States, or any state, local or foreign
government or by any department, agency or other political subdivision or
taxing authority thereof or therein and all interest, penalties, additions to
tax and similar liabilities with respect thereto.
"Termination Date" shall mean the date the Lease Term ends pursuant to
(a) Article X of the Lease relating to termination as a result of an Event of
Default, (b) Article XII of the Lease or (c) Article XIV of the Lease.
"UCC" shall mean the Uniform Commercial Code, as in effect from time
to time in any applicable jurisdiction.
"Variable Rent" shall mean, for each Rent Period with respect to the
Lease Balance, an amount equal to interest accrued on the Lease Balance
outstanding during such Rent Period at the Interest Rate.
ARTICLE II
PURCHASE; DELIVERY AND ACCEPTANCE; OWNERSHIP;
CANCELLATION OF EXISTING LEASE
Section 2.1. Purchase of Aircraft. The parties acknowledge that
Lessee has previously paid to the Manufacturer the Equipment Cost of the
Aircraft. On the Closing Date, subject to the terms and conditions of this
Lease (including the conditions precedent set forth herein), Lessor shall
reimburse Lessee for such payment and lease the Aircraft to the Lessee and, to
accomplish said purchase and lease (to the extent that they have not already
done so), Lessor and Lessee shall take the following action with respect to the
Aircraft and consummation of the transaction contemplated hereby:
(a) Lessor shall:
(i) Authorize a representative (who shall be
designated by Lessee and acceptable to Lessor) to accept
delivery of the Aircraft on behalf of Lessor and Lessee on the
Closing Date pursuant to this Lease;
(ii) Take such appropriate action as may be
reasonably requested by Lessee and at Lessee's expense in
connection with the application to the FAA for registration of
the Aircraft in the name of Lessee;
(iii) Execute and deliver the Lease Supplement; and
(iv) Reimburse Lessee in the amount of the
Equipment Cost of the Aircraft by transferring such amount in
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immediately available funds to the Lessee at such bank account as
Lessee may direct.
(b) Lessee. Subject to the terms and conditions of this
Lease and any other Operative Document (including the conditions
precedent set forth herein), and upon payment by Lessor to Lessee of
the Equipment Cost of the Aircraft, on the Closing Date Lessee shall
lease the Aircraft from Lessor and, to accomplish such lease, shall
(to the extent that it has not already done so) take the following
action with respect to the Aircraft and consummation of the
transactions hereby:
(i) Accept delivery of the Aircraft for purposes of
the Lease, and in accordance with the terms thereof (such
acceptance to be made by the employee of Lessee who is
accepting delivery of the Aircraft for Lessor pursuant to
Section 2.2 hereof);
(ii) Execute and deliver the Lease, the Lease
Supplement and the other Operative Documents;
(iii) Deliver or cause to be delivered to Lessor the
Opinion of Counsel and all other documents and certificates
and take all other actions as are required to be executed and
delivered or taken by Lessee on or before the Closing Date
pursuant to any Operative Document and for the purpose of
consummating the transaction contemplated herein;
(iv) Deliver to Lessor a State of Florida sales tax
resale certificate which shall be acceptable to Lessor in form
and content; and
(v) Pay the Initial Transaction Costs.
Section 2.2. Acceptance Procedure. Lessor hereby authorizes one
or more employees of Lessee, to be designated by Lessee in one or more
Officer's Certificates delivered to Lessor pursuant to the terms hereof, as the
authorized representative or representatives of Lessor to accept delivery of
the Aircraft under this Lease. Lessee hereby agrees that the execution and
delivery by Lessee on the Closing Date of the Lease Supplement shall, without
further act, constitute such an Officer's Certificate and shall constitute the
irrevocable acceptance by Lessee under this Lease of the Aircraft for all
purposes of this Lease on the terms set forth herein.
Section 2.3. Ownership. At all times during the Lease Term, full
legal title to the Aircraft shall remain vested in Lessor to the exclusion of
Lessee; notwithstanding the possession and use thereof by Lessee, provided,
however, Lessor and Lessee agree that as between Lessor and Lessee, solely for
Federal and state tax purposes, Lessee shall be deemed to be the owner of the
Aircraft.
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Section 2.4. Cancellation of Existing Lease. By execution of this
Lease, Lessor and Lessee hereby agree that the Existing Lease is cancelled and
terminated effective immediately and neither Lessor nor Lessee shall have any
further liability or obligation whatsoever with respect to each other in
respect of the Existing Lease.
ARTICLE III
LEASE TERM
Section 3.1. Lease Term. Unless earlier terminated, the term of
this Lease (the "Lease Term") shall commence on and include the Closing Date
and end on but not include the tenth anniversary of the Closing Date.
ARTICLE IV
RENT; OTHER ECONOMIC PROVISIONS
Section 4.1. Rent Payments.
(a) Lessee shall pay to Lessor the amounts of Rent
determined in accordance with this Section 4.1 and the Lease
Supplement. On each Payment Date during the Base Period, Lessee shall
pay to Lessor the Rent consisting of the amount of Fixed Rent set
forth opposite the applicable Payment Date on the Amortization
Schedule and Variable Rent accrued on the Lease Balance during the
Rent Period ended on such Payment Date.
(b) Determination of Fixed Rent and Applicable
Percentage. On or before the Base Date Lessor shall determine the
Fixed Rent in respect of the Aircraft, which shall be an amount equal
to the quotient of (i) the Equipment Cost less $3,960,000.00, divided
by (ii) the number of Payment Dates scheduled to occur during the Base
Period. On or before the Base Date, Lessor shall calculate the
Applicable Percentage. The Lessor shall notify Lessee on the Base
Date of (A) Fixed Rent and corresponding Payment Dates for the Base
Period, which shall be included in the Amortization Schedule and (B)
the Applicable Percentage and the corresponding Applicable Percentage
Amount.
Section 4.2. Place and Manner of Payment. Rent and all other sums
due to Lessor hereunder shall be paid in immediately available funds at the
office of Lessor or at such other office of Lessor as it may from time to time
specify to Lessee in a notice pursuant to this Lease. Lessee shall pay to
Lessor, on demand, interest at the Default Rate on any overdue amount of Rent
or any other payment due under this Lease (including, without limitation, any
reasonable fees, expenses or Proceeds) from the date due (not taking into
account any grace period) until payment is made.
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Section 4.3. Other Amounts. Any amount owing under this Lease and
not otherwise paid prior thereto shall be due and payable on the Termination
Date.
Section 4.4. Net Lease. This Lease is a net lease and Lessee's
obligation to pay all Rent, indemnities and other amounts payable hereunder
shall be absolute and unconditional under any and all circumstances and,
without limiting the generality of the foregoing, Lessee shall not be entitled
to any abatement or reduction of Rent or any setoff against Rent, indemnities
or other amounts, whether arising by reason of any past, present or future
claims of any nature by Lessee against Lessor, or otherwise. Except as
otherwise expressly provided herein, this Lease shall not terminate, nor shall
the obligations of Lessee be otherwise affected: (a) by reason of any defect
in, damage to, or loss of possession or use, obsolescence or destruction, of
the Aircraft, however caused; or (b) by the taking or requisitioning of the
Aircraft by condemnation or otherwise; or (c) by the invalidity or
unenforceability or lack of due authorization by Lessor or Lessee or other
infirmity of this Lease; or (d) by lack of power or authority of Lessor to
enter into this Lease or any other Operative Document; or (e) by the attachment
of any Lien of any third party to the Aircraft; or (f) by any prohibition or
restriction of or interference with Lessee's use of the Aircraft by any Person;
or (g) by the insolvency of or the commencement by or against Lessor of any
bankruptcy, reorganization or similar proceeding; or (h) by any other cause,
whether similar or dissimilar to the foregoing, any present or future law to
the contrary notwithstanding. It is the intention of the parties that all
Rent, indemnities and other amounts payable by Lessee hereunder shall be
payable in all events in the manner and at the times herein provided unless
Lessee's obligations in respect thereof have been terminated or modified
pursuant to the express provisions of this Lease. To the extent permitted by
applicable law, Lessee hereby waives any and all rights which it may now have
or which may at any time be conferred upon it, by statute or otherwise, to
terminate, cancel, quit or surrender this Lease, in whole or in part, except
strictly in accordance with the express terms hereof. Each rental, indemnity
or other payment made by Lessee hereunder shall be final, and Lessee shall not
seek to recover (except as expressly provided in this Lease) all or any part of
such payment from Lessor for any reason whatsoever except as a result of
overpayment by Lessee. Without affecting Lessee's obligation to pay Rent or
other amounts payable hereunder, Lessee may seek damages for a breach by Lessor
of its obligations under this Lease.
Section 4.5. Capital Adequacy. Without limiting any other provision
of this Lease, in the event that Lessor shall have determined that the adoption
of any law, treaty, governmental (or quasi-governmental) rule, regulation,
guideline or order regarding capital adequacy not currently in effect or fully
applicable as of the Closing Date, or any change therein or in the
interpretation or application thereof after the Closing Date, or compliance by
Lessor
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with any request or directive regarding capital adequacy not currently in
effect or fully applicable as of the Closing Date (whether or not having the
force of law and whether or not failure to comply therewith would be unlawful)
from a central bank or governmental authority or body having jurisdiction, does
or shall have the effect of reducing Lessor's rate of return on the Lease
Balance to a level below that which Lessor would have achieved but for such
law, treaty, rule, regulation, guideline or order, or such change or compliance
(taking into consideration Lessor's policies with respect to capital adequacy
by an amount deemed by such Lessor to be material, then within ten Business
Days after written notice and demand by Lessor, Lessee shall from time to time
pay to such Lessor additional amounts sufficient to compensate Lessor for such
reduction. Each certificate as to the amount payable under this Section 4.5
(which certificate shall set forth the basis for requesting such amounts in
reasonable detail), submitted to Lessee by the Lessor in good faith, shall,
absent manifest error, be final, conclusive and binding for all purposes.
