Exhibit 10.13

 

LOGO [g611983g98b35.jpg]

PROMISSORY NOTE

 

Principal

$18,000,000.00

   Loan Date 09-14-2018   

Maturity

09-14-2021

   Loan No 20007675682   

Call / Coll

220 / 61

  

Account

0003626486

  

Officer

***

   Initials

References in the boxes above are for Lender’s use only and do not limit the
applicability of this document to any particular loan or item.

Any item above containing “***” has been omitted due to text length limitations.

 

    Borrower:    

   CONTRAIL AVIATION SUPPORT, LLC       Lender:    OLD NATIONAL BANK    CONTRAIL
AVIATION LEASING, LLC          619 Madison/Southern Wl Coml LPO    435
INVESTMENT CT          23 W Main St    VERONA, Wl 53593-8788          Madison,
Wl 53703

 

 

 

 

Principal Amount: $18,000,000.00

   Date of Note: September 14, 2018

PROMISE TO PAY. CONTRAIL AVIATION SUPPORT, LLC; and CONTRAIL AVIATION LEASING,
LLC (‘‘Borrower’’) jointly and severally promise to pay to OLD NATIONAL BANK
(“Lender”), or order, in lawful money of the United States of America, the
principal amount of Eighteen Million & 00/100 Dollars ($18,000,000.00), together
with interest on the unpaid principal balance from September 14, 2018, until
paid in full.

PAYMENT. Subject to any payment changes resulting from changes in the Index,
Borrower will pay this loan in accordance with the following payment schedule,
which calculates interest on the unpaid principal balances as described in the
“INTEREST CALCULATION METHOD” paragraph using the interest rates described in
this paragraph: 35 monthly consecutive interest payments, beginning October 14,
2018, with interest calculated on the unpaid principal balances using an
interest rate based on the Index described below, plus a margin of 3.750
percentage points; 35 monthly consecutive principal payments of $500,000.00
each, beginning October 14, 2018, during which interest continues to accrue on
the unpaid principal balances using an interest rate based on the Index
described below, plus a margin of 3.750 percentage points; and one principal and
interest payment on September 14, 2021, with interest calculated on the unpaid
principal balances using an interest rate based on the Index described below,
plus a margin of 3.750 percentage points. The final payment will be for all
principal and accrued interest not yet paid, together with any other unpaid
amounts under this Note. Notwithstanding the foregoing, the rate of interest
accrual described for the principal only payment stream applies only to the
extent that no other interest rate for any other payment stream applies. Unless
otherwise agreed or required by applicable law, payments will be applied first
to any accrued unpaid interest; then to principal; then to any escrow or reserve
account payments as required under any mortgage, deed of trust, or other
security instrument or security agreement securing this Note; then to any late
charges; and then to any unpaid collection costs. Borrower will pay Lender at
Lender’s address shown above or at such other place as Lender may designate in
writing.

PAYMENT ADJUSTMENT REQUEST. Borrower anticipates making significant principal
payments on the Note between July 2019 and November 2019 (the “Anticipated
Principal Reduction”). Upon receipt of the Anticipated Principal Reduction,
Borrower may request that Lender recalculate the remaining monthly payment
amounts based on the outstanding principal balance of the Note after applying
the Anticipated Principal Reduction, the current interest rate based on the
Index plus a margin of 3.750, and the remaining amortization. Notwithstanding
anything to the contrary contained herein, Borrower may only request one payment
re-calculation adjustment and such request may only be made after Lender has
received and applied the required Anticipated Principal Reduction to the Note.

VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an independent index which is the one month
London Interbank Offered Rate (LIBOR) as published in the Wall Street Journal
(the “Index”). The Index is not necessarily the lowest rate charged by Lender on
its loans. If the Index becomes unavailable during the term of this loan. Lender
may designate a substitute index after notifying Borrower. Lender will tell
Borrower the current Index rate upon Borrower’s request. The interest rate
change will not occur more often than each month. Borrower understands that
Lender may make Ioans based on other rates as well. The interest rate or rates
to be applied to the unpaid principal balance during this Note will be the rate
or rates set forth herein in the “Payment” section. Notwithstanding any other
provision of this Note, after the first payment stream, the interest rate for
each subsequent payment stream will be effective as of the due date of the last
payment in the just-ending payment stream. NOTICE: Under no circumstances will
the interest rate on this Note be more than the maximum rate allowed by
applicable law. Whenever increases occur in the interest rate, Lender, at its
option, may do one or more of the following: (A) increase Borrower’s payments to
ensure Borrower’s loan will pay off by its original final maturity date,
(B) increase Borrower’s payments to cover accruing interest, (C) increase the
number of Borrower’s payments, and (D) continue Borrower’s payments at the same
amount and increase Borrower’s final payment.

INTEREST CALCULATION METHOD. Interest on this Note is computed on a 365/360
basis; that is, by applying the ratio of the interest rate over a year of 360
days, multiplied by the outstanding principal balance, multiplied by the actual
number of days the principal balance is outstanding. All interest payable under
this Note is computed using this method. This calculation method results in a
higher effective interest rate than the numeric interest rates stated in this
Note.

PREPAYMENT; MINIMUM FINANCE CHARGE. Borrower agrees that all loan fees and other
prepaid finance charges are earned fully as of the date of the loan and will not
be subject to refund upon early payment (whether voluntary or as a result of
default), except as otherwise required by law. In any event, even upon full
prepayment of this Note. Borrower understands that Lender is entitled to a
minimum finance charge of $95.00. Other than Borrower’s obligation to pay any
minimum finance charge. Borrower may pay without penalty all or a portion of the
amount owed earlier than it is due. Early payments will not, unless agreed to by
Lender in writing, relieve Borrower of Borrower’s obligation to continue to make
payments under the payment schedule. Rather, early payments will reduce the
principal balance due and may result in Borrower’s making fewer payments.
Borrower agrees not to send Lender payments marked “paid in full”, “without
recourse”, or similar language. If Borrower sends such a payment. Lender may
accept it without losing any of Lender’s rights under this Note, and Borrower
will remain obligated to pay any further amount owed to Lender. All written
communications concerning disputed amounts, including any check or other payment
instrument that indicates that the payment constitutes “payment in full” of the
amount owed or that is tendered with other conditions or limitations or as full
satisfaction of a disputed amount must be mailed or delivered to: Old National
Bank, PO Box 3728 Evansville, IN 47736-3728.

LATE CHARGE. If a payment is not made on or before the 10th day after its due
date. Borrower will be charged 5.000% of the regularly scheduled payment.

INTEREST AFTER DEFAULT. Upon default, including failure to pay upon final
maturity, the interest rate on this Note shall be increased by adding an
additional 3.000 percentage point margin (“Default Rate Margin”). The Default
Rate Margin shall also apply to each succeeding interest rate change that would
have applied had there been no default. After maturity, or after this Note would
have matured had there been no default, the Default Rate Margin will continue to
apply to the final interest rate described in this Note. However, in no event
will the interest rate exceed the maximum interest rate limitations under
applicable law.

DEFAULT. Each of the following shall constitute an event of default (“Event of
Default”) under this Note:

Payment Default. Borrower fails to make any payment when due under this Note.

Other Defaults. Borrower fails to comply with or to perform any other term,
obligation, covenant or condition contained in this Note or in any of the
related documents or to comply with or to perform any term, obligation, covenant
or condition contained in any other agreement between Lender and Borrower.

Default in Favor of Third Parties. Borrower or any Grantor defaults under any
loan, extension of credit, security agreement, purchase or sales agreement, or
any other agreement, in favor of any other creditor or person that may
materially affect any of Borrower’s property or Borrower’s ability to repay this
Note or perform Borrower’s obligations under this Note or any of the related
documents.

False Statements. Any warranty, representation or statement made or furnished to
Lender by Borrower or on Borrower’s behalf under this Note or the related
documents is false or misleading in any material respect, either now or at the
time made or furnished or becomes false or misleading at any time thereafter.

Death or insolvency. The dissolution of Borrower (regardless of whether election
to continue is made), any member withdraws from Borrower, or any other
termination of Borrower’s existence as a going business or the death of any
member, the insolvency of Borrower, the appointment of a receiver for any part
of Borrower’s property, any assignment for the benefit of creditors, any type of
creditor workout, or the commencement of any proceeding under any bankruptcy or
insolvency laws by or against Borrower.

