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OMB Number 3235-0145
Expires: December 31, 2002
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. )*
Great Lakes Aviation, Ltd.
--------------------------
(Name of Issuer)
Common Stock
------------------------------
(Title of Class of Securities)
39054K108
--------------
(CUSIP Number)
1022 Airport Parkway, Cheyenne, Wyoming 82001
---------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
December 31, 2002
------------------------------------------------------
(Date of Event which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of ss. 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the
following box [_].
Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See ss. 240.13d-7(b) for other
parties to whom copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 or otherwise subject to the liabilities of that section of the Act but
shall be subject to all other provisions of the Act (however, see the Notes).
POTENTIAL PERSONS WHO ARE TO RESPOND TO THE COLLECTION OF INFORMATION CONTAINED
IN THIS FORM ARE NOT REQUIRED TO RESPOND UNLESS THE FORM DISPLAYS A CURRENTLY
VALID OMB CONTROL NUMBER.
2
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1. Name of Reporting Persons. I.R.S. Identification Nos. of above persons
(entities only).
Raytheon Company
------------------------------------------------------------------------
2. Check the Appropriate Box If a Member of a Group (See Instructions)
(a) [_]
(b) [_]
------------------------------------------------------------------------
3. SEC Use Only
------------------------------------------------------------------------
4. Source of Funds (See Instructions)
OO
------------------------------------------------------------------------
5. Check If Disclosure of Legal Proceedings Is Required Pursuant to Items
2(d) or 2(e) [X]
------------------------------------------------------------------------
6. Citizenship or Place of Organization
Delaware
------------------------------------------------------------------------
7. Sole Voting Power
NUMBER OF 0
SHARES ----------------------------------------------------------
BENEFICIALLY 8. Shared Voting Power
OWNED BY 5,371,980
EACH ----------------------------------------------------------
REPORTING 9. Sole Dispositive Power
PERSON 0
WITH ----------------------------------------------------------
10. Shared Dispositive Power
5,371,980
------------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned by Each Reporting Person
5,371,980
------------------------------------------------------------------------
12. Check Box If the Aggregate Amount in Row (11) Excludes Certain
Shares (See Instructions) [_]
------------------------------------------------------------------------
13. Percent of Class Represented by Amount in Row (11)
38.2%
------------------------------------------------------------------------
14. Type of Reporting Person (See Instructions)
CO
------------------------------------------------------------------------
3
------------------------------------------------------------------------
1. Name of Reporting Persons. I.R.S. Identification Nos. of above persons
(entities only).
Raytheon Aircraft Holdings, Inc.
------------------------------------------------------------------------
2. Check the Appropriate Box If a Member of a Group (See Instructions)
(a) [_]
(b) [_]
------------------------------------------------------------------------
3. SEC Use Only
------------------------------------------------------------------------
4. Source of Funds (See Instructions)
OO
------------------------------------------------------------------------
5. Check If Disclosure of Legal Proceedings Is Required Pursuant to Items
2(d) or 2(e) [_]
------------------------------------------------------------------------
6. Citizenship or Place of Organization
Delaware
------------------------------------------------------------------------
7. Sole Voting Power
NUMBER OF 0
SHARES ----------------------------------------------------------
BENEFICIALLY 8. Shared Voting Power
OWNED BY 5,371,980
EACH ----------------------------------------------------------
REPORTING 9. Sole Dispositive Power
PERSON 0
WITH ----------------------------------------------------------
10. Shared Dispositive Power
5,371,980
------------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned by Each Reporting Person
5,371,980
------------------------------------------------------------------------
12. Check Box If the Aggregate Amount in Row (11) Excludes Certain
Shares (See Instructions) [_]
------------------------------------------------------------------------
13. Percent of Class Represented by Amount in Row (11)
38.2%
------------------------------------------------------------------------
14. Type of Reporting Person (See Instructions)
CO
------------------------------------------------------------------------
4
------------------------------------------------------------------------
1. Name of Reporting Persons. I.R.S. Identification Nos. of above persons
(entities only).
Raytheon Aircraft Credit Corporation
------------------------------------------------------------------------
2. Check the Appropriate Box If a Member of a Group (See Instructions)
(a) [_]
(b) [_]
------------------------------------------------------------------------
3. SEC Use Only
------------------------------------------------------------------------
4. Source of Funds (See Instructions)
OO
------------------------------------------------------------------------
5. Check If Disclosure of Legal Proceedings Is Required Pursuant to Items
2(d) or 2(e) [_]
------------------------------------------------------------------------
6. Citizenship or Place of Organization
Kansas
------------------------------------------------------------------------
7. Sole Voting Power
NUMBER OF 0
SHARES ----------------------------------------------------------
BENEFICIALLY 8. Shared Voting Power
OWNED BY 5,371,980
EACH ----------------------------------------------------------
REPORTING 9. Sole Dispositive Power
PERSON 0
WITH ----------------------------------------------------------
10. Shared Dispositive Power
5,371,980
------------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned by Each Reporting Person
5,371,980
-----------------------------------------------------------------------
12. Check Box If the Aggregate Amount in Row (11) Excludes Certain
Shares (See Instructions) [_]
------------------------------------------------------------------------
13. Percent of Class Represented by Amount in Row (11)
38.2%
------------------------------------------------------------------------
14. Type of Reporting Person (See Instructions)
CO
------------------------------------------------------------------------
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ITEM 1. SECURITY AND ISSUER
This statement on Schedule 13D relates to the common stock, par value $0.01 per
share (the "Common Stock"), of Great Lakes Aviation, Ltd. ("Great Lakes") and is
being filed pursuant to Rule 13d-1 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
The address of the principal office of Great Lakes is:
1022 Airport Parkway
Cheyenne, Wyoming 82001
ITEM 2. IDENTITY AND BACKGROUND
(a) This statement on Schedule 13D is being jointly filed by Raytheon Company
("Raytheon"), a Delaware corporation, Raytheon Aircraft Holdings, Inc.
("RAHI"), a Delaware corporation, and Raytheon Aircraft Credit Corporation
("RACC"), a Kansas corporation. RACC is a subsidiary of RAHI which in turn
is a subsidiary of Raytheon. RACC, RAHI and Raytheon are collectively
referred to herein as the "Reporting Persons."
For information required by General Instruction C to Schedule 13D
with respect to the executive officers and directors of the
Reporting Persons (collectively the "Covered Persons"), please
refer to Exhibit 2 attached hereto and incorporated herein by
reference. The Reporting Persons and the Covered Persons do not
admit that they constitute a group.
(b) The business address of Raytheon is:
141 Spring Street
Lexington, Massachusetts 02421
The business address of RAHI is:
10511 East Central Street
Wichita, Kansas 67206
The business address of RACC is:
10511 East Central Street
Wichita, Kansas 67206
Raytheon is a global defense electronics contractor, RAHI is a
holding company for the subsidiaries comprising Raytheon's aircraft
operating segment and RACC is an aircraft finance company.
(c) Not applicable.
(d) The Reporting Persons have not been convicted in any criminal proceeding
during the last five years.
(e) On November 25, 2002, the Securities and Exchange Commission (the "SEC")
instituted and settled cease-and-desist proceedings against Raytheon and a
former executive officer of Raytheon for alleged violations of Regulation
FD in February 2001. The settlement did not impose any civil penalty or
other monetary sanctions against Raytheon. Raytheon neither admitted nor
denied the findings in the SEC's cease-and-desist order.
(f) Each of Raytheon and RAHI is a Delaware corporation and RACC is a Kansas
corporation. For the citizenship of each Covered Person, please refer to
Exhibit 2 attached hereto and incorporated herein by reference.
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ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
Great Lakes issued 5,371,980 shares of Common Stock to RACC in connection with
the restructuring of certain aircraft financing provided by RACC with respect to
certain Beech 1900D and 1900C aircraft. In exchange for the cancellation and
restructuring of certain indebtedness related to the financing of said aircraft,
and RACC's agreement to accept the return of certain aircraft, Great Lakes
issued to RACC 38.2% of the outstanding Common Stock of Great Lakes.
ITEM 4. PURPOSE OF TRANSACTION
The Common Stock is being held for investment purposes. None of the Reporting
Persons or the Covered Persons has any plans to dispose of or acquire additional
shares of the Common Stock or to engage in any material transactions affecting
Great Lakes.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a) Amount beneficially owned as of April 25, 2003:
5,371,980, representing 38.2% of the Common Stock of Great Lakes.
RACC is the holder of record of the shares, RAHI is the direct
parent of RACC and Raytheon is the direct parent of RAHI.
(b) The Reporting Persons, along with the Covered Persons, share power to vote
or to direct the vote and to dispose or to direct the disposition of the
Common Stock as noted in (a) above.
(c) None of the Reporting Persons or the Covered Persons has engaged in any
transaction with respect to the Common Stock within the last 60 days.
(d) Not applicable.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER
The Restructuring Agreement, dated as of December 31, 2002 between Great Lakes
and RACC (the "Restructuring Agreement") provides that, in the event that Great
Lakes issues any additional shares of, or options or warrants to purchase or
other securities convertible into common stock, RACC shall be entitled to
purchase its pro rata share of such securities at the same issuance price. In
addition, in the event that RACC desires to sell any of the securities of Great
Lakes that it has acquired pursuant to the Restructuring Agreement to certain
competitors of Great Lakes, Great Lakes has the right of first refusal to
purchase such securities on the same terms. The Restructuring Agreement is filed
as Exhibit 3 attached hereto. There are no contracts, arrangements,
understandings or relationships by or between the Covered Persons with respect
to the securities of Great Lakes.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Exhibit 1 Joint Filing Agreement, dated as of April 25, 2003.
Exhibit 2 Information with Respect to Executive Officers and Directors of the
the Reporting Persons.
Exhibit 3 Restructuring Agreement, dated as of December 31, 2002 between
Great Lakes and RACC.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
RAYTHEON COMPANY
/s/ John W. Kapples
John W. Kapples Date
Vice President and Secretary 04/24/03
RAYTHEON AIRCRAFT HOLDINGS, INC.
