Exhibit 10.2

 

TERM NOTE D

 

U.S. $1,680,000.00 Dated as of February 15, 2018

     

 

FOR VALUE RECEIVED, the undersigned, AIR T, INC., a Delaware corporation (the
“Borrower”), promises to pay to the order of MINNESOTA BANK & TRUST, a national
banking association (the “Lender”), the principal sum of ONE MILLION SIX HUNDRED
EIGHTY THOUSAND AND No/100ths DOLLARS (U.S. $1,680,000.00) on or before January
1, 2028, or such earlier date as this promissory note (this “Note”) may be
declared due and payable by Lender pursuant to the terms hereof and the terms of
the Credit Agreement (the “Maturity Date”), together with interest on the
principal amount thereof outstanding from time to time at the rate or rates
described below, and any and all other amounts which may be due and payable
hereunder or under any of the Loan Documents (as hereinafter defined) from time
to time. This Note is made pursuant to the terms and conditions set forth in
that certain Credit Agreement dated of even date herewith by and between
Borrower and Lender (as amended, modified, supplemented or restated from time to
time being the “Credit Agreement”). The amount disbursed by the Lender to
Borrower, repayment of which is evidenced by this Note, is referred to as the
“Loan”. All capitalized terms used and not expressly defined herein shall have
the meanings given to such terms in the Loan Agreement.

 

Interest Prior to Default.

 

(a)     Interest Rate.

 

(i)     The Borrower promises to pay interest on the unpaid principal amount
hereof from the date hereof until such principal amount is paid in full at a per
annum rate of interest (the “Interest Rate”) that equals the sum of (a) the
Index (as hereinafter defined), plus (b) 2.00% (the “Margin”).

 

(ii)     The interest rate on this Note is subject to change from time to time
based on changes in an independent index which is LIBOR (as hereafter defined)
adjusted and determined, without notice to Borrower, as of the date of this Note
and on the first day of each calendar month hereafter (the “Interest Rate Change
Date”). “LIBOR” shall mean the London Interbank Offered Rate of interest for an
interest period of 1 month which appears on Bloomberg on the day that is two
London Business Days preceding each Interest Rate Change Date (the “Reset
Date”). If LIBOR as defined above is not available or is not published for any
Reset Date, then Lender shall, at its sole discretion, choose a substitute
source for LIBOR, which LIBOR plus the Margin, shall become effective on the
next Interest Rate Change Date. “London Business Day” shall mean any day on
which commercial banks in London, England are open for general business
(collectively, 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 the Loan, Lender may designate a substitute Index after notice to 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 loans based on other rates as well. The Index
currently is [_.____%] per annum. NOTICE: Under no circumstances will the
interest rate on this Note be more than the maximum rate allowed by applicable
law.

 

 

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TERM NOTE D

Page 2

 

U.S. $1,680,000.00 Dated as of February 15, 2018

     

 

(b)     Prohibition on Making LIBOR Loans. If Lender shall have reasonably
determined that the making or continuation of any LIBOR Loan has become
prohibited or otherwise unlawful under any law, governmental rule, regulation or
order of any governmental body, then Lender shall promptly give notice to
Borrower of such determination. Upon delivery of such notice the Loan shall
immediately commence bearing interest at, and the Loan Rate shall be converted
to the Prime Rate (as defined herein) plus the Margin. The term “Prime Rate”
means the “Prime Rate” as published in the “Money Rates” column of The Wall
Street Journal as and when such rate changes (or, if The Wall Street Journal
ceases to publish a rate so designated, any similar successor rate as the Lender
shall in good faith designate). The Prime Rate is not necessarily the lowest
rate charged to any customer), adjusted and changing immediately when and as
said prime rate changes.

 

(c)     Change in Capital Adequacy Requirements. If Lender shall determine that
the adoption after the date hereof (for purposes of this Agreement, the
Dodd-Frank Wall Street Reform and Consumer Protection Act and all guidelines and
regulations adopted in connection therewith are deemed to have been adopted
after the date hereof) of any applicable law, rule or regulation regarding
capital adequacy, or any change in any existing law, rule or regulation
regarding capital adequacy, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration of any such law, rule
or regulation regarding capital adequacy, or compliance by Lender (or any of its
branches) with any request or directive regarding capital adequacy (whether or
not having the force of law) of any such authority, central bank or comparable
agency, has or would have the effect of reducing the rate of return on Lender’s
capital as a consequence of its obligations hereunder or for the credit which is
the subject matter hereof to a level below that which Lender could have achieved
but for such adoption, change or compliance (taking into consideration Lender’s
policies with respect to liquidity and capital adequacy) by an amount deemed by
Lender to be material, then from time to time, within fifteen (15) days after
demand by Lender, Borrower shall pay to Lender such additional amount or amounts
reasonably determined by Lender as will compensate Lender for such reduction.

 

Interest After Default. Upon the occurrence of an Event of 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”; such increased rate of interest being the “Default Rate”). The Default
Rate Margin shall also apply to each succeeding interest rate change that would
have applied had there been no default. However, in no event will the interest
rate exceed the maximum interest rate limitations under applicable law.

