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, 1999
Commission File Number 0-11720
AIRT, 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.
2,764,653 Common Shares, par value of $.25 per share were outstanding as of
November 5, 1999.
This filing contains 35 pages.
The exhibit index is on page 19.
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<PAGE>
AIRT, INC. AND SUBSIDIARIES
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Earnings (Loss)
for the three and six-month periods ended
September 30, 1999 and 1998 (Unaudited) 3
Consolidated Balance Sheets at
September 30, 1999 (Unaudited)
and March 31, 1999 4
Consolidated Statements of Cash
Flows for the six-month periods
ended September 30, 1999 and 1998 (Unaudited) 5
Notes to Consolidated Financial
Statements (Unaudited) 6-7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 8-15
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 16-18
Exhibit Index 19
Exhibits 20-35
2 </page>
<PAGE>
<TABLE>
AIRT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) (UNAUDITED)
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Operating Revenues:
Cargo $ 4,613,910 $ 4,894,720 $ 8,970,977 $ 9,571,459
Maintenance 3,458,748 3,413,048 6,934,573 6,761,717
Ground equipment 3,923,913 3,333,572 4,654,533 6,693,595
Aircraft services and other 1,909,816 1,274,704 4,136,357 2,399,414
13,906,387 12,916,044 24,696,440 25,426,185
Operating Expenses:
Flight operations 3,508,802 3,507,872 6,561,119 6,739,720
Maintenance and brokering 5,013,094 4,241,617 10,174,343 8,205,083
Ground equipment 3,740,064 2,616,757 4,379,046 5,486,880
General and administrative 2,036,934 1,922,929 3,625,709 3,671,693
Depreciation and amortization 225,045 180,386 464,402 351,763
14,523,939 12,469,561 25,204,619 24,455,139
Operating Income (Loss) (617,552) 446,483 (508,179) 971,046
Non-operating Expense (Income):
Interest 173,073 73,990 302,331 124,686
Deferred retirement expense 6,505 6,249 12,754 12,498
Investment income (45,786) (59,877) (91,040) (103,422)
133,792 20,362 224,045 33,762
Earnings (Loss) Before
Income Taxes (751,344) 426,121 (732,224) 937,284
Income Taxes Expense (Benefit)
Provision (286,600) 186,988 (278,000) 391,453
Net Earnings (Loss) $ (464,744) $ 239,133 $ (454,224)$ 545,831
Net Earnings (Loss) Per Share:
Basic $ (0.17) $ 0.09 $ (0.16)$ 0.20
Diluted $ (0.17) $ 0.09 $ (0.16)$ 0.19
Average Shares Outstanding:
Basic 2,764,653 2,696,320 2,764,653 2,703,986
Diluted 2,764,653 2,793,565 2,764,653 2,802,220
<FN>
See notes to consolidated financial statements.
</TABLE>
3</page>
<PAGE>
<TABLE>
AIRT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
September 30, 1999 March 31,1999
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 124,939 $ 263,362
Marketable securities 1,675,576 2,086,259
Accounts receivable, net 6,635,241 7,008,987
Inventories 8,787,169 6,925,545
Deferred tax asset, net 424,980 424,980
Prepaid expenses and other 203,227 174,450
Total Current Assets 17,851,132 16,883,583
Property and Equipment 6,091,505 5,856,182
Less accumulated depreciation (3,406,765) (2,992,556)
2,684,740 2,863,626
Deferred Tax Asset 233,625 233,625
Intangible Pension Asset 546,119 498,119
Other Assets 505,258 372,691
Total Assets $ 21,820,874 $ 20,851,644
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable to bank $ 5,224,756 $ 3,893,502
Accounts payable 4,989,068 4,267,890
Accrued expenses 1,450,778 1,690,036
Current portion of long-term obligations 55,241 57,853
Total Current Liabilities 11,719,843 9,909,281
Capital Lease Obligation (less current
Portion) 23,374 23,920
Deferred Retirement Obligation (less current
Portion) 1,299,652 1,282,545
Stockholders' Equity:
Preferred stock, $1 par value, authorized
10,000,000 shares, none issued - -
Common stock, par value $.25; authorized
4,000,000 shares; 2,764,653 and
2,764,653 shares issued 690,491 690,491
Additional paid in capital 7,049,157 7,049,157
Accumulated other comprehensive loss (338,134) (154,745)
Retained earnings 1,376,493 2,050,995
8,778,006 9,635,898
Total Liabilities and Stockholders' Equity $ 21,820,874 $ 20,851,644
<FN>
See notes to consolidated financial statements.
</TABLE>
4</page>
<PAGE>
<TABLE>
AIRT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<CAPTION>
Six Months Ended
September 30,
1999 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) earnings $ (454,224) $ 545,831
Adjustments to reconcile net earnings (loss)
to net cash used in operations:
Depreciation and amortization 464,402 351,763
Change in retirement obligation 17,106 35,274
Change assets and liabilities:
Accounts receivable 373,746 128,549
Inventories (1,861,624) (1,058,137)
Prepaid expenses and other (209,344) 4,460
Accounts payable 721,178 (631,789)
Accrued expenses (242,416) 26,102
Income taxes payable - (762,961)
Total adjustments (736,952) (1,906,739)
Net cash used in
operating activities (1,191,176) (1,360,908)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (285,517) (385,584)
Purchase of marketable securities (100,000) -
Sale of marketable securities 327,294 458,614
Net cash (used in) provided by
investing activities (58,223) 73,030
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line of credit 1,331,254 2,099,743
Payment of cash dividend (220,278) (377,687)
Repurchase of common stock - (149,500)
Net cash provided by
financing activities 1,110,976 1,572,556
NET (DECREASE) INCREASE IN CASH
& CASH EQUIVALENTS (138,423) 284,678
CASH & CASH EQUIVALENTS AT BEGINNING
OF PERIOD 263,362 193,918
CASH & CASH EQUIVALENTS AT END OF PERIOD $ 124,939 $ 478,596
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITIES:
Unrealized loss on available-
for-sale securities $ 183,389 -
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 247,616 $ 115,796
Income/Franchise taxes 53,402 1,287,130
<FN>
See notes to consolidated financial statements.