/s/ John W. Kapples
John W. Kapples Date
Secretary 04/24/03
RAYTHEON AIRCRAFT CREDIT CORPORATION
/s/ Andrew A. Mathews
Andrew A. Mathews Date
President 04/24/03
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EXHIBIT 1
JOINT FILING AGREEMENT
In accordance with Rule 13d-1(k) under the Securities Exchange Act of
1934, as amended, the undersigned hereby agrees to the joint filing with all
other Reporting Persons (as such term is defined the Schedule 13D referred to
below) on behalf of each of them of a statement on Schedule 13D (including
amendments thereto) with respect to the common stock, par value $0.01 per share,
of Great Lakes Aviation, Ltd. and that this Agreement be included as an exhibit
to such joint filing. This Agreement may be executed in any number of
counterparts all of which taken together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the undersigned hereby execute this Agreement this
25th day of April, 2003.
RAYTHEON COMPANY
By:/s/ John W. Kapples
John W. Kapples
Vice President and Secretary
RAYTHEON AIRCRAFT HOLDINGS, INC.
By:/s/ John W. Kapples
John W. Kapples
Secretary
RAYTHEON AIRCRAFT CREDIT CORPORATION
By:/s/ Andrew Mathews
Andrew Mathews
President
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Exhibit 2
INFORMATION WITH RESPECT TO EXECUTIVE OFFICERS
AND DIRECTORS OF THE REPORTING PERSONS
The following sets forth as to each of the executive officers and directors of
the Reporting Persons, as defined in Schedule 13D, the person's name, title,
present occupation, business address and citizenship of each individual.
Raytheon
Name Title Present Occupation
------------------- ------- -------------------
Barbara M. Barrett Director President
Triple Creek Guest Ranch
Ferdinand Colloredo-Mansfeld Director Retired Chairman
and CEO Cabot Corp.
John M. Deutch Director Professor MIT
Thomas E. Everhart Director President Emeritus
California Institute
of Technology
Frederic M. Poses Director Chairman and CEO
American Standard
Companies, Inc.
Warren B. Rudman Director Of Counsel
Paul, Weiss,
Rifkind, Wharton &
Garrison
Michael C. Ruettgers Director Executive Chairman
EMC Corporation
Ronald L. Skates Director Private Investor
William R. Spivey Director Retired President
Luminent, Inc.
John H. Tilelli Director President
Cypress International, Inc.
Daniel P. Burnham Chairman, CEO and Director Chairman and CEO
Raytheon Company
William H. Swanson President President
Raytheon Company
Francis S. Marchilena Executive Vice President Executive Vice President
Raytheon Company
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James E. Schuster Executive Vice President Chairman and CEO,
and Chairman and CEO, Raytheon Aircraft Company
Raytheon Aircraft Company
Thomas M. Culligan Senior Vice President, Senior Vice President, Business Development
Business Development and and Chairman and CEO Raytheon International,
Chairman and CEO Raytheon Inc.
International, Inc.
Bryan J. Even Vice President and President
President Raytheon Raytheon Technical
Technical Services Company Services Company
Richard J. Foley Vice President - Contracts Vice President - Contracts Raytheon Company
Louise L. Francesconi Vice President and President - Missile Systems
President - Missile Systems
Charles E. Franklin Vice President and President - Integrated Defense Systems
President - Integrated
Defense Systems
Richard A. Goglia Vice President and Vice President and Treasurer Raytheon Company
Treasurer
Jack R. Kelble Vice President and President - Space and
President - Space and Airborne Systems
Airborne Systems
Michael D. Keebaugh Vice President and President - Intelligence and Information
President - Intelligence Systems
and Information Systems
Keith J. Peden Senior Vice President - Senior Vice President - Human Resources
Human Resources Raytheon Company
Edward S. Pliner Senior Vice President and Chief Financial
Chief Financial Officer Officer Raytheon Company
Rebecca B. Rhoads Vice President and Chief Chief Information Officer Raytheon Company
Information Officer
Colin Schottlaender Vice President and President - Network Centric Systems Raytheon
President - Network Company
Centric Systems
Gregory S. Shelton Vice President - Vice President - Engineering and Technology
Engineering and Technology Raytheon Company
Jay B. Stephens Senior Vice President and General Counsel Raytheon Company
General Counsel
RAHI
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John W. Kapples Director and Secretary Vice President, Raytheon c/o Raytheon Company
Company
James M. Schuster Director and Chairman President, Raytheon 10511 E. Central St.
Aircraft Company Wichita, Kansas 67206
Neal E. Minahan President N/A 16 Cazenove Street
Boston, MA 02116
Anthony F. O'Brien Vice President and CFO CFO, Raytheon Aircraft 10511 E. Central St.
Company Wichita, Kansas 67206
Richard A. Goglia Vice President and Vice President and c/o Raytheon Company
Treasurer Treasurer, Raytheon
Company
Wayne W. Wallace Vice President and General Counsel, 10511 E. Central St.
General Counsel Raytheon Aircraft Company Wichita, Kansas 67206
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RACC
Andrew A. Mathews Director and President President RACC 10511 E. Central St.
Wichita, Kansas 67206
David A. Williams Director, Vice President Vice President and 10511 E. Central St.
and General Counsel General Counsel RACC Wichita, Kansas 67206
Julie A. Shea Vice President, Vice President, 10511 E. Central St.
Controller, Secretary Controller RACC Wichita, Kansas 67206
and Director
Scott Cleveland Vice President Vice President RACC 10511 E. Central St.
Wichita, Kansas 67206
13
Unless otherwise specified, the business address of each individual is 141
Spring Street, Lexington, Massachusetts 02421. Each such individual identified
above is a citizen of the United States.
To the knowledge of the Reporting Persons, during the last five years, no such
person has been convicted in a criminal proceeding (excluding traffic violations
or similar misdemeanors), and no such person was a party to a civil proceeding
of a judicial or administrative body of competent jurisdiction as a result of
which that person was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities subject
to, Federal or State securities laws or finding any violation with respect to
such laws.
14
EXHIBIT 3
RESTRUCTURING AGREEMENT
As of this 31st day of December, 2002, this Agreement ("Agreement") is
made by and between Great Lakes Aviation, Ltd., an Iowa corporation with its
principal place of business at 1022 Airport Parkway, Cheyenne, Wyoming 82001
("Great Lakes"), and Raytheon Aircraft Credit Corporation, a Kansas corporation
with its principal place of business at 10511 East Central Avenue, Wichita,
Kansas 67206 ("RACC").
RECITALS
A. Great Lakes currently owns or leases under finance leases thirty-seven
(37) Beech Model 1900D Airliners that have been financed or leased by
RACC and leases from RACC under operating leases two (2) Beech Model
1900C Airliners. These aircraft are identified and grouped as follows:
(1) the seven (7) 1900D Airliners having Manufacturer's Serial
Numbers UE-97, UE-101, UE-204, UE-226, UE-228, UE-249 and
UE-260 (collectively and individually, the "Group A
Aircraft");
(2) the thirty (30) 1900D Airliners having Manufacturer's Serial
Numbers UE-94, UE-96, UE-100, UE-118, UE-122, UE-150, UE-153,
UE-154, UE-169, UE-170, UE-179, UE-184, UE-192, UE-195,
UE-201, UE-202, UE-208, UE-210, UE-211, UE-219, UE-220,
UE-240, UE-245, UE-247, UE-251, UE-253, UE-254, UE-255, UE-257
and UE-261 (collectively and individually, the "Group B
Aircraft"); and
(3) the two (2) 1900C Airliners having Manufacturer's Serial
Numbers UC-101 and UC-122 (collectively and individually, the
"Group C Aircraft," and, together with the Group A Aircraft
and the Group B Aircraft, the "Aircraft").
B. Subject to the terms and conditions contained herein, RACC has agreed
to (i) accept the return of the Group A Aircraft and extinguish the
debt and or lease obligations on each Group A Aircraft upon such
return, (ii) restructure its financing of the Group B Aircraft, and
(iii) reduce the lease payments on the Group C Aircraft and Great Lakes
has agreed to issue to RACC shares of Great Lakes' common stock, a
deferral note, a senior note, and a subordinated note.
C. This Agreement, taken together with the Transaction Documents (as
defined herein) to be executed in connection herewith, constitute the
entire agreement between RACC and Great Lakes concerning the subject
matter hereof and supercede and merge any prior written or oral
agreements between RACC and Great Lakes concerning the subject matter
hereof.
D. The parties hereto have reached further agreement as to certain matters
relating to the Aircraft and certain related obligations between the
parties, and desire to set forth the terms of such agreement herein.
AGREEMENT
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Great Lakes and RACC agree as follows:
1. Recitals Incorporated. The parties hereto hereby incorporate the
Recitals as if fully set forth herein.
2. Group A Aircraft. The following applies to all Group A Aircraft.
15
(A) Return Conditions. The Group A Aircraft, including engines, shall be
returned by Great Lakes to RACC to destinations within the United
States selected by RACC in accordance with the schedule attached
hereto as Schedule 1. The Group A Aircraft are to be returned in
accordance with the following terms and conditions (the "Return
Conditions"): (i) all engines, engine life cycle fatigue components,
propellers, airframe and other time/life components shall be at a
minimum of half-life remaining, as defined in accordance with the
aircraft manufacturer's maintenance manual or, in the case of engines,
as set forth in Pratt & Whitney's engine overhaul recommendations.
With regards to the half life requirement RACC may waive this
requirement on a case by case basis in economic consideration of the
component time remaining and for consideration that certain components
may be returned with better than half life remaining. In all cases the
decision of the RACC representative will be final. (ii) all originally
installed equipment shall be in working order, (iii) such Group A
Aircraft shall be airworthy, and immediately prior to return have a
complete 1-6 detail inspection, and no structural inspections due
within 5% of the structural inspection schedule. Any structural
inspection that is due within 5% of the inspection schedule will be
completed prior to the return of the aircraft. This 5% requirement may
be waived on a case by case basis as agreed to by the GLA Director of
Maintenance and the RACC representative. All required inspections
shall be completed by an FAA Authorized Part 145 Certified Repair
Station. (CRS) The aircraft shall be in compliance with all
Airworthiness Directives issued by the FAA pertaining to such Group A
Aircraft, and the manufacturers published maintenance specifications
and Mandatory Service Bulletins (iv) such Group A Aircraft shall be
delivered ready for Commuter use under part 121 and/or Part 91. RACC
shall promptly perform an inspection of each Group A Aircraft and
attached engines, airframe and other time/life components that is
returned to it so as to determine whether all of the Return Conditions
have been satisfied. In the event that RACC determines that any Group
A Aircraft is not in compliance with any of the Return Conditions,
RACC shall promptly notify Great Lakes in writing of such
determination and RACC shall have the option of either requesting that
Great Lakes (1) remedy such noncompliance in a manner reasonably
satisfactory to RACC within thirty (30) days or (2) return a
substitute Group B Aircraft designated by RACC in compliance with the
Return Conditions within thirty (30) days, in which case such
substitute Group B Aircraft shall be deemed to be a Group A Aircraft
for purposes of this Agreement and such noncompliant Group A Aircraft
shall be deemed to be a Group B Aircraft for purposes of this
Agreement. If RACC requests, Great Lakes shall store and maintain any
Group A Aircraft accepted by RACC for a period not to exceed thirty
(30) days.
