8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)  December 19, 2008

AIR T, INC.

(Exact Name of Registrant as Specified in its Charter)

        Delaware                                                                        0-11720                                                              52-1206400      

                                                                                        (State or Other Jurisdiction                          (Commission File Number)                                                       (I.R.S. Employer

                                                                                                of Incorporation)                                                                                                                                        Identification No.)

3524 Airport Road

        Maiden, North Carolina 28650         

(Address of Principal Executive Offices)

 (Zip Code)

                                   (828) 464-8741                                

 (Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former name or former address, if changed from last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4c))

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Item 1.01. Entry into a Definitive Material Agreement

On December 19, 2008, Air T, Inc. (the “Company”) entered into amendments to the employment agreements of two of its executive officers, William H. Simpson and John Parry.  The amendment to Mr. Simpson’s employment agreement deletes provisions providing for certain payments to be made to Mr. Simpson upon his retirement and replaces them with an obligation for the Company to pay Mr. Simpson in July 2009 an amount designed to equal the amount that he would have been entitled to receive under those provisions if he were to retire in July 2009 and elect to receive payment in a lump sum.  The amendment eliminates the incentive for Mr. Simpson to retire early in order to receive these vested benefits under the employment agreement and to avoid tax penalties under Section 409A of the Internal Revenue Code.

The amendment to Mr. Parry’s employment agreement provides for the annual renewal of his term of employment for consecutive one-year terms unless either party provides notice of non-renewal at least 180 days prior to the scheduled expiration of the term.  The term would have otherwise expired in October 2009.  In addition, the amendment provides that in the event that Mr. Parry’s employment is terminated without cause, the Company would provide, for a period of twelve months, continued group health insurance benefits or, at the Company’s discretion, reimbursement for COBRA payments for continuation of such insurance coverage for twelve months.  The continued health insurance coverage or COBRA reimbursement is in addition to severance benefits that had otherwise been provided for in the employment agreement.

The amendments are filed as exhibits 10.1 and 10.2 hereto and are incorporated by reference herein.

Item 8.01.                                Other Events.

On December 24, 2008, the Company issued a press release announcing the settlement of certain pending litigation.  The press release is filed as Exhibit 99.1 hereto and is incorporated by reference herein.

Item 9.01.                                Financial Statements and Exhibits.

(c)           Exhibits

Exhibit 10.1 Amendment to Employment Agreement dated as of December 19, 2008 between William H. Simpson and Air T, Inc., Mountain Air Cargo, Inc. and MAC Aviation Services, LLC

Exhibit 10.2 Amendment to Employment and Noncompete Agreement dated as of December 19, 2008 between John Parry and Air T, Inc.

Exhibit 99.1 Press release of Air T, Inc. dated December 24, 2008

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: December 24, 2008

       AIR T, INC.

        By: /s/ Walter Clark                                                                

          Walter Clark, Chief Executive Office

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Exhibit Index

Exhibit	Description
Exhibit 10.1	Amendment to Employment Agreement dated as of December 19, 2008 between William H. Simpson and Air T, Inc., Mountain Air Cargo, Inc. and MAC Aviation Services, LLC
Exhibit 10.2	Amendment to Employment and Noncompete Agreement dated as of December 19, 2008 between John Parry and Air T, Inc.
Exhibit 99.1	Press release of Air T, Inc. dated December 24, 2008

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EX-10.1

EXHIBIT 10.1

AMENDMENT TO EMPLOYMENT AGREEMENT

WILLIAM H. SIMPSON

THIS AMENDMENT TO EMPLOYMENT AGREEMENT (this “Amendment”) is made and entered into as of December 19, 2008 and amends the Employment Agreement (the “Agreement”) dated as of January 1, 1996, by and among AIR T, INC., formerly known as Air Transportation Holding Company, Inc. (“AirT”), a Delaware corporation; MOUNTAIN AIR CARGO, INC., a North Carolina corporation; MAC AVIATION SERVICES, LLC, formerly known as Mountain Aircraft Services, LLC, a North Carolina limited liability company (all collectively referred to herein as “Employer”); and WILLIAM H. SIMPSON, an individual residing in Denver, North Carolina (“Employee”).

Background Statement

Employee and Employer wish to amend the Agreement to terminate all rights and obligations under Paragraph 4 thereof and to provide for the payment by Employer to Employee of an amount in cash on July 31, 2009 as determined in the manner set forth herein.

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.           Termination of Paragraph 4.  Employer and Employee agree that all rights and obligations of Employer and Employee and any successor thereto under Paragraph 4 of the Agreement are hereby terminated and henceforth such Paragraph 4 shall be deemed void.

2.           Payment.  On July 31, 2009, Employer shall pay to Employee (or Employee’s estate if Employee dies before July 31, 2009) cash equal to the amount of the Substitute Payment, as defined below, less applicable withholding for taxes.  The “Substitute Payment” means an amount equal to the present value of a single life annuity for Employee with an annual benefit of $68,250 paid on a monthly basis commencing on July 31, 2009.  For purposes of this Amendment the present value shall be determined by Employer using the insurance industry’s standard 1983 Group Annuity Mortality Table and an interest rate equal to the average (for the 90 days ending June 30, 2009) yield of ten-year U.S. Treasury Notes (as reported over such period in The Wall Street Journal or any successor to such publication).

3.           Remainder Unaffected.  Except as expressly amended by this Amendment, the remainder of the Agreement shall not be affected by this Amendment, and the Agreement shall continue in full force and effect as amended hereby.

