FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter Ended September 30, 1998
Commission File Number 0-11720
AIR TRANSPORTATION HOLDING COMPANY, INC.
(Exact name of registrant as specified in its charter)
Delaware 52-1206400
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Post Office Box 488, Denver, North Carolina 28037
(Address of principal executive offices)
(704) 377-2109
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
2,688,653 Common Shares, par value of $.25 per share were outstanding as of
November 5, 1998.
This filing contains 29 pages.
The exhibit index is on page 18.
<PAGE>
AIR TRANSPORTATION HOLDING COMPANY, INC. AND SUBSIDIARIES
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Earnings
for the three and six-month periods ended
September 30, 1998 and 1997 (Unaudited) 3
Consolidated Balance Sheets at
September 30, 1998 (Unaudited)
and March 31, 1998 4
Consolidated Statements of Cash
Flows for the six-month periods
ended September 30, 1998 and 1997 (Unaudited) 5
Notes to Consolidated Financial
Statements (Unaudited) 6-7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 8-14
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 15-17
Exhibit Index 18
Exhibits 19-29
2 <PAGE>
<TABLE>
AIR TRANSPORTATION HOLDING COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Operating Revenues:
Cargo $ 4,894,720 $ 4,653,947 $ 9,571,459 $ 9,028,156
Maintenance 3,413,048 3,372,192 6,761,717 511,613
Ground equipment 3,333,572 1,552,852 6,693,595 1,552,852
Aircraft services and other 1,274,704 1,173,325 2,399,414 1,818,775
12,916,044 10,752,316 25,426,185 18,911,396
Operating Expenses:
Flight operations 3,507,872 3,363,464 6,739,720 6,378,520
Maintenance and brokering 4,241,617 4,158,602 8,205,083 7,667,933
Ground equipment 2,616,757 1,170,780 5,486,880 1,170,780
General and administrative 1,922,929 1,275,673 3,671,693 2,212,785
Depreciation and amortization 180,386 114,994 351,763 222,007
Facility start-up & merger exp - 53,991 - 179,755
12,469,561 10,137,504 24,455,139 17,831,780
Operating Income 446,483 614,812 971,046 1,079,616
Non-operating Expense (Income):
Interest 73,990 - 124,686 -
Deferred retirement expense 6,249 - 12,498 418,000
Investment income (59,877) (77,946) (103,422) (157,453)
Gain on asset sale - 6,249 - 8,332
20,362 (71,697) 33,762 268,879
Earnings Before Income Taxes 426,121 686,509 937,284 810,737
Income Taxes 186,988 267,869 391,453 297,600
Net Earnings $ 239,133 $ 418,640 $ 545,831 $ 513,137
Net Earnings Per Share:
Basic $ 0.09 $ 0.16 $ 0.20 $ 0.19
Diluted $ 0.09 $ 0.15 $ 0.19 $ 0.18
Average Shares Outstanding:
Basic 2,696,320 2,645,653 2,703,986 2,648,543
Diluted 2,793,565 2,775,005 2,802,220 2,787,388
<FN>
See notes to consolidated financial statements.
</TABLE>
3<PAGE>
<TABLE>
AIR TRANSPORTATION HOLDING COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
September 30, 1998 March 31,1998
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 478,596 $ 193,918
Marketable securities 2,097,643 2,556,257
Accounts receivable, net 6,544,552 6,673,101
Inventories 6,383,750 5,325,613
Deferred tax asset, net 272,980 272,980
Prepaid expenses and other 37,219 33,922
Total Current Assets 15,814,740 15,055,791
Property and Equipment 5,036,470 4,693,268
Less accumulated depreciation (2,738,412) (2,429,031)
2,298,058 2,264,237
Deferred Tax Asset 152,000 152,000
Intangible Pension Asset 449,495 389,495
Other Assets 360,123 427,880
Total Assets $ 19,074,416 $ 18,289,403
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable to bank $ 3,015,822 $ 916,079
Accounts payable 3,343,844 3,975,633
Accrued expenses 1,807,223 1,778,664
Income taxes payable - 762,961
Current portion of long-term obligations 57,646 56,241
Total Current Liabilities 8,224,535 7,489,578
Capital Lease Obligation (less current
Portion) 27,041 30,904
Deferred Retirement Obligation (less current
Portion) 1,092,069 1,056,795
Stockholders' Equity:
Preferred stock, $1 par value, authorized
10,000,000 shares, none issued - -
Common stock, par value $.25; authorized
4,000,000 shares; 2,688,653 and
2,711,653 shares issued 671,491 677,241
Additional paid in capital 6,985,157 7,128,907
Retained earnings 2,074,123 1,905,978
9,730,771 9,712,126
Total Liabilities and Stockholders' Equity $ 19,074,416 $ 18,289,403
<FN>
See notes to consolidated financial statements.
</TABLE>
4 <PAGE>
<TABLE>
AIR TRANSPORTATION HOLDING COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<CAPTION>
Six Months Ended
September 30,
1998 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 545,831 $ 513,137
Adjustments to reconcile net earnings to net
cash (used in) provided by operations:
Depreciation and amortization 351,763 222,007
Change in deferred tax asset - (80,000)
Change in retirement obligation 35,274 718,000
Change in assets and liabilities which
provided (used) cash:
Accounts receivable 128,549 (673,437)
Inventories (1,058,137) (878,029)
Prepaid expenses and other 4,460 (260,230)
Accounts payable (631,789) 898,369
Accrued expenses 26,102 81,472
Income taxes payable (762,961) (169,911)
Total adjustments (1,906,739) (141,759)
Net cash (used in) provided by
operating activities (1,360,908) 371,378
CASH FLOWS FROM INVESTING ACTIVITIES:
Business acquisition - (715,981)
Capital expenditures (385,584) (328,209)
Purchase of marketable securities - (948,055)
Sale of marketable securities 458,614 716,446
Net cash provided by (used in)
investing activities 73,030 (1,275,799)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line of credit 2,099,743 -
Payment of cash dividend (377,687) (265,143)
Repurchase of common stock (149,500) (67,254)
Proceeds from exercise of stock options - 18,750
Net cash provided by (used in)
financing activities 1,572,556 (313,647)
NET INCREASE (DECREASE) IN CASH
& CASH EQUIVALENTS 284,678 (1,218,068)
CASH & CASH EQUIVALENTS AT BEGINNING
OF PERIOD 193,918 2,377,898
CASH & CASH EQUIVALENTS AT END OF PERIOD $ 478,596 $ 1,159,830
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 115,796 $ 67
Income/Franchise taxes 1,287,130 559,118
<FN>
See notes to consolidated financial statements.
</TABLE>
5<PAGE>
AIR TRANSPORTATION HOLDING COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
A. Financial Statements
The Consolidated Balance Sheet as of September 30, 1998, the
Consolidated Statements of Earnings for the three and six-month periods
ended September 30, 1998 and 1997 and the Consolidated Statements of
Cash Flows for the six-month periods ended September 30, 1998 and 1997
have been prepared by Air Transportation Holding Company, Inc. (the
Company) without audit. In the opinion of management, all adjustments
(consisting only of normal recurring adjustments) necessary to present
fairly the financial position, results of operations and cash flows as
of September 30, 1998, and for prior periods presented, have been made.
