8.	Financing Arrangements

December 21, 2017,

the Company refinanced its previously existing financing arrangement with Branch Banking and Trust Company (“BB&T) by entering into a Credit Agreement (“MBT Credit Agreement”) with Minnesota Bank & Trust (“MBT”), pursuant to which MBT extended to the Company an aggregate of

$26,900,000

in financing in the form of a floating-rate,

$10,000,000

revolving credit facility, and three, fixed-rate amortizing term loans in the amounts of

$10,000,000

(“Term Loan A”),

$5,000,000

(“Term Loan B”) and

$1,900,000

(“Term Loan C”), respectively. The interest rate on the

$10,000,000

revolving note floats at a rate equal to the prime rate plus

one

percent (

); the interest rate on Term Note A floats at the

one

month LIBOR rate plus

two

percent (

); the interest rate on Term Note B is fixed at

four

and

one

-half percent (

4.50%

); and, the interest on Term Note C floats at a rate equal to prime minus

one

percent (

), subject to a floor of

three

and

one

quarter percent (

3.25%

In connection with the financing, the Company entered into a swap agreement to fix the interest rate on Term Note A at

four

and

56/100ths

percent (

4.56%

). The revolving note is due on

November 30, 2019,

Term Loan A and Term Loan B mature in

ten

years from the date of issuance, and Term Loan C matures on

January 1, 2019

although there are

amounts outstanding on this loan as of December

31,

2017.

The loans are guaranteed by certain subsidiaries of the Company, secured by a

first

lien on all personal property of the Company and the guaranteeing subsidiaries. The Company applied a portion of the proceeds from the financing to refinance the obligations of the Company and certain of its subsidiaries under its Prior Revolving Credit Facility (as defined below) with BB&T.

December 21, 2017,

the Company entered into an interest rate swap pursuant to an International Swap Dealer

’s Association, Inc. Master Agreement with MBT. The effective date of the swap was

January 1, 2018

and the termination date of the swap agreement is

January 1, 2028.

As of

January 1, 2018,

the notional amount was

$10,000,000,

which amount adjusts each month consistent with the amortization schedule of Term Note A. The purpose of the swap is to fix the interest rate on the Company’s

$10,000,000

Term Note A at

four

and

56/100ths

percent (

4.56%

), thereby mitigating the interest rate risk inherent in Term Note A. The fair value of the interest rate swap as of

December 31, 2017

was a liability of

$199,000.

The interest rate swap was

not

designated as a hedging instrument. The change in the fair value of the swap from the trade date to

December 31, 2017

is recorded in the condensed consolidated statements of income (loss). The interest rate swap is considered a Level

fair value measurement.

The MBT Credit Agreement contains affirmative and negative covenants, including covenants

requiring compliance certificates and borrowing base certificates, notices of events of default or other events deemed to have a material adverse effect on the Company, as defined in the credit agreement, and limitations on certain types of additional debt and certain types of investments. The MBT Credit Agreement also contains financial covenants applicable to the Company and the obligation subsidiaries, including either the maintenance of a Debt Service Coverage Ratio of

1.25

1.00

or an Asset Coverage Ratio of

1.50

1.00.

The MBT Credit Agreement contains events of default, as defined therein, including, without limitation, nonpayment of principal, interest or other obligations, violation of covenants, cross-default to other debt, bankruptcy and other insolvency events, actual or asserted invalidity of loan documentation, or material adverse changes in the Company

’s or the guaranteeing subsidiaries’ financial condition. At

December 31, 2017,

the Company and the subsidiaries were in compliance with all applicable covenants under this credit facility.

As of

December 31, 2017,

long-term debt under the financing arrangements with MBT

is as follows:

Term Note A	$	10,000,000
Term Note B		5,000,000
Term Note C		-
Revolving credit facility		7,248,489
Total		22,248,489
Current portion of long-term debt		2,500,000
Long-term debt, less current portion		19,748,489
Less: Unamortized deferred financing costs		(143,813	)
	$	19,604,676

Prior to

December 21, 2017,

the Company had a senior secured revolving credit facility of

$25.0

million with BB&T with a maturity date of

April 1, 2019 (

the “Prior Revolving Credit Facility”). Initially, borrowings under the Prior Revolving Credit Facility bore interest (payable monthly) at an annual rate of

one

-month LIBOR plus an incremental amount ranging from

1.50%

2.00%

based on a consolidated leverage ratio. In addition, a commitment fee accrued with respect to the unused amount of the Prior Revolving Credit Facility at an annual rate of

0.15%.

The Company included the commitment fee expense within the interest expense and other line item of the accompanying condensed consolidated statements of income. Amounts applied to repay borrowings under the Prior Revolving Credit Facility could be reborrowed, subject to the terms of the facility.

May 2, 2017,

the Company and certain of its subsidiaries entered into an amendment to the agreement governing the Prior Revolving Credit Facility to establish a separate

$2.4

million term loan facility under that agreement. Each of the Company and such subsidiaries were obligors with respect to the term loan, which matured on

May 1, 2018,

with equal

$200,000

installments of principal due monthly, commencing

June 1, 2017.

Interest on the term loan was payable monthly at a per annum rate equal to

basis points above the interest rate applicable to the Prior Revolving Credit Facility. The proceeds of the term loan were used to fund the acquisition of the AirCo business. The term loan was secured by the existing collateral securing borrowings under the Prior Revolving Credit Facility, including such acquired assets.