 

 

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TERM NOTE D

Page 3

 

U.S. $1,680,000.00 Dated as of February 15, 2018

     

 

Payment Terms.

 

(a)     Principal and Interest. Payments of principal and interest due under
this Note, if not sooner declared to be due in accordance with the provisions
hereof, shall be made as follows (each such date when a payment is due and
payable, a “Payment Date”):

 

(i)     On the first day of each month, commencing on March 1, 2018 and
continuing until the Maturity Date, the Borrower shall make payments of
principal, each in the amount of $5,600.00 plus accrued interest; and

 

(ii)     The Loan shall be due and payable, and Borrower hereby promises to pay
the outstanding principal amount of the Loan to Lender, together with all
accrued interest thereon then remaining unpaid and all other unpaid amounts,
charges, fees and expenses outstanding under this Note or under any of the other
Loan Documents, on the Maturity Date.

 

(iii)     THIS NOTE REQUIRES A BALLOON PAYMENT ON THE MATURITY DATE.

 

(b)     Method of Payments. Both principal and interest are payable in lawful
money of the United States of America to the Lender at 7701 France Avenue South,
Edina, MN 55435 (or other location specified by the Lender) in immediately
available funds. By its execution of this Note, the Borrower authorizes the
Lender to charge from time to time against any of Borrower’s depository accounts
maintained with the Lender any such payments when due and the Lender will use
its reasonable efforts to notify the Borrower of such charges.

 

Interest Calculation Method. Interest on this Note shall be calculated on the
basis of a 360-day year and the actual number of days elapsed in any portion of
a month in which interest is due. If any payment to be made by the Borrower
hereunder shall become due on a day other than a Business Day, such payment
shall be made on the next succeeding Business Day.

 

Prepayment; Minimum Interest Charge. This Note may be prepaid in whole or in
part at any time, so long as such prepayment is accompanied by a simultaneous
payment of any applicable termination fees payable under any Hedge Agreement,
plus accrued interest on the amount being prepaid through the date of
prepayment. In any event, even upon full prepayment of this Note, Borrower
understands that Lender is entitled to a minimum interest charge of $10.00.
Early payments will not, unless agreed to by Lender in writing, relieve Borrower
of Borrower’s obligation to continue to make payments of accrued unpaid
interest. Rather, early payment will reduce the principal balance due. 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: Minnesota Bank & Trust,
7701 France Avenue South, Edina, MN 55435.

 

 

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TERM NOTE D

Page 4

 

U.S. $1,680,000.00 Dated as of February 15, 2018

     

 

Late Charge. If a payment due hereunder is not made within seven days after the
date when due, Borrower shall pay to Lender a late payment charge of 5% of the
amount of the overdue payment to compensate Lender for a portion of the cost
related to handling the overdue payment.

 

Interest After Default. Upon the occurrence of an Event of 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. However, in no
event will the interest rate exceed the maximum interest rate limitations under
applicable law.

 

Credit Agreement. This Note is the Term Note D referred to in, and is entitled
to the benefits of, the Credit Agreement. The Credit Agreement, among other
things, (i) contains provisions for acceleration of the maturity hereof upon the
happening of certain stated events prior to the maturity hereof upon the terms
and conditions therein specified; (ii) contains provisions for the mandatory
prepayment hereof upon certain conditions; and (iii) contains provisions for the
voluntary prepayment hereof, upon certain conditions.

 

Security Agreement. This Note is secured by, among other things, that certain
Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture
Financing Statement dated of even date herewith executed by the Borrower for the
benefit of the Lender.

 

Waiver of Presentment and Demand for Payment; Etc. Borrower and any endorsers or
guarantors hereof severally waive presentment and demand for payment, notice of
intent to accelerate maturity, protest or notice of protest and non-payment,
bringing of suit and diligence in taking any action to collect any sums owing
hereunder or in proceeding against any of the rights and properties securing
payment hereunder, and expressly agree that this Note, or any payment hereunder,
may be extended from time to time, and consent to the acceptance of further
security or the release of any security for this Note, all without in any way
affecting the liability of Borrower and any endorsers or guarantors hereof. No
extension of time for the payment of this Note, or any installment thereof, made
by agreement by Lender with any person now or hereafter liable for the payment
of this Note, shall affect the original liability under this Note of the
undersigned, even if the undersigned is not a party to such agreement.

 

 

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TERM NOTE D

Page 5

 

U.S. $1,680,000.00 Dated as of February 15, 2018

     

 

Event of Default. Any Event of Default (as defined in the Credit Agreement)
shall constitute an Event of Default under this Note. Upon the occurrence of an
Event of Default, in addition to any other rights or remedies Lender may have at
law or in equity or under the Credit Agreement or under any other Loan Document,
Lender may, at its option, without notice to Borrower, declare immediately due
and payable the entire unpaid principal sum hereof, together with all accrued
and unpaid interest thereon plus any other sums owing at the time of such Event
of Default pursuant to this Note, the Security Agreement or any other Loan
Document. The failure to exercise the foregoing or any other options shall not
constitute a waiver of the right to exercise the same or any other option at any
subsequent time in respect of the same event or any other event. The acceptance
by the holder of any payment hereunder which is less than payment in full of all
amounts due and payable at the time of such payment shall not constitute a
waiver of the right to exercise any of the foregoing options at that time or at
any subsequent time.