Section 4.6. LIBO Rate Not Ascertainable, etc. In the event that
the Lessor shall have determined (which determination shall be made in good
faith and, absent manifest error, shall be final, conclusive and binding upon
all parties) that on any date for determining the LIBO Rate for any Rent
Period, by reason of any changes arising after the date of this Lease affecting
the London interbank market and fair means do not exist for ascertaining the
applicable interest rate on the basis provided for in the definition of the
LIBO Rate then, and in any such event, the Lessor shall forthwith give notice
(by telephone confirmed in writing) to Lessee of such determination and a
summary of the basis for such determination. Until the Lessor notifies Lessee
that the circumstances giving rise to the suspension described herein no longer
exist, the obligations of the Lessor to permit Variable Rent to accrue at the
LIBO Rate shall be suspended, and, during the term of such suspension, Variable
Rent shall accrue at one hundred seventy-five basis points (1.75%) below the
Prime Rate.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF LESSEE
Lessee represents, warrants and covenants to Lessor that, as of the
date hereof the below representations and warranties are true and correct and,
at all times during the Lease Term, will remain true and correct:
Section 5.1. Organization and Qualification. Lessee is a
corporation duly organized and existing in good standing under the laws of the
State of Florida. Each Subsidiary of Lessee is a corporation duly organized
and existing under the laws of the jurisdiction of its incorporation. Lessee
and each of its Subsidiaries are duly qualified to do business as a foreign
corporation and are in good standing in each jurisdiction in which
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<PAGE> 21
the character of their properties or the nature of their business makes such
qualification necessary, except for such jurisdictions in which a failure to
qualify to do business would not have a materially adverse effect. Lessee and
each of its Subsidiaries have the corporate power to own their respective
properties and to carry on their respective businesses as now being conducted.
Section 5.2. Corporate Authority. The execution and delivery by
the Lessee of and the performance by Lessee and the Guarantor of its
obligations under the Operative Documents have been duly authorized by all
requisite corporate action and all requisite shareholder action, if any, on the
part of Lessee and the Guarantor and do not and will not (i) violate any
provision of any law, rule or regulation, any judgment, order or ruling of any
court or governmental agency, the organizational papers or bylaws of Lessee and
the Guarantor, or any indenture, agreement or other instrument to which Lessee
or the Guarantor is a party or by which Lessee or the Guarantor or any of their
properties are bound, or (ii) be in conflict with, result in a breach of, or
constitute with notice or lapse of time or both a default under any such
indenture, agreement or other instrument.
Section 5.3. Financial Statements. Lessee has furnished Lessor with
the audited consolidated financial statements of Guarantor as at December 31,
1995 and the unaudited consolidated financial statements of Guarantor for the
two (2) fiscal quarters ended March 31, 1996 and June 30, 1996. Such financial
statements (including any related schedules and notes) are true and correct in
all material respects (subject, as to interim statements, to the absence of
certain footnote disclosures required in audited statements under GAAP and to
changes resulting from audits and year end adjustments), have been prepared in
accordance with GAAP consistently applied throughout the period or periods in
question and show, in the case of audited statements, all liabilities, direct or
contingent, of Guarantor and its Subsidiaries, required to be shown in
accordance with GAAP consistently applied throughout the period or periods in
question and fairly present the consolidated financial position and the
consolidated results of operations of the Guarantor and its Subsidiaries for the
periods indicated therein. There has been no material adverse change in the
business, condition or operations, financial or otherwise, of Guarantor on a
consolidated basis since the dates of such financial statements.
Section 5.4. Tax Returns. Each of Guarantor and its Subsidiaries has
filed all federal, state and other income tax returns which, to the best
knowledge of Guarantor and its Subsidiaries, are required to have been filed,
and each has paid all taxes as shown on said returns and on all assessments
received by it to the extent that such taxes have become due or except such as
are being contested in good faith by appropriate proceedings for which adequate
reserves have been established in accordance with GAAP.
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Section 5.5. Actions Pending. There is no action, suit,
investigation or proceeding pending or, to the knowledge of Guarantor,
threatened against or affecting Guarantor or any of its Subsidiaries or any of
their properties or rights, by or before any court, arbitrator or
administrative or governmental body, which, if adversely determined would
result in a material adverse effect on the Guarantor on a consolidated basis.
Section 5.6. Title to Properties and Assets; Liens, etc. Each of
Guarantor and its Subsidiaries has (i) good and marketable fee simple title to
its respective real properties (other than real properties which it leases from
others), and good title to all of its other respective properties and assets,
including all such assets reflected in the financial statements described in
Section 5.3, above (other than properties and assets disposed of in the
ordinary course of business). Each of Guarantor and its Subsidiaries enjoys
peaceful and undisturbed possession under all leases necessary in any material
respect for the operation of its respective properties and assets, none of
which contains any unusual or burdensome provisions which materially affect or
impair the operation of such properties and assets, and all such leases are
valid and subsisting and in full force and effect against the Lessee.
Section 5.7. Enforceability of Lease. This Lease is the legal, valid
and binding agreement of Lessee enforceable against Lessee in accordance with
its terms, and all other Operative Documents, when executed and delivered, will
be similarly legal, valid, binding and enforceable as against Lessee and
Guarantor, as the case may be, except as the enforceability of the other
Operative Documents may be limited by bankruptcy, insolvency, reorganization,
moratorium and other laws affecting creditor's rights and remedies in general
and by general principles of equity, whether considered in a proceeding at law
or in equity.
Section 5.8. Governmental Consent. Neither the nature of Guarantor or
any of its Subsidiaries nor any of their respective businesses or properties,
nor any relationship between Guarantor or Lessee and any other Person, nor any
circumstance in connection with the execution and delivery of the Operative
Documents and the consummation of the transactions contemplated thereby is such
as to require on behalf of Guarantor or any of its Subsidiaries any consent,
approval or other action by or any notice to or filing with any court or
administrative or governmental body in connection with the execution and
delivery of this Lease and the Operative Documents, except such filings as are
necessary to perfect the Lessor's Liens.
Section 5.9. Solvency. Each of the Lessee and the Guarantor is
solvent and able to pay its debts as and when they accrue and are due.
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Section 5.10. Perfection of Title. Except for (i) the registration
of the Aircraft in the name of Lessee pursuant to the Federal Aviation Act,
(ii) the filing and recordation of the Lease, with the executed Lease
Supplement and the FAA Bill of Sale covering the Aircraft pursuant to the
Federal Aviation Act and (iii) the filing of UCC financing statements, no
further action, including any filing or recording of any document, is necessary
in order to establish and perfect Lessor's title to and interest in the
Aircraft.
Section 5.11. Warranty of Title. On the Closing Date, Lessor will
have received good and marketable title to the Aircraft free and clear of all
Liens (other than Permitted Liens), such title will not be voidable by Lessee's
creditors and Lessee will defend such title forever against all claims and
demands whatsoever.
ARTICLE VI
WARRANTIES
Section 6.1. Warranty Disclaimer. LESSEE ACKNOWLEDGES AND AGREES
THAT: (A) THE AIRCRAFT IS OF A SIZE, DESIGN, CAPACITY AND MANUFACTURE SELECTED
BY LESSEE; (B) LESSEE IS SATISFIED THAT THE SAME IS SUITABLE FOR ITS PURPOSES;
(C) LESSOR IS NOT A MANUFACTURER THEREOF OR A DEALER IN PROPERTY OF SUCH KIND;
AND (D) LESSOR HAS NOT MADE NOR SHALL BE DEEMED TO HAVE MADE: (I) ANY
REPRESENTATION, WARRANTY OR COVENANT WITH RESPECT TO THE TITLE,
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, CONDITION, QUALITY,
DESCRIPTION, DURABILITY OR SUITABILITY OF THE AIRCRAFT IN ANY RESPECT OR IN
CONNECTION WITH OR FOR THE PURPOSES AND USES OF LESSEE; OR (II) ANY OTHER
REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE
AIRCRAFT.
Section 6.2. Quiet Enjoyment. So long as no Event of Default
shall have occurred and be continuing, neither Lessor nor any Person acting by,
through or under Lessor, shall take or cause to be taken any actions
inconsistent with the Lessee's rights under this Lease or otherwise in any way
interfere with the Lessee's quiet enjoyment, possession, use or operation of
the Aircraft during the Lease Term.
Section 6.3. Lessor Liens. Lessor represents and warrants to the
Lessee that there are no Lessor Liens attributable to the Lessor (or an
Affiliate thereof) against, on or with respect to the Aircraft and Lessor
covenants and agrees with Lessee that Lessor will, at its own cost and expense,
take such action as may be necessary to duly discharge and satisfy in full
promptly after the same become known to Lessor, any Lessor Lien against, on or
with respect to the Aircraft and shall indemnify and hold harmless the Lessee
from and against any loss, costs and expense or liability that may be suffered
by Lessee as a result of Lessor's failure to satisfy or discharge any Lessor
Lien attributable to it.
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ARTICLE VII
POSSESSION, ASSIGNMENT, USE AND
MAINTENANCE, INSPECTION AND RETURN OF AIRCRAFT
Section 7.1. Restriction on Lessee's Possession and Use. Lessee
shall not: (a) use, operate, maintain or store the Aircraft or any portion
thereof: (i) except in accordance with Section 7.2; or (ii) in violation of any
applicable insurance policy or law or regulation of any Authority; (b) except
as a result of a Casualty, abandon the Aircraft; (c) sublease or assign the
Aircraft or permit the operation thereof by anyone other than Lessee, in each
case unless it shall have obtained the prior written consent of Lessor (not to
be unreasonably withheld); (d), sell, assign or transfer any of its rights
hereunder or in the Aircraft, or directly or indirectly create, incur or suffer
to exist any Lien on any of its rights hereunder or in the Aircraft, except for
Permitted Liens; (e) permit the Aircraft to be registered in any jurisdiction
other than the United States of America; and (f) permit the Aircraft to be
based outside of the United States.
Section 7.2. Operation and Use, Maintenance, Registration.