</TABLE>
5</page>
<PAGE>
AIRT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
A. Financial Statements
The Consolidated Balance Sheet as of September 30, 1999, the
Consolidated Statements of Earnings (Loss)for the three and six-month
periods ended September 30, 1999 and 1998 and the Consolidated
Statements of Cash Flows for the six-month periods ended September 30,
1999 and 1998 have been prepared by AirT, Inc. (formerly Air
Transportation Holding Company, Inc.) (the Company) without audit. On
August 13, 1999, Air Transportation Holding Company, Inc. stockholder's
approved a name change to AIRT, Inc.; AIRT, Inc. common shares will
continue to be traded on NASDAQ under the symbol AIRT. 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, 1999, 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,
1999. 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, 1999 and March 31, 1999 consolidated
balance sheets.
The Company records a valuation allowance in order to reduce its
deferred tax asset to an amount which is more likely than not to be
realized. At September 30, 1999 and March 31, 1999, the Company had no
valuation allowance.
The income tax provisions for the six-months ended September 30,
1999 and 1998 differ from the federal statutory rate primarily as a
result of state income taxes and permanent timing differences.
C. Net Earnings (Loss) Per Share
Basic earnings (loss) per share has been calculated by dividing
net earnings (loss) 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 were
considered common share equivalents and were included in the weighted
average common shares. For the three and six-months ended September
30, 1999, shares issuable under employee stock options were excluded
from the diluted loss per share calculation due to an anti-dilutive
effect.
6</page>
<PAGE>
The computation of basic and diluted earnings (loss) per common share
is as follows:
Three Months Ended Six Months Ended
September 30, September 30,
1999 1998 1999 1998
Net earnings (loss) $(464,744)$ 239,133 $(454,224)$ 545,831
Weighted average common shares:
Shares outstanding - basic 2,764,653 2,696,320 2,764,653 2,703,986
Dilutive stock options - 97,245 - 98,234
Shares outstanding - diluted 2,764,653 2,793,565 2,764,653 2,802,220
Net earnings (loss) per common share:
Basic $ (0.17)$ 0.09 $ (0.16)$ 0.20
Diluted $ (0.17)$ 0.09 $ (0.16)$ 0.19
7</page>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Overview
On August 13, 1999, Air Transportation Holding Company, Inc.
stockholder's approved a name change to AIRT, Inc.; AIRT Inc. common
shares will continue to be traded on NASDAQ under the symbol AIRT.
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.
Separate agreements cover the four types of aircraft operated by
MAC and CSA-Cessna Caravan, Fokker F-27, Short Brothers SD3-60, and
Short Brothers SD3-30. Cessna Caravan, Fokker F-27 and Shorts SD3-60
aircraft (a total of 94 aircraft at March 31, 1999) are owned by and
dry-leased from a major air express company (Customer), and Short
Brothers SD3-30 aircraft (two aircraft at March 31, 1999) are owned by
the Company and periodically operated under wet-lease arrangements with
the Customer. Pursuant to such agreements, the Customer determines the
type of aircraft and schedule of routes to be flown by MAC and CSA,
with all other operational decisions made by the Company. Under the
terms of the dry-lease service agreements, 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, parts and certain other direct operating costs are
included in operating expenses and billed to the customer as cargo and
maintenance revenue, at cost.
Agreements are renewable annually and may be terminated by the
Customer at any time upon 15 to 30 days' notice. The Company believes
that the short term and other provisions of its agreements with the
Customer are standard within the air freight contract delivery service
industry. The Company is not contractually precluded from providing
such services to other firms, and has done so in the past. Loss of its
contracts with the Customer would have a material adverse effect on the
Company.
8</page>
<PAGE>
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
$4,072,000 and $2,210,000 to the Company's revenues for the six-month
periods ended September 30, 1999 and 1998, 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, operated as a subsidiary of MAS, contributed
approximately $4,655,000 and $6,694,000 for the six-month periods ended
September 30, 1999 and 1998, respectively.
In June 1999, Global was awarded a four-year, $25,000,000 contract
to supply deicing equipment to the United States Air Force. The
Company was subsequently made aware that a competing bidder had filed a
protest opposing the awarding of the contract to Global. In September
1999 the General Accounting Office finalized the denial of the protest
and upheld the awarding of the Air Force contract to Global.
As a result of the delays created by this protest, revenue
originally anticipated to commence during the quarter ending December
31, 1999, is currently projected to be delayed until the quarter ending
March 31, 2000. Additionally, the protest and its resulting delay
caused Global to incur substantial legal fees and additional overhead
costs per direct labor hour due to reallocation of fixed production
costs to other product lines during the six-month period ended
September 30, 1999.
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 plans to reduce Global's
seasonal fluctuation in revenues and earnings by broadening its product
line to increase revenues in the first and fourth fiscal quarters. The
remainder of the Company's business is not materially seasonal.
Results of Operations
Consolidated revenue decreased $730,000 (2.9%) to $24,696,000 and
increased $990,000 (7.7%) to $13,906,000, respectively, for the six and
three-month periods ended September 30, 1999 compared to their
equivalent 1998 periods. The six-month current period net decrease in
revenue primarily resulted from decreased sales by Global and MAC,
partially offset by increased revenue at MAS, while the three-month
increase in revenue primarily resulted from increases in Global's sales
and component repair services revenue at MAS, partially offset by
decreased MAC revenue.
9>/page>
<PAGE>
Results of Operations (Cont'd)
Operating expenses increased $749,000 (3.1%) to $25,205,000 for
the six-month period ended September 30, 1999 and $2,054,000 (16.5%) to
$14,524,000 for the three-month period ended September 30, 1999
compared to their equivalent 1998 periods. The change in operating
expenses for the six-month period consisted of the following: cost of
flight operations decreased $179,000 (2.7%), primarily as a result of
decreases in pilot and flight personnel and costs associated with pilot
travel offset by a $88,000 prior period worker's compensation insurance
adjustment ; maintenance and brokerage expense increased $1,969,000
(24.0%), primarily as a result of increases associated with personnel
and cost of parts and labor related to the expansion of MAS's repair
shop, and increased personnel cost and a $72,000 prior period worker's
compensation adjustment at MAC; ground equipment decreased $1,108,000
(20.2%), as a result of decreased Global sales partially offset by
higher than normal production costs associated with the introduction of
new products and the reallocation of unused plant capacity and legal
costs related to the Air Force contract protest and resulting delays;
depreciation and amortization increased $113,000 (32.0%)
as a result of increased depreciation related to the expansion of MAS
and Global; general and administrative expense decreased $46,000 (1.3%)
primarily as a result of decreased wages and benefits, advertising and
staff travel expense associated with changes at Global partially offset
by increased legal fees.
