-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EyBjH3tzG/pTTn9E1z8o3YiHG71YnB3JFAZARzr+ogdMVxG4uA6FWrAk+UKJlkVC 01P3TL7N+WC1sScAH1Rprw== 0000353184-96-000009.txt : 19960627 0000353184-96-000009.hdr.sgml : 19960627 ACCESSION NUMBER: 0000353184-96-000009 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960626 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AIR TRANSPORTATION HOLDING CO INC CENTRAL INDEX KEY: 0000353184 STANDARD INDUSTRIAL CLASSIFICATION: AIR COURIER SERVICES [4513] IRS NUMBER: 521206400 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-11720 FILM NUMBER: 96586268 BUSINESS ADDRESS: STREET 1: 3524 AIRPORT RD CITY: MAIDEN STATE: NC ZIP: 28650 BUSINESS PHONE: 7043772109 MAIL ADDRESS: STREET 1: P O BOX 488 CITY: DENVER STATE: NC ZIP: 28037 FORMER COMPANY: FORMER CONFORMED NAME: ATLANTA EXPRESS AIRLINE CORP DATE OF NAME CHANGE: 19840321 10-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _________________ Form 10-K _________________ (Mark One) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE X SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended March 31, 1996 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from _______________ to _____________ Commission file number 0-11720 AIR TRANSPORTATION HOLDING COMPANY, INC. (Exact name of registrant as specified in its charter) Delaware 52-1206400 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 3524 Airport Road Maiden, North Carolina 28650 (Address of principal executive offices) (Zip Code) (704) 377-2109 (Registrant's telephone number, including area code) SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Common Stock, par value $.25 per share (Title of Class) __________________ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ____ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of voting stock held by non-affiliates of the registrant as of May 31, 1996, computed by reference to the average of the closing bid and asked prices for such stock on such date, was $3,837,960. As of the same date, 2,613,433 shares of Common Stock, no par value, were outstanding. PART I Item 1. Business. Air Transportation Holding Company, Inc., incorporated under the laws of the State of Delaware in 1980 (the "Company"), operates through three wholly owned subsidiaries, Mountain Air Cargo, Inc., a North Carolina corporation ("MAC"), CSA Air, Inc., a North Carolina corporation ("CSA"), and Mountain Aircraft Services, LLC, a North Carolina limited liability company ("MAS"). The principal place of business of the Company, MAC and MAS is Maiden, North Carolina, and the principal place of business of CSA is Iron Mountain, Michigan. The Company through its subsidiaries employs approximately 360 persons, of which approximately 300 are employed by MAC, 50 are employed by CSA and 10 are employed by MAS. Effective July 1, 1992, the Company reorganized its subsidiaries. Prior to such reorganization, the Company directly held the shares of capital stock of MAC and a corporation then known as CSA Air, Inc. ("Old CSA"), and MAC held the shares of capital stock of CSA, then known as MS Aircraft Maintenance Corporation, Inc. In the reorganization, MAC transferred the shares of stock of CSA to the Company, Old CSA transferred its assets to CSA and Old CSA merged with and into MAC. Immediately following the reorganization CSA changed its name to "CSA Air, Inc." In the following discussion of the Company's business operations, all references to "CSA" include Old CSA. MAC and CSA operate exclusively as contract carriers for overnight delivery of small package air freight throughout the eastern half of the United States and Canada, and in Puerto Rico and the U.S. Virgin Islands. Over the past six fiscal years, as a consequence of changes in customer preference, MAC and CSA have shifted their focus away from operating company- owned aircraft to operating customer-owned aircraft under dry-lease service contracts. In prior years, MAC's predominant business practice involved carrying small package air freight in company-owned aircraft under contracts that provided for a fixed fee per flight regardless of the amount of cargo carried under so-called "wet lease" arrangements. For the most recent fiscal year, these operations accounted for 6.0% of the Company's consolidated revenue, compared to 7.1% for the prior fiscal year. Under the dry-lease service contracts, the customer leases its aircraft to MAC (or CSA) for a nominal amount and pays an administrative fee to MAC (or CSA). Under these arrangements, all direct costs related to the operation of the aircraft (including fuel, maintenance, landing fees and pilot costs) are passed through to the customer. For the most recent fiscal year, operations under dry lease service contracts accounted for 83.1% of the Company's consolidated revenue, compared to 88.2% for the prior fiscal year. For the fiscal year ended March 31, 1996, MAC and CSA provided air delivery service exclusively to Federal Express Corporation ("Federal Express"). As of March 31, 1996, MAC and CSA operated an aggregate of 93 aircraft under agreements with Federal Express. Separate agreements cover 2 the three types of aircraft operated by MAC and CSA for Federal Express -- Cessna Caravan, Fokker F-27 and Short Brothers SD3-30. Cessna Caravan and Fokker F-27 aircraft are dry-leased from Federal Express, and Short Brothers SD3-30 aircraft are owned by the Company and operated under "wet-lease" arrangements with Federal Express. For the fiscal year ended March 31, 1996, 89.1% of the Company's consolidated revenues was attributable to the Company's operations under these agreements. Pursuant to such agreements, Federal Express determines the schedule of routes to be flown by MAC and CSA. As of March 31, 1996, MAC and CSA were flying approximately 85 routes pursuant to their agreements with Federal Express. Agreements with Federal Express are renewable annually and may be terminated by Federal Express any time upon 15 to 30 days' notice. The Company believes that the short term and other provisions of its agreements with Federal Express are standard within the air freight contract delivery service industry. Loss of Federal Express as a customer would have a material adverse affect on MAC, CSA and the Company. In October 1993, the Company organized MAS to sell aircraft parts and offer engine overhaul management and engine component repair services for commercial and military aircraft. For the fiscal year ended March 31, 1996, MAS contributed 10.1% of the Company's consolidated revenues. On April 15, 1994, the Company announced that it will relocate and expand the MAC aircraft maintenance facility and MAS engine overhaul management and repair station facility to North Carolina's new Global TransPark located in Kinston, North Carolina. This new 66,000 square foot facility is projected to be completed in August 1996 and will consolidate the Company's aircraft maintenance and aircraft component repair stations operations currently located in Anderson, South Carolina and Miami, Florida. On November 16, 1995, MAC entered into a 21 1/2-year facilities lease with Global TransPark Foundation, Inc. After an 18-month grace period, rent under the lease will escalate from $2.25 per square foot to $5.90 per square foot over the life of the lease. MAC and CSA operate under separate aviation certifications. MAC is certified to operate under Part 121 and Part 135 of the regulations of the Federal Aviation Administration (the "FAA"). This certification permits MAC to operate aircraft that can carry up to 18,000 pounds of cargo. CSA is certified to operate under Part 135 of the FAA regulations. This certification permits CSA to operate aircraft with a maximum cargo capacity of 7,500 pounds. As a result of the shift from Company-owned aircraft to customer-owned aircraft, the Company sold the bulk of its owned aircraft in 1989, 1990 and 1991. At the end of the most recent fiscal year, the Company owned three cargo aircraft. 3 MAC and CSA, together, operated or held for sale the following aircraft as of March 31, 1996: [CAPTION] Form of Number of Type of Aircraft Model Year Ownership Aircraft Cessna Caravan, 208A and 208B (single turbo prop) 1985-1996 dry lease 71 Fokker F-27 (twin turbo prop) 1968-1981 dry lease 22 Short Brothers SD3-30 (twin turbo prop) 1981 owned 3 __________ Total 96 Of the 96 aircraft fleet, 93 aircraft--that is, the Cessna Caravan and Fokker F-27 aircraft--are owned by Federal Express. Under the dry-lease service contracts, certain maintenance expense, including cost of parts inventory, and maintenance performed by personnel not employed by the Company, is passed directly to the customer, and the expense of daily, routine maintenance and aircraft service checks is charged to the customer on an hourly basis. Accordingly, the Company does not anticipate maintenance expense, such as engine overhauls, to be material to the Company's operating results. All FAA Part 135 aircraft, including Cessna Caravan models 208A and 208B, and Short Brothers SD3-30 aircraft are maintained on FAA approved inspection programs. The inspection intervals range from 100 to 200 hours. The engines are produced by Pratt & Whitney, and overhaul periods are based on FAA- approved schedules. The current overhaul period on the Cessna aircraft is 4,500 hours. The Short Brothers manufactured aircraft are maintained on an "on condition" maintenance program (i.e., maintenance is performed when performance deviates from certain specifications) with engine inspections at each phase inspection and in-shop maintenance at predetermined intervals. The Fokker F-27 aircraft are maintained under a FAA Part 121 maintenance program. The program consists of A, B, C, D and I service checks. The engine overhaul period is 5,700 hours. The Company operates in highly competitive markets and competes with approximately 50 other contract cargo carriers in the United States. MAC and CSA's contracts are renewed on an annual basis. Accurate industry data is not available to indicate the Company's position within its marketplace (in large measure because most of the Company's competitors are privately held), but management believes that MAC and CSA, combined, constitute one of the largest contract carriers of the type described immediately above. The Company's operations are not materially seasonal. 4 Governmental Regulation. Under the Federal Aviation Act of 1958, as amended, the FAA has safety jurisdiction over flight operations generally, including flight equipment, flight and ground personnel training, examination and certification, certain ground facilities, flight equipment maintenance programs and procedures, examination and certification of mechanics, flight routes, air traffic control and communications and other matters. The FAA also has power to suspend or revoke for cause the certificates it issues and to institute proceedings for imposition and collection of fines for violation of federal aviation regulations. The Company has secured appropriate operating certificates and airworthiness certificates for all aircraft operated by it. During the most recent fiscal year, the Company underwent periodic routine FAA reviews of MAC and CSA's operating procedures and flight and maintenance records; no violations of procedures or recordkeeping were reported. The Airline Deregulation Act of 1978 created a new class of domestic certificated all-cargo carriers. Pursuant to such certificate, aircraft of specified size may be operated within the United States, without restriction on routes. The Company has been subject to FAA regulation since the commencement of its business activities. The FAA is concerned with safety and the regulation of flight operations generally, including equipment used, ground facilities, maintenance, communications and other matters. The FAA can suspend or revoke the authority of air carriers or their licensed personnel for failure to comply with its regulations and can ground aircraft if questions arise concerning airworthiness. The Company, through its subsidiaries, holds all operating airworthiness and other FAA certificates that are currently required for the conduct of its business, although these certificates may be suspended or revoked for cause. The FAA has authority under the Noise Control Act of 1972, as amended, to monitor and regulate aircraft engine noise. The aircraft operated by the Company are in compliance with all such regulations promulgated by the FAA. Moreover, because the Company does not operate jet aircraft noncompliance is not likely. Such aircraft also comply with standards for aircraft exhaust emissions promulgated by the Environmental Protection Agency pursuant to the Clean Air Act of 1970, as amended. Because of the extensive use of radio and other communication facilities in its aircraft operations, the Company is subject to the Federal Communications Act of 1934, as amended. Maintenance and Insurance. The Company, through its subsidiaries, maintains its aircraft under the appropriate FAA standards and regulations. 5 The Company has secured public liability and property damage insurance in excess of minimum amounts required by the United States Department of Transportation. The Company has also obtained all-risk hull insurance on Company-owned aircraft. The Company maintains cargo liability insurance, workers' compensation insurance and fire and extended coverage insurance, for leased as well as owned facilities and equipment. Item 2. Properties. The Company leases the Little Mountain Airport in Maiden, North Carolina from a corporation whose stock is owned by David Clark, J. Hugh Bingham, William H. Simpson and John J. Gioffre, officers and directors of the Company, and three unaffiliated third parties. The facility consists of approximately 65 acres with one 3000 foot landing strip, approximately 20,000 square feet of hangar space and approximately 9,700 square feet of office space. The operations of the Company and MAC are headquartered at this facility. The lease for this facility was renewed in May 1996, and is currently scheduled to expire on May 31, 2001, and may be renewed for an additional five-year period. In connection with the renewal, the monthly rental payment for this facility increased to $8,073. The Company also leases approximately 800 square feet of office space and approximately 6,000 square feet of hangar space at the Ford Airport in Iron Mountain, Michigan. CSA's operations are headquartered at these facilities. These facilities are leased under an annually renewable agreement with a monthly rental payment, as of March 31, 1996, of approximately $1,000. On November 16, 1995, the Company entered into a twenty-one and a half year premises and facilities lease with Global TransPark Foundation, Inc. to lease approximately 53,000 square feet of a new 66,000 square foot aircraft hangar, shop and office facility to be built at the North Carolina Global TransPark in Kinston, North Carolina. Rent under this lease increases over time as follows: the first 18 months, no rent; the next 5-year period, $2.25 per square foot; the next 5-year period, $3.50 per square foot; the next 5- year period, $4.50 per square foot; and the final 5-year period, $5.90 per square foot. The Company anticipates occupying this facility commencing in August 1996. The Company operates a maintenance facility in Anderson, South Carolina, leasing approximately 2,200 square feet of office space and approximately 22,000 square feet of hangar space. Such facilities are leased on a month-to- month basis. As of March 31, 1996, the monthly rental payment for this facility was $3,000. The Company operates a maintenance facility in Miami, Florida, leasing approximately 4,700 square feet of hangar space. The lease expires in April 1998, and the monthly rental payment is $2,500. As of March 31, 1995, the Company leased hangar space at 15 other 6 locations for aircraft storage. Such hangar space is leased at prevailing market terms. The table of aircraft presented in Item 1 lists the aircraft operated by the Company's subsidiaries and the form of ownership. Item 3. Legal Proceedings. The Company is not aware of any pending or threatened lawsuits that if adversely decided would have a material adverse effect on the Company. Item 4. Submission of Matters to a Vote of Security Holders. No matter was submitted during the fourth quarter of the fiscal year covered by this report to a vote of security holders. PART II Item 5. Registrant's Common Equity and Related Stockholder Matters. The Company's common stock is publicly traded in the over-the-counter market under the NASDAQ symbol "AIRT." As of May 31, 1996, the number of holders of record of the Company's Common Stock was approximately 720. Over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commissions and may not necessarily represent actual transactions. The range of high and low bid quotations per share for the Company's common stock from April 1994 through March 1996 (which quotations have been adjusted to reflect the one- for-five reverse split effected on May 16, 1994) is as follows: [CAPTION] Common Stock Quarter Ended High Low June 30, 1994 . . . . . . . . . . . 7 3/16 4 1/4 September 30, 1994 . . . . . . . . 4 3/4 4 December 31, 1994 . . . . . . . . . 4 1/2 3 3/4 March 31, 1995 . . . . . . . . . . 3 7/8 3 3/4 June 30, 1995 . . . . . . . . . . . 4 1/8 3 7/8 September 30, 1995. . . . . . . . . 4 1/2 3 3/4 December 31, 1995 . . . . . . . . . 4 3/4 3 3/4 March 31, 1996. . . . . . . . . . . 4 1/2 3 3/4 In January 1992 and May 1993, the Company paid a cash dividend on its Common Stock of $.01 per share (pre-reverse stock split, or $.05 per share post-reverse stock split). On June 15, 1994, following the Company's one-for- five reverse split of shares of its Common Stock, the Company paid a cash dividend of $.06 per share ($.012 per pre-split share). On May 31, 1995, the Company paid a cash dividend of $.07 7 per share. On April 22, 1996, the Company paid a cash dividend of $.08 per share. Prior to January 1992, the Company had not paid a dividend. The Company's Board of Directors intends to review the Company's operating results, financial condition, capital requirements and other factors in determining whether to pay cash dividends in the future. AIR TRANSPORTATION HOLDING COMPANY, INC. AND SUBSIDIARIES Selected Financial Data. SELECTED FINANCIAL DATA (in thousands except per share data)
Year Ended March 31, 1996 1995 1994 1993 1992 Operating revenues $36,101 $32,951 $30,674 $26,776 $20,097 Earnings before extraordinary credit and change in accounting principle 1,612 1,598 1,579 1,504 823 Extraordinary credit - - - 309 392 Change in accounting principle - - 715 - - Net earnings 1,612 1,598 2,294 1,813 1,215 Net earnings per share (1): Earnings before extraordinary credit and change in accounting principle $ .53 $ .48 $ .47 $ .47 $ .26 Extraordinary credit - - - .09 .12 Change in accounting principle - - .22 - - Net earnings $ .53 $ .48 $ .69 $ .56 $ .38 Total assets $10,220 $10,161 $ 8,550 $ 7,147 $ 4,770 Long-term debt, including current portion $ 10 $ 14 $ 20 $ 241 $ 524 Stockholders' equity $ 7,414 $ 7,130 $ 6,642 $ 4,493 $ 2,756 Average common shares outstanding (1) 3,020 3,312 3,348 3,210 3,190 Dividends declared per common share (1)(2) $ .15 $ .06 $ .05 $ - $ .05 Dividends paid per common share (1)(2) $ .07 $ .06 $ .05 $ - $ .05 (1) - All common share and dividend data reflect the one-for-five reverse stock split effective May 16, 1994. 8 (2) - On April 25, 1995 the Company declared a $.07 per common share special cash dividend, which was paid on May 31, 1995. On February 1, 1996 the Company declared an $.08 per common share special cash dividend, paid April 22, 1996.