It is suggested that these financial statements be read in
conjunction with the financial statements and notes thereto included in
the Company's Annual Report on Form 10-K for the year ended March 31,
1998. The results of operations for the period ended September 30 are
not necessarily indicative of the operating results for the full year.
B. Income Taxes
The tax effect of temporary differences, primarily asset reserves
and accrued liabilities, gave rise to the Company's deferred tax asset
in the accompanying September 30, 1998 and March 31, 1998 consolidated
balance sheets.
The Company has recorded a valuation allowance in order to reduce
its deferred tax asset to an amount which is more likely than not to be
realized. Changes in the valuation allowance, related to future
utilization of net operating losses, reduced the provision for income
taxes by $44,000 during the six-months ended September 30, 1997. At
September 30, 1998, the Company had no valuation allowance.
The income tax provisions for the six-months ended September 30,
1998 and 1997 differ from the federal statutory rate primarily as a
result of state income taxes and a reduction in the above mentioned
valuation allowance.
C. Net Earnings Per Share
Basic earnings per share has been calculated by dividing net
earnings by the weighted average number of common shares outstanding
during each period. For purposes of calculating diluted earnings per
share, shares issuable under employee stock options which were dilutive
were considered common share equivalents and were included in the
weighted average common shares.
6<PAGE>
The computation of basic and diluted earnings per common share is as
follows:
Three Months Ended Six Months Ended
September 30, September 30,
1998 1997 1998 1997
Net earnings $ 239,133 $ 418,640 $ 545,831 $ 513,137
Weighted average common shares:
Shares outstanding - basic 2,696,320 2,645,653 2,703,986 2,648,543
Dilutive stock options 97,245 129,352 98,234 138,845
Shares outstanding - diluted 2,793,565 2,775,005 2,802,220 2,787,388
Net earnings per common share:
Basic $ 0.09 $ 0.16 $ 0.20 $ 0.19
Diluted $ 0.09 $ 0.15 $ 0.19 $ 0.18
D. Acquisition
On August 29, 1997, the Company acquired the Simon Deicer
Division of Terex, Inc. for $715,000 cash. The acquisition, renamed
Global Ground Support, LLC (Global), manufactures, sells and services
aircraft deice equipment on a worldwide basis. The acquisition was
accounted for using the purchase method; accordingly, the assets and
liabilities (which included $1,522,000 inventory, $287,000 fixed assets
and $3,000 accounts receivable, net of $1,048,000 in customer deposits
and $49,000 warranty obligation) of the acquired entity have been
recorded at their estimated fair values at the date of acquisition.
Global's results of operations have been included in the Consolidated
Statement of Income since the date of acquisition.
E. Recent Accounting Pronouncement
Statement of Financial Accounting Standards No. 131, "Disclosures
about Segments of an Enterprise and Related Information (SFAS 131) was
issued in June 1997. SFAS 131 is effective for the Company in the
fiscal year ending March 31, 1999. SFAS 131 redefines how operating
segments are determined and requires disclosure of certain financial
and descriptive information about a company's operating segments.
Management does not believe that the adoption of SFAS 131 will have a
material impact on the Company's current disclosures of its operating
segments.
7<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Overview
Statements in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations" or made by management of
the Company which contain more than historical information may be
considered forward-looking statements (as such term is defined in the
Private Securities Litigation Reform Act of 1995) which are subject to
risks and uncertainties. Actual results may differ materially from
those expressed in the forward-looking statements because of important
risks and uncertainties, including but not limited to the effects of
economic, competitive and market conditions in the aviation industry.
The Company's most significant component of revenue is generated
through its air cargo subsidiaries, Mountain Air Cargo, Inc. (MAC) and
CSA Air, Inc. (CSA), which are short-haul express air freight carriers
flying nightly contracts for a major express delivery company out of 80
cities, principally located in 30 states in the eastern half of the
United States and in Puerto Rico, Canada and the Virgin Islands. Under
the terms of its dry-lease service contracts (which currently cover
approximately 98% of the revenue aircraft operated), the Company passes
through to its customer certain cost components of its operations
without markup. The cost of fuel, flight crews, landing fees, outside
maintenance, aircraft certification and conversion, parts and certain
other direct operating costs are included in operating expenses and
billed to the customer as cargo and maintenance revenue.
In May 1997, to expand its revenue base, the Company's Mountain
Aircraft Services, LLC (MAS) subsidiary expanded its offering of
aircraft component repair services. MAS's revenue contributed
$2,210,000 and $1,765,000 to the Company's revenues for the six-month
periods ended September 30, 1998 and 1997, respectively.
In August 1997, the Company acquired certain assets and order
backlog and assumed certain liabilities of Simon Deicer Company, a
division of Terex Aviation Ground Equipment, Inc. located in Olathe,
Kansas. The acquisition, renamed Global Ground Support, LLC (Global),
manufactures, services and supports aircraft deicers on a worldwide
basis. Global is operated as a subsidiary of MAS. Global's revenue
contributed $6,694,000 and $1,553,000 for the six-month periods ended
September 30, 1998 and 1997, respectively.
8<PAGE>
Seasonality
Global's business has historically been highly seasonal. In
general, the bulk of Global's revenues and earnings have typically
occurred during the second and third fiscal quarters, and comparatively
little has occurred during the first and fourth fiscal quarters due to
the nature of its product line. The Company is currently reducing
Global's seasonal fluctuation in revenues and earnings by broadening
its product line to increase revenues and earnings in the first and
fourth fiscal quarters. The Company expended exceptional effort in the
second quarter of 1998 to design and produce prototype equipment to
expand its current product line. The remainder of the Company's
business is not materially seasonal.
Results of Operations
Consolidated revenue increased $6,515,000 (34.5%) to $25,426,000
and $2,164,000 (20.1%) to $12,916,000, respectively, for the six and
three-month periods ended September 30, 1998 compared to their
equivalent 1997 periods. The six and three-month current period net
increase in revenue primarily resulted from the operations of Global
and increases in air cargo and component repair services.
Operating expenses increased $6,623,000 (37.1%) to $24,455,000 for
the six-month period ended September 30, 1998 and $2,332,000 (23.0%) to
$12,470,000 for the three-month period ended September 30, 1998
compared to their equivalent 1997 periods. The change in operating
expenses for the six-month period consisted of the following: cost of
flight operations increased $361,000 (5.7%), primarily as a result of
increases in pilot and flight personnel and costs associated with pilot
travel; maintenance and brokerage expense increased $537,000 (7.0%),
primarily as a result of increases associated with contract services,
and cost of parts and labor related to the expansion of MAS's repair
shop; ground equipment increased $4,316,000 (368.7%), as a result of
the August 1997 Global acquisition; depreciation and amortization
increased $130,000 (58.5%) as a result of increased depreciation
related to the above Global acquisition; general and administrative
expense increased $1,459,000 (65.6%) primarily as a result of increases
associated with the start-up of Global and expansion of MAS's repair
shop operations.
The $235,000 decrease between the six months ended September 30,
1997 and September 30, 1998 in non-operating expense was principally
due to a $418,000 provision, accrued in the first quarter of 1997, to
fulfill contractual benefits related to the death of the Company's
Chairman and CEO, offset by a $125,000 increase in interest expense in
the 1998 six-month period. The $93,000 increase in non-operating
expense for the comparative three-month periods ended September 30,
1998 and 1997 was primarily due to $74,000 in interest expense incurred
in the 1998 period.