(B) Delivery of Aircraft Records, Etc. Great Lakes shall deliver to RACC,
as an additional Return Condition, all of the following items related
to each of the Group A Aircraft:
(1) All records of maintenance, preventative maintenance,
alterations and repairs relating to such Group A
Aircraft. All major repairs and alteration
documentation shall be in the form of either FAA Form
337 or FR-CO (FAA Approved Field Repairs).
16
(2) All airframe, engine and propeller logbooks endorsed
for current total time and cycles for the airframe,
total time and cycles for each engine and engine life
cycle fatigue components and an entry for total time
and cycles since overhaul and hot section inspection
for each engine, and total time since new and time
since overhaul for each propeller. The airframe
logbook must include all appropriate endorsements
(i.e., maintenance releases) verifying that the
avionics have been periodically tested and inspected
in accordance with 14 CFR Section 91.411 and Section
91.413 and Chapters 4 and 5 of the Beechcraft
Maintenance Manual.
(3) A current written summary certified by Great Lakes'
inspection authority listing the status of all
applicable airworthiness directives and service
bulletins for the airframe, engines, propellers and
appliances.
(4) A written summary certified by Great Lakes'
authorized inspection authority of the current status
of life limited and/or overhauled components for the
airframe, engines (in accordance with the
Manufacturer's recommended intervals), engine
accessories and appliances as defined in the most
current revision(s) of all Beechcraft maintenance
publications applicable to such Group A Aircraft. The
aforesaid summary shall be organized in the chapter
order specified by the Air Transport Association.
(5) Great Lakes must provide the following documentation
and data for each component having an overhaul or
inspection requirement or life limit, which
components are identified in Chapter 4 and/or Chapter
5 of Beechcraft Maintenance Manual applicable to such
Group A Aircraft, as follows: (i) an airworthiness
release certificate or maintenance release tag, (ii)
the vendor work order or copy thereof verifying the
details of each component's overhauls, and (iii) an
appropriate record certifying the date and expended
time status of the components when installed (i.e.,
copy of log or inspection squawk card). The three (3)
items identified in the preceding sentence must be
properly organized and provided on-board such Group A
Aircraft.
(6) Great Lakes must provide written verification that
Pratt & Whitney has approved all of the Group A
Aircraft engines as being eligible for enrollment in
a Pratt & Whitney engine fleet maintenance program.
(7) For each Group A Aircraft that is not leased from
RACC and for each engine that is not leased but is on
a Group A Aircraft that is leased, Great Lakes shall
deliver to RACC an executed FAA Bill of Sale for such
Group A Aircraft or, in the case of an engine, an
appropriate document of conveyance.
Great Lakes acknowledges that each of the items
described above in subsections (1) through (6) must
be provided to RACC upon return of each Group A
Aircraft regardless of whether Great Lakes has
conducted its periodic inspections of such Group A
Aircraft pursuant to Chapter 5 of the Beechcraft
Maintenance Manual or in accordance with an
inspection program approved by the FAA pursuant to 14
CFR Section 91.4099(f).
17
(C) Suspension of Payments; Extinguishment of Debt. Payments due from
Great Lakes to RACC under the existing aircraft lease or secured
promissory note, as applicable (each a "Existing Finance Agreement"
and collectively, the "Existing Finance Agreements") for each of the
Group A Aircraft shall be suspended for the period commencing on the
Effective Date through the applicable deadline for the return of such
Aircraft set forth on Schedule 1 hereto (the "Group A Cut-Off Date").
If any Group A Aircraft has not been returned by Great Lakes to RACC
in accordance with the terms of this Agreement on or before the
applicable Group A Cut-Off Date, debt and/or lease payments due on
such Group A Aircraft will resume for the period from such Group A
Cut-Off Date until such time as such Aircraft is so returned, with
such payments to be made in accordance with the terms of the related
Existing Finance Agreement without modification by this Agreement.
Upon the return of any Group A Aircraft in accordance with the terms
of this Agreement, all payments and other amounts owed at such time of
return under the related Existing Finance Agreement shall be cancelled
and extinguished, except for any payments that become due after the
applicable Group A Cut-Off Date.
(D) Financing of Costs of Return Conditions. RACC agrees to provide
financing to Great Lakes with respect to each Group A Aircraft in the
form of advances (the "Advances") in an amount not to exceed
seventy-five percent (75%) of the reasonable out-of-pocket costs
incurred by Great Lakes (exclusive of any costs associated with the
labor of any Great Lakes' employees) in refurbishing and repairing
such Group A Aircraft so as to meet the Return Conditions for which
(1) the nature of the work to be done, estimated cost and identity of
the service provider have been pre-approved by RACC in writing and (2)
copies of the related purchase orders and invoices have been provided
to RACC, provided that the aggregate amount of the Advances to be
provided with respect to all of the Group A Aircraft shall not exceed
$3,000,000. The Advances shall be evidenced by a promissory note
executed by Great Lakes payable to RACC (the "Group A Return
Conditions Note," the form of which is attached hereto as Exhibit A),
which shall have a bullet maturity on the fourth anniversary of issue
(December 31, 2006) and bear interest at the rate of LIBOR plus 500
basis points. "LIBOR" shall mean the rate of interest determined by
RACC at which Dollar deposits for ninety (90) days are offered based
on information provided in The Wall Street Journal on the second
business day prior to the date of the issuance of the Group A Return
Conditions Note or the first day of January, April, July and October,
as applicable, provided, however, that if the rate described above
does not appear in The Wall Street Journal on any applicable interest
determination date, LIBOR shall be the rate determined by RACC in good
faith based on the offered rates for deposits in Dollars for ninety
(90) days that are then offered by major banks in the London interbank
market. LIBOR shall be adjusted on the first business day of each
calendar quarter to reflect any increase or decrease in LIBOR as of
that date.
3. Group B Aircraft. The Existing Finance Agreements on the Group B
Aircraft and all amounts owed thereunder as of the Effective Date
shall be restructured in their entirety by the issuance of amended and
restated promissory notes or, with respect to the Existing Finance
Agreements that are aircraft leases, promissory notes executed by
Great Lakes payable to RACC (each "Group B Note" and collectively, the
"Group B Notes," the form of which is attached hereto as Exhibit B).
In addition, with respect to Existing Finance Agreements that are
aircraft leases, RACC shall transfer title of the related Group B
Aircraft to Great Lakes and Great Lakes shall execute and deliver to
RACC aircraft security agreements and, with respect to Existing
Finance Agreements that are promissory notes, Great Lakes shall
execute and deliver to RACC amended and restated aircraft security
agreements (each such aircraft security agreement or amended and
restated aircraft security agreement to be executed and delivered by
Great Lakes is referred to herein as a "Group B Security Agreement"
18
and are collectively referred to as the "Group B Security
Agreements"), the form of which is attached as Exhibit C. Each of the
Group B Notes shall bear interest at LIBOR plus 375 basis points
(subject to adjustment as set forth below), shall have an original
principal amount of $2,500,000 and provide for initial monthly
payments as set forth on Schedule 2 hereto payable in arrears starting
on January 31, 2003, with the amount of the monthly payment to be
adjusted quarterly, on the first day of each calendar quarter as
described in Section 2(D), based on changes in the underlying interest
rate. The principal balances of the Group B Notes shall amortize as
set forth on Schedule 2 hereto, with a final maturity on December 31,
2012. Schedule 1 to the Group B Notes shall incorporate a credit
pricing matrix to reduce the interest rate upon Great Lakes' meeting
specific debt service coverage targets. The Group B Notes shall be
fully assignable and Great Lakes agrees to cooperate with RACC to
facilitate any such assignment, with RACC agreeing to pay Great Lakes'
actual reasonable out-of-pocket costs of such assignment.
4. Group C Aircraft. RACC agrees, as of the Effective Date, to reduce the
monthly rental payments due from Great Lakes pursuant to each of the
airliner lease agreements for the Group C Aircraft (the "Group C
Leases") from $22,000 per month to $17,000 per month pursuant to an
amendment to each of the Group C Leases (each a "Group C Lease
Amendment", and collectively, the "Group C Lease Amendments"), the
form of which is attached hereto as Exhibit D, to reflect this change
in rental payments. In addition, all unpaid monetary lease obligations
on the Group C Aircraft will be extinguished provided that the payment
referred to in Section 14(B)(23) has been made pursuant to the letter
dated November 25, 2002 from RACC to Great Lakes, and all such
payments not addressed in the letter are current as of the Effective
Date.
5. Intentionally Omitted.
6. Deferral Note. The (i) $800,000 payment that was due to paid by Great
Lakes to RACC on October 15, 2002 and (ii) the $400,000 balance of the
payment that was due to paid by Great Lakes to RACC on November 15,
2002, both of which were not paid and deferred by RACC, shall be the
subject of a promissory note (the "Deferral Note"), the form of which
is attached hereto as Exhibit E. The interest rate on the Deferral
Note shall be LIBOR plus 375 basis points. Interest on the Deferral
Note shall be payable quarterly in arrears on the last day of each
calendar quarter commencing on March 31, 2003. Amortization of the
Deferral Note shall be in quarterly payments on the last day of each
calendar quarter beginning on June 30, 2003. In 2003, there will be
three principal payments on June 30, September 30 and December 31 of
$133,333.33 each, in 2004, there shall be four quarterly payments of
$125,000 each and in 2005, there shall be four quarterly payments of
$75,000 each.