Management's Discussion and Analysis of Financial Condition and Results of Operations. Results of Operations. The Company's revenue is primarily generated through its air cargo subsidiaries, Mountain Air Cargo, Inc. (MAC) and CSA Air, Inc. (CSA), which are short-haul express air freight carriers flying nightly contracts for a major express delivery company out of 78 cities, principally located in 30 states in the eastern half of the United States and in Canada, Puerto Rico, and the Virgin Islands. In 1993, the Company organized Mountain Aircraft Services, LLC. (MAS) to engage in the sale of commercial aircraft parts and provide aircraft engine overhaul management and component repair services. Revenues from this operation contributed approximately $3,629,000 and $1,236,000 to the Company's revenues in fiscal 1996 and 1995, respectively. Under the terms of MAC and CSA's dry-lease service contracts (which currently cover approximately 96% of the revenue aircraft operated), the Company passes through to its customer certain cost components of its operations without markup. The cost of fuel, landing fees, outside maintenance, aircraft certification and conversion, parts and certain other direct operating costs are included in operating expenses and billed to the customer as cargo and maintenance revenue at no additional mark-up to the customer. The following table summarizes the changes and trends in the Company's expenses as a percentage of revenue:
Fiscal Year Ended March 31 1996 1995 1994 Operating revenue (in thousands) $36,101 $32,951 $30,674 Expense as a percentage of revenue: % % % Flight operations 35.05 36.81 37.81 Maintenance 46.73 43.50 42.42 General and administrative 10.63 10.90 10.90 Depreciation and amortization 1.34 1.40 1.08 Interest, net - - 0.03 Total costs and expenses 93.75% 92.61% 92.24%
9 Fiscal 1996 vs 1995. Consolidated revenue increased $3,150,000 (9.6%) to $36,101,000 for the fiscal year ended March 31, 1996 compared to the prior fiscal year. Fiscal 1996's revenue increase resulted primarily from a $2,393,000 (193.6%) increase in parts brokering and quick engine change revenue related to the expansion of MAS, and an increase in the number of customer-owned aircraft operated by the Company, partially offset by a decrease in maintenance billing. Operating expenses increased $3,338,000 (10.9%) to $33,843,000 for fiscal 1996 compared to fiscal 1995. The increase in operating expenses consisted of the following changes: cost of flight operations increased $522,000 (4.3%) primarily due to an increase in pilot staffing and airport fees; maintenance expense increased $2,556,000 (17.8%), primarily as a result of increases in cost of sales related to aircraft parts sold by MAS and increased use of outside contract services; depreciation increased $26,000 (5.4%); general and administrative expense increased $234,000 (6.5%) as a result of increased staffing at MAS, cost associated with the Company's future relocation of maintenance operations and increased employee benefits, salary and wage rates. The $263,000 increase, in fiscal 1996, in non-operating income reflects a gain on disposal of Company-owned aircraft. Pretax earnings increased $75,000 (3.1%) to $2,520,000 for fiscal 1996 compared to 1995. The increases were due to the gain on disposal of Company- owned aircraft, income on Company investments and increased earnings generated by MAS, partially offset by increased operating and administration cost, and decreased cargo aircraft maintenance revenue. The provision for income taxes increased $60,000 (7.1%) to $908,000 for fiscal 1996 compared to fiscal 1995. Fiscal 1996 experienced an increased effective Federal tax rate due to the full utilization of certain net operating loss carryforwards during the third quarter of fiscal 1995. The Company adopted Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes" as of the beginning of fiscal 1994, and the cumulative effect of this change was reported in the Consolidated Statements of Earnings for Fiscal 1994. The cumulative effect on fiscal 1994 net earnings of adoption of $715,000 ($.22 per share) reflects the impact of "temporary differences" between amounts of assets and liabilities for financial reporting purposes and such amounts as measured by tax laws, and the future utilization of net operating loss and alternative minimum tax credit carryforwards. In addition, the cumulative effect of adoption reduced goodwill by $320,000, which reflects the effect of future utilization of pre- acquisition loss carryforwards. Because of the Company's dependence upon a single customer and uncertainty as to the future allocation of taxable income among subsidiaries to which the separate-return limitation applies, the Company has provided a valuation allowance against gross deferred tax assets as of March 31, 1996. Of the $170,000 valuation allowance approximately $152,000 is related to potential benefits from pre-acquisition carryforwards, while approximately $18,000 is related to other deferred benefits. Reductions in the valuation allowance derived from utilization of pre-acquisition net operating loss 10 carryforwards of $401,000 have been credited directly to goodwill during the 1996 fiscal year. Changes in the valuation allowance, related to future utilization of post-acquisition net operating losses, reduced the provision for income taxes by $115,000 during the 1996 fiscal year. As of March 31, 1996, the Company had federal net operating loss carryforwards available for tax return purposes of approximately $500,000. These carryforwards expire in 1997. The potential utilization of these carryforwards is subject to the separate return limitation rules pursuant to Treasury regulations. Fiscal 1995 vs 1994. Consolidated revenue increased $2,277,000 (7.4%) to $32,951,000 for the fiscal year ended March 31, 1995 compared to the prior fiscal year. The increase in 1995 revenue primarily resulted from a $1,152,000 increase in cargo revenue generated by Company-owned aircraft and a $903,000 increase in revenue related to the expansion of MAS. Operating expenses increased $2,220,000 (7.8%) to $30,505,000 for fiscal 1995 compared to fiscal 1994. The increase in operating expenses consisted of the following changes: cost of flight operations increased $535,000 (4.6%) as a result of increases in pilot and flight personnel and costs associated with fuel, travel, and landing fees (primarily related to Company-owned aircraft) which were partially offset by decreased aircraft lease costs; maintenance expense increased $1,320,000 (10.1%) primarily as a result of increased outside maintenance, inside personnel and cost of parts purchased for MAS, offsetting decreases in parts purchases and contract service costs; depreciation and amortization increased $128,000 (38.8%) due to additional depreciation related to the acquisition of aircraft, computer system hardware, and maintenance and office equipment; the general and administrative expense increase of $238,000 (7.1%) resulted from increases in operational and clerical staffing related to expansion of MAS and increased levels of administrative service required by the Company's principal customer, increases in professional fees and stockholder expense (including expense of special stockholder meeting held in May 1994) and general increases in salary and wage rates. Interest expense decreased $8,000 (92.0%) for fiscal 1995 compared to fiscal 1994 due to the repayment of debt. Pretax earnings increased $59,000 to $2,445,000 for fiscal 1995. The pretax earnings increase was primarily related to the increased level of cargo revenue generated by Company-owned aircraft and earnings generated by the Company's brokerage and engine overhaul management services. Provision for income taxes increased $41,000 (5.0%) to $848,000 in 1995. The increase was due to the full utilization of post-acquisition net operating loss carryforwards, resulting in higher Federal income tax rates, on certain Company income starting in the second quarter of fiscal 1995. The provision for income taxes for the fiscal years ended March 31, 1995 and 1994 were different from the Federal statutory rates due to state tax provisions and changes to the deferred tax valuation allowance. 11 Changes in the valuation allowance, related to future utilization of post-acquisition net operating losses, reduced the provision for income taxes by $112,000 during the 1995 fiscal year. Liquidity and Capital Resources. As of March 31, 1996 the Company's working capital amounted to $5,662,000, an increase of $1,185,000 compared to March 31, 1995. The net increase, primarily resulted from profitable operations, disposal of aircraft and earnings on investments, as reflected by a $723,000 increase in cash and investments, a $790,000 decrease in accounts payable and a $456,000 increase in inventory, partially offset by a $233,000 decrease in accounts receivable and a $351,000 increase in accrued expenses and taxes. The March 31, 1996 cash and short-term investments included $3,266,000 invested primarily in bonds, commercial paper and mutual funds. The Company's accounts receivable and inventory financing line provides credit in the aggregate of up to $2,250,000 to September 1996. The Company anticipates renewing the line of credit in 1996. Loans under the line of credit bear interest at the lender's prime rate. Substantially all of the Company's assets, excluding aircraft, have been pledged as collateral under this financing arrangement. As of March 31, 1996, the Company was in a net investment position against its credit line. Management believes that funds anticipated from operations and existing credit facilities will provide adequate cash flow to meet the Company's future financial needs. The respective years ended March 31, 1996, 1995 and 1994 resulted in the following changes in cash flow: Operating activities provided $1,778,000, $3,047,000, and $1,693,000; investing activities used $1,830,000, $299,000, and $1,008,000; and financing activities used $1,114,000, $1,115,000 and $367,000 respectively. Net cash and cash equivalents decreased $1,167,000 for the year ended March 31, 1996, and increased $1,633,000 and $318,000 for the years ended March 31, 1995 and 1994 respectively. Cash provided by operating activities was $1,268,000 less for the year ended March 31, 1996 compared to 1995, primarily due to reductions in accounts payable. Cash used in investing activities for the year ended March 31, 1996 was approximately $1,532,000 more than 1995, principally due to the Company's purchase of short-term investments in 1996. The primary use of cash in investing activities in 1995 related to the acquisition of two aircraft. Cash used in financing activities was $1,000 less in 1996 compared to 1995. The primary use of cash in investing activities for 1995 related to the Company's purchases of short-term investments in 1996. During the fiscal year ended March 31, 1996 the Company repurchased 238,500 shares of its common stock at a total cost of $1,011,043. Pursuant to its previously announced stock repurchase program, $821,000 remains available for repurchase of common stock. The Company's planned relocation of aircraft maintenance and repair operations to Kinston, North Carolina is scheduled for August 1996. Costs asso- ciated with the relocation are projected to reduce the Company's cash flow by approximately $500,000 in fiscal 1997. Other than the above relocation there 12 are, currently, no commitments for significant capital expenditures and none are anticipated during the fiscal year ending March 31, 1997. Company stockholders approved, at a special stockholders' meeting held May 4, 1994, a consolidation of common shares via a one-for-five reverse stock split, which became effective May 16, 1994. The following cash dividend data gives effect to the reverse stock split. The Company paid, on June 15, 1994, a special cash dividend of $.06 per common share to shareholders of record May 20, 1994, and paid a $.07 per common share special cash dividend on May 31, 1995 to shareholders of record May 8, 1995. The Company also paid a $.08 per common share special cash dividend on April 22, 1996 to shareholders of record April 2, 1996. Impact of Inflation. The Company believes the impact of inflation and changing prices on its revenues and net earnings will not have a material effect since the major cost components of its operations, consisting principally of fuel, crew and certain maintenance costs, are reimbursed, without markup, under current contract terms. Item 8. Financial Statements and Supplementary Data. The following pages present the consolidated financial statements of the Company and the independent auditors' report thereon. 13 INDEPENDENT AUDITORS' REPORT Board of Directors and Stockholders Air Transportation Holding Company, Inc. Denver, North Carolina We have audited the accompanying consolidated balance sheets of Air Transportation Holding Company, Inc. and subsidiaries as of March 31, 1996 and 1995, and the related consolidated statements of earnings, stockholders' equity, and cash flows for each of the three years in the period ended March 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Air Transportation Holding Company, Inc. and subsidiaries as of March 31, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 1996 in conformity with generally accepted accounting principles. DELOITTE & TOUCHE LLP June 10, 1996 Charlotte, North Carolina 14 AIR TRANSPORTATION HOLDING COMPANY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
March 31, 1996 1995 ASSETS (Note 3) CURRENT ASSETS: Cash and cash equivalents $ 2,213,841 $ 3,380,885 Short-term investments 1,889,819 - Accounts receivable, less allowance for doubtful accounts of $44,000 in 1996 and $38,000 in 1995 3,133,670 3,366,286 Parts and supplies inventory 725,503 269,653 Assets held for sale 20,646 40,646 Prepaid expenses 40,679 450 Deferred tax asset (Note 7) 440,000 440,000 Total Current Assets 8,464,158 7,497,920 PROPERTY AND EQUIPMENT (Notes 3 and 4): Furniture, fixtures and improvements 2,084,027 1,893,924 Flight equipment and rotables inventory 1,164,807 1,419,740 3,248,834 3,313,664 Accumulated depreciation and amortization (1,678,980) (1,271,750) Property and equipment, net 1,569,854 2,041,914 EXCESS OF COST OVER NET ASSETS OF SUBSIDIARY ACQUIRED, net of amortization of $807,000 (1996) and $1,202,000 (1995) (Notes 1 and 7) 33,834 429,167 OTHER ASSETS 124,387 56,435 DEFERRED TAX ASSET (Note 7) 27,838 135,620 TOTAL $10,220,071 $10,161,056 See notes to consolidated financial statements.
15 AIR TRANSPORTATION HOLDING COMPANY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
March 31, 1996 1995 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 1,003,081 $ 1,574,438 Accrued expenses (Note 2, 5, and 8) 1,555,284 1,401,275 Income taxes payable (Note 7) 238,113 41,054 Current maturities of long-term debt 5,976 4,437 Total Current Liabilities 2,802,454 3,021,204 LONG-TERM DEBT, less current maturities (Notes 3 and 4) 3,649 9,838 COMMITMENTS (Note 4) STOCKHOLDERS' EQUITY (Note 5): Preferred stock, $1 par value; authorized 10,000,000 shares; none issued Common stock, par value $.25; authorized 4,000,000 shares; issued 2,725,433 shares in 1996 and 2,865,933 shares in 1995 681,358 716,483 Additional paid-in capital 7,299,045 7,891,108 Deficit (566,435) (1,477,577) Total Stockholders' Equity 7,413,968 7,130,014 TOTAL $10,220,071 $10,161,056 See notes to consolidated financial statements
16 AIR TRANSPORTATION HOLDING COMPANY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS
For Year Ended March 31 1996 1995 1994 OPERATING REVENUE (Note 6): Cargo $19,129,860 $18,283,842 $17,050,465 Maintenance 13,104,829 13,149,946 12,919,773 Aircraft services and other 3,865,859 1,517,184 703,670 36,100,548 32,950,972 30,673,908 OPERATING EXPENSES: Flight operations 12,653,601 12,131,978 11,597,475 Maintenance and brokerage 16,888,729 14,332,419 13,012,291 General and administrative (Note 8) 3,815,987 3,582,055 3,344,489 Depreciation and amortization 484,711 458,619 330,515 33,843,028 30,505,071 28,284,770 OPERATING INCOME 2,257,520 2,445,901 2,389,138 NON-OPERATING EXPENSE (INCOME): Interest 981 661 8,227 Other (263,508) (313) (5,352) (262,527) 348 2,875 EARNINGS BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 2,520,047 2,445,553 2,386,263 INCOME TAXES (Note 7) 908,000 848,000 807,000 EARNINGS BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 1,612,047 1,597,553 1,579,263 CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE (Note 7) - - 715,000 NET EARNINGS $ 1,612,047 $ 1,597,553 $ 2,294,263 NET EARNINGS PER COMMON SHARE (Note 5): Earnings before cumulative effect of change in accounting principle $ 0.53 $ 0.48 $ 0.47 Cumulative effect of change in accounting principle - - 0.22 Net earnings $ .53 $ 0.48 $ 0.69 WEIGHTED AVERAGE SHARES OUTSTANDING 3,019,831 3,312,387 3,347,689 See notes to consolidated financial statements.
17 AIR TRANSPORTATION HOLDING COMPANY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Common Stock (Note 6) Additional Paid-In Shares Amount Capital Deficit Balance, March 31, 1993 2,912,433 $728,108 $8,279,308 $(4,514,500) Cash dividend ($.05 per share) - - - (145,622) Net earnings - - - 2,294,263 Balance, March 31, 1994 2,912,433 728,108 8,279,308 (2,365,859) Repurchase and retirement of common stock (278,500) (69,625) (563,450) (534,525) Exercise of stock options 232,000 58,000 175,250 - Cash dividend ($.06 per share) - - - (174,746) Net earnings - - - 1,597,553 Balance, March 31, 1995 2,865,933 716,483 7,891,108 (1,477,577) Repurchase and retirement of common stock (238,500) (59,625) (669,563) (281,855) Exercise of stock options 98,000 24,500 77,500 - Cash dividend paid ($.07 per share) - - - (200,615) Cash dividend declared ($.08 per share) (218,435) Net earnings - - - 1,612,047 Balance, March 31, 1996 2,725,433 $ 681,358 $7,299,045 $ (566,435) See notes to consolidated financial statements.
18 AIR TRANSPORTATION HOLDING COMPANY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
For Year Ended March 31 1996 1995 1994 CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 1,612,047 $ 1,597,553 $ 2,294,263 Adjustments to reconcile net earnings to net cash provided by operating activities Cumulative effect of change in accounting principle - - (715,000) Depreciation and amortization 484,711 458,619 330,515 Other - - (5,352) Change in deferred tax asset 107,782 104,180 355,000 Charge in lieu of income taxes credited to goodwill 323,346 275,468 214,000 Changes in assets and liabilities which provided (used) cash: Accounts receivable 232,616 (344,082) (236,631) Parts and supplies inventory (455,850) (168,833) (13,280) Other assets (88,180) (4,709) (6,122) Accounts payable (789,792) 834,037 (485,581) Accrued expenses 154,009 264,334 (20,686) Income taxes payable 197,059 29,941 (18,254) Total adjustments 165,701 1,448,955 (601,391) Net cash provided by operating activities 1,777,748 3,046,508 1,692,872 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (204,172) (1,048,851) (758,932) Proceeds from sale of equipment 263,508 - 30,552 Loans (to) from officers - 750,000 (280,000) Short-term investments (1,889,819) - - Net cash used in investing activities(1,830,483) (298,851) (1,008,380) CASH FLOWS FROM FINANCING ACTIVITIES Payments on long-term debt (4,651) (5,935) (221,098) Payment of cash dividend (200,615) (174,746) (145,622) Repurchase of common stock (1,011,043) (1,167,600) - Exercise of stock options 102,000 233,250 - Net cash used in financing activities(1,114,309) (1,115,031) (366,720) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,167,044) 1,632,626 317,772 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 3,380,885 1,748,259 1,430,487 CASH AND CASH EQUIVALENTS AT END OF YEAR $ 2,213,841 $ 3,380,885 $ 1,748,259 19 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the year for: Interest $ 981 $ 1,233 $ 9,347 Income taxes 346,873 338,562 275,703 Non-Cash financing activity - dividend accrual 218,435 - - See notes to consolidated financial statements
AIR TRANSPORTATION HOLDING COMPANY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED MARCH 31, 1996, 1995, AND 1994 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principal Business Activity - The Company, through its operating subsidiaries, is an air cargo carrier specializing in the overnight delivery of small package air freight, for a major express delivery company out of 78 cities principally located in 30 states in the eastern half of the U.S. and in Canada, Puerto Rico, and the Virgin Islands. The Company also provides aircraft parts, engine overhaul management and component repair services. Principles of Consolidation - The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Mountain Air Cargo, Inc., CSA Air, Inc., and Mountain Aircraft Services, LLC. All significant intercompany transactions and balances have been eliminated. Use of Estimates - The preparation of the Company's financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reportedamounts of revenues and expenses during the reporting period. Actual results Investments could differ from those estimates. Parts and Supplies Inventory - Parts and supplies inventory are carried at the lower of average cost or market. In accordance with industry practice, the Company includes in current assets parts and supplies, although a certain portion of these inventories are not expected to be used within one year. Property and Equipment - Property and equipment is stated at cost or, in the case of equipment under capital leases, the present value of future lease payments. Rotables inventory represents aircraft parts which are repairable and are, therefore, capitalized and depreciated over their estimated useful lives. Depreciation and amortization are provided on a straight-line basis over estimated useful lives of 3-9 years for property and equipment. Assets held for sale are carried at the lower of cost or estimated realizable value. 20 Excess of Cost Over Net Assets of Subsidiary Acquired - Excess of cost over net assets of subsidiary acquired represents the difference between the fair value of the Company's stock issued and the carrying value of the net asset deficiency of an acquired business as of the acquisition date. The excess is being amortized on a straight-line basis over a 40 year period. The Company periodically evaluates the value of the carrying amount of goodwill using estimates of future cash flows and operating earnings of the business acquired. Adjustments to the carrying amount, or amortization period of goodwill, will be made if the earnings and cash flow outlook do not support the current carrying value. Investments - The Company has a cash management program which provides for the investment of excess cash balances. Investments at March 31, 1996 represent available-for-sale securities carried at fair value (which approximates cost). Investments consist primarily of commercial paper, bonds, and mutual funds. Cargo and Maintenance Revenue - Cargo revenue is recognized at the time the route is completed, and maintenance revenue is recognized when the service has been performed. Operating Expenses Reimbursed by Customer - The Company, under the terms of its dry lease service contracts, passes through to its major customer certain cost components of its operations without markup. The cost of fuel, landing fees, outside maintenance and certain other direct operating costs are included in operating expenses and billed to the customer, as cargo and maintenance revenue, at cost. Net Earnings Per Common Share - Earnings per share have been compiled by dividing net earnings by the weighted average number of common shares outstanding, including common shares issuable under employee stock options which are considered common share equiva-lents. There were no material differences between primary and fully diluted earnings per share. (see Reverse Stock Split below) Reverse Stock Split - Company stockholders, at a special stockholders meeting held May 4, 1994, approved, effective May 16, 1994, a one-for-five reverse stock split of the Company's common shares. All 1996, 1995 and 1994 common stock par values, share balances, earnings per share and dividends have been restated to reflect the reverse stock split. Cash Equivalents - Cash equivalents consist of liquid investments with maturities of three months or less when purchased. 21 Income Taxes - The Company adopted Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes" as of the beginning of fiscal 1994, and the cumulative effect of this change in accounting principle is reported in the Consolidated Statements of Earnings for Fiscal 1994. The cumulative effect on net earnings of adoption of $715,000 ($.22 per share) reflects the impact of "temporary differences" between amounts of assets and liabilities for financial reporting purposes and such amounts as measured by tax laws, and the future utilization of net operating loss and alternative minimum tax credit carryforwards. In addition, the cumulative effect of adoption reduced goodwill by $320,000, which reflects the effect of future utilization of pre-acquisition loss carryforwards. Effect of New Accounting Standards - In October 1995, the Financial Accounting Standards Board issued SFAS No. 123, "Accounting for Stock-Based Compensation". Under SFAS No. 123, companies are permitted to either adopt this new standard and record expenses of stock options and other stock-based employee compensation plans based on their fair value at date of grant or continue to apply Accounting Principles Board ("APB") Opinion No. 25 and increase footnote disclosure. The Company has decided to continue to apply APB Opinion No. 25, and in fiscal 1997, to increase footnote disclosure to include the pro forma impact on net earnings and earnings per share based on the application of the fair value based method of accounting. Reclassification - Certain amounts have been reclassified for 1995 and 1994 to conform to the 1996 presentation. 