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        Loan No: 20007675682   

PROMISSORY NOTE

(Continued)

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Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any
other method, by any creditor of Borrower or by any governmental agency against
any collateral securing the loan. This includes a garnishment of any of
Borrower’s accounts, including deposit accounts, with Lender. However, this
Event of Default shall not apply if there is a good faith dispute by Borrower as
to the validity or reasonableness of the claim which is the basis of the
creditor or forfeiture proceeding and if Borrower gives Lender written notice of
the creditor or forfeiture proceeding and deposits with Lender monies or a
surety bond for the creditor or forfeiture proceeding, in an amount determined
by Lender, in its sole discretion, as being an adequate reserve or bond for the
dispute.

Events Affecting Guarantor. Any of the preceding events occurs with respect to
any Guarantor of any of the indebtedness or any Guarantor dies or becomes
incompetent, or revokes or disputes the validity of, or liability under, any
guaranty of the indebtedness evidenced by this Note.

Adverse Change. A material adverse change occurs in Borrower’s financial
condition, or Lender believes the prospect of payment or performance of this
Note is impaired.

Cure Provisions. If any default, other than a default in payment, is curable and
if Borrower has not been given a notice of a breach of the same provision of
this Note within the preceding twelve (12) months, it may be cured if Borrower,
after Lender sends written notice to Borrower demanding cure of such default:
(1) cures the default within fifteen (15) days; or (2) if the cure requires more
than fifteen (15) days, immediately initiates steps which Lender deems in
Lender’s sole discretion to be sufficient to cure the default and thereafter
continues and completes all reasonable and necessary steps sufficient to produce
compliance as soon as reasonably practical.

LENDER’S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance under this Note and all accrued unpaid interest immediately due, and
then Borrower will pay that amount.

ATTORNEYS’ FEES; EXPENSES. Lender may hire or pay someone else to help collect
this Note if Borrower does not pay. Borrower will pay Lender that amount. This
includes, subject to any limits under applicable law. Lender’s attorneys’ fees
and Lender’s legal expenses, whether or not there is a lawsuit, including
attorneys’ fees, expenses for bankruptcy proceedings (including efforts to
modify or vacate any automatic stay or injunction), and appeals. If not
prohibited by applicable law. Borrower also will pay any court costs, in
addition to all other sums provided by law.

JURY WAIVER. Lender and Borrower hereby waive the right to any jury trial in any
action, proceeding, or counterclaim brought by either Lender or Borrower against
the other.

GOVERNING LAW. This Note will be governed by federal law applicable to Lender
and, to the extent not preempted by federal law, the laws of the State of
Wisconsin without regard to its conflicts of law provisions. This Note has been
accepted by Lender in the State of Wisconsin.

CHOICE OF VENUE. If there is a lawsuit, Borrower agrees upon Lender’s request to
submit to the jurisdiction of the courts of Dane County, State of Wisconsin.

DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $20.00 if Borrower
makes a payment on Borrower’s loan and the check or preauthorized charge with
which Borrower pays is later dishonored.

RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Borrower’s accounts with Lender (whether checking,
savings, or some other account). This includes all accounts Borrower holds
jointly with someone else and all accounts Borrower may open in the future.
However, this does not include any IRA or Keogh accounts, or any trust accounts
for which setoff would be prohibited by law. Borrower authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
indebtedness against any and all such accounts, and, at Lender’s option, to
administratively freeze all such accounts to allow Lender to protect Lender’s
charge and setoff rights provided in this paragraph.

COLLATERAL. Borrower acknowledges this Note is secured by the collateral under
any and all existing and subsequent security documents, including mortgages,
security agreements and collateral assignments by any Borrower or Guarantor.

COLLATERAL INSPECTION/APPRAISAL COST REIMBURSEMENT. Upon such frequency as
Lender may determine and whether or not Borrower is in default. Lender shall be
entitled to perform and Borrower shall cooperate with examinations, inspections,
audits and appraisals as provided herein. Upon advance notice by Lender to
Borrower. Borrower shall permit access to its books and records by Lender and by
Lender’s designated representatives and agents for purposes of inspection,
copying and/or auditing. Lender and Lender’s designated representatives and
agents shall also have the right upon advance notice to examine, inspect and/or
appraise any collateral for this Note wherever located. Subject to any
limitations under applicable law. Borrower shall reimburse Lender for any
professional fees or other expenses incurred by Lender in connection with any
examinations, inspections or audits of the books and records of Borrower and/or
any examinations, inspections and/or appraisals of such collateral.

FINANCIAL RECORDS. In absence of a more specific agreement, requirement or
covenant with regard to the preparation and delivery of financial statements and
additional information which may be contained in a Business Loan Agreement
between Borrower and Lender. Borrower agrees to furnish Lender with, as soon as
available, but in no event later than ninety (90) days after the end of each
fiscal year of Borrower. Borrower’s balance sheet and income statement for the
year ended. Borrower further agrees to furnish Lender with, as soon as
available, but in no event later than thirty (30) days after direction to do so
from Lender, current interim financial statements, lists of assets and
liabilities, agings of receivables and payables, inventory schedules, budgets,
forecasts, tax returns, and other reports with respect to Borrower’s financial
condition and business operations. All financial reports required to be provided
by Borrower shall be prepared in accordance with generally accepted accounting
principles, applied on a consistent basis, and certified by an authorized
officer of Borrower as being true and correct. Borrower also agrees to cause all
guarantors of this Note to furnish financial statements and federal income tax
returns within thirty (30) days after direction to do so by the Lender. If the
required financial statements or financial information required by this Note or
any Business Loan Agreement between Borrower and Lender is not delivered to
Lender within fifteen days after the date required to do so, in addition to its
other rights and remedies hereunder. Lender shall be entitled to increase
Borrower’s interest rate on this Note 3.00 percentage points above the interest
rate which would otherwise apply until such time as all of the required
financial information is provided to the Lender.

CAPITALIZATION OF LATE CHARGES. Borrower understands and agrees that any late
charges imposed under this Note may be added by Lender to the principal amount
due under this loan and shall bear interest at the rate then applicable under
the terms of this Note.

SUCCESSOR INTERESTS. The terms of this Note shall be binding upon Borrower, and
upon Borrower’s heirs, personal representatives, successors and assigns, and
shall inure to the benefit of Lender and its successors and assigns.

GENERAL PROVISIONS. This Note benefits Lender and its successors and assigns,
and binds Borrower and Borrower’s heirs, successors, assigns, and
representatives. If any part of this Note cannot be enforced, this fact will not
affect the rest of the Note. Lender may delay or forgo enforcing any of its
rights or remedies under this Note without losing them. Each Borrower
understands and agrees that, with or without notice to Borrower. Lender may with
respect to any other Borrower (a) make one or more additional secured or
unsecured loans or otherwise extend additional credit; (b) alter, compromise,
renew, extend, accelerate, or otherwise change one or more times the time for
payment or other terms of any indebtedness, including increases and decreases of
the rate of interest on the indebtedness; (c) exchange, enforce, waive,
subordinate, fail or decide not to perfect, and release any security, with or
without the substitution of new collateral; (d) apply such security and direct
the order or manner of sale thereof, including without limitation, any
non-judicial sale permitted by the terms of the controlling security agreements,
as Lender in its discretion may determine; (e) release, substitute, agree not to
sue, or deal with any one or more of Borrower’s sureties, endorsers, or other
guarantors on any terms or in any manner Lender may choose; and (f) determine
how, when and what application of payments and credits shall be made on any
other indebtedness owing by such other Borrower. Borrower and any other person
who signs, guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, and notice of dishonor. Upon any change in the
terms of this Note, and unless otherwise expressly stated in writing, no party
who signs this Note, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability. All such parties agree that Lender
may renew or extend (repeatedly and for any length of time) this loan or release
any party or guarantor or collateral; or impair, fail to realize upon or perfect
Lender’s security interest in the collateral; and take any other action deemed
necessary by Lender without the consent of or notice to anyone. All such parties
also agree that Lender may modify this loan without the consent of or notice to
anyone other than the party with whom the modification is made. The obligations
under this Note are joint and several.

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       Loan No: 20007675682   

PROMISSORY NOTE

(Continued)

   Page 3    

 

 

 

 

PRIOR TO SIGNING THIS NOTE, EACH BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS
OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. EACH BORROWER
AGREES TO THE TERMS OF THE NOTE.

BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.

BORROWER:

CONTRAIL AVIATION SUPPORT, LLC

 

          By:

 

/s/ JOSEPH KUHN

  JOSEPH KUHN, CEO of CONTRAIL AVIATION SUPPORT, LLC

CONTRAIL AVIATION LEASING, LLC

CONTRAIL AVIATION SUPPORT, LLC, SOLE MEMBER AND MANAGER of CONTRAIL AVIATION
LEASING, LLC

 

          By:

 

/s/ JOSEPH KUHN

  JOSEPH KUHN, CEO of CONTRAIL AVIATION SUPPORT, LLC

 

LOGO [g611983g81t70.jpg]

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LOGO [g611983g33q27.jpg]

BUSINESS LOAN AGREEMENT

 

Principal

$18,000,000.00

   Loan Date 09-14-2018   

Maturity

09-14-2021

   Loan No 20007675682   

Call / Coll

220 / 61

  

Account

0003626486

  

Officer

***

   Initials

References in the boxes above are for Lender’s use only and do not limit the
applicability of this document to any particular loan or item.