Effective as of

June 28, 2017,

the Company and certain of its subsidiaries agreed to amend the Prior Revolving Credit Facility to provide that the interest rates on the revolving loans and the above-referenced term loan under the Prior Revolving Credit Facility were each increased by an additional

0.25%

per annum from the date of the amendment until the

second

business day after delivery of a compliance certificate for the quarter ended

March 31, 2017

or any subsequent fiscal quarter end showing compliance with the financial covenants required under the Prior Revolving Credit Facility, other than with respect to covenants as to which compliance had been waived. The compliance certificate for the quarter ended

June 30, 2017,

was so delivered on

October 26, 2017

and accordingly, the additional

0.25%

per annum additional interest ceased to accrue commencing on

October 26, 2017.

The Prior Revolving Credit Facility contained a number of affirmative and negative covenants as well as financial covenants. Revisions to the terms of the Prior Revolving Credit Facility and waiver of compliance with certain covenants by the lender occurred pursuant to a number of amendments to the facility.

October 31, 2016,

the Company and its subsidiaries, MAC, GGS, CSA, GAS, ATGL, Jet Yard and Stratus Aero Partners, LLC, entered into a loan agreement dated as of

October 31, 2016, (

the “Construction Loan Agreement”) with the Prior Revolving Credit Facility lender to borrow up to

$1,480,000

to finance the acquisition and development of the Company

’s new corporate headquarters facility located in Denver, North Carolina. Under the Construction Loan Agreement, the Company was permitted to make monthly drawings to fund construction costs until

October 2017.

Borrowings under the Construction Loan Agreement bore interest at the same rate charged under the Revolving Credit Facility. Monthly interest payments began in

November 2016.

Monthly principal payments (based on a

-year amortization schedule) commenced in

November 2017,

with the final payment of the remaining principal balance due in

October 2026.

Borrowings under the Construction Loan Agreement were secured by a mortgage on the new headquarters facility and a collateral assignment of the Company’s rights in life insurance policies with respect to certain former executives, as well as the same collateral securing borrowings under the Revolving Credit Facility. The Construction Loan included the same covenants as in the Prior Revolving Credit Facility.

All of the obligations of the Company and its subsidiaries under the Prior Revolving Credit Facility including the Construction Loan Agreement referenced above were repaid in full with proceeds of the MBT Credit Agreement,

and the Prior Revolving Credit Facility was terminated effective as of

December 21, 2017.

May 5, 2017,

Contrail Aviation Support, LLC (“Contrail

Aviation”), a partially owned subsidiary of the Company, entered into a Business Loan Agreement with Old National Bank (“ONB Loan Agreement”). The ONB Loan Agreement provides for revolving credit borrowings by Contrail Aviation in an amount up to

$15,000,000

and replaces the revolving credit facility that Contrail Aviation had entered into with BMO Harris Bank N.A on

July 18, 2016.

Borrowings under the ONB Loan Agreement will bear interest at an annual rate equal to

one

-month LIBOR plus

3.00%.

December 31, 2017,

$9,353,000

of aggregate borrowings were outstanding under the ONB Loan Agreement and

$5,647,000

was available for borrowing.

The obligations of Contrail

Aviation under the ONB Loan Agreement are secured by a

first

-priority security interest in substantially all of the assets of Contrail Aviation and are also guaranteed by the Company, with such guaranty limited in amount to a maximum of

$1,600,000

plus interest on such amount at the rate of interest in effect under the ONB Loan Agreement, plus costs of collection.

The

ONB Loan Agreement contains affirmative and negative covenants, including covenants that restrict Contrail Aviation’s ability to make acquisitions or investments, make certain changes to its capital structure, and engage in any business substantially different than it presently conducts. The ONB Loan Agreement also contains financial covenants applicable to Contrail Aviation, including maintenance of a Cash Flow Coverage Ratio of

2.0

1.0,

a Tangible Net Worth of

not

less than

$3,500,000,

and a Debt Service Coverage Ratio of

1.1

1.0,

as such terms are defined in the ONB Loan Agreement.

The

ONB Loan Agreement contains Events of Default, as defined, including, without limitation, nonpayment of principal, interest or other obligations, violation of covenants, if both Contrail Aviation’s current chief executive officer and chief financial officer cease to oversee day-to-day operations of Contrail Aviation, cross-default to other debt, bankruptcy and other insolvency events, actual or asserted invalidity of loan documentation, or material adverse changes in Contrail Aviation’s financial condition. At

December 31, 2017,

Contrail Aviation was in compliance with these covenants.

October 27, 2017

AirCo

LLC, a wholly-owned subsidiary of AirCo, LLC, closed a loan in the amount of

$3,441,000

from Minnesota Bank &

Trust in order to finance, in part, the purchase of a

737

800

airframe for the purpose of disassembling the plane and selling it for parts. The plane will be disassembled by Jet Yard, LLC, an affiliate, and the parts will be sold on consignment to AirCo, LLC, which will market them to

third

parties. AirCo

LLC is a special purpose entity formed for the purpose of this transaction. Borrowings under this loan agreement will bear interest at an annual rate of

7.25%.

Beginning on

November 1, 2017,

monthly installments of accrued interest are due. The principal balance on the loan and any remaining unpaid interest being due on

March 26, 2019.

December 31, 2017,

the outstanding balance on this loan was approximately

$3,347,000,

which is reported net of deferred financing costs of

$58,000

on the consolidated balance sheet.

The loan contains affirmative and negative covenants and is secured by a security interest in all of Air

LLC’s assets, a collateral assignment of the purchase agreement for the plane, assignments of the disassembly contract and the consignment agreement, and bailee agreements with Jet Yard, LLC and AirCo, LLC. AirCo, LLC is a wholly-owned subsidiary of Stratus Aero Partners LLC.

The loan is

not

guaranteed by the Company

The Company assumes various financial obligations and commitments in the normal course of its operations and financing activities. Financial obligations are considered to represent known future cash payments that the Company is required to make under existing contractual arrangements suc

h as debt and lease agreements.