2. ACCRUED EXPENSES Accrued expenses consist of the following: MARCH 31, 1996 1995 Salaries, Wages and Related Items $ 684,440 $ 648,685 Profit Sharing 409,000 402,079 Other 461,844 350,511 $1,555,284 $1,401,275 3. FINANCING ARRANGEMENTS The Company's accounts receivable and inventory financing line provides for credit up to the lesser of $2,250,000 or the sum of 85% of eligible accounts receivable and 35% of inventory (up to $400,000 maximum inventory borrowing). Amounts advanced bear interest at the prime rate payable upon demand. The prime rate at March 31, 1996 was 8 1/4%. Any advances are collateralized by a first lien on accounts receivable, inventories (including inventory classified as assets held for sale) and certain equipment. There were no advances outstanding as of March 31, 1996 or 1995. 22 4. LEASE COMMITMENTS The Company has capital lease obligations for office equipment and also has operating lease commitments for office equipment and its office and maintenance facilities. The Company leased its central office and maintenance facilities from a company controlled by Company officers for $7,000 per month under a five year lease which expires in May 1996. Effective June 1996, the lease was renewed for an additional five-year period at $8,073 per month. The Company is scheduled to relocate and expand its maintenance and repair facilities to North Carolina's new Global TransPark (GTP) located in Kinston, N.C. in August 1996. The lease for this facility is to be twenty one and one half years, but may be cancellable by the Company upon the occurance of certain events. Under the terms of the lease, the Company will pay rent, after an 18 month grace period, per square foot escalating from $2.25 to $5.90 over the remaining life of the lease. At March 31, 1996, future minimum annual rental payments under capital leases and operating leases, including the GTP lease, with initial or remaining terms of more than one year are as follows: Capital Operating Leases Leases 1997 $ 6,372 $ 132,525 1998 3,717 146,399 1999 216,805 2000 216,805 2001 216,805 Thereafter 3,943,428 Total minimum lease payments 10,089 $4,872,767 Less amount representing interest, at 5.7% 464 Present value of lease payments 9,625 Less current maturities 5,976 Long-term maturities $ 3,649 Rent expense for operating leases amounted to $177,000 (1996), $179,000 (1995), and $149,000 (1994). Rent expense to related parties was $84,000 (1996, 1995, and 1994). 5. STOCKHOLDERS' EQUITY In 1984, the Company created a class of preferred stock, $1 par value. The Company may issue up to 10,000,000 shares of preferred stock, in one or more series, on such terms and with such rights, preferences and limitations as determined by the Board of Directors. No preferred shares have been issued as of March 31, 1996. 23 The Company has granted options to purchase 447,000 and 130,000 shares of common stock to certain Company employees at a price of $1.00 and $1.25 per share, respectively. As of March 31, 1996, options totaling 330,000 shares have been exercised and 247,000 shares remain available and exercisable through outstanding options. The Company has reserved an aggregate of 247,000 common shares for issuance upon exercise of these stock options. The Company has announced its intention to repurchase the Company's common stock under a share repurchase program. At March 31, 1996, the Company may expend up to $821,000 under this program. 6. REVENUES FROM MAJOR CUSTOMER Approximately 90% of the Company's revenues are derived from services performed for a major air express company. 7. INCOME TAXES The provision for income taxes was based upon the liability method in 1996, 1995 and 1994 and consists of: YEAR ENDED MARCH 31, 1996 1995 1994 Current: Federal $ 296,000 $ 273,000 $ 44,000 State 182,000 195,000 194,000 Total current 478,000 468,000 238,000 Charge in lieu of Federal taxes 430,000 380,000 569,000 Total $ 908,000 $ 848,000 $ 807,000 Pre-acquisition net operating loss carryforwards have been utilized for federal income tax purposes for fiscal years 1996, 1995 and 1994. The income tax benefit ($323,000) in 1996, $275,000 in 1995 and $214,000 in 1994) derived from these pre-acquisition net operating loss carryforwards has been accounted for as a reduction of goodwill. The consolidated income tax provision was different from the amount computed using the statutory Federal income tax rate for the following reasons: 1996 1995 1994 Income tax provision at U.S. statutory rate $841,000 $765,000 $745,000 State income taxes 182,000 195,000 194,000 Reduction in valuation allowance (115,000) (112,000) (132,000) Income tax provision $908,000 $848,000 $807,000 The tax effect of temporary differences and net operating loss carryfor- wards that gave rise to the Company's deferred tax asset at March 31, 1996 and 1995 are as follows: 24 1996 1995 Net operating loss carryforwards $ 163,849 $ 715,166 Alternative minimum tax credit carryforwards - 91,565 Fixed assets 420,392 115,409 Other 53,850 261,820 638,091 1,183,960 Less: Valuation allowance (170,253) (608,340) Deferred tax asset $ 467,838 $ 575,620 The deferred tax asset is broken down between current and noncurrent amounts in the accompanying 1996 and 1995 consolidated balance sheets according to the classification of the related asset and liability or, in the case of tax loss carryforwards, based on their expected utilization date. The Company has recorded a valuation allowance in order to reduce its deferred tax asset to an amount which is more likely than not to be realized. Of the $170,000 valuation allowance at March 31, 1996, approximately $152,000 relates to pre-acquisition carryforwards while approximately $18,000 is related to other deferred benefits. Reductions in the valuation allowance derived from utilization of pre-acquisition carryforwards of $323,000 and $275,000 have been credited directly to goodwill during the 1996 and 1995 fiscal years, respectively. Changes in the valuation allowance, related to future utilization of post- acquisition net operating losses, reduced the provision for income taxes by $115,000 and $112,000, respectively, during the 1996 and 1995 fiscal years. At March 31, 1996, the Company has federal net operating loss carryforw- ards available for tax purposes of approximately $500,000. These carryforwards expire in 1997. The potential utilization of these pre- acquisition carryforwards is subject to the separate return limitation rules pursuant to Treasury regulations. These carryforwards, to the extent realized, will result in a reduction of goodwill, until goodwill is reduced to zero. 8. EMPLOYEE BENEFITS The Company has a 401K defined contribution plan (AirT 401(K) Retirement Plan). All employees of the Company are eligible to participate in the plan. The Company's contribution to the 401(K) plan for the years ended March 31, 1996, 1995 and 1994 was $210,052, $171,298, and $142,593, respectively. The Company, in each of the past three years, has paid a discretionary profit sharing bonus in which all employees have participated. The Company's March 31, 1996, 1995, and 1994 expense was $409,000, $397,000 and $388,000, respectively. 25 Effective January 1, 1996 the Company entered into supplemental retirement agreements with certain key executives of the Company, to provide for a monthly benefit upon retirement. The following table sets forth the funded status of the plan at March 31, 1996. Vested Benefit Obligation $ 913,847 Accumulated Benefit Obligation $ 913,847 Projected Benefit Obligation $ 913,847 Plan Assets at Fair Value $ - Projected Benefit Obligation greater than plan assets (913,847) Prior service cost not yet recognized 871,737 Accrued pension cost recognized in the consolidated balance sheet $ (42,110) The projected benefit obligation was determined using an assumed discount rate of 7%. The liability relating to these benefits has been included in accrued expenses in the accompanying financial statements. Net periodic pension expense for 1996 included the following: Service Cost $ 6,838 Interest Cost 15,212 Amortization 20,060 Net periodic pension cost $ 42,110 9. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) (in thousands except per share data) FIRST SECOND THIRD FOURTH 1996 QUARTER QUARTER QUARTER QUARTER Operating Revenues $8,364 $8,694 $8,762 $10,281 Gross Profit 812 504 663 541 Net Earnings 520 301 353 438 Net Earnings Per Share $ .17 $ .10 $ .12 $ .15 FIRST SECOND THIRD FOURTH 1995 QUARTER QUARTER QUARTER QUARTER Operating Revenues $8,051 $8,081 $8,121 $8,698 Gross Profit 652 693 613 487 Net Earnings 431 433 384 350 Net Earnings Per Share $ .13 $ .13 $ .11 $ .11 26 Item 9. Disagreements on Accounting and Financial Disclosure. The Company had no disagreements on accounting or financial disclosure matters with its independent certified public accountants to report under this Item 9. PART III Item 10. Directors and Executive Officers of the Registrant. J. Hugh Bingham, age 50, has served as Senior Vice President of the Company since June 1990, as Executive Vice President from June 1983 to June 1990, and as a director since March 1987. Mr. Bingham also serves as an Executive Vice President and a director of MAC and of CSA and as President of MAS. David Clark, age 73, has served as Chairman of the Board of Directors of the Company and as Chairman of the Board of all the Company's subsidiaries since June 23, 1983. From June 23, 1983, Mr. Clark also served as the Company's, and each of its subsidiaries', Chief Executive Officer and from the spring of 1984 until June 1990, he served as the Company's President. Mr. Clark is also Chairman of the Board of MAC and of CSA. He has served for the past five years as President of a real estate development concern with interests in North Carolina. John J. Gioffre, age 52, has served as Vice President-Finance and Chief Financial Officer of the Company since April 1984 and as Secretary/Treasurer of the Company since June 1983. He has served as a director of the Company since March 1987. Mr. Gioffre also serves as Vice-President, Secre- tary/Treasurer and a director of MAC and CSA and as Vice President-Finance, Treasurer and Secretary of MAS. H. Wayne Ross, age 51, has served as President of CSA since October 1988. William H. Simpson, age 48, has served as Executive Vice President of the Company since June 1990, as Vice President from June 1983 to June 1990, and as a director of the Company since June 20, 1985. Mr. Simpson is also the President and a director of MAC, a director of CSA and Executive Vice President of MAS. Menda J. Street, age 44, has served as Vice President of MAC since 1984, and in various other capacities at MAC since 1979. Claude S. Abernethy, Jr., age 69, was elected as director of the Company in June 1990. For the past five years, Mr. Abernethy has served as a Senior Vice President of Interstate/Johnson Lane Corporation, a securities brokerage and investment banking firm. Mr. Abernethy is also a director of Inter- state/Johnson Lane Corporation and Carolina Mills, Inc. Sam Chesnutt, age 62, was elected a director of the Company in August 1994. Mr. Chesnutt serves as President of Sam Chesnutt and Associates, an agribusiness consulting firm. From November 1988 to December 1994, Mr. Chesnutt served as Executive Vice President of AgriGeneral Company, L.P., an agribusiness firm. 27 Walter Clark, age 39, was elected a director of the Company in April 1996. Mr. Clark has been self-employed in the real estate development business since 1985. J. Leonard Martin, age 59, was elected a director in August 1994. Mr. Martin is currently an independent aviation consultant. From April 1994 to June 1995, Mr. Martin has served as Chief Operating Officer of Musgrave Machine & Tool, Inc., a machining company. From January 1989 to April 1994, Mr. Martin served as a consultant to the North Carolina Air Cargo Authority in connection with the establishment of the Global TransPark air cargo facility in Kinston, North Carolina. From 1955 through 1988 Mr. Martin was employed by Piedmont Airlines, a commercial passenger airline, in various capacities, ultimately serving as Senior Vice President-Passenger Services. George C. Prill, age 73, has served as a director of the Company since June 1982, as Chief Executive Officer and Chairman of the Board of Directors from August 1982 until June 1983, and as President from August 1982 until spring 1984. Mr. Prill has served as an Editorial Director for General Publications, Inc., a publisher of magazines devoted to the air transportation industry, since November 1992 and was retired from 1990 until that time. From 1979 to 1990, Mr. Prill served as President of George C. Prill & Associates, Inc., of Charlottesville, Virginia, which performed consulting services for the aerospace and airline industry. Mr. Prill has served as President of Lockheed International Company, as Assistant Administrator of the FAA, as a Senior Vice President of the National Aeronautic Association and Chairman of the Aerospace Industry Trade Advisory Committee. Terry Sanford, age 78, was elected a director in August 1994. Mr. Sanford is President Emeritus of Duke University, a position held since 1985, and has been a Professor of Public Policy at the Terry Sanford Institute of Public Policy at Duke University since 1992. In addition, since 1993, Mr. Sanford has been a partner of The Sanford Law Firm in Raleigh, North Carolina. From 1986 to 1993, Mr. Sanford served as a United States Senator representing the State of North Carolina. Mr. Sanford serves on the board of directors of IMC, Inc., the parent of Golden Corral Corporation. Walter Clark is David Clark's son. The officers of the Company and its subsidiaries each serve at the pleasure of the Board of Directors. Each director receives a director's fee of $500 per month and an attendance fee of $500 is paid to outside directors for each meeting of the board of directors or a committee thereof. 28 To the Company's knowledge, based solely on review of the copies of reports under Section 16(a) of the Securities Exchange Act of 1934 that have been furnished to the Company and written representations that no other reports were required, during the fiscal year ended March 31, 1996 all executive officers, directors and greater than ten-percent beneficial owners have complied with all applicable Section 16(a) filing requirements, except that Mr. Chesnutt was a few days late in filing one report with respect to an acquisition transaction. Item 11. Executive Compensation. The following table sets forth a summary of the compensation paid during each of the three most recent fiscal years to Mr. Clark, as Chief Executive Officer, and to each of the other individuals who were executive officers on March 31, 1996 with total compensation of $100,000 or more. SUMMARY COMPENSATION TABLE All Other Annual Compensation Compensation Name and Principal Position Year Salary ($) Bonus ($) ($) David Clark 1996 155,749 59,583 - Chief Executive Officer 1995 144,738 59,345 - 1994 136,381 55,494 (1) J. Hugh Bingham 1996 124,953 67,583 - Senior Vice President 1995 107,177 67,845 - 1994 102,153 37,747 - John J. Gioffre 1996 97,426 49,937 - Vice President 1995 99,898 52,134 - 1994 90,443 28,747 - William H. Simpson 1996 160,204 73,583 - Executive Vice President 1995 149,221 79,845 - 1994 140,537 77,494 - Menda J. Street 1996 93,316 38,291 - Vice President of MAC 1995 89,283 39,422 - 1994 84,113 36,747 - ____________________________ (1) During the fiscal year ended March 31, 1994, the Company made certain loans to Mr. Clark. See "Item 13 - Certain Relationships and Related Transactions." 29 The following table sets forth the number of shares of Common Stock underlying unexercised options at March 31, 1996 held by each of the executive officers listed in the Summary Compensation Table. The table also includes the value of such options at March 31, 1996 based upon the closing bid price of the Company's Common Stock in the over-the-counter market on that date ($4.00 per share) and the exercise price of the options. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES Number of Securities Value of Shares Underlying Unexercised Acquired Value Unexercised In-the-Money Options On Realized Options at FYE(#) at FY-End ($) Exer- Exer- Unexer- Exer- Unexer- Name cise # ($) cisable cisable cisable cisable David Clark - - - - - - J. Hugh Bingham 14,000 42,000 78,000 - 312,000 - John J. Gioffre 8,000 24,000 42,000 - 168,000 - William H. Simpson 20,000 60,000 108,000 - 432,000 - Menda J. Street - - 15,000 - 60,000 - Item 12. Security Ownership of Certain Beneficial Owners and Management. The following table sets forth information regarding the beneficial ownership of shares of Common Stock (determined in accordance with Rule 13d-3 of the Securities and Exchange Commission) of the Company as of May 15, 1996 by each person that beneficially owns five percent or more of the shares of Common Stock. Each person named in the table has sole voting and investment power with respect to all shares of Common Stock shown as beneficially owned, except as otherwise set forth in the notes to the table. 30 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS Amount and Nature of Title of Name and Address of Beneficial Ownership Percent Class Beneficial Owner as of May 31, 1996 of Class Common Stock, David Clark, Trustee 1,294,826(1) 49.5% par value $.25 P.O. Box 488 per share Denver, N.C. Thomas B. Henson, Trustee 1,294,826(1) 49.5% 1900 Independence Center 101 North Tryon Street Charlotte, N.C. 28246 William H. Simpson 261,580(2) 9.9% P.O. Box 488 Denver, N.C. 32 Kennedy Capital Mgmt, Inc.(3) 229,438 8.8% 425 North Ballas Road St. Louis, Missouri 63141 ____________________________ (1) Shares held pursuant to a revocable trust established by David Clark under an Agreement dated August 21, 1995. (2) Includes 1,200 shares held jointly with J. Hugh Bingham, and 108,000 shares under options granted by the Company. (3) Information regarding Kennedy Capital Management, Inc. is based upon information provided by Kennedy Capital Management Inc. to the Company on June 17, 1996. The following table sets forth information regarding the beneficial ownership of shares of Common Stock of the Company by each director of the Company and by all directors and officers of the Company as a group as of May 15, 1996. Each person named in the table has sole voting and investment power with respect to all shares of Common Stock shown as beneficially owned, except as otherwise set forth in the notes to the table. 31 SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS Shares and Percent of Common Stock Beneficially Owned Name Position with Company as of May 15, 1996 No. of Shares Percent J. Hugh Bingham Senior Vice President, 116,080 (1)(2) 4.3% Director David Clark Chairman of the Board of 1,294,826 (3) 49.5% Directors and Chief Executive Officer John J. Gioffre Vice President-Finance, 57,580 (4) 2.2% Secretary and Treasurer, Director William H. Simpson Executive Vice President, 261,580 (1)(5) 9.6% Director Claude S. Abernethy, Jr. Director 22,611 * Sam Chesnutt Director 3,600 * Walter Clark Director 0 0% J. Leonard Martin Director 100 (6) * George C. Prill Director 45,966 1.8% Terry Sanford Director 0 0% All directors and N/A 1,823,343 (7) 63.9% executive officers as a group (12 persons) __________________________________________ * Less than one percent. (1) Includes 1,200 shares jointly held by Messrs. Simpson and Bingham. (2) Includes 78,000 shares under options granted by the Company to Mr. Bingham. (3) Shares held pursuant to a revocable trust established by David Clark under an Agreement dated August 21, 1995. (4) Includes 42,000 shares under options granted by the Company to Mr. Gioffre. (5) Includes 108,000 shares under options granted by the Company to Mr.Simpson. (6) Such 100 shares are held by Mr. Martin's spouse of which shares Mr.Martin disclaims beneficial ownership. (7) Includes an aggregate of 243,000 shares of Common Stock members of such group have the right to acquire within 60 days. 32 Item 13. Certain Relationships and Related Transactions. The Company leases its corporate and operating facilities at the Little Mountain, North Carolina airport from Little Mountain Airport Associates, Inc. ("Airport Associates"), a corporation whose stock is owned by David Clark, J. Hugh Bingham, William H. Simpson, John J. Gioffre and three unaffiliated third parties. On May 30, 1996, the Company renewed its lease for this facility, scheduled to expire on that date, for an additional five-year term, and adjusted the rent to account for increases in the consumer price index. The lease may be extended for an additional five-year term, with rental payments to be adjusted to reflect changes in the consumer price index. Upon the renewal, the monthly rental payment was increased from $7,000 to $8,073. The Company paid aggregate rental payments of $84,000 to Airport Associates pursuant to such lease during the fiscal year ended March 31, 1996. As part of the Company's stock repurchase program, the Company repurchased certain shares of Common Stock from Messrs. Bingham, Gioffre and Simpson during fiscal year ended March 31, 1996. On October 16, 1995, the Company purchased for cash 25,000 shares of Common Stock from Mr. Simpson in a negotiated transaction at a price of $4.35 per share. On March 15, 1996, the Company purchased for cash 40,000 shares and 17,500 shares of Common Stock from Messrs. Bingham and Gioffre, respectively, in negotiated trans- actions at a price of $4.20 per share. The per share purchase price in each of the foregoing transactions was equal to the average closing price per share of the Common Stock as reported by NASDAQ for the 30-day period prior to the date of repurchase. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K The following documents are filed as part of this report: 1. Financial Statements The following financial statements are incorporated herein by reference in Item 8 of Part II of this report: (i) Independent Auditors' Report. (ii) Consolidated Balance Sheets as of March 31, 1996 and 1995. (iii) Consolidated Statements of Earnings for each of the three years in the period ended March 31, 1996. (iv) Consolidated Statements of Stockholders' Equity for each of the three years in the period ended March 31, 1996. (v) Consolidated Statements of Cash Flows for each of the three years in the period ended March 31, 1996. (vi) Notes to Consolidated Financial Statements. 2. Financial Statement Schedules No schedules are required to be submitted. 33 3. Exhibits No. Description 3.1 Certificate of Incorporation, as amended, incorporated by reference to Exhibit 3.1 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1994 3.2 By-laws of the Company 4.1 Specimen Common Stock Certificate, incorporated by reference to Exhibit 4.1 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31,1994 10.1 Aircraft Dry Lease and Service Agreement dated February 2, 1994 between Mountain Air Cargo, Inc. and Federal Express Corporation, incorporated by reference to Exhibit 10.13 to Amendment No. 1 on Form 10-Q/A to the Company's Quarterly Report on Form 10-Q for the quarterly period ended December 31, 1993 10.2 Loan Agreement among NationsBank of North Carolina, N.A., the Company and its subsidiaries, dated January 17, 1995, incorporated by reference to Exhibit 10.7 to the Company's Quarterly Report on Form 10-Q for the period ended December 31, 1994 10.3 Aircraft Wet Lease Agreement dated April 1, 1994 between Mountain Air Cargo, Inc. and Federal Express Corporation, incorporated by reference to Exhibit 10.4 of Amendment No. 1 on Form 10-Q/Q to the Company's Quarterly Report on Form 10-Q for the period ended September 30, 1994 10.4 Adoption Agreement regarding the Company's Master 401(k) Plan and Trust, incorporated by reference to Exhibit 10.7 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1993* 10.5 Form of options to purchase the following amounts of Common Stock issued by the Company to the following executive officers during the following fiscal years ended March 31: * Number of Shares Executive Officer 1993 1992 1991 J. Hugh Bingham 150,000 150,000 200,000 John J. Gioffre 100,000 100,000 125,000 William H. Simpson 200,000 200,000 300,000 incorporated by reference to Exhibit 10.8 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1993 10.6 Premises and Facilities Lease dated November 16, 1995 between Global TransPark Foundation, Inc. and Mountain Air Cargo, Inc., incorporated by reference to Exhibit 10.5 to Amendment No. 1 on Form 10-Q/Ato the Company's Quarterly Report on Form 10-Q for the period ended December 31, 1995 34 10.7 Employment Agreement dated January 1, 1996 between the Company,Mountain Air Cargo Inc., CSA Air Inc. and Mountain Aircraft Services, LLC and David Clark. 10.8 Employment Agreement dated January 1, 1996 between the Company,Mountain Air Cargo Inc. and Mountain Aircraft Services, LLC and William H. Simpson. 10.9 Employment Agreement dated January 1, 1996 between the Company,Mountain Air Cargo Inc., CSA Air Inc. and Mountain Aircraft Services, LLC and John J. Gioffre. 10.10 Employment Agreement dated January 1, 1996 between the Company,Mountain Air Cargo Inc. and Mountain Aircraft Services, LLC and J. Hugh Bingham. 11.1 Computation of Primary and Fully Diluted Earnings per Common Share 21.1 List of subsidiaries of the Company, incorporated by reference to Exhibit 21.1 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1994 27.1 Financial Data Schedule __________________ * Management compensatory plan or arrangement required to be filed as an exhibit to this report. b. Reports on Form 8-K. No Current Reports on Form 8-K were filed in the last quarter of the fiscal year ended March 31, 1996. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AIR TRANSPORTATION HOLDING COMPANY, INC. By: /s/ David Clark David Clark, Chief Executive Officer (Principal Executive Officer) Date: June 20, 1996 35 By: /s/ John J. Gioffre John J. Gioffre, Vice President - Finance (Principal Financial and Accounting Officer) Date: June 20, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ Claude S. Abernathy Claude S. Abernethy, Jr., Director Date: June 20, 1996 By: /s/ J. Hugh Bingham J. Hugh Bingham, Director Date: June 20, 1996 By: /s/ David Clark David Clark, Director Date: June 20, 1996 By: /s/ Sam Chesnutt Sam Chesnutt, Director Date: June 20, 1996 By: /s/ Walter Clark Walter Clark, Director Date: June 20, 1996 By: /s/ John J. Gioffre John J. Gioffre, Director Date: June 20, 1996 By: /s/ J. Leonard Martin J. Leonard Martin, Director Date: June 20, 1996 36 By: /s/ George C. Prill George C. Prill, Director Date: June 20, 1996 By: /s/ William Simpson William Simpson, Director Date: June 20, 1996 By: /s/ Terry Sanford Terry Sanford, Director Date: June 20, 1996 EXHIBIT INDEX Sequentially Exhibit Number Document Numbered Page 3.2 By-laws of the Company 38-49 10.7 Executive employment agreement with David Clark 50-58 10.8 Executive employment agreement with William Simpson 59-70 10.9 Executive employment agreement with John Gioffre 71-81 10.10 Executive employment agreement with Hugh Bingham 82-92 11.1 Computation of Primary and Fully Diluted Earnings per Common Stock 93 27.1 Financial Data Schedule 94 37 EX-11 2 AIR TRANSPORTATION HOLDING COMPANY, INC. AND SUBSIDIARIES Exhibit 11.1 Computation for Primary and Fully Diluted Earnings Per Common Share