Pretax earnings increased $127,000 and decreased $260,000 for the
six and three-month periods ended September 30, 1998, respectively
compared to their respective September 30, 1997 periods. The six-month
increase was principally due to the above 1997 death benefit provision,
offset by a current period $80,000 net loss at Global compared
9<PAGE>
Results of Operations (cont'd)
to $246,000 net income in 1997. The second quarter decrease was
principally due to increased operating costs and a $196,000 decrease in
Global's profitability for the quarter ended September 30, 1998 versus
the September 30, 1997 quarter.
The provision for income taxes increased $94,000 and decreased
$81,000 for the six and three-month periods ended September 30, 1998,
respectively compared to their respective 1997 periods due to changes
in taxable income and effective tax rates.
Liquidity and Capital Resources
As of September 30, 1998 the Company's working capital amounted to
$7,590,000, an increase of $24,000 compared to March 31, 1998. The net
increase primarily resulted from profitable operations offset by cash
required in the operation of Global and expansion of MAS.
On July 17, 1998, the Company increased its unsecured line of
credit from $5,000,000 to $7,000,000. The line, which matures August
31, 1999, is expected to be renewed before its expiration date.
Amounts advanced under the line of credit bear interest at the 30-day
"LIBOR" rate (5.60% at September 30, 1998) plus 137 basis points.
Under the terms of the line of credit the Company must maintain
certain financial ratios and may not encumber certain real or personal
property. At September 30, 1998 the Company was in compliance with the
debt covenants. As of September 30, 1998, the Company was in a net
borrowing position against its line of credit in the amount of
$3,016,000, a $2,100,000 increase over the March 31, 1998 loan balance,
principally to fund the expanded operations of Global. Management
believes that funds anticipated from operations and existing credit
facilities will provide adequate cash flow to meet the Company's future
financial needs.
The respective six-month periods ended September 30, 1998 and 1997
resulted in the following changes in cash flow: operating activities
used $1,361,000 and provided $371,000, investing activities provided
$73,000 and used $1,276,000 and financing activities provided
$1,573,000 and used $314,000. Net cash increased $285,000 and
decreased $1,218,000 for the respective six-month periods ended
September 30, 1998 and 1997.
Cash used in operating activities was $1,732,000 more for the six-
months ended September 30, 1998 compared to the similar 1997 period,
principally due to increases in inventory and decreases in accounts
payable and taxes payable and a $418,000 provision related to the death
of the Company's former Chairman and CEO in the first quarter of 1997.
Cash provided by investing activities for the six-months ended
September 30, 1998 was approximately $1,349,000 more than the
comparable period in 1997, principally due the 1997 Global business
acquisition and a current period decrease in purchase of marketable
securities.
10<PAGE>
Liquidity and Capital Resources (cont'd)
Cash provided by financing activities for the six-months ended
September 30, 1998 was approximately $1,886,000 more than the
comparable 1997 period, principally due to an increase in borrowings
under the line of credit in 1998, partially offset by an increase in
cash dividend and repurchase of common stock.
There are currently no commitments for significant capital
expenditures. The Company's Board of Directors, on August 7, 1997,
adopted the policy to pay an annual cash dividend in the first quarter
of each fiscal year, in an amount to be determined by the board. The
Company paid a $0.14 per share cash dividend in June 1998.
Recent Accounting Pronouncement
Statement of Financial Accounting Standards No. 131, "Disclosures
about Segments of an Enterprise and Related Information (SFAS 131) was
issued in June 1997. SFAS 131 is effective for the Company in the
fiscal year ending March 31, 1999. SFAS 131 redefines how operating
segments are determined and requires disclosure of certain financial
and descriptive information about a company's operating segments.
Management does not believe that the adoption of SFAS 131 will have a
material impact on the Company's current disclosures of its operating
segments.
Deferred Retirement Obligation
The Company's former Chairman and Chief Executive Officer passed
away on April 18, 1997. In addition to amounts previously expensed,
under the terms of his supplemental retirement agreement, death
benefits with a present value of approximately $418,000 were expensed
in the first quarter 1998. The death benefits are payable in the
amount of $75,000 per year for 10 years.
Impact of Inflation
The Company believes the impact of inflation and changing prices
on its revenues and net earnings will not have a material effect on its
manufacturing operations because increased costs due to inflation could
be passed on to its customers, or on its air cargo business since the
major cost components of its operations, consisting principally of
fuel, crew and certain maintenance costs are reimbursed, without
markup, under current contract terms.
11<PAGE>
Year 2000 Issue
The Company has initiated a comprehensive review of its operations
and computer systems to identify the extent to which it could be
affected by the "year 2000 issue", which is the result of computer
programs written using two digits rather than four to define the
applicable year. The Company has broken down its review to assess its
information technology systems ("IT Systems"), the aspects of its
operations that rely on devices that may contain embedded microchips
("Non-IT Systems") and its relationships and reliance on vendors,
suppliers, customers and others with whom the Company deals whose
operations may be affected by the year 2000 issue. This review was
conducted by the Company's Year 2000 committee, authorized to assess
the Company's risks and develop a comprehensive plan to address the
year 2000 issue.
State of Readiness
IT Systems. As a result of such review, as of the date of this
Quarterly Report on Form 10-Q, the Company believes it has catalogued
all IT Systems utilized directly by the Company. The Company has
revised certain customized IT Systems to enable such systems to work
properly following the year 2000 and is in the process of confirming
oral verification that recently acquired IT Systems from third-party
vendors are "year 2000 compliant". Management believes only one
significant set of IT Systems, which are used in the operations area of
the Company, has not been confirmed as being "year 2000 compliant".
Management has decided to upgrade this set of software systems to
confirm that it will function properly after the year 2000. Management
believes that such systems can be upgraded by the end of the current
fiscal year. Management believes that adequate replacement systems
that are year 2000 compliant are commercially available in the event
that such upgrades cannot be timely completed.
Non-IT Systems. The Company utilizes a number of devices that
include embedded microchips that may be affected by the year 2000
issue, including aircraft operated under lease agreements with its
major customer. The Company is in the process of testing all
identified devices that include embedded microchips. This process is
scheduled to be completed by the end of the current fiscal year. The
Company anticipates replacing any noncompliant devices, other than
aircraft, by the end of the current fiscal year. With respect to the
aircraft operated by the Company, the Company anticipates replacing any
noncompliant components. Under its agreements with its major customer
the cost of replacing such components in aircraft leased by the Company
from its customer would be passed on to the customer.
Material Third Parties. The Company is making concerted efforts
to understand the year 2000 compliance of third parties (including,
among others, domestic and international government agencies and air
traffic control systems material to the Company's operations, vendors,
suppliers and major customers) whose year 2000 non-compliance could
either have a material adverse effect on the Company's business,
financial condition or results of operations or involve a safety risk
to employees or customers.
12<PAGE>
State of Readiness (Cont'd)
The Company is actively encouraging year 2000 compliance on the part of
third parties and is developing contingency plans in the event of their
year 2000 non-compliance. The Company has contacted, in writing, each
material vendor and supplier, requesting completion of a questionnaire
to assess such third party's year 2000 compliance. Failure to respond
to these questionnaires results in further mail or phone
correspondence, contingency plan development or vendor/product
replacement.