The change in operating expenses for the three-month period
consisted of the following: cost of flight operations increased a net
of $1,000, primarily as a result of the $88,000 prior period worker's
compensation premium adjustment offsetting decreased personnel and
travel cost; maintenance and brokerage expense increased $771,000
(18.2%), primarily as a result of increases associated with personnel
and cost of parts and labor related to the expansion of MAS's repair
shop and increased personnel cost and a $72,000 prior period worker's
compensation premium adjustment at MAC; ground equipment increased
$1,123,000 (42.9%), as a result of increased Global sales and higher
than normal production costs associated with the introduction of new
products and the reallocation of unused plant capacity and legal costs
related to the Air Force contract protest and resulting delays;
depreciation and amortization increased $45,000 (24.8%) as a result of
increased depreciation related to the expansion of MAS and Global;
general and administrative expense increased $114,000 (5.9%) primarily
as a result of increased legal fees associated with finalizing Global's
Air Force contract.
Non-operating expense increased $190,000 and $113,000,
respectively, for the six and three-month periods ended September 30,
1999 and September 30, 1998. The increases were principally due to
increased credit line interest.
10</page>
<PAGE>
Results of Operations (Cont'd)
Pretax earnings decreased $1,670,000 and $1,177,000, respectively,
for the six and three-month periods ended September 30, 1999, compared
to their respective September 30, 1998 periods. The six-month decrease
was principally due to a $1,216,000 increase in the loss at Global and
$686,000 decreased earnings at MAC, partially offset by an increase in
CSA and MAS earnings. Global's net loss increased $808,000 for the
three-month period ended September 30, 1999 compared to 1998 was
partially offset by increased profitability at MAS and CSA. The
substantial increase in Global's current period loss was primarily due
to lost revenue, reallocation of unused productive capacity and legal
cost associated with the protest and delay in finalizing the Air Force
contract, higher than normal production, engineering and design cost
associated with the introduction of new products and higher levels of
interest expense to fund its operations. MAC's decreased earnings are
primarily related to decreased wet lease cargo and maintenance revenue,
increased operating costs and costs related to prior period worker's
compensation premium adjustment.
The provision for income taxes decreased $669,000 and $474,000 for
the six and three-month periods ended September 30, 1999, respectively
compared to their respective 1998 periods due to decreased taxable
income.
Liquidity and Capital Resources
As of September 30, 1999 the Company's working capital amounted to
$6,131,000, a decrease of $843,000 compared to March 31, 1999.
In August 1999, the Company renewed its $7,000,000 unsecured line
of credit to August 2000. In October 1999, the Company temporarily
increased its unsecured line of credit to $7,500,000 for a ninety-day
period to end December 31, 1999. The line, which matures August 31,
2000, is expected to be renewed before its expiration date. Amounts
advanced under the line of credit bear interest at the 30-day "LIBOR"
rate 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, 1999 the Company was in a net borrowing
position against its credit line of $5,225,000. Management believes
that funds anticipated from operations and the continuation of existing
credit facilities will provide adequate cash flow to meet the Company's
future financial needs.
The respective six-month periods ended September 30, 1999 and 1998
resulted in the following changes in cash flow: operating activities
used $1,191,000 and $1,361,000, investing activities used $58,000 and
provided $73,000 and financing activities provided $1,111,000 and
$1,573,000. Net cash decreased $138,000 and increased $285,000 for the
respective six-month periods ended September 30, 1999 and 1998.
11</page>
<PAGE>
Liquidity and Capital Resources (Cont'd)
Cash used in operating activities was $170,000 less for the six-
months ended September 30, 1999 compared to the similar 1998 period,
principally due to decreased earnings, increases in accounts payable
and taxes payable partially offset by decreased earnings and increased
inventory.
Cash used in investing activities for the six-months ended
September 30, 1999 was approximately $131,000 more than the comparable
period in 1998, principally due to marketable securities transactions
and fewer capital expenditures in 1999.
Cash provided by financing activities for the six-months ended
September 30, 1999 was approximately $462,000 less than the comparable
1998 period, principally due to a decrease in borrowings under the line
of credit in 1999, partially offset by a decrease in cash dividend and
repurchase of common stock in 1999.
There are currently no commitments for significant capital
expenditures. The Company's Board of Directors, on August 7, 1998,
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 $0.08 per share cash dividend in June 1999.
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 $420,000 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.
12</page>
<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 compliance 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 has catalogued all IT
Systems utilized directly by the Company. The Company has revised,
and tested, certain customized IT Systems to enable such systems to
work properly following the year 2000 and has verified that recently
acquired IT Systems from third-party vendors are "year 2000 compliant".
Management utilized external resources to upgrade internal software
systems to become year 2000 compliant. Management believes that such
systems have been completely tested and are currently compliant.
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 has completed the testing and replacing of any
noncompliant devices. Under its agreements with its major customer the
cost of replacing such components in aircraft leased by the Company
from its customer was passed on to the customer.
Material Third Parties. The Company has made concerted efforts to
understand the year 2000 compliance readiness 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.
13</page>
<PAGE>
The Company has actively encouraged year 2000 compliance on the part of
third parties and has developed contingency plans in the event of their
year 2000 non-compliance. The Company has contacted, in writing and by
telephone, each "mission critical" vendor and supplier, requesting
completion of a questionnaire to assess such third party's year 2000
compliance. The Company's vendors and suppliers are under no
contractual obligation to provide such information to the Company.
Although the Company has received written or verbal assurances of
compliance, year 2000 issue disruptions experienced by "mission
critical" vendors could adversely affect the Company's operations.
The Company has met with its major air cargo customer on numerous
occasions, to discuss and co-ordinate year 2000 readiness and
contingency planning. 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 be 100% internal systems year 2000 compliant, including
operating subsidiaries, by September 1, 1999 and Non-IT system
compliant by November 1, 1999. However, such customer's 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.
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 detailed plans and the time
schedule for completion of its year 2000 compliance program, which the
Company has verified fits within the customer's 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.
Costs
The Company estimates the cost incurred to date for year 2000
compliance is approximately $120,000. No material future cost are
expected to be incurred. The foregoing costs do not include the
allocation of substantial internal employee time since the Company does
not track such internal costs.