Any item above containing “ * * * ” has been omitted due to text length
limitations.

 

    Borrower:    

   CONTRAIL AVIATION SUPPORT, LLC       Lender:    OLD NATIONAL BANK    CONTRAIL
AVIATION LEASING, LLC          619 Madison/Southern Wl Coml LPO    435
INVESTMENT CT          23 W Main St    VERONA, Wl 53593-8788          Madison,
Wl 53703

 

 

 

THIS BUSINESS LOAN AGREEMENT dated September 14, 2018, is made and executed
between CONTRAIL AVIATION SUPPORT, LLC; and CONTRAIL AVIATION LEASING, LLC
(“Borrower”) and OLD NATIONAL BANK (“Lender”) on the following terms and
conditions. Borrower has received prior commercial loans from Lender or has
applied to Lender for a commercial loan or loans or other financial
accommodations, including those which may be described on any exhibit or
schedule attached to this Agreement. Borrower understands and agrees that:
(A) in granting, renewing, or extending any Loan, Lender is relying upon
Borrower’s representations, warranties, and agreements as set forth in this
Agreement; (B) the granting, renewing, or extending of any Loan by Lender at all
times shall be subject to Lender’s sole judgment and discretion; and (C) all
such Loans shall be and remain subject to the terms and conditions of this
Agreement.

TERM. This Agreement shall be effective as of September 14, 2018, and shall
continue in full force and effect until such time as all of Borrower’s Loans in
favor of Lender have been paid in full, including principal, interest, costs,
expenses, attorneys’ fees, and other fees and charges, or until such time as the
parties may agree in writing to terminate this Agreement.

CONDITIONS PRECEDENT TO EACH ADVANCE. Lender’s obligation to make the initial
Advance and each subsequent Advance under this Agreement shall be subject to the
fulfillment to Lender’s satisfaction of all of the conditions set forth in this
Agreement and in the Related Documents.

Loan Documents. Borrower shall provide to Lender the following documents for the
Loan: (1) the Note; (2) Security Agreements granting to Lender security
interests in the Collateral; (3) financing statements and all other documents
perfecting Lender’s Security Interests; (4) evidence of insurance as required
below; (5) guaranties; (6) together with all such Related Documents as Lender
may require for the Loan; all in form and substance satisfactory to Lender and
Lender’s counsel.

Borrower’s Authorization. Borrower shall have provided in form and substance
satisfactory to Lender properly certified resolutions, duly authorizing the
execution and delivery of this Agreement, the Note and the Related Documents. In
addition, Borrower shall have provided such other resolutions, authorizations,
documents and instruments as Lender or its counsel, may require.

Payment of Fees and Expenses. Borrower shall have paid to Lender all fees,
charges, and other expenses which are then due and payable as specified in this
Agreement or any Related Document.

Representations and Warranties. The representations and warranties set forth in
this Agreement, in the Related Documents, and in any document or certificate
delivered to Lender under this Agreement are true and correct.

No Event of Default. There shall not exist at the time of any Advance a
condition which would constitute an Event of Default under this Agreement or
under any Related Document.

MULTIPLE BORROWERS. This Agreement has been executed by multiple obligors who
are referred to in this Agreement individually, collectively and interchangeably
as “Borrower.” Unless specifically stated to the contrary, the word “Borrower”
as used in this Agreement, including without limitation all representations,
warranties and covenants, shall include all Borrowers. Borrower understands and
agrees that, with or without notice to any one Borrower, Lender may (A) make one
or more additional secured or unsecured loans or otherwise extend additional
credit with respect to any other Borrower; (B) with respect to any other
Borrower alter, compromise, renew, extend, accelerate, or otherwise change one
or more times the time for payment or other terms of any indebtedness, including
increases and decreases of the rate of interest on the indebtedness;
(C) exchange, enforce, waive, subordinate, fail or decide not to perfect, and
release any security, with or without the substitution of new collateral;
(D) release, substitute, agree not to sue, or deal with any one or more of
Borrower’s or any other Borrower’s sureties, endorsers, or other guarantors on
any terms or in any manner Lender may choose; (E) determine how, when and what
application of payments and credits shall be made on any indebtedness; (F) apply
such security and direct the order or manner of sale of any Collateral,
including without limitation, any non-judicial sale permitted by the terms of
the controlling security agreement or deed of trust, as Lender in its discretion
may determine; (G) sell, transfer, assign or grant participations in all or any
part of the Loan; (H) exercise or refrain from exercising any rights against
Borrower or others, or otherwise act or refrain from acting; (I) settle or
compromise any indebtedness; and (J) subordinate the payment of all or any part
of any of Borrower’s indebtedness to Lender to the payment of any liabilities
which may be due Lender or others.

REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date of each disbursement of loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any Indebtedness exists:

Organization. CONTRAIL AVIATION SUPPORT, LLC is a limited liability company
which is, and at all times shall be, duly organized, validly existing, and in
good standing under and by virtue of the laws of the State of North Carolina.
CONTRAIL AVIATION SUPPORT, LLC is duly authorized to transact business in the
State of Wisconsin and all other states in which CONTRAIL AVIATION SUPPORT, LLC
is doing business, having obtained all necessary filings, governmental licenses
and approvals for each state in which CONTRAIL AVIATION SUPPORT, LLC is doing
business. Specifically, CONTRAIL AVIATION SUPPORT, LLC is, and at all times
shall be, duly qualified as a foreign limited liability company in all states in
which the failure to so qualify would have a material adverse effect on its
business or financial condition. CONTRAIL AVIATION SUPPORT, LLC has the full
power and authority to own its properties and to transact the business in which
it is presently engaged or presently proposes to engage. CONTRAIL AVIATION
SUPPORT, LLC maintains an office at 435 INVESTMENT CT, VERONA, WI 53593-8788.
Unless CONTRAIL AVIATION SUPPORT, LLC has designated otherwise in writing, the
principal office is the office at which CONTRAIL AVIATION SUPPORT, LLC keeps its
books and records including its records concerning the Collateral. CONTRAIL
AVIATION SUPPORT, LLC will notify Lender prior to any change in the location of
CONTRAIL AVIATION SUPPORT, LLC’s state of organization or any change in CONTRAIL
AVIATION SUPPORT, LLC’s name. CONTRAIL AVIATION SUPPORT, LLC shall do all things
necessary to preserve and to keep in full force and effect its existence, rights
and privileges, and shall comply with all regulations, rules, ordinances,
statutes, orders and decrees of any governmental or quasi-governmental authority
or court applicable to CONTRAIL AVIATION SUPPORT, LLC and CONTRAIL AVIATION
SUPPORT, LLC’s business activities.

CONTRAIL AVIATION LEASING, LLC is a limited liability company which is, and at
all times shall be, duly organized, validly existing, and in good standing under
and by virtue of the laws of the State of Wisconsin. CONTRAIL AVIATION LEASING,
LLC is duly authorized to transact business in all other states in which
CONTRAIL AVIATION LEASING, LLC is doing business, having obtained all necessary
filings, governmental licenses and approvals for each state in which CONTRAIL
AVIATION LEASING, LLC is doing business. Specifically, CONTRAIL AVIATION
LEASING, LLC is, and at all times shall be, duly qualified as a foreign limited
liability company in all states in which the failure to so qualify would have a
material adverse effect on its business or financial condition. CONTRAIL
AVIATION LEASING, LLC has the full power and authority to own its properties and
to transact the business in which it is presently engaged or presently proposes
to engage. CONTRAIL AVIATION LEASING, LLC maintains an office at 435 INVESTMENT
CT, VERONA, WI 53593-8788. Unless CONTRAIL AVIATION LEASING, LLC has designated
otherwise in writing, the principal office is the office at which CONTRAIL
AVIATION LEASING, LLC keeps its books and records including its records
concerning the Collateral. CONTRAIL AVIATION LEASING, LLC will notify Lender
prior to any change in the location of CONTRAIL AVIATION LEASING, LLC’s state of
organization or any change in CONTRAIL AVIATION LEASING, LLC’s name. CONTRAIL
AVIATION LEASING, LLC shall do all things necessary to preserve and to keep in
full force and effect its existence, rights and privileges, and shall comply
with all regulations, rules, ordinances, statutes, orders and decrees of any
governmental or quasi-governmental authority or court applicable to CONTRAIL
AVIATION LEASING, LLC and CONTRAIL AVIATION LEASING, LLC’s business activities.