(a) Operation and Use. Lessee shall operate the Aircraft
only in the normal course of conducting its business, and in any
event, Lessee shall not operate, use or locate the Aircraft or suffer
the Aircraft to be operated, used or located (i) in any area excluded
from coverage by any insurance required by the terms of Article IX
hereof or (ii) outside the United States, Canada and Mexico, Caribbean
and Western Europe. Lessee shall not permit the Aircraft to be used
or operated during the Lease Term in violation of any Applicable Law
or in violation of any airworthiness certificate, license or
registration relating to the Aircraft.
(b) Maintenance. Lessee, at its own cost and expense,
shall service, repair, maintain and overhaul, test or cause the same
to be done to the Airframe and each Engine during the Lease Term so as
to keep the Airframe and each Engine in such operating condition as
may be necessary to enable the airworthiness certification of the
Aircraft to be maintained in good standing at all times under the
applicable rules and regulations of the FAA. Lessee's servicing,
repairs, maintenance, overhaul and testing of the Airframe and each
Engine will be performed on the same basis, in the same manner and
with the same care as used by Lessee with respect to other, similar
airframes and engines owned or leased by Lessee, if any. Lessee shall
maintain or cause to be maintained all records, logs and other
materials required by the FAA to be maintained in respect to the
Aircraft.
(c) Registration and Insignia. Lessee, at its own
expense, upon the Closing Date shall cause the Aircraft to be
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duly registered in the name of Lessee under the Federal Aviation Act
and at all times thereafter during the Lease Term to remain so
registered. On the Closing Date, Lessee shall place and thereafter at
all times during the Lease Term maintain in the cockpit of the
Airframe in a location reasonably adjacent to the airworthiness
certificate and on each Engine, a metal nameplate identifying the
security interest of Lessor in the Aircraft, as follows:
"SUNTRUST BANK, CENTRAL FLORIDA, NATIONAL ASSOCIATION,
Owner and Lessor"
Lessee will not allow the name of any Person other than Lessee and
Lessor, or its successors or assigns, to be placed on the Aircraft or
any Engine as a designation that might be interpreted as a claim of
ownership or of any interest therein, provided, however, that Lessee
may operate the Aircraft in its livery, in its name and with its logo
thereon.
Section 7.3. Replacement, Removal of Parts.
(a) Replacement of Parts. Except as otherwise provided
in Section 7.4 hereof or if the Airframe or an Engine has suffered a
Casualty, Lessee, at its own cost and expense, will during the Lease
Term promptly replace all Parts that may from time to time become worn
out, lost, stolen, destroyed, seized, confiscated, damaged beyond
repair or permanently rendered unfit for use for any reason
whatsoever. In addition, in the ordinary course of maintenance,
service, repair, overhaul or testing, Lessee may remove any Parts,
whether or not worn out, lost, stolen, destroyed, seized, confiscated,
damaged beyond repair or permanently rendered unfit for use, provided
that Lessee shall, except as otherwise provided in Section 7.4 hereof,
replace such Parts as promptly as practicable with replacement Parts.
All replacement parts shall be free and clear of all Liens except
Permitted Liens and shall be in as good operating conditions as, and
shall have a value and utility at least equal to, the Parts replaced,
assuming such replaced Parts were in the condition and repair required
to be maintained by the terms hereof.
(b) Title to Parts. Except as otherwise provided in
Section 7.4 hereof, title to all Parts at any time removed from the
Airframe or any Engine shall remain vested in Lessor and no matter
where located, until such time as such Parts shall be replaced by
Parts that have been incorporated or installed in or attached to such
Airframe or Engine and that meet the requirements for replacement
Parts specified in Section 7.3.(a) hereof. Immediately upon any
replacement Part becoming incorporated or installed in or attached to
an Airframe or Engine as provided in Section 7.3.(a) hereof, without
further act, (i) title to the replaced Part shall thereupon vest in
Lessee, free and clear of all rights of
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Lessor and shall no longer be deemed a Part hereunder; (ii) title to
such replacement Part shall thereupon vest in Lessor; and (iii) such
replacement Part shall become subject to this Lease and be deemed part
of such Airframe or Engine, as the case may be, for all purposes
hereof to the same extent as the Parts originally incorporated or
installed in or attached to such Airframe or Engine.
Section 7.4. Alterations, Modifications and Additions. Lessee, at
its own expense, shall make alterations and modifications in and additions to
the Airframe and any Engine as may be required to be made from time to time
during the Lease Term by Applicable Law regardless upon whom such requirements
are, by their terms, nominally imposed. In addition, Lessee, at its own
expense, may from time to time make such alterations and modifications in and
additions to the Airframe and any Engine as Lessee may deem desirable in the
proper conduct of its business (including, without limitation, removal of
Parts), provided that no such alterations, modification or addition diminishes
the value, utility, condition or airworthiness of such Airframe or Engine below
the value, utility, condition or airworthiness thereof immediately prior to
such alterations, modification or addition, assuming such Airframe or Engine
was then in the condition required to be maintained by the terms of this Lease.
Title to all Parts incorporated or installed in or attached or added to the
Airframe or any Engine as the result of any alteration, modification or
addition effected by Lessee shall, without further act, vest in the Lessee and
become subject to the security interest created pursuant to Section 13.1 of
this Lease; provided, however, Lessee may remove any such Part from the
Airframe or an Engine if (i) such Part is in addition to, and not in
replacement of or in substitution for, any Part originally incorporated or
installed in or attached to such Airframe or Engine at the time of delivery
thereof hereunder or any Part in replacement of, or in substitution for, any
such original part, (ii) such Part is not required to be incorporated or
installed in or attached or added to such Airframe or Engine pursuant to the
terms of Section 7.2.(b) hereof or the first sentence of this Section 7.4, and
(iii) such Part is readily removable without causing material damage to such
Airframe or Engine and such Part can be removed from such Airframe or Engine
without diminishing or impairing the value, condition, utility or airworthiness
which such Airframe or Engine would have had at the time of removal had such
alteration, modification or addition not been effected by Lessee. Upon the
removal by Lessee of any such Part as above provided, title thereto shall,
without further act, vest in Lessee free and clear of all rights of Lessor and
such Part shall no longer be deemed a Part hereunder and Lessee shall, as soon
as practicable, repair any damage to the Aircraft or Engine resulting from the
removal of such Part. Any Part not removed by Lessee as above provided prior
to the return of the Airframe or respective Engine to Lessor hereunder shall
remain the property of Lessor all subject to this Lease. If any removable Part
is (i) owned by any third party and leased to Lessee or installed on
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the Aircraft under license granted to or by Lessee, or (ii) sold to Lessee
subject to a conditional sales contract or other security subject to a security
interest in favor of any third party, then Lessor will not acquire or claim, as
against such lessor, licensor, conditional vendor or secured party, any right,
title or interest in any such removable part as the result of such removable
part being installed in the Aircraft; provided, however, (I) that the inability
of Lessor to so acquire or claim is subject to the express condition that such
lessor, licensor, conditional vendor or secured party shall not acquire or
claim, as against Lessor, any right, title or interest in the Aircraft, or any
Part other than its interest in such removable Part by reason of such removable
Part being installed thereon, and (II) that any removable Part not removed by
Lessee within 60 days after the occurrence of an Event of Default which is
continuing uncured, shall, at such time, become the property of Lessor, and be
subject to this Lease. In no event shall Lessor bear any liability or cost for
any alteration, modification or addition to, or for any grounding or suspension
of certification of, the Aircraft, or for any loss of revenue arising
therefrom.
Section 7.5. Inspection of Aircraft. At all reasonable times
during the Lease Term (including, without limitation, during scheduled
maintenance visits), Lessor or its authorized representative may inspect the
Aircraft and the books and records of Lessee relative thereto. Lessor shall
have no duty to make any such inspection and shall not incur any liability or
obligation by reason of not making any such inspection.
Section 7.6. Return of Aircraft and Records.
(a) Return of Aircraft. Upon termination of this Lease
and the end of the Lease Term or upon the earlier termination of this
Lease pursuant to the terms hereof, unless Lessee shall purchase the
Aircraft or there shall have been a Casualty with respect to the
Aircraft, Lessee, at its own expense, shall, except as otherwise
expressly provided herein, return the Aircraft by delivering the same
to Lessor at such location in the continental United States of America
which shall be selected by Lessor. The Aircraft shall be fully
equipped with the two Engines duly installed thereon.
(b) Records. Upon the return of the Aircraft, Lessee
shall deliver to Lessor all logs, manuals, certificates and
inspection, modification and overhaul records which are required to be
maintained with respect thereto under applicable rules and regulations
of the FAA.
(c) Condition of Aircraft. The Aircraft when returned to
Lessor shall be in good operating condition and appearance, ordinary
wear and tear excepted, shall have a valid FAA certificate of
airworthiness issued by the FAA, and shall be in compliance with the
Lessee's FAA-approved maintenance
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program and all Applicable Laws governing the possession and use of
the Aircraft. The Aircraft shall be free and clear of all Liens other
than Lessor Liens and shall meet the additional return conditions of
Exhibit B hereto.
ARTICLE VIII
RISK OF LOSS; REPLACEMENT; WAIVER AND INDEMNITY
Section 8.1. Casualty. Upon the occurrence of a Casualty, Lessee
shall give prompt written notice thereof (a "Casualty Notice") to Lessor and
shall pay the Casualty Amount together with all Variable Rent accrued on such
Lease Balance to the date of payment which payment shall be made on the earlier
of (a) the date on which the loss proceeds are paid by Lessee's insurance
underwriters or brokers or (b) 60 days after the Casualty Date; provided that
in any event such repayment shall be made no later than the last day of the
Lease Term (the "Casualty Settlement Date").
Lessee shall continue to make all payments of Rent due under the Lease
Supplement until and including the Casualty Settlement Date. Upon payment of
the Casualty Amount on such Casualty Settlement Date, (a) the Lessee's
obligation to pay the remaining scheduled payments of Rent, if any, shall cease
and terminate, and (b) Lessor shall transfer to Lessee, without recourse or
warranty (except as to Lessor's own acts or omissions), all of its right, title
and interest in and to the Aircraft, free and clear of all Liens (other than
Liens arising by, through or under Lessee).