For Year Ended March 31 1996 1995 1994 EARNINGS BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPAL $1,612,047 $1,597,553 $1,579,263 CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE - - 715,000 NET EARNINGS $1,612,047 $1,597,553 $2,294,263 WEIGHTED AVERAGE COMMON SHARES: Primary: Weighted average shares outstanding 2,771,025 2,867,766 2,912,433 Dilutive stock options 248,806 444,621 435,256 3,019,831 3,312,387 3,347,689 Fully Diluted: Weighted average shares outstanding 2,771,025 2,867,766 2,912,433 Dilutive stock options 250,054 426,988 451,330 3,021,079 3,294,754 3,363,763 NET EARNINGS PER COMMON SHARE: Primary: Earnings before cumulative effect of change in accounting principle $ 0.53 $ 0.48 $ 0.47 Change in accounting principle - - 0.22 Net earnings $ 0.53 $ 0.48 $ 0.69 Fully Diluted: Earnings before cumulative effect of change in accounting principle $ 0.53 $ 0.48 $ 0.47 Change in accounting principle - - 0.21 Net earnings $ 0.53 $ 0.48 $ 0.68 Note: All common share data reflect the one-for-five reverse stock split effective May 15, 1995.
EX-27 3
5 "This schedule contains summary financial information extracted from Air Transportation Holding Company, Inc.'s SEC Form 10-K for fiscal year ended March 31, 1996 (identify specific fianancial statements) and is qualified in its entirety by reference to such financial statements." 12-MOS MAR-31-1996 MAR-31-1996 2213841 0 3133670 0 725503 8464158 3248834 1678980 10220071 2802454 0 0 0 681358 0 10220071 36100548 36100548 0 33843028 (263508) 0 981 2520047 908000 1612047 0 0 0 1612047 0.530 0.530
EX-3 4 Exhibit 3.2 ATLANTA EXPRESS AIRLINE CORPORATION ---ooOoo--- BY - L A W S ---ooOoo--- ARTICLE I OFFICES Section 1. The registered office shall be in the City of Wilmington, County of New Castle, State of Delaware. Section 2. The corporation may also have offices at such other places both within and without the State of Delaware as the board of directors may from time to time determine or the business of the corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS Section 1. All meetings of the stockholders for the election of directors shall be held in the City of Auburn, State of Alabama, at such place as may be fixed from time to time by the board of directors, or at such other place either within or without the State of Delaware as shall be designated from time to time by the board of directors and stated in the notice of the meeting. Meetings of stockholders for any other purpose may be held at such time and place, within or without the State of Delaware, as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2. Annual meetings of stockholders, commencing with the year 1981, shall be held on the twentieth day of May if not a legal holiday, and if a legal holiday, then on the next secular day following, at 10:00 A.M., or at such other date and time as shall be designated from time to time by the board of directors and stated in the notice of the meeting, at which they shall elect by a plurality vote a board of directors, and transact such other business as may properly be brought before the meeting. Section 3. Written notice of the annual meeting stating the place, date and hour of the meeting shall be given to each stockholder entitled to vote at such meeting not less than ten nor more than sixty days before the date of the meeting. Section 4. The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. Section 5. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the certificate of incorporation, may be called by the 38 president and shall be called by the president or secretary at the request in writing of a majority of the board of directors, or at the request in writing of stockholders owning a majority in amount of the entire capital stock of the corporation issued and outstanding and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting. Section 6. Written notice of a special meeting stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is called, shall be given not less than ten nor more than sixty days before the date of the meeting, to each stockholder entitled to vote at such meeting. Section 7. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice. Section 8. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the certificate of incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally notified. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 9. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of the statutes or of the certificate of incorporation, a different vote is required in which case such express provision shall govern and control the decision of such question. Section 10. Unless otherwise provided in the certificate of incorpora- tion each stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of the capital stock having voting power held by such stockholder, but no proxy shall be voted on after three years from its date, unless the proxy provides for a longer period. Section 11. Unless otherwise provided in the certificate of incorpora- tion, any action required to be taken at any annual or special meeting of stockholders of the corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. 39 ARTICLE III DIRECTORS Section 1. The number of directors which shall constitute the whole board shall be not less than one nor more than nine. The first board shall consist of one director. Thereafter, within the limits above specified, the number of directors shall be determined by resolution of the board of directors or by the stockholders at the annual meeting. The directors shall be elected at the annual meeting of the stockholders, except as provided in Section 2 of this Article, and each director elected shall hold office until his successor is elected and qualified. Directors need not be stockholders. Section 2. Vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until the next annual election and until their successors are duly elected and shall qualify, unless sooner displaced. If there are no directors in office, then an election of directors may be held in the manner provided by statute. If, at the time of filling any vacancy or any newly created directorship, the directors then in office shall constitute less than a majority of the whole board (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten percent of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorship or to replace the directors chosen by the directors then in office. Section 3. The business of the corporation shall be managed by or under the direction of its board of directors which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the certificate of incorporation or by these by-laws directed or re- quired to be exercised or done by the stockholders. MEETINGS OF THE BOARD OF DIRECTORS Section 4. The board of directors of the corporation may hold meetings, both regular and special, either within or without the State of Delaware. Section 5. The first meeting of each newly elected board of directors shall be held at such time and place as shall be fixed by the vote of the stockholders at the annual meeting and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present. In the event of the failure of the stockholders to fix the time or place of such first meeting of the newly elected board of directors, or in the event such meeting is not held at the time and place so fixed by the stockholders, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the board of directors, or as shall be specified in a written waiver signed by all of the directors. Section 6. Regular meetings of the board of directors may be held without notice at such time and at such place as shall from time to time be determined by the board. Section 7. Special meetings of the board may be called by the president on two days' notice to each director, either personally or by mail or by telegram; special meetings shall be called by the president or secretary in like manner and on like notice on the written request of two directors unless the board consists of only one director; in which case 40 special meetings shall be called by the president or secretary in like manner and on like notice on the written request of the sole director. Section 8. At all meetings of the board a majority of the directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the board of directors, except as may be otherwise specifically provided by statute or by the certificate of incorporation. If a quorum shall not be present at any meeting of the board of directors the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 9. Unless otherwise restricted by the certificate of incorpora- tion or these by-laws, any action required or permitted to be taken at any meeting of the board of directors or of any committee thereof may be taken without a meeting, if all members of the board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the board or committee. Section 10. Unless otherwise restricted by the certificate of incorporation or these by-laws, members of the board of directors, or any committee designated by the board of directors, may participate in a meeting of the board of directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participat- ing in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting. COMMITTEES OF DIRECTORS Section 11. The board of directors may, by resolution passed by a majority of the whole board, designate one or more committees, each committee to consist of one or more of the directors of the corporation. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Any such committee, to the extent provided in the resolution of the board of directors, shall have and may exercise all the powers and authority of the board of directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the certificate of incorporation, adopting an agreement of merge or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property and assets, recommending to the stockholders a dissolution of the corporation or a revocation of a dissolution, or amending the by-laws of the corporation; and, unless the resolution or the certificate of incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the board of directors. Section 12. Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required. COMPENSATION OF DIRECTORS Section 13. Unless otherwise restricted by the certificate of incorporation or these 41 by-laws, the board of directors shall have the authority to fix the compensation of directors. The directors may be paid their expenses, if any, of attendance at each meeting of the board of directors and may be paid a fixed sum for attendance at each meeting of the board of directors or a stated salary as director. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. REMOVAL OF DIRECTORS Section 14. Unless otherwise restricted by the certificate of incorporation or by law, any director or the entire board of directors may be removed, with or without cause, by the holders of a majority of shares entitled to vote at an election of directors. ARTICLE IV NOTICES Section 1. Whenever, under the provisions of the statutes or of the certificate of incorporation or of these by-laws, notice is required to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or stockholder, at his address as it appears on the records of the corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given by telegram Section 2. Whenever any notice is required to be given under the provisions of the statutes or of the certificate of incorporation or of these by-laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. ARTICLE V OFFICERS Section 1. The officers of the corporation shall be chosen by the board of directors and shall be a president, a vice-president, a secretary and a treasurer. The board of directors may also choose additional vice-presidents, and one or more assistant secretaries and assistant treasurers. Any number of offices may be held by the same person, unless the certificate of incorporation or these by-laws otherwise provide. Section 2. The board of directors at its first meeting after each annual meeting of stockholders shall choose a president, one or more vice-presidents, a secretary and a treasurer. Section 3. The board of directors may appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board. Section 4. The salaries of all officers and agents of the corporation shall be fixed by the board of directors. Section 5. The officers of the corporation shall hold office until their successors are chosen and qualify. Any officer elected or appointed by the board of directors may be 42 removed at any time by the affirmative vote of a majority of the board of directors. Any vacancy occurring in any office of the corporation shall be filled by the board of directors. THE PRESIDENT Section 6. The president shall be the chief executive officer of the corporation, shall preside at all meetings of the stockholders and the board of directors, shall have general and active management of the business of the corporation and shall see that all orders and resolutions of the board of di- rectors are carried into effect. Section 7. He shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation. THE VICE-PRESIDENTS Section 8. In the absence of the president or in the event of his inability or refusal to act, the vice-president (or in the event there be more than one vice-president, the vice-presidents in the order designated by the directors, or in the absence of any designation, then in the order of their election) shall perform the duties of the president, and when so acting, shall have all the powers of and be subject to all the restrictions upon the president. The vice-presidents shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. THE SECRETARY AND ASSISTANT SECRETARY Section 9. The secretary shall attend all meetings of the board of directors and all meetings of the stockholders and record all the proceedings of the meetings of the corporation and of the board of directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the board of directors, and shall perform such other duties as may be prescribed by the board of directors or president, under whose supervision he shall be. He shall have custody of the corporate seal of the corporation and he, or an assistant secretary, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by his signature or by the signature of such assistant secretary. The board of directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by his signature. Section 10. The assistant secretary, or if there be more than one, the assistant secretaries in the order determined by the board of directors (or if there be no such determination, then in the order of their election) shall, in the absence of the secretary or in the event of his inability or refusal to act, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. THE TREASURER AND ASSISTANT TREASURERS Section 11. The treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and 43 to the credit of the corporation in such depositories as may be designated by the board of directors. Section 12. He shall disburse the funds of the corporation as may be ordered by the board of directors, taking proper vouchers for such disburse- ments, and shall render to the president and the board of directors, at its regular meetings, or when the board of directors so requires, an account of all his transactions as treasurer and of the financial condition of the corporation. Section 13. If required by the board of directors, he shall give the corporation a bond (which shall be renewed every six years) in such sum and with such surety or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of his office and for the restoration to the corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation. Section 14. The assistant treasurer, or if there shall be more than one, the assistant treasurers in the order determined by the board of directors (or if there be no such determination, then in the order of their election), shall, in the absence of the treasurer or in the event of his inability or refusal to act, perform the duties and exercise the powers of the treasurer and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. ARTICLE VI CERTIFICATE OF STOCK Section 1. Every holder of stock in the corporation shall be entitled to have a certificate, signed by, or in the name of the corporation by, the chairman or vice-chairman of the board of directors, or the president or a vice-president and the treasurer or an assistant treasurer, or the secretary or an assistant secretary of the corporation, certifying the number of shares owned by him in the corporation. Section 2. Any of or all the signatures on the certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. LOST CERTIFICATES Section 3. The board of directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the board of directors may, in, its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen or destroyed. 44 TRANSFER OF STOCK Section 4. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitle thereto, cancel the old certificate and record the transaction upon its books. FIXING RECORD DATE Section 5. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the board of directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting: provided, however, that the board of directors may fix a new record date for the adjourned meeting. REGISTERED STOCKHOLDERS Section 6. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. ARTICLE (VII) GENERAL PROVISIONS DIVIDENDS Section 1. Dividends upon the capital stock of the corporation, subject to the provisions of the certificate of incorporation, if any, may be declared by the board of directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the certificate of incorporation. Section 2. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interest of the corporation, and the directors may modify or abolish any such reserve in the manner in which it was created. ANNUAL STATEMENT Section 3. The board of directors shall present at each annual meeting, and at any 45 special meeting of the stockholders when called for by vote of the stockholders, a full and clear statement of the business and condition of the corporation. CHECKS Section 4. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the board of directors may from time to time designate. FISCAL YEAR Section 5. The fiscal year of the corporation shall be fixed by resolution of the board of directors. SEAL Section 6. The corporate seal shall have inscribed thereon the name of the corporation, the year of its organization and the words "Corporate Seal, Delaware". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. INDEMNIFICATION Section 7. The corporation shall indemnify its officers, directors, employees and agents to the extent permitted by the General Corporation Law of Delaware. ARTICLE VIII AMENDMENTS Section 1. These by-laws may be altered, amended or repealed or new by- laws may be adopted by the stockholders or by the board of directors, when such power is conferred upon the board of directors by the certificate of incorporation at any regular meeting of the stockholders or of the board of directors or at any special meeting of the stockholders or of the board of directors if notice of such alteration, amendment, repeal or adoption of new by-laws be contained in the notice of such special meeting. If the power to adopt, amend or repeal by-laws is conferred upon the board of directors by the certificate of incorporation it shall not divest or limit the power of the stockholders to adopt, amend or repeal by-laws. 46 ATLANTA EXPRESS AIRLINE CORPORATION AMENDMENT #1 TO BY-LAWS By resolution of the sole director of Atlanta Express Airline Corporation dated as of February 27, 1981, Article II, Sections 1 and 2 of the By-laws were amended to read in their entirety as follows: Article II. Meetings of Stockholders. Section 1. Meetings of stockholders for any purpose shall be held at such time and place, within or without the State of Delaware, as shall be fixed by the board of directors and stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2. Annual meetings of stockholders, commencing with the year 1982, shall be held on the twentieth day of June if not a legal holiday, and if a legal holiday, then on the next secular day following, at 10:00 A.M., or at such other date and time as shall be designated from time to time by the board of directors and stated in the notice of the meeting, at which they shall elect by a plurality vote a board of directors, and transact such other business as may properly be brought before the meeting. The By-laws were otherwise ratified and confirmed. /s/ Michael L. Lehrman Michael L. Lehrman, Secretary 47 ATLANTA EXPRESS AIRLINE CORPORATION AMENDMENT #2 TO BY-LAWS By resolution of the Board of Directors of Atlanta Express Airline Corporation adopted at the February 12, 1982 Special Meeting of the Board of Directors, Article II, Section 2 of the By-laws was amended to read in its entirety as follows: Article II. Meetings of Stockholders. Section 2. Annual meetings of stockholders, commencing with the year 1983, shall be held on the twentieth day of June if not a legal holiday, and if a legal holiday, then on the next secular day following, at 10:00 A.M., or at such other date and time as shall be designated from time to time by the board of directors and stated in the notice of the meeting, at which they shall elect by a plurality vote a board of directors, and transact such other business as may properly be brought before the meeting. The By-laws were otherwise ratified and confirmed. /s/ Michael L. Lehrman Michael L. Lehrman, President 48 AIR TRANSPORTATION HOLDING COMPANY, INC. (formerly, Atlanta Express Airline Corporation) AMENDMENT # 3 TO BY-LAWS By resolution of the board of directors of Air Transportation Holding Company, Inc. adopted at the May 7, 1996 meeting of the board of directors, Article III, Section 1 of the By-laws was amended to read in its entirety as follows: Article III Directors. Section 1. The number of directors which shall constitute the whole board shall be not less than one nor more than ten. The first board shall consist of one director. Thereafter, within the limits above specified, the number of directors shall be determined by resolution of the board of directors or by the stockholders at the annual meeting. The directors shall be elected at the annual meeting of the stockholders, except as provided in Section 2 of this Article, and each director elected shall hold office until his successor is elected and qualified. Directors need not be stockholders. The By-laws were otherwise ratified and confirmed. /s/ John J. Gioffre John J. Gioffre, Secretary 49 EX-10 5 EXECUTION COPY EMPLOYMENT AGREEMENT DAVID CLARK THIS EMPLOYMENT AGREEMENT is made and entered into as of the 1st day of January, 1996, by and among AIR TRANSPORTATION HOLDING COMPANY, INC., ("AirT"); a Delaware corporation; MOUNTAIN AIR CARGO, INC., a North Carolina corporation; CSA, INC., a North Carolina corporation; MOUNTAIN AIRCRAFT SERVICES, LLC, a North Carolina limited liability company (all collectively referred to herein as "Employer"); and DAVID CLARK, an individual having an address at 214 South Ingleside Farm Road, Iron Station, North Carolina 28080 ("Employee"). Background Statement Employee currently is employed by Employer and holds the positions for the different companies listed on Exhibit A attached hereto and made a part hereof. Employee has worked for the companies which comprise Employer in positions of responsibility and authority for several years and has been instrumental in successfully developing, expanding and increasing the business and earnings of Employer. Employer desires to ensure that the services of Employee will continue to be available to it on a mutually satisfactory basis. In the course of his employment with Employer, Employee has had access to trade secrets and proprietary information of Employer and will, as an employee of Employer, continue to have access to trade secrets and proprietary information of Employer. Accordingly, Employee has and will continue to acquire the knowledge and ability to compete with Employer. Employer as offered Employee an employment agreement on the terms and pursuant to the conditions hereof, including the stability and security provided to Employee by the arrangement provided for herein. The parties agree that the execution and delivery of this Employment Agreement is a condition precedent to the benefits extended to Employee hereunder. Employee agrees that the benefits provided for herein are adequate and sufficient consideration for the covenants made by Employee hereunder, including, without limitation, the covenant not to compete. NOW, THEREFORE, for valuable consideration, the receipt of which is hereby acknowledged, the mutual duties and obligations set forth herein, and intending to be legally bound, the parties hereto agree as follows: 1. Employment. Employer hereby agrees to employ Employee and Employee hereby agrees to serve Employer upon the terms and conditions set forth in this Employment Agreement in the capacities set forth on Exhibit A attached hereto, with the duties and responsibilities of such positions to be determined from time to time by the Board of Directors of AirT. 2. Term. (a) Statement of Term. The term of this Employment Agreement shall begin on January 1, 1996, and end on December 31, 1998, or on such later date to which the term of this Employment Agreement may be extended pursuant to the provisions of this Section 2. (b) Automatic Extension. Subject to subsection (c) of this Section 2, the term of this Employment Agreement shall be extended automatically for one year effective on the 1st day of September, 1996 (so that effective on such date the term of employment shall be extended from December 31, 1998, to December 31, 1999), and on the 1st day of each succeeding September (so that effective on each such day, the remaining term of employment shall be for a full three-year, four month period). (c) Termination of Automatic Extensions. Employee or the Board of Directors of AirT, by written notice delivered to the other, may at any time elect to terminate the automatic extension provisions of subsection (b) of this section. Such election shall apply only to extensions that would otherwise become effective after delivery of such notice and shall not apply to extensions that have theretofore become effective. 