EXHIBIT 10.14
RACC
SUBORDINATED NOTE
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RAYTHEON AIRCRAFT CREDIT CORPORATION
AS OF DECEMBER 31, 2002
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1. Restructuring Agreement. Reference is hereby made to that
certain Restructuring Agreement (as amended and in effect from time to time, the
"Restructuring Agreement"), dated as of December 31, 2002, by and between Great
Lakes Aviation, Ltd., an Iowa corporation (the "Debtor"), and Raytheon Aircraft
Credit Corporation, a Kansas corporation ("RACC"). Capitalized terms used and
not otherwise defined herein shall have the meanings assigned to them in the
Restructuring Agreement.
2. Promise to Pay. FOR VALUE RECEIVED, the undersigned hereby
absolutely and unconditionally promises to pay to the order of RACC, at ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ (together with its successor and assigns
hereinafter referred to as "RACC"), in lawful money of the United States of
America and in immediately available funds, the principal sum of FIVE MILLION
DOLLARS ($5,000,000.00) (as such amount may be increased pursuant to Section 3
below, the "Principal Sum"). All payments made pursuant to this discount
subordinated note (this "Subordinated Note") will be made free and clear of, and
without deduction for, withholding, setoff, recoupment or counterclaim of any
kind.
3. Interest Rate. In addition to Debtor's payment of the Principal
Sum, Debtor shall pay interest to RACC on the Principal Sum at the rate of 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 Sum
under the Subordinated Note and shall be capitalized and added to the Principal
Sum on the last day of each calendar quarter commencing on March 31, 2003.
Beginning on the third anniversary of the date of issue of this Subordinated
Note, interest shall be payable in cash quarterly in arrears on the last day of
each calendar quarter commencing on March 31, 2006. The annual rate of interest
applicable hereunder from time to time, as specified above, is referred to
herein as the "Interest Rate." All interest shall be calculated on the basis of
a 360-day year and actual days outstanding. Notwithstanding anything set forth
in this Subordinated Note to the contrary, in no event shall the rate of
interest payable pursuant to this Section 3 be higher than the maximum amount
permitted under applicable law.
4. Late Payment Charge. While an Event of Default (as defined
below) is continuing, Debtor agrees to pay to RACC interest on the unpaid
principal balance hereunder or other amounts payable hereunder (compounded
monthly and payable on demand in respect of overdue amounts) at a rate per annum
which is equal to LIBOR plus six hundred basis points (the "Default Interest
Rate") until such Event of Default has been cured or waived in writing by RACC
(after as well as before judgment).
5. Repayment. In addition to payments of interest as provided in
Section 3, the Principal Sum plus all unpaid accrued interest shall be repaid in
full by the Debtor to RACC on or before September 30, 2007 (the "Due Date"). All
amounts of principal and interest not repaid by Debtor prior to September 30,
2007 shall be paid in full on the Due Date.
6. Prepayment. This Subordinate Note shall be subject to mandatory
prepayments from Excess Cash Flow as provided in Section 11(A) of the
Restructuring Agreement. Any partial prepayment shall be applied first to
payments of interest as provided in Section 3 and then to payment of the
Principal Sum.
7. Subordination. Except as otherwise provided in Section 11 of the
Restructuring Agreement, the indebtedness evidenced by this Subordinated Note is
subordinated to the prior payment in full of all of the Debtor's obligations
under the Group A Return Conditions Note and the Group B Notes (collectively,
the "Senior Obligations"). Until the date on which the Senior Obligations have
been repaid in full, RACC shall not demand, accelerate, ▇▇▇ for, take, receive
or accept from the Debtor, directly or indirectly, in cash or other property or
by set-off or any other manner (including, without limitation, from or by way of
collateral) any payment that is not expressly provided for in Section 11 of the
Restructuring Agreement or security of all or any of the indebtedness under this
Subordinated Note or exercise any remedies or take any action or proceeding to
enforce the same; provided, however, that, so long as no Default or Event of
Default has occurred and is continuing under the Restructuring Agreement,
nothing in this paragraph shall restrict the Debtor from paying, or RACC from
requesting, any payments under this Subordinated Note that are consistent with
the terms of Section 11 of the Restructuring Agreement. Should any payment,
distribution or security or proceeds thereof be received by RACC in violation of
the immediately preceding sentence, RACC agrees that such payment shall be
segregated, received and held in trust for the benefit of, and deemed to be the
property of, and shall be immediately be paid over and delivered to the holders
of the Senior Obligations. This paragraph shall constitute a continuing offer to
all persons who, in reliance upon such provisions, become holders of, or
continue to hold, the Senior Obligations and such holders are made obligees
hereunder and any one or more of them may enforce such provisions.