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        Loan No: 20007675682   

BUSINESS LOAN AGREEMENT

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Assumed Business Names. Borrower has filed or recorded all documents or filings
required by law relating to all assumed business names used by Borrower.
Excluding the name of Borrower, the following is a complete list of all assumed
business names under which Borrower does business: None.

Authorization. Borrower’s execution, delivery, and performance of this Agreement
and all the Related Documents have been duly authorized by all necessary action
by Borrower and do not conflict with, result in a violation of, or constitute a
default under (1) any provision of (a) Borrower’s articles of organization or
membership agreements, or (b) any agreement or other instrument binding upon
Borrower or (2) any law, governmental regulation, court decree, or order
applicable to Borrower or to Borrower’s properties.

Financial Information. Each of Borrower’s financial statements supplied to
Lender truly and completely disclosed Borrower’s financial condition as of the
date of the statement, and there has been no material adverse change in
Borrower’s financial condition subsequent to the date of the most recent
financial statement supplied to Lender. Borrower has no material contingent
obligations except as disclosed in such financial statements.

Legal Effect. This Agreement constitutes, and any instrument or agreement
Borrower is required to give under this Agreement when delivered will constitute
legal, valid, and binding obligations of Borrower enforceable against Borrower
in accordance with their respective terms.

Properties. Except as contemplated by this Agreement or as previously disclosed
in Borrower’s financial statements or in writing to Lender and as accepted by
Lender, and except for property tax liens for taxes not presently due and
payable, Borrower owns and has good title to all of Borrower’s properties free
and clear of all Security Interests, and has not executed any security documents
or financing statements relating to such properties. All of Borrower’s
properties are titled in Borrower’s legal name, and Borrower has not used or
filed a financing statement under any other name for at least the last five
(5) years.

Hazardous Substances. Except as disclosed to and acknowledged by Lender in
writing, Borrower represents and warrants that: (1) During the period of
Borrower’s ownership of the Collateral, there has been no use, generation,
manufacture, storage, treatment, disposal, release or threatened release of any
Hazardous Substance by any person on, under, about or from any of the
Collateral. (2) Borrower has no knowledge of, or reason to believe that there
has been (a) any breach or violation of any Environmental Laws; (b) any use,
generation, manufacture, storage, treatment, disposal, release or threatened
release of any Hazardous Substance on, under, about or from the Collateral by
any prior owners or occupants of any of the Collateral; or (c) any actual or
threatened litigation or claims of any kind by any person relating to such
matters. (3) Neither Borrower nor any tenant, contractor, agent or other
authorized user of any of the Collateral shall use, generate, manufacture,
store, treat, dispose of or release any Hazardous Substance on, under, about or
from any of the Collateral; and any such activity shall be conducted in
compliance with all applicable federal, state, and local laws, regulations, and
ordinances, including without limitation all Environmental Laws. Borrower
authorizes Lender and its agents to enter upon the Collateral to make such
inspections and tests as Lender may deem appropriate to determine compliance of
the Collateral with this section of the Agreement. Any inspections or tests made
by Lender shall be at Borrower’s expense and for Lender’s purposes only and
shall not be construed to create any responsibility or liability on the part of
Lender to Borrower or to any other person. The representations and warranties
contained herein are based on Borrower’s due diligence in investigating the
Collateral for hazardous waste and Hazardous Substances. Borrower hereby
(1) releases and waives any future claims against Lender for indemnity or
contribution in the event Borrower becomes liable for cleanup or other costs
under any such laws, and (2) agrees to indemnify, defend, and hold harmless
Lender against any and all claims, losses, liabilities, damages, penalties, and
expenses which Lender may directly or indirectly sustain or suffer resulting
from a breach of this section of the Agreement or as a consequence of any use,
generation, manufacture, storage, disposal, release or threatened release of a
hazardous waste or substance on the Collateral. The provisions of this section
of the Agreement, including the obligation to indemnify and defend, shall
survive the payment of the Indebtedness and the termination, expiration or
satisfaction of this Agreement and shall not be affected by Lender’s acquisition
of any interest in any of the Collateral, whether by foreclosure or otherwise.

Litigation and Claims. No litigation, claim, investigation, administrative
proceeding or similar action (including those for unpaid taxes) against Borrower
is pending or threatened, and no other event has occurred which may materially
adversely affect Borrower’s financial condition or properties, other than
litigation, claims, or other events, if any, that have been disclosed to and
acknowledged by Lender in writing.

Taxes. To the best of Borrower’s knowledge, all of Borrower’s tax returns and
reports that are or were required to be filed, have been filed, and all taxes,
assessments and other governmental charges have been paid in full, except those
presently being or to be contested by Borrower in good faith in the ordinary
course of business and for which adequate reserves have been provided.

Lien Priority. Unless otherwise previously disclosed to Lender in writing.
Borrower has not entered into or granted any Security Agreements, or permitted
the filing or attachment of any Security Interests on or affecting any of the
Collateral directly or indirectly securing repayment of Borrower’s Loan and
Note, that would be prior or that may in any way be superior to Lender’s
Security Interests and rights in and to such Collateral.

Binding Effect. This Agreement, the Note, all Security Agreements (if any), and
all Related Documents are binding upon the signers thereof, as well as upon
their successors, representatives and assigns, and are legally enforceable in
accordance with their respective terms.

AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, so long
as this Agreement remains in effect, Borrower will:

Notices of Claims and Litigation. Promptly inform Lender in writing of (1) all
material adverse changes in Borrower’s financial condition, and (2) all existing
and all threatened litigation, claims, investigations, administrative
proceedings or similar actions affecting Borrower or any Guarantor which could
materially affect the financial condition of Borrower or the financial condition
of any Guarantor.

Financial Records. Maintain its books and records in accordance with GAAP,
applied on a consistent basis, and permit Lender to examine and audit Borrower’s
books and records at all reasonable times.

Financial Statements. Furnish Lender with the following:

Additional Requirements. Applies to CONTRAIL AVIATION SUPPORT LLC and CONTRAIL
AVIATION LEASING LLC: As soon as available, but in any event not later than 120
days after the end of each fiscal year of the Borrower, Borrower’s audited
balance sheet and audited statements of income, accumulated earnings, and cash
flows for such year, setting forth in each case in comparative form the figures
for the previous year, prepared by an independent certified public accountant
satisfactory to Lender. In addition, as soon as available, but in any event not
later than 45 days after the end of each fiscal quarter, Borrower’s balance
sheet and statements of income, accumulated earnings, and cash flows for the
respective fiscal quarter and year-to-date periods, all prepared in accordance
with GAAP, setting forth in each case in comparative form the figures for the
previous year’s respective fiscal quarter and year-to-date periods and certified
by an officer of Borrower as being true and correct. Lender, in its sole
discretion, reserves the ability to change the required times and frequencies of
submissions of financial statements by Borrower. In addition to any other
financial reporting requirements of Borrower to Lender, Borrower agrees to
furnish to Lender, at times and frequencies determined appropriate by Lender in
its sole discretion from time to time, Federal and State income tax returns,
borrowing base certificates, agings of receivables and payables, inventory
schedules, budgets, forecasts, and other reports with respect to Borrower’s
financial condition and business operations.

All financial reports required to be provided under this Agreement shall be
prepared in accordance with GAAP, applied on a consistent basis, and certified
by Borrower as being true and correct.

Additional Information. Furnish such additional information and statements, as
Lender may request from time to time.

Financial Covenants and Ratios. Comply with the following covenants and ratios:

Additional Requirements. Applies to CONTRAIL AVIATION SUPPORT LLC and CONTRAIL
AVIATION LEASING LLC: Maintain with Lender all of Borrower’s depository
accounts.

Applies to CONTRAIL AVIATION SUPPORT LLC and CONTRAIL AVIATION LEASING LLC:
Distributions and/or dividends of any kind are not permitted without prior
Lender review and approval, with the exception of distributions for tax
liability will be permitted.