Section 8.2. Casualty Proceeds. All proceeds of any casualty
insurance or condemnation proceeds, to the extent of the Casualty Amount
("Casualty Proceeds") paid or payable to Lessee or any Affiliate of Lessee by
reason of a Casualty shall be paid to Lessor, unless Lessee shall have already
complied with the provisions of Section 8.1 with respect to such Casualty. Any
monies paid to Lessor attributable to a Casualty shall be remitted promptly to
Lessee after Lessee's full compliance with Section 8.1.
ARTICLE IX
INSURANCE
Section 9.1. Public Liability and Property Damage Insurance.
Lessee will, without expense to Lessor, maintain or cause to be maintained in
effect, at all times during the Lease Term, with insurers of recognized
responsibility, public liability insurance (including, without limitation,
passenger legal liability, property damage and product liability coverage, but
excluding manufacturer's product liability coverage) with respect to the
Aircraft in an amount not less than $300,000,000.00 or such higher amount as
Lessee may carry from time to time on other similar aircraft in its fleet, if
any. Such insurer and insurance shall be reasonably
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acceptable to Lessor and shall be of the type which is usually carried by
corporations, similarly situated with Lessee and owning and operating similar
aircraft and engines, and covering risks of the kind customarily insured
against by such corporations or which is customarily maintained by Lessee.
Section 9.2. Insurance Against Loss or Damage to the Aircraft and
Engines. Lessee will, without expense to Lessor maintain or cause to be
maintained in effect, at all times during the Lease Term, with insurers of
recognized responsibility, all risk, ground and flight aircraft hull insurance
on an agreed value basis (including, without limitation, ingestion), excluding
war risks and allied perils, covering the Aircraft for an amount not less than
the then applicable Casualty Amount from time to time. Such hull insurance or
other personal property insurance shall cover Parts temporarily removed from
the Airframe pending replacement by installation of the same or similar Parts
on the Airframe. Such insurance shall be of the type usually carried by
corporations similarly situated with Lessee and owning and operating similar
aircraft and engines, and covering risks of the kind customarily insured
against by such corporations and such insurer and insurance shall be reasonably
acceptable to Lessor. If and to the extent that Lessee or a permitted
sublessee operates the Aircraft on routes (other than routes within or between
the United States, Canada and Mexico) where the custom in the industry is to
carry war risk insurance, Lessee shall maintain or cause to be maintained such
insurance in effect with respect to the Aircraft in an amount not less than the
then applicable Casualty Amount.
Section 9.3. Additional Insureds; Loss Payment. Lessee shall
cause all policies of insurance carried in accordance with this Article IX to
name Lessor, any Affiliate of Lessor and their respective successors and
assigns as additional insureds as their respective interests may appear. Such
policies shall provide with respect to such additional insureds that (i) none
of their respective interests in such policies shall be invalidated by any act
or omission or breach of warranty by Lessee or, in the case of any particular
additional insured, any other named insured; (ii) no cancellation or lapse of
coverage for nonpayment of premium or otherwise, and no substantial change of
coverage which adversely affects the interests of any additional insured, shall
be effective as to such additional insured until 30 days (or 7 days or such
lesser period as may be applicable in the case of any war risk coverage) after
receipt by such additional insured of written notice from the insurers of such
cancellation, lapse or change; (iii) they shall have no liability for premiums,
commissions, calls, assessments or advances with respect to such policies; (iv)
such policies will be primary without any right of contribution from any other
insurance carried by such additional insureds; and (v) the insurers waive any
rights of set-off, counterclaim, deduction or subrogation against such
additional insureds. Each liability policy shall provide that all the
provisions thereof, except the limits of liability, shall operate in the same
manner as
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if there were a separate policy covering each insured and provide that the
exercise by the insurer of rights of subrogation derived from rights retained
by Lessee will not delay payment of any claim that would otherwise be payable
but for such rights of subrogation. Each hull policy shall provide that any
proceeds in respect of any loss exceeding $50,000 individually or in the
aggregate, shall be payable to the Lessor (to the extent of the sum of the
Casualty Amount plus accrued but unpaid Variable Rent as of the date of such
payment).
Section 9.4. Reports, etc. Lessee will during the Lease Term
furnish to Lessor evidence of renewal of the insurance policies required
pursuant to this Article IX prior to the cancellation, lapse or expiration of
such insurance policies and, on the renewal dates of the insurance policies
carried by Lessee pursuant to this Article IX, a certificate of insurance
signed by a firm of independent aircraft insurance brokers, appointed by Lessee
and reasonably satisfactory to Lessor, demonstrating that the insurance then
carried and maintained on the Aircraft complies with the terms hereof. From
time to time, Lessor may request from Lessee a report of Lessee's independent
aircraft insurance brokers stating that in the opinion of such firm the
insurance then carried and maintained on the Aircraft comply with the
requirements of this Article IX. All information contained in such report
shall be held confidential by Lessor and shall not be furnished or disclosed by
it to anyone except Lessor and its duly authorized agents and bona fide
prospective transferees and their duly authorized agents (provided they shall
agree for the benefit of Lessee to hold all such information similarly
confidential) and as may be required by Applicable Law. Lessee will cause such
firm 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 of which it has
knowledge and which would in such firm's opinion invalidate or render
unenforceable, in whole or in any material part, any insurance on the Aircraft.
Lessee will also cause such firm to advise Lessor in writing at least 30 days
prior to the termination or cancellation of, or material adverse change in,
such insurance carried and maintained on the Aircraft pursuant to this Article
IX. On or prior to the Closing Date and as a condition to the Lessor's
obligations hereunder, Lessee shall deliver to Lessor a certificate, in scope
and substance satisfactory to Lessor, certifying the existence of insurance
coverage complying with the requirements of this Article IX.
ARTICLE X
DEFAULT
Section 10.1. Events of Default. The following shall constitute
events of default (each an "Event of Default") hereunder and under the Lease
Supplement (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
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order of any court or any order, rule or regulation of any Authority):
(a) any payment of Rent or any portion of the Lease Balance shall
not be paid when due or within 3 days of the due date; or any other payment
payable by Lessee or Guarantor under any other Operative Document (including
without limitation, any other amount payable pursuant to Article XII of this
Lease) shall not have been paid as and when due or within 3 days of the due
date;
(b) any representation or warranty made by or on behalf of Lessee
or Guarantor contained in any Operative Document, or in any certificate, letter
or other writing or instrument furnished or delivered to Lessor, or pursuant
thereto, shall at any time prove to have been incorrect in any material respect
when made, deemed made or reaffirmed, as the case may be;
(c) Lessee shall fail to maintain the insurance required by
Article IX hereof;
(d) Lessee or Guarantor shall default in the performance or
observance of any other term, covenant, condition or agreement (other than as
specified in clauses (a) through (c) above or (e) through (j) below) on its
part to be performed or observed hereunder or under any other Operative
Document, and such default shall continue unremedied for a period of 30 days
after the earlier to occur of (i) written notice thereof by Lessor to Lessee or
Guarantor or (ii) Lessee or Guarantor having Actual Knowledge thereof;
(e) (i) Lessee or Guarantor shall generally fail to pay, or admit
in writing its inability to pay, its debts as they become due, or shall
voluntarily commence any case or proceeding or file any petition under any
bankruptcy, insolvency or similar law, seeking dissolution, liquidation or
reorganization or the appointment of a receiver, agent, custodian or liquidator
for itself or a substantial portion of its property, assets or business or to
effect a plan or other arrangement with its creditors, or shall file any answer
admitting the jurisdiction of the court and the material allegations of any
involuntary petition filed against it in any bankruptcy, insolvency or similar
case or proceeding, or shall be adjudicated bankrupt, or shall make a general
assignment for the benefit of creditors, or shall consent to, or acquiesce in
the appointment of, a receiver, agent, custodian or liquidator for itself or a
substantial portion of its property, assets or business; or (ii) corporate
action shall be taken by Lessee or Guarantor for the purpose of effectuating
any of the foregoing;
(f) an involuntary proceeding or an involuntary petition shall be
commenced or filed against Lessee or Guarantor under any bankruptcy, insolvency
or similar law, seeking the dissolution, liquidation or reorganization of such
Person or the appointment of a receiver, agent, custodian or liquidator for
such Person or of a
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substantial part of the property, assets or business of such Person, or any
writ, judgment, warrant of attachment, execution or similar process shall be
issued or levied against a substantial part of the property, assets or business
of such Person, and any such proceeding or petition shall not be dismissed or
stayed, or such writ, judgment, warrant of attachment, execution or similar
process shall not be released, vacated or fully bonded, within 30 days after
commencement, filing or levy, as the case may be;
(g) any Operative Document shall cease to be effective or to be
the legal, valid, binding and enforceable obligation of Lessee or Guarantor;
Lessee or any Affiliate of Lessee (including any Guarantor shall, directly or
indirectly, contest in any manner in any court the effectiveness, validity,
binding nature or enforceability of any Operative Document; or the security
interest securing Lessee's obligations under the Operative Documents shall, in
whole or in part, cease (except in accordance with the terms of the Operative
Documents) to be a perfected first priority security interest;
(h) there shall have occurred any default in the performance or
observance of any obligation or condition with respect to the(i) Revolving
Credit Agreement or (ii) any other indebtedness in excess of $250,000.00 owing
by or guaranteed by Lessee or Guarantor the effect of which is to permit the
acceleration of the maturity of such indebtedness prior to its expressed or
stated maturity or the acceleration of such guarantee;
(i) one or more non-interlocutory judgments, orders, decrees or
arbitration awards is entered against Lessee, Guarantor or any Subsidiary
involving in the aggregate a liability (to the extent not covered by
independent third-party insurance as to which the insurer does not dispute
coverage) as to any single or related series of transactions, incidents or
conditions, in an aggregate amount in excess of $500,000.00, and the same shall
remain unsatisfied, unvacated and unstayed pending appeal for a period of 30
days after the entry thereof;
(j) (i) any "person" or "group" (within the meaning of Sections
13(d) and 14(d)(2) of the Exchange Act) shall become the "beneficial owner(s)"
(as defined in said Rule 13d-3) of more than 49% of the shares of the
outstanding common stock of Lessee entitled to vote for members of Lessee's
board of directors or (ii) any event or condition shall occur or exist which,
pursuant to the terms of any change in control provision, requires or permits
the holder(s) of Indebtedness of the Lessee, Guarantor or any Subsidiary to
require that such Indebtedness be redeemed, repurchased, defeased, prepaid or
repaid, in whole or in part, or the maturity of such Indebtedness to be
accelerated in any respect.
