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) September 14, 2018

Air T, Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware	001-35476	52-1206400
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

5930 Balsom Ridge Road

Denver, North Carolina 28037

(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))

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Item 1.01 Entry into a Material Definitive Agreement

To the extent responsive, the information included in Items 2.01 and 2.03 is incorporated herein by reference.

Item 2.01 Completion of Acquisition or Disposition of Assets

On September 17, 2018, Contrail Aviation Support, LLC (“Contrail”) a 79%-owned subsidiary of Air T, Inc. (the “Company”) acquired two used Airbus A319-100 aircraft. The transaction value exceeded $35,000,000. Contrail financed a portion of the purchase price as described in Item 2.03 below. Contrail assumed the lessor’s interest in a lease for each aircraft.*

The aircraft purchases discussed above continue Contrail’s business of purchasing aircraft and/or aircraft engines for the purpose of leasing or disassembling them and selling them for parts. Significant purchase/sales and leases since May 24, 2017 include the following transactions.

Date	Asset	Purchase/Lease Agreement*
5/12/17	Aircraft	Exhibit 10.1
9/22/17	Engine	Exhibit 10.2
9/22/17	Aircraft	Exhibit 10.3
9/29/17	Engine	Exhibit 10.4
10/9/17	Aircraft	Exhibit 10.5
12/27/17	Aircraft	Exhibit 10.6
1/10/18	Engine	Exhibit 10.7
1/25/18	Engine	Exhibit 10.8
2/11/18	Engine	Exhibit 10.9

Transaction documents with respect to each transaction are filed as Exhibits 10.1 through 10.13 hereto, which are incorporated herein by reference.

* Portions of each transaction exhibit are treated as confidential pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities and Exchange Commission.

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant

On September 14, 2018, Contrail and its wholly-owned subsidiary Contrail Aviation Leasing, LLC (“CAL”) entered into a new Business Loan Agreement (the “Loan Agreement”) with Old National Bank (“ONB”). The new Loan Agreement and related Promissory Note provide for a borrowing by Contrail and CAL of $18,000,000 with a maturity date of September 14, 2021. The Loan Agreement and related Promissory Note constitute new debt with ONB, not a refinancing of current debt. The borrowing under the Loan Agreement bears interest at a variable rate equal to the 1-month LIBOR plus 375 basis points. Contrail and CAL have used proceeds of the new loan in connection with the purchase by CAL of two aircraft, each an Airbus A319-100 (together, the “Aircraft”). The Aircraft are intended to be used in commercial operations pursuant to leasing arrangements until the Aircraft and their component parts are disassembled in connection with the part-out and sale of the Aircraft once the Aircraft or engine(s) are removed from service.

2

The obligations of Contrail and CAL under the Loan Agreement are secured by a first-priority security interest in all of the assets of Contrail and CAL, including a first-priority security interest in the Aircraft evidenced by separate Aircraft Security Agreements. The obligations of Contrail and CAL are also guaranteed by the Company; provided, however, that the total dollar amount of borrowings guaranteed by the Company to ONB is limited to $1,600,000, plus costs of collection and costs, fees and expenses associated with the recovery, repossession or other similar efforts to retrieve any of ONB’s collateral securing any of the outstanding debt of Contrail or CAL to ONB, including the Aircraft.

The Loan Agreement contains affirmative and negative covenants, including covenants that restrict Contrail’s and CAL’s ability to make acquisitions or investments, make certain changes to their respective capital structures, and engage in any business substantially different than they presently conduct, as well as financial covenants relating to, among other things, tangible net worth, quarterly cash flow coverage, and a required pay down period (unless, with respect to the pay down period, Contrail and CAL maintain a minimum debt service coverage ratio).

The Loan Agreement contains Events of Default, as defined therein, including, without limitation, nonpayment of principal, interest or other obligations, violation of covenants, bankruptcy and other insolvency events, false statements made in a warranty or representation, death or incompetency or any guarantor or material adverse change in the borrower’s condition.

The foregoing summary of the terms of the Loan Agreement and Promissory Note does not purport to be complete and is qualified in its entirety by reference to the Loan Agreement and Promissory Note, which are filed as Exhibit 10.13 hereto and is incorporated by reference herein.

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Item 9.01 Financial Statements and Exhibits

10.1	Purchase Agreement dated May 12, 2017 with Contrail Aviation Support, LLC as Buyer*
10.2	Engine Sale Agreement dated September  22, 2017 with Contrail Aviation Support, LLC as Buyer*
10.3	Purchase Agreement dated September 22, 2017 with Contrail Aviation Support, LLC as Buyer*
10.4	Lease Agreement dated September 29, 2017 with Contrail Aviation Support, LLC as Lessor*
10.5	Purchase Agreement dated October 9, 2017 with Contrail Aviation Support, LLC as Seller*
10.6	Lease Agreement dated December 27, 2017 with Contrail Aviation Support, LLC as Lessor*
10.7	Engine Lease Agreement dated January  10, 2018 with Contrail Aviation Support, LLC as Lessor*
10.8	Engine Sale Agreement dated January  25, 2018 with Contrail Aviation Leasing, LLC as Buyer*
10.9	Aircraft Sale & Purchase Agreement dated February  11, 2018 with Contrail Aviation Support, LLC as Purchaser*
10.10	Aircraft Sale Agreement dated August  3, 2018 with Contrail Aviation Support, LLC as Purchaser*
10.11	Novation and Amendment Agreement dated September  4, 2018, with Contrail Aviation Support, LLC as the New Lessor, assuming the Aircraft Lease Agreement, dated October 26, 2001, New Aircraft No. 1*
10.12	Novation and Amendment Agreement dated September  4, 2018, with Contrail Aviation Support, LLC as the New Lessor, assuming the Aircraft Lease Agreement, dated October 26, 2001, New Aircraft No. 2*
10.13	Promissory Note and Business Loan Agreement executed as of September  14, 2018 between Contrail Aviation Support, LLC and Contrail Aviation Leasing, LLC as Borrower and Old National Bank as the Lender

* Portions of the exhibit are treated as confidential pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities and Exchange Commission.

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SIGNATURES

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

Date: September 20, 2018

AIR T, INC.
By:	/s/ Brett Reynolds
	Brett Reynolds, Chief Financial Officer

5

EX-10.1

Exhibit 10.1

Execution Version

PURCHASE AGREEMENT

dated

as of May 12, 2017

between

* *

as Seller,

and

Contrail Aviation Support, LLC

as Buyer

* Contrail Contrail PA i

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

TABLE OF CONTENTS

	Page
1.  Definitions		1
2.  Sale		1
3.  Purchase Price; Deposit; Purchase Price Adjustment		1
4.  Inspection of Aircraft; Value at Closing; Delivery Condition; Deregistration; Export		2
5.  Representations and Warranties of Seller		3
(a)   Organization, Etc.		3
(b)   Organizational Authorization		3
(c)   No Violation		3
(d)   Approvals		3
(e)   Valid and Binding Agreements		4
(f)   Litigation		4
(g)   Encumbrances		4
(h)   Brokers’ Fees		4
(i) Title to Interests		4
(j) Operation		4
6.  Disclaimer		4
7.  Representations and Warranties of Buyer		5
(a)   Organization, Etc.		5
(b)   Authorization		5
(c)   No Violation		5
(d)   Approvals		5
(e)   Valid and Binding Agreements		6
(f)   Litigation		6
(g)   Broker’s Fees		6
8.  Conditions Precedent to the Obligations of Seller		6
(a)   Purchase Price		6
(b)   Due Authorization, Execution and Delivery		6
(c)   Representations and Warranties		6
(d)   Additional Information		6
(e)   Illegality		6
(f)   No Proceedings		6
(g)   Delivery Location		7
(h)   Approvals, Consents and Notices		7
(i) Insurance		7

i

9.  Conditions Precedent to the Obligations of Buyer	7
(a)   Due Authorization, Execution and Delivery	7
(b)   Representations and Warranties	7
(c)   Additional Information	7
(d)   Illegality	7
(e)   No Proceedings	7
(f)   Delivery Location	7
(g)   Material Damage	7
(h)   Liens	7
10.  International Registry	8
11.  Further Assurances	8
12.  Taxes, Indemnities and Insurance	8
(a)   Buyer’s Obligations regarding Taxes	8
(b)   Seller’s Indemnity	8
(c)   Buyer’s Indemnity	9
(d)   Withholding	9
(e)   Contest Resolution	9
(f)   Cooperation	10
(g)   Notice of Claims	10
(h)   Insurance	10
13.  Know Your Customer	11
14.  Miscellaneous	11
(a)   Notices	11
(b)   Confidentiality	12
(c)   Limitation of Liability of Any Party	12
(d)   Headings	13
(e)   References	13
(f)   Governing Law	13
(g)   Arbitration/Jurisdiction	13
(h)   Severability	13
(i) Amendments in Writing	13
(j) Survival	13
(k)   Expenses	13
(1)   Execution in Counterparts	14
(m) Entire Agreement	14
(n)   Exhibits and Schedules	14
(o)   Successors and Assigns	14
(p)   No Third Party Benefit	14
(q)   Assignment	14

ii

SCHEDULES:

Schedule 1	Definitions
Schedule 2	Aircraft Description; Purchase Price
Schedule 3	Aircraft Documents
EXHIBITS:
Exhibit A	Acknowledgment of Delivery
Exhibit B	Certificate of Technical Acceptance
Exhibit C	Warranty Bill of Sale

iii

PURCHASE AGREEMENT

THIS PURCHASE AGREEMENT, dated as of, 2017 (this “Agreement”), is entered into between * * *, a legal entity organized under the laws of * (the “Seller”), and Contrail Aviation Support, LLC, a legal entity organized under the laws of                      in (the “Buyer”).

WHEREAS, subject to the terms and conditions hereof, Seller desires to sell, transfer, and convey to Buyer, and Buyer desires to purchase from Seller, one (1) used Boeing 737-800 Aircraft and related Aircraft Documents (as defined herein).

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and agreements of the parties contained herein and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Seller and Buyer agree as follows:

1. Definitions

Capitalized terms used in this Agreement shall have the meanings set forth in Schedule 1 to this Agreement.