14</page>
<PAGE>
Contingency Plans
The Company has developed contingency plans for year 2000 non-
compliance, including the pre-arranging of alternative operating
methods and locations, the stockpiling of critical inventory and
supplies and implementing back-up systems and procedures, including
manual systems to perform mission-critical functions while IT systems
can be brought back on line. Contingency plans also call for
alternative Company-wide communications systems and complete on site
staffing of key executive and management personnel during the
transition to January 1, 1999. 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 believes its
internal year 2000 compliance efforts and contingency planning have
reduced significantly the Company's level of uncertainty about the
impact of year 2000 issues affecting both its IT Systems and non-IT
Systems.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
The Company does not hold or issue derivative financial instruments for
trading or other purposes. The Company is exposed to changes in
interest rates on its line of credit, which bears interest based on the
30-day LIBOR rate plus 137 basis points. If the LIBOR interest rate
had been increased by one percentage point, based on the quarter-end
balance of the line of credit, annual interest expense would have
increased by approximately $49,000.
15</page>
<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 Bank of America, the Company and its
subsidiaries, dated August 31, 1999
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 following fiscal years ended March 31:*
Number of Shares
Executive Officer 1993 1992 1991
J. Hugh Bingham 30,000 30,000 40,000
John J. Gioffre 20,000 20,000 25,000
William H. Simpson 40,000 40,000 60,000
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
16</page>
<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 refer-
ence 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 for the quarter ended June 30, 1999.*
10.12 Commercial and Industrial Lease Agreement dated August 25, 1998
between William F. Bieber and Global Ground Support, LLC, incorporated
by reference to Exhibit 10.12 of the Company's Quarterly Report on 10Q
for the period ended September 30, 1998.
10.13 Amendment, dated February 1, 1999, to 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 of the Company's Quarterly Report on 10Q for the period ended
December 31, 1998.
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 first six months of the
fiscal year ending March 31, 2000.
17</page>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AIRT, INC.
(Registrant)
Date: November 9, 1999 /s/ Walter Clark
Walter Clark, Chief Executive Officer
Date: November 9, 1999 /s/ John Gioffre
John J. Gioffre, Chief Financial Officer
18</page>
<PAGE>
AIRT, INC.
EXHIBIT INDEX
EXHIBIT PAGE
10.2 Loan Agreement among Bank of America, the Company
and its subsidiaries, dated August 31, 1999. 20-35
19</page>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
"This schedule contains summary financial information extracted from AIRT,
Inc. SEC Form 10-Q for Quarter ended September 30, 1999 (identify specific
financial statements) and is qualified in its entirety by reference to
such financial statements."
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> SEP-30-1999
<CASH> 124939
<SECURITIES> 1675576
<RECEIVABLES> 6635241
<ALLOWANCES> 0
<INVENTORY> 8758523
<CURRENT-ASSETS> 17851132
<PP&E> 6091505
<DEPRECIATION> 3406765
<TOTAL-ASSETS> 21820874
<CURRENT-LIABILITIES> 11719843
<BONDS> 0
0
0
<COMMON> 690491
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 21820874
<SALES> 24696440
<TOTAL-REVENUES> 24696440
<CGS> 0
<TOTAL-COSTS> 25204619
<OTHER-EXPENSES> 224045
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (732224)
<INCOME-TAX> (278000)
<INCOME-CONTINUING> (454224)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (454224)
<EPS-BASIC> (0.17)
<EPS-DILUTED> (0.17)
</TABLE>
Bank of America, N.A.
LOAN AGREEMENT
This Loan Agreement (the "Agreement") dated as of August 31,
1999, by and between Bank of America, N.A. a national banking
association ("Bank") and the Borrower described below.
[This Agreement contains some provisions preceded by boxes. A
box which is not marked means that the provision beside it is not
applicable to this transaction.]
In consideration of the Loan or Loans described below and the
mutual covenants and agreements contained herein, and intending to be
legally bound hereby, Bank and Borrower agree as follows:
1. DEFINITIONS AND REFERENCE TERMS. In addition to any other
terms defined herein, the following terms shall have the meaning set
forth with respect thereto:
A. Borrower: Air T, Inc.
CSA Air, Inc
Mountain Air Cargo, Inc.
Mountain Aircraft Services, LLC
Global Ground Support, LLC
B. Borrower's Address:
3524 Airport Road, Maiden, North Carolina 28650
C. Current Assets. Current Assets means the aggregate
amount of all of Borrower's assets which would, in accordance with
GAAP, properly be defined as
current assets.
D. Current Liabilities. Current Liabilities means the
aggregate amount of all current liabilities as determined in
accordance with GAAP, but in any event shall include all
liabilities except those having a maturity date which is more than
one year from the date as of which such computation is being made.
20<PAGE>
E. Hazardous Materials. Hazardous Materials include all
materials defined as hazardous materials or substances under any
local, state or federal environmental laws, rules or regulations,
and petroleum, petroleum products, oil and asbestos.
F. Loan. Any loan described in Section 2 hereof and any
subsequent loan which states that it is subject to this Loan
Agreement.
G. Loan Documents. Loan Documents means this Loan
Agreement and any and all promissory notes executed by Borrower in
favor of Bank and all other documents, instruments, guarantees,
certificates and agreements executed and/or delivered by Borrower,
any guarantor or third party in connection with any Loan.
H. Tangible Net Worth. Tangible Net Worth means the
amount by which total assets exceed total liabilities in accordance
with GAAP.
I. Accounting Terms. All accounting terms not
specifically defined or specified herein shall have the meanings
generally attributed to such terms under generally accepted
accounting principles ("GAAP"), as in effect from time to time,
consistently applied, with respect to the financial statements
referenced in Section 3.H. hereof.
21<PAGE>
2. LOANS.
A. Loan. Bank hereby agrees to make (or has made) one
or more loans to Borrower in the aggregate principal face amount of
$7,000,000.00. The obligation to repay the loans is evidenced by a
promissory note or notes dated August 31, 1999, (the promissory note
or notes together with any and all renewals, extensions or
rearrangements thereof being hereafter collectively referred to as
the "Note") having a maturity date, repayment terms and interest rate
as set forth in the Note.
i . [X] Revolving Credit Feature. The Loan provides
for a revolving line of credit (the "Line") under which Borrower may
from time to time, borrow, repay and re-borrow funds.
ii. [] Clean-Up Period. Borrower shall maintain a
zero balance on the Line for a period of at least ____ consecutive
days during [] each fiscal year [] any consecutive twelve month
period.
iii. [] Borrowing Base. The Line is subject to the
Borrowing Base Agreement attached hereto as Exhibit "A" and by
reference made a part hereof.
iv. [] Usage Fee. Borrower will pay hereafter on
________________, 19_____ and on the ______ day of each
_________________ for the period from and including the date the
Line was established to and including the maturity date of the Line,
a usage fee at a rate per annum of _______% of the [] average daily
unused portion of the Line during such period [] average daily used
portion of the Line during such period [] committed amount of the
Line. The Borrower may at any time upon written notice to the Bank
permanently reduce the amount of the Line at which time the
obligation of the Borrower to pay a usage fee shall thereupon
correspondingly be reduced.