The Company has met with its major air cargo customer on numerous
occasions to discuss year 2000 readiness. In addition, the Company has
reviewed public filings of its major customer to assess the customer's
state of year 2000 compliance. Such discussions and filings indicate
plans by such customer to establish 100% internal year 2000 compliance
by September 1, 1999. However, such customers' operations rely on many
third parties, including governmental agencies, airports and air
traffic control systems described below.
In conjunction with the Company's major air cargo customer and
industry trade associations, the Company is involved in an industry-
wide effort to understand the year 2000 compliance status of airports,
air traffic systems, and other U.S. and international government
agencies that may affect the Company's air cargo operations. The
Company's air cargo routes are selected and scheduled by its major
customer.
Risks
In addition to general risks raised by the year 2000 issue, the
Company's primary business segment, providing air cargo services to the
overnight express delivery industry, is subject to significant
additional risks. First, the Company's relationship with its major air
cargo customer is based, in significant part, on the Company's operating
reliability. A failure to timely confirm its year
2000 compliance to the customer could result in a loss of such
relationship. The Company has provided this customer with an
anticipated time schedule for completion of its year 2000 compliance
program, which the Company believes fits within the customers' planned
schedule. In addition, the bulk of the Company's aircraft fleet is
leased from such customer and is dedicated for use in flying routes
designated by the customer. Accordingly, the Company cannot currently
develop meaningful contingency plans for its air cargo operations in
the event that year 2000 issues interrupt the operations of the
Company's major air cargo customer to the extent that such customer
does not require the Company's services.
13<PAGE>
Costs
The Company currently anticipates that costs of its year 2000
compliance program will likely be in the range of $120,000, assuming
that planned revisions to the remaining IT Systems which are not yet
year 2000 compliant can be successfully completed. If such revisions
cannot be successfully completed, the cost of replacement systems would
add materially to that estimate. As of September 30, 1998, the Company
had incurred approximately $30,000 in year 2000 compliance costs. The
foregoing costs do not include the allocation of internal employee time
since the Company does not track such internal costs.
Contingency Plans
The Company has begun developing possible contingency plans for
year 2000 non-compliance, some of which are discussed above. Due to
the Company's dependence upon, and its current uncertainty with, the
year 2000 compliance of certain government agencies, third-party
suppliers, vendors and customers with whom the Company deals, the
Company is unable to determine at this time its most reasonably likely
worst case scenario. While costs related to the lack of year 2000
compliance by third parties, business interruptions, litigation and
other liabilities related to year 2000 issues could materially and
adversely affect the Company's business, results of operations and
financial condition, the Company expects its internal year 2000
compliance efforts to reduce significantly the Company's level of
uncertainty about the impact of year 2000 issues affecting both its IT
Systems and Non-IT Systems.
14<PAGE>
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
No. Description
3.1 Certificate of Incorporation, as amended, incorporated by
reference to Exhibit 3.1 of the Company's Annual Report on Form
10-K for the fiscal year ended March 31, 1994
3.2 By-laws of the Company, incorporated by reference to
Exhibit 3.2 of the Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 1996
4.1 Specimen Common Stock Certificate, incorporated by
reference to exhibit 4.1 of the Company's Annual Report on Form
10-K for the fiscal year ended March 31, 1994
10.1 Aircraft Dry Lease and Service Agreement dated February 2,
1994 between Mountain Air Cargo, Inc. and Federal Express
Corporation, incorporated by reference to Exhibit 10.13 to
Amendment No. 1 on Form 10-Q/A to the Company's Quarterly
Report on Form 10-Q for the quarterly period ended December 31,
1993
10.2 Loan Agreement among NationsBank of North Carolina, N.A.,
the Company and its subsidiaries, dated July 17, 1998
incorporated by reference to Exhibit 10.2 to the Company's
Quarterly Report on Form 10-Q for the period ended June 30,
1998.
10.3 Aircraft Wet Lease Agreement dated April 1, 1994 between
Mountain Air Cargo, Inc. and Federal Express Corporation,
incorporated by reference to Exhibit 10.4 of Amendment No. 1 on
Form 10-Q/Q to the Company's Quarterly Report on Form 10-Q for
the period ended September 30, 1994
10.4 Adoption Agreement regarding the Company's Master 401(k) Plan and Trust,
incorporated by reference to Exhibit 10.7 to the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 1993*
10.5 Form of options to purchase the following amounts of Common Stock issued by
the Company to the following executive officers during the follow-
ing fiscal years ended March 31:*
Number of Shares
Executive Officer 1993 1992 1991
J. Hugh Bingham 150,000 150,000 200,000
John J. Gioffre 100,000 100,000 125,000
William H. Simpson 200,000 200,000 300,000
incorporated by reference to Exhibit 10.8 of the Company's
Annual Report on Form 10-K for the fiscal year ended March 31,
1993
15<PAGE>
10.6 Premises and Facilities Lease dated November 16, 1995
between Global TransPark Foundation, Inc. and Mountain Air
Cargo, Inc., incorporated by reference to Exhibit 10.5 to
Amendment No. 1 on form 10-Q/A to the Company's Quarterly
Report on Form 10-Q for the period ended December 31, 1995
10.7 Employment Agreement dated January 1, 1996 between the
Company, Mountain Air Cargo Inc. and Mountain Aircraft
Services, LLC and William H. Simpson, incorporated by reference
to Exhibit 10.8 to the Company's Annual Report Form 10-K for
the fiscal year ended March 31, 1996*
10.8 Employment Agreement dated January 1, 1996 between the
Company, Mountain Air Cargo Inc. and Mountain Aircraft
Services, LLC and John J. Gioffre, incorporated by reference to
Exhibit 10.9 to the Company's Annual Report Form 10-K for the
fiscal year ended March 31, 1996*
10.9 Employment Agreement dated January 1, 1996 between Company, Mountain Air
Cargo Inc. and Mountain Aircraft Services, LLC and J. Hugh Bingham,
incorporated by reference to Exhibit 10.10 to the Company's Annual
Report Form 10-K for the fiscal year end March 31, 1996.*
10.10 Employment Agreement dated September 30, 1997 between Mountain
Aircraft Services, LLC and J. Leonard Martin, incorporated by ref-
erence to Exhibit 10.10 to the Company's Quarterly Report
Form 10-Q for the quarter ended December 31, 1997.*
10.11 Omibus Securities Award Plan, incorporated by reference to Exhibit
10.11 to the Company's Quarterly Report Form 10-Q for the quarter
ended June 30, 1998.*
10.12 Commercial and Industrial Lease Agreement dated August 25, 1998
between William F. Bieber and Global Ground Support, LLC.
21.1 List of subsidiaries of the Company, incorporated by reference to
Exhibit 21.1 of the Company's Quarterly Report on Form 10-Q for
the period ended September 30, 1997
27.1 Financial Data Schedule (For SEC use only)
_______________________
* Management compensatory plan or arrangement required to be filed as an
exhibit to this report.
b. Reports on form 8-K
No Current Reports on Form 8-K were filed in the second quarter of
fiscal 1999.
16<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AIR TRANSPORTATION HOLDING COMPANY, INC.
(Registrant)
Date: November 10, 1998 /s/ Walter Clark
Walter Clark, Chief Executive Officer
Date: November 10, 1998 /s/ John Gioffre
John J. Gioffre, Chief Financial Officer
17<PAGE>
AIR TRANSPORTATION HOLDING COMPANY, INC.