2. Sale

Subject to the terms and conditions of this Agreement, Seller agrees to sell and transfer to Buyer, and Buyer agrees to purchase from Seller, all of Seller’s right, title and interest in, to and under the Aircraft and Aircraft Documents, free and clear of all liens. The Closing of the purchase and sale of the Aircraft shall take place upon satisfaction or waiver of all of the conditions set forth in Section 8 and Section 9 on the Anticipated Closing Date but not later than the respective Final Closing Date, or at such other time as Buyer and Seller may agree in writing.

3. Purchase Price; Deposit; Purchase Price Adjustment

(a) The purchase price for the Aircraft shall be in the amount and allocated (as applicable) as set forth on Schedule 2 hereto (collectively and individually, the “Purchase Price”).

(b) Buyer has previously paid to Seller a security deposit in the amount and allocation (as applicable) as set forth on Schedule 2 hereto (the “Deposit”) which shall be non-refundable to Buyer unless any of the following events occur:

(i) Seller fails to deliver the Aircraft to Buyer on or before the Final Closing Date;

(ii) the Aircraft suffers an Event of Loss or Material Damage between the time of Technical Acceptance and Delivery. “Material damage” shall mean any damage 1) exceeding $100,000 in the total amount; 2) affecting the current non-incident statement; or 3) preventing Buyer from ferrying the Aircraft to the U.S.A. (Buyer shall negotiate in good faith with Seller to resolve concerns over any material damage to the Aircraft before requesting termination of the Purchase Agreement and return of the Deposit.);

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

(iii) Buyer’s or Seller’s material breach of this Agreement;

(iv) Buyer does not issue the Certificate of Technical Acceptance to Seller; or

(v) Seller’s inability to satisfy the Conditions Precedent listed in Section 9 of this Agreement, save where such failure is as a result of Buyer’s breach of the Purchase Agreement.

(c) Prior to Closing, Seller shall provide an original undated signed bill of sale in the form shown on Exhibit C, and Buyer shall provide an original undated signed delivery receipt for the Aircraft in the form shown on Exhibit A, to an escrow agent designated by Buyer, and reasonably acceptable to Seller, to be held by such escrow agent until Seller gives notice that the full Purchase Price has been received by Seller. Said bill of sale shall be delivered (and shall only be delivered) to Buyer by the escrow agent upon receiving Seller’s email confirmation of receipt of the full Purchase Price in cleared funds in Seller’s bank account, which confirmation Seller shall provide immediately upon receiving the Purchase Price.

(d) At Closing, Buyer shall deliver to Seller an amount equal to the Purchase Price (less the Deposit), in immediately available funds, by wire transfer to the following account:

*

4. Inspection of Aircraft; Value at Closing; Delivery Condition; Deregistration; Export

(a) Buyer shall have the opportunity to perform inspections of the Aircraft and Aircraft Documents prior to Closing at * * * * (“Inspection”). Buyer shall be entitled to perform a general inspection of the Aircraft, including (i) a physical “walk around” inspection of the Aircraft interiors and exteriors; (ii) review of the engine borescopes and engine performance checks and (iii) an inspection of all Aircraft Documents relating to such Aircraft. Upon Buyer’s confirmation that the Aircraft and Aircraft Documents are in a condition required by this Agreement and as otherwise acceptable to Buyer, Buyer shall execute and deliver to Seller the Certificate of Technical Acceptance.

(b) Seller shall provide to Buyer at the time of delivery all Aircraft records, including but not limited to, the following current documentation: (i) updated disk sheets, and (ii) non-incident statement(s) and non-PMA/DER statement(s), all in the form presented to Buyer in connection with the Inspection.

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

(c) At Closing, the Aircraft (including the Aircraft Documents) shall be delivered to Buyer in “as-is” “where-is” basis. Seller makes no warranties, guarantees or representations of any kind, either express or implied, statutory or otherwise, as to the condition of the Aircraft.

(d) The export and re importation of the Aircraft under this Agreement are subject to the export laws of the State of Registration. Buyer shall be responsible for the post-closing exportation process required for the Aircraft, including any and all costs associated therewith.

5. Representations and Warranties of Seller

On the date hereof and on the Closing Date Seller makes the following representations and warranties.

(a) Organization, Etc. Seller is duly organized, validly existing and in good standing under the laws of * * * with all requisite organizational power and authority to own, participate in or hold under lease its properties and enter into and perform its obligations under this Agreement and the Transfer Documents to which Seller is or will be a party (collectively, the “Seller Agreements”);

(b) Organizational Authorization. Seller has taken, or caused to be taken, all necessary organizational action (including, without limitation, the obtaining of any consent or approval of any of its board of directors or committee thereof or any officers required by its charter documents or other organizational agreements) to authorize the execution and delivery of this Agreement and each of the Seller Agreements and the performance of its obligations hereunder and thereunder;

(c) No Violation. The execution and delivery by Seller of this Agreement and the Seller Agreements, the performance by Seller of its obligations hereunder and thereunder and the consummation by Seller on the date hereof and on the Closing Date of the transactions contemplated hereby and thereby, do not and will not (i) violate or contravene any provision of the charter documents or other organizational agreements of Seller, (ii) violate or contravene any law applicable to or binding on Seller or (iii) violate, contravene or constitute any default under, or result in the creation of any lien upon, any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, lease, loan or other material agreement, instrument or document to which Seller is a party or by which Seller or any of its properties is or may be bound or affected;

(d) Approvals. The execution and delivery by Seller of this Agreement and the Seller Agreements, the performance by Seller of its obligations hereunder and thereunder and the consummation by Seller on the Closing Date of the transactions contemplated hereby or thereby do not and will not require the consent, approval or authorization of, or the giving of notice to, or the registration with, or the recording or filing of any documents with, or the taking of any other action in respect of any Government Entity;

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

(e) Valid and Binding Agreements. This Agreement has, and the Seller Agreements have been or as of the Closing Date will have been, duly authorized, executed and delivered by Seller and, assuming the due authorization, execution and delivery by the other party or parties thereto, this Agreement and, as of the Closing Date, the Seller Agreements constitute the legal, valid and binding obligations of Seller and are enforceable against Seller in accordance with the respective terms thereof, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, receivership, moratorium and other similar laws affecting the rights of creditors generally and general principles of equity, whether considered in a proceeding at law or in equity;

(f) Litigation. There are no pending or, or to the knowledge of Seller, threatened actions or proceedings against Seller before any court, administrative agency or tribunal which, if determined adversely to Seller, would prohibit or materially adversely affect the ability of Seller to perform its obligations under this Agreement or the Seller Agreements;

(g) Encumbranccs. Seller has not previously sold, assigned, encumbered, transferred or conveyed and, except as contemplated hereby, has no obligation to sell, assign, encumber, transfer or convey, any of its right, title or interest in, to or under the Aircraft;

(h) Brokers’ Fees. Buyer shall not be liable for the fees of any broker or other Person acting on Seller’s behalf in connection with the transactions contemplated hereby;

(i) Title to Interests. Seller is the sole owner of the Aircraft and has good title thereto, free and clear of any and all Liens. At Closing, such title shall be transferred to Buyer free and clear of all Liens.

6. Disclaimer

Other than the express representations and warranties of Seller set forth in Section 5 and in any other Transfer Document, the Aircraft is being sold and assigned hereunder, “AS IS, WHERE IS” and BUYER ACKNOWLEDGES AND AGREES THAT NEITHER THE SELLER NOR ANY OF ITS AFFILIATES, OFFICERS, DIRECTORS, MEMBERS, EMPLOYEES OR REPRESENTATIVES HAS MADE OR WILL BE DEEMED TO HAVE MADE ANY TERM, CONDITION, REPRESENTATION, WARRANTY OR COVENANT EXPRESS OR IMPLIED (WHETHER STATUTORY OR OTHERWISE) AS TO, AND BUYER HEREBY WAIVES, RELEASES AND RENOUNCES ANY AND ALL WARRANTIES, OBLIGATIONS AND LIABILITIES, EXPRESS OR IMPLIED (WHETHER STATUTORY OR OTHERWISE) WITH RESPECT TO, (a) THE CAPACITY, AGE, VALUE, QUALITY, DURABILITY, DESCRIPTION (EXCEPT AS TO SERIAL NUMBERS), CONDITION (WHETHER OF THE AIRCRAFT, ANY PART THEREOF OR ITS AIRCRAFT DOCUMENTS), DESIGN, WORKMANSHIP, MATERIALS, MANUFACTURE, CONSTRUCTION, OPERATION, DESCRIPTION, STATE, MERCHANTABILITY, PERFORMANCE, FITNESS FOR ANY PARTICULAR USE OR PURPOSE (INCLUDING THE ABILITY TO OPERATE OR REGISTER THE AIRCRAFT OR USE THE AIRCRAFT IN ANY OR ALL JURISDICTIONS) OR SUITABILITY OF THE AIRCRAFT, OR ANY PART THEREOF, (b) THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, KNOWN OR UNKNOWN, APPARENT OR CONCEALED, EXTERIOR OR INTERIOR, (c) THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK, COPYRIGHT OR OTHER INTELLECTUAL PROPERTY RIGHTS, (d) ANY IMPLIED WARRANTY ARISING

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FROM THE COURSE OF PERFORMANCE, COURSE OF DEALING OR USAGE OF TRADE OR (e) ANY OTHER REPRESENTATIONS OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT OR ANY PART THEREOF OR ITS AIRCRAFT DOCUMENTS, ALL OF WHICH ARE HEREBY EXPRESSLY EXCLUDED, IT BEING UNDERSTOOD THAT NOTHING HEREIN WILL BE DEEMED TO LIMIT THE BUYER FROM AVAILING ITSELF OF ANY WARRANTIES, COVENANTS, AND REPRESENTATIONS OF ANY MANUFACTURER.

7. Representations and Warranties of Buyer

On the date hereof and on the Closing Date, Buyer makes the following representations and warranties as to itself, to Seller:

(a) Organization, Etc. Buyer is a limited liability company duly organized, validly existing and in good standing under the laws of North Carolina, U.S.A., and has the power and authority to own, participate in or hold under lease its properties and to enter into and perform its obligations under this Agreement and the Transfer Documents to which Buyer is a party (collectively, the “Buyer Agreements”);.