Applies to CONTRAIL AVIATION SUPPORT LLC and CONTRAIL AVIATION LEASING LLC:
Maintain a Quarterly Rolling Cash Flow Coverage Ratio of not less than 1.25 to
1.0. The term Quarterly Rolling Cash Flow Coverage Ratio means a ratio, the
numerator of which is the Borrower Net Income After Tax in accordance with GAAP,
but excluding extraordinary gains and losses and nonrecurring income as
determined by the Lender in its sole discretion, less dividends or withdrawals
from capital to members, plus the aggregate amounts deducted in determining Net
Income After Tax in respect of interest, depreciation, depletion, and
amortization expense, in each case determined in accordance with GAAP, plus
Capital Contributions and any increase in Subordinated Debt, all for the then
most recently ended period of four (4) consecutive fiscal quarters, and the
denominator of which is Borrower Debt Service for the corresponding period.
Capital Contribution means cash acquired from an owner, partner, member or
shareholder, the GAAP

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BUSINESS LOAN AGREEMENT

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accounting effect of which is to increase the equity capital. Subordinated Debt
means any liabilities for borrowed money which have been subordinated in right
of payment and priority to the Loan, all on terms and conditions satisfactory to
Lender. Debt Service means with respect to any period, the sum of all due and
owing payments of principal on liabilities for borrowed money and interest
expense determined in accordance with GAAP for such period. This ratio should be
maintained at all times and may be evaluated at any time.

Applies to CONTRAIL AVIATION SUPPORT LLC and CONTRAIL AVIATION LEASING LLC: It
is an event of default if Joe Kuhn and Miriam Cohen-Kuhn cease to oversee the
day to day operations of the business. Annual inventory and fixed asset
appraisal required to be completed by a third- party acceptable to Lender.

Applies to CONTRAIL AVIATION SUPPORT LLC and CONTRAIL AVIATION LEASING LLC:
Maintain a Tangible Net Worth of at least $8,500,000.00. The term Tangible Net
Worth means Borrower total assets excluding all intangible assets (i.e.
goodwill, trademarks, patents, copyrights, organizational expenses, investments
in subsidiaries, investments in affiliates, Obligations Due from Related Parties
and similar intangible items as classified by Lender in its sole discretion)
less total liabilities excluding any amounts owing to Joe Kuhn pursuant to the
GAAP treatment of the earn out provision in the asset purchase agreement of
Control Aviation Support, Inc. This minimum level of Tangible Net Worth should
be maintained at all times and may be evaluated at any time. Obligations Due
from Related Parties means any and all debts, liabilities and obligations of
every nature or form owing from Related Parties, elated Parties means a parent
company or any shareholder or shareholder spouse, owner or owner spouse, member
or member spouse, manager or manager spouse, officer or officer spouse, employee
or employee spouse, agent, or a business entity more than five percent (5%) of
the ownership interests of which is owned directly or by any of such persons.

Applies to CONTRAIL AVIATION SUPPORT LLC and CONTRAIL AVIATION LEASING LLC: Line
of Credit Required Cleanup Period. Borrower shall cause the outstanding
principal balance of this Note to be zero (0) for at least thirty
(30) consecutive days during the term of the Note, or if the term of the Note
exceeds one (1) year, during each annual period ending on the anniversary of the
date of the Note (the testing Period. Notwithstanding the foregoing, it shall
not be considered an event of default under this provision if the Borrower
achieves a Debt Service Coverage Ratio of 1.10:1. For purposes of this section
only. Debt Service Coverage Ratio shall mean a ratio, the numerator of which
shall be EBITDA for the 12-month period then ended and the denominator being
Debt Service; EBITDA shall mean, with respect to any period. Net Income of the
Borrower for such period plus all amounts deducted in arriving at such Net
Income amount in respect of (i) interest expense of Borrower for such period,
(ii) federal, state and local income taxes for such period, and
(iii) depreciation and amortization expense for such period; Net Income shall
mean, with reference to any period, the net income (or net loss) of the Borrower
for such period, but excluding any nonrecurring income and extraordinary profits
during such period and any taxes on such nonrecurring income and extraordinary
profits; and Debt Service shall mean, with reference to any period, the sum of
(i) the aggregate amount of payments required to be paid by Borrower by
amortizing the lowest principal balance outstanding on the Note at any time
during the applicable Testing Period over a hypothetical five-year period at the
then outstanding interest rate in effect at the time of the testing, plus
(ii) interest expenses of the Borrower for such period.

Applies to CONTRAIL AVIATION SUPPORT LLC and CONTRAIL AVIATION LEASING LLC:
Field audits and borrowing base certificates required to be completed at
Lender’s request.

Applies to CONTRAIL AVIATION SUPPORT LLC and CONTRAIL AVIATION LEASING LLC:
Borrower to maintain ASA certification at all times.

Except as provided above, all computations made to determine compliance with the
requirements contained in this paragraph shall be made in accordance with
generally accepted accounting principles, applied on a consistent basis, and
certified by Borrower as being true and correct.

Insurance. Maintain fire and other risk insurance, public liability insurance,
and such other insurance as Lender may require with respect to Borrower’s
properties and operations, in form, amounts, coverages and with insurance
companies acceptable to Lender. Borrower, upon request of Lender, will deliver
to Lender from time to time the policies or certificates of insurance in form
satisfactory to Lender, including stipulations that coverages will not be
cancelled or diminished without at least ten (10) days prior written notice to
Lender. Each insurance policy also shall include an endorsement providing that
coverage in favor of Lender will not be impaired in any way by any act, omission
or default of Borrower or any other person. In connection with all policies
covering assets in which Lender holds or is offered a security interest for the
Loans. Borrower will provide Lender with such lender’s loss payable or other
endorsements as Lender may require.

Insurance Reports. Furnish to Lender, upon request of Lender, reports on each
existing insurance policy showing such information as Lender may reasonably
request, including without limitation the following: (1) the name of the
insurer; (2) the risks insured; (3) the amount of the policy; (4) the properties
insured; (5) the then current property values on the basis of which insurance
has been obtained, and the manner of determining those values; and (6) the
expiration date of the policy. In addition, upon request of Lender (however not
more often than annually). Borrower will have an independent appraiser
satisfactory to Lender determine, as applicable, the actual cash value or
replacement cost of any Collateral. The cost of such appraisal shall be paid by
Borrower.

Guaranties. Prior to disbursement of any Loan proceeds, furnish executed
guaranties of the Loans in favor of Lender, executed by the guarantors named
below, on Lender’s forms, and in the amounts and under the conditions set forth
in those guaranties.

 

Names of Guarantors

   Amounts  

JOSEPH G. KUHN

   $ 400,000.00  

AIR T, INC.

   $ 1,600,000.00  

Other Agreements. Comply with all terms and conditions of all other agreements,
whether now or hereafter existing, between Borrower and any other party and
notify Lender immediately in writing of any default in connection with any other
such agreements.

Loan Proceeds. Use all Loan proceeds solely for Borrower’s business operations,
unless specifically consented to the contrary by Lender in writing.

Taxes, Charges and Liens. Pay and discharge when due all of its indebtedness and
obligations, including without limitation all assessments, taxes, governmental
charges, levies and liens, of every kind and nature, imposed upon Borrower or
its properties, income, or profits, prior to the date on which penalties would
attach, and all lawful claims that, if unpaid, might become a lien or charge
upon any of Borrower’s properties, income, or profits. Provided however,
Borrower will not be required to pay and discharge any such assessment, tax,
charge, levy, lien or claim so long as (1) the legality of the same shall be
contested in good faith by appropriate proceedings, and (2) Borrower shall have
established on Borrower’s books adequate reserves with respect to such contested
assessment, tax, charge, levy, lien, or claim in accordance with GAAP.

Performance. Perform and comply, in a timely manner, with all terms, conditions,
and provisions set forth in this Agreement, in the Related Documents, and in all
other instruments and agreements between Borrower and Lender. Borrower shall
notify Lender immediately in writing of any default in connection with any
agreement.

Operations. Maintain executive and management personnel with substantially the
same qualifications and experience as the present executive and management
personnel; provide written notice to Lender of any change in executive and
management personnel; conduct its business affairs in a reasonable and prudent
manner.

Environmental Studies. Promptly conduct and complete, at Borrower’s expense, all
such investigations, studies, samplings and testings as may be requested by
Lender or any governmental authority relative to any substance, or any waste or
by-product of any substance defined as toxic or a hazardous substance under
applicable federal, state, or local law, rule, regulation, order or directive,
at or affecting any property or any facility owned, leased or used by Borrower.

Compliance with Governmental Requirements. Comply with all laws, ordinances, and
regulations, now or hereafter in effect, of all governmental authorities
applicable to the conduct of Borrower’s properties, businesses and operations,
and to the use or occupancy of the Collateral, including without limitation, the
Americans With Disabilities Act. Borrower may contest in good faith any such
law, ordinance, or regulation and withhold compliance during any proceeding,
including appropriate appeals, so long as Borrower has notified Lender in
writing prior to doing so and so long as, in Lender’s sole opinion, Lender’s
interests in the Collateral are not jeopardized. Lender may require Borrower to
post adequate security or a surety bond, reasonably satisfactory to Lender, to
protect Lender’s interest.