3. Compensation, Incentives and Employee Benefits. (a.) Base Salary. Employer shall pay to the Employee for his performance of services hereunder a base salary ("Base Salary") at the rate of not less than One Hundred Fifty Thousand No/100 ($150,000.00) per year for the period of this Employment Agreement. The Employee's Base Salary rate shall be reviewed by Employer annually and may be increased from time to time only with the approval of the Compensation Committee of the Board of Directors of Employer. From and after the effective date of any such change the increased rate shall become the Base Salary rate applicable thereafter. Base Salary shall be paid in accordance with Employer's normal payroll practices and shall be prorated for any partial months of employment. (b) Incentive Compensation. Employer shall pay to the Employee incentive compensation equal to two percent (2%) of the earnings before income taxes or extraordinary items reported each year by AirT on its Annual Report on Form 10-K (the "10-K"). Amounts payable under this subsection, if any, shall be paid within fifteen (15) days after AirT files its 10-K with the Securities and Exchange Commission. Amounts otherwise payable hereunder shall be prorated for a partial year's employment in the event Employee's employment is terminated or ceases during the course of AirT's fiscal year. (c) Employee Benefit Plans. In addition to the Base Salary and Incentive Compensation provided for above, Employer shall provide to the Employee the opportunity to continue to participate in all life insurance, medical, dental, optical, disability, and other employee benefit plans (collectively, "Employee Benefit Plans") sponsored from time to time by Employer and covering its employees generally or a particular group of its employees of which the Employee is a member (including participation by the Employee's dependents to the extent they are eligible under the terms of such plans), subject to the terms and conditions of such benefit plans. (d) Reimbursement of Expenses. Employer shall pay or reimburse Employee for all reasonable travel and other expenses incurred by him in performing his obligations under this Employment Agreement. Such expenses shall be appropriately submitted and approved in accordance with the policies approved by the Board of Directors of AirT. (e) Vacation. Employee shall be entitled to paid annual vacation of up to 4 weeks per year. (f) Automobile Expense. Employee shall be reimbursed for the use of his automobile for Employer's business at the rate of $4,800.00 per year, payable in monthly installments. 4. Retirement Benefits. (a) Benefits Defined. The Employer hereby agrees to pay a retirement benefit to the Employee of $75,000 per year. The retirement benefit will be paid monthly installments in the form of a 10-year term certain annuity (with no payments thereafter). In the event of the Employee's death prior to the close of the 10-year term certain, the remaining retirement benefit payments shall be paid annually to the Employee's estate. (a) Nonforfeitable Interest. Notwithstanding the foregoing, the Employer shall have no obligation to pay any retirement benefit until and unless the Employee remains employed until attaining a full, nonforfeitable interest in such retirement benefit. The Employee shall have a full, nonforfeitable interest in such retirement benefit as of the earlier of April 1, 2001, his death, his disability (as defined in Section 6(c)), or his termination without cause. (b) Commencement of Benefit. Payment of the annual benefit shall commence a soon as practicable after the Employee's termination of employment, except that, if the Employee's employment is terminated without cause or due to disability, payment of the retirement benefit shall not commence until the earlier of April 1, 2001 or the Employee's death. (c) Payment From General Assets. The retirement benefits payable under this Agreement shall be paid by the Employer from its general assets. The Employee shall have no right, interest, or claim whatsoever to the payment of a benefit from any person other than the Employer, and shall have no right, interest, or claim whatsoever that is superior in any manner to the right of any other general and unsecured creditor of the Employer. The employee shall have no right to assign, alienate, pledge or otherwise encumber the retirement benefits payable under this agreement and any attempt to do so shall be void. 5. Duties. During the term hereof, Employee shall devote all of his business time, attention, skills and efforts to the business of Employer and the faithful performance of his duties hereunder; provided, however, that (i) nothing contained herein shall prevent Employee from making outside investments consistent with the provisions contained herein and (ii) with the approval of the Board of Directors of AirT, from time to time Employee may serve, or continue to serve, on the boards of directors of, and hold any other offices or positions in, companies or organizations which, in the AirT Board's judgment, will not present any conflict of interest with Employer, or materially affect the performance of Employee's duties pursuant to this Agreement. Except for such incidental matters as may be assigned by Employer from time to time, the Employee's duties shall be confined to those geographic areas in which Employer operates its business and (ii) Employee may not be transferred from the principal office of Employer in Denver, North Carolina. 6. Termination by Employer. (a) Without Cause. The parties recognize (i) that the Board of Directors of AirT has the duty to use its judgment in the best interests of Employer in determining whether to remove or to elect or reelect Employee as an executive officer of Employer even though there may be no legal cause therefor under this Agreement, and (ii) that any action or inaction of the Board of Directors of AirT pursuant to clause (i) shall not prejudice the rights of Employee under this Agreement. Accordingly, the parties agree that, subject to all other provisions of this Paragraph 6, Employer shall have the right at any time during the term of this Agreement to terminate this Agreement without cause. Such right of termination may be exercised by removal of Employee by the Board of Directors of AirT or the failure of the Board of Directors of AirT to elect or reelect Employee as an executive officer of Employer or otherwise. Termination of this Agreement shall be deemed to occur on the date Employee is notified thereof or, if he is not so notified, on the date of the act or failure to act by the Board of Directors of AirT referred to in the preceding sentence. (b) Termination Payments. If Employer terminates Employee's employment hereunder pursuant to paragraph 6(a) hereof for any reason other than for "Cause", as defined herein, then the following provisions shall govern: (i) immediately upon the effectiveness of such event Employer shall make a lump sum cash payment to Employee in an amount equal to the sum of (A) the aggregate Base Salary that would have been paid to Employee under the terms hereof after the date of such event through the date of the then term of this Employment Agreement (based upon the assumption that the Base Salary as in effect immediately prior to the date of such event(s) continued to be the Base Salary through the term of this Employment Agreement; and (B) one-half of the maximum additional compensation that could have been paid to Employee after the date of termination of employment pursuant to Paragraph 3(b) had his employment hereunder continued through the then date of the expiration of this Agreement. (c) Disability. If the Employee is unable to perform his duties hereunder for a period of thirty-six (36) consecutive months due to disability (as defined by the primary disability insurance carrier then providing such insurance coverage for the Employer's executive officers), this Agreement may be terminated at Employer's discretion by giving to the Employee written notice specifying a termination date subsequent thereto and also subsequent to the end of said thirty-six (36) month period. 7. No Mitigation. Employee shall have no obligation to seek other employment in the event of termination of his employment or termination of the automatic renewal provisions of this Employment Agreement and no compensation or other benefits received by Employee from any other employment shall reduce or limit Employer's obligation to make payment under this entire Paragraph 6. (a) Definitions. "Cause" shall exist if, and only if, a court of competent jurisdiction enters a final order finding that (a) the Employee has committed wrongful acts (but excluding matters of business judgment) which have had or will have a material adverse effect on the business, operations or financial condition of Employer, or (b) the Employee has willfully and materially failed to perform the duties reasonably required of him under this Agreement. 8. Confidential Information. Employee shall not, at any time during or following his employment by Employer regardless of the reason for such termination of employment, furnish, divulge, communicate, use to the detriment of Employer or for the benefit of any business, firm, person, partnership, trust or corporation, or otherwise, any of Employer's confidential information, data, trade secrets, sales methods, names of customers, advertising methods, financial affairs or methods of procurement, or take with him any document or paper relating to the foregoing, it being acknowledged that Employee received or obtained all of the above in confidence and as a fiduciary of Employer. 9. Non-Competition. Employee agrees that, during Employee's employment with Employer and for a period of three (3) years thereafter, whether Employee leaves voluntarily or involuntarily: (a) Employee will not directly or indirectly, individually or as a partner, employee, stockholder, consultant, agent, officer, director, advisor or in any other capacity, solicit any of the customers of Employer for the purpose of selling any service or product similar to those provided by Employer, or in any manner attempt to induce any of Employer's customers or suppliers to withdraw, reduce or divert any of their business from Employer or otherwise interfere or attempt to interfere with any business relationship between Employer and its customers or suppliers. For the purposes of this Paragraph 8(a), customers shall mean (i) any client, account or customer of the Employer that has transacted any business with or been contacted by Employer within the twelve months preceding the date hereof, and (ii) any other client, account or customer of Employer that has done business with Employer within two years of the date of such separation or termination; (b) Employee will not in any manner induce or attempt to induce any of Employer's employees to leave the employment of Employer to become associated with any business operation engaged in the air cargo or air freight business; or (c) Employee will not directly or indirectly, either as principal, agent, manager, employee, owner (if the percentage of ownership exceeds one percent (1%) of the net worth of the business), partner (general or limited), director, officer, consultant or in any other capacity, participate in any business operation engaged in the air cargo or air freight business. 10. Limitations on Scope. Because of the present and contemplated future operations of Employer in the geographic areas hereinafter set forth, it is further understood and agreed by the parties hereto that the restriction set forth in Paragraph 8(c) shall apply to a business operation engaged in the air cargo or air freight business in the following geographic areas: (i) The State of North Carolina; (ii) The State of Michigan; (iii) The State of South Carolina; (iv) The State of Florida; (v) Any State contiguous with the State of North Carolina; (vi) Any State contiguous with the State of Michigan; (vii) Any State contiguous with the State of South Carolina; (viii)Any State contiguous with the State of Florida; (ix) Any State east of the Mississippi River; (x) Any State of the United States of America. The parties intend the above geographical areas to be completely severable and independent, and any invalidity or unenforceability of this Employment Agreement with respect to any one area shall not render this Employment Agreement unenforceable as applied to any one or more of the other areas. 12. Severability. If any provision contained in this Agreement shall for any reason be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement but this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein. The parties agree that in the event a court should determine that this Agreement or any of the covenants contained herein is unreasonable, void or invalid, for any reason whatsoever, then in such event,the parties hereto agree that the duration, geographical or other limitation imposed herein should be as the court, or jury, if applicable, should determine to be fair and reasonable, it being the intent of each of the parties hereto to be subject to an agreement that protects the legitimate competitive interests of Employer and does not unreasonably curtail the rights of the Employee. 13. Employee's Representation. Employee represents that his experience and capabilities are such that the provisions of Paragraph 8 will not prevent him from earning a livelihood. 14. Employer's Right to Obtain an Injunction. Employee acknowledges that Employer will have no adequate means of protecting their rights under Paragraphs 7 and 8 of this Agreement other than securing an injunction. Accordingly, Employee agrees that Employer is entitled to enforce this Employment Agreement by obtaining a preliminary and permanent injunction and any other appropriate equitable relief in a court of competent jurisdiction. Employee acknowledges that the recovery of damages by Employer will not be an adequate means to redress a breach of this Agreement. Nothing contained in this Paragraph, however, shall prohibit Employer from pursuing any remedies in addition to injunctive relief, including recovery of damages. 15. General Provisions. (a) Entire Agreement. This Employment Agreement contains the entire understanding between the parties hereto relating to the employment of Employee by Employer and supersedes any and all prior employment or compensation agreements between Employer or any predecessors of Employer or any of its subsidiaries and Employee. (b) Nonassignability. Neither this Agreement nor any right or interest hereunder shall be assignable by Employee, his beneficiaries or legal representatives, without the prior written consent of Employer; provided, however, that nothing shall preclude (i) Employee from designating a beneficiary to receive any benefit payable hereunder upon his death, or (ii) the executors, administrators or other legal representatives of Employee or his estate from assigning any rights hereunder to the person or persons entitled thereunto. (c) Binding Agreement. This Employment Agreement shall be binding upon, and inure to the benefit of, Employee and Employer and their respective permitted successors and assigns. (d) Amendment or Modification of Employment Agreement. This Employment Agreement may not be modified or amended except by an instrument in writing signed by the parties hereto. (e) Insurance. Employer, at its discretion, may apply for and procure in their own name and for its own benefit, life insurance on Employee in any amount or amounts considered advisable; and Employee shall have no right, title or interest therein, and further, Employee agrees to submit to any medical or other examination and to execute and deliver any applications or other instruments in writing as may be reasonably necessary to obtain such insurance. (f) Notices. All notices under this Employment Agreement shall be in writing and shall be deemed effective when delivered in person (in the case of Employer, to its Secretary) or when mailed, if mailed by certified mail, return receipt requested. Notices mailed shall be addressed, in the case of Employee, to him at his residential address currently on file with Employer, and in the case of Employer, to its corporate headquarters, attention of the Secretary, or to such other address as Employer or Employee may designate in writing at any time or from time to time to the other party. In lieu of notice by deposit in the U.S. mail, a party may give notice by telegram or telex. (g) Waiver. No delay or omission by either party hereto in exercising any right, power or privilege hereunder shall impair such right, power or privilege, nor shall any single or partial exercise of any right, power or privilege preclude any further exercise thereof or the exercise of any other right, power or privilege. The provisions of this Paragraph 14(g) cannot be waived except in writing signed by both parties. (h) Governing Law. This agreement shall be governed and construed in accordance with the laws of the State of North Carolina, exclusive of its choice of law provisions. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. AIR TRANSPORTATION HOLDING COMPANY, INC. By: ____________________________ Its: ___________ MOUNTAIN AIR CARGO, INC. By: ____________________________ Its: ___________ CSA, INC. By: ____________________________ Its: ___________ MOUNTAIN AIRCRAFT SERVICES, LLC By: ____________________________ Its: ______________ ______________________________ (SEAL) David Clark EXHIBIT A COMPANY POSITION HELD AirT Chairman of the Board Chief Executive Officer Chief Operating Officer President Mountain Air Cargo, Inc. Chairman of the Board Chief Executive Officer CSA Air, Inc. Chairman of the Board Chief Executive Officer Mountain Aircraft Services LLC Chairman of the Board Chief Executive Officer EX-10 6 EXECUTION COPY EMPLOYMENT AGREEMENT WILLIAM H. SIMPSON THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of the 1st day of January, 1996, by and among AIR TRANSPORTATION HOLDING COMPANY, INC., ("AirT"); a Delaware corporation; MOUNTAIN AIR CARGO, INC., a North Carolina corporation; MOUNTAIN AIRCRAFT SERVICES, LLC, a North Carolina limited liability company (all collectively referred to herein as "Employer"); and WILLIAM H. SIMPSON, an individual having an address at P.O. Box 543, Denver, North Carolina 28037 ("Employee"). Background Statement Employee currently is employed by Employer and holds the positions for the different companies listed on Exhibit A attached hereto and made a part hereof. Employee has worked for the companies which comprise Employer in positions of responsibility and authority for several years and has been instrumental in successfully developing, expanding and increasing the business and earnings of Employer. Employer desires to ensure that the services of Employee will continue to be available to it on a mutually satisfactory basis. In the course of his employment with Employer, Employee has had access to trade secrets and proprietary information of Employer and will, as an employee of Employer, continue to have access to trade secrets and proprietary information of Employer. Accordingly, Employee has and will continue to acquire the knowledge and ability to compete with Employer. Employer has offered Employee an employment agreement on the terms and pursuant to the conditions hereof, including the stability and security provided to Employee by the arrangement provided for herein. The parties agree that the execution and delivery of this Agreement is a condition precedent to the benefits extended to Employee hereunder. Employee agrees that the benefits provided for herein are adequate and sufficient consideration for the covenants made by Employee hereunder, including, without limitation, the covenant not to compete. NOW, THEREFORE, for valuable consideration, the receipt of which is hereby acknowledged, the mutual duties and obligations set forth herein, and intending to be legally bound, the parties hereto agree as follows: Employment. Employer hereby agrees to employ Employee and Employee hereby agrees to serve Employer upon the terms and conditions set forth in this Agreement in the capacities set forth on Exhibit A attached hereto, with the duties and responsibilities of such positions to be determined from time to time by the President and/or Chief Executive Officer of each of the companies which comprise Employer and the Board of Directors of AirT. Term. Statement of Term. The term of this Agreement shall begin on January 1, 1996, and end on March 31, 1999, or on such later date to which the term of this Agreement may be extended pursuant to the provisions of this Paragraph 2. Automatic Extension. Subject to subparagraph (c) of this Paragraph 2, the term of this Agreement shall be extended automatically for one year effective on the 1st day of December, 1996 (so that effective on such date the term of employment shall be extended from March 31, 1999, to March 31, 2000), and on the 1st day of each succeeding December (so that effective on each such day, the remaining term of employment shall be for a full three- year, four month period). Termination of Automatic Extensions. Employee or the Board of Directors of AirT, by written notice delivered to the other, may at any time elect to terminate the automatic extension provisions of subparagraph (b) of this section. Such election shall apply only to extensions that would otherwise become effective after delivery of such notice and shall not apply to extensions that have theretofore become effective. Compensation, Incentives and Employee Benefits. Base Salary. Employer shall pay to the Employee for his performance of services hereunder a base salary ("Base Salary") at the rate of not less than One Hundred Sixty-Five Thousand Five Hundred Thirty-Seven and No/100 ($165,537.00) per year for the period of this Agreement. The Employee's Base Salary rate shall be reviewed by Employer annually and may be increased from time to time only with the approval of the Compensation Committee of the Board of Directors of AirT. From and after the effective date of any such change the increased rate shall become the Base Salary rate applicable thereafter. Base Salary shall be paid in accordance with Employer's normal payroll practices and shall be prorated for any partial months of employment. Incentive Compensation. Employer shall pay to the Employee incentive compensation ("Incentive Compensation") equal to two percent (2%) of the earnings before income taxes or extraordinary items reported each year by AirT on its Annual Report on Form 10-K (the "10-K"). Amounts payable under