(b) Authorization. Buyer has taken, or caused to be taken, all necessary action (including, without limitation, the obtaining of any consent or approval of its members required by its certificate of formation or limited liability company agreement) to authorize the execution and delivery of this Agreement and each of the Buyer Agreements, as the case may be, and the performance of its obligations hereunder and thereunder;

(c) No Violation. The execution and delivery by Buyer of this Agreement and the Buyer Agreements, the performance by Buyer of its obligations hereunder and thereunder and the consummation by Buyer on the Closing Date of the transactions contemplated hereby and thereby, do not and will not (i) violate or contravene any provision of the certificate of formation, limited liability company agreement, other charter documents or other organizational agreements of Buyer, (ii) violate or contravene any law applicable to or binding on Buyer or (iii) violate, contravene or constitute any default under, or result in the creation of any lien upon, any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, lease, loan or other material agreement, instrument or document to which Buyer is a party or by which Buyer or any of its properties is or may be bound or affected;

(d) Approvals. The execution and delivery by Buyer of this Agreement and the Buyer Agreements, the performance by Buyer of its obligations hereunder and thereunder and the consummation by Buyer on the Closing Date of the transactions contemplated hereby and thereby do not and will not require the consent, approval or authorization of, or the giving of notice to, or the registration with, or the recording or filing of any documents with, or the taking of any other action in respect of, (i) any trustee or other holder of any debt of Buyer and (ii) any Government Entity;

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(e) Valid and Binding Agreements. This Agreement has been and the Buyer Agreements have been or as of the Closing Date will have been duly authorized, executed and delivered by Buyer and, assuming the due authorization, execution and delivery by the other party or parties thereto, this Agreement and, as of the Closing Date, the Buyer Agreements constitute the legal, valid and binding obligations of Buyer and are enforceable against Buyer in accordance with the respective terms thereof, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, receivership, moratorium and other similar laws affecting the rights of creditors generally and general principles of equity, whether considered in a proceeding at law or in equity;

(f) Litigation. There are no pending or, to the knowledge of Buyer, threatened actions or proceedings against Buyer before any court, administrative agency or tribunal which, if determined adversely to Buyer would materially adversely affect the ability of Buyer to perform its obligations under this Agreement or the Buyer Agreements; and

(g) Broker’s Fees. Seller shall not be liable for the fees of any broker or other person acting on Buyer’s behalf in connection with the transactions contemplated hereby.

8. Conditions Precedent to the Obligations of Seller

The obligation of Seller to sell, transfer, assign and convey the Aircraft to Buyer on each Closing Date is subject to the satisfaction or waiver of the following conditions:

(a) Purchase Price. Seller shall have received the Purchase Price via wire transfer to Seller’s account as specified in Section 3;

(b) Due Authorization, Execution and Delivery. This Agreement and each other Transfer Document shall have been duly authorized, executed and delivered by each party thereto other than Seller;

(c) Representations and Warranties. The representations and warranties of Buyer contained herein and in any other Buyer Agreements shall be true and correct as of Closing in all material respects;

(d) Additional Information. Seller shall have received such other documents and evidence with respect to Buyer as Seller may reasonably request in order to establish the authority of Buyer to consummate the transactions contemplated by this Agreement and the other Transfer Documents on such date, the taking by Buyer of all appropriate action in connection therewith and compliance by Buyer with the conditions set forth in this Agreement on such date;

(e) Illegality. The performance on such date of the transactions contemplated hereby, upon the terms and conditions set forth herein, shall not, in the reasonable judgment of Seller, violate, and shall not subject Seller to any penalty or liability under, any law, rule or regulation binding upon Seller;

(f) No Proceedings. No legal or governmental action, suit or proceeding shall have been instituted or threatened before any court, administrative agency or tribunal, nor shall any order, judgment or decree have been issued or proposed to be issued by any court, administrative agency or tribunal to set aside, restrain, enjoin or prevent the consummation of this Agreement or the transactions contemplated hereby;

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(g) Delivery Location. The Aircraft shall be located at the agreed Delivery Location;

(h) Approvals, Consents and Notices. All approvals and consents of, or notices to, any Governmental Entity, any trustee or holder of any indebtedness or obligation of the Seller or any other person, which are required in connection with the transaction contemplated by this Agreement shall have been duly obtained, given or accomplished; and

(i) Insurance. Seller shall have received the insurance certificate specified in Section 12(h).

9. Conditions Precedent to the Obligations of Buyer

The obligation of Buyer to purchase the Aircraft from Seller on each Closing Date is subject to the satisfaction or waiver of the following conditions:

(a) Due Authorization. Execution and Delivery. This Agreement and each other Transfer Document shall have been duly authorized, executed and delivered by each party thereto other than Buyer;

(b) Representations and Warranties. The representations and warranties of Seller contained in the Transfer Documents shall be true and correct as of the Closing Date in all material respects;

(c) Additional Information. Buyer shall have received such other documents and evidence with respect to Seller as Buyer may reasonably request in order to establish the authority of Seller to consummate the transactions contemplated by this Agreement and other Transfer Documents on such date, the taking by Seller of all appropriate corporate action in connection therewith and compliance by Seller with the conditions set forth in the Transfer Documents on such date;

(d) Illegality. The performance of the transactions contemplated hereby, upon the terms and conditions set forth herein, shall not, in the reasonable judgment of Buyer, violate, and shall not subject any Buyer to any penalty or liability under, any law, rule or regulation binding upon such Buyer;

(e) No Proceedings. No legal or governmental action, suit or proceeding shall have been instituted or threatened before any court, administrative agency or tribunal, nor shall any order, judgment or decree have been issued or proposed to be issued by any court, administrative agency or tribunal to set aside, restrain, enjoin or prevent the consummation of this Agreement or the transactions contemplated hereby;

(f) Delivery Location. The Aircraft shall be located at the agreed Delivery Location;

(g) Material Damage. No Material Damage (as defined in Section 3) or an Event of Loss with respect to the Aircraft shall have occurred;

(h) Liens. The Aircraft shall be free and clear of all Liens;

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10. International Registry

At or promptly after Closing, upon request by Buyer, Seller shall provide any consents required to register a contract of sale for the sale of the Aircraft on the International Registry.

11. Further Assurances

Each party agrees, upon the reasonable request of the other party, at any time and from time to time, promptly to execute and deliver all such further documents, and promptly to take and forebear from all such action, as may be reasonably necessary or appropriate in order more effectively to confirm or carry out the provisions of this Agreement. Without limiting the foregoing, Seller shall, at the sole cost and expense of Buyer, do or cause to be done all acts and things as may be required to perfect and preserve the title and interest of Buyer in the Aircraft as Buyer may reasonably request, including, without limitation, that Seller shall, upon request by Buyer and at Buyer’s cost and expense, cause all instruments which shall be executed pursuant to the terms hereof to be kept, filed and recorded in the appropriate office or offices pursuant to applicable laws to perfect, protect and preserve the rights and interests of Buyer hereunder and in the Aircraft.

12. Taxes, Indemnities and Insurance

(a) Buyer’s Obligations regarding Taxes. Buyer hereby agrees promptly to pay and indemnify each Seller Indemnitee from and against any and all Taxes payable in connection with the sale, transfer and delivery by Seller to Buyer of the Aircraft or in connection with any other transaction to occur on or after the Closing expressly contemplated hereby. The foregoing shall expressly exclude any liability for Taxes on or based on or measured by the gross or net income of Seller or capital gains of Seller or Taxes imposed by a taxing authority in a jurisdiction that would not have been imposed but for the business activity (other than the transactions contemplated hereby) or tax residence of Seller in such jurisdiction. The parties agree to cooperate in takingactions to minimize or eliminate Taxes in connection with this transaction.

(b) Seller’s Indemnity. Seller hereby covenants and agrees that it will pay and assume liability for, and indemnify, protect, defend, save and keep harmless each Buyer Indemnitee from and against, any and all liabilities, Taxes, obligations, losses, damages, settlements, claims, actions, suits, penalties, costs and expenses (including, without limitation, reasonable fees and expenses of counsel) of whatsoever kind and nature which may at any time or from time to time be imposed upon, incurred by or asserted against any Buyer Indemnitee in any way relating to, resulting from or arising out of (i) any inaccuracy or breach of any representation or warranty made by Seller under this Agreement or any Seller Agreements, (ii) any failure by Seller to have observed or performed any of its obligations under or in connection with this Agreement or any Seller Agreements, or (iii) any claims made after Closing, solely to the extent any such claim is attributable to (A) the gross negligence or willful misconduct of Seller and occurring prior to Closing, or (B) the existence of any Liens on the Aircraft attributable to the period occurring prior to Closing.

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(c) Buyer’s Indemnity. Buyer hereby covenants and agrees upon demand of Seller to pay and assume liability for, and indemnify, protect, defend, save and keep harmless each Seller Indemnitee from and against, any and all liabilities, Taxes, fees, obligations, losses, damages, settlements, claims, actions, suits, penalties, costs and expenses (including, without limitation, reasonable fees and expenses of counsel) of whatsoever kind and nature which may at any time or from time to time be imposed upon, incurred by or asserted against any Seller Indemnitee in any way relating to, resulting from or arising out of (i) any inaccuracy or breach of any representation or warranty made by Buyer under this Agreement or any Buyer Agreements, (ii) any failure by Buyer to have observed or performed any of its obligations under or in connection with this Agreement or any Buyer Agreements in respect of or to the extent attributable to the period from and after Closing, or (iii) any claims made after Closing, solely to the extent such claim is not attributable (A) to the period occurring prior to Closing or (B) to Seller’s failure to perform its obligations under this Agreement or the Seller Agreements.

(d) Withholding. If any Tax is required by law to be deducted or withheld from or with respect to any amount paid or payable by Buyer or the Seller pursuant to this Agreement (the “Paying Party”) to the other party hereto (the “Receiving Party”), then the Paying Party shall pay such additional amount as shall be necessary to enable the Receiving Party to receive, after all such withholding (including any withholding from or with respect to such additional amount), the amount that the Receiving Party would have received if such deduction or withholding had not been made.