22<PAGE>
v. [X] Letter of Credit Subfeature. As a
subfeature under the Line, Bank may from time to time up to and
including August 31, 2000, issue letters of credit for the account of
Borrower (each, a "Letter of Credit" and collectively, "Letters of
Credit"); provided, however, that the form and substance of each
Letter of Credit shall be subject to approval by Bank in its sole
discretion; and provided further that the aggregate undrawn amount of
all outstanding Letters of Credit shall not at any time exceed
$4,000,000. Each Letter of Credit shall be issued for a term
designated by Borrower, provided, however, that no Letter of Credit
shall have an expiration date subsequent to August 31, 2000. The
undrawn amount of all Letters of Credit plus any and all amounts paid
by Bank in connection with drawings under any Letter of Credit for
which the Bank has not been reimbursed shall be reserved under the
Line and shall not be available for advances thereunder. Each draft
paid by Bank under a Letter of Credit shall be deemed an advance
under the Line and shall be repaid in accordance with the terms of
the Line; provided however, that if the Line is not available for any
reason whatsoever, at the time any draft is paid by Bank, or if
advances are not available under the Line in such amount due to any
limitation of borrowing set forth herein, then the full amount of
such drafts shall be immediately due and payable, together with
interest thereon, from the date such amount is paid by Bank to the
date such amount is fully repaid by Borrower, at that rate of
interest applicable to advances under the Line. In such event,
Borrower agrees that Bank, at Bank's sole discretion may debit
Borrower's deposit account with Bank for the amount of such draft.
3. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents
and warrants to Bank as follows:
A. Good Standing. Borrower is a corporation duly
organized, validly existing and in good standing under the laws of
Deleware and has the power and authority to own its property and to
carry on its business in each jurisdiction in which Borrower does
business.
B. Authority and Compliance. Borrower has full power and
authority to execute and deliver the Loan Documents and to incur and
perform the obligations provided for therein, all of which have been
duly authorized by all proper and necessary action of the appropriate
governing body of Borrower. No consent or approval of any public
authority or other third party is required as a condition to the
validity of any Loan Document, and Borrower is in compliance with all
laws and regulatory requirements to which it is subject.
23<PAGE>
C. Binding Agreement. This Agreement and the other Loan
Documents executed by Borrower constitute valid and legally binding
obligations of Borrower, enforceable in accordance with their terms.
D. Litigation. There is no proceeding involving Borrower
pending or, to the knowledge of Borrower, threatened before any court
or governmental authority, agency or arbitration authority, except as
disclosed to Bank in writing and acknowledged by Bank prior to the
date of this Agreement.
E. No Conflicting Agreements. There is no charter,
bylaw, stock provision, partnership agreement or other document
pertaining to the organization, power or authority of Borrower and no
provision of any existing agreement, mortgage, indenture or contract
binding on Borrower or affecting its property, which would conflict
with or in any way prevent the execution, delivery or carrying out of
the terms of this Agreement and the other Loan Documents.
F. Ownership of Assets. Borrower has good title to its
assets, and its assets are free and clear of liens, except those
granted to Bank and as disclosed to Bank in writing prior to the date
of this Agreement.
G. Taxes. All taxes and assessments due and payable by
Borrower have been paid or are being contested in good faith by
appropriate proceedings and the Borrower has filed all tax returns
which it is required to file.
H. Financial Statements. The financial statements of
Borrower heretofore delivered to Bank have been prepared in
accordance with GAAP applied on a consistent basis throughout the
period involved and fairly present Borrower's financial condition as
of the date or dates thereof, and there has been no material adverse
change in Borrower's financial condition or operations since June 30,
1997. All factual information furnished by Borrower to Bank in
connection with this Agreement and the other Loan Documents is and
will be accurate and complete on the date as of which such
information is delivered to Bank and is not and will not be
incomplete by the omission of any material fact necessary to make
such information not misleading.
24<PAGE>
I. Place of Business. Borrower's chief executive office
is located at
3524 Airport Road
Maiden, NC 28650
J. Environmental. The conduct of Borrower's business
operations and the condition of Borrower's property does not and will
not violate any federal laws, rules or ordinances for environmental
protection, regulations of the Environmental Protection Agency, any
applicable local or state law, rule, regulation or rule of common law
or any judicial interpretation thereof relating primarily to the
environment or Hazardous Materials.
K. Continuation of Representations and Warranties. All
representations and warranties made under this Agreement shall be
deemed to be made at and as of the date hereof and at and as of the
date of any advance under any Loan.
4. AFFIRMATIVE COVENANTS. Until full payment and performance
of all obligations of Borrower under the Loan Documents, Borrower
will, unless Bank consents otherwise in writing (and without limiting
any requirement of any other Loan Document):
A. Financial Condition. Maintain Borrower's
financial condition as follows, determined in accordance with
GAAP applied on a consistent basis throughout the period
involved except to the extent modified by the following
definitions:
I. Maintain at all times a ratio of debt to tangible
net worth of not greater than 1.0 to 1.0.
II. Maintain on a rolling 4 quarter basis a ratio of Funded Debt to
EBITDA of not greater than:
Quarter Ending Ratio
9/30/99 4.25 to 1.0
12/31/99 3.5 to 1.0
3/31/00 and thereafter 3.0 to 1.0
25<PAGE>
B. Financial Statements and Other Information. Maintain
a system of accounting satisfactory to Bank and in accordance with
GAAP applied on a consistent basis throughout the period involved,
permit Bank's officers or authorized representatives to visit and
inspect Borrower's books of account and other records at such
reasonable times and as often as Bank may desire, and pay the
reasonable fees and disbursements of any accountants or other agents
of Bank selected by Bank for the foregoing purposes. Unless written
notice of another location is given to Bank, Borrower's books and
records will be located at Borrower's chief executive office set
forth above. All financial statements called for below shall be
prepared in form and content acceptable to Bank and by independent
certified public accountants acceptable to Bank.