8. Taxes. All payments (whether of principal, interest or
otherwise) made by Debtor to RACC pursuant to this Subordinated Note will be
free and clear of and without deduction for any taxes, levies, duties, charges,
fees or withholdings of any nature, provided, however, that taxes based on the
net income of RACC are specifically excluded from the provisions of this Section
8. If Debtor is required by law to make any such deduction or withholding, the
sum due from Debtor will be increased to the extent necessary to ensure that
RACC receives a sum equal to what it would have received had no such deduction
or withholding been required. Within thirty (30) days after Debtor has made any
payment from which it is required by law to make any deduction or withholding,
Debtor will deliver to RACC a receipt issued by the applicable tax or other
authority evidencing the deduction or withholding.
9. Covenants. Debtor covenants and agrees that, until the payment
and satisfaction in full of all the obligations of and amounts owed by Debtor
under this Subordinated Note, Debtor will:
(a) furnish RACC with such financial information with
respect to Debtor or the collateral described in the Security Agreements
and in Section 13 of the Restructuring Agreement (the "Collateral") as
RACC may reasonably request;
(b) keep true and accurate books of account with respect to
the Collateral and to permit RACC or its designated representatives to
inspect the Collateral and the Aircraft and to examine and be advised as
to such records upon the request of RACC;
(c) comply with any law, treaty, rule, regulation or
determination of an arbitrator, court, or other governmental authority,
in each case applicable to or binding upon Debtor or affecting any of
its property;
(d) notify RACC promptly in writing of (i) the occurrence of
any Default or Event of Default, (ii) any change of name or address of
Debtor, (iii) any threatened or pending litigation or similar proceeding
affecting Debtor or any material change in any such litigation or
proceeding previously reported and (iv) any claims of any nature against
the Collateral or the Aircraft; and
(e) cooperate with RACC, take such action, execute such
documents, and provide such information as RACC may from time to time
request in order further to effect the transactions contemplated by and
the purposes of this Subordinated Note and the other Transaction
Documents.
10. Security Agreement. The payment and performance of all of the
Obligations due RACC by Debtor under this Subordinated Note and any renewals,
extensions or changes hereof, including all such Obligations 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 (collectively, the "Obligations"), shall be secured by the Corporate
Security Documents, the Group B Security Documents and any other collateral
security now or hereafter granted to RACC by the Debtor.
11. Purpose of Loan; Usury. Debtor warrants and represents to RACC
that this loan is for business and commercial purposes and not for personal,
family, household or agricultural purposes. It is agreed, notwithstanding any
provision to the contrary in any of the Transaction Documents, in no event will
this Subordinated Note require the payment of interest or charges in excess of
the maximum amount permitted by applicable law (the "Maximum Rate") and the
payment of obligations of Debtor under this Subordinated Note are hereby limited
accordingly. If under any circumstances, whether by reason of advancement or
acceleration of the maturity of the unpaid principal balance hereof or
otherwise, the aggregate amounts paid on this Subordinated Note shall include
amounts which by law are deemed interest and would exceed the Maximum Rate,
Debtor stipulates that payment and collection of such excess amounts shall have
been and will be deemed to have been the result of a mistake on the part of both
Debtor and RACC, and RACC shall promptly credit such excess (to the extent only
of such payments in excess of the Maximum Rate) against the unpaid principal
balance hereof and any portion of such excess payments not capable of being so
credited shall be refunded to Debtor.
12. Waiver. The Debtor hereby waives presentment, demand for
payment, notice of non-payment, notice of dishonor, and all other notices or
demands in connection with the delivery, acceptance, performance, default or
endorsement of this Subordinated Note, protest and impairment of collateral, as
well as diligence in collecting this Subordinated Note or enforcing any of the
security therefor, and consents to all extensions, deferrals, partial payments
and refinancings hereof before or after maturity.