4.           Counterparts.  This Amendment may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument.

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5.           Governing Law.  Employer and Employee agree that this Amendment shall be governed by and construed in all respects in accordance with the internal laws of the State of North Carolina, without regard to the conflicts of laws principles thereof.

IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first above written.

AIR T, INC.

By:                  /s/ Walter Clark

Its: Chief Executive Officer

MOUNTAIN AIR CARGO, INC.

By:                  /s/ Walter Clark

Its: Chief Executive Officer

MAC AVIATION SERVICES, LLC

By:                  /s/ Walter Clark

Its: Executive Vice President

             /s/  William H. Simpson

                   William H. Simpson

EX-10.2

EXHIBIT 10.2

AMENDMENT TO

EMPLOYMENT AND NONCOMPETE AGREEMENT

THIS AMENDMENT is dated as of December 19, 2008 (this “Amendment”) and amends the Employment and Noncompete Agreement (the “Agreement”) dated as of October 6, 2006 by and between JOHN PARRY (“Employee”) and AIR T, INC., a Delaware corporation (the “Company”).

Background Statement

Employee and the Company wish to amend the Agreement to provide for annual renewal of the agreement and to provide for reimbursement of costs of continuation of health benefits following termination of employment under specified circumstances.

Statement of Agreement

In consideration of good and valuable consideration and the mutual promises set forth herein, Employee and the Company hereby amend the Agreement as follows:

1.           Annual Renewal of Term.  Paragraph 3 of the Agreement is hereby amended and restated to read as follows:

3.           Term of Employment.  Subject to paragraph 5, the term of Employee’s employment by the Company hereunder (the “Term of Employment”) shall commence as of October 6, 2006 and shall continue for a period of three (3) years after such commencement date, which term shall be automatically extended for successive one-year periods thereafter unless either party gives written notice to the other of non-renewal of such term at least one hundred eighty (180) days prior to the scheduled date of expiration.

In consideration of good and valuable consideration and the mutual promises set forth herein, Employee and Company hereby amend the Agreement as follows:

2.           Continuation of Certain Benefits.  Paragraph 6 of the Agreement is hereby amended and restated to read as follows:

6.           Severance Payment.  In the event of the termination of Employee’s employment without Cause, the Company shall, conditional upon Employee’s execution of a release of claims against the Company, (i) continue to pay the base salary of Employee for a period of twelve (12) months from the date of termination, such amounts shall be subject to and reduced by any applicable federal and state withholding taxes, and (ii) continue to provide, for a period of twelve (12) months from the date of termination, the group health insurance benefits provided to Employee under paragraph 4(c) hereof, or in lieu thereof, and at the Company’s discretion, promptly reimburse Employee for COBRA payments made by Employee for continuation of such insurance coverage for such period.  The release shall be in a form satisfactory to the Company, and shall be a general release of all claims.  The salary continuation payments shall be payable at a time and in accord with the regular payroll practices of the Company, but shall not commence until the execution of such release by Employee and the satisfaction of all waiting and revocation periods required by law.

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3.           Remainder Unaffected.  Except as expressly amended by this Amendment, the remainder of the Agreement shall not be affected by this Amendment, and the Agreement shall continue in full force and effect as amended hereby.

4.           Counterparts.  This Amendment may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument.

5.           Governing Law.  The Company and Employee agree that this Amendment shall be governed by and construed in all respects in accordance with the internal laws of the State of North Carolina, without regard to the conflicts of laws principles thereof.

IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first above written.

AIR T, INC.

By:                  /s/ Walter Clark                                                                

Its: Chief Executive Officer

/s/ John Parry                                                                       

                                   John Parry

EX-99.1

EXHIBIT 99.1

December 24, 2008

Contact:  John Parry

Chief Financial Officer

3524 Airport Road

Maiden, NC  28650

(828) 464-8741 Ext. 6677

FOR IMMEDIATE RELEASE

AIR T TO GET $550,000 SETTLEMENT

MAIDEN, N.C., December 24, 2008 -- Air T, Inc. (Nasdaq Capital Market: AIRT) today reported that it will receive $550,000 over two and a half years, in a legal settlement relating to inspection and repair costs it incurred following an incident in February 2005 involving  deicing equipment it sold to the Philadelphia International Airport.  Air T, Inc. through its wholly owned subsidiary Global Ground Support, LLC (“GGS”), negotiated the settlement with Elliot Equipment Company, the actual designer and fabricator of the equipment involved in the incident.

The related action brought by U. S. Airways against GGS, Elliot Equipment Company and others was also settled this week.  While the amount of the settlement and specific contributions by the various defendants is confidential, GGS’s share, which was paid entirely by GGS’s insurer, had no material impact on the total liability insurance available to GGS.

Air T, through its subsidiaries, provides overnight air freight service to the express delivery industry, manufactures and sells aircraft deicers and other special purpose industrial equipment, and provides ground support equipment and facilities maintenance to airlines.  Air T is one of the largest, small-aircraft air cargo operators in the United States.  Air T’s Mountain Air Cargo (MAC) and CSA, Air subsidiaries currently operate a fleet of single and twin-engine turbo-prop aircraft nightly in the eastern half of the United States, Puerto Rico and the Caribbean Islands.  Air T’s Global Ground Support subsidiary manufactures deicing and other specialized military and industrial equipment and is one of the largest providers of deicers in the world.  The Global Aviation Services subsidiary provides ground support equipment and facilities maintenance to domestic airline customers.