Inspection. Permit employees or agents of Lender at any reasonable time to
inspect any and all Collateral for the Loan or Loans and Borrower’s other
properties and to examine or audit Borrower’s books, accounts, and records and
to make copies and memoranda of Borrower’s books, accounts, and records. If
Borrower now or at any time hereafter maintains any records (including without
limitation computer generated records and computer software programs for the
generation of such records) in the possession of a third party, Borrower, upon
request of Lender, shall notify such party to permit Lender free access to such
records at all reasonable times and to provide Lender with copies of any records
it may request, all at Borrower’s expense.

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BUSINESS LOAN AGREEMENT

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Environmental Compliance and Reports. Borrower shall comply in all respects with
any and all Environmental Laws; not cause or permit to exist, as a result of an
intentional or unintentional action or omission on Borrower’s part or on the
part of any third party, on property owned and/or occupied by Borrower, any
environmental activity where damage may result to the environment, unless such
environmental activity is pursuant to and in compliance with the conditions of a
permit issued by the appropriate federal, state or local governmental
authorities; shall furnish to Lender promptly and in any event within thirty
(30) days after receipt thereof a copy of any notice, summons, lien, citation,
directive, letter or other communication from any governmental agency or
instrumentality concerning any intentional or unintentional action or omission
on Borrower’s part in connection with any environmental activity whether or not
there is damage to the environment and/or other natural resources.

Additional Assurances. Make, execute and deliver to Lender such promissory
notes, mortgages, deeds of trust, security agreements, assignments, financing
statements, instruments, documents and other agreements as Lender or its
attorneys may reasonably request to evidence and secure the Loans and to perfect
all Security Interests.

RECOVERY OF ADDITIONAL COSTS. If the imposition of or any change in any law,
rule, regulation, guideline, or generally accepted accounting principle, or the
interpretation or application of any thereof by any court, administrative or
governmental authority, or standard-setting organization (including any request
or policy not having the force of law) shall impose, modify or make applicable
any taxes (except federal, state or local income or franchise taxes imposed on
Lender), reserve requirements, capital adequacy requirements or other
obligations which would (A) increase the cost to Lender for extending or
maintaining the credit facilities to which this Agreement relates, (B) reduce
the amounts payable to Lender under this Agreement or the Related Documents, or
(C) reduce the rate of return on Lenders capital as a consequence of Lender’s
obligations with respect to the credit facilities to which this Agreement
relates, then Borrower agrees to pay Lender such additional amounts as will
compensate Lender therefor, within five (5) days after Lender’s written demand
for such payment, which demand shall be accompanied by an explanation of such
imposition or charge and a calculation in reasonable detail of the additional
amounts payable by Borrower, which explanation and calculations shall be
conclusive in the absence of manifest error.

LENDER’S EXPENDITURES. If any action or proceeding is commenced that would
materially affect Lender’s interest in the Collateral or if Borrower fails to
comply with any provision of this Agreement or any Related Documents, including
but not limited to Borrower’s failure to discharge or pay when due any amounts
Borrower is required to discharge or pay under this Agreement or any Related
Documents, Lender on Borrower’s behalf may (but shall not be obligated to) take
any action that Lender deems appropriate, including but not limited to
discharging or paying all taxes, liens, security interests, encumbrances and
other claims, at any time levied or placed on any Collateral and paying all
costs for insuring, maintaining and preserving any Collateral. All such
expenditures incurred or paid by Lender for such purposes will then bear
interest at the rate charged under the Note from the date incurred or paid by
Lender to the date of repayment by Borrower. All such expenses will become a
part of the Indebtedness and, at Lender’s option, will (A) be payable on demand;
(B) be added to the balance of the Note and be apportioned among and be payable
with any installment payments to become due during either (1) the term of any
applicable insurance policy; or (2) the remaining term of the Note; or (C) be
treated as a balloon payment which will be due and payable at the Note’s
maturity.

NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent of
Lender:

Additional Financial Restrictions. Applies to CONTRAIL AVIATION SUPPORT LLC and
CONTRAIL AVIATION LEASING LLC: (1) Engage in any business activities
substantially different than those in which Borrower is presently engaged,
(2) cease operations, liquidate, merge, transfer, acquire or consolidate with
any other entity, change its name, dissolve or transfer or sell Collateral out
of the ordinary course of business, or (3) purchase or retire any of Borrower’s
outstanding shares or alter or amend Borrower’s capital structure.

Agreements. Enter into any agreement containing any provisions which would be
violated or breached by the performance of Borrower’s obligations under this
Agreement or in connection herewith.

CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(A) Borrower or any Guarantor is in default under the terms of this Agreement or
any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender; (B) Borrower or any Guarantor dies, becomes
incompetent or becomes insolvent, files a petition in bankruptcy or similar
proceedings, or is adjudged a bankrupt; (C) there occurs a material adverse
change in Borrower’s financial condition, in the financial condition of any
Guarantor, or in the value of any Collateral securing any Loan; or (D) any
Guarantor seeks, claims or otherwise attempts to limit, modify or revoke such
Guarantor’s guaranty of the Loan or any other loan with Lender.

RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Borrower’s accounts with Lender (whether checking,
savings, or some other account). This includes all accounts Borrower holds
jointly with someone else and all accounts Borrower may open in the future.
However, this does not include any IRA or Keogh accounts, or any trust accounts
for which setoff would be prohibited by law. Borrower authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
Indebtedness against any and all such accounts, and, at Lender’s option, to
administratively freeze all such accounts to allow Lender to protect Lender’s
charge and setoff rights provided in this paragraph.

DEFAULT. Each of the following shall constitute an Event of Default under this
Agreement:

Payment Default. Borrower fails to make any payment when due under the Loan.

Other Defaults. Borrower fails to comply with or to perform any other term,
obligation, covenant or condition contained in this Agreement or in any of the
Related Documents or to comply with or to perform any term, obligation, covenant
or condition contained in any other agreement between Lender and Borrower.

Default in Favor of Third Parties. Borrower or any Grantor defaults under any
loan, extension of credit, security agreement, purchase or sales agreement, or
any other agreement, in favor of any other creditor or person that may
materially affect any of Borrower’s or any Grantor’s property or Borrower’s or
any Grantor’s ability to repay the Loans or perform their respective obligations
under this Agreement or any of the Related Documents.

False Statements. Any warranty, representation or statement made or furnished to
Lender by Borrower or on Borrower’s behalf under this Agreement or the Related
Documents is false or misleading in any material respect, either now or at the
time made or furnished or becomes false or misleading at any time thereafter.

Death or Insolvency. The dissolution of Borrower (regardless of whether election
to continue is made), any member withdraws from Borrower, or any other
termination of Borrower’s existence as a going business or the death of any
member, the insolvency of Borrower, the appointment of a receiver for any part
of Borrower’s property, any assignment for the benefit of creditors, any type of
creditor workout, or the commencement of any proceeding under any bankruptcy or
insolvency laws by or against Borrower.

Defective Collateralization. This Agreement or any of the Related Documents
ceases to be in full force and effect (including failure of any collateral
document to create a valid and perfected security interest or lien) at any time
and for any reason.

Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any
other method, by any creditor of Borrower or by any governmental agency against
any collateral securing the Loan. This includes a garnishment of any of
Borrower’s accounts, including deposit accounts, with Lender. However, this
Event of Default shall not apply if there is a good faith dispute by Borrower as
to the validity or reasonableness of the claim which is the basis of the
creditor or forfeiture proceeding and if Borrower gives Lender written notice of
the creditor or forfeiture proceeding and deposits with Lender monies or a
surety bond for the creditor or forfeiture proceeding, in an amount determined
by Lender, in its sole discretion, as being an adequate reserve or bond for the
dispute.

Events Affecting Guarantor. Any of the preceding events occurs with respect to
any Guarantor of any of the Indebtedness or any Guarantor dies or becomes
incompetent, or revokes or disputes the validity of, or liability under, any
Guaranty of the indebtedness.

Adverse Change. A material adverse change occurs in Borrower’s financial
condition, or Lender believes the prospect of payment or performance of the Loan
is impaired.

Right to Cure. If any default, other than a default on Indebtedness, is curable
and if Borrower or Grantor, as the case may be, has not been given a notice of a
similar default within the preceding twelve (12) months, it may be cured if
Borrower or Grantor, as the case may be, after Lender sends written notice to
Borrower or Grantor, as the case may be, demanding cure of such default;
(1) cure the default within fifteen (15) days; or (2) if the cure requires more
than fifteen (15) days, immediately initiate steps which Lender deems in
Lender’s sole discretion to be sufficient to cure the default and thereafter
continue and complete all reasonable and necessary steps sufficient to produce
compliance as soon as reasonably practical.