(e) Contest Resolution. If a claim is made by any tax authority against a party hereto (the “taxed party”) with respect to any Tax of which another party (the “indemnifying party”) is obligated to indemnify under this Section 12, the taxed party shall promptly notify the indemnifying party of such claim; provided, however, that the failure to give such notice will not prejudice or otherwise affect any of the rights of the taxed party hereunder unless such failure materially and adversely affects the indemnifying party in exercising its contest rights hereunder or to the extent such failure results in any increase in, or fine or penalty with respect to, any amounts claimed to be payable by the indemnifying party to the taxed party pursuant to this Section 12. If reasonably requested by the indemnifying party in writing, the taxed party shall (at the expense and direction of the indemnifying party) contest in the name of the taxed party or indemnifying party (as applicable), the validity, applicability or amount of such Taxes so indemnified by (i) if permitted by applicable law without adverse consequences to the taxed party, resisting payment thereof, (ii) paying under protest, if protest is necessary or proper, and (iii) if payment be made, using reasonable commercial efforts to obtain a refund thereof in appropriate administrative and judicial proceedings. If the taxed party becomes eligible for a refund of any Taxes paid by the indemnifying party, it shall notify the indemnifying party and, if reasonably requested by the indemnifying party and permissible under applicable law, the taxed party shall consider in good faith any request by the indemnifying party to assign such right to the indemnifying party. Should the taxed party obtain a refund of all or any part of the Taxes paid by the indemnifying party, the taxed party shall pay the indemnifying party the amount of such refund, plus, any interest thereon (net of any taxes imposed on such interest) obtained by the taxed party from the taxing authority if fairly attributable to such Taxes.

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(f) Cooperation. Seller and Buyer shall reasonably cooperate so as to minimize any potential tax risk to Buyer or Seller as a result of the transactions contemplated hereby. Seller and Buyer shall provide one another with such assistance as may reasonably be required in connection with the preparation of any tax return, any audit or other examination by any taxing authority, or any judicial or administrative proceedings relating to liability for Taxes arising from the transactions contemplated by this Agreement, and shall provide one another upon written request with any records or information that are relevant to such Tax return, audit or examination or proceedings. The party requesting assistance, records or information under the preceding sentence shall reimburse the other for reasonable out-of-pocket expenses incurred by the other in providing such assistance, records or information.

(g) Notice of Claims. Seller and Buyer agree to provide written notification to the other party promptly after becoming aware of any liability, obligation or claim, whether pending or threatened, that is the subject of indemnification pursuant to this Section 12; unless the failure to provide such notification would not materially and adversely affect the indemnifying party in exercising its contest rights hereunder or result in any increase in, or fine or penalty with respect to, any amounts claimed to be payable by the indemnifying party to the other party pursuant to this Section 12, provided, that the failure by either party to so notify the other party will not in any manner affect either party’s other obligations under this Section 12.

(h) Insurance. For the earlier of a period of two years after the purchase of the Aircraft or the dismantling of the Aircraft, or the airframe or engine, Buyer shall, or shall cause any subsequent buyer or operator to, at its own cost and expense, maintain and keep in full force and effect an insurance policy(ies) for the Aircraft and Engines providing $10,000,000 of aviation products liability coverage, except in the event that any Engine is returned to service, in which event $500,000,000 of aviation general liability coverage shall be provided with respect to such Engine. Aviation General Liability insurance covering Buyer’s or any operator’s aviation activities shall include Premises Liability, Contractual Liability, Products Liability, War Risks Liability, and including Extended Coverage Endorsement (Aviation Liabilities) AVN52 or equivalent covering War and Allied Perils excluded by War, Hijacking and Other Perils Exclusion Clause AVN48B or any modification or substitution thereof for the time in force. Such policies shall be carried with insurers reasonably acceptable to Seller. Such insurance shall include the Seller and any other Seller Indemnitees as Additional Insureds. Such policies shall include a Waiver of Subrogation Clause, Breach of Warranty Clause, and Severability of Interest Clause in favor of the Additional Insureds. Buyer shall furnish an insurance certificate evidencing the same at Closing, and, upon Seller’s request, at the expiration of an existing certificate.

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13. Know Your Customer

Seller and Buyer shall (i) ensure that no Person who owns a controlling interest in or otherwise controls Buyer or Seller is or shall be listed on the Specially Designated Nationals and Blocked Person List or other similar lists maintained by the Office of Foreign Assets Control (“OFAC”), the Department of the Treasury or included in any Executive Orders, (ii) not violate any of the foreign asset control regulations of OFAC or any enabling statute or Executive Order relating thereto, (iii) comply with all applicable Bank Secrecy Act laws and regulations, as amended or (iv) comply with any other applicable national sanctions program. As required by federal law or other applicable law, Seller or Buyer may need to obtain, verify and record certain customer identification information and documentation in connection herewith, and each party hereto shall provide such information as is reasonably requested prior to Closing.

14. Miscellaneous

(a) Notices.

All notices, demands, declarations and other communications required by this Agreement shall be in writing and shall be effective (i) if given by facsimile, when transmitted, (ii) if given by registered or certified mail, three Business Days after being deposited with the U.S. Postal Service or other commercially recognized carrier and (iii) if given by a nationally recognized overnight courier, when received, or, if personally delivered, when so delivered, addressed:

If to Seller, to:

*

or to such other address as Seller shall from time to time designate in writing to Buyer; and

If to Buyer, to:

CONTRAIL AVIATION SUPPORT, LLC

435 Investment Court

Verona, Wisconsin 53593

Attn: Joseph Kuhn, CEO

Fax: (608) 848-8100

Email: Joe@contrail.com

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Page 11

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

or to such other address as Buyer may from time to time designate in writing to Seller.

(b) Confidentiality.

(i) Each party hereto shall keep strictly confidential any and all Confidential Information furnished to it or to its Affiliates, or their respective officers, employees, agents, directors or advisers (collectively, “Representatives”) in the course of negotiations relating to this Agreement or any transaction contemplated by this Agreement, and the business and financial reviews and investigation conducted by any party hereto in connection with this Agreement, and each such party has instructed its Representatives having access to such Confidential Information of such obligation of confidentiality. The obligations of confidentiality set forth herein shall not apply to information to the limited extent (v) it is contained in a Transfer Document that is publicly filed as contemplated hereby; (w) it is required to be disclosed by any Governmental Entity or required to be disclosed by applicable law or administrative proceeding, (x) for which a party has received a subpoena or similar demand (provided that such party shall to the extent permitted by applicable law first, as promptly as practicable upon receipt of such subpoena or demand, furnish a copy thereof to the other party), (y) that such information is generally available to the public or in the possession of the receiving party before its disclosure by the disclosing party to the receiving party or (z) that it is given to the receiving party by another Person other than in breach of obligations of confidentiality owed by such Person to the disclosing party. Notwithstanding the foregoing, each party acknowledges and agrees that any party may disclose Confidential Information to (A) regulators, (B) such party’s counsel, Affiliates, beneficiaries, hedging arrangement providers, insurance brokers and providers, reinsurers and auditors provided that such recipients maintain the confidentiality of the Confidential Information and (C) prospective transferees and lenders who agree to keep such Confidential Information confidential.

(ii) Notwithstanding anything herein to the contrary, any party to this Agreement (and any Representative) may disclose to any and all Persons, without limitation of any kind, the tax treatment and tax structure of the transactions contemplated by this Agreement and all materials of any kind (including opinions or other tax analyses) that are provided to it relating to such tax treatment and tax structure; provided, however, that such disclosure may not be made to the extent required to be kept confidential to comply with any applicable federal or state securities laws.

(c) Limitation of Liability of Any Party. THE PARTIES ACKNOWLEDGE AND AGREE THAT, NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, NO PARTY SHALL BE LIABLE TO ANOTHER PARTY TO THIS AGREEMENT OR ASSERT A CLAIM FOR ANY INCIDENTAL, CONSEQUENTIAL, SPECIAL, OR PUNITIVE DAMAGES, REGARDLESS OF THE NATURE OR THEORY OF ANY UNDERLYING CAUSE OF ACTION THAT MIGHT OTHERWISE APPLY.

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(d) Headings. Headings used herein are for convenience only and shall not in any way affect the construction of, or be taken into consideration in interpreting, this Agreement.

(e) References. Any reference to a specific Section or Section number shall be interpreted as a reference to that Section of this Agreement unless otherwise expressly provided.

(f) Governing Law; Jurisdiction; Attorney Fees. This Agreement and any other Transfer Documents shall in all respects be governed by, and construed in accordance with, the laws of the State of New York, U.S.A., including all matters of construction, validity and performance, without giving effect to principles of conflicts of law. The federal courts located in the State of New York shall serve as the exclusive forum for any such dispute and the parties irrevocably consent to the jurisdiction of such courts. In the event of a dispute between the parties, the prevailing party shall be entitled to reasonable attorney fees and costs.

(g) Severability. If any provision hereof should be held invalid, illegal or unenforceable in any respect in any jurisdiction, then, to the fullest extent permitted by law, (i) all other provisions hereof shall remain in full force and effect in such jurisdiction and shall be construed in order to carry out the intentions of the parties hereto as nearly as may be possible, and (ii) such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of such provision in any other jurisdiction.

(h) Amendments in Writing. No amendment, modification, waiver, termination or discharge of any provision of this Agreement, or any consent to any departure by Seller or Buyer from any provision hereof, shall in any event be effective unless the same shall be in writing and signed by Seller and Buyer, and each such amendment, modification, waiver, termination or discharge shall be effective only in the specific instance and for the specific purpose for which given.

(i) Survival. Notwithstanding anything contained herein to the contrary, all agreements, indemnities, representations and warranties contained in this Agreement shall survive the Closing Date and the consummation of the transactions contemplated hereby for such date.

(j) Expenses. Each of Seller and Buyer shall be responsible for its own costs and expenses incurred in connection with the negotiation, preparation, execution and delivery of this Agreement and the Transfer Documents, and shall not have any right of reimbursement or indemnity for such costs and expenses as against the Buyer or Seller, respectively. Notwithstanding anything to the contrary, Buyer shall be responsible for any cost associated with the registration of the transfer of title in the State of Registration including any special aviation counsel fees. [Subject to review by *counsel.]

(k) Execution in Counterparts; Signatures. This Agreement, the other Transfer Documents and any amendments, waivers or consents hereto or thereto may be executed by Seller and Buyer in separate counterparts (or upon separate signature pages bound together into one or more counterparts), each of which, when so executed and delivered, shall be an original, but all such counterparts shall together constitute one and the same instrument. Promptly upon Closing, each Party shall provide executed originals of this Agreement and the Transaction Documents, as applicable, to the other Party. Nevertheless, facsimile and PDF copy signatures shall also be treated as original signatures for all purposes.

Purchase Agreement

Page 13

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

(l) Entire Agreement. This Agreement and the other Transfer Documents constitute the entire agreement of Seller and Buyer with respect to the subject matter hereof or thereof, and all prior or contemporaneous understandings or agreements, whether written or oral, between Seller and Buyer with respect to such subject matter are hereby superseded in their entirety. In the event of a conflict between this Agreement and any other Transfer Document, the terms and conditions of this Agreement shall govern.