19
7. Extinguishment of Non-Aircraft Debt; Certain Deposits. The
indebtedness owing from Great Lakes to RACC and evidenced by certain
Negotiable Promissory Notes dated November 1, 2000, June 29, 2001 and
December 1, 2001 issued by Great Lakes to RACC (the "Existing
Promissory Notes") shall be extinguished and cancelled by RACC as of
the "Effective Date" (as hereinafter defined in Section 14). The
outstanding principal amount of this indebtedness as of the Effective
Date is approximately $13,750,000, and the amount of the past due
interest obligation will be approximately $1,000,000, for a total
approximate obligation of $14,750,000. Great Lakes acknowledges that
$1,100,000 that it previously has paid to RACC as lease deposits for
certain leased aircraft has been applied in connection with the
restructuring pursuant to this Agreement and that Great Lakes no
longer has any rights to such funds.
8. Receipt of Equity.
(A) Grant of Shares. In partial consideration of RACC's extinguishing and
restructuring certain indebtedness owing to it from Great Lakes, RACC
shall obtain equity in Great Lakes. On the Effective Date, Great Lakes
shall deliver to RACC a stock certificate issued in the name of RACC
evidencing 5,371,980 shares (the "RACC Shares") of common stock, par
value $.01 per share, of Great Lakes (the "Common Stock"),
representing 36% of outstanding post-restructuring shares of Common
Stock on a fully-diluted, as if fully exercised, basis. Such shares of
Common Stock shall be duly authorized, fully paid and nonassessable.
(B) Anti-Dilution. Except for (i) the issuance of options to purchase up
to 1,000,000 shares of Common Stock pursuant to Great Lakes' 1993
Stock Option Plan, (ii) the issuance of options to purchase up to
300,000 shares of Common Stock pursuant to Great Lakes' 1993 Director
Stock Option Plan, (iii) the issuance of options for new management of
Great Lakes hired subsequent to the effectiveness of this Agreement to
purchase up to 400,000 shares of Common Stock pursuant to an
additional equity incentive plan to be implemented in the near future
provided that all recipients of options pursuant to such additional
equity incentive plan sign lockup agreements as set forth in Section
14(B)(31), (iv) the issuance of up to 2,300,000 shares of Common Stock
in connection with the exercise of any of the foregoing options, and
(v) the issuance of up to 150,000 shares of Common Stock pursuant to
Great Lakes' Employee Stock Purchase Plan, if, at any time or from
time to time Great Lakes issues any shares of, or options or warrants
to purchase or other securities convertible into, Common Stock (an
"Additional Issuance"), Great Lakes shall provide not less than five
(5) days' prior written notice of such Additional Issuance to RACC,
20
and RACC shall be entitled to receive, on the date of each such
issuance (an "Additional Issuance Date"), by giving Great Lakes notice
within thirty (30) days of its receipt of Great Lakes' notice of such
Additional Issuance, at a price per share equal to the price per share
payable in connection with such Additional Issuance or, in the case of
an option or warrant to purchase Common Stock, at a price per share
equal to the price per option, if any, payable in connection with such
Additional Issuance plus the per share exercise price thereunder, a
number of additional shares of Common Stock (the "Anti-Dilution
Shares") as is equal to the product of (i) fifty-six and 25/100
(56.25) multiplied by (ii) the number of shares of Common Stock issued
or issuable in connection with such Additional Issuance, determined on
a fully-diluted basis. The Anti-Dilution Shares, when issued, shall be
duly authorized, fully paid and nonassessable shares of Common Stock.
The certificates for the Anti-Dilution Shares shall be issued in the
name of RACC (or RACC's transferee or designee), and delivered to such
person within three (3) business days after the Additional Issuance
Date. Issuance of certificates for Anti-Dilution Shares shall be made
without charge to RACC (or RACC's transferee or designee) for any
issue or transfer taxes or other incidental expenses in respect of the
issuance of such certificates, all of which taxes and expenses shall
be paid by Great Lakes. This Section 8(B) shall expire upon the
earlier of (1) the Debt Service Ratio (as defined in Section 15(A)) as
at the end of any two consecutive fiscal quarters being greater than
or equal to 3.0:1.0 or (2) the Free Cash Flow (as defined on Schedule
5) as at the end of any fiscal year is greater than or equal to
$15,000,000 (the date of such earlier occurrence is referred to as the
"Limited Termination Date") provided that Great Lakes is in compliance
with this Agreement, each of the other Transaction Documents (as
defined below) and any other agreement between itself and RACC.
(C) Restrictions on Transfers to Competitors. Great Lakes shall have the
right of first refusal with respect to any proposed sale by RACC of
all or any portion of the RACC Shares or any Anti-Dilution Shares
received by RACC (collectively, the "Shares") to any regional commuter
airline that competes directly with Great Lakes and is listed on
Schedule 3 hereto. Prior to accepting any bona fide offer for purchase
of any Shares, RACC shall give to Great Lakes notice in writing (the
"Offer Notice") disclosing the price and the terms at which RACC
proposes to sell such Shares pursuant to such bona fide offer, and
within twenty (20) days after such notice has been given Great Lakes
shall give RACC notice (the "Reply Notice") of its intention to
purchase or not to purchase at the price and on the terms specified in
the Offer Notice accompanied by a bona fide third party lender's
proposal for the financing of any such purchase (a "Financing
Proposal"). Within thirty (30) days after providing the Reply Notice
and Financing Proposal, Great Lakes shall provide RACC with evidence
of such lender's firm commitment to provide the financing referenced
in the Financing Proposal (the "Financing Commitment"). Upon receipt
of a Financing Commitment, Great Lakes shall pay to RACC a good faith
purchase deposit in an amount mutually acceptable to each of RACC and
Great Lakes. If Great Lakes gives notice of its intention to purchase
in the Reply Notice and provides RACC with the Financing Proposal and
the Financing Commitment in accordance with the terms hereof, RACC
will sell to Great Lakes or its nominee such Shares on the same terms
and conditions set forth in the Offer Notice. If (i) Great Lakes
notifies RACC in the Reply Notice of its intention not to purchase at
such price and on such terms, (ii) or if no Reply Notice, Financing
Proposal or Financing Commitment is given by Great Lakes in accordance
with the terms hereof or (iii) if Great Lakes fails to close the
purchase of such Shares within twenty (20) days after its delivery of
a Financing Commitment, RACC shall be free to sell such Shares
described in the Offer Notice, within 120 days after the Offer Notice
has been given, to the competitor named in the Offer Notice free and
clear of Great Lakes' right of first refusal as provided in this
Agreement, but at a price not lower than, and on terms not
substantially different from, the price and terms specified in the
Offer Notice. However, no sale to the competitor named in the Offer
Notice shall be made after 180 days following the date of the Offer
Notice without Great Lakes having again given RACC an Offer Notice and
again complied in full with the terms of this Section 8(C).
21
9. Additional Notes. In partial consideration of RACC's extinguishing and
restructuring certain indebtedness owing to it from Great Lakes:
(A) Senior Note. RACC shall receive from Great Lakes a senior promissory
note with a face amount of $5,000,000 (the "Senior Note"), the form of
which is attached hereto as Exhibit F. The interest rate on the Senior
Note shall be eight and one quarter percent (8.25%) per annum.
Interest shall accrue on the outstanding principal amount under the
Senior Note and shall be capitalized and added to principal on the
last day of each calendar quarter commencing on March 31, 2003.
Commencing on March 31, 2005, interest on the Senior Note shall be
payable quarterly in arrears on the last day of each calendar quarter.
The outstanding principal balance of the Senior Note outstanding on
March 31, 2005 shall amortize in equal quarterly payments payable on
the last day of each calendar quarter beginning on March 31, 2005 with
a final maturity on December 31, 2009.
(B) Subordinated Note. RACC shall receive from Great Lakes a subordinated
promissory note with a face amount of $5,000,000 (the "Subordinated
Note" and, collectively with the Group A Return Conditions Note, the
Group B Notes, the Deferral Note, and the Senior Note, the "Notes"),
the form of which is attached hereto as Exhibit G. The interest rate
on the Subordinated Note shall be six percent (6%) per annum. For the
first three years after the date of issuance of the Subordinated Note,
interest shall accrue on the outstanding principal amount under the
Subordinated Note and shall be capitalized and added to principal on
the last day of each calendar quarter commencing on March 31, 2003.
Interest shall be payable in cash quarterly in arrears on the last day
of each calendar quarter commencing on March 31, 2006 with a bullet
maturity of the outstanding principal on September 30, 2007. The
Subordinated Note shall contain covenants (financial and otherwise)
and other terms and conditions typical for debt of this type.
10. Engine Fleet Maintenance Program.
(A) Subject to (i) the establishment of the engine management team
as set forth in Section 10(B) below, and (ii) the EMP
requirement set forth in Section 10(C) below, RACC hereby
consents to Great Lakes continued operation of the engines on
the Aircraft on an "On Condition" basis. In the event that the
FAA withdraws its approval of Great Lakes' "On Condition"
TBO/CBO, then RACC's consent given hereunder shall
automatically terminate.
(B) On or before January 30, 2003, Great Lakes agrees to establish
an engine management team comprised of qualified maintenance
personnel approved by RAAS, in its reasonable discretion, to
manage Great Lakes' "On Condition" TBO/CBO program currently
approved by the FAA. The engine management team shall consist
of no less than two (2) persons. The engine management team
shall be exclusively responsible for making all maintenance
decisions with respect to the engines, including the necessity
or frequency of hot section inspections and overhauls. The
engine management team shall be responsible for timely
providing to RACC any and all information RACC may request
with respect to the engines.
(C) On or before April 30, 2003, Great Lakes will enter into an
engine maintenance plan with a third-party vendor approved by
RACC ("EMP"), which EMP shall include at least the following
requirements:
22
(1) Each individual engine shall be enrolled in the EMP
immediately following its next scheduled or
unscheduled overhaul. Great Lakes shall be
responsible to cause a complete engine (both a gas
generator module and a power section module) to be
overhauled simultaneously, so as to produce a
complete zero (0) time/cycle engine to be enrolled in
the EMP.
(2) The EMP shall be a "mature rate" plan. As such, (i)
the EMP shall be tracked on an individual engine
basis, (ii) the EMP shall require that EMP payments
are made for each engine sufficient to pay to the
vendor for parts and labor to complete the next
overhaul.
(3) The EMP, and any engine balances within the EMP,
shall be fully assignable and transferable with the
engine. As such, the party succeeding in interest to
the engine (including, without limitation, RACC)
shall be entitled to the full benefit of any EMP
engine balances, without claim by Great Lakes.
