Item 2.03
Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant
On January 31, 2018, Contrail Aviation Leasing, LLC
(“CAL”) and Contrail Aviation Support, LLC (“CAS”, together with CAL, the “Subsidiaries”), two subsidiaries of Air T, Inc. (the “Company”), executed a Business Loan Agreement (the “Loan Agreement”) with Old National Bank (“ONB”)
.
The Loan Agreement provides for borrowings by the Subsidiaries in an aggregate amount equal to $9,920,000.00 with a maturity date of January 26, 2021. Borrowings under the Loan Agreement will bear interest at a variable rate equal to the 1-month LIBOR plus 375 basis points. Pursuant to the Loan Agreement, the Subsidiaries are required to make aggregate quarterly payments equal to $250,000, plus an additional “excess cash flow payment” equal to seventy percent (70%) of the gross lease income of the Collateral (as defined below) minus $250,000.
The obligations of
the Subsidiaries under the Loan Agreement are secured by a first-priority security interest in all of the assets of CAL (the “Collateral”) and are also guaranteed by the Company; provided, however, that the total dollar amount of borrowings guaranteed by the Company under the Loan Agreement, together with borrowings guaranteed by the Company under that certain Business Loan Agreement between CAS and ONB dated May 5, 2017, as further described on the Company’s Current Report on Form 8-K filed on May 10, 2017 (together with the Loan Agreement, the “Loans”), is limited to a maximum of $1,600,000 plus interest on such amount at the applicable rates of interest the Loans, plus costs of collection.
The
Loan Agreement contains affirmative and negative covenants, including covenants that restrict the Subsidiaries’ ability to make acquisitions or investments, make certain changes to its capital structure, and engage in any business substantially different than it presently conducts.
The Loan Agreement contains Events of Default, as defined therein, including, without limitation, nonpayment of principal, interest or other obligations, violation of covenants, bankruptcy and other insolvency events, actual or asserted invalidity of loan documentation, death or incompetency of any guarantor or material adverse changes in Contrail
’s financial condition.
The foregoing summary of the terms of the Loan Agr
eement does not purport to be complete and is qualified in its entirety by reference to the Loan Agreement, which is filed as Exhibit 10.1 hereto and is incorporated by reference herein.