(m) Exhibits and Schedules. The exhibits and schedules attached hereto are incorporated by reference herein and shall have the same force and effect with respect to the provisions set forth therein as though fully set forth in this Agreement.

(n) Successors and Assigns. This Agreement shall be binding upon, shall inure to the benefit of and shall be enforceable by Seller and Buyer, and their respective successors and assigns.

(o) No Third Party Benefit. Seller and Buyer agree that except as provided in Section 12 with respect to Seller Indemnitees and Buyer Indemnitees, the provisions of this Agreement, including, without limitation, Section 2, are for the sole benefit of Seller and Buyer and their respective successors and assigns, and are not for the benefit, directly or indirectly, of any other Person.

(p) Assignment. Neither party shall assign or delegate this Agreement, or any of its rights or obligations hereunder, without the prior written consent of the other party.

Purchase Agreement

Page 14

IN WITNESS WHEREOF, the undersigned have caused this PURCHASE AGREEMENT to be duly executed as of the day and year first written above.

*		as Seller
	By:
	Name:
	Title:
	CONTRAIL AVIATION SUPPORT, LLC, as Buyer
	By:	/s/ Joseph G. Kuhn
	Name:	Joseph G. Kuhn
	Title:	CEO

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Page 15

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

SCHEDULE 1

DEFINITIONS

(a) Unless the context otherwise indicates, any reference in this Agreement to:

(i) a “part” means any engine, module, component, instrument, furnishing, control, appliance, accessory, reverser, nacelle, equipment or other item or equipment of any kind whether similar to any of the foregoing or not;

(ii) a “regulation” includes any present or future directive, regulation, request or requirement (in each case whether or not having the force of law) but, if not having the force of law, the compliance with which is in accordance with the general practice of the persons to whom it is addressed;

(iii) any “agreement”, “license” or other document includes any agreement, license or other instrument as varied, novated, amended or replaced from time to time (but without prejudice to any restrictions on such variation, novation, amendment or replacement);

(iv) the expressions “hereof”, “herein” and similar expressions shall be construed as references to this Agreement as a whole and shall not be limited to the particular clause in which the relevant expressions appear and the expressions “thereof”, “therein” and similar expressions shall be construed in like fashion;

(v) references to any statute or other legislative provision shall be read to include any statutory or legislative modification or re-enactment thereof or any substitution therefor;

(vi) references to a party shall be read to include its successors and permitted assigns;

(vii) a Clause or Schedule shall be construed as a reference to a clause hereof or a schedule hereto;

(viii) a word importing the singular number shall be construed so as to include the plural and vice versa;

(ix) the expression “in writing” includes by facsimile or e-mail; and

(x) the index, clause and sub-clause headings in this Agreement (including their use in cross references) are for ease of reference only and shall not affect the interpretation of this Agreement.

(b) In this Agreement, the following terms have the following meanings:

“Acknowledgment of Delivery” means the Acknowledgment of Delivery substantially in the form attached hereto as Exhibit A.

Schedule 1

Page 1

“Affiliate” means, as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person or which owns, directly or indirectly, more than fifty percent of the outstanding equity interests of such Person. A Person shall be deemed to control another Person if the controlling Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the other Person, whether through the ownership of voting securities, by contract, or otherwise.

“Aircraft” means the Airframe, equipped with the Engines and other items of equipment installed in or attached thereto, and all Aircraft Documents related thereto.

“Aircraft Documents” means full back-to-birth traceability of life limited parts which shall include commercial trace as required to show the part change of ownership from new to current and a non-incident / accident / military / government letter and the manuals and records described in Schedule 3 attached hereto including all inspection, modification and overhaul records required to be maintained under applicable rules and regulations, all records of any third party which has made any modifications to or refurbishments of the Aircraft, and any other technical documents that pertain to the Aircraft including, without limitation, the dirty finger prints for all the shop visits from last performance restoration.

“Airframe” means that certain Boeing 737-800 airframe more specifically described on Schedule 2.

“Anticipated Closing Date” means the date for anticipated Closing for the Aircraft as designated on Schedule 2.

“Bill of Sale” means the Warranty Bill of Sale for the Aircraft.

“Business Day” means any day, other than a Saturday or Sunday, on which banks in New York City and *Taiwan, Republic of China are open for business.

“Certificate of Technical Acceptance” means the Certificate of Technical Acceptance in the form attached hereto as Exhibit B.

“Closing” means the closing of the sale and purchase of the Aircraft pursuant to this Agreement on the Closing Date.

“Closing Date” means the date of the Closing.

“Confidential Information” means any and all information, whether written, in electronic form, or oral concerning or relating in any way to the Aircraft, which is provided by a party hereto or such party’s Affiliates or representatives to the other party hereto or such party’s Affiliates or representatives, and includes, without limitation, all agreements, analyses, compilations, forecasts, studies, capabilities, specifications, program plans, marketing plans, e-commerce strategies, inspection reports, certificates of insurance or other documents which contain or otherwise reflect such information, or any portion thereof or notes or other documents which contain or reflect such information, whether or not marked or specifically identified as “confidential” or “proprietary.”

Schedule 1

Page 2

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

“Delivery Location” * *, or such other location as mutually agreed to by the parties.

“Deposit” has the meaning set forth in Section 3 hereof.

“Engines” means those CFM56-7B26 aircraft engines including all parts, components, appliances, accessories, instruments, furnishings, alterations thereto whether or not attached to the Airframe on the Closing Date as more specifically described on Schedule 2.

“Event of Loss” means any of the following events with respect to the Aircraft, including, but not limited to, the Aircraft, the Airframe or any Engine or engine installed on the Airframe: (a) loss of such property or its use due to theft, hijacking or disappearance for a period in excess of sixty (60) consecutive days, or in any event extending beyond the Anticipated Closing Date, or destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use for any reason whatsoever, (b) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss or on the basis of a compromised or constructive total loss, (c) the condemnation, confiscation, appropriation or seizure of, or requisition of title to, such property by a governmental entity or purported governmental entity, (d) the condemnation, confiscation, appropriation or seizure of the use of such property by or on behalf of the authority of any governmental entity or purported governmental entity, that in any such case shall have resulted in the loss of possession thereof for a period in excess of sixty (60) consecutive days or in any event extending beyond the Anticipated Closing Date or (e) any divestiture of title of such property except as otherwise permitted by the other party.

“Final Closing Date” means the date which is 21 days after the Anticipated Closing Date the Aircraft as designated on Schedule 2.

“Government Entity” means any (i) nation, state, county, city, town, village, district, or other jurisdiction of any nature; (ii) federal, state, local, municipal, foreign, or other government; (iii) governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official, or entity and any court or other tribunal); (iv) multinational organization or body; or (v) body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, regulatory, or taxing authority or power of any nature.

“Inspection” has the meaning set forth in Section 4 hereof.

“International Registry” means the International Registry of Mobile Assets established pursuant to the Convention on International Interests in Mobile Equipment and its Protocol on Matters Specific to Aircraft Equipment, concluded in Cape Town on November 16, 2001.

“Lien” means any pledge, lien, charge, encumbrance, exercise of rights, security interest or claim of any kind or nature.

“OFAC” has the meaning set forth in Section 13 hereof.

Schedule 1

Page 3

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

“Person” means an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Government Entity or other entity of whatever nature.

“Purchase Price” has the meaning set forth in Section 3 hereof.

“Buyer Agreements” has the meaning ascribed in Section 7(a) hereof.

“Buyer Indemnitee” means Buyer and any Buyer’s Affiliates, members, managers, officers, directors, employees, successors and assigns.

“Seller Agreements” has the meaning ascribed to such term in Section 5(a) hereof.

“Seller Indemnitee” means each of the Seller, * * * and any Affiliates of either, and the members, managers, officers, directors, employees, successors and assigns of any of such entities.

“State of Registration” means * (previous registration) and USA (after sale)

“Taxes” means and includes all present and future income, gains, sales, stamp, documentary, use, value-added, goods and services and other taxes, duties, imposts, levies, deductions, charges and withholdings imposed by any Government Entity and also includes all fines, penalties and interest thereon, and the terms “Tax” and “Taxation” shall be construed accordingly.

“Transfer Documents” means this Agreement, the Bill of Sale, the Acknowledgments of Delivery, the Certificates of Technical Acceptance and any other agreements, documents, certificates and instruments executed and delivered in connection herewith.

“Warranty Bill of Sale” means the warranty bill of sale for the Aircraft, in the form of Exhibit C hereto for the Aircraft.

Schedule 1

Page 4

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

SCHEDULE 2

AIRCRAFT DESCRIPTION; PURCHASE PRICE

MSN	*Chinese Registration Mark	Engine Make and Model	ESNs	Purchase Price	Deposit	Anticipated Closing Date	Final Closing Date
*	*	CFM56-7B26	*	*	*	May 10, 2017	May 31, 2017
			*

Schedule 2

Page 1

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

SCHEDULE 3

AIRCRAFT DOCUMENTS

AIRCRAFT RECORDS

All aircraft technical documents and records relating to the Aircraft in Seller’s possession as

inspected and accepted by Buyer, including non-incident statements from previous operators and

Seller, and including but not limited to the following:

1. Copies of original Certificates delivered by the Manufacturer, such as:

2. Copies of original Documents delivered by the Manufacturer, such as:

3. Letters signed and stamped by Quality Assurance:

a. Current aircraft hours and cycles

b. Current engines hours and cycles, including LLP Disk Sheets

c. Accident and Incident report

d. Summary of Maintenance Program

e. AD compliance

4. Aircraft log books

5. Last weighing report

6. Cabin Configuration drawing (LOPA)

ENGINES RECORDS

1. Life-limited Parts status and traceability

2. AD compliance report

3. Engine Modification / service bulletin /inspection report and applicable forms

4. Last heavy maintenance records for each module

5. Engine log books

6. Engine removal history

7. Last 3 months’ trend monitoring reports

APU RECORDS

1. APU status (FH, FC, limits)

2. Life-limited Part status and traceability

3. AD compliance report

4. Modification status

5. Last heavy maintenance documents

6. APU log books

7. Last test cell report

COMPONENT RECORDS

1. Aircraft component inventory

2. Hard time component inventory

4. Landing Gear status with last Overhaul and life-limited Part status

5. AD compliance report

6. Modification status

Schedule 3

Page 1

EXHIBIT A

ACKNOWLEDGMENT OF DELIVERY

, 2017

By this Acknowledgment of Delivery, * * (the “Seller”), and Contrail Aviation Support, LLC (the “Buyer”), acknowledge that pursuant to that certain Purchase Agreement dated as of             , 2017, among Seller and Buyer, (the “Agreement”), Seller does hereby deliver to Buyer and Buyer does hereby accept the following in all respects under the Agreement:

One Boeing model 737-800 aircraft bearing manufacturer’s serial number * and equipped with two CFM56-7B26 aircraft engines bearing manufacturer’s serial numbers * and *, including all parts, components, appliances, accessories, instruments, furnishings, alterations and other items of equipment installed in or attached thereto, and all Aircraft Documents related thereto (collectively the “Aircraft”).