(4) Any default by Great Lakes of the terms and
conditions of the EMP shall constitute a default
under all applicable promissory notes, security
agreements, finance leases and/or operating leases.
Great Lakes agrees to execute appropriate amendments
or other agreements evidencing the addition of this
requirement to the promissory notes, security
agreements, finance leases and operating leases.
11. Prepayments.
(A) Mandatory Prepayments. Not later than the earlier of ninety (90) days
after the end of each fiscal year end of Great Lakes or the filing of
Great Lakes' Form 10-K with the Securities and Exchange Commission
("Form 10-K") for such fiscal year, Great Lakes shall prepay amounts
outstanding under the Notes in an aggregate amount equal to fifty
percent (50%) of the Excess Cash Flow for such fiscal year,
accompanied by a certificate of the chief financial officer of Great
Lakes setting forth in reasonable detail the calculation of Excess
Cash Flow for such fiscal year. "Excess Cash Flow" shall mean cash
flow from operations as determined in accordance with generally
accepted accounting principles less capital expenditures less all
payments in respect of funded indebtedness of Great Lakes for or made
during such fiscal year less $250,000.
(B) Voluntary Prepayment. Great Lakes may prepay its obligations in whole
or in part under this Agreement or any of the Transaction Documents
(as defined below) at any time without penalty.
23
(C) Application of Prepayments. All prepayments made pursuant to Section
11(A) or 11(B) shall be applied in the following order: first, to the
Group A Return Conditions Note until such time as it has been paid in
full, with such prepayments being applied to principal, interest and
other amounts owing under the Group A Return Conditions Note in such
order or preference as RACC may determine; second, to the Deferral
Note until such time as it has been paid in full, with such
prepayments being applied to principal, interest and other amounts
owing under the Deferral Note in such order or preference as RACC may
determine; third, to the Senior Note until such time as it has been
paid in full, with such prepayments being applied to principal,
interest and other amounts owing under the Senior Note in such order
or preference as RACC may determine; fourth, to the Subordinated Note
until such time as it has been paid in full, with such prepayments
being applied to principal, interest and other amounts owing under the
Subordinated Note in such order or preference as RACC may determine;
and fifth, to the Group B Notes until such time as they have been paid
in full, with such prepayments being applied to principal, interest
and other amounts owing under the Group B Notes in such order or
preference as RACC may determine; with all such prepayments to be
applied to reduce the then-remaining installments due thereunder in
the inverse order of scheduled maturity and, in the case of
prepayments in respect of the Group B Notes, applied thereto on a pro
rata basis.
12. Other Agreements.
(A) Management. On or before the Effective Date (i) Douglas G. Voss shall
assume the role of traditional Chairman of the Board of Directors of
Great Lakes, (ii) Charles R. Howell shall have been appointed Chief
Executive Officer of Great Lakes, (iii) James B. Glennon shall assume
the duties of Chief Financial Officer for at least one hundred twenty
(120) days following the Effective Date or until an appropriate
replacement has been hired and given an opportunity to transition into
the position, (iv) within one hundred twenty (120) days following the
Effective Date, Great Lakes shall have found and have in place a
qualified Chief Financial Officer with demonstrated experience and
airline expertise and (v) Great Lakes shall have entered into
management contracts in form and substance reasonably acceptable to
RACC for a period of not less than twenty-four months with appropriate
incentives with Mr. Howell and, within one hundred twenty (120) days
following the Effective Date, with the new Chief Financial Officer
described in clause (iv).
(B) Board Observer Rights. RACC shall have unlimited observer rights for
the Great Lakes Board of Directors, subject only to being excused if
either Great Lakes or RACC reasonably believes that participation
would involve a conflict of interest for RACC. These observer rights
shall not allow RACC to vote or enter into any discussions at any
Board of Directors meeting. Without in any way limiting the foregoing,
Great Lakes agrees to provide RACC with prior written notice
(consistent with the notice given other directors) of the time, place
and subject matter of any proposed meeting (or action by written
consent) of the Board of Directors of Great Lakes, such notice to
include true and complete copies of all documents furnished to any
director in connection with such meeting or consent, provided there is
no conflict of interest as provided above. Any two (2) of RACC's
officers or authorized representatives will be entitled to attend as
an observer at any such meeting or, if a meeting is held by telephone
conference, to participate therein. Great Lakes also agrees to provide
RACC with copies of the official minutes of every meeting of the Great
Lakes Board of Directors or of resolutions taken by unanimous written
consent within fifteen (15) days following such meeting or unanimous
written consent, provided there is no conflict of interest as provided
above. This Section 12(B) shall expire on the Limited Termination Date
provided that Great Lakes is in compliance with this Agreement, each
of the other Transaction Documents (as defined below) and any other
agreement between itself and RACC. Great Lakes also agrees to hold
actual shareholder meetings at least annually at such time and at such
location as the Great Lakes Board of Directors may determine.
24
(C) Independent Directors. Great Lakes agrees to cause two new independent
directors who are unaffiliated with RACC and Great Lakes and
reasonably acceptable to RACC to be appointed to the Great Lakes Board
of Directors by no later than March 15, 2003. RACC acknowledges that
Mr. John Reardon is acceptable to it as one of the two directors.
13. Collateral Security of Borrower. All indebtedness, obligations and
liabilities of Great Lakes to RACC, existing on the Effective Date or
arising thereafter, direct or indirect, joint or several, absolute or
contingent, matured or unmatured, liquidated or unliquidated, secured
or unsecured, arising by contract, operation of law or otherwise,
arising or incurred under this Agreement, the Corporate Security
Documents (as defined below), the Notes, the Group C Leases as amended
by the Group C Lease Amendments, the Group B Security Agreements and
any other notes, security agreements, leases or other agreements in
favor of RACC or to which RACC is a party (such documents, as amended
and in effect from time to time, are referred to collectively as the
"Transaction Documents"), including, without limitation, all such
indebtedness, obligations and liabilities that would become due but
for the operation of the automatic stay pursuant to section 362(a) of
the Federal Bankruptcy Code and the operation of sections 502(b) and
506(b) of the Federal Bankruptcy Code and including, without
limitation, post-petition interest (such indebtedness, obligations and
liabilities are collectively referred to as the "Obligations") shall
be secured by a first priority perfected lien on all accounts
receivable, inventory and (subject only to historic liens and liens
entitled to priority under applicable law) other assets, including,
without limitation, real estate, of Great Lakes, whether now owned or
hereafter acquired, pursuant to the terms of a security agreement (the
"Security Agreement"), the form of which is attached as Exhibit H
hereto, the Security Agreement and Encumbrance Against Aircraft
Carrier Engines, Propellers, Appliances and Spare Parts dated August
21, 1997, as amended and as to be further amended pursuant to a Third
Amendment to Security Agreement (the "Security Agreement Amendment";
such Security Agreement as amended and to be amended by the Security
Agreement Amendment is referred to as the "FAA Security Agreement"),
the form of which is attached as Exhibit I hereto, the Amended and
Restated Security Agreement for the Embraer model EMB-120ER aircraft
with manufacturer's serial number 120-071 (the "120-071 Security
Agreement"), the form of which is attached as Exhibit J hereto, and
all other instruments and documents, including without limitation
Uniform Commercial Code financing statements, required to be executed
or delivered pursuant to the Security Agreement or any other document
to which Great Lakes is a party (collectively, the "Corporate Security
Documents"). The Corporate Security Documents shall terminate on the
Limited Termination Date provided that Great Lakes is in compliance
with this Agreement, each of the other Transaction Documents and any
other agreement between itself and RACC.
14. Effective Date; Conditions to Effectiveness.
(A) Effective Date. This Agreement shall become effective if, and
only if, on or before 5:00 P.M. Eastern time on December 31,
2002, each of the conditions precedent contained in this
section has been satisfied (the first date as of which all of
these conditions precedent shall have been satisfied is
referred to herein as the "Effective Date").
25
(B) Conditions to Effectiveness. The effectiveness of this
Agreement as a contract shall be subject to the occurrence or
delivery of the following:
(1) This Agreement, executed by Great Lakes and RACC;
(2) The Group A Return Conditions Note, executed by Great Lakes;
(3) The thirty (30) Group B Notes, executed by Great Lakes;
(4) The thirty (30) Group B Security Agreements, executed by Great Lakes
and RACC for the Group B Aircraft;
(5) FAA Bills of Sale, executed by RACC for the nine (9) Group B Aircraft
(UE-169, UE-170, UE-201, UE-202, UE-204, UE-208, UE-210, UE-211 and
UE-254) that are currently subject to Existing Finance Agreements that
are leases;
(6) FAA Bill of Sale, executed by Iowa Great Lakes Flyers, Inc. ("IGLF")
for UE-225;
(7) The Deferral Note, executed by Great Lakes;
(8) The Senior Note, executed by Great Lakes;
(9) The Subordinated Note, executed by Great Lakes;
(10) A stock certificate in the name of RACC evidencing the RACC Shares;
(11) The two (2) Group C Lease Amendments, executed by each of Great Lakes
and RACC;
(12) Security Agreement, executed by Great Lakes and RACC;
(13) The Security Agreement Amendment, executed by Great Lakes and RACC;
(14) The 120-071 Security Agreement, executed by Great Lakes and RACC;
(15) All UCC-1 Financing Statements required by the Corporate Security
Documents, naming Great Lakes as Debtor and RACC as Secured Party;
(16) A copy of the resolutions of the Board of Directors of Great Lakes
approving this Agreement and the other Transaction Documents (as
defined below) to be delivered by it hereunder and the transactions
contemplated thereby, certified by an officer to be true and correct
and in full force and effect as of the Effective Date;
(17) A copy of (i) the charter and (ii) the by-laws of Great Lakes, each
certified by an officer to be true and correct and in full force and
effect as of the Effective Date;
(18) Corporate and tax good standing certificates for Great Lakes in (i) its
jurisdiction of incorporation, (ii) the jurisdiction where its chief
operating office is located, and (iii) any jurisdiction where its
material assets are located;
(19) Legal opinions of Briggs and Morgan, P.A., counsel to Great Lakes, and
of Davis, Brown, Koehn, Shors & Roberts, P.C., special Iowa counsel to
Great Lakes, with respect to corporate authority, enforceability,
perfection (UCC and FAA) and such other matters as RACC's counsel may
reasonably request;
(20) Perfection certificate, executed by Great Lakes;
(21) Copies of the executed employment agreements between Great Lakes and
each of Messrs. Charles Howell and Douglas Voss;
26
(22) Great Lakes shall have paid all of RACC's legal and out-of-pocket
expenses incurred through the Effective Date as set forth on Schedule
4 hereto;
(23) All outstanding amounts that are then due and payable on or before the
Effective Date by Great Lakes under the Existing Finance Agreements
relating to the Aircraft, including, without limitation, the $800,000
payment that is due on December 15, 2002 and a $400,000 payment for the
period from December 15, 2002 until the Effective Date (provided that
such $400,000 payment may be paid by not later than January 15, 2003);
(24) Great Lakes shall provide to RACC reasonably satisfactory evidence
that UCC-3 termination statements have been filed with respect to
Coast Business Credit; and
(25) Letters substantially in the form of Exhibit K attached hereto
executed and delivered to RACC by each of Douglas G. Voss, Gayle R.
