10.	FINANCING ARRANGEMENTS

As of

March 31, 2016,

the Company had a senior secured revolving credit facility of

$20.0

million (the “Revolving Credit Facility”). The Revolving Credit Facility includes a sublimit for issuances of letters of credit of up to

$500,000.

Under the Revolving Credit Facility, each of the Company, MAC, CSA, GGS, GAS and ATGL

may

make borrowings. Initially, borrowings under the Revolving Credit Facility bear interest (payable monthly) at an annual rate of

one

-month LIBOR plus

1.50%,

although the interest rates under the Revolving Credit Facility are subject to incremental increases based on a consolidated leverage ratio. In addition, a commitment fee accrues with respect to the unused amount of the Revolving Credit Facility at an annual rate of

0.15%.

The Company includes commitment fee expense within the interest expense and other line item of the accompanying consolidated statements of income. Amounts applied to repay borrowings under the Revolving Credit Facility

may

be reborrowed, subject to the terms of the facility. The Revolving Credit Facility matures on

April 1, 2017.

Borrowings under the Revolving Credit Facility, together with hedging obligations, if any owing to the lender under the Revolving Credit Facility or any affiliate of such lender, are secured by a

first

-priority security interest in substantially all assets of the Company and the other borrowers (including, without limitation, accounts receivable, equipment, inventory and other goods, intellectual property, contract rights and other general intangibles, cash, deposit accounts, equity interests in subsidiaries and joint ventures, investment property, documents and instruments, and proceeds of the foregoing), but excluding interests in real property.

The agreement governing the Revolving Credit Facility contains affirmative and negative covenants, including covenants that restrict the ability of the Company and the other borrowers to, among other things, incur or guarantee indebtedness, incur liens, dispose of assets, engage in mergers and consolidations, make acquisitions or other investments, make changes in the nature of their business, enter into certain operating leases, and make certain capital expenditures. The Credit Agreement also contains financial covenants, including a minimum consolidated tangible net worth of

$22.0

million, a minimum consolidated fixed charge coverage ratio of

1.35

1.0,

a minimum consolidated asset coverage ratio of

1.75

1.0,

and a maximum consolidated leverage ratio of

3.5

1.0.

The agreement governing the Revolving Credit Facility contains events of default including, without limitation, nonpayment of principal, interest or other obligations, violation of covenants, misrepresentation, cross-default to other debt, bankruptcy and other insolvency events, judgments, certain ERISA events, certain changes of control of the Company, termination of, or modification to materially reduce the scope of the services required to be provided under, certain agreements with FedEx, and the occurrence of a material adverse effect upon the Company and the other borrowers as a whole.

The Company is exposed to changes in interest rates on its prior line of credit and its current revolving credit facility. If the LIBOR interest rate had been increased by

one

percentage point, based on the weighted average balance outstanding for the year, the change in annual interest expense would have been negligible.

borrowings were outstanding under the credit facility on

March 31, 2016.

Amounts advanced under the credit facility bear interest at the

-day “LIBOR” rate plus

150

basis points. The LIBOR rate at

March 31, 2016

was approximately

.44%.

The Company was in compliance with all covenants under this credit facility at

March 31, 2016.

As of

March 31, 2016,

Delphax maintained a debt facility consisting of a

$7.0

million revolving senior secured credit facility, subject to a borrowing base of North American accounts receivable and inventory. Because Delphax

’s senior credit facility prohibits the payment of cash dividends, the facility is

not

a source of liquidity to Air T, Inc. or any of its subsidiaries. Neither Air T nor any of its subsidiaries is a guarantor of Delphax’s obligations under its senior credit facility.

The Delphax senior credit facility is secured by substantially all of its North American assets, expires in

November 2018,

prohibits payment of cash dividends by Delphax and is subject to certain financial covenants. The Delphax senior credit facility provides for interest based upon the prime rate plus a margin (

4.25%

as of

March 31, 2016).

As of

March 31, 2016,

Delphax had aggregate borrowings of

$1,833,000

outstanding under its senior credit facility, with a borrowing base that would have permitted additional borrowings of approximately

$800,000.

Delphax has advised that at

March 31, 2016

it was

not

in compliance with financial covenants under the agreement governing its senior credit facility. Due to Delphax

’s non-compliance with financial covenants, the lender has the contractual right to cease permitting borrowings under the facility and to declare all amounts outstanding under the senior credit facility due and payable immediately. As of the date of this report the lender has neither made such declaration, nor waived its right to do so and Delphax has continued to make borrowings under the senior credit facility. As of the date of this report, Delphax has

not

regained compliance with these financial covenants. In the event that Delphax is denied access to additional borrowings under the senior credit facility, unless it obtains access to other adequate sources of liquidity, which

may

include cash from operations, Delphax

may

be unable to adequately fund its operations or pay its debts as they come due. Delphax has recently implemented cost-savings initiatives, including employee furloughs, to minimize ongoing cash needs.