Section 10.2. Remedies. If any Event of Default has occurred and
is continuing, Lessor may exercise in any order one or more or
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the remedies set forth in this Section 10.2, subject to any requirements of
Applicable Law (it being understood that no remedy herein conferred is intended
to be exclusive of any other remedy or remedies, but each and every remedy
shall be cumulative and shall be in addition to every other remedy given herein
or now or hereafter existing at law or in equity or by statute).
(a) Lessor may proceed by appropriate court action or actions,
either at law or in equity, to enforce performance by Lessee of the applicable
covenants of this Lease or to recover damages for the breach thereof;
(b) Lessor may by notice in writing to Lessee terminate this
Lease, but Lessee shall remain liable as hereinafter provided; and Lessor may,
at its option, do any one or more of the following: (i) declare the Lease
Balance, all accrued Variable Rent, all other amounts then payable by Lessee
under this Lease and the other Operative Documents to be immediately due and
payable, and recover any other damages and expenses in addition thereto which
Lessor shall have sustained by reason of such Event of Default; (ii) enforce
the security interest given hereunder pursuant to the Uniform Commercial Code
or any other law, exercise its right of setoff as set forth in Section 15.16
hereinbelow or otherwise exercise any other right or remedy which may be
available to it under applicable law; and (iii) require Lessee to return the
Aircraft as provided in Article XI; or
(c) Lessor may require Lessee immediately to purchase Lessor's
interest in the Aircraft for an amount equal to the sum of the Lease Balance,
all accrued and unpaid Rent and all other amounts then due and payable under
the Operative Documents.
Notwithstanding the foregoing, upon the occurrence of any Event of Default
described in subsection (e) or (f) of Section 10.1, Lessee shall automatically
and immediately be required to purchase the Aircraft for an amount equal to the
entire outstanding Lease Balance, together with all accrued unpaid Rent and
other amounts then due and payable under the Operative Documents, without
presentment, demand, notice, declaration, protest or other requirements of any
kind, all of which are hereby expressly waived.
Except for notices expressly otherwise provided for in the Operative
Documents or as required by Applicable Law, Lessee hereby waives presentment,
demand, protest and notice of any kind including, without limitation, notices
of default, notice of acceleration and notice of intent to accelerate.
Section 10.3. Additional Remedies. In addition to the remedies set
forth in Section 10.2, if any Event of Default shall occur, Lessor may, but is
not required to, sell the Leased Equipment in one or more sales. Lessor may
purchase all or any part of the Leased Equipment at such sale. Lessee
acknowledges that sales for cash or on credit to a wholesaler, retailer or user
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of such Leased Equipment, at a public or private auction, are all commercially
reasonable. Any notice required by law of intended disposition by Lessor shall
be deemed reasonable and properly given if given in writing at least 10 days
before such disposition.
Section 10.4. Proceeds of Sale; Deficiency. All payments received
and amounts held or realized by the Lessor at any time when an Event of Default
shall have occurred and be continuing and after the Lease Balance shall have
been accelerated or Lessee is required to purchase the Aircraft, as well as all
payments or amounts then held or thereafter received by Lessor, shall be
distributed forthwith upon receipt by the Lessor in the following order of
priority:
first: so much of such payments or amounts as shall be required to
reimburse the Lessor for any tax (other than any income tax payable on interest
and on fees and other compensation of the Lessor), expense or other amount owed
to the Lessor hereunder in connection with the collection or distribution of
such payments or amounts to the extent not previously reimbursed by Lessee
(including, without limitation, the expenses of any sale, taking or other
proceeding, expenses in connection with realizing on any of the Leased
Equipment, reasonable attorneys' fees and expenses (including the allocated
costs of internal counsel), court costs and any other reasonable expenditures
incurred or reasonable expenditures or advances made by the Lessor in the
protection, exercise or enforcement of any right, power or remedy upon such
Event of Default whether pursuant to Section 10.2 or otherwise) shall be so
applied by the Lessor;
second: so much of such payments or amounts remaining as shall be
required to pay in full the Lease Balance, together with all unpaid accrued
Rent, shall be distributed to Lessor, and in the event that the aggregate
amount so to be distributed shall be insufficient to pay any of the foregoing
in full all as aforesaid, then in the following order, (a) all accrued unpaid
Rent (including, to the extent permitted by applicable law, interest on
interest) and (b) the aggregate Lease Balance; and
third: so much of such payments or amounts as shall remain shall be
distributed to Lessee or to any third party who may be entitled thereto by
Applicable Law.
Section 10.5. Right to Perform Lessee's Agreements. If Lessee
fails to perform any of its agreements contained herein or in any other
Operative Document within the time period specified therefor and after delivery
of any notice specified herein within three Business Days (or one Business Day
where Lessor determines in its reasonable discretion that time is of the
essence), Lessor, may perform such agreement and the fees and expenses incurred
by Lessor in connection with such performance together with interest thereon
shall be payable by Lessee upon demand. Interest on fees and
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expenses so incurred by Lessor shall accrue at the Default Rate from the date
paid by Lessor until reimbursed by Lessee.
Section 10.6. Reference to Revolving Credit Agreement. With
respect to subsection 10.1.(h), so long as the Lessor is a party to the
Revolving Credit Agreement, (x) if there exists a breach by Guarantor or any of
its Subsidiaries (including, without limitation, Lessee) of any provision or
part thereof, a waiver of such breach under the Revolving Credit Agreement
shall be deemed a waiver of such breach by the Lessor under such subsection
10.1.(h), and (y) any consent granted by the Lessor under the Revolving Credit
Agreement to any variation from any provision or part thereof shall be deemed a
consent to such variation by the Lessor under such subsection 10.1.(h).
ARTICLE XI
RETURN OF AIRCRAFT; OPTION CONDITION
Section 11.1. After Termination. If Lessor has terminated this
Lease pursuant to Section 10.2.(b), upon demand of Lessor, Lessee shall at its
own expense (a) maintain (or cause to be maintained) the Aircraft in the
condition required by Section 7.2 and Section 7.6, store the Aircraft without
cost to Lessor and keep Aircraft insured in accordance with Article IX or (b)
forthwith deliver exclusive possession of the Aircraft to Lessor, at a location
within the continental United States designated by Lessor, together with all
then current operating, maintenance and repair manuals relating to the Aircraft
that have been received or prepared by or on behalf of Lessee, appropriately
protected and in the condition required by Section 7.2 and Section 7.6 (and in
any event in condition to be placed in immediate service). This Section 11.1
shall survive a termination of this Lease pursuant to Section 10.2.(b).
ARTICLE XII
LEASE TERMINATION
Section 12.1. Lessee's Options. On the last day of the Lease Term,
Lessee shall, by delivery of written notice from Lessee to Lessor delivered not
less than 180 days prior to the Termination Date, exercise one of the following
options:
(a) purchase for cash for the Purchase Option Exercise Amount the
Aircraft (the "Fixed Purchase Price Option"); or
(b) sell on behalf of the Lessor for cash to a purchaser or
purchasers that is/are not an Affiliate of Lessee the Aircraft (the "Sale
Option"). Simultaneously with a sale pursuant to the Sale Option, Lessee shall
pay to Lessor, as supplemental Rent from the gross proceeds of sale of the
Aircraft, without deductions or expense reimbursements (the "Proceeds"), an
amount equal to the
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Option Exercise Amount. If the Proceeds exceed the Option Exercise Amount,
Lessee will retain the portion of the Proceeds in excess thereof. If the
Proceeds are less than the Option Exercise Amount as of such date, Lessee will
simultaneously pay or will cause to be paid to Lessor, as supplemental Rent, on
such date, in addition to the Proceeds, the Applicable Percentage Amount, it
being understood, however, that the amount payable pursuant to this Section
12.1.(b) shall in no event be construed to limit any other obligation of Lessee
under the Operative Documents. In no event shall the Applicable Percentage
Amount exceed the Lease Balance (after taking into account all payments of Rent
and Proceeds applied against the Lease Balance). The obligation of Lessee to
pay the amounts determined pursuant to this Section 12.1.(b) shall be a
recourse obligation of Lessee.
Section 12.2. Election of Options. Lessee's election of the Fixed
Price Purchase Option will be irrevocable at the time made, but if Lessee fails
to make a timely election, Lessee will be deemed to have irrevocably elected
the Fixed Price Purchase Option. In addition, the Sale Option shall
automatically be revoked if there exists an Incipient Default or Event of
Default at any time after the Sale Option is properly elected and Lessor shall
be entitled to exercise all rights and remedies provided in Article X. Lessee
may not elect the Sale Option if there exists on the date the election is made
an Event of Default or an Incipient Default.
Section 12.3. Sale Option Procedures. If Lessee elects the Sale
Option, it shall use its diligent commercial efforts to obtain the highest all
cash purchase price for the Aircraft. All costs related to such sale and
delivery, including, without limitation, the cost of sales agents, removal of
the Aircraft, delivery of documents and Aircraft, certification and testing of
the Aircraft in any location chosen by the buyer or prospective buyer, legal
costs, costs of notices, any advertisement or other similar costs, or other
information shall be borne entirely by Lessee, without regard to whether such
costs were incurred by Lessor, Lessee or any potentially qualified buyer, and
shall in no event be paid from any of the Proceeds. Lessor shall not have any
responsibility for procuring any purchaser. If, nevertheless, Lessor
undertakes any sales efforts, Lessee shall promptly reimburse Lessor for any
reasonable charges, costs and expenses incurred in such effort, including any
allocated time charges, costs and expenses of internal counsel or other
attorneys' fees. Upon a sale pursuant to the Sale Option, the Aircraft shall
be in the condition required by Section 7.2 and Section 7.6. Lessee's
acceptance of any bid shall be subject to the prior written consent of the
Lessor. Any purchaser of the Aircraft shall not in any way be an Affiliate of
Lessee or Guarantor.