In addition, Borrower will:
i. Furnish to Bank annual audited financial statements and 10K
filings of Borrower for each fiscal year of Borrower, within
150 days after the close of each such fiscal year.
ii. Furnish to Bank certified copies of 10Q filings and related
financial statements including a balance sheet and income
statement for each quarter of each fiscal year within 60 days
after the close of each such period.
iii. Furnish to Bank a compliance certificate for (and executed
by an authorized representative of) Borrower concurrently with
and dated as of the date of delivery of each of the financial
statements as required in paragraphs i and ii above, containing
(a) a certification that the financial statements of even date
are true and correct and that the Borrower is not in default
under the terms of this Agreement, and (b) computations and
conclusions, in such detail as Bank may request, with respect to
compliance with this Agreement, and the other Loan Documents,
including computations of all quantitative covenants.
vii. Furnish to Bank promptly such additional information,
reports and statements respecting the business operations and
financial condition of Borrower from time to time, as Bank may
reasonably request.
26<PAGE>
C. Insurance. Maintain insurance with responsible
insurance companies on such of its properties, in such amounts and
against such risks as is customarily maintained by similar businesses
operating in the same vicinity, specifically to include fire and
extended coverage insurance covering all assets, business
interruption insurance, workers compensation insurance and liability
insurance, all to be with such companies and in such amounts as are
satisfactory to Bank and providing for at least 30 days prior notice
to Bank of any cancellation thereof. Satisfactory evidence of such
insurance will be supplied to Bank prior to funding under the Loan(s)
and 30 days prior to each policy renewal.
D. Existence and Compliance. Maintain its existence,
good standing and qualification to do business, where required and
comply with all laws, regulations and governmental requirements
including, without limitation, environmental laws applicable to it or
to any of its property, business operations and transactions.
E. Adverse Conditions or Events. Promptly advise Bank in
writing of (i) any condition, event or act which comes to its
attention that would or might materially adversely affect Borrower's
financial condition or operations or Bank's rights under the Loan
Documents, (ii) any litigation filed by or against Borrower, (iii)
any event that has occurred that would constitute an event of default
under any Loan Documents and (iv) any uninsured or partially
uninsured loss through fire, theft, liability or property damage in
excess of an aggregate of $500,000.
F. Taxes and Other Obligations. Pay all of its taxes,
assessments and other obligations, including, but not limited to
taxes, costs or other expenses arising out of this transaction, as
the same become due and payable, except to the extent the same are
being contested in good faith by appropriate proceedings in a
diligent manner.
G. Maintenance. Maintain all of its tangible property in
good condition and repair and make all necessary replacements
thereof, and preserve and maintain all licenses, trademarks,
privileges, permits, franchises, certificates and the like necessary
for the operation of its business.
27<PAGE>
H. Environmental. Immediately advise Bank in writing
of (i) any and all enforcement, cleanup, remedial, removal, or other
governmental or regulatory actions instituted, completed or
threatened pursuant to any applicable federal, state, or local laws,
ordinances or regulations relating to any Hazardous Materials
affecting Borrower's business operations; and (ii) all claims made or
threatened by any third party against Borrower relating to damages,
contribution, cost recovery, compensation, loss or injury resulting
from any Hazardous Materials. Borrower shall immediately notify Bank
of any remedial action taken by Borrower with respect to Borrower's
business operations. Borrower will not use or permit any other party
to use any Hazardous Materials at any of Borrower's places of
business or at any other property owned by Borrower except such
materials as are incidental to Borrower's normal course of business,
maintenance and repairs and which are handled in compliance with all
applicable environmental laws. Borrower agrees to permit Bank, its
agents, contractors and employees to enter and inspect any of
Borrower's places of business or any other property of Borrower at
any reasonable times upon three (3) days prior notice for the
purposes of conducting an environmental investigation and audit
(including taking physical samples) to insure that Borrower is
complying with this covenant and Borrower shall reimburse Bank on
demand for the costs of any such environmental investigation and
audit. Borrower shall provide Bank, its agents, contractors,
employees and representatives with access to and copies of any and
all data and documents relating to or dealing with any Hazardous
Materials used, generated, manufactured, stored or disposed of by
Borrower's business operations within five (5) days of the request
therefore.
5. NEGATIVE COVENANTS. Until full payment and performance of
all obligations of Borrower under the Loan Documents, Borrower will
not, without the prior written consent of Bank (and without limiting
any requirement of any other Loan Documents):
[] A. Capital Expenditures. Make capital expenditures
during each fiscal year (including capitalized leases) exceeding in
the aggregate the lesser of $__________.
[] B. Lease Expenditures. Incur new obligations for the
lease or hire of real or personal property requiring payments in any
fiscal year in excess of an aggregate of $__________.
[] C. Compensation. Pay by way of salary, bonus,
distribution, dividend, lease payment or otherwise, aggregate annual
compensation to ______________________, and
__________________________ in excess of:
$________________ during fiscal year 19_____
$________________ during fiscal year 19_____
$________________ during fiscal year 19_____
$________________ during fiscal year 19_____
D. Transfer of Assets or Control. Sell, lease, assign or
otherwise dispose of or transfer any assets, except in the normal
course of its business, or enter into any merger or consolidation, or
transfer control or ownership of the Borrower or form or acquire any
subsidiary.
E. Liens. Grant, suffer or permit any contractual or
noncontractual lien on or security interest in its assets, except in
favor of Bank, or fail to promptly pay when due all lawful claims,
whether for labor, materials or otherwise.
28<PAGE>
F. Extensions of Credit. Make or permit any subsidiary
to make, any loan or advance to any person or entity, or purchase or
otherwise acquire, or permit any subsidiary to purchase or otherwise
acquire, any capital stock, assets, obligations, or other securities
of, make any capital contribution to, or otherwise invest in or
acquire any interest in any entity, or participate as a partner or
joint venturer with any person or entity, except for the purchase of
direct obligations of the United States or any agency thereof with
maturities of less than one year.
G. Borrowings. Create, incur, assume or become liable in
any manner for any indebtedness (for borrowed money, deferred payment
for the purchase of assets, lease payments, as surety or guarantor
for the debt for another, or otherwise) other than to Bank, except
for normal trade debts incurred in the ordinary course of Borrower's
business, and except for existing indebtedness disclosed to Bank in
writing and acknowledged by Bank prior to the date of this Agreement.
[] H. Dividends and Distributions. Make any distribution
(other than dividends payable in capital stock of Borrower) on any
shares of any class of its capital stock or, if Borrower is a
partnership, make any distribution to any partner, or apply any of
its property or assets to the purchase, redemption or other
retirement of any shares of any class of capital stock of or any
partnership interest in Borrower exceeding in the aggregate []
$_______________ per fiscal year, [] _____% of net profit per fiscal
year, or in any way amend its capital structure.