Buyer has accepted delivery of the Aircraft at                  hours G.M.T. at * * *1. Accordingly, as of the date hereof, Seller has delivered the Aircraft to Buyer and that the Closing Date as defined and set forth in the Agreement has occurred. Buyer hereby declares that the Aircraft is acceptable and does conform to the Agreement in all respects.

This Acknowledgment of Delivery may be signed in one or more counterparts with the same effect as if the signatures to each counterpart were upon a single instrument. All counterparts shall, taken together, be considered an original of this Acknowledgment of Delivery. All capitalized terms used herein not otherwise defined shall have the same meaning as that given in the Agreement.

[Signature page follows.]

Exhibit A

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

IN WITNESS WHEREOF, the undersigned have duly executed this Acknowledgment of Delivery as of the date first written above.

* (Seller)

By:

Name:

Title:

Contrail Aviation Support, LLC (Buyer)

By:

Name:

Title:

Exhibit A

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

EXHIBIT B

CERTIFICATE OF TECHNICAL ACCEPTANCE

relating to that Boeing 737-800 Aircraft,

manufacturer’s serial number * (the “Aircraft”)

, 2017

This Certificate of Technical Acceptance (this “Certificate”) is delivered on the date set out below by Contrail Aviation Support, LLC (“Buyer”), to * * * (“Seller”), pursuant to that certain Purchase Agreement dated             , 2017 between Buyer and Seller (the “Agreement”). The capitalized terms used in this Certificate shall have the meaning given to such terms in the Agreement.

(a) Buyer has inspected the Aircraft in accordance with the provisions of Section 4 of the Agreement at [insert inspection location] and the Aircraft and found the Aircraft to be satisfactory; and

(b) Buyer has received and inspected all of the Aircraft Documents and found them to be complete and satisfactory.

IN WITNESS WHEREOF, Buyer has, by its duly authorized representative, executed this Certificate on the date first written above, accepted the Aircraft and confirmed its compliance with the Agreement in all respects.

Contrail Aviation Support, LLC (Buyer)

By:

Name:

Title:

Exhibit B

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

EXHIBIT C

WARRANTY BILL OF SALE

relating to that Boeing 737-800 Aircraft,

manufacturer’s serial number *

, 2017

KNOW ALL MEN BY THESE PRESENTS:

THAT for and in consideration of good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, * * (“Seller”) dues, on the date hereof, grant, convey, transfer, bargain, sell, deliver and set over to Contrail Aviation Support, LLC (“Buyer”), all of Seller’s right, title and interest in and to the one Boeing 737-800 aircraft bearing manufacturer’s serial number *, equipped with two CFM56-7B26 aircraft engines bearing manufacturer’s serial numbers * and *, including all parts, components, appliances, accessories, instruments, furnishings, alterations and other items of equipment installed in or attached thereto, and all Aircraft Documents related thereto (collectively the “Aircraft”). Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to them in that certain Purchase Agreement dated as of                     , 2017, among Seller and Buyer (the “Agreement”).

TO HAVE AND TO HOLD said Aircraft unto Buyer, its successors and assigns, for its and their own use forever.

THAT Seller hereby warrants to Buyer, its successors and assigns, that it is the holder of title to the Aircraft and has the right to sell the same as aforesaid and that this Warranty Bill of Sale conveys to Buyer on the date hereof, good title to the Aircraft, free and clear of all Liens, encumbrances and rights of others, and that Seller will warrant and defend such title forever against all claims and demands whatsoever.

This Bill of Sale shall be governed by the laws of New York, U.S.A, without giving effect to its conflicts-of-laws principles.

IN WITNESS WHEREOF, Seller has caused this Warranty Bill of Sale to be executed by its duly authorized officers as of the date first written above.

* (Seller)

By:

Name:

Title:

Exhibit C

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

EX-10.2

Exhibit 10.2

* Engine Sale Agreement vo717            

Private & Confidential

Engine Sale Agreement

between

^*

as Seller

and

Contrail Aviation Support, LLC

as Buyer

Seller and Buyer referred to as a “Party” and collectively the “Parties”

relating to

one (1) CFM56-7B26/3 engine bearing engine serial number *’

^*

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

* Engine Sale Agreement v0717

CONTENTS

1.	Definitions and Interpretation	3
2.	Sale of Engine	4
3.	Delivery, Acceptance, Title and Risk	4
4.	Payments	5
5.	Conditions precedent	5
6.	Liability	6
7.	Representations, Warranties and Undertakings	7
8.	Notices	8
9.	Taxes and Indemnities	9
10.	Costs and Expenses	9
11.	Termination	10
12.	Assignment	10
13.	Miscellaneous	10
14.	Governing law and Jurisdiction	11
SCHEDULE 1: TECHNICAL ACCEPTANCE CERTIFICATE		13
SCHEDULE 2: FORM OF BILL OF SALE		14
SCHEDULE 3: DESCRIPTION OF ENGINE		15
SCHEDULE 4: ENGINE DOCUMENTS		17

  Engine Sale Agreement * Contrail *   2                 *

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

* Engine Sale Agreement v0717

THIS AGREEMENT is dated September 22, 2017 and made between

(1)      * * * * (“Seller”), a company duly organised and existing under the laws of * *; whose registered address is * * * * * *;

(2)      Contrail Aviation Support, LLC (or its wholly-owned designee) (“Buyer”), a company incorporated under the laws of the State of North Carolina, U.S.A. whose registered office is at 435 Investment Court Verona, WI 53593, USA.

IT IS HEREBY AGREED as follows:

1. Definitions and Interpretation

1.1 In this Agreement the following words shall have the following meanings unless the context otherwise requires:

“Acceptance Certificate” means a certificate of acceptance of the technical condition of the Engine in the form set out in Schedule 1 to be executed by or on behalf of Buyer and delivered to Seller in accordance with Clause 3.3

“Bill of Sale” means a bill of sale relating to the relevant Engine substantially in the form of Schedule 2;

“Business Day” means any day on which banks are open for business in * * and in New York, New York, U.S.A.

“Delivery” means Seller’s provision of the Engine to Buyer at the Delivery Location;

“Delivery Date” means the date on which Delivery of the Engine to Buyer occurs;

“Delivery Location” shall be * * * * * * * *.

“Dollars” and “$” mean the lawful currency of the United States of America in relation to all payments in dollars to be made under this Agreement;

“Engine” means one (1) CFM56-7B26/3 engine bearing engine serial number * more specifically described in Schedule 3, together with the Engine Documents and all Parts installed, attached or appurtenant thereto at Delivery of the Engine;

“Engine Documents” means all data and records supplied by the Manufacturer which are in the possession of Seller and may include records, logs, manuals, technical data and other materials and documents (whether kept or to be kept in compliance with any regulation of the Aviation Authority or otherwise) relating to the Engine (including, at a minimum, the manuals and technical records and other media listed in Schedule 4 in respect of the Engine);

“Lien” means any mortgage, pledge, lien, security interest, option, covenant, condition, restriction, encumbrance, charge or other third-party claim of any kind;

  Engine Sale Agreement * Contrail *   3                 *

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

* Engine Sale Agreement v0717

“Purchase Price” means $ * * * * * * Dollars, such amount being exclusive of Taxes.

2. Sale of Engine

Seller agrees to sell and Buyer agrees to buy and accept the Engine upon and subject to the terms and conditions of this Agreement, in “as is” condition, free from all Liens, in consideration of the payment by Buyer of the Purchase Price.

3. Delivery, Acceptance, Title and Risk

3.1 Seller will deliver the Engine in serviceable condition, subject to the terms and conditions of this Agreement, to Buyer at the Delivery Location. Buyer confirms that he will ship the Engine from the Delivery Location to * * * within ten (10) days from Delivery.

3.2 On the Delivery Date, and subject to the terms and conditions of this Agreement, the parties shall close the transaction in the following manner:

(A) Buyer shall pay or have paid to Seller the Purchase Price relating to that Engine; and

(B) Seller shall deliver to Buyer the Engine in serviceable condition; and

(C) Buyer shall execute and deliver to Seller an Acceptance Certificate in respect of that Engine.

(D) Immediately upon receipt by Seller of the Acceptance Certificate and the Purchase Price, Seller shall release to Buyer the Bill of Sale in respect of the Engine. Upon delivery of the Bill of Sale, title to the Engine shall be transferred from Seller to Buyer.

3.3 Buyer or its representatives may, at its own cost inspect and verify the condition of the Engine and the Engine Documents at the Delivery Location or any other location mutually agreed upon.

3.4 Upon completion of the closing under Section 3.2, risk of damage to or loss of the Engine shall pass from Seller to Buyer.

3.5 In the event between the date of signing of this Agreement and Delivery, the Engine suffers an Event of Loss, then Seller shall promptly notify Buyer of such damage and with effect from the date of such Event of Loss, neither Party shall have any further obligations under this Agreement with respect to the Engine, except that any property transferred or payments received by either Party shall be returned to the other Party with respect to the particular Engine. “Event of Loss” means any of the following events:

(A) the loss of the Engine due to theft or disappearance for a period of at least thirty (30) days, destruction, damage beyond repair or rendition of the Engine permanently unfit for normal use for any reason whatsoever; or

(B) the receipt of insurance proceeds based upon an event of loss with respect to the Engine under any insurance policy pertaining thereto; or

(C) the condemnation, confiscation or seizure of, or requisition or loss of title to, or use for a period in excess of thirty (30) days of the Engine; or

  Engine Sale Agreement * Contrail *   4                 *

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

* Engine Sale Agreement v0717

(D) unrepaired damage to the Engine in which the costs of repair exceeds 20% (twenty percent) of the Purchase Price.