EXHIBIT INDEX
EXHIBIT PAGE
10.12 Commercial and Industrial Lease Agreement dated
August 25, 1998 between William F. Bieber and
Global Ground Support, LLC 19-29
18<PAGE>
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"This schedule contains summary financial information extracted from Air
Transportation Holding Company, Inc. SEC Form 10-Q for Quarter ended September
30, 1998 (identify specific financial statements) and is qualified in its
entirety by reference to such financial statements."
</LEGEND>
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</TABLE>
COMMERCIAL AND INDUSTRIAL LEASE AGREEMENT
THIS LEASE is made as of August 25 , 1998 between
William F. Bieber ("Landlord") with an address of
2600 Niagara Lane North, Plymouth, MN 55447,
and Global Ground Support, LLC,
a North Carolina limited liability company. ("Tenant")
with an address of 540 East 56 Highway, Olathe, Kansas,
who here by agree as follows:
1. PREMISES. Subject to the covenants and conditions of
this Lease, Landlord leases to Tenant, and Tenant leases from
Landlord, the premises (the "Premises") commonly know and
numbered as 540 East 56 Highway in the City of
Olathe, County of Johnson, State of Kansas, and
further described as:
An approximately 112,493 square foot industrial and office
facility. Further identified on attached Exhibit "A",
together with the right of ingress and egress.
2. USE OF PREMISES. The Premises will be used only for:
office, manufacturing, storage and assembly of truck mounted
equipment (collectively, the "Permitted Use")
3. TERM. The term of this Lease (the "Term") is for
three years and no months, commencing one the
first day of September 1998, and ending on the
last day of August, 2001.
4. RENT PAYMENTS. Tenant shall pay to Landlord an
aggregate sum of One Million Sixty-three Thousand Fifty-
eight and 76/100s DOLLARS ($ 1,063,058.76 )
as rent in monthly Installments each due and payable
in advance without notice or demand at Landlord's
above stated address or at any other place Landlord designates in
writing. The first monthly rent installment of $ 29,529.41
will be paid at execution here of and all subsequently monthly
rent Installments will be due on the first day of each
succeeding month during the Term. The amount of each monthly
rent installment will be as follows: $29,529.41
5. SECURITY DEPOSIT. Concurrently with its execution of
this Lease, Tenant shall deliver to Landlord $ 29,529.41 as
security for the performance by Tenant of every covenant and
condition of this Lease (the "Security Deposit"). Said Security
Deposit may be co-mingled with other funds of Landlord and shall
bear no interest. If Tenant shall default with respect to any
covenant or condition of this Lease, including, but not the
payment of rent, Landlord may apply the whole or any part of such
Security Deposit to the payment of any sum in default or any sum
which Landlord may be required to spend by reason of Tenant's
default. If any portion of the Security Deposit is so applied,
Tenant, upon demand by Landlord, will deposit cash with Landlord
in an amount sufficient to restore the Security Deposit to its
original amount. Should Tenant comply with all of the covenants
and conditions of this Lease, the Security Deposit of any balance
thereof shall be returned to Tenant promptly after expiration of
the term thereof.
19<PAGE>
6. POSSESSION AT BEGINNING OF TERM. Landlord shall use
due diligence to give possession as nearly as possible at the
beginning of the Term. Rent shall abate pro rata for the period
of any delay in giving Tenant possession, but the Term will not
be extended as a result of such delay. Tenant will make no other
claim against Landlord for delay in obtaining possession.
7. PROPERTY INSURANCE. Tenant shall comply with all
Insurance regulations so the lowest property damage Insurance and
liability insurance rates may be obtained; and nothing shall be
done or kept in or on the Premises by Tenant which will cause an
increase in the premium for any such insurance on the Premises or
on any building of which the Premises are a part of on any
contents located therein, over the rate usually obtained for the
proper use of the Premises permitted by this Lease or which will
cause cancellation or make void any such Insurance. Tenant will
pay to Landlord, as additional rent the insurance premium
covering the Premises within thirty (30) days after receipt of
Landlord's billing statement and demand for payment of the same.
The amount payable by Tenant under this section will be pro rated
on a per diem basis for the partial years, if any, in which this
Lease commences and terminates.
Tenant shall maintain, at all times during the Term,
adequate insurance on its personal property used, stored or kept
in the Premises.
8. INDEMNITY AND LIABILITY INSURANCE. Tenant shall at all
times indemnify, defend and hold Landlord harmless from all loss,
liability, costs, damages and expenses that may occur or be
claimed with respect to any person or persons, or property on or
about the Premises or to the Premises resulting from any act done
or omission by or through Tenant, its agents, employees, invitees
or any person on the Premises by reason of Tenant's use or
occupancy or resulting from Tenant's non-use or possession of
said property and any and all loss, cost, liability or expense
resulting therefrom. Tenant shall maintain, at all times during
the Term, comprehensive general liability insurance in a
responsible insurance company, licensed to do business in the
state in which the Premises are located and satisfactory to
Landlord, properly protecting and indemnifying Landlord with
single limit coverage of not less than $ 2,000,000.00 for injury
to or death of persons and for property damage. During the Term,
Tenant shall furnish Landlord with a certificate of certificates
of insurance covering such insurance so maintained by Tenant and
naming Landlord and Landlord's mortgages, if any, as additional
insureds.
9. ASSIGNMENT AND SUBLETTING. Tenant shall not assign,
transfer or encounter this Lease and shall not sublease the
Premises or any part thereof or allow any other person to be in
possession thereof without the prior written consent of Landlord,
in each and every instance, which consent or consents shall not
be unreasonably withheld. For the purpose of this provision, any
transfer of majority or controlling interest in Tenant (whether
in one or more related on unrelated transactions), whether by
transfer of stock, consolidation, merger, transfer of a
partnership interest or transfer of any or all of Tenant's assets
or otherwise or by operation of law, shall be deemed an
assignment of this lease. Notwithstanding any permitted
assignment of subletting. Tenant shall at all times remain
directly, primarily and fully responsible and liable for the
payment of the rent herein specified and for compliance with all
of its other obligations under the terms and provisions of this
Lease.
10. SIGNS AND ADVERTISEMENTS. Tenant shall not place upon
nor permit to be placed upon any part of the Premises, any signs,
billboards or advertisements whatever, without the prior written
consent of Landlord.
20<PAGE>
11. CONDITION OF PREMISES AT BEGINNING OAND END OF TERM.
Tenant acknowledges Tenant has inspected the Premises and, except
as may be provided otherwise in this Lease and without abrogating
Landlord's obligations under Paragraph 15 hereof. Tenant accepts
the Premises in their present condition.
At the end of the Term, except for damage caused by fire or
other perils, Tenant, at Tenant's expense will (a) surrender the
Premises in as good a condition as the Permitted Use will have
reasonably permitted, subject to Tenant's obligations stated in
Paragraphs 12 and 14 herein; (b) have removed all of Tenant's
property from the Premises; (c) have promptly repaired any damage
to the Premises caused by the removal of Tenant's Property; and
(d) leave the Premises free of trash and debris and the building
in "broom clean" condition.