 

Expense Reimbursement. Borrower agrees to reimburse Lender upon demand for all
reasonable out-of-pocket expenses (including attorneys’ fees and legal expenses)
in connection with Lender’s enforcement of the obligations of the Borrower
hereunder or under the Security Agreement or any other collateral document,
whether or not suit is commenced including, without limitation, attorneys’ fees
and legal expenses in connection with any appeal of a lower court’s order or
judgment. The obligations of the Borrower under this paragraph shall survive any
termination of the Credit Agreement, this Note, the Security Agreement, and any
other Loan Document.

 

Successors and Assigns. This Note shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns except
that Borrower may not assign or transfer its rights hereunder without the prior
written consent of Lender, which consent may be withheld in Lender’s sole
discretion. In connection with the actual or prospective sale by the Lender of
any interest or participation in the loan obligation evidenced by this Note,
Borrower hereby authorizes the Lender to furnish any information concerning the
Borrower or any of its affiliates, however acquired, to any person or entity.

 

Usury. Borrower and Lender agree that no payment of interest or other
consideration made or agreed to be made by Borrower to Lender pursuant to this
Note shall, at any time, be in excess of the maximum rate of interest
permissible by law. In the event such payments of interest or other
consideration provided for in this Note shall result in an effective rate of
interest which, for any period of time, is in excess of the limit of the usury
or any other law applicable to the loan evidenced hereby, all sums in excess of
those lawfully collectible as interest for the period in question shall, without
further agreement or notice between or by any party hereto, be applied to the
unpaid principal balance and not to the payment of interest; if a surplus
remains after full payment of principal and lawful interest, the surplus shall
be remitted by Lender to Borrower, and Borrower hereby agrees to accept such
remittance. This provision shall control every other obligation of the Borrower
and Lender relating to this Note.

 

Business Purpose Loan. The Loan is a business loan. Borrower hereby represents
that this loan is for commercial use and not for personal, family or household
purposes. The Borrower agrees that the Loan evidenced by this Note is an
exempted transaction under the Truth In Lending Act, 15 U.S.C., §1601, et seq.

 

 

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TERM NOTE D

Page 6

 

U.S. $1,680,000.00 Dated as of February 15, 2018

     

 

Governing Law. THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS NOTE SHALL
BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF MINNESOTA, WITHOUT GIVING
EFFECT TO CONFLICT OF LAWS PRINCIPLES THEREOF.

 

WAIVER OF DEFENSES. OTHER THAN CLAIMS BASED UPON THE FAILURE OF THE LENDER TO
ACT IN A COMMERCIALLY REASONABLE MANNER, THE BORROWER WAIVES EVERY PRESENT AND
FUTURE DEFENSE (OTHER THAN THE DEFENSE OF PAYMENT IN FULL), CAUSE OF ACTION,
COUNTERCLAIM OR SETOFF WHICH THE BORROWER MAY NOW HAVE OR HEREAFTER MAY HAVE TO
ANY ACTION BY THE LENDER IN ENFORCING THIS NOTE OR ANY OF THE LOAN DOCUMENTS.
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER GRANTING ANY FINANCIAL
ACCOMMODATION TO THE BORROWER.

 

Waiver of Right to Jury Trial; Venue. BORROWER WAIVES ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN ANY ACTION RELATING TO OR ARISING FROM THIS NOTE. AT THE OPTION
OF LENDER, THIS NOTE MAY BE ENFORCED IN ANY UNITED STATES DISTRICT COURT FOR THE
DISTRICT OF MINNESOTA OR THE STATE COURT SITTING IN HENNEPIN OR RAMSEY COUNTY,
MINNESOTA. BORROWER CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND
WAIVES ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT PROPER OR CONVENIENT. IN
THE EVENT AN ACTION IS COMMENCED IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT
OR CONTRACT THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED
BY THIS NOTE, LENDER, AT ITS OPTION, SHALL BE ENTITLED TO HAVE THE CASE
TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES ABOVE DESCRIBED, OR IF SUCH
TRANSFER CANNOT BE ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE
DISMISSED WITHOUT PREJUDICE.

 

 

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TERM NOTE D

Page 7

 

U.S. $1,680,000.00      

 

 

IN WITNESS WHEREOF, the Borrower has caused this Term Note D to be signed by its
duly authorized officer in favor of MINNESOTA BANK & TRUST and to be dated as of
the date set forth above.

 

 

AIR T, INC., a Delaware corporation

 

By:                                                                        

Name: Candice L. Otey

Its:       Secretary