Death of a Guarantor. Notwithstanding anything to the contrary herein, or in any
of the Related Documents, the death of a Guarantor shall not be an Event of
Default if, within one hundred twenty (120) days following such death, the
Borrower provides a substitute guarantor reasonably acceptable to Lender.

Permitted Liens. Notwithstanding anything to the contrary herein, or in any of
the Related Documents, it shall not be an Event of Default if any Collateral
owned by Borrower is or becomes subject to any of the following liens; (a) liens
for taxes not yet due and payable or which are being contested in good faith by
appropriate proceedings diligently pursued and for which adequate reserves have
been established on the Borrower’s books in accordance to GAAP to fully satisfy
the contested lien; (b) mechanics’, materialmen’s, bankers’, carriers’.

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BUSINESS LOAN AGREEMENT

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warehousemen’s and similar liens and encumbrances arising in the ordinary course
of Borrower’s business and securing obligations of Borrower that are not overdue
or are being contested in good faith by appropriate proceedings diligently
pursued, provided that in the case of any such contest any proceedings commenced
for the enforcement of such liens and encumbrances shall have been duly
suspended and for which adequate reserves have been established on the
Borrower’s books in accordance to GAAP to fully satisfy the contested lien;
(c) liens arising in connection with worker’s compensation, unemployment
insurance, old age pensions and social security benefits and similar statutory
obligations which are not overdue or are being contested in good faith by
appropriate proceedings diligently pursued, provided that in the case of any
such contest any proceedings commenced for the enforcement of such liens shall
have been duly suspended and for which adequate reserves have been established
on the Borrower’s books in accordance to GAAP to fully satisfy the contested
lien; (d) liens in favor of Lender; (e) minor survey exceptions or minor
encumbrances, easements or reservations, or rights of others for rights-of-way,
utilities and other similar purposes, or zoning or other restrictions as to the
use of real properties, which do not materially interfere with the business of
Borrower; and (f) any interest or title of a lessor under any operating lease.

EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where
otherwise provided in this Agreement or the Related Documents, all commitments
and obligations of Lender under this Agreement or the Related Documents or any
other agreement immediately will terminate (including any obligation to make
further Loan Advances or disbursements), and, at Lender’s option, all
Indebtedness immediately will become due and payable, all without notice of any
kind to Borrower, except that in the case of an Event of Default of the type
described in the “Insolvency” subsection above, such acceleration shall be
automatic and not optional. In addition, Lender shall have all the rights and
remedies provided in the Related Documents or available at law, in equity, or
otherwise. Except as may be prohibited by applicable law, all of Lender’s rights
and remedies shall be cumulative and may be exercised singularly or
concurrently. Election by Lender to pursue any remedy shall not exclude pursuit
of any other remedy, and an election to make expenditures or to take action to
perform an obligation of Borrower or of any Grantor shall not affect Lender’s
right to declare a default and to exercise its rights and remedies.

PRIOR AGREEMENTS AND GUARANTIES. Even though the definition of Related Documents
includes loan agreements and credit agreements, this Agreement supersedes any
and all prior loan agreements or credit agreements between the Borrower and the
Lender except for any existing cash allocation management agreement, floorplan
agreement, letter of credit reimbursement agreement, loan or credit agreement
for any bond transaction, attorney prepared loan or credit agreement for a
specific transaction, SWAP agreement, SBA loan agreement, agricultural loan
agreement or a construction loan agreement for a project not yet completed. Any
and all forms of guaranty executed prior to this Agreement shall remain in full
force and effect even if not listed in this Agreement.

RESTRICTED DEPOSIT ACCOUNT. Contemporaneous with closing of the Loan, Lender
shall deposit one-hundred percent (100%) of the Loan proceeds (the “Loan
Proceeds”) into Borrower’s deposit account number 133788963. The Loan Proceeds
will be unavailable to Borrower until such time as Borrower receives Lender’s
consent to initiate a wire to purchase the Collateral that wilt secure the Loan.

MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:

Amendments. This Agreement, together with any Related Documents, constitutes the
entire understanding and agreement of the parties as to the matters set forth in
this Agreement. No alteration of or amendment to this Agreement shall be
effective unless given in writing and signed by the party or parties sought to
be charged or bound by the alteration or amendment.

Attorneys’ Fees; Expenses. Borrower agrees to pay upon demand all of Lender’s
costs and expenses, including Lender’s attorneys’ fees and Lender’s legal
expenses, incurred in connection with the enforcement of this Agreement. Lender
may hire or pay someone else to help enforce this Agreement, and Borrower shall
pay the costs and expenses of such enforcement. Costs and expenses include
Lender’s attorneys’ fees and legal expenses whether or not there is a lawsuit,
including attorneys’ fees and legal expenses for bankruptcy proceedings
(including efforts to modify or vacate any automatic stay or injunction),
appeals, and any anticipated post-judgment collection services. Borrower also
shall pay all court costs and such additional fees as may be directed by the
court.

Caption Headings. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions of
this Agreement.

Consent to Loan Participation. Borrower agrees and consents to Lender’s sale or
transfer, whether now or later, of one or more participation interests in the
Loan to one or more purchasers, whether related or unrelated to Lender. Lender
may provide, without any limitation whatsoever, to any one or more purchasers,
or potential purchasers, any information or knowledge Lender may have about
Borrower or about any other matter relating to the Loan, and Borrower hereby
waives any rights to privacy Borrower may have with respect to such matters.
Borrower additionally waives any and all notices of sale of participation
interests, as well as all notices of any repurchase of such participation
interests. Borrower also agrees that the purchasers of any such participation
interests will be considered as the absolute owners of such interests in the
Loan and will have all the rights granted under the participation agreement or
agreements governing the sale of such participation interests. Borrower further
waives all rights of offset or counterclaim that it may have now or later
against Lender or against any purchaser of such a participation interest and
unconditionally agrees that either Lender or such purchaser may enforce
Borrower’s obligation under the Loan irrespective of the failure or insolvency
of any holder of any interest in the Loan. Borrower further agrees that the
purchaser of any such participation interests may enforce its interests
irrespective of any personal claims or defenses that Borrower may have against
Lender.

Governing Law. This Agreement will be governed by federal law applicable to
Lender and, to the extent not preempted by federal law, the laws of the State of
Wisconsin without regard to its conflicts of law provisions. This Agreement has
been accepted by Lender in the State of Wisconsin.

Choice of Venue. If there is a lawsuit, Borrower agrees upon Lender’s request to
submit to the jurisdiction of the courts of Dane County, State of wisconsin.

Joint and Several Liability. All obligations of Borrower under this Agreement
shall be joint and several, and all references to Borrower shall mean each and
every Borrower. This means that each Borrower signing below is responsible for
all obligations in this Agreement. Where any one or more of the parties is a
corporation, partnership, limited liability company or similar entity, it is not
necessary for Lender to inquire into the powers of any of the officers,
directors, partners, members, or other agents acting or purporting to act on the
entity’s behalf, and any obligations made or created in reliance upon the
professed exercise of such powers shall be guaranteed under this Agreement.

No Waiver by Lender. Lender shall not be deemed to have waived any rights under
this Agreement unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall operate as
a waiver of such right or any other right. A waiver by Lender of a provision of
this Agreement shall not prejudice or constitute a waiver of Lender’s right
otherwise to demand strict compliance with that provision or any other provision
of this Agreement. No prior waiver by Lender, nor any course of dealing between
Lender and Borrower, or between Lender and any Grantor, shall constitute a
waiver of any of Lender’s rights or of any of Borrower’s or any Grantor’s
obligations as to any future transactions. Whenever the consent of Lender is
required under this Agreement, the granting of such consent by Lender in any
instance shall not constitute continuing consent to subsequent instances where
such consent is required and in all cases such consent may be granted or
withheld in the sole discretion of Lender.

Notices. Any notice required to be given under this Agreement shall be given in
writing, and shall be effective when actually delivered, when actually received
by telefacsimile (unless otherwise required by law), when deposited with a
nationally recognized overnight courier, or, if mailed, when deposited in the
United States mail, as first class, certified or registered mail postage
prepaid, directed to the addresses shown near the beginning of this Agreement.
Any party may change its address for notices under this Agreement by giving
formal written notice to the other parties, specifying that the purpose of the
notice is to change the party’s address. For notice purposes, Borrower agrees to
keep Lender informed at all times of Borrower’s current address. Unless
otherwise provided or required by law, if there is more than one Borrower, any
notice given by Lender to any Borrower is deemed to be notice given to all
Borrowers.