Section 12.4. Appraisals. If Lessee exercises the Sale Option and
the aggregate Proceeds from the sale of the Aircraft are less than the Lease
Balance, Lessor may engage an Appraiser of nationally recognized standing and
reasonably acceptable to Lessee,
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<PAGE> 37
at Lessee's expense (not to exceed $15,000.00), to determine (by appraisal
methods satisfactory to the Lessor) the Fair Market Value of the Aircraft as of
the Termination Date. If the Appraisal concludes that the Fair Market Value of
the Aircraft as of the Termination Date was in excess of the aggregate Proceeds
from the sale of the Aircraft, Lessee shall promptly pay to Lessor, such
excess, which together with such aggregate Proceeds so paid to Lessor shall not
exceed the Lease Balance.
ARTICLE XIII
GRANT OF SECURITY
INTEREST TO LESSOR AND FURTHER ASSURANCES
Section 13.1. Grant of Security Interest. Lessee hereby assigns,
grants and pledges to Lessor a security interest in all of Lessee's right,
title and interest, whether now or hereafter existing or acquired, in the
Leased Equipment, to secure the payment and performance of all obligations of
Lessee now or hereafter existing under this Lease or any other Operative
Document. Lessee shall, at its expense, do any further act and execute,
acknowledge, deliver, file, register and record any further documents or
instruments (including financing statements and other evidences of security
interests) which Lessor may reasonably request in order to protect Lessor's
interest in the Leased Equipment, subject to no Liens other than Permitted
Liens, and Lessor's rights and benefits under this Lease. Lessee shall
promptly and duly execute and deliver to Lessor such documents, instruments and
assurances and take such further action as Lessor may from time to time
reasonably request in order to carry out more effectively the intent and
purpose of this Lease and the other Operative Documents, to establish and
protect the rights and remedies created or intended to be created in favor of
Lessor hereunder and thereunder, and to establish, perfect and maintain the
rights and interest of Lessor in and to the Leased Equipment, subject to no
Lien other than Permitted Liens, and Lessee agrees to execute and deliver
promptly such of the foregoing as may require execution by Lessee (including,
without limitation, any documents required in connection with causing Lessor's
interest to be reflected on any registration.) To the extent permitted by
applicable laws, Lessee hereby authorizes any such financing statements and
other documents to be filed without the necessity of the signature of Lessee,
if Lessee has failed to sign any such instrument within 10 Business Days after
request therefor by Lessor. Upon Lessee's request, Lessor shall at such time
as all of the obligations of Lessee under this Lease and all other Operative
Documents have been paid or performed in full, execute and deliver termination
statements and other appropriate documentation reasonably requested by Lessee,
all at Lessee's expense, to evidence Lessor's release of its security interest
and any other interest of Lessor in any and all of the Leased Equipment. At
such time, Lessor shall execute and deliver to Lessee such documents as may be
reasonably necessary (without representations or warranties
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<PAGE> 38
except that the Aircraft is free and clear of Lessor Liens) to release Lessor's
security interest and any other interest of Lessor in the Aircraft. If at any
time any payment of Rent or any other amount due under the Operative Documents
is rescinded or must be otherwise restored or returned upon an Insolvency Event
of the Lessee or Guarantor, the obligations hereunder and under the other
Operative Documents, and all rights in Leased Equipment released in connection
therewith, shall be reinstated as though such payment had been due but not paid
as of such time.
Section 13.2. Retention of Proceeds in the Case of Default. If
Lessee would be entitled to any amount (including any Casualty Proceeds) but
for the existence of any Event of Default or Incipient Default, Lessor shall
hold such amount as part of the Leased Equipment and shall be entitled to
apply such amounts against any amounts due hereunder; provided, that Lessor
shall distribute such amount or transfer the Aircraft in accordance with the
other terms of this Lease if and when no Event of Default or Incipient Default
exists.
Section 13.3. Attorney-in-Fact. Subject to the limitation and
qualifications set forth herein, Lessee hereby irrevocably appoints Lessor as
Lessee's attorney-in-fact, with full authority in the place and stead of Lessee
and in the name of Lessee or otherwise, from time to time in Lessor's
discretion, upon the occurrence and during the continuance of an Event of
Default, to take any action (including any action that Lessee is entitled to
take) and to execute any instrument which Lessor may deem necessary or
advisable to accomplish the purposes of this Lease (subject to any limitations
set forth in the Operative Documents), including, without limitation:
(a) to ask, demand, collect, sue for, recover, compromise, receive
and give acquittance and receipts for money due and to become due under or in
connection with the Leased Equipment ;
(b) to receive, endorse and collect any drafts or other
instruments, documents and chattel paper in connection with the foregoing
clause (a); and
(c) to file any claim or take any action or institute any
proceedings which Lessor may deem to be necessary or advisable for the
collection thereof or to enforce compliance with the terms and conditions of
any Leased Equipment.
Lessee hereby acknowledges, consents and agrees that the power of
attorney granted pursuant to this Section 13.3 is irrevocable and coupled with
an interest.
Section 13.4. Release of Liens. Upon the payment of all amounts
required pursuant to Section 8.1 in connection with a Casualty, in each case in
compliance with the applicable provisions
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<PAGE> 39
of the Lease, the Aircraft shall be released from the security interest and any
other interest of Lessor created hereunder.
ARTICLE XIV
EARLY TERMINATION
Section 14.1. Early Termination. On any Payment Date occurring
after the fifth anniversary of the Base Date, and provided no Incipient Default
or Event of Default shall exist, Lessee may, at its option, upon at least 30
days' advance written notice from Lessee to Lessor, purchase Lessor's interest
in the Aircraft subject to this Lease for the sum of (i) the Lease Balance
outstanding on the date of purchase, (ii) the accrued Variable Rent payable on
or prior to the date of purchase and (iii) all other expenses and other amounts
due and payable pursuant to this Lease and the other Operative Documents.
ARTICLE XV
MISCELLANEOUS
Section 15.1. No Waiver. No delay or omission in the exercise of
any right, power or remedy accruing to Lessor upon any breach or default of
Lessee hereunder shall impair any such right, power or remedy, nor shall it be
construed to be a waiver of any such breach or default, or an acquiescence
therein or of or in any similar breach or default thereafter occurring, nor
shall any single or partial exercise of any right, power or remedy preclude
other or further exercise thereof, or the exercise of any other right, power or
remedy, nor shall any waiver of any single breach or default be deemed a waiver
of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of
Lessor of any breach or default under this Lease must be specifically set forth
in writing.
Section 15.2. Survival of Covenants. All claims pertaining to the
representations, warranties and covenants of Lessee under Articles IV, V, VI,
VII, VIII, IX, XI, XII, XIII, XIV, and XV shall survive the termination of this
Lease to the extent such claims arose out of events occurring or conditions
existing prior to any such termination. The covenant of the Lessor under
Section 13.4 hereof shall survive the termination of this Lease.
Section 15.3. APPLICABLE LAW. THIS LEASE SHALL BE GOVERNED BY AND
CONSTRUED UNDER THE LAWS OF FLORIDA, WITHOUT REGARD TO THE CHOICE OF LAW
PROVISIONS THEREOF.
Section 15.4. Effect and Modification of Lease. No variation,
modification, amendment or waiver of this Lease, including any schedules or
exhibits hereto, or any other Operative
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<PAGE> 40
Document to which Lessor is a party shall be valid unless in writing, signed by
Lessee and Lessor.
Section 15.5. Notices. All notices, requests, demands and other
communications (other than routine communications between the Lessee and the
Lessor) provided for hereunder and any of the other Operative Documents shall
be in writing and mailed or personally delivered to each of the parties hereto,
regardless of whether said notice is only required to be given to only selected
parties hereto at the addresses indicated below:
If to Lessee: PMG Acquisition Corp.
1445 North Park Drive
Ft. Lauderdale, FL 33326
Attn: Cathy J. Lerman, Esq.
With copy to: Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel,
P.A.
1221 Brickell Avenue
Miami, FL 33131
Attn: Rebecca Orand, Esq.
If to the Lessor: SunTrust Bank, Central Florida, National Association
200 South Orange Avenue
Post Office Box 3833
Orlando, Florida 32802
Attn: Leasing Department
With a copy to: Akerman, Senterfitt & Eidson, P.A.
Post Office Box 231
Orlando, Florida 32802-0231
Attn: Charles T. Brumback, Jr.
or, as to each party, at such other address as shall be designated by such
party in written notice to the other party complying as to delivery with the
terms hereof. Except as otherwise expressly provided in this Lease or in any
of the other Operative Documents, all such notices, requests, demands and other
communications shall be effective and given three (3) Days after being
deposited in the United States mails (postage prepaid) by registered or
certified mail, return receipt requested, or when personally delivered to the
addressee.
Section 15.6. Counterparts. This Lease has been executed in
several counterparts. One counterpart has been prominently marked "Lessor's
Copy". Only the counterpart marked "Lessor's Copy" shall evidence a monetary
obligation of Lessee or shall be deemed to be an original or to be chattel
paper for purposes of the Uniform Commercial Code, and such copy shall be held
by Lessor.
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<PAGE> 41
Section 15.7. Severability. Whenever possible, each provision of
this Lease shall be interpreted in such manner as to be effective and valid
under applicable law; but if any provision of this Lease shall be prohibited by
or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Lease.
Section 15.8. Successors and Assigns, Benefit of Agreement. This
Lease shall be binding upon the parties hereto and, subject to Sections 15.9
and 15.10 hereof, their respective successors and assigns, and shall inure to
the benefit of the parties hereto and their respective successors and permitted
assigns.
Section 15.9. Assignment by Lessor. Lessor may, at its discretion,
assign its rights, benefits and obligations under this Lease, provided that no
such assignment shall diminish or adversely affect Lessee's rights hereunder or
increase Lessee's liabilities in respect of any tax or other obligation
hereunder, or cause Lessee to incur any obligations, costs or expense in excess
of those for which it would otherwise have been responsible in the absence of
such assignment. Lessor shall procure from any assignee a written agreement
for the benefit of Lessee to the effect of Sections 6.2 or 6.3.