13. Events of Default; Acceleration. If any of the following events
(each an "Event of Default") shall occur:
(a) Debtor shall fail to pay any principal of interest on
this Subordinated Note or any other sum due under this Subordinated
Note, any Transaction Document, or any other note or other agreement
between Debtor and RACC when the same becomes due and such failure shall
continue for ten (10) days beyond the due date of such payment;
(b) Debtor shall fail to perform any term, covenant or
agreement contained in any of the Transaction Documents and such failure
shall continue for thirty (30) days after written notice;
(c) any representation or warranty of Debtor in any of the
Transaction Documents or in any certificate or notice given in
connection therewith shall have been false or misleading in any material
respect at the time made or deemed to have been made;
(d) Debtor shall be in default under any agreement or
agreements evidencing (i) any other debt and similar monetary
obligations (including, without limitation, capitalized leases,
synthetic leases or securitization transactions) (collectively,
"Indebtedness") owing to RACC or any of its affiliates or (ii) any other
Indebtedness in excess of $100,000.00 in aggregate principal amount, or
shall fail to pay any such Indebtedness when due or within any
applicable period of grace;
(e) any of the Transaction Documents shall cease to be in
full force and effect;
(f) Debtor (i) shall make an assignment for the benefit of
creditors; (ii) shall be adjudicated bankrupt or insolvent; (iii) shall
seek the appointment of, or be the subject of an order appointing, a
trustee, liquidator or receiver as to all or part of its assets, (iv)
shall commence, approve or consent to, any case or proceeding under any
bankruptcy, reorganization or similar law and, in the case of an
involuntary case or proceeding, such case or proceeding is not dismissed
within forty-five (45) days following the commencement thereof, or (v)
shall be the subject of an order for relief in an involuntary case under
federal bankruptcy law;
(g) Debtor shall be unable to pay its debts as they mature;
(h) there shall remain undischarged for more than thirty
(30) days any final judgment or execution action against Debtor that,
together with other outstanding claims and execution actions against
Debtor, respectively, exceeds $100,000.00 in the aggregate;
(i) the prospect of payment or performance by Debtor or
realization on the Collateral, in the reasonable opinion of RACC, is or
becomes significantly impaired;
(j) any of the Aircraft shall have been lost, stolen or
confiscated or shall have incurred substantial damage or have been
destroyed to such an
extent that the repair thereof is impracticable (as determined solely by
RACC); or
(k) Debtor (i) sells, transfers or disposes of all or
substantially all of its respective stock, assets or property, (ii)
becomes the subject of, or engages in, a leveraged buy-out, or (iii)
terminates its existence by merger, reorganization or consolidation.
THEN, or at any time thereafter:
(1) In the case of any Event of Default under clauses (f) or
(g), the entire unpaid principal amount of this Subordinated Note and
all other amounts payable hereunder, shall automatically become
forthwith due and payable, without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived by Debtor;
and
(2) In the case of any Event of Default other than under
clauses (f) or (g), RACC may, by written notice to Debtor, declare the
unpaid principal amount of this Subordinated Note and all other amounts
payable hereunder, to be forthwith due and payable, without presentment,
demand, protest or further notice of any kind, all of which are hereby
expressly waived by Debtor.
In addition to and without in any way limiting the foregoing, upon the
occurrence of an Event of Default or at any time thereafter, RACC may employ all
remedies allowed by law, including, without limitation, those available to a
secured party under the Uniform Commercial Code. No remedy herein conferred upon
RACC is intended to be exclusive of any other remedy and each and every remedy
shall be cumulative and in addition to every other remedy hereunder, now or
hereafter existing at law or in equity or otherwise.
14. Obligations Absolute. Debtor's payment and performance
obligations under this Subordinated Note and the other Transaction Documents are
absolute and unconditional. Any claim that Debtor may now or hereafter have
against RACC or any affiliate thereof arising out of or in connection with the
Aircraft, any of the other Collateral or any other matter shall not affect or
excuse the unconditional obligation of Debtor to make any payment required to be
made to RACC under the Transaction Documents, and shall not be used or asserted
as a defense to payment of such obligation or as set-off, counterclaim or
deduction against such payment. RACC shall have no obligation or responsibility
with respect to any dispute that may arise between Debtor and any such foregoing
person, and no such dispute shall prevent RACC from taking such action as it may
deem appropriate in order to preserve, protect or enforce its rights hereunder.