Brandt, Charles R. Howell and IGLF confirming that such
shareholder or option holder agrees (i) not to transfer any of
its Common Stock or any options to purchase Common Stock or (ii)
purchase any additional shares of Common Stock or exercise any
options to purchase shares, whether now in existence or hereafter
granted, for a period of three (3) years commencing on the
Effective Date; provided, however, that Mr. Howell shall be
permitted to purchase publicly traded shares of Common Stock on
the open market so long as such purchase does not result in such
purchaser becoming a five percent (5%) owner of Great Lakes. Such
letter shall further provide for that the lockup agreements shall
be released upon the earlier to occur of (y) an ownership change
of Great Lakes for purposes of Section 382 of the Internal
Revenue Code of 1986 such that the utilization of its Net
Operating Loss (as defined in Section 16(A)(6)) is restricted for
tax purposes or (z) delivery by Great Lakes of an opinion issued
by KPMG LLP or other tax advisers mutually acceptable to RACC and
Great Lakes in form and substance reasonably acceptable to RACC
stating that release of the lockup agreements will not jeopardize
the ability of Great Lakes to utilize its Net Operating Loss or
have the potential to jeopardize the ability of Great Lakes to
utilize its Net Operating Loss; provided, however, that the
letter executed and delivered by Gayle R. Brandt shall also
permit sale of $50,000 worth of Common Stock per year, consistent
with the terms of her and Mr. Voss' divorce decree.
15. Great Lakes Covenants. As partial consideration for the settlements and
agreements of RACC contained herein, until such time as all Obligations
shall be paid in full in cash, Great Lakes agrees as follows:
(A) Great Lakes Indebtedness. Great Lakes will not create, incur,
assume, guarantee or be or remain liable, contingently or
otherwise, with respect to any Indebtedness other than: (1) the
Obligations; (2) Indebtedness existing on the Effective Date and
described on Schedule 5; and (3) other Indebtedness incurred in
the ordinary course of business provided that at the time of the
incurrence of any such Indebtedness the aggregate amount of
Indebtedness outstanding pursuant to this clause (4) shall not
exceed the Permitted Amount then in effect. The "Permitted
Amount" at any time shall be the amount based on the most recent
financial statements of Great Lakes delivered pursuant to Section
15(D) and calculated quarterly based on the Debt Service Ratio as
follows, provided, however, that on and after the occurrence of
the Limited Termination Date, the Permitted Amount shall be
$5,000,000:
27
---------------------------------- ---------------------------------
Debt Service Ratio Permitted Amount of Indebtedness
---------------------------------- ---------------------------------
Less than 2.2:1.0 $1,500,000
---------------------------------- ---------------------------------
Greater than 2.2:1.0 but less $2,500,000
than or equal to 2.5:1.0
---------------------------------- ---------------------------------
Greater than 2.5:1.0 $3,500,000
---------------------------------- ---------------------------------
"Indebtedness" means, whether on or off balance sheet for
purposes of with generally accepted accounting principles
("GAAP"): (a) all obligations for borrowed money or other
extensions of credit, whether secured or unsecured, absolute
or contingent, including, without limitation, unmatured
reimbursement obligations with respect to letters of credit or
guarantees issued for the account of or on behalf of Great
Lakes, all obligations representing the deferred purchase
price of property, other than accounts payable arising in the
ordinary course of business, and all obligations arising under
capitalized leases, synthetic leases, operating leases and
securitization transactions, (b) all obligations evidenced by
bonds, notes, debentures or other similar instruments, (c) all
obligations secured by liens on property owned or acquired by
Great Lakes whether or not the obligations secured thereby
shall have been assumed, and (d) all guaranties by such entity
of any of the foregoing for the benefit of another person.
"Debt Service Ratio" shall be defined as provided in the
attached Schedule 6.
(B) Payment of Dividends and Distributions. Great Lakes shall not
declare or make any dividend or other distributions to any
holder of any Common Stock or any other capital stock of Great
Lakes, except for dividends declared or made in the form of
Common Stock, redeem or purchase any Common Stock or any other
capital stock of Great Lakes or make any loan or other
payments to any affiliate or holder of Common Stock or any
other capital stock of Great Lakes, at any time during the
period from and after the Effective Date to and including
December 31, 2005. Thereafter, payment of dividends or other
distributions shall be permitted provided that no Event of
Default shall then exist or arise as a result of any such
dividend or distribution.
(C) Cost Reduction Program. Great Lakes shall fully implement by not
later than March 31, 2003 a cost reduction program (the "Cost
Reduction Program"). For fiscal year 2003, the Cost Reduction
Program shall result in a an overall annual cost reduction of not
less than $550,000. For fiscal year 2004 and beyond, the Cost
Reduction Program shall result in an overall annual cost
reduction of not less than $730,000. Evidence of the overall
annual cost reduction under the Cost Reduction Program shall be
set forth in reasonable detail as part of Great Lakes' annual
officer's certificate to be delivered pursuant to Section
15(D)(3). Great Lakes also agrees to provide evidence reasonably
satisfactory to RACC of the closing of Great Lakes' Chicago hub
by not later than January 30, 2003.
28
(D) Provision of Financial Statements.
(1) Quarterly Financial Statements. As soon as available
and, in any event, within forty-five (45) days after
the end of each of the first three (3) quarters of
each fiscal year, Great Lakes shall furnish to RACC
copies of its financial statements, consisting of at
least a balance sheet as at the close of such quarter
and statements of earnings for such quarter and for
the period from the beginning of the fiscal year to
the close of such quarter, in each case in conformity
with GAAP, duly certified by the principal financial
officer of Great Lakes.
(2) Annual Financial Statements. As soon as available
and, in any event, within ninety (90) days after the
end of each fiscal year, Great Lakes shall furnish to
RACC copies of its audited financial statements,
consisting of at least a balance sheet of Great Lakes
for such year and statements of earnings and cash
flows, in each case in conformity with GAAP setting
forth in each case in comparative form corresponding
figures from the preceding fiscal year, with all such
financial statements to be certified without
qualification, except for any qualifications so given
in the past, by Great Lakes' certified public
accountants.
(3) Officer's Certificate. At the time of delivery of the financial
statements of Great Lakes provided for in Section 15(D)(1) and
(2), a certificate of the Chief Financial Officer of Great Lakes
(I) to the effect that no Default or Event of Default exists or,
if any Default or Event of Default does exist, specifying the
nature and extent thereof and what action Great Lakes proposes to
take with respect thereto; (II) calculating the Permitted Amount,
the Debt Service Ratio, Quarterly Free Cash Flow and its various
components as set forth on Schedule 6 as at the end of such
fiscal period; (III) setting forth a detailed variance analysis
showing how such financial statements differ from the business
plan delivered by Great Lakes to RACC on December 12, 2002 (the
"Financial Plan"); and (IV) outline in reasonable detail, and
accompanied by supporting documentation, in a manner reasonably
satisfactory to RACC, demonstrating Great Lakes' compliance with
the Cost Reduction Program requirements set forth in Section
15(C).
(E) Confidentiality and Non-Disclosure. This Agreement is
confidential between the parties. Great Lakes agrees not to
disclose the provisions of this Agreement to any person
without the prior written consent of RACC, except (i) as may
be required by Great Lakes in order to restructure its
current debt with existing aircraft creditors, provided that
Great Lakes may disclose solely the fact that its
obligations to RACC are being restructured and the terms of
the restructured debt, including, without limitation, RACC's
receipt of the RACC Shares, but Great Lakes may not disclose
any other details of this Agreement, (ii) to its legal and
financial advisers and its independent public accountants
(on the condition that they agree not to disclose such
provisions) and (iii) as may be required by applicable law,
including applicable securities law.
29
(F) No Material Transactions. Great Lakes shall not become a party
to or agree to or effect any merger, amalgamation or
consolidation, asset acquisition, stock acquisition,
disposition of any of its assets or create or permit to exist
any subsidiary unless, as a result of such disposition, all
Obligations shall be contemporaneously paid in full in cash.
This Section 15(F) shall expire on the Limited Termination
Date provided that Great Lakes is in compliance with this
Agreement, each of the other Transaction Documents and any
other agreement between itself and RACC.
(G) Affiliate Transactions. Great Lakes shall not engage in any
transaction with any affiliate, including any contract,
agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or
from any such affiliate or, to the knowledge of Great Lakes,
any corporation, partnership, trust or other entity in which
any such affiliate has a substantial interest or is an
officer, director, trustee or partner, on terms more favorable
to such person than would have been obtainable on an
arm's-length basis in the ordinary course of business.
(H) Equity Issuances. Except for issuances pursuant to the equity
incentive plans as described in Section 8(B) above and the
issuance of Common Stock dividends pursuant to Section 15(B)
above, Great Lakes shall not issue any capital stock or any
warrants, options or other rights to acquire any of its
capital stock or any other form of equity capital unless the
terms of each such issuance are reasonably acceptable to RACC.
Capital stock does not include preferred stock as described in
Section 1504(a)(4) of the Internal Revenue Code of 1986 and
regulations thereunder, interpretations thereof and rulings
applying or interpreting such Section.