12. MAINTENANCE AND REPAIR BY TENANT. Except for the
obligations imposed upon Landlord in Paragraph 15 hereof, and
except for damage resulting from an Insurable Loss, during the
Term and at Tenant's sole cost and expense. Tenant will maintain
and keep in good order, repair and condition and, when necessary,
will replace all parts of the Premises (except those for which
Landlord is expressly responsible under the terms of this Lease),
including, but not limited to, dock bumpers and other dock
equipment and apparatus, utility service lines form the point
where they enter the building(s) of which the Premises are a
part, interior walls, inside surfaces of exterior walls,
fixtures, floor coverings, lighting fixtures, heating,
ventilating, air conditioning, plumbing, sprinkler system, glass,
windows, doors, electrical and other mechanical equipment,
appliances and systems, railroad spur track, if any, improvements
made by and at the expense of Tenant and Tenant's property,
including, but not limited to: Tenants signs and advertisements.
Tenant will police and keep the driveways, approaches, sidewalks,
parking areas and adjacent alleys that are a part of the Premises
clean, orderly, sightly, unobstructed and free ice and snow.
Tenant will regularly water, mow, trim, fertilize and otherwise
maintain the lawn, shrubs, plants, trees and other landscaping of
the Premises and will prevent water pipes in the Premises from
freezing.
13. LANDLORD'S RIGHT OF ENTRY. Landlord or Landlord's
agent may enter the Premises at reasonable hours to examine the
same, to show the same to prospective lenders and purchasers, and
to do anything Landlord may be required to do hereunder or which
Landlord may deem necessary for the good of the Premises or any
building of which they are a part; and during the last 180 days
of this Lease, Landlord may display a "For Rent" sign on and show
the Premises.
14. PARKING LOT MAINTENANCE. Tenant shall be responsible
for maintenance, cleaning, repainting and repairs of the parking
areas, driveways, sidewalks and approaches, including snow
removal. Tenant will repair all damage to parking areas,
driveways, sidewalks and approaches caused by placement or
movement of trash containers, truck trailers dollies, trucks,
etc. Tenant understands and agrees that no personal property
shall be stored in the parking area or anyplace outside the
building without the prior written consent of Landlord.
21<PAGE>
15. MAINTENANCE AND REPAIR BY LANDLORD. Landlord, during
the Term and at Landlord's sole cost and expense will maintain
and keep in good repair the roof, exterior walls (exclusive of
inside surfaces and glass, windows and doors), gutters,
downspouts, foundations and all other structural components of
the building(s) of which the Premises are a part, all underground
plumbing and sewer lines, and water, gas and electric service
lines to the point where such service lines enter the building(s)
of which the Premises are a part. Landlord will be under no
obligation, and will not be liable for any failure to make and
repairs until and unless Tenant notifies Landlord in writing they
are necessary, in which event Landlord will have a reasonable
time after notice to make such repairs.
16. DAMAGE BY CASULTY. In case, during the Term or
previous thereto, the Premises hereby let or the building of
which said Premises are a part, shall be destroyed or shall be so
damaged by fire or other casualty as to become untenantable, then
in such event, at the option of Landlord, the Term shall cease
and this Lease shall become null and void from the date of such
damage or destruction and Tenant shall immediately surrender said
Premises and all interest therein to landlord, and Tenant shall
pay rent within said Term only to the time of such surrender
provided however, that Landlord shall exercise such option to so
terminate this Lease by notice in writing delivered to Tenant
within thirty days after such damage or destruction. In case
Landlord shall not so elect to terminate this Lease, this Lease
shall continue in full force and effect and Landlord shall repair
the Premises with all reasonable promptitude, placing the same in
as good a condition as they were at the time of the damage or
destruction, and for that purpose may enter said Premises and
rent shall abate in proportion to the extent and duration of
untenantability. In either event, Tenant shall remove all
rubbish, debris, merhcandise, furniture, equipment and other of
its personal property, within five days after the request of
Landlord. If the Premises shall be but slightly injured by fire
or other casualty, so as not to render the same untenantable and
unfit for occupancy, then Landlord shall repair the same with all
reasonable promptitude, and in that case the rent shall not
abate. Except as provided herein, no compensation or claim shall
be made by or allowed to Tenant by reason of an inconvenience or
annoyance arising from the necessity of repairing any portion of
the building of the Premises, however the necessity may occur.
17. PERSONAL PROPERTY. Landlord shall not be liable for
any loss or damage to any merchandise Inventory, goods, fixtures,
improvements or personal property of tenant in or about the
Premises, regardless of the cause of such loss or damage.
18. ALTERATIONS. Tenant shall not make any alterations or
additions nor to the Premises without the prior written consent
of Landlord.
19. UTILITIES AND SERVICES. Tenant shall furnish and pay
for all electricity, gas, water, fuel, trash removal and any
services or utilities used in or assessed against the Premises
unless otherwise herein expressly provided.
20. LEGAL REQUIREMENTS. Tenant shall comply with all laws,
orders, ordinances and other public requirements now or hereafter
affecting the Premises or the use thereof, including without
limitation ADA, OSHA and like requirements, and indemnify, defend
and hold Landlord harmless from expense or damage resulting from
failure to do so.
21. MULTIPLE TENANCY BUILDING. N/A
22<PAGE>
22. FIXTURES. Except for Tenant's property and business
fixtures, all buildings, repairs, alterations, additions,
improvements, installations and other non-business fixtures
installed or erected on the Premises, whether by or at the
expense of Landlord or Tenant, will belong to Landlord and will
remain on and be surrendered with the Premises at the expiration
or termination of this Lease. However, at Landlord's option,
Tenant shall remove Tenant's alterations or improvements prior to
the expiration of this Lease and return the Premises to their
original condition.
23. INCREASE IN REAL ESTATE TAXES AND SPECIAL ASSESSMENTS.
N/A
24. EMINENT DOMAIN. If the Premises or any substantial
part thereof shall be taken under the power of eminent domain or
be acquired for any public or quasi-public use or purpose, the
Term shall cease and terminate upon the date when the possession
of said Premises or the part thereof so taken shall be required
for such sue or purpose and without apportionment of the award,
and Tenant shall have not claim against Landlord for the value of
any unexpired term. If any condemnation proceeding shall be
instituted in which it is sought to take or damage any part of
the Premises or the building of which the Premises are a part or
the land under it, or if the grade of any street or alley
adjacent to the Premises is changed by any legal authority and
such change of grade makes it necessary or desirable to remodel
the Premises to conform to the changed grade. Landlord shall
have the right to cancel this Lease after having give written
notice of cancellation to Tenant not less than ninety (90) days
prior to the date of cancellation designated in the notice. In
either of said events, rent at the then current rate shall be
apportioned as of the date of the termination. No money or other
consideration shall be payable by Landlord to Tenant for the
right of cancellation and Tenant shall have no right to share in
the condemnation award or in any judgment for damages caused by
taking or the change or grade. Nothing in this paragraph shall
preclude an award being made to Tenant for loss of business or
depreciation to and cost of removal of equipment of fixtures.
25. WAIVER OF SUBROGATION. As part of the consideration
for this Lease, each of the parties hereby releases the other
party hereto from all liability for damage due to any act or
neglect of the other party (except as hereinafter provided)
occasioned to property owned by said parties which is or might be
incident to or the result of a fire or any other casualty against
loss for which either of the parties in now carrying or hereafter
may carry insurance; provided, however, that the releases herein
contained shall not apply to any loss or damage occasioned by
intentional acts of either of the parties hereto, and the parties
hereto further covenant that any insurance they obtain on their
respective properties shall contain an appropriate provision
whereby the insurance company, or companies, consent to the
mutual release of liability contained in this paragraph.