Section 15.10. Assignment by Lessee. Lessee shall not sell, assign,
transfer or otherwise dispose of its rights or delegate its obligations under
this Lease to any other Person.
Section 15.11. JURY TRIAL. LESSOR AND LESSEE WAIVE ANY RIGHT THEY
MAY HAVE TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND
ANY RIGHTS UNDER THIS LEASE OR ANY OTHER OPERATIVE DOCUMENT OR UNDER ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY
RELATIONSHIP EXISTING IN CONNECTION WITH THIS LEASE OR ANY OPERATIVE DOCUMENT
AND AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND
NOT BEFORE A JURY.
Section 15.12. Section Headings; Table of Contents. Section
headings and the table of contents used in this Lease (including the schedule)
are for convenience of reference only and shall not affect the construction of
this Lease.
Section 15.13. Final Agreement. This Lease, together with the other
Operative Documents, represents the entire final agreement between the parties
with respect to the transactions contemplated by the Lease and the other
Operative Documents. This Lease cannot be modified, supplemented, amended,
rescinded or contradicted by evidence of prior, contemporaneous or subsequent
oral agreements of the parties, except by an instrument in writing signed by
the parties hereto. There are no unwritten oral agreements between the
parties.
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Section 15.14. Timeliness of Performance. The provisions of
Articles X and XI pertaining to the delivery of notice and the performance of
certain events on dates required by Articles X and XI are to be strictly
adhered to by the parties hereto.
Section 15.15. Payment of Expenses, Etc. Lessee shall:
(a) pay to Lessor, on or prior to the Closing Date, the
Administrative Fee and shall also pay all other reasonable,
out-of-pocket costs and expenses of the Lessor in the administration
(both before and after the execution hereof and including reasonable
expenses actually incurred relating to advice of counsel as to the
rights and duties of the Lessor with respect thereto) of, and in
connection with the preparation, execution and delivery of,
preservation of rights under, enforcement of, and, after a Default or
Event of Default, refinancing, renegotiation or restructuring of, this
Lease and the other Operative Documents and the documents and
instruments referred to therein, and any amendment, waiver or consent
requested by Lessee relating thereto (including, without limitation,
the reasonable fees actually incurred and disbursements of counsel for
the Lessor), and in the case of enforcement of this Lease or any
Operative Document after the occurrence and during the continuance of
an Event of Default, all such reasonable, out-of-pocket costs and
expenses (including, without limitation, the reasonable fees actually
incurred and disbursements of counsel), for the Lessor;
(b) pay and hold the Lessor harmless from and against any
and all present and future stamp, documentary, intangible, sales, use
and other Taxes with respect to this Lease and any other Operative
Documents, any collateral described therein, or any payments due
thereunder, including interest and penalties and save Lessor harmless
from and against any and all liabilities with respect to or resulting
from any delay or omission of Lessee to pay such Taxes, provided,
however, nothing contained in this subsection shall obligate the
Lessee to pay any taxes (A) based on or measured by or with respect to
the net or gross income, items of tax preference, minimum tax, excess
profits, capital franchise or net worth of Lessor, (B) that result
from gross negligence or wilful misconduct of Lessor, (C) to the
extent such taxes exceed the amount of taxes that would have been
imposed and indemnified against had there not been an assignment or
other disposition by Lessor of any interest in the Aircraft or this
Lease (other than in connection with an Event of Default), or (D)
imposed against or payable by Lessor as a result of any failure by
Lessor to comply with any certification or other procedure required by
law or to timely file any return, report or notice;
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(c) indemnify the Lessor, and their respective officers,
directors, employees, representatives and agents from, and hold each
of them harmless against, any and all costs, losses, liabilities,
claims, damages or expenses incurred by the Lessor (whether or not it
is designated a party thereto) (an "Indemnitee") arising out of or by
reason of: (i) the operation, possession, use, maintenance, overhaul,
testing, registration, re-registration, storage, preparation,
installation, modification, alteration, repair, sublease or
transportation of the Aircraft, Airframe or Engine or any Part thereof
by Lessee, any sublessee or any other Person whatsoever, whether or
not such operation, possession, use, maintenance, overhaul, testing,
registration, re-registration, storage, preparation, installation,
modification, alteration, repair, sublease or transportation is in
compliance with the terms of the Lease, including without limitation,
claims for death, personal injury or property damage or other loss or
harm to any Person whatsoever; (ii) the manufacture, design, purchase,
acceptance, rejection, delivery, non-delivery or condition of the
Aircraft, including, without limitation, latent and other defects,
whether or not discoverable and patent, trademark or copyright
infringement; and (iii) any breach of or failure to perform or observe
or any other non-compliance with any covenant or agreement to be
performed, or other obligation of Lessee under any of the Operative
Documents, or the falsity of any representation or warranty of Lessee
in any of the Operative Documents; and (iv) any investigation,
litigation or other proceeding related to any actual or proposed use
of the proceeds of the Lease or Lessee's entering into and performing
of the Lease or the other Operative Documents, including, without
limitation, the reasonable fees actually incurred and disbursements of
counsel incurred in connection with any such investigation, litigation
or other proceeding but excluding any costs, losses, liabilities,
claims, damages or expenses (i) arising from the gross negligence or
willful misconduct of Lessor or any Affiliate of Lessor, (ii) that is
or is attributable to any Tax for which Lessee is not responsible to
indemnify Lessor hereunder, or (iii) to the extent attributable to the
sale, assignment or transfer, voluntary or involuntary, by Lessor of
any interest in the Aircraft or this Lease, other than a transfer
resulting from the exercise of remedies in connection with an Event of
Default or pursuant to Section 12.1 hereof or as otherwise
contemplated by this Lease.
If and to the extent that the obligations of Lessee under this Section 15.15
are unenforceable for any reason, Lessee hereby agrees to make the maximum
contribution to the payment and
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<PAGE> 44
satisfaction of such obligations which is permissible under applicable law.
Section 15.16. Right of Setoff. In addition to and not in
limitation of all rights of offset that Lessor may have under applicable law,
Lessor shall, upon the occurrence and during the continuance of any Event of
Default and whether or not such Lessor has made any demand or Lessee's
obligations are matured, have the right to appropriate and apply to the payment
of Lessee's obligations hereunder and under the other Operative Documents, all
deposits of Lessor (general or special, time or demand, provisional or final,
other than escrow or trust accounts denoted as such) then or thereafter held
by and other indebtedness or property then or thereafter owing by Lessor to
Lessee, whether or not related to this Lease or any transaction hereunder.
Section 15.17. Nature of Transactions. It is the intent of the
parties that (a) the transaction contemplated by the Operative Documents may be
treated as an operating lease from Lessor to Lessee for purposes of Lessee's
financial reporting, and (b) the obligations of Lessee to pay Fixed Rent and
Variable Rent shall be treated as payments of principal and interest,
respectively. Nevertheless, Lessee acknowledges and agrees that Lessor, has
not made any representations or warranties to Lessee concerning the tax,
accounting or legal characteristics of the Operative Documents and that Lessee
has obtained and relied upon such tax, accounting and legal advise from
Lessee's advisors and professionals concerning the Operative Documents as they
deem appropriate. Lessor shall not claim any tax depreciation with respect to
the Aircraft.
Section 15.18. Recordation. Lessee shall cause this Lease, all
exhibits hereto, any Lease Supplements and any and all additional instruments
which shall be executed pursuant to the terms hereof, so far as permitted by
Applicable Law, to be kept, filed and recorded and to be re-executed, re-filed
and re-recorded at all times during the Lease Term with the FAA, to the extent
required to perfect, protect and preserve Lessor's interest in the Aircraft.
Section 15.19. Truth in Leasing.
THE AIRCRAFT WILL BE MAINTAINED AND INSPECTED UNDER FAR PART 91 FOR
OPERATIONS TO BE CONDUCTED UNDER THIS LEASE. LESSEE IS CONSIDERED
RESPONSIBLE FOR OPERATIONAL CONTROL OF THE AIRCRAFT.
AN EXPLANATION OF THE FACTORS BEARING ON OPERATIONAL CONTROL AND THE
PERTINENT FEDERAL AVIATION REGULATIONS CAN BE OBTAINED FROM THE
NEAREST FAA FLIGHT STANDARDS DISTRICT OFFICE.
THE LESSEE CERTIFIES THAT IT IS RESPONSIBLE FOR OPERATIONAL CONTROL OF
THE AIRCRAFT AND THAT IT UNDERSTANDS ITS
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<PAGE> 45
RESPONSIBILITIES FOR COMPLIANCE WITH APPLICABLE FEDERAL AVIATION
REGULATIONS.
IN WITNESS WHEREOF, the parties hereto have caused this Lease to be
executed and delivered as of date first above written.
LESSEE:
PMG ACQUISITION CORP.
[CORPORATE SEAL]
By: /s/ Lawrence M. Mullen
------------------------
Lawrence M. Mullen,
Vice President
SUNTRUST BANK, CENTRAL FLORIDA, NATIONAL
ASSOCIATION
By: /s/ Paul L. DuPuis, Jr.
------------------------
Paul L. DuPuis, Jr.
First Vice President
JOINDER AND CONSENT OF GUARANTOR
The undersigned Guarantor hereby joins in and consents to the
foregoing Aircraft Lease Agreement for the specific purpose of acknowledging
and confirming the accuracy of the representations and warranties set forth in
Article V thereof.
PEDIATRIX MEDICAL GROUP, INC.