(I) Further Assurances. Great Lakes will promptly furnish such
information and execute and deliver such further documents,
and do all other such acts as RACC may reasonably request to
further implement the provisions contained in this Agreement,
including, without limitation, its obligation to cooperate
with RACC to facilitate any assignment of any of the Group B
Notes pursuant to Section 3.
(J) Shelf Registration. Great Lakes shall, simultaneously with
the completion of its Form 10-K for its 2002 fiscal year,
file with the Securities and Exchange Commission a Shelf
Registration as to the RACC Shares and any Anti-Dilution
Shares and shall use its best efforts thereafter to obtain
and maintain the effectiveness of the Shelf Registration.
"Shelf Registration" means the shelf registration pursuant
to Rule 145 promulgated under the Securities Act of 1933, as
amended, by Great Lakes of the sale by RACC (which sale, at
the option of RACC in its sole and absolute discretion, may
be through an underwriter) of the RACC Shares and any
Anti-Dilution Shares held by RACC. In the event of the
issuance of any Anti-Dilution Shares, Great Lakes will
promptly either (i) amend the Shelf Registration to include
such Anti-Dilution Shares or (ii) or file an additional
Shelf Registration with respect to such Anti-Dilution
Shares. Great Lakes shall not allow the effectiveness of the
Shelf Registration to lapse at any time after its initial
effectiveness as a result of events within Great Lakes'
control. If, at any time after its initial effectiveness,
the Shelf Registration shall cease to be effective as the
result of events beyond Great Lakes' control, Great Lakes
shall at all times thereafter use its best efforts to
reinstate the effectiveness of the Shelf Registration.
30
(K) Incentive Compensation Plan. Great Lakes shall not adopt any
incentive compensation plan for any of its officers that
provides for the possibility of aggregate payments thereunder
to any officers in any fiscal year in excess of such officer's
current annual base salary without the prior written approval
of RACC.
(L) Press Release. On or about the Effective Date, Great Lakes
shall have issued a press release relating to the transactions
contemplated hereby substantially in the form of Exhibit L
attached hereto.
(M) Quarterly Free Cash Flow. Quarterly Free Cash Flow shall not
be less than $(500,000).
(N) Debt Service Threshold. The Debt Service Threshold shall be
calculated and maintained as set forth on Schedule 6 to this
Agreement.
(O) Net Debt to EBITDA. The Net Debt to EBITDA Threshold shall
be calculated and maintained as set forth on Schedule 6 to
this Agreement. "Net Debt" means on balance sheet
Indebtedness of Great Lakes, including current maturities,
minus cash on hand. "EBITDA" means with respect to any
rolling four quarter period, an amount equal to the sum of
(a) net income of Great Lakes for such fiscal period, plus
(b) in each case to the extent deducted in the calculation
of Great Lakes' net income and without duplication, (i)
depreciation and amortization for such period, plus (ii)
income tax expense for such period, plus (iii) the aggregate
amount of interest required to be paid or accrued by Great
Lakes during such period on all Indebtedness of the Great
Lakes and its subsidiaries outstanding during all or any
part of such period, whether such interest was or is
required to be reflected as an item of expense or
capitalized, including payments consisting of interest in
respect of any capitalized lease or any synthetic lease, and
including commitment fees, agency fees, facility fees,
balance deficiency fees and similar fees or expenses in
connection with the borrowing of money, plus (iv) other
noncash charges for such period, all as determined in
accordance with GAAP.
(P) Capital Expenditures. Great Lakes shall not make Capital Expenditures
that exceed, in the aggregate, $1,000,000 for its 2003 fiscal year
and $800,000 for each fiscal year thereafter, provided, however, that
for each fiscal year commencing after the occurrence of the Limited
Termination Date, Great Lakes shall be allowed up to $1,100,000 in
Capital Expenditures per year. "Capital Expenditures" means amounts
paid or Indebtedness incurred by Great the purchase or lease by Great
Lakes of fixed assets, both tangible (such as land, buildings,
fixtures, machinery and equipment) and intangible (such as patents,
copyrights, trademarks, franchises and good will), that would be
required to be capitalized and shown on its balance sheet in
accordance with GAAP, provided that this Section 15(P) shall not
include any item customarily charged directly to expense or
depreciated over a useful life of twelve (12) months or less in
accordance with GAAP.
31
(Q) Restructuring of Other Aircraft Indebtedness. As a condition to the
effectiveness of this Agreement, Great Lakes was to have delivered to
RACC written evidence reasonably satisfactory to RACC that Great
Lakes' Indebtedness owing to other similarly situated aircraft
creditors (specifically, Finova Capital, CIT and Boeing Capital) shall
have been restructured such that none of these creditors shall be paid
more than RACC (on a relative basis). Great Lakes has entered into
term sheets with regard to restructuring its Indebtedness and other
obligations with each of its aircraft creditors, copies of which were
provided to RACC on December 26, 2002, the terms of which are
acceptable to RACC. Great Lakes agrees to implement such
restructurings pursuant to the term sheets provided to RACC, and RACC
agrees to allow Great Lakes to implement such restructurings so long
as such restructurings follow, in a manner reasonably satisfactory to
RACC, the term sheets provided to RACC on December 26, 2002. The
failure of Great Lakes to enter into restructurings that follow these
term sheets in a manner reasonably satisfactory to RACC shall
constitute an Event of Default, as set forth in Section 17(A)(3).
16. Representations and Warranties.
(A) By Great Lakes. Great Lakes represents and warrants to RACC as of
the date hereof that:
(1) Authority and Enforceability. Great Lakes has the full power to
enter into and perform its respective obligations under this Agreement,
including, without limitation, the issuance of the RACC Shares and any
issuance of Anti-Dilution Shares that may be required by Great Lakes to
RACC and all other Transaction Documents contemplated hereby or executed
pursuant hereto to which Great Lakes is a party. The execution and delivery
of this Agreement, the Notes, the Group B Security Agreements, the Security
Agreement, the Security Agreement Amendment and all other Transaction
Documents contemplated hereby or executed pursuant hereto to which Great
Lakes is a party and the performance and observance of their terms,
conditions and obligations have been duly authorized by all necessary
action on the part of Great Lakes. This Agreement, the Notes, the Group B
Security Agreements, the Security Agreement, the Security Agreement
Amendment and all other Transaction Documents contemplated hereby or
executed pursuant hereto constitute, when executed and delivered by Great
Lakes to RACC, will be valid and binding obligations of Great Lakes
enforceable in accordance with their terms (subject to bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or
affecting creditors' rights generally and general principles of equity).
(2) No Conflict. The execution, delivery and performance of this
Agreement, the Notes, the Group B Security Agreements, the Security
Agreement, the Security Agreement Amendment and all other Transaction
Documents to which Great Lakes is a party and the consummation of the
transactions herein contemplated on the part of Great Lakes, including,
without limitation, the issuance to RACC of the RACC Shares and any
Anti-Dilution Shares, will not result in a breach or violation of any of
the terms or provisions of, or constitute a default under, any statute,
rule or regulation applicable to, or order of any governmental body or
agency or any court having jurisdiction over Great Lakes or any of its
properties, or any agreement or instrument to which Great Lakes is a party
or by which Great Lakes is bound or to which any of the properties of Great
Lakes is subject, or the charter or by-laws of Great Lakes.
32
(3) Capitalization. As of the Effective Date, the authorized capital
stock of Great Lakes consists solely of 50,000,000 shares of Common Stock
and 25,000,000 shares of preferred stock, par value $.01 per share (the
"Preferred Stock"), of Great Lakes. On the Effective Date, Great Lakes will
have no outstanding capital stock other than 8,680,186 shares of Common
Stock, all of which shall be owned as set forth in Schedule 7 hereto and
shall be duly authorized, validly issued, fully paid and non-assessable.
Upon the issuance of any RACC Shares in accordance with the terms of
Section 8, such shares of Common Stock shall be duly authorized, validly
issued, fully paid and non-assessable.
(4) Options, Etc. Other than as disclosed on Schedule 8 hereto, there
are no outstanding rights (either preemptive or other) or options to
subscribe for or purchase from Great Lakes and no warrants or other
agreements providing for or requiring the issuance by Great Lakes of any
capital stock of Great Lakes. The issuance of the RACC Shares or any
Anti-Dilution Shares shall not be subject to pre-emptive rights in favor of
any present or future stockholders of Great Lakes.
(5) Litigation. Except as set forth on Schedule 9 hereto, there are no
actions, suits, proceedings or investigations of any kind pending or
threatened against Great Lakes before any governmental authority, that, (a)
if adversely determined, might, either in any case or in the aggregate, (i)
have a material adverse effect on the business, properties, prospects,
condition (financial or otherwise), assets, operations or income of Great
Lakes, or (ii) materially impair the right of Great Lakes to carry on
business substantially as now conducted by them, or result in any
substantial liability not adequately covered by insurance, or for which
adequate reserves are not maintained on the consolidated balance sheet of
Great Lakes, or (b) which question the validity of this Agreement or any of
the other Transaction Documents, or any action taken or to be taken
pursuant hereto or thereto.
(6) Net Operating Loss. The net operating loss carryover ("Net
Operating Loss Carryover" or "Net Operating Loss"), as that term is defined
by section 172 of the Internal Revenue Code of 1986 as currently in effect
(the "Code"), of Great Lakes available for use by Great Lakes (subject to
adjustment upon audit) in computing its federal income tax liability for
the year ending December 31, 2002, calculated as of the beginning of such
year based on the tax provision for the year ended December 31, 2001, is
$80,308,934. Based on the reasonable judgment of Great Lakes' management,
the amount of the Net Operating Loss for the year ended December 31, 2002,
after taking into account the transactions contemplated under this
Agreement, is projected to be at least $70,000,000 (subject to adjustment
upon audit), but this amount cannot be determined with certainty as of the
date hereof because of certain unknown variables, including (1) the fact
that the accounting and tax operating results for the year ending December
31, 2002 are not finalized and (2) the impact of Great Lakes restructuring
its indebtedness with other creditors is not known.
(B) By RACC. RACC represents and warrants to Great Lakes that it has
the full power to enter into and perform its obligations under this
Agreement and all other documents contemplated hereby or executed pursuant
hereto. The execution and delivery of this Agreement and all other
Transaction Documents contemplated hereby or executed pursuant hereto and
the performance and observance of their terms, conditions and obligations
have been duly authorized by all necessary action on the part of RACC. This
Agreement and all other Transaction Documents contemplated hereby or
executed pursuant hereto constitute, when executed and delivered by RACC to
Great Lakes, valid and binding obligations of RACC, respectively,
enforceable in accordance with their terms (subject to bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or
affecting creditors' rights generally and general principles of equity).