23<PAGE>
26. DEFAULT AND REMEDIES. In the event: (a) Tenant fails
to comply with any term, provision, condition or covenant of this
Lease; (b) Tenant deserts or vacates the Premises; (c) any
petition is filed by or against Tenant under any section or
chapter of the Federal Bankruptcy Act, as amended, or under any
similar law or statue of the United States or any state thereof;
(d) Tenant becomes insolvent or makes a transfer in fraud of
creditors; (e) Tenant makes an assignment for benefit of
creditors; or (f) a receiver is appointed for Tenant or any of
the assets of Tenant, then in any of such events. Tenant shall
be in default and Landlord shall have the option to do any one or
more of the following: upon ten (10) days prior written notice,
excepting the payment of rent or additional rent for which no
demand or notice shall be necessary, in addition to and not in
limitation of any other remedy permitted by law, to enter
upon the Premises either with or without process of law, and to
expel, remove and put out Tenant or any other persons who might
be thereon, together with all personal property found therein;
and, Landlord may terminate this Lease or it may from time to
time, without terminating this Lease, rent said Premises or any
part thereof for such term or terms (which may be for a term
extending beyond the Term) and at such rental or rentals and upon
such other terms and conditions as Landlord in its sole
discretion may deem advisable, with the right to repair,
renovate, remodel, redecorate, alter and change said Premises.
At the option of Landlord, rents received by Landlord form such
reletting shall be applied first to the payment of any
indebtedness from Tenant to Landlord other than rent and
additional rent due hereunder; second, to payment of any costs
and expenses of such reletting, including, but not limited to,
attorney's fees, advertising fees and brokerage fees and to the
payment of any repairs, renovation, remodeling, redecorations,
alterations and changes in the Premises; third, to the payment of
rent and additional rent due and payable hereunder and interest
thereon; and if after applying said rentals there is any
deficiency in the rent and additional rent and interest to be
paid by Tenant under this Lease. Tenant shall pay any such
deficiency to Landlord and such deficiency shall be calculated
and collected by Landlord monthly. No such re-entry or taking
possession of said Premises shall be construed as an election of
Landlord's part to terminate this Lease unless a written notice
of such intention be given to Tenant. Notwithstanding any such
reletting without termination, Landlord may at any time
thereafter elect to terminate this Lease for such previous breach
and default. Should Landlord at any time terminate this Lease by
reason of any default, in addition to any other remedy it may
have, it may recover from Tenant the worth at the time of such
termination of the excess of the amount of rent and additional
rent reserved in this Lease for he balance of the Term over the
then reasonable rental value of the Premises for the same period.
Landlord shall have the right and remedy to seek redress in the
courts at any time to correct or remedy any default of Tenant by
injunction or otherwise, without such resulting or being deemed a
termination of this Lease, and Landlord, whether this Lease has
been or is terminated or not, shall have the absolute right by
court action or otherwise to collect any and all amounts of
unpaid rent or unpaid additional rent or any other sums due from
Tenant to Landlord under this Lease which were or are unpaid at
the date of termination. In case it should be necessary for
Landlord to bring any action under this Lease, to consult or
place said lease or any amount payable by Tenant hereunder with
an attorney concerning or for the enforcement of any of
Landlord's rights hereunder then Tenant agrees in each and any
such case to pay to Landlord, Landlord's reasonable attorney's
fees.
24<PAGE>
27. WAIVER. The rights and remedies of Landlord under this
Lease, as well as those provided or accorded by law, shall be
cumulative, and none shall be exclusive of any other rights or
remedies hereunder or allowed by law. A waiver by Landlord of
any breach or breaches, default or defaults of Tenant hereunder
shall not be deemed or construed to be a continuing waiver of
such breach or default nor as a waiver of or permission,
expressed or implied, for any subsequent breach or default, and
it is agreed that the acceptance by Landlord of any installment
of rent subsequently to the date the same should have been paid
hereunder, shall in no manner alter or affect the covenant and
obligation of Tenant to pay subsequent installments of rent
promptly upon the due date thereof. No receipt of money by
Landlord after the termination of this Lease shall in any way
reinstate, continue or extend the term above demised.
28. TOXIC OR HAZARDOUS MATERIALS. Tenant shall not store,
use or dispose of any toxic or hazardous materials in, on or
about the Premises without the prior written consent of Landlord.
Tenant, at its sole cost, will comply with all laws relating to
Tenant's storage, use and disposal of hazardous or toxic
materials. Tenant shall be solely responsible for and will
defend, indemnify and hold Landlord, its agents and employees,
harmless from and against all claims, costs and liabilities,
including attorney's fees and costs, arising out of or in
connection with the removal, clean-up and restoration work and
materials necessary to return the Premises, and any other
property of whatever nature located on the Premises, to their
condition existing prior to the appearance of toxic or hazardous
materials on the Premises. Tenant's obligations under this
paragraph will survive the termination of this Lease.
29. REAL ESTATE COMMISSION. B. A. Karbank & Co.,LLC
the REALTOR(S) identified in the "Agency Disclosure(s)" attached
to and hereby incorporated into this Lease is(are) the only real
estate broker(s) involved in representing or procuring the
parties to this Lease.
Upon complete execution of this Lease by both Landlord and
Tenant. Landlord will pay the REALTOR(S) a leasing commission of
five percent
Pursuant to the agreement between Landlord and REALTOR(S).
Upon execution of any extensions or renewals of this Lease,
or expansions of the Premises, a commission of five percent
shall also be paid by Landlord to the above named
REALTOR(S) on all rentals to be received for any extensions or
renewals of the Term and on all increases in the amount of rent
due Landlord as a result of any enlargement of the Premises. If
the Premises are purchased by Tenant during the Term, Landlord
will pay such REALTOR(S) a sales commission of five percent
less credit for any unamortized portion of the leasing commission
already paid.
Any party to this Lease through whom a claim to any
broker's, finder's or other fee is made, contrary to the
representations made above in this paragraph, shall indemnify,
defend and hold harmless the other party to this Lease from any
other loss, liability, damage, cost or expense including without
limitation, reasonable attorney's fees, court costs and other
legal expenses paid or incurred by the other party, that is in
any way related to such a claim.
30. NOTICES. Any notice hereunder shall be sufficient if
sent by certified mail, addressed to Tenant at the Premises, and
to Landlord where rent is payable,
25<PAGE>
31. SUBORDINATION. In the event Landlord holds title to
said Premises by virtue of lease, then this sublease is and shall
remain subject to all of the terms and conditions of such
underlying lease so far as shall be applicable to the Premises.
This Lease shall also be subject and subordinate in law and
equity to any existing or future mortgage or deeds of trust
placed by Landlord upon the Premises or the property of which the
Premises form a part.
32. SUCCESSORS. The provisions, covenants and conditions
of this Lease shall bind and insure to the benefit of the legal
representatives, heirs, successors and assigns of each of the
parties hereto except that not assignment or subletting by Tenant
without the written consent of Landlord shall vest any rights in
the assignee or subtenant of Tenant.
33. QUIET POSSESSION. Landlord agrees, so long as Tenant
fully complies with all of the terms, covenants and conditions
herein contained on Tenant's part to be kept and performed Tenant
shall and may peaceably and quietly have, hold and enjoy the
Premises for the Term aforesaid. It being expressly understood
and agreed that the aforesaid covenant of quiet enjoyment shall
be binding upon Landlord, its heirs, successors or assigns, but
only during such party's ownership of the Premises. Landlord and
Tenant further covenant and represent that each has full right,
title, power and authority to make, execute and deliver this
Lease.