Severability. If a court of competent jurisdiction finds any provision of this
Agreement to be illegal, invalid, or unenforceable as to any person or
circumstance, that finding shall not make the offending provision illegal,
invalid, or unenforceable as to any other person or circumstance. If feasible,
the offending provision shall be considered modified so that it becomes legal,
valid and enforceable. If the offending provision cannot be so modified, it
shall be considered deleted from this Agreement. Unless otherwise required by
law, the illegality, invalidity, or unenforceability of any provision of this
Agreement shall not affect the legality, validity or enforceability of any other
provision of this Agreement.

Subsidiaries and Affiliates of Borrower. To the extent the context of any
provisions of this Agreement makes it appropriate, including without limitation
any representation, warranty or covenant, the word “Borrower” as used in this
Agreement shall include all of Borrower’s subsidiaries and affiliates.
Notwithstanding the foregoing however, under no circumstances shall this
Agreement be construed to require Lender to make any Loan or other financial
accommodation to any of Borrower’s subsidiaries or affiliates.

Successors and Assigns. All covenants and agreements by or on behalf of Borrower
contained in this Agreement or any Related Documents shall bind Borrower’s
successors and assigns and shall inure to the benefit of Lender and its
successors and assigns. Borrower shall not, however, have the right to assign
Borrower’s rights under this Agreement or any interest therein, without the
prior written consent of Lender.

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BUSINESS LOAN AGREEMENT

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Survival of Representations and Warranties. Borrower understands and agrees that
in making the Loan, Lender is relying on all representations, warranties, and
covenants made by Borrower in this Agreement or in any certificate or other
instrument delivered by Borrower to Lender under this Agreement or the Related
Documents. Borrower further agrees that regardless of any investigation made by
Lender, all such representations, warranties and covenants will survive the
making of the Loan and delivery to Lender of the Related Documents, shall be
continuing in nature, and shall remain in full force and effect until such time
as Borrower’s Indebtedness shall be paid in full, or until this Agreement shall
be terminated in the manner provided above, whichever is the last to occur.

Time is of the Essence. Time is of the essence in the performance of this
Agreement.

Waive Jury. All parties to this Agreement hereby waive the right to any jury
trial in any action, proceeding, or counterclaim brought by any party against
any other party.

Subsidiaries and Affiliates of Borrower – Air T, Inc. Notwithstanding anything
to the contrary herein, or in any of the Related Documents, Air T, Inc., a
Delaware corporation shall not be construed or interpreted as either an
affiliate or subsidiary of the Borrower.

DEFINITIONS. The following capitalized words and terms shall have the following
meanings when used in this Agreement, Unless specifically stated to the
contrary, all references to dollar amounts shall mean amounts in lawful money of
the United States of America. Words and terms used in the singular shall include
the plural, and the plural shall include the singular, as the context may
require. Words and terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. Accounting
words and terms not otherwise defined in this Agreement shall have the meanings
assigned to them in accordance with generally accepted accounting principles as
in effect on the date of this Agreement:

Advance. The word “Advance” means a disbursement of Loan funds made, or to be
made, to Borrower or on Borrower’s behalf on a line of credit or multiple
advance basis under the terms and conditions of this Agreement.

Agreement. The word “Agreement” means this Business Loan Agreement, as this
Business Loan Agreement may be amended or modified from time to time, together
with all exhibits and schedules attached to this Business Loan Agreement from
time to time.

Borrower. The word “Borrower” means CONTRAIL AVIATION SUPPORT, LLC; and CONTRAIL
AVIATION LEASING, LLC and includes all co-signers and co-makers signing the Note
and all their successors and assigns.

Collateral. The word “Collateral” means all property and assets granted as
collateral security for a Loan, whether real or personal property, whether
granted directly or indirectly, whether granted now or in the future, and
whether granted in the form of a security interest, mortgage, collateral
mortgage, deed of trust, assignment, pledge, crop pledge, chattel mortgage,
collateral chattel mortgage, chattel trust, factor’s lien, equipment trust,
conditional sale, trust receipt, lien, charge, lien or title retention contract,
lease or consignment intended as a security device, or any other security or
lien interest whatsoever, whether created by law, contract, or otherwise.

Environmental Laws. The words “Environmental Laws” mean any and all state,
federal and local statutes, regulations and ordinances relating to the
protection of human health or the environment, including without limitation the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended, 42 U.S.C. Section 9601, et seq. (“CERCLA”), the Superfund Amendments
and Reauthorization Act of 1986, Pub. L. No, 99-499 (“SARA”), the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or other
applicable state or federal laws, rules, or regulations adopted pursuant
thereto.

Event of Default. The words “Event of Default” mean any of the events of default
set forth in this Agreement in the default section of this Agreement.

GAAP. The word “GAAP” means generally accepted accounting principles.

Grantor. The word “Grantor” means each and all of the persons or entities
granting a Security Interest in any Collateral for the Loan, including without
limitation all Borrowers granting such a Security Interest.

Guarantor. The word “Guarantor” means any guarantor, surety, or accommodation
party of any or all of the Loan.

Guaranty. The word “Guaranty” means the guaranty from Guarantor to Lender,
including without limitation a guaranty of all or part of the Note.

Hazardous Substances. The words “Hazardous Substances” mean materials that,
because of their quantity, concentration or physical, chemical or infectious
characteristics, may cause or pose a present or potential hazard to human health
or the environment when improperly used, treated, stored, disposed of,
generated, manufactured, transported or otherwise handled. The words “Hazardous
Substances” are used in their very broadest sense and include without limitation
any and all hazardous or toxic substances, materials or waste as defined by or
listed under the Environmental Laws. The term “Hazardous Substances” also
includes, without limitation, petroleum and petroleum by-products or any
fraction thereof and asbestos.

Indebtedness. The word “Indebtedness” means the indebtedness evidenced by the
Note or Related Documents, including all principal and interest together with
all other indebtedness and costs and expenses for which Borrower is responsible
under this Agreement or under any of the Related Documents.

Lender. The word “Lender” means OLD NATIONAL BANK, its successors and assigns.

Loan. The word “Loan” means any and all loans and financial accommodations from
Lender to Borrower whether now or hereafter existing, and however evidenced,
including without limitation those loans and financial accommodations described
herein or described on any exhibit or schedule attached to this Agreement from
time to time.

Note. The word “Note” means the Note dated September 14, 2018 and executed by
CONTRAIL AVIATION SUPPORT, LLC; and CONTRAIL AVIATION LEASING, LLC in the
principal amount of $18,000,000.00, together with all renewals of, extensions
of, modifications of, refinancings of, consolidations of, and substitutions for
the note or credit agreement.

Related Documents. The words “Related Documents” mean all promissory notes,
credit agreements, loan agreements, environmental agreements, guaranties,
security agreements, mortgages, deeds of trust, security deeds, collateral
mortgages, and all other instruments, agreements and documents, whether now or
hereafter existing, executed in connection with the Loan.

Security Agreement. The words “Security Agreement” mean and include without
limitation any agreements, promises, covenants, arrangements, understandings or
other agreements, whether created by law, contract, or otherwise, evidencing,
governing, representing, or creating a Security Interest.

Security Interest. The words “Security Interest” mean, without limitation, any
and all types of collateral security, present and future, whether in the form of
a lien, charge, encumbrance, mortgage, deed of trust, security deed, assignment,
pledge, crop pledge, chattel mortgage, collateral chattel mortgage, chattel
trust, factor’s lien, equipment trust, conditional sale, trust receipt, lien or
title retention contract, lease or consignment intended as a security device, or
any other security or lien interest whatsoever whether created by law, contract,
or otherwise.

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       Loan No: 20007675682   

BUSINESS LOAN AGREEMENT

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BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT AND BORROWER AGREES TO ITS TERMS. THIS BUSINESS LOAN AGREEMENT IS
DATED SEPTEMBER 14, 2018.

BORROWER:

CONTRAIL AVIATION SUPPORT, LLC

 

        By:  

/s/ JOSEPH KUHN

  JOSEPH KUHN, CEO of CONTRAIL AVIATION SUPPORT, LLC

CONTRAIL AVIATION LEASING, LLC

CONTRAIL AVIATION SUPPORT, LLC, SOLE MEMBER AND MANAGER of CONTRAIL AVIATION
LEASING, LLC

 

        By:  

/s/ JOSEPH KUHN

  JOSEPH KUHN, CEO of CONTRAIL AVIATION SUPPORT, LLC

LENDER:

OLD NATIONAL BANK

 

        By:  

Not Eligible

  Authorized Signer

 

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