33
17. Events of Default and Remedies.
(A) The following events shall constitute "Events of Default" under
this Agreement:
(1) The failure by any party to perform any promise,
agreement, obligation, warranty or covenant made by
it herein or in any other Transaction Document, if
such default is not cured by Great Lakes, on the one
hand, or RACC, on the other, within thirty (30)
calendar days of receipt of notice from any party
specifying such default; provided, however, that (i)
there shall be no cure period, except as otherwise
specifically set forth in the applicable Transaction
Document, with respect to any payment default by
Great Lakes in respect of any of the Obligations and
(ii) there shall be no notice or cure period with
respect to failure to comply with Section 12(A)(iv)
and (v) of this Agreement;
(2) Any "Event of Default" as defined in any of the Transaction
Documents shall have occurred; or
(3) If Great Lakes fails to implement restructurings with
each of its aircraft creditors (Finova Capital,
Boeing Capital and CIT) on final terms that, in a
manner reasonably satisfactory to RACC, implement the
financial and other terms set forth in the term
sheets provided to RACC on December 26, 2002.
(B) Remedies. Upon the occurrence of any Event of Default, a
non-defaulting party may proceed with every remedy available at law or
equity or provided for herein, or, in the case of RACC upon the occurrence
of any Event of Default by Great Lakes, in any Transaction Document or
document executed in connection herewith. No delay or failure of any party
in the exercise of any right or remedy provided for hereunder shall be
deemed a waiver of the right by such party, and no exercise or partial
exercise or waiver of any right or remedy shall be deemed a waiver of any
further exercise of such right or remedy or of any other right or remedy
that RACC may have. The rights and remedies herein expressed are cumulative
and not exclusive of any right or remedy that any party shall otherwise
have. Further, nothing contained herein shall obligate any party to
undertake any action unless required by law.
(C) Default Interest Rate. Upon the occurrence and during the
continuance of any Event of Default, the outstanding principal under each
of the Notes shall bear interest at the Default Interest Rate. The "Default
Interest Rate" is defined as LIBOR plus 600 basis points.
18. Notices. Any notice pertaining to or required by this Agreement shall
be deemed sufficiently given if personally delivered or sent by
registered or certified mail, return receipt requested, to the party
to whom said notice is to be given, or sent via telecopier with oral
confirmation from a person at the receiving office that the
transmission has been received, or sent via overnight carrier. Notices
sent by registered or certified mail shall be deemed given on the
third day after the date of postmark. Notices hand-delivered shall be
deemed given on the date delivered. Notices forwarded by telecopier
shall be deemed given upon the foregoing oral confirmation that the
transmission has been received. Notices sent by overnight carrier
shall be deemed delivered the day after being forwarded. Until changed
by written notice given by any of the noted parties, the addresses of
the parties shall be as follows:
34
Great Lakes: Great Lakes Aviation, Limited
Attention: President
1022 Airport Parkway
Cheyenne, Wyoming 82001
Telephone: (307) 432-7000
Telecopier: (307) 432-7001
with a copy to: Briggs and Morgan, P.A.
Attention: Timothy R. Thornton
2400 IDS Center
Minneapolis, Minnesota 55402
Telephone: (612) 334-8400
Telecopier: (612) 334-8650
RACC: Raytheon Aircraft Credit Corporation
Attention: President
10511 E. Central Avenue
Wichita, Kansas 67206
Telephone: (316) 676-7673
Telecopier: (316) 676-6975
with a copy to: Raytheon Company
Attention: Richard A. Goglia
Vice President and Treasurer
141 Spring Street
Lexington, Massachusetts 02421
Telephone: (781) 860-2240
Telecopier (781) 860-2341
and Peter D. Schellie, Esq.
Bingham McCutchen LLP
1120 20th Street, NW, Suite 800
Washington, DC 20036
Telephone: (202) 778-6150
Telecopier: (202) 778-6155
19. Miscellaneous.
(A) Amendments. No provision or term of this Agreement may be amended,
modified, revoked, supplemented, waived or otherwise changed except by
a written instrument duly executed by Great Lakes and RACC and
designated as an amendment, supplement or waiver.
(B) Counterparts. This Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed an original.
(C) Headings. The paragraph headings herein are for convenience only and
shall not affect the construction hereof.
(D) Use of Terms. As used herein, words in any gender shall be deemed to
include the other gender and the singular shall be deemed to include
the plural, and vice versa.
(E) Severability. If any provision in this Agreement shall be held
invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions of this
Agreement shall not be impaired thereby, nor shall the validity,
legality or enforceability of any such defective provision be in any
way affected or impaired in any other jurisdiction.
35
(F) Governing Law and Informed Choice. THIS AGREEMENT WAS MADE AND ENTERED
INTO IN THE STATE OF KANSAS AND THE LAW GOVERNING THIS TRANSACTION
SHALL BE THAT OF THE STATE OF KANSAS AS IT MAY FROM TIME TO TIME
EXIST. THE LAWS OF THE STATE OF KANSAS SHALL APPLY TO ANY AND ALL
MATTERS ARISING FROM OR RELATED TO THIS AGREEMENT. THE PARTIES AGREE
THAT ANY LEGAL PROCEEDING BASED UPON THE PROVISIONS OF THIS AGREEMENT
OR, UNLESS OTHERWISE EXPRESSLY PROVIDED THEREIN, ANY OTHER TRANSACTION
DOCUMENT, SHALL BE BROUGHT EXCLUSIVELY IN EITHER THE UNITED STATES
DISTRICT COURT OF THE DISTRICT OF KANSAS AT WICHITA, KANSAS OR IN THE
EIGHTEENTH JUDICIAL DISTRICT COURT OF SEDGWICK COUNTY, KANSAS TO THE
EXCLUSION OF ALL OTHER COURTS AND TRIBUNALS. NOTWITHSTANDING THE
ABOVE, RACC (AT ITS SOLE OPTION) MAY INSTITUTE A LEGAL PROCEEDING IN
ANY JURISDICTION AS MAY BE APPROPRIATE IN ORDER FOR RACC TO OBTAIN
POSSESSION OF AND FORECLOSE UPON THE PROPERTY OR ASSET IN WHICH IT HAS
A SECURED OR OWNERSHIP INTEREST. THE PARTIES CONSENT AND AGREE TO BE
SUBJECT TO THE JURISDICTION OF THE AFORESAID COURTS IN SUCH
PROCEEDING.
(G) Damages. To the extent that any party hereto is subject to liability
for any breach under this Agreement or any of the other Transaction
Documents, the liability of such party shall be limited to the actual
and direct monetary damages caused by such breach. In no event shall
any party hereto be liable for indirect, special, consequential,
multiple or punitive damages, or any damage deemed to be of an
indirect or consequential nature arising out of or related to its
performance hereunder, whether based upon breach of contract,
warranty, negligence and whether grounded in tort, contract, civil law
or other theories of liability, including strict liability. To the
extent that this limitation of liability conflicts with any other
provision(s) in this Agreement or any of the other Transaction
Documents, said provision(s) shall be regarded as amended to whatever
extent required to make such provision(s) consistent with this Section
19(G).
(H) Successors and Assigns. This Agreement shall be binding upon and enure
to the benefit of RACC and Great Lakes and their respective successors
and assigns, provided that Great Lakes may not assign any rights,
duties or obligations hereunder. Each of the Notes and related
Transaction Documents may be fully transferred by RACC at any time to
any person.
(I) Exhibits and Schedules. All exhibits and schedules referred to herein
and attached hereto are hereby incorporated by reference as an
integral part of this Agreement, subject to the terms and conditions
set forth herein.
(J) Entire Agreement. This Agreement, taken together with the additional
Transaction Documents to be executed in connection herewith (as set
forth herein), constitute the entire agreement between RACC and Great
Lakes concerning the subject matter hereof and supersede and merge any
prior written or oral agreements between RACC and Great Lakes
concerning the subject matter hereof. The parties hereby acknowledge
and agree that the Limited Recourse Guaranty of Douglas G. Voss, the
Limited Recourse Guaranty of IGLF, the Stock Pledge Agreement by and
among Douglas G. Voss, IGLF and RACC, and the Irrevocable Proxy of
Douglas G. Voss in favor of RACC, each dated as of May 14, 2002, are
terminated in their entirety.
36
(K) Time of Essence. Time is of the essence with respect to all of the
provisions of this Agreement.
(L) Termination of Agreement. This Agreement shall terminate upon the
indefeasible payment in full in cash of all of the Obligations.
[The remainder of this page intentionally left blank.]
37
In witness of the mutual promises, covenants and agreements set forth herein,
the parties have caused their duly authorized officers to execute this Agreement
on the day and year set forth beneath their signatures hereto.
GREAT LAKES AVIATION, LTD., an Iowa corporation
By: s/s Charles R. Howell, IV
Its CEO
Date: December 31, 2002
RAYTHEON AIRCRAFT CREDIT CORPORATION,
a Kansas corporation
By: /s/ Andrew A. Mathews
Its President
Date:December 31, 2002
38
List of Exhibits and Schedules
Exhibit A Form of Group A Return Conditions Note
Exhibit B Form of Group B Note
Exhibit C Form of Group B Security Agreement
Exhibit D Form of Group C Lease Amendment
Exhibit E Form of Deferral Note
Exhibit F Form of Senior Note
Exhibit G Form of Subordinated Note
Exhibit H Form of Security Agreement
Exhibit I Form of Security Agreement Amendment
Exhibit J Form of 120-071 Security Agreement
Exhibit K Form of Shareholder or Option Holder Letter
Exhibit L Form of Press Release
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Schedule 1 Group A Aircraft Return Schedule
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Schedule 2 Group B Notes Payment and Amortization Schedule
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Schedule 3 List of Great Lakes' Direct Competitors
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Schedule 4 RACC's Legal and Out-of-Pocket Expenses
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Schedule 5 Existing Indebtedness of Great Lakes
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Schedule 6 Debt Service Covenant
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Schedule 7 Great Lakes Capitalization
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Schedule 8 Outstanding Rights and Options to Purchase Capital
Stock of Great Lakes
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Schedule 9 Litigation
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