this subparagraph, if any, shall be paid within fifteen (15) days after AirT files its 10-K with the Securities and Exchange Commission. Amounts otherwise payable hereunder shall be prorated for a partial year's employment in the event Employee's employment is terminated or ceases during the course of AirT's fiscal year. Employee Benefit Plans. In addition to the Base Salary and Incentive Compensation provided for above, Employer shall provide to the Employee the opportunity to continue to participate in all life insurance, medical, dental, optical, disability, and other employee benefit plans (collectively, "Employee Benefit Plans") sponsored from time to time by Employer and covering its employees generally or a particular group of its employees of which the Employee is a member (including participation by the Employee's spouse and dependents to the extent they are eligible under the terms of such plans), subject to the terms and conditions of such benefit plans. Reimbursement of Expenses. Employer shall pay or reimburse Employee for all reasonable travel and other expenses incurred by him in performing his obligations under this Agreement. Such expenses shall be appropriately submitted and approved in accordance with the policies approved by the Board of Directors of AirT. Vacation. Employee shall be entitled to paid annual vacation of up to 4 weeks per year. Automobile Expense. Employee shall be reimbursed for the use of his automobile for Employer's business at the rate of $4,800.00 per year, payable in monthly installments. Retirement Benefits. Amount. The Employer shall pay Employee an annual retirement benefit of Seventy-Five Thousand and No/100 Dollars ($75,000.00) per year in the event Employee continues work until he reaches age 65. If Employee voluntarily terminates his employment before he reaches age 65, such amount shall be reduced by three (3) percentage points for each full year that his termination of employment precedes the date he reaches age 65, but in no event prior to his reaching age 62. If such termination of employment occurs on a date other than his birthday, the three (3) percentage point reduction shall be prorated on a monthly basis. Form. Such retirement benefit shall commence as of the date elected pursuant to Paragraph 4(c) hereof and shall be paid monthly in the form of a single life annuity or, at Employee's option, an actuarially equivalent joint and survivor annuity or life annuity with a ten-year period certain; provided, however, that Employee shall have the right to receive the present value of his retirement benefit in a single lump sum payment if he files an election in writing with the Employer at least one year before the date as of which his benefit is scheduled to commence. For purposes of this Agreement, (a) the present value shall be determined by using the insurance industry's standard 1983 Group Annuity Mortality Table (the "Table") and an interest rate (the "Rate") equal to the average (for the 90 days prior to payment) yield of ten year U.S. Treasury Notes (as reported over such period in The Wall Street Journal or any successor to such publication), (b) the term "joint and survivor annuity" shall mean an annuity payable for Employee's life and, if he dies before his survivor annuitant, a 50%, 75% or 100% survivor annuity payable to such survivor for such person's life, (c) the term "life annuity with a ten-year period certain" shall mean an annuity payable for the life of Employee and, if Employee dies before payments have been made for ten years, with continued payments to his designated beneficiary for the balance of such ten-year period, and (d) an actuarially equivalent benefit shall be determined using the Table and the Rate. Timing. Such retirement benefit shall be paid, or benefit payments shall commence, in the form elected pursuant to Paragraph 4(b) hereof, as of the first day of the month immediately following Employee's 65th birthday; provided, however, that Employee shall have the right at any age to elect that the payment of his benefit commence after the later of the date he reaches age 62 or his employment terminates provided such election is filed in writing with the Employer at least one year before his employment terminates. If the payment of Employee's retirement benefit begins before age 65 pursuant to such an election, such benefit shall be reduced by three percentage points (3%) for each full year that the benefit commencement date precedes Employee's 65th birthday. In the event that benefits commence as of a date other than Employee's birthday, the three percentage point reduction factor shall be prorated on a monthly basis. Offset for Other Retirement Benefits. In the event that the retirement benefits payable under any retirement benefits program applicable to all employees (the " AirT Plan") are paid in the same form and at the same time as the retirement benefits under this Paragraph 4, then the annual benefit payable under Paragraph 4 hereof each year shall be offset by the dollar amount paid to Employee under the AirT Plan in such year. In the event that the retirement benefits payable under the AirT Plan are not paid in the same form or are not paid at the same time, then the retirement benefits under this Paragraph 4 shall be offset by the actuarial equivalent of the benefit expected to be paid to Employee under the AirT Plan. The actuarial equivalent benefit shall be determined by using the Table and the Rate. Death Benefit. In the event of Employee's death prior to the commencement of the retirement benefit described in Paragraph 4(a), Employer hereby agrees to pay an annual death benefit to Employee's estate that is equal to the single life annuity benefit Employee would have received if he had terminated employment on the later of his 65th birthday or his date of death; provided, however, that the amount payable under this subparagraph shall be reduced by five percent (5%) per year for each year Employee's death occurs prior to age 65, but in no event by more than fifty percent (50%). Such annual benefit shall commence as soon as practicable after Employee's death and shall be paid in substantially equal monthly payments for a period of ten years. Disability Benefit. In the event of Employee's termination of employment as a result of total disability, his retirement benefit under Paragraph 4 hereof shall be calculated under Paragraph 4(a) and 4(c), shall be paid in the form elected pursuant to Paragraph 4(b), and shall be paid at the time elected pursuant to Paragraph 4(c), except that Employee shall have the right to make an election under Paragraph 4(c) no later than six months before his employment terminates, instead of one year before his employment terminates. Source of Benefits. The retirement benefits payable under this Agreement shall be paid by the Employer from its general assets. Employee shall have no right, interest, or claim whatsoever to the payment of a benefit from any person other than the Employer, and shall have no right or interest whatsoever that is superior in any manner to the right of any other general and unsecured creditor of the Employer. Employee shall have no right to assign, alienate, pledge or otherwise encumber the retirement benefits payable under this Agreement, and any attempt to do so shall be void. Participation in Other Plans. Employee shall participate in all retirement plans (qualified or non-qualified) and all deferred compensation arrangements maintained by the Employer in which other senior executives participate as a group, subject to the terms and conditions of such retirement plans. Vesting. Notwithstanding anything herein to the contrary, Employee's right to the retirement and death benefits provided for hereunder shall vest upon the execution hereof even though Employee shall have no right to the payment of any retirement benefits until he reaches age 62 or to the death benefit until death. Duties. During the term hereof, Employee shall devote all of his business time, attention, skills and efforts to the business of Employer and the faithful performance of his duties hereunder; provided, however, that (i) nothing contained herein shall prevent Employee from making outside investments consistent with the provisions contained herein and (ii) with the approval of the Board of Directors of AirT, from time to time Employee may serve, or continue to serve, on the boards of directors of, and hold any other offices or positions in, companies or organizations which, in the AirT Board of Directors' judgment, will not present any conflict of interest with Employer, or materially affect the performance of Employee's duties pursuant to this Agreement. Except for such incidental matters as may be assigned by Employer from time to time, Employee's duties shall be confined to those geographic areas in which Employer operates its business and Employee may not be transferred so that Employee's principal office is located anywhere outside the state of North Carolina. Termination. Termination By Employer Without Cause. The parties recognize (i) that the Board of Directors of AirT has the duty to use its judgment in the best interests of Employer in determining whether to remove or to elect or reelect Employee as an executive officer of Employer even though there may be no legal cause therefor under this Agreement, and (ii) that any action or inaction of the Board of Directors of AirT pursuant to clause (i) shall not prejudice the rights of Employee under this Agreement. Accordingly, the parties agree that, subject to all other provisions of this Paragraph 6, Employer shall have the right at any time during the term of this Agreement to terminate this Agreement without cause. Such right of termination may be exercised by removal of Employee by the Board of Directors of AirT or the failure of the Board of Directors of AirT to elect or re- elect Employee as an executive officer of Employer or otherwise. Termination of this Agreement shall be deemed to occur on the date Employee is notified thereof or, if he is not so notified, on the date of the act or failure to act by the Board of Directors of AirT referred to in the preceding sentence. Termination by Employee. Employee may terminate his employment with Employer, for any reason or without reason, during the term hereof. Such termination must be accompanied by the delivery of at least 10 days' written notice delivered to Employer. Termination Payments. If Employer terminates Employee's employment hereunder pursuant to Paragraph 6(a) hereof for any reason other than for "Cause", as defined herein, then the following provisions shall govern: Immediately upon the effectiveness of the termination set forth in Paragraph 6(a) above, Employer shall make a lump sum cash payment to Employee in an amount equal to the sum of (A) the aggregate Base Salary that would have been paid to Employee under the terms hereof after the date of such event through the date of the then term of this Agreement (based upon the agreement that the Base Salary as in effect immediately prior to the date of such event(s) continued to be the Base Salary through the term of this Agreement; and (B) one-half of the maximum additional compensation that would have been paid to Employee after the date of termination of employment pursuant to Paragraph 3(b) had his employment hereunder continued through the then date of the expiration of this Agreement (based upon the agreement that the amount of incentive compensation paid to Employee pursuant to Paragraph 3(b) for the calendar year immediately preceding the date of termination continued to be the amount payable through the term of this Agreement). Notwithstanding anything contained in this Paragraph to the contrary, in the event that the payments under this Paragraph to Employee, either alone or together with other payments Employee has a right to receive from Employer, would not be deductible (in whole or in part) by Employer as a result of such payments constituting a "parachute payment" (as defined in Section 280G of the Internal Revenue Code, as amended (the "Code")), such payments shall be reduced to the largest amount as will result in no portion of the payments not being fully deductible by Employer as the result of Section 280G of the Code. The determination of any reduction in the payments pursuant to the foregoing sentence shall be made exclusively by AirT's independent public accountants (whose fees and expenses shall be borne by Employer), and such determination shall be conclusive and binding on Employer and Employee. Disability. If the Employee is unable to perform his duties hereunder for a period of twelve (12) consecutive months due to disability (as defined by the primary disability insurance car- rier then providing such insurance coverage for the Employer's executive officers), this Agreement may be terminated at Employer's discretion by giving to the Employee written notice specifying a termination date subsequent thereto and also subsequent to the end of said twelve (12) month period. (e) No Mitigation. Employee shall have no obligation to seek other employment in the event of termination of his employment and no compensation or other benefits received by Employee from any other employment shall reduce or limit Employer's obligation to make payment under this entire Paragraph 6. (f) Definitions. "Cause" shall exist if, and only if, a court of competent jurisdiction enters a final order finding that (a) the Employee has committed wrongful acts (but excluding matters of business judgment) which have had or will have a material adverse effect on the business, operations or financial condition of Employer, or (b) the Employee has willfully and materially failed to perform the duties reasonably required of him under this Agreement. Confidential Information. Employee shall not, at any time during or following his employment by Employer regardless of the reason for such termination of employment, furnish, divulge, communicate, use to the detriment of Employer or for the benefit of any business, firm, person, partnership, trust or corporation, or otherwise, any of Employer's confidential information, data, trade secrets, sales methods, names of customers, advertising methods, financial affairs or methods of procurement, or take with him any document or paper relating to the foregoing, it being acknowledged that Employee received or obtained all of the above in confidence and as a fiduciary of Employer. Non-Competition. Employee agrees that, during Employee's employment with Employer and for a period of three (3) years thereafter, whether Employee leaves voluntarily or involuntarily: (a) Employee will not directly or indirectly, individually or as a partner, employee, stockholder, consultant, agent, officer, director, advisor or in any other capacity, solicit any of the customers of Employer for the purpose of selling any service or product similar to those provided by Employer, or in any manner attempt to induce any of Employer's customers or suppliers to withdraw, reduce or divert any of their business from Employer or otherwise interfere or attempt to interfere with any business relationship between Employer and its customers or suppliers. For the purposes of this Paragraph 8(a), customers shall mean (i) any client, account or customer of the Employer that has transacted any business with or been contacted by Employer within the twelve months preceding the date hereof, and (ii) any other client, account or customer of Employer that has done business with Employer within two years of the date of such separation or termination; (b) Employee will not in any manner induce or attempt to induce any of Employer's employees to leave the employment of Employer to become associated with any business operation engaged in the air cargo or air freight business; (c) Employee will not directly or indirectly, either as principal, agent, manager, employee, owner (if the percentage of ownership exceeds one percent (1%) of the net worth of the business), partner (general or limited), director, officer, consultant or in any other capacity, participate in any business operation engaged in the air cargo or air freight business; Limitations on Scope. Because of the present and contemplated future operations of Employer in the geographic areas hereinafter set forth, it is further understood and agreed by the parties hereto that the restriction set forth in Paragraph 8(c) shall apply to a business engaged in the air cargo, air freight, aircraft maintenance or aircraft parts brokering business or businesses in the following geographic areas: (i) The State of North Carolina; (ii) The State of Michigan; (iii) The State of South Carolina; (iv) The State of Florida; (v) Any State contiguous with the State of North Carolina; (vi) Any State contiguous with the State of Michigan; (vii) Any State contiguous with the State of South Carolina; (viii) Any State contiguous with the State of Florida; (ix) Any State east of the Mississippi River; (x) Any State of the United States of America. The parties intend the above geographical areas to be completely severable and independent, and any invalidity or unenforceability of this Agreement with respect to any one area shall not render this Agreement unenforceable as applied to any one or more of the other areas. Severability. If any provision contained in this Agreement shall for any reason be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement but this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein. The parties agree that in the event a court should determine that this Agreement or any of the covenants contained herein is unreasonable, void or invalid, for any reason whatsoever, then in such event,the parties hereto agree that the duration, geographical or other limitation imposed herein should be as the court, or jury, if applicable, should determine to be fair and reasonable, it being the intent of each of the parties hereto to be subject to an agreement that protects the legitimate competitive interests of Employer and does not unreasonably curtail the rights of the Employee. Employee's Representation. Employee represents that his experience and capabilities are such that the provisions of Paragraphs 8 and 9 will not prevent him from earning a livelihood. Employer's Right to Obtain an Injunction. Employee acknowledges that Employer will have no adequate means of protecting its rights under Paragraphs 8 and 9 of this Agreement other than securing an injunction. Accordingly, Employee agrees that Employer is entitled to enforce this Agreement by obtaining a preliminary and permanent injunction and any other appropriate equitable relief in a court of competent jurisdiction. Employee acknowledges that the recovery of damages by Employer will not be an adequate means to redress a breach of this Agreement. Nothing contained in this Paragraph, however, shall prohibit Employer from pursuing any remedies in addition to injunctive relief, including recovery of damages. General Provisions. Entire Agreement. This Agreement contains the entire understanding between the parties hereto relating to the employment of Employee by Employer and supersedes any and all prior employment, compensation or retirement agreements between Employer or any predecessors of Employer or any of its subsidiaries and Employee. Nonassignability. Neither this Agreement nor any right or interest hereunder shall be assignable by Employee, his beneficiaries or legal representatives, without the prior written consent of Employer; provided, however, that nothing shall preclude (i) Employee from designating a beneficiary to receive any benefit payable hereunder upon his death, or (ii) the executors, administrators or other legal representatives of Employee or his estate from assigning any rights hereunder to the person or persons entitled thereunto. Binding Agreement. This Agreement shall be binding upon, and inure to the benefit of, Employee and Employer and their respective permitted successors and assigns. Amendment or Modification of Agreement. This Agreement may not be modified or amended except by an instrument in writing signed by the parties hereto. Insurance. Employer, at its discretion, may apply for and procure in their own name and for its own benefit, life insurance on Employee in any amount or amounts considered advisable; and Employee shall have no right, title or interest therein, and further, Employee agrees to submit to any medical or other examination and to execute and deliver any applications or other instruments in writing as may be reasonably necessary to obtain such insurance. Notices. All notices under this Agreement shall be in writing and shall be deemed effective when delivered in person (in the case of Employer, to its Secretary) or when mailed, if mailed by certified mail, return receipt requested. Notices mailed shall be addressed, in the case of Employee, to him at his residential address currently on file with Employer, and in the case of Employer, to its corporate headquarters, attention of the Secretary, or to such other address as Employer or Employee may designate in writing at any time or from time to time to the other party. In lieu of notice by deposit in the U.S. mail, a party may give notice by telegram or telex. Waiver. No delay or omission by either party hereto in exercising any right, power or privilege hereunder shall impair such right, power or privilege, nor shall any single or partial exercise of any right, power or privilege preclude any further exercise thereof or the exercise of any other right, power or privilege. The provisions of this Paragraph 14(g) cannot be waived except in writing signed by both parties. Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of North Carolina, exclusive of its choice of law provisions. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. AIR TRANSPORTATION HOLDING COMPANY, INC. By: ____________________________ Its: ___________ MOUNTAIN AIR CARGO, INC. By: ____________________________ Its: ___________ MOUNTAIN AIRCRAFT SERVICES, LLC By: ____________________________ Its: ______________ ______________________________ (SEAL) William H. Simpson EXHIBIT A COMPANY POSITION HELD AirT Executive Vice President Mountain Air Cargo, Inc. President Mountain Aircraft Services, LLC Executive Vice President EX-10 7 EXECUTION COPY EMPLOYMENT AGREEMENT JOHN J. GIOFFRE THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of the 1st day of January, 1996, by and among AIR TRANSPORTATION HOLDING COMPANY, INC., ("AirT"); a Delaware corporation; MOUNTAIN AIR CARGO, INC., a North Carolina corporation; CSA, INC., a North Carolina corporation; MOUNTAIN AIRCRAFT SERVICES, LLC, a North Carolina limited liability company (all collectively referred to herein as "Employer"); and JOHN J. GIOFFRE, an individual having an address at 17940 Mollypop Lane, Huntersville, North Carolina 28078 ("Employee"). Background Statement Employee currently is employed by Employer and holds the positions for the different companies listed on Exhibit A attached hereto and made a part hereof. Employee has worked for the companies which comprise Employer in positions of responsibility and authority for several years and has been instrumental in successfully developing, expanding and increasing the business and earnings of Employer. Employer desires to ensure that the services of Employee will continue to be available to it on a mutually satisfactory basis. In the course of his employment with Employer, Employee has had access to trade secrets and proprietary information of Employer and will, as an employee of Employer, continue to have access to trade secrets and proprietary information of Employer. Accordingly, Employee has and will continue to acquire the knowledge and ability to compete with Employer. Employer has offered Employee an employment agreement on the terms and pursuant to the conditions hereof, including the stability and security provided to Employee by the arrangement provided for herein. The parties agree that the execution and delivery of this Agreement is a condition precedent to the benefits extended to Employee hereunder. Employee agrees that the benefits provided for herein are adequate and sufficient consideration for the covenants made by Employee hereunder, including, without limitation, the covenant not to compete. NOW, THEREFORE, for valuable consideration, the receipt of which is hereby acknowledged, the mutual duties and obligations set forth herein, and intending to be legally bound, the parties hereto agree as follows: Employment. Employer hereby agrees to employ Employee and Employee hereby agrees to serve Employer upon the terms and conditions set forth in this Agreement in the capacities set forth on Exhibit A attached hereto, with the duties and responsibilities of such positions to be determined from time to time by the President and/or Chief Executive Officer of each of the companies which comprise Employer and the Board of Directors of AirT. Term. Statement of Term. The term of this Agreement shall begin on January 1, 1996, and end on March 31, 1999, or on such later date to which the term of this Agreement may be extended pursuant to the provisions of this Paragraph 2. Automatic Extension. Subject to subparagraph (c) of this Paragraph 2, the term of this Agreement shall be extended automatically for one year effective on the 1st day of December, 1996 (so that effective on such date the term of employment shall be extended from March 31, 1999, to March 31, 2000), and on the 1st day of each succeeding December (so that effective on each such day, the remaining term of employment shall be for a full three- year, four month period). Termination of Automatic Extensions. Employee or the Board of Directors of AirT, by written notice delivered to the other, may at any time elect to terminate the automatic extension provisions of subparagraph (b) of this Paragraph. Such election shall apply only to extensions that would otherwise become effective after delivery of such notice and shall not apply to extensions that have theretofore become effective. Compensation, Incentives and Employee Benefits. Base Salary. Employer shall pay to the Employee for his performance of services hereunder a base salary ("Base Salary") at the rate of not less than One Hundred Three Thousand Four Hundred Forty Three and No/100 ($103,443.00) per year for the period of this Agreement. The Employee's Base Salary rate shall be reviewed by Employer annually and may be increased from time to time only with the approval of the Compensation Committee of the Board of Directors of AirT. From and after the effective date of any such change the increased rate shall become the Base Salary rate applicable thereafter. Base Salary shall be paid in accordance with Employer's normal payroll practices and shall be prorated for any partial months of employment. Incentive Compensation. Employer shall pay to the Employee incentive compensation ("Incentive Compensation") equal to one and one-half percent (1.5%) of the earnings before income taxes or extraordinary items reported each year by AirT on its Annual Report on Form 10-K (the "10-K"). Amounts payable under this subparagraph, if any, shall be paid within fifteen (15) days after AirT files its 10-K with the Securities and Exchange Commission. Amounts otherwise payable hereunder shall be prorated for a partial year's employment in the event Employee's employment is terminated or ceases during the course of AirT's fiscal year. Employee Benefit Plans. In addition to the Base Salary and Incentive Compensation provided for above, Employer shall provide to the Employee the opportunity to continue to participate in all life insurance, medical, dental, optical, disability, and other employee benefit plans (collectively, "Employee Benefit Plans") sponsored from time to time by Employer and covering its employees generally or a particular group of its employees of which the Employee is a member (including participation by the Employee's dependents to the extent they are eligible under the terms of such plans), subject to the terms and conditions of such benefit plans. Reimbursement of Expenses. Employer shall pay or reimburse Employee for all reasonable travel and other expenses incurred by him in performing his obligations under this Agreement. Such expenses shall be appropriately submitted and approved in accordance with the policies approved by the Board of Directors of AirT. Vacation. Employee shall be entitled to paid annual vacation of up to 4 weeks per year. Automobile Expense. Employee shall be reimbursed for the use of his automobile for Employer's business at the rate of $4,800.00 per year, payable in monthly installments. Retirement Benefits. Amount. The Employer shall pay Employee an annual retirement benefit of Sixty Thousand and No/100 Dollars ($60,000.00) per year in the event Employee continues work until he reaches age 65. If Employee voluntarily terminates his employment before he reaches age 65, such amount shall be reduced by three (3) percentage points for each full year that his termination of employment precedes the date he reaches age 65, but in no event prior to his reaching age 62. If such termination of employment occurs on a date other than his birthday, the three (3) percentage point reduction shall be prorated on a monthly basis. Form. Such retirement benefit shall commence as of the date elected pursuant to Paragraph 4(c) hereof and shall be paid monthly in the form of a single life annuity or, at Employee's option, an actuarially equivalent joint and survivor annuity or life annuity with a ten-year period certain; provided, however, that Employee shall have the right to receive the present value of his retirement benefit in a single lump sum payment if he files an election in writing with the Employer at least one year before the date as of which his benefit is scheduled to commence. For purposes of this Agreement, (a) the present value shall be determined by using the insurance industry's standard 1983 Group Annuity Mortality Table (the "Table") and an interest rate (the "Rate") equal to the average (for the 90 days prior to payment) yield of ten year U.S. Treasury Notes (as reported over such period in The Wall Street Journal or any successor to such publication), (b) the term "joint and survivor annuity" shall mean an annuity payable for Employee's life and, if he dies before his survivor annuitant, a 50%, 75% or 100% survivor annuity payable to such survivor for such person's life, (c) the term "life annuity with a ten-year period certain" shall mean an annuity payable for the life of Employee and, if Employee dies before payments have been made for ten years, with continued payments to his designated beneficiary for the balance of such ten-year period, and (d) an actuarially equivalent benefit shall be determined using the Table and the Rate. Timing. Such retirement benefit shall be paid, or benefit payments shall commence, in the form elected pursuant to Paragraph 4(b) hereof, as of the first day of the month immediately following Employee's 65th birthday; provided, however, that Employee shall have the right at any age to elect that the payment of his benefit commence after the later of the date he reaches age 62 or his employment terminates provided such election is filed in writing with the Employer at least one year before his employment terminates. If the payment of Employee's retirement benefit begins before age 65 pursuant to such an election, such benefit shall be reduced by three percentage points (3%) for each full year that the benefit commencement date precedes Employee's 65th birthday. In the event that benefits commence as of a date other than Employee's birthday, the three percentage point reduction factor shall be prorated on a monthly basis. Offset for Other Retirement Benefits. In the event that the retirement benefits payable under any retirement benefits program applicable to all employees (the " AirT Plan") are paid in the same form and at the same time as the retirement benefits under this Paragraph 4, then the annual benefit payable under Paragraph 4 hereof each year shall be offset by the dollar amount paid to Employee under the AirT Plan in such year. In the event that the retirement benefits payable under the AirT Plan are not paid in the same form or are not paid at the same time, then the retirement benefits under this Paragraph 4 shall be offset by the actuarial equivalent of the benefit expected to be paid to Employee under the AirT Plan. The actuarial equivalent benefit shall be determined by using the Table and the Rate. Death Benefit. In the event of Employee's death prior to the commencement of the retirement benefit described in Paragraph 4(a), the Employer hereby agrees to pay an annual death benefit to Employee's estate that is equal to the single life annuity benefit Employee would have received if he had terminated employment on the later of his 65th birthday or his date of death; provided, however, that the amount payable under this subparagraph shall be reduced by five percent (5%) per year for each year Employee's death occurs prior to age 65, but in no event by more than fifty percent (50%). Such annual benefit shall commence as soon as practicable after Employee's death and shall be paid in substantially equal monthly payments for a period of ten years. Disability Benefit. In the event of Employee's termination of employment as a result of total disability, his retirement benefit under Paragraph 4 hereof shall be calculated under Paragraph 4(a) and 4(c), shall be paid in the form elected pursuant to Paragraph 4(b), and shall be paid at the time elected pursuant to Paragraph 4(c), except that Employee shall have the right to make an election under Paragraph 4(c) no later than six months before his employment terminates, instead of one year before his employment terminates. Source of Benefits. The retirement benefits payable under this Agreement shall be paid by the Employer from its general assets. Employee shall have no right, interest, or claim whatsoever to the payment of a benefit from any person other than the Employer, and shall have no right or interest whatsoever that is superior in any manner to the right of any other general and unsecured creditor of the Employer. Employee shall have no right to assign, alienate, pledge or otherwise encumber the retirement benefits payable under this Agreement, and any attempt to do so shall be void. Participation in Other Plans. Employee shall participate in all retirement plans (qualified or non-qualified) and all deferred compensation arrangements maintained by the Employer in which other senior executives participate as a group, subject to the terms and conditions of such retirement plans. Vesting. Notwithstanding anything herein to the contrary, Employee's right to the retirement and death benefits provided for hereunder shall vest upon the execution hereof even though Employee shall have no right to the payment of any retirement benefits until he reaches age 62 or to the death benefit until death. Duties. During the term hereof, Employee shall devote all of his business time, attention, skills and efforts to the business of Employer and the faithful performance of his duties hereunder; provided, however, that (i) nothing contained herein shall prevent Employee from making outside investments consistent with the provisions contained herein and (ii) with the approval of the Board of Directors of AirT, from time to time Employee may serve, or continue to serve, on the boards of directors of, and hold any other offices or positions in, companies or organizations which, in the AirT Board of Directors' judgment, will not present any conflict of interest with Employer, or materially affect the performance of Employee's duties pursuant to this Agreement. Except for such incidental matters as may be assigned by Employer from time to time, Employee's duties shall be confined to those geographic areas in which Employer operates its business and Employee may not be transferred so that Employee's principal office is located anywhere outside the state of North Carolina. Termination. Termination By Employer Without Cause. The parties recognize (i) that the Board of Directors of AirT has the duty to use its judgment in the best interests of Employer in determining whether to remove or to elect or reelect Employee as an executive officer of Employer even though there may be no legal cause therefor under this Agreement, and (ii) that any action or inaction of the Board of Directors of AirT pursuant to clause (i) shall not prejudice the rights of Employee under this Agreement. Accordingly, the parties agree that, subject to all other provisions of this Paragraph 6, Employer shall have the right at any time during the term of this Agreement to terminate this Agreement without cause. Such right of termination may be exercised by removal of Employee by the Board of Directors of AirT or the failure of the Board of Directors of AirT to elect or re- elect Employee as an executive officer of Employer or otherwise. Termination of this Agreement shall be deemed to occur on the date Employee is notified thereof or, if he is not so notified, on the date of the act or failure to act by the Board of Directors of AirT referred to in the preceding sentence. Termination by Employee. Employee may terminate his employment with Employer, for any reason or without reason, during the term hereof. Such termination must be accompanied by the delivery of at least 10 days' written notice delivered to Employer. Termination Payments. If Employer terminates Employee's employment hereunder pursuant to Paragraph 6(a) hereof for any reason other than for "Cause", as defined herein, then the following provisions shall govern: Immediately upon the effectiveness of the termination set forth in Paragraph 6(a) above, Employer shall make a lump sum cash payment to Employee in an amount equal to the sum of (A) the aggregate Base Salary that would have been paid to Employee under the terms hereof after the date of such event through the date of the then term of this Agreement (based upon the agreement that the Base Salary as in effect immediately prior to the date of such event(s) continued to be the Base Salary through the term of this Agreement; and (B) one-half of the maximum additional compensation that would have been paid to Employee after the date of termination of employment pursuant to Paragraph 3(b) had his employment hereunder continued through the then date of the expiration of this Agreement (based upon the agreement that the amount of incentive compensation paid to Employee pursuant to Paragraph 3(b) for the calendar year immediately preceding the date of termination continued to be the amount payable through the term of this Agreement). Notwithstanding anything contained in this Paragraph to the contrary, in the event that the payments under this Paragraph to Employee, either alone or together with other payments Employee has a right to receive from Employer, would not be deductible (in whole or in part) by Employer as a result of such payments constituting a "parachute payment" (as defined in Section 280G of the Internal Revenue Code, as amended (the "Code")), such payments shall be reduced to the largest amount as will result in no portion of the payments not being fully deductible by Employer as the result of Section 280G of the Code. The determination of any reduction in the payments pursuant to the foregoing sentence shall be made exclusively by AirT's independent public accountants (whose fees and expenses shall be borne by Employer), and such determination shall be conclusive and binding on Employer and Employee. Disability. If the Employee is unable to perform his duties hereunder for a period of twelve (12) consecutive months due to disability (as defined by the primary disability insurance car- rier then providing such insurance coverage for the Employer's executive officers), this Agreement may be terminated at Employer's discretion by giving to the Employee written notice specifying a termination date subsequent thereto and also subsequent to the end of said twelve (12) month period. (e) No Mitigation. Employee shall have no obligation to seek other employment in the event of termination of his employment and no compensation or other benefits received by Employee from any other employment shall reduce or limit Employer's obligation to make payment under this entire Paragraph 6. (f) Definitions. "Cause" shall exist if, and only if, a court of competent jurisdiction enters a final order finding that (a) the Employee has committed wrongful acts (but excluding matters of business judgment) which have had or will have a material adverse effect on the business, operations or financial condition of Employer, or (b) the Employee has willfully and materially failed to perform the duties reasonably required of him under this Agreement. Confidential Information. Employee shall not, at any time during or following his employment by Employer regardless of the reason for such termination of employment, furnish, divulge, communicate, use to the detriment of Employer or for the benefit of any business, firm, person, partnership, trust or corporation, or otherwise, any of Employer's confidential information, data, trade secrets, sales methods, names of customers, advertising methods, financial affairs or methods of procurement, or take with him any document or paper relating to the foregoing, it being acknowledged that Employee received or obtained all of the above in confidence and as a fiduciary of Employer. Non-Competition. Employee agrees that, during Employee's employment with Employer and for a period of three (3) years thereafter, whether Employee leaves voluntarily or involuntarily: (a) Employee will not directly or indirectly, individually or as a partner, employee, stockholder, consultant, agent, officer, director, advisor or in any other capacity, solicit any of the customers of Employer for the purpose of selling any service or product similar to those provided by Employer, or in any manner attempt to induce any of Employer's customers or suppliers to withdraw, reduce or divert any of their business from Employer or otherwise interfere or attempt to interfere with any business relationship between Employer and its customers or suppliers. For the purposes of this Paragraph 8(a), customers shall mean (i) any client, account or customer of the Employer that has transacted any business with or been contacted by Employer within the twelve months preceding the date hereof, and (ii) any other client, account or customer of Employer that has done business with Employer within two years of the date of such separation or termination; (b) Employee will not in any manner induce or attempt to induce any of Employer's employees to leave the employment of Employer to become associated with any business operation engaged in the air cargo or air freight business; (c) Employee will not directly or indirectly, either as principal, agent, manager, employee, owner (if the percentage of ownership exceeds one percent (1%) of the net worth of the business), partner (general or limited), director, officer, consultant or in any other capacity, participate in any business operation engaged in the air cargo or air freight business; Limitations on Scope. Because of the present and contemplated future operations of Employer in the geographic areas hereinafter set forth, it is further understood and agreed by the parties hereto that the restriction set forth in Paragraph 8(c) shall apply to a business engaged in the air cargo, air freight, aircraft maintenance or aircraft parts brokering business or businesses in the following geographic areas: (i) The State of North Carolina; (ii) The State of Michigan; (iii) The State of South Carolina; (iv) The State of Florida; (v) Any State contiguous with the State of North Carolina; (vi) Any State contiguous with the State of Michigan; (vii) Any State contiguous with the State of South Carolina; (viii) Any State contiguous with the State of Florida; (ix) Any State east of the Mississippi River; (x) Any State of the United States of America. The parties intend the above geographical areas to be completely severable and independent, and any invalidity or unenforceability of this Agreement with respect to any one area shall not render this Agreement unenforceable as applied to any one or more of the other areas. Severability. If any provision contained in this Agreement shall for any reason be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement but this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein. The parties agree that in the event a court should determine that this Agreement or any of the covenants contained herein is unreasonable, void or invalid, for any reason whatsoever, then in such event,the parties hereto agree that the duration, geographical or other limitation imposed herein should be as the court, or jury, if applicable, should determine to be fair and reasonable, it being the intent of each of the parties hereto to be subject to an agreement that protects the legitimate competitive interests of Employer and does not unreasonably curtail the rights of the Employee. Employee's Representation. Employee represents that his experience and capabilities are such that the provisions of Paragraphs 8 and 9 will not prevent him from earning a livelihood. Employer's Right to Obtain an Injunction. Employee acknowledges that Employer will have no adequate means of protecting its rights under Paragraphs 8 and 9 of this Agreement other than securing an injunction. Accordingly, Employee agrees that Employer is entitled to enforce this Agreement by obtaining a preliminary and permanent injunction and any other appropriate equitable relief in a court of competent jurisdiction. Employee acknowledges that the recovery of damages by Employer will not be an adequate means to redress a breach of this Agreement. Nothing contained in this Paragraph, however, shall prohibit Employer from pursuing any remedies in addition to injunctive relief, including recovery of damages. General Provisions. Entire Agreement. This Agreement contains the entire understanding between the parties hereto relating to the employment of Employee by Employer and supersedes any and all prior employment, compensation or retirement agreements between Employer or any predecessors of Employer or any of its subsidiaries and Employee. Nonassignability. Neither this Agreement nor any right or interest hereunder shall be assignable by Employee, his beneficiaries or legal representatives, without the prior written consent of Employer; provided, however, that nothing shall preclude (i) Employee from designating a beneficiary to receive any benefit payable hereunder upon his death, or (ii) the executors, administrators or other legal representatives of Employee or his estate from assigning any rights hereunder to the person or persons entitled thereunto. Binding Agreement. This Agreement shall be binding upon, and inure to the benefit of, Employee and Employer and their respective permitted successors and assigns. Amendment or Modification of Agreement. This Agreement may not be modified or amended except by an instrument in writing signed by the parties hereto. Insurance. Employer, at its discretion, may apply for and procure in their own name and for its own benefit, life insurance on Employee in any amount or amounts considered advisable; and Employee shall have no right, title or interest therein, and further, Employee agrees to submit to any medical or other examination and to execute and deliver any applications or other instruments in writing as may be reasonably necessary to obtain such insurance. Notices. All notices under this Agreement shall be in writing and shall be deemed effective when delivered in person (in the case of Employer, to its Secretary) or when mailed, if mailed by certified mail, return receipt requested. Notices mailed shall be addressed, in the case of Employee, to him at his residential address currently on file with Employer, and in the case of Employer, to its corporate headquarters, attention of the Secretary, or to such other address as Employer or Employee may designate in writing at any time or from time to time to the other party. In lieu of notice by deposit in the U.S. mail, a party may give notice by telegram or telex. Waiver. No delay or omission by either party hereto in exercising any right, power or privilege hereunder shall impair such right, power or privilege, nor shall any single or partial exercise of any right, power or privilege preclude any further exercise thereof or the exercise of any other right, power or privilege. The provisions of this Paragraph 14(g) cannot be waived except in writing signed by both parties. Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of North Carolina, exclusive of its choice of law provisions IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. AIR TRANSPORTATION HOLDING COMPANY, INC. By: ____________________________ Its: ___________ MOUNTAIN AIR CARGO, INC. By: ____________________________ Its: ___________ CSA, INC. By: ____________________________ Its: ___________ MOUNTAIN AIRCRAFT SERVICES, LLC By: ____________________________ Its: ______________ ______________________________ (SEAL) John J. Gioffre EXHIBIT A COMPANY POSITION HELD AirT Vice President Secretary Treasurer Chief Financial Officer Mountain Air Cargo, Inc. Vice President Finance Secretary Treasurer Chief Financial Officer CSA Air, Inc. Vice President Finance Secretary Treasurer Mountain Aircraft Services LLC Vice President Finance Secretary Treasurer EX-10 8 EXECUTION COPY EMPLOYMENT AGREEMENT J. HUGH BINGHAM THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of the 1st day of January, 1996, by and among AIR TRANSPORTATION HOLDING COMPANY, INC., ("AirT"); a Delaware corporation; MOUNTAIN AIR CARGO, INC., a North Carolina corporation; MOUNTAIN AIRCRAFT SERVICES, LLC, a North Carolina limited liability company (all collectively referred to herein as "Employer"); and J. HUGH BINGHAM, an individual having an address at 107 Labans Lane, Lincolnton, North Carolina 28092 ("Employee"). Background Statement Employee currently is employed by Employer and holds the positions for the different companies listed on Exhibit A attached hereto and made a part hereof. Employee has worked for the companies which comprise Employer in positions of responsibility and authority for several years and has been instrumental in successfully developing, expanding and increasing the business and earnings of Employer. Employer desires to ensure that the services of Employee will continue to be available to it on a mutually satisfactory basis. In the course of his employment with Employer, Employee has had access to trade secrets and proprietary information of Employer and will, as an employee of Employer, continue to have access to trade secrets and proprietary information of Employer. Accordingly, Employee has and will continue to acquire the knowledge and ability to compete with Employer. Employer has offered Employee an employment agreement on the terms and pursuant to the conditions hereof, including the stability and security provided to Employee by the arrangement provided for herein. The parties agree that the execution and delivery of this Agreement is a condition precedent to the benefits extended to Employee hereunder. Employee agrees that the benefits provided for herein are adequate and sufficient consideration for the covenants made by Employee hereunder, including, without limitation, the covenant not to compete. NOW, THEREFORE, for valuable consideration, the receipt of which is hereby acknowledged, the mutual duties and obligations set forth herein, and intending to be legally bound, the parties hereto agree as follows: Employment. Employer hereby agrees to employ Employee and Employee hereby agrees to serve Employer upon the terms and conditions set forth in this Agreement in the capacities set forth on Exhibit A attached hereto, with the duties and responsibilities of such positions to be determined from time to time by the President and/or Chief Executive Officer of each of the companies which comprise Employer and the Board of Directors of AirT. Term. Statement of Term. The term of this Agreement shall begin on January 1, 1996, and end on March 31, 1999, or on such later date to which the term of this Agreement may be extended pursuant to the provisions of this Paragraph 2. Automatic Extension. Subject to subparagraph (c) of this Paragraph 2, the term of this Agreement shall be extended automatically for one year effective on the 1st day of December, 1996 (so that effective on such date the term of employment shall be extended from March 31, 1999, to March 31, 2000), and on the 1st day of each succeeding December (so that effective on each such day, the remaining term of employment shall be for a full three- year, four month period). Termination of Automatic Extensions. Employee or the Board of Directors of AirT, by written notice delivered to the other, may at any time elect to terminate the automatic extension provisions of subparagraph (b) of this Paragraph 2. Such election shall apply only to extensions that would otherwise become effective after delivery of such notice and shall not apply to extensions that have theretofore become effective. Compensation, Incentives and Employee Benefits. Base Salary. Employer shall pay to the Employee for his performance of services hereunder a base salary ("Base Salary") at the rate of not less than One Hundred Thirty Thousand and No/100 ($130,000) per year for the period of this Agreement. The Employee's Base Salary rate shall be reviewed by Employer annually and may be increased from time to time only with the approval of the Compensation Committee of the Board of Directors of AirT. From and after the effective date of any such change the increased rate shall become the Base Salary rate applicable thereafter. Base Salary shall be paid in bi-weekly installments and shall be pro- rated for any partial months of employment. Incentive Compensation. Employer shall pay to the Employee incentive compensation ("Incentive Compensation") equal to two percent (2%) of the earnings before income taxes or extraordinary items reported each year by AirT on its Annual Report on Form 10-K (the "10-K"). Amounts payable under this subparagraph, if any, shall be paid within fifteen (15) days after AirT files its 10-K with the Securities and Exchange Commission. Amounts otherwise payable hereunder shall be prorated for a partial year's employment in the event Employee's employment is terminated or ceases during the course of AirT's fiscal year. Employee Benefit Plans. In addition to the Base Salary and Incentive Compensation provided for above, Employer shall provide to the Employee the opportunity to continue to participate in all life insurance, medical, dental, optical, disability, and other employee benefit plans (collectively, "Employee Benefit Plans") sponsored from time to time by Employer and covering its employees generally or a particular group of its employees of which the Employee is a member (including participation by the Employee's dependents to the extent they are eligible under the terms of such plans), subject to the terms and conditions of such benefit plans. Reimbursement of Expenses. Employer shall pay or reimburse Employee for all reasonable travel and other expenses incurred by him in performing his obligations under this Agreement. Such expenses shall be appropriately submitted and approved in accordance with the policies approved by the Board of Directors of AirT. Vacation. Employee shall be entitled to paid annual vacation of up to 4 weeks per year. Automobile Expense. Employee shall be reimbursed for the use of his automobile for Employer's business at the rate of $4,800.00 per year, payable in monthly installments. Retirement Benefits. Amount. The Employer shall pay Employee an annual retirement benefit of Seventy-Five Thousand and No/100 Dollars ($75,000.00) per year in the event Employee continues work until he reaches age 65. If Employee voluntarily terminates his employment before he reaches age 65, such amount shall be reduced by three (3) percentage points for each full year that his termination of employment precedes the date he reaches age 65, but in no event prior to his reaching age 62. If such termination of employment occurs on a date other than his birthday, the three (3) percentage point reduction shall be prorated on a monthly basis. Form. Such retirement benefit shall commence as of the date elected pursuant to Paragraph 4(c) hereof and shall be paid monthly in the form of a single life annuity or, at Employee's option, an actuarially equivalent joint and survivor annuity or life annuity with a ten-year period certain; provided, however, that Employee shall have the right to receive the present value of his retirement benefit in a single lump sum payment if he files an election in writing with the Employer at least one year before the date as of which his benefit is scheduled to commence. For purposes of this Agreement, (a) the present value shall be determined by using the insurance industry's standard 1983 Group Annuity Mortality Table (the "Table") and an interest rate (the "Rate") equal to the average (for the 90 days prior to payment) yield of ten year U.S. Treasury Notes (as reported over such period in The Wall Street Journal or any successor to such publication), (b) the term "joint and survivor annuity" shall mean an annuity payable for Employee's life and, if he dies before his survivor annuitant, a 50%, 75% or 100% survivor annuity payable to such survivor for such person's life, (c) the term "life annuity with a ten-year period certain" shall mean an annuity payable for the life of Employee and, if Employee dies before payments have been made for ten years, with continued payments to his designated beneficiary for the balance of such ten-year period, and (d) an actuarially equivalent benefit shall be determined using the Table and the Rate. Timing. Such retirement benefit shall be paid, or benefit payments shall commence, in the form elected pursuant to Paragraph 4(b) hereof, as of the first day of the month immediately following Employee's 65th birthday; provided, however, that Employee shall have the right at any age to elect that the payment of his benefit commence after the later of the date he reaches age 62 or his employment terminates provided such election is filed in writing with the Employer at least one year before his employment terminates. If the payment of Employee's retirement benefit begins before age 65 pursuant to such an election, such benefit shall be reduced by three percentage points (3%) for each full year that the benefit commencement date precedes Employee's 65th birthday. In the event that benefits commence as of a date other than Employee's birthday, the three percentage point reduction factor shall be prorated on a monthly basis. Offset for Other Retirement Benefits. In the event that the retirement benefits payable under any retirement benefits program applicable to all employees (the " AirT Plan") are paid in the same form and at the same time as the retirement benefits under this Paragraph 4, then the annual benefit payable under Paragraph 4 hereof each year shall be offset by the dollar amount paid to Employee under the AirT Plan in such year. In the event that the retirement benefits payable under the AirT Plan are not paid in the same form or are not paid at the same time, then the retirement benefits under this Paragraph 4 shall be offset by the actuarial equivalent of the benefit expected to be paid to Employee under the AirT Plan. The actuarial equivalent benefit shall be determined by using the Table and the Rate. Death Benefit. In the event of Employee's death prior to the commencement of the retirement benefit described in Paragraph 4(a), Employer hereby agrees to pay an annual death benefit to Employee's estate that is equal to the single life annuity benefit Employee would have received if he had terminated employment on the later of his 65th birthday or his date of death; provided, however, that the amount payable under this subparagraph shall be reduced by five percent (5%) per year for each year Employee's death occurs prior to age 65, but in no by event more than fifty percent (50%). Such annual benefit shall commence as soon as practicable after Employee's death and shall be paid in substantially equal monthly payments for a period of ten years. Disability Benefit. In the event of Employee's termination of employment as a result of total disability, his retirement benefit under Paragraph 4 hereof shall be calculated under Paragraph 4(a) and 4(c), shall be paid in the form elected pursuant to Paragraph 4(b), and shall be paid at the time elected pursuant to Paragraph 4(c), except that Employee shall have the right to make an election under Paragraph 4(c) no later than six months before his employment terminates, instead of one year before his employment terminates. Source of Benefits. The retirement benefits payable under this Agreement shall be paid by the Employer from its general assets. Employee shall have no right, interest, or claim whatsoever to the payment of a benefit from any person other than the Employer, and shall have no right or interest whatsoever that is superior in any manner to the right of any other general and unsecured creditor of the Employer. Employee shall have no right to assign, alienate, pledge or otherwise encumber the retirement benefits payable under this Agreement, and any attempt to do so shall be void. Participation in Other Plans. Employee shall participate in all retirement plans (qualified or non-qualified) and all deferred compensation arrangements maintained by the Employer in which other senior executives participate as a group, subject to the terms and conditions of such retirement plans. Vesting. Notwithstanding anything herein to the contrary, Employee's right to the retirement and death benefits provided for hereunder shall vest upon the execution hereof even though Employee shall have no right to the payment of any retirement benefits until he reaches age 62 or to the death benefit until death. Duties. During the term hereof, Employee shall devote all of his business time, attention, skills and efforts to the business of Employer and the faithful performance of his duties hereunder; provided, however, that (i) nothing contained herein shall prevent Employee from making outside investments consistent with the provisions contained herein and (ii) with the approval of the Board of Directors of AirT, from time to time Employee may serve, or continue to serve, on the boards of directors of, and hold any other offices or positions in, companies or organizations which, in the AirT Board of Directors' judgment, will not present any conflict of interest with Employer, or materially affect the performance of Employee's duties pursuant to this Agreement. Except for such incidental matters as may be assigned by Employer from time to time, Employee's duties shall be confined to those geographic areas in which Employer operates its business and Employee may not be transferred so that Employee's principal office is located anywhere outside the state of North Carolina. Termination. Termination By Employer Without Cause. The parties recognize (i) that the Board of Directors of AirT has the duty to use its judgment in the best interests of Employer in determining whether to remove or to elect or reelect Employee as an executive officer of Employer even though there may be no legal cause therefor under this Agreement, and (ii) that any action or inaction of the Board of Directors of AirT pursuant to clause (i) shall not prejudice the rights of Employee under this Agreement. Accordingly, the parties agree that, subject to all other provisions of this Paragraph 6, Employer shall have the right at any time during the term of this Agreement to terminate this Agreement without cause. Such right of termination may be exercised by removal of Employee by the Board of Directors of AirT or the failure of the Board of Directors of AirT to elect or re- elect Employee as an executive officer of Employer or otherwise. Termination of this Agreement shall be deemed to occur on the date Employee is notified thereof or, if he is not so notified, on the date of the act or failure to act by the Board of Directors of AirT referred to in the preceding sentence. Termination by Employee. Employee may terminate his employment with Employer, for any reason or without reason, during the term hereof. Such termination must be accompanied by the delivery of at least 10 days' written notice delivered to Employer. Termination Payments. If Employer terminates Employee's employment hereunder pursuant to Paragraph 6(a) hereof for any reason other than for "Cause", as defined herein, then the following provisions shall govern: Immediately upon the effectiveness of the termination set forth in Paragraph 6(a) above, Employer shall make a lump sum cash payment to Employee in an amount equal to the sum of (A) the aggregate Base Salary that would have been paid to Employee under the terms hereof after the date of such event through the date of the then term of this Agreement (based upon the agreement that the Base Salary as in effect immediately prior to the date of such event(s) continued to be the Base Salary through the term of this Agreement; and (B) one-half of the maximum additional compensation that would have been paid to Employee after the date of termination of employment pursuant to Paragraph 3(b) had his employment hereunder continued through the then date of the expiration of this Agreement (based upon the agreement that the amount of incentive compensation paid to Employee pursuant to Paragraph 3(b) for the calendar year immediately preceding the date of termination continued to be the amount payable through the term of this Agreement). Notwithstanding anything contained in this Paragraph to the contrary, in the event that the payments under this Paragraph to Employee, either alone or together with other payments Employee has a right to receive from Employer, would not be deductible (in whole or in part) by Employer as a result of such payments constituting a "parachute payment" (as defined in Section 280G of the Internal Revenue Code, as amended (the "Code")), such payments shall be reduced to the largest amount as will result in no portion of the payments not being fully deductible by Employer as the result of Section 280G of the Code. The determination of any reduction in the payments pursuant to the foregoing sentence shall be made exclusively by AirT's independent public accountants (whose fees and expenses shall be borne by Employer), and such determination shall be conclusive and binding on Employer and Employee. Disability. If the Employee is unable to perform his duties hereunder for a period of twelve (12) consecutive months due to disability (as defined by the primary disability insurance car- rier then providing such insurance coverage for the Employer's executive officers), this Agreement may be terminated at Employer's discretion by giving to the Employee written notice specifying a termination date subsequent thereto and also subsequent to the end of said twelve (12) month period. (e) No Mitigation. Employee shall have no obligation to seek other employment in the event of termination of his employment and no compensation or other benefits received by Employee from any other employment shall reduce or limit Employer's obligation to make payment under this entire Paragraph 6. (f) Definitions. "Cause" shall exist if, and only if, a court of competent jurisdiction enters a final order finding that (a) the Employee has committed wrongful acts (but excluding matters of business judgment) which have had or will have a material adverse effect on the business, operations or financial condition of Employer, or (b) the Employee has willfully and materially failed to perform the duties reasonably required of him under this Agreement. Confidential Information. Employee shall not, at any time during or following his employment by Employer regardless of the reason for such termination of employment, furnish, divulge, communicate, use to the detriment of Employer or for the benefit of any business, firm, person, partnership, trust or corporation, or otherwise, any of Employer's confidential information, data, trade secrets, sales methods, names of customers, advertising methods, financial affairs or methods of procurement, or take with him any document or paper relating to the foregoing, it being acknowledged that Employee received or obtained all of the above in confidence and as a fiduciary of Employer. Non-Competition. Employee agrees that, during Employee's employment with Employer and for a period of three (3) years thereafter, whether Employee leaves voluntarily or involuntarily: (a) Employee will not directly or indirectly, individually or as a partner, employee, stockholder, consultant, agent, officer, director, advisor or in any other capacity, solicit any of the customers of Employer for the purpose of selling any service or product similar to those provided by Employer, or in any manner attempt to induce any of Employer's customers or suppliers to withdraw, reduce or divert any of their business from Employer or otherwise interfere or attempt to interfere with any business relationship between Employer and its customers or suppliers. For the purposes of this Paragraph 8(a), customers shall mean (i) any client, account or customer of the Employer that has transacted any business with or been contacted by Employer within the twelve months preceding the date hereof, and (ii) any other client, account or customer of Employer that has done business with Employer within two years of the date of such separation or termination; (b) Employee will not in any manner induce or attempt to induce any of Employer's employees to leave the employment of Employer to become associated with any business operation engaged in the air cargo or air freight business; (c) Employee will not directly or indirectly, either as principal, agent, manager, employee, owner (if the percentage of ownership exceeds one percent (1%) of the net worth of the business), partner (general or limited), director, officer, consultant or in any other capacity, participate in any business operation engaged in the air cargo or air freight business; Limitations on Scope. Because of the present and contemplated future operations of Employer in the geographic areas hereinafter set forth, it is further understood and agreed by the parties hereto that the restriction set forth in Paragraph 8(c) shall apply to a business engaged in the air cargo, air freight, aircraft maintenance or aircraft parts brokering business or businesses in the following geographic areas: (i) The State of North Carolina; (ii) The State of Michigan; (iii) The State of South Carolina; (iv) The State of Florida; (v) Any State contiguous with the State of North Carolina; (vi) Any State contiguous with the State of Michigan; (vii) Any State contiguous with the State of South Carolina; (viii) Any State contiguous with the State of Florida; (ix) Any State east of the Mississippi River; (x) Any State of the United States of America. The parties intend the above geographical areas to be completely severable and independent, and any invalidity or unenforceability of this Agreement with respect to any one area shall not render this Agreement unenforceable as applied to any one or more of the other areas. Severability. If any provision contained in this Agreement shall for any reason be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement but this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein. The parties agree that in the event a court should determine that this Agreement or any of the covenants contained herein is unreasonable, void or invalid, for any reason whatsoever, then in such event,the parties hereto agree that the duration, geographical or other limitation imposed herein should be as the court, or jury, if applicable, should determine to be fair and reasonable, it being the intent of each of the parties hereto to be subject to an agreement that protects the legitimate competitive interests of Employer and does not unreasonably curtail the rights of the Employee. Employee's Representation. Employee represents that his experience and capabilities are such that the provisions of Paragraphs 8 and 9 will not prevent him from earning a livelihood. Employer's Right to Obtain an Injunction. Employee acknowledges that Employer will have no adequate means of protecting its rights under Paragraphs 8 and 9 of this Agreement other than securing an injunction. Accordingly, Employee agrees that Employer is entitled to enforce this Agreement by obtaining a preliminary and permanent injunction and any other appropriate equitable relief in a court of competent jurisdiction. Employee acknowledges that the recovery of damages by Employer will not be an adequate means to redress a breach of this Agreement. Nothing contained in this Paragraph, however, shall prohibit Employer from pursuing any remedies in addition to injunctive relief, including recovery of damages. General Provisions. Entire Agreement. This Agreement contains the entire understanding between the parties hereto relating to the employment of Employee by Employer and supersedes any and all prior employment, compensation or retirement agreements between Employer or any predecessors of Employer or any of its subsidiaries and Employee. Nonassignability. Neither this Agreement nor any right or interest hereunder shall be assignable by Employee, his beneficiaries or legal representatives, without the prior written consent of Employer; provided, however, that nothing shall preclude (i) Employee from designating a beneficiary to receive any benefit payable hereunder upon his death, or (ii) the executors, administrators or other legal representatives of Employee or his estate from assigning any rights hereunder to the person or persons entitled thereunto. Binding Agreement. This Agreement shall be binding upon, and inure to the benefit of, Employee and Employer and their respective permitted successors and assigns. Amendment or Modification of Agreement. This Agreement may not be modified or amended except by an instrument in writing signed by the parties hereto. Insurance. Employer, at its discretion, may apply for and procure in their own name and for its own benefit, life insurance on Employee in any amount or amounts considered advisable; and Employee shall have no right, title or interest therein, and further, Employee agrees to submit to any medical or other examination and to execute and deliver any applications or other instruments in writing as may be reasonably necessary to obtain such insurance. Notices. All notices under this Agreement shall be in writing and shall be deemed effective when delivered in person (in the case of Employer, to its Secretary) or when mailed, if mailed by certified mail, return receipt requested. Notices mailed shall be addressed, in the case of Employee, to him at his residential address currently on file with Employer, and in the case of Employer, to its corporate headquarters, attention of the Secretary, or to such other address as Employer or Employee may designate in writing at any time or from time to time to the other party. In lieu of notice by deposit in the U.S. mail, a party may give notice by telegram or telex. Waiver. No delay or omission by either party hereto in exercising any right, power or privilege hereunder shall impair such right, power or privilege, nor shall any single or partial exercise of any right, power or privilege preclude any further exercise thereof or the exercise of any other right, power or privilege. The provisions of this Paragraph 14(g) cannot be waived except in writing signed by both parties. Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of North Carolina, exclusive of its choice of law provisions. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. AIR TRANSPORTATION HOLDING COMPANY, INC. By: ____________________________ Its: ___________ MOUNTAIN AIR CARGO, INC. By: ____________________________ Its: ___________ MOUNTAIN AIRCRAFT SERVICES, LLC By: ____________________________ Its: ______________ ______________________________ (SEAL) J. Hugh Bingham EXHIBIT A COMPANY POSITION HELD AirT Senior Vice President Mountain Air Cargo, Inc. Executive Vice President Mountain Aircraft Services LLC President -----END PRIVACY-ENHANCED MESSAGE-----