3.6 In the event between the date of signing of this Agreement and Delivery, the Engine suffers damage which does not constitute an Event of Loss, Seller shall promptly notify Buyer of such damage and the Parties shall jointly determine, each Party acting reasonably, as soon as reasonably practicable whether such damage can be repaired in a manner satisfactory to Buyer prior to the Delivery Date. If the Parties agree that such damage can be so repaired and Seller elects to do so prior to the Delivery Date, Seller shall procure the repair of such damage as soon as reasonably practicable and if Buyer or Seller determines that such damage cannot be satisfactorily repaired, or Seller determines that it will not elect to repair the Engine by the Delivery Date, the Party making such determination shall immediately notify the other Party, in writing, whereupon neither Party shall have any further obligation or liability to the other under this Agreement with respect to the Engine, except that any property transferred or payments received by either Party shall be returned to the other Party with respect to the particular Engine as if this Agreement had never been formed.

4. Payments

4.1 All payments to be made by Buyer to Seller under this Agreement shall be made in immediately available funds by telegraphic transfer in Dollars to the following account of Seller:

^*

4.2 Buyer shall pay to Seller the Purchase Price in respect of the Engine before Delivery.

5. Conditions precedent

5.1 The obligation of Seller to sell the Engine to Buyer is subject to the following conditions being fulfilled to the satisfaction of Seller on or prior to the Delivery Date of an Engine:

Receipt by Seller of a certificate issued by a duly authorised officer of Buyer, attaching and certifying as being true, complete and up-to-date copies of;

(A) a resolution of Buyer approving the terms of, and the transactions contemplated by this Agreement; and

(B) the relevant power, or powers of attorney (If applicable) authorising a specified person or persons to execute this Agreement and the Acceptance Certificate.

(C) The parties having agreed upon the terms for lease of the Engine for a minimum period of 12-months following arrival of the Engine in * * in accordance with Clause 3.1 above.

(D) Completion of VAT tax forms and related documents reasonably satisfactory to the parties.

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

* Engine Sale Agreement v0717

The conditions specified in this Clause 5.1 are inserted for the sole benefit of Seller and may be waived in whole or in part and with or without conditions by Seller.

5.2 The obligation of Buyer to purchase the Engine from Seller is subject to the following conditions being fulfilled to the satisfaction of Buyer on or prior to the Delivery Date of that Engine (any one of which may be waived by Buyer to the extent permitted by Law in writing in whole or in part with or without conditions):

(A) Receipt by Buyer of a certificate issued by a duly authorised officer of Seller, attaching and certifying as being true, complete and up-to-date copies of the relevant power, or powers of attorney (if applicable), and any other relevant documents, authorising a specified person or persons to execute this Agreement and the Bill of Sale and to tender delivery of the Engine on behalf of Seller to Buyer.

(B) The Engine being free and clear of Liens.

(C) Buyer’s completion of its inspection of the Engine and satisfaction with the results thereof.

(D) The parties having agreed upon the terms for lease of the Engine for a minimum period of 12-months following arrival of the Engine in * * in accordance with Clause 3.1 above.

(E) Completion of VAT tax forms and related documents reasonably satisfactory to the parties.

The conditions specified in this Clause 5.2 are inserted for the sole benefit of Buyer and may be waived in whole or in part and with or without conditions by Buyer.

6. Liability

6.1 Seller hereby covenants and agrees upon demand of Buyer and each of its respective affiliates, directors, officers, employees, partners, employees, successors, assigns, shareholders, investors, parent companies and agents (the “Buyer Indemnitees”) to pay and assume liability for, and to indemnify, protect, defend, save and keep harmless, the Buyer Indemnitees, on an after-tax basis, from and against any and all liabilities (including liability for negligence or strict liability in tort or under any statute), taxes, fees, duties, charges, withholdings, obligations, losses, damages, settlements, claims, actions, suits, penalties, costs and expenses (including, without limitation, reasonable fees and expenses of counsel) and expenses of successfully establishing such rights to indemnification under this indemnity of whatsoever kind and nature which may at any time or from time to time be imposed upon, incurred by or asserted against any Buyer Indemnitee for death of or injury to any persons whomsoever and for loss of, damage to, or delay in delivery of any property whatsoever (any such losses, the “Buyer Losses”) in any way relating to, resulting from or arising out of the possession, operation, condition, storage, maintenance or repair of the Engine arising or occurring prior to Delivery of the Engine, provided that the foregoing indemnity shall not apply to the extent that the Buyer Losses resulted from the negligence or wllful misconduct of a Buyer Indemnitee.

6.2 Buyer hereby covenants and agrees upon demand of Seller and each of its respective affiliates, directors, officers, employees, partners, employees, successors, assigns, shareholders, investors, parent companies and agents (the “Seller Indemnitees”) to pay and assume liability for, and to indemnify, protect, defend, save and keep harmless, the Seller Indemnitees, on an after-tax basis, from and against any and all liabilities (including liability for negligence or strict liability in tort or under any statute), taxes, fees, duties,

  Engine Sale Agreement * Contrail *   6                 *

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

* Engine Sale Agreement v0717

charges, withholdings, obligations, losses, damages, settlements, claims, actions, suits, penalties, costs and expenses (including, without limitation, reasonable fees and expenses of counsel) and expenses of successfully establishing such rights to indemnification under this indemnity of whatsoever kind and nature which may at any time or from time to time be imposed upon, incurred by or asserted against any Seller Indemnitee for death of or injury to any persons whomsoever and for loss of, damage to, or delay in delivery of any property whatsoever (any such losses, the “Seller Losses”) in any way relating to, resulting from or arising out of the possession, operation, condition, storage, maintenance or repair of the Engine arising or occurring on or after Delivery, provided that the foregoing indemnity shall not apply to the extent that the Seller Losses result from 1) the negligence or wilful misconduct of a Seller Indemnitee; 2) the breach of Seller’s obligations, representations or warranties hereunder; or, 3) Seller or Seller Indemnitee’s post-closing acts or omissions as a manufacturer, operator, repairer or service of aviation products.

6.3 Neither Party shall be liable for any special, incidental or consequential damages which may arise from or in connection with the performance or failure to perform under the Agreement.

7. Representations, Warranties and Undertakings

7.1 Seller represents and warrants to Buyer, on the date of this Agreement and as of the Delivery Date that:

(A) Seller has sole legal and beneficial title in and to the Engine, free from Liens and Seller has full power and lawful authority to enter into this Agreement and to transfer such title in and to the Engine to Buyer.

(B) Seller is a company established, duly incorporated and validly existing under the Laws of * with full power and authority (corporate and other) to conduct its operations as presently conducted, to own its properties and to execute and deliver, and to perform all of its obligations under this Agreement;

(C) The entry into and performance by it of, and the transactions contemplated by, this Agreement do not and will not:

(1) conflict with any laws binding on it; or

(2) conflict with the constitutional documents of it; or

(3) conflict with or result in default under any document which is binding upon it or any of its assets, nor result in the creation of any Lien over any of its assets;

(D) No Immunity:

(1) It is subject to civil commercial law with respect to its obligations under this Agreement; and

(2) neither it nor any of its assets is entitled to any right of immunity and the entry into and performance of this Agreement by Seller constitute private and commercial acts.

  Engine Sale Agreement * Contrail *   7                 *

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

* Engine Sale Agreement v0717

7.2 Buyer represents and warrants to Seller, on the date of this Agreement and as of the Delivery Date that:

(A) Buyer is a company established, duly incorporated and validly existing under the under the Laws of the State of North Carolina, U.S.A., with full power and authority (corporate and other) to conduct its operations as presently conducted, to own its properties and to execute and deliver, and to perform all of its obligations under this Agreement;

(B) It has the power to execute, deliver and perform, and that execution, delivery and performance of this Agreement and the transactions contemplated therein have been properly authorised;

(C) The entry into and performance by it of, and the transactions contemplated by, this Agreement do not and will not:

(1) conflict with any laws binding on it; or

(2) conflict with the constitutional documents of it; or

(3) conflict with or result in default under any document which is binding upon it or any of its assets, nor result in the creation of any Lien over any of its assets;

(D) No Immunity:

(1) It is subject to civil commercial law with respect to its obligations under this Agreement; and

(2) neither it nor any of its assets is entitled to any right of immunity and the entry into and performance of this Agreement by Buyer constitute private and commercial acts;

(E) Export Control: The Engine and related components are subject to export controls under the U.S. Export Administration Regulations, 15 C.F.R. Parts 730-774, the International Traffic in Arms Regulations, 22 C.F.R. Parts 120-130 and other export control laws and regulations of the United States (“Regulations”). Buyer acknowledges that it will comply with all such laws and regulations, and obtain all licenses to export the Engine as may be required.

8. Notices

Any notice or other communication under or in connection with this Agreement shall be in writing and shall be delivered personally, or by post (postage prepaid) or facsimile transmission, to the respective addresses or facsimile numbers given below or such other address or facsimile number as the recipient may have notified to the sender in writing. Proof of posting or despatch shall be deemed to be proof of receipt:

(A) in the case of a letter, on the seventh day after posting;

(B) in the case of a facsimile transmission, on the day immediately following the date of despatch or transmission;

to Seller at:

  Engine Sale Agreement * Contrail *   8                 *

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

* Engine Sale Agreement v0717

*

to Buyer at:

Contrail Aviation Support, LLC

435 Investment Court Verona

WI 53593

USA

Attention:    Joseph Kuhn, President

Fax:             (608) 848-8101

9. Taxes and Indemnities

9.1 The Purchase Price is exclusive of any and all taxes applicable thereto (including, without limitation, any VAT or other value added or sales taxes).

9.2 Buyer shall on demand pay and discharge any taxes (including any payable by Seller) imposed on or in connection with this Agreement, the Acceptance Certificate and/or the Bill of Sale or otherwise in connection with the transactions contemplated herein; provided, however, that Buyer shall not be liable for any taxes related to Seller’s income.