[CORPORATE SEAL]
By: /s/ Lawrence M. Mullen
------------------------
Lawrence M. Mullen,
Vice President and Chief
Financial Officer
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<PAGE> 46
ACKNOWLEDGMENTS
STATE OF GEORGIA
COUNTY OF CLAYTON
On this the 5th day of September, 1996, personally appeared Lawrence
M. Mullen, the Vice President of PMG Acquisition Corp., a Florida corporation
(the "Lessee") and before me, executed that certain Aircraft Lease Agreement
dated September 5, 1996 by and between the Lessee and SunTrust Bank, Central
Florida, National Association, (the "Lessor"), on behalf of the corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
_____________________________________________
Signature of Notary Public, State of Georgia
_____________________________________________
(Print, Type or Stamp Commissioned Name of Notary Public)
Personally known ____; OR Produced identification ____
Type of identification produced: ________________________
____________________________________
(Notary Seal)
STATE OF GEORGIA
COUNTY OF CLAYTON
On this the 5th day of September, 1996, personally appeared Paul L.
DuPuis, Jr., the First Vice President of SunTrust Bank, Central Florida,
National Association, a national banking association (the "Lessor") and before
me, executed that certain Aircraft Lease Agreement dated September 5, 1996 by
and between the Lessor and PMG Acquisition Corp., (the "Lessee"), on behalf of
the association.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
_____________________________________________
Signature of Notary Public, State of Georgia
_____________________________________________
(Print, Type or Stamp Commissioned Name of Notary Public)
Personally known ____; OR Produced identification ____
Type of identification produced:
________________________
____________________________________
(Notary Seal)
42
<PAGE> 47
STATE OF GEORGIA
COUNTY OF CLAYTON
On this the 5th day of September, 1996, personally appeared Lawrence
M. Mullen, the Vice President of Pediatrix Medical Group, Inc., a Florida
corporation (the "Lessee") and before me, executed the Joinder and Consent of
Guarantor to that certain Aircraft Lease Agreement dated September 5, 1996 by
and between the Lessee and SunTrust Bank, Central Florida, National
Association, (the "Lessor"), on behalf of the corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
_____________________________________________
Signature of Notary Public, State of Georgia
_____________________________________________
(Print, Type or Stamp Commissioned Name of Notary Public)
Personally known ____; OR Produced identification ____
Type of identification produced:
_________________________
__________________________________
(Notary Seal)
43
<PAGE> 48
LEASE SUPPLEMENT NO. 1
Lease Supplement dated September 5, 1996 (this "Lease Supplement")
between PMG Acquisition Corp., a Florida corporation (the "Lessee"), and
Suntrust Bank, Central Florida, National Association, as Lessor ("Lessor").
WITNESSETH:
WHEREAS, Lessee and Lessor have heretofore entered into that certain
Aircraft Lease Agreement dated as of September 5, 1996 (the "Lease";
capitalized terms used herein shall have the meanings specified in the Lease);
and
WHEREAS, the Lease provides for the execution and delivery of a Lease
Supplement on the Closing Date substantially in the form hereof for the purpose
of confirming the acceptance and lease of the Aircraft, setting forth all
matters required pursuant to the Lease;
NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, Lessor and Lessee hereby agree as follows:
1. Delivery and Acceptance. Lessor hereby leases to the Lessee,
and Lessee hereby confirms acceptance of delivery and leases from Lessor, under
the Lease as hereby supplemented, of the Aircraft listed on Exhibit A hereto.
Any one or more of the following individuals are hereby authorized to accept
delivery of the Aircraft pursuant to Section 2.2 of the Lease:
Clark Hutcheson
----------------------------------------
----------------------------------------
----------------------------------------
2. Inspection and Approval. Lessee hereby acknowledges and
confirms that it has inspected and approved the Aircraft described on Exhibit A
hereto for all purposes of the Lease and the other Operative Documents and, as
between the Lessor and the Lessee, the Aircraft complies in all material
respects with the specifications for the Aircraft, is in good working order,
repair, condition and appearance, and without defect therein with respect to
design, manufacture, condition, operation and fitness for use or in any other
respect, whether or not discoverable by Lessee as of the date hereof. Lessee
reaffirms, as to the Aircraft described in Exhibit A, each of the waivers,
acknowledgments and agreements of Lessee set forth in Section 6.1 of the Lease.
3. Warranty. Lessee hereby represents and warrants that no event
which would constitute a Casualty under the Lease has
<PAGE> 49
occurred with respect to the Aircraft described on Exhibit A hereto as of the
date hereof. Lessee hereby reaffirms the representation that the Aircraft
described on Exhibit A hereto is free and clear of all Liens other than
Permitted Liens.
4. Term of Lease Supplement. The term of this Lease Supplement
shall commence on the date hereof and end on the Termination Date.
5. Confirmation. Lessee hereby confirms its agreement, in
accordance with the Lease as supplemented by this Lease Supplement, to pay Rent
to Lessor for the Aircraft leased hereunder. Nothing herein shall reduce
Lessee's obligation to make all other payments required under the Lease,
including those payments to be made on the last day of the Lease Term pursuant
to Article XII of the Lease.
6. Incorporation into Lease. This Lease Supplement shall be
construed in connection with and as part of the Lease, and all terms,
conditions and covenants contained in the Lease, as supplemented by this Lease
Supplement, shall be and remain in full force and effect and shall govern the
Aircraft described on Exhibit A hereto.
7. References. Any and all notices, requests, certificates and
other instruments executed and delivered concurrently with or after the
execution and delivery of this Lease Supplement may refer to the "Aircraft
Lease Agreement, dated as of September 5, 1996", or may identify the Lease in
any other respect without making specific reference to this Lease Supplement,
but nevertheless all such references shall be deemed to include this Lease
Supplement, unless the context shall otherwise require.
8. Counterparts. This Lease Supplement may be executed in any
number of counterparts, each executed counterpart constituting an original but
all together one and the same instrument.
9. Governing Law. This Lease Supplement shall be governed by and
construed in accordance with the laws and decisions of the State of Florida
without regard to principles of conflicts of laws.
IN WITNESS WHEREOF, the parties hereto have caused this Lease
Supplement to be duly executed and delivered on the day and year first above
written.
LESSEE:
PMG ACQUISITION CORP.
[CORPORATE SEAL]
By: /s/ Lawrence M. Mullen
-----------------------
Lawrence M. Mullen,
Vice President
2
<PAGE> 50
SUNTRUST BANK, CENTRAL FLORIDA, NATIONAL
ASSOCIATION
By: /s/ Paul L. DuPuis, Jr.
--------------------------------
Paul L. DuPuis, Jr.
First Vice President
3
<PAGE> 51
ACKNOWLEDGMENTS
STATE OF GEORGIA
COUNTY OF CLAYTON
On this the 5th day of September, 1996, personally appeared Lawrence
M. Mullen, the Vice President of PMG Acquisition Corp., a Florida corporation
(the "Lessee") and before me, executed that certain Lease Supplement No. 1
dated September 5, 1996 by and between the Lessee and SunTrust Bank, Central
Florida, National Association, (the "Lessor"), on behalf of the corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
_____________________________________________
Signature of Notary Public, State of Georgia
_____________________________________________
(Print, Type or Stamp Commissioned Name of Notary Public)
Personally known ____; OR Produced identification ____
Type of identification produced:
_________________________
___________________________________
(Notary Seal)
STATE OF GEORGIA
COUNTY OF CLAYTON
On this the 5th day of September, 1996, personally appeared Paul L.
DuPuis, Jr., the First Vice President of SunTrust Bank, Central Florida,
National Association, a national banking association (the "Lessor") and before
me, executed that certain Lease Supplement No. 1 dated September 5, 1996 by
and between the Lessor and PMG Acquisition Corp., (the "Lessee"), on behalf of
the association.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
_____________________________________________
Signature of Notary Public, State of Georgia
_____________________________________________
(Print, Type or Stamp Commissioned Name of Notary Public)
Personally known ____; OR Produced identification ____
Type of identification produced:
________________________
__________________________________
(Notary Seal)
4
<PAGE> 1
EXHIBIT 11.1
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- ------------------------
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Income applicable to common stock:
Net Income ................................ $ 3,565 $ 1,971 $ 9,212 $ 4,396
Less: preferred stock dividends .......... -- (333) -- (1,040)
------- ------- ------- -------
Income applicable to common stock ............ 3,565 1,638 9,212 3,356
======= ======= ======= =======
Weighted average number of common and
common equivalent shares
Primary:
Weighted average number of common
shares outstanding .................... 14,232 6,801 13,454 6,442
Weighted average number of dilutive
common stock equivalents .............. 762 588 734 703
------- ------- ------- -------
Weighted average number of common and
common equivalent shares
outstanding for primary earnings
per share .............................. 14,994 7,389 14,188 7,145
======= ======= ======= =======
Fully diluted:
Weighted average number of common
shares outstanding .................... 14,232 6,801 13,454 6,442
Weighted average number of dilutive
common stock equivalents .............. 815 5,078 761 5,247
------- ------- ------- -------
Weighted average number of common and
common equivalent shares
outstanding for fully diluted
earnings per share .................... 15,047 11,879 14,215 11,689
======= ======= ======= =======
Income per share:
Primary .................................... $ .24 $ .22 $ .65 $ .47
======= ======= ======= =======
Fully diluted .............................. $ .24 $ .17 $ .65 $ .38
======= ======= ======= =======
</TABLE>
11.1
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET AT SEPTEMBER 30, 1996, AND THE
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 37,962
<SECURITIES> 38,230
<RECEIVABLES> 20,885<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 98,110
<PP&E> 8,001<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 152,269
<CURRENT-LIABILITIES> 17,847
<BONDS> 2,799
0
0
<COMMON> 148
<OTHER-SE> 131,835
<TOTAL-LIABILITY-AND-EQUITY> 152,269
<SALES> 0
<TOTAL-REVENUES> 56,339
<CGS> 0
<TOTAL-COSTS> 42,196
<OTHER-EXPENSES> (1,457)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 142
<INCOME-PRETAX> 15,458
<INCOME-TAX> 6,246
<INCOME-CONTINUING> 9,212
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,212
<EPS-PRIMARY> .65
<EPS-DILUTED> .65
<FN>
<F1>AMOUNTS FOR RECEIVABLES AND PROPERTY PLANT AND EQUIPMENT ARE NET OF ANY
ALLOWANCES AND ACCUMULATED DEPRECIATION.
</FN>
</TABLE>