34. BANKRUPTCY. Neither this Lease nor any interest
therein nor any estate hereby created shall pass to any trustee
or receiver in bankruptcy or to any other receiver or assignee
for the benefit of creditors by operation of law or otherwise
during the Term of any renewal thereof.
35. ENTIRE AGREEMENT. This Lease contains the entire
agreement between the parties and no modification of Lease shall
be binding upon the parties unless evidence by an agreement in
writing signed by Landlord and Tenant after the date hereof. If
there be more than on Tenant named herein, the provisions of this
Lease shall be applicable to and binding upon such Tenants,
jointly and severally.
36. SUBORDINATION. Tenant shall attorn to any successor to
Landlord upon request and to execute any documents reasonably
required or appropriate to effectuate such an attornment or the
subordination aforesaid, upon written notice thereof, and Tenant
does hereby make, constitute and irrevocably appoint Landlord as
Tenant's attorney-in-fact and in Tenant's name, place and steed
to execute all such documents in accordance therewith.
37. ESTOPPEL CERTIFICATES. Tenant shall at any time upon
not less than ten (10) days prior written notice from Landlord
execute, acknowledge and deliver to Landlord or to any lender of
or purchaser from Landlord a statement in writing certifying that
this Lease is unmodified and in full force and effect (or if
modified stating the nature of such modification) and the data to
which the rent and other charges are paid in advance, if any, and
acknowledging that there are not, to Tenant's knowledge, any
uncured defaults on the part of Landlord or specifying such
defaults if any are claimed. Any such statement may be
conclusively relied upon by any prospective purchaser or
encumbrancer of the Premises or of the business of Landlord
SEE ATTACHED ADDENDUM FOR ADDITIONAL PROVISIONS
IN WITNESS WHEREOF, said parties hereunto subscribed their names.
Executed in four originals.
26<PAGE>
Landlord Tenant
William F. Bieber Global Ground Support, LLC
By: /s/ William F. Bieber By: /s/ William Dempsey
Date: 8/26/98 Date: 8/26/98
ADDENDUM TO COMMERCIAL AND INDUSTRIAL LEASE AGREEMENT
BETWEEN WILLIAM F. BIEBER (LANDLORD)
AND GLOBAL GROUND SUPPORT, LLC (TENANT) FOR 540 EAST 56
HIGHWAY, OLATHE, KANSAS
38. REAL ESTATE TAXES. Tenant shall pay to Landlord in
monthly installments all real estate taxes and installments of
special easements, if any, assessed and payable with respect to
the leased premises. The 1997 real estate taxes were $76,488.00
or approximately $6,374.00 per month. This figure shall be
adjusted annually to reflect any changes in the tax assessment.
39. BRIDGE CRANE. Tenant shall have use of the bridge
cranes and Tenant shall accept such bridge cranes and cable lifts
in their "as is" condition. Landlord shall have no obligation to
make repairs to the bridge cranes either at delivery of the
Premises or during the lease term. All maintenance and repair of
the bridge cranes shall be Tenant's responsibility and such
bridge cranes shall be returned to Landlord at the end of the
lease term in good condition as at the beginning of the lease
term, ordinary wear and tear excepted.
40. CONDITION OF PREMISES. Tenant is leasing the premises
in an "as is" condition, except Landlord shall insure at the
beginning of the lease term or as soon thereafter as reasonable
possible the following:
(a) Repair or replace malfunctioning light fixtures in the
plant area in accordance with Exhibit "B" attached hereto.
(b) Replace all carpet in east office area in a color and
shade mutually acceptable to Landlord and Tenant at a cost not to
exceed $13.00 per yard installed.
After the lighting repair work required herein is completed,
Tenant shall then maintain and repair the equipment as provided
under Paragraph 12 of this Lease.
41. OPTION TO EXTEND. Tenant is granted one option to
extend the lease term for a period of three (3) years. All terms
and provisions of the lease shall remain except the basic rent.
The basic monthly rent for the extended term shall be increased
by the same percentage change of the Consumer Price Index, All
Urban Consumers, U. S. City Average (1982-84=100) between the
index for August 1998 and August 2001. This option to extend
shall only be effective if Tenant has given Landlord written
notice on or before March 1, 2001 of its intention toe extend the
lease term. Notwithstanding the foregoing, in no event shall
monthly basic rental for the extended term be less than
$29,529.41.
27<PAGE>
ADDENDUM TO COMMERCIAL AND INDUSTRIAL LEASE AGREEMENT
BETWEEN
WILLIAM F. BIEBER (LANDLORD)
AND
GLOBAL GROUND SUPPORT, LLC (TENANT)
FOR
540 E. 56 HIGHWAY, OLATHE, KANSAS
PAGE 2
42. PURCHASE OPTION. Provided Tenant is not in default
hereunder, the Tenant is granted the option to purchase the
leased premises during the first two years of the leases term for
a price of $3,4000,000.00. To exercise the option, Landlord must
receive from Tenant or Guarantor an acceptable purchase contract
from the Tenant together with an earnest money deposit of
$100,000.00 on or before September 1, 2000.
43. EQUIPMENT MAINTENANCE. The provisions of paragraph 12
notwithstanding, Landlord agrees to replace the office HVAC
equipment if, in the opinion of a reputable HVAC contractor the
HVAC unit or units cannot be reasonably repaired and has been
maintained in a reasonable manner by Tenant. Once such
replacement of HVAC unit or units is completed, Tenant shall then
maintain, repair or replace the equipment in accordance with
paragraph 12 hereof.
44. AIR COMPRESSOR. Tenant shall have use of the air
compressor with related equipment and Tenant shall accept such
air compressor in "as is" condition. Landlord shall have no
obligation to make repairs to the air compressor and equipment
either at delivery of the Premises or during the Lease Term. All
maintenance and repair of the air compressor and equipment shall
be Tenant's responsibility and such air compressor and equipment
shall be returned to Landlord at the end of Lease Term in as good
condition as at the beginning of the Lease Term, ordinary wear
and tear excepted.
The present condition of Worthington 40 horsepower air compressor
at the beginning of lease term is as specified in letter of
August 31, 1998 from Kaeser Compressors, a copy of which has been
delivered and acknowledged by both parties.
28<PAGE>
Guaranty of Lease
This Guaranty made as of this 25th day of August, 1998, by
the undersigned Guarantor in favor of William F. Bieber.
Reference is made to the Commercial and Industrial Lease of even
date herewith (the "Lease") between William F. Bieber
("Landlord"), whose address is 2600 Niagara Lane North, Plymouth,
MN 55447-4718, and Global Ground Support, LLC ("Tenant"), of
certain premises identified as the one-story industrial building
at 540 E. 56 Highway, Olathe, Kansas and the adjoining parking
lot and grounds.
In consideration of the Landlord's execution of the Lease
and other valuable consideration paid, the receipt of which is
hereby acknowledged, the undersigned Guarantor hereby
unconditionally guarantees to Landlord, and its successors and
assigns the payment of the rents and other sums provided for in
the Lease and the performance of all conditions contained therein
on the part of the Tenant.
In witness whereof, the Guarantor has executed this Guaranty
as of the day and year first above written.
Guarantor: Air Transportation Holding Company, Inc.
By: /s/ Walter Clark
29<PAGE>