9.3 Gross-Up. Buyer shall increase the Purchase Price which would otherwise be required to be made hereunder so that the Seller is left in the same position as it would have been in had no Taxes been payable. All payments by the Buyer under or in connection with this Agreement shall be made without set-off or counterclaim, free and clear of and without deduction for or on account of all Taxes unless the Buyer is required by law to make any such deduction or withholding. If any Taxes are required to be deducted or withheld from any amount payable hereunder, the Buyer shall:

(a) pay to the Seller such additional amounts in the same currency as such payment as may be necessary in order that the amount of such payment received by the Seller on the date of such payment, after deduction or withholding for all such taxes, will be equal to the amount that the Seller would have received If such taxes had not been deducted or withheld;

(b) pay to the relevant authority within the period for payment permitted by applicable law the full amount of the deduction or withholding; and

(c) furnish to the Seller evidence of payment to the relevant authority of all amounts deducted or withheld as aforesaid.

10. Costs and Expenses

Save as expressly contained herein, each party shall be responsible for the costs and expenses of its own legal and other professional advisors in connection with the negotiation, preparation and execution of this Agreement. However, in the event of a dispute under this Agreement, the prevailing party shall be entitled to reasonable attorney fees.

  Engine Sale Agreement * Contrail *   9                 *

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

* Engine Sale Agreement v0717

11. Termination

Seller has the right terminate the Agreement in case of Buyer’s non-compliance with clauses 5.1, 6.2, 7.2 and 9. Either party has the right to terminate the Agreement in the event that the closing of this transaction has not been completed by September 29, 2917.

12. Assignment

Neither Party may assign any of its rights and/or obligations under this Agreement without the prior written consent of the other Party.

13. Miscellaneous

13.1 This Agreement contains the entire agreement between Seller and Buyer relating to the sale and purchase of the Engine, and the terms and conditions of this Agreement shall not be varied otherwise than by an instrument in writing of even date herewith or subsequent hereto executed by or on behalf of each of Seller and Buyer.

13.2 No failure or delay on the part of either party hereto in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise of any such right, power or remedy. The rights, powers and remedies provided in this Agreement are cumulative and additional to, and not exclusive of, any rights, powers or remedies provided by Law or otherwise.

13.3 This Agreement may be entered into in the form of any number of counterparts, each executed by at least one of the parties and, provided that all the parties shall so enter into this Agreement, each of the executed counterparts, when duly exchanged or delivered, shall be deemed to be an original but, taken together, they shall constitute one instrument. Facsimile and PDF copies of signatures shall be treated as original signatures for all purposes.

13.4 No term of this Agreement is enforceable under the Contracts (Rights of Third Parties) Act 1999 by a person who is not a party to this Agreement, except a party’s successor in interest.

13.5 Each provision of this Agreement is severable and distinct from the others and, if any provision is or at any time becomes to any extent or in any circumstances Invalid, illegal or unenforceable for any reason, it shall to that extent or in those circumstances, be deemed not to form part of this Agreement but (except to that extent or in those circumstances in the case of that provision) the validity, legality and enforceability of that and all other provisions of this Agreement shall not be affected or impaired, it being the parties’ intention that every provision of this Agreement shall be and remain valid and enforceable to the fullest extent permitted by Law.

13.6 Each of the parties undertakes with the other to do and perform such other and further acts and execute and deliver any and all other instruments as may be required by Law or reasonably required by the other party in order to establish, maintain and protect the rights and remedies of that party and to carry out and effect the intent and purpose of this Agreement.

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

* Engine Sale Agreement v0717

13.7 Neither Seller nor Buyer shall without the other’s prior written consent, communicate or disclose the contents of this Agreement to any third party (other than to their respective external legal advisors, auditors, insurance brokers and for underwriters or those of the airframe) provided however that disclosure will be permitted:

(A) pursuant to an order of any court of competent jurisdiction;

(B) pursuant to any procedure for discovery of documents in any proceedings before any such court;

(C) pursuant to any law or regulation having the force of law;

(D) pursuant to a lawful requirement of any authority with whose requirements the disclosing party is legally obliged to comply; or

(E) to effect any registrations, filings or recordations of the Engine.

14. Governing law and Jurisdiction

14.1 This Agreement and any contractual or non-contractual obligations arising out of or in connection with this Agreement shall be governed by, and construed in accordance with, the laws of New York, U.S.A., without reference to provisions governing conflicts of laws. The U.N. Convention on Contracts for the International Sales of Goods is not applicable to this Agreement.

14.2 Seller and Buyer each agree that in any legal action or proceedings against it or its assets in connection with this Agreement no immunity from such legal action or proceedings (which shall include, without limitation, suit, attachment prior to judgment, other attachment, the obtaining of judgment, execution or other enforcement) shall be claimed by or on behalf of Seller and/or Buyer or with respect to its assets, irrevocably waives any such right of immunity which it or its assets now have or may hereafter acquire or which may be attributed to it or its assets and consents generally in respect of any such legal action or proceedings to the giving of any relief or the issue of any process in connection with such action or proceedings including, without limitation, the making, enforcement or execution against any property whatsoever, (irrespective of its use or intended use) of any order or judgment which may be made or given in such action or proceedings.

14.3 Each party irrevocably agrees that the federal courts located in the State of New York shall have exclusive jurisdiction to settle any dispute or claim arising out of or in connection with this agreement or its subject matter or formation (including non-contractual disputes or claims).

IN WITNESS whereof the parties hereto have caused this Agreement to be duly executed as a deed the day and year first above written.

[signature page to follow]

  Engine Sale Agreement * Contrail *   11                 *

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

* Engine Sale Agreement v0717

EXECUTION PAGE

ENGINE SALE AGREEMENT –* *

* * * * * *

*	Date:
	Signature:
	Title:
	Name:

Contrail Aviation Support, LLC (Buyer)

Date:    9/22/2017

Signature: /s/ Joseph Kuhn Signature:

Title:	President & CEO	Title:
Name:	Joseph Kuhn	Name:

  Engine Sale Agreement * Contrail *   12                 *

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

* Engine Sale Agreement v0717

ACCEPTANCE CERTIFICATE

Contrail Aviation Support, LLC (the “Buyer”) hereby acknowledges that at 12:00 hours (CST time) on September 28, 2017 the technical condition of the CFM56-7B26/3 engine bearing engine serial number * (the “Engine”) is satisfactory to, and accepted by, Buyer (the Engine having been inspected by Buyer).

SIGNED for and on behalf of

Contrail Aviation Support, LLC

/s/ Joseph Kuhn

Joseph Kuhn

President and CEO

Duly Authorised Officer

  Engine Sale Agreement * Contrail *   13                 *

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

* Engine Sale Agreement v0717

BILL OF SALE

For valuable consideration, the receipt and sufficiency of which is hereby acknowledged, * * * * (“Seller”) in respect of:

1. one (1) CFM56-7B26/3 engine bearing engine serial number * and all equipment, accessories and parts belonging to, installed in or appurtenant to such engine; and

2. the Engine Documents,

referred to herein as the “Engine” does hereby sell, grant, transfer and deliver all its right, title and interest in and to the Engine to Contrail Aviation Support, LLC (“Buyer”) under an engine sale agreement dated September 22, 2017 between Seller and Buyer (the “Sale Agreement”), subject to and in accordance with the provisions of the Sale Agreement.

Seller hereby warrants to Buyer, its successors and assigns that Seller hereby conveys to Buyer good and marketable title in and to the Engine in accordance with the provisions of the Sale Agreement, and conveys full legal and beneficial title to the Engine to Buyer free and clear of Liens.

Unless otherwise defined herein or the context requires otherwise, capitalised terms in this Bill of Sale but not otherwise defined herein shall have the same meaning as used in the Sale Agreement (whether defined therein or incorporated therein by reference), and the Governing Law and Jurisdiction clause of the Sale Agreement (clause 14) shall apply hereto.

IN WITNESS WHEREOF Seller has caused this Bill of Sale to be duly executed at 16.00 hours (CET time) this 29th day of September 2017.

* (Seller)

Date: *

Signature: *

Title: *

Name: *

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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SCHEDULE 3: DESCRIPTION OF ENGINE

ENGINE

Manufacturer:	CFM International
Type:	CFM56-7
Manufacturer’s Serial Number:	*
Thrust rating (at start of the lease):	*
QEC/EBU:	See Attachment 1 to this Schedule 3
Engine Stand:	None
Engine Documents and Records:	Listed below

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

* Engine Sale Agreement v0717

Attachment 1 to Schedule 3

QEC/EBU List

  Engine Sale Agreement * Contrail *   16                 *

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

* Engine Sale Agreement v0717

SCHEDULE 4: ENGINE DOCUMENTS

1. Latest EASA form 1 and FAA Form 8130-3.

2. Logbook or equivalent On/Off log showing aircraft tail number, date on & off, hours and cycles of engine since new, reason for removal and location of this action.

3. Latest LLP status listing all tracked parts in accordance with the applicable EMM Chapter 5 and listing the Manual revision date.

4. Latest and up to date AD Compliance Statement & SB applicability and compliance listing. Includes all dirty finger print workcards and certificates of all ADs carried out on any / all LLPs installed.

5. Latest ECM trent monitoring data including EGTM, Oil Pressure, Fuel Flow, Vibrations, Oil Temperature, Derate, RPMs etc at take off.

6. Accessory and QEC listing including MFG P/N and S/N.

7. All Engine shop visit report incl. workscope, history and dirty finger print cards, including LLP records.

8. All non incident statements issued

9. All preservation tags or records.

10. All warranties still applicable to each engine.

11. No DER repairs and PMA parts statements.

  Engine Sale Agreement * Contrail *   17                 *

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

POWER OF ATTORNEY

1, Joseph Kuhn, President and CEO of Contrail Aviation Support, LLC (the “Company”), a limited liability company duly organized and existing under the laws of the State of North Carolina, U.S.A., do hereby designate, authorise and empower any and each one of the following named individuals, acting individually or collectively, as the Company’s true and lawful attorney-in-fact (each an “Attorney”) to:

(A) agree, make, sign and execute any and all of the documents (the “Documents”) in connection with the purchase and leasing of one CFMS6-7 engine with ESN * (the “Engine”) from and to * * * *, a legal entity organized under the laws of * *;

(B) to make, give, sign, execute and do all such deeds arrangements, instruments, applications, oaths, affidavits, declarations, notices, confirmations, certificates, approvals, acknowledgements, acceptances, deliveries and all other acts, matters and things whatsoever, in connection with the preparation, signature, execution and delivery of the Documents or any other documents required to be executed by the Company in connection with them, or the performance of any acts, matters and things therein contemplated; and

(C) to acknowledge this Power of Attorney as the act and deed of the Company and generally to do all other acts which may be necessary and desirable for carrying the purpose of this Power of Attorney into effect.

I