15. Debtor's Agreement to Pay Enforcement Costs, Etc. Debtor further
agrees to pay to RACC, on demand, all costs and expenses (including court costs
and legal expenses) incurred or expended by RACC in connection with the
Obligations, this Subordinated Note and the enforcement hereof, together with
interest on amounts recoverable under this Section 15 from the time when such
amounts become due until payment, whether before or after judgment, at the
Default Interest Rate, provided that if such interest exceeds the maximum amount
permitted to be paid under applicable law, then such interest shall be reduced
to such maximum permitted amount.
16. Waiver of Default. No waiver by RACC of any default shall be
effective unless in writing, nor operate as a waiver of any other default or of
the same default in the future.
17. Change of Address. Debtor will notify RACC in writing of any
change of address from that shown herein within ten (10) days of such change.
18. GOVERNING LAW AND CHOICE OF FORUM. THIS SUBORDINATED NOTE 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 PARTIES AGREE THAT ANY LEGAL PROCEEDING BASED UPON THE PROVISIONS OF
THIS SUBORDINATED NOTE SHALL BE BROUGHT EXCLUSIVELY IN EITHER THE UNITED STATES
DISTRICT COURT FOR 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, IN THE EVENT AN
EVENT OF DEFAULT SHOULD OCCUR, RACC (AT ITS SOLE OPTION) MAY INSTITUTE LEGAL
PROCEEDINGS IN ANY JURISDICTION AS MAY BE APPROPRIATE IN ORDER FOR RACC TO
OBTAIN POSSESSION OF THE COLLATERAL OR OTHERWISE REALIZE UPON ITS SECURITY. THE
PARTIES HEREBY CONSENT AND AGREE TO BE SUBJECT TO THE JURISDICTION OF THE
AFORESAID COURTS IN SUCH PROCEEDINGS.
19. WAIVER OF RIGHT TO JURY TRIAL. ALL PARTIES TO THIS AGREEMENT
HEREBY VOLUNTARILY, KNOWINGLY AND IRREVOCABLY WAIVE ANY CONSTITUTIONAL OR OTHER
RIGHT EACH MAY HAVE TO A TRIAL BY JURY IN THE EVENT OF LITIGATION CONCERNING
THIS SUBORDINATED NOTE.
20. Damages. To the extent that any party hereto is subject to
liability for any breach under this Subordinated Note, 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 Subordinated Note, said provision(s) shall be
regarded as amended to whatever extent required to make such provision(s)
consistent with this Section 20.
21. Enforceability. The unenforceability of any provision hereof
shall not affect the validity of any other provision hereof.
22. Binding Agreement. All obligations of Debtor hereunder shall
bind the heirs, agents and attorneys-in-fact, successors and assigns of Debtor.
All rights of RACC hereunder shall inure to the benefit of its successors and
assigns.
23. Assignment. RACC may transfer or assign all or any part of its
interest in this Subordinated Note without the consent of Debtor or any other
party. Debtor shall not sell, assign, transfer, encumber or convey any of its
interests in the Collateral or in this Subordinated Note without the prior
written consent of RACC.
24. Entire Agreement. The Transaction Documents constitute the
entire agreement between and among the parties with respect to the subject
matter hereof. There are no verbal understandings, agreements, representations
or warranties not expressly set forth herein. This Subordinated Note shall not
be changed orally, but only by writing signed by the parties hereto.
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DEBTOR HEREIN ACKNOWLEDGES THAT IT HAS READ AND FULLY UNDERSTANDS ALL OF THE
TERMS AND CONDITIONS OF THIS SUBORDINATED NOTE. BY EXECUTION HEREOF, THE
UNDERSIGNED HEREBY CERTIFIES THAT HE/SHE IS DULY AUTHORIZED TO EXECUTE THIS
SUBORDINATED NOTE IN THE CAPACITY STATED BELOW.
Executed this 31st day of December, 2002.
Debtor: Great Lakes Aviation, Ltd.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ CEO
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(signature) (title)
Address: ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Raytheon Aircraft Credit Corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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"RACC"