I. Character of Business. Change the general character
of business as conducted at the date hereof, or engage in any type of
business not reasonably related to its business as presently
conducted.
[] J. Management Change. Make any substantial change in its
present executive or management personnel.
6. DEFAULT. Borrower shall be in default under this Agreement
and under each of the other Loan Documents if it shall default in the
payment of any amounts due and owing under the Loan or should it fail
to timely and properly observe, keep or perform any term, covenant,
agreement or condition in any Loan Document or in any other loan
agreement, promissory note, security agreement, deed of trust, deed
to secure debt, mortgage, assignment or other contract securing or
evidencing payment of any indebtedness of Borrower to Bank or any
affiliate or subsidiary of Bank of America Corporation.
7. REMEDIES UPON DEFAULT. If an event of default shall occur,
Bank shall have all rights, powers and remedies available under each
of the Loan Documents as well as all rights and remedies available at
law or in equity.
29<PAGE>
8. NOTICES. All notices, requests or demands which any party
is required or may desire to give to any other party under any
provision of this Agreement must be in writing delivered to the other
party at the following address:
Borrower:
Air T, Inc.
3524 Airport Road
Maiden, NC 28650
Bank:
Bank of America, NA
100 East Main Street
Lincolnton, NC 28092
or to such other address as any party may designate by written notice
to the other party. Each such notice, request and demand shall be
deemed given or made as follows:
A. If sent by mail, upon the earlier of the date of
receipt or five (5) days after deposit in the U.S. Mail, first class
postage prepaid;
B. If sent by any other means , upon delivery.
9. COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall pay to
Bank immediately upon demand the full amount of all costs and
expenses, including reasonable attorneys' fees (to include outside
counsel fees and all allocated costs of Bank's in-house counsel if
permitted by applicable law), incurred by Bank in connection with (a)
negotiation and preparation of this Agreement and each of the Loan
Documents, and (b) all other costs and attorneys' fees incurred by
Bank for which Borrower is obligated to reimburse Bank in accordance
with the Terms of the Loan Documents.
10. MISCELLANEOUS. Borrower and Bank further covenant and
agree as follows, without limiting any requirement of any other Loan
Document:
A. Cumulative Rights and No Waiver. Each and every right
granted to Bank under any Loan Document, or allowed it by law or
equity shall be cumulative of each other and may be exercised in
addition to any and all other rights of Bank, and no delay in
exercising any right shall operate as a waiver thereof, nor shall any
single or partial exercise by Bank of any right preclude any other or
future exercise thereof or the exercise of any other right. Borrower
expressly waives any presentment, demand, protest or other notice of
any kind, including but not limited to notice of intent to accelerate
and notice of acceleration. No notice to or demand on Borrower in
any case shall, of itself, entitle Borrower to any other or future
notice or demand in similar or other circumstances.
B. Applicable Law. This Loan Agreement and the rights
and obligations of the parties hereunder shall be governed by and
interpreted in accordance with the laws of D.C. and applicable United
States federal law.
30<PAGE>
C. Amendment. No modification, consent, amendment or
waiver of any provision of this Loan Agreement, nor consent to any
departure by Borrower therefrom, shall be effective unless the same
shall be in writing and signed by an officer of Bank, and then shall
be effective only in the specified instance and for the purpose for
which given. This Loan Agreement is binding upon Borrower, its
successors and assigns, and inures to the benefit of Bank, its
successors and assigns; however, no assignment or other transfer of
Borrower's rights or obligations hereunder shall be made or be
effective without Bank's prior written consent, nor shall it relieve
Borrower of any obligations hereunder. There is no third party
beneficiary of this Loan Agreement.
D. Documents. All documents, certificates and other
items required under this Loan Agreement to be executed and/or
delivered to Bank shall be in form and content satisfactory to Bank
and its counsel.
E. Partial Invalidity. The unenforceability or
invalidity of any provision of this Loan Agreement shall not affect
the enforceability or validity of any other provision herein and the
invalidity or unenforceability of any provision of any Loan Document
to any person or circumstance shall not affect the enforceability or
validity of such provision as it may apply to other persons or
circumstances.
F. Indemnification. Notwithstanding anything to the
contrary contained in Section 10(G), Borrower shall indemnify, defend
and hold Bank and its successors and assigns harmless from and
against any and all claims, demands, suits, losses, damages,
assessments, fines, penalties, costs or other expenses (including
reasonable attorneys' fees and court costs) arising from or in any
way related to any of the transactions contemplated hereby, including
but not limited to actual or threatened damage to the environment,
agency costs of investigation, personal injury or death, or property
damage, due to a release or alleged release of Hazardous Materials,
arising from Borrower's business operations, any other property owned
by Borrower or in the surface or ground water arising from Borrower's
business operations, or gaseous emissions arising from Borrower's
business operations or any other condition existing or arising from
Borrower's business operations resulting from the use or existence of
Hazardous Materials, whether such claim proves to be true or false.
Borrower further agrees that its indemnity obligations shall include,
but are not limited to, liability for damages resulting from the
personal injury or death of an employee of the Borrower, regardless
of whether the Borrower has paid the employee under the workmen' s
compensation laws of any state or other similar federal or state
legislation for the protection of employees. The term "property
damage" as used in this paragraph includes, but is not limited to,
damage to any real or personal property of the Borrower, the Bank,
and of any third parties. The Borrower's obligations under this
paragraph shall survive the repayment of the Loan and any deed in
lieu of foreclosure or foreclosure of any Deed to Secure Debt, Deed
of Trust, Security Agreement or Mortgage securing the Loan.
31<PAGE>
G. Survivability. All covenants, agreements,
representations and warranties made herein or in the other Loan
Documents shall survive the making of the Loan and shall continue in
full force and effect so long as the Loan is outstanding or the
obligation of the Bank to make any advances under the Line shall not
have expired.
[] H. Updated Appraisals and Maintenance of Collateral
Value. Bank may at its option obtain at Borrower's expense, once
every _____________ (or as otherwise requested by Bank) an appraisal
of any real property securing payment of the Loan (the "Real
Property") prepared in accordance with applicable bank regulatory
agency regulations and the written instructions from Bank by a third
party appraiser engaged directly by Bank. The costs of each such
appraisal shall be payable by Borrower to Bank on demand. If such
appraisal shows the market value of the Real Property has declined,
Borrower agrees that upon demand of Bank it will immediately either
pledge additional collateral in form and substance satisfactory to
Bank or make such payments as shall be necessary to reduce the
principal balance outstanding under the Loan, so that in either case
the principal amount outstanding under the Loan shall not exceed
______% of the market value of the Real Property and any additional
collateral.
11. ADDITIONAL PROVISIONS: [] The Borrower shall comply with
those additional provisions set forth on Exhibit "__" attached hereto
and by reference made a part hereof.
12. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE
PARTIES HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR
RELATING TO THIS, INSTRUMENT, AGREEMENT OR DOCUMENT OR ANY RELATED
INSTRUMENTS, AGREEMENTS OR DOCUMENTS, INCLUDING ANY CLAIM BASED ON
OR ARISING FROM AN ALLEGED TORT, SHALL BE DETERMINED BY BINDING
ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION ACT (OR IF NOT
APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND
PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF
J.A.M.S./ENDISPUTE OR ANY SUCCESSOR THEREOF ("J.A.M.S."), AND THE
"SPECIAL RULES" SET FORTH BELOW. IN THE EVENT OF ANY INCONSISTENCY,
THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON ANY ARBITRATION AWARD
MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY PARTY TO THIS
AGREEMENT MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED
PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO
WHICH THIS AGREEMENT APPLIES IN ANY COURT HAVING JURISDICTION OVER
SUCH ACTION.
A. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN
THE CITY OF THE BORROWER'S DOMICILE AT TIME OF THE EXECUTION OF THIS
INSTRUMENT, AGREEMENT OR DOCUMENT AND ADMINISTERED BY J.A.M.S. WHO
WILL APPOINT AN ARBITRATOR; IF J.A.M.S. IS UNABLE OR LEGALLY
PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN THE AMERICAN
ARBITRATION ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL BE
COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE
ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO
EXTEND THE COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60
DAYS.
B. RESERVATION OF RIGHTS. NOTHING IN THIS ARBITRATION
PROVISION SHALL BE DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY
OTHERWISE APPLICABLE STATUTES OF LIMITATION OR REPOSE AND ANY WAIVERS
CONTAINED IN THIS ARBITRATION PROVISION; OR (II) BE A WAIVER BY THE
BANK OF THE PROTECTION AFFORDED TO IT BY 12 U.S.C. SEC. 91 OR ANY
SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT OF THE
BANK HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT
LIMITED TO) SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL
PROPERTY COLLATERAL, OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR
ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF,
WRIT OF POSSESSION OR THE APPOINTMENT OF A RECEIVER. THE BANK MAY
EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH PROPERTY, OR
OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR AFTER
THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT. NEITHER THIS EXERCISE OF SELF
HELP REMEDIES NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR
FORECLOSURE OR PROVISIONAL OR ANCILLARY REMEDIES SHALL CONSTITUTE A
WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN ANY SUCH
ACTION, TO ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM
OCCASIONING RESORT TO SUCH REMEDIES.
32<PAGE>
13. NO ORAL AGREEMENT. THIS WRITTEN LOAN AGREEMENT AND THE
OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed under seal by their duly authorized
representatives as of the date first above written.
BORROWER: BANK:
Air T, Inc. Bank of America, NA
By: _____________________(Seal) By: _______________________ (Seal)
Name:______________________ Name: C. Gerome Chambers, Jr.
Title: _______________________ Title: Vice President
[Corporate Seal]
Attest:________________________ (Seal)
Name:____________________________
Title:_____________________________
BORROWER: BORROWER:
CSA Air, Inc. Mountain Air Cargo, Inc.
By: ______________________(Seal) By:___________________________ (Seal)
Name:______________________ Name: ____________________________
Title: _______________________ Title:_____________________________
[Corporate Seal] [Corporate Seal]
Attest:_____________________(Seal) Attest:________________________ (Seal)
Name:____________________________ Name:____________________________
Title:_____________________________ Title:_____________________________
BORROWER: BORROWER:
Mountain Aircraft Services, LLC Global Ground Support, LLC
By: _______________________(Seal) By:______________________________ (Seal)
Name:______________________ Name: ____________________________
Title:_______________________ Title:____________________________
[Corporate Seal] [Corporate Seal]
Attest:____________________ (Seal) Attest:________________________ (Seal)
Name:____________________________ Name:____________________________
Title:_____________________________ Title:_____________________________
33<PAGE>
INDEX
Accounting Terms, 1
Adverse Conditions or Events, 6
AFFIRMATIVE COVENANTS, 4
Amendment, 8
Applicable Law, 8
ARBITRATION, 9
Authority and Compliance., 2
Bank, 1
Binding Agreement, 3
Borrower, 1
Borrower's Address, 1
Borrowing Base, 2
Borrowings, 7
Capital Expenditures, 6
Cash flow coverage ratio, 4
Character of Business, 7
Clean-Up Period, 2
Compensation, 6
Compliance certificate, 5
Continuation of Representation and Warranties, 4
COSTS, EXPENSES AND ATTORNEY'S FEES, 8
Cumulative Rights and No Waiver, 8
Current Assets, 1
Current Liabilities, 1
DEFAULT, 7
Dividends and Distributions, 7
Documents, 8
Environmental Matters, 3
Existence and Compliance, 6
Extensions of Credit, 7
Financial Condition, 4
Financial Statements, 3
Financial Statements and Other Information, 5
34<PAGE>
GAAP, 1
Good Standing, 2
Hazardous Materials, 1
Indemnification, 8
Insurance, 5
Lease Expenditures., 6
Letter of Credit Subfeature, 2
Liens, 7
Litigation, 3
Loan, 1
Loan Documents., 1
Maintenance of property in good condition, 6
Maintenance of Collateral Value, 9
MISCELLANEOUS, 8
NEGATIVE COVENANTS, 6
Net working capital, 4
No Conflicting Agreements, 3
NOTICES, 7
Notification of Environmental Claims, 6
Ownership of Assets, 3
Partial Invalidity, 8
Place of Business, 3
Ratio of Current Assets to Current Liabilities, 4
Ratio of total liabilities to Tangible Net Worth, 4
REMEDIES UPON DEFAULT, 7
Revolving Credit Feature, 2
Survivability, 9
Tangible Net Worth, 1, 4
Taxes, 3
Taxes and Other Obligations, 6
Transfer of Assets or Control, 7
Updated Appraisals, 9
Usage Fee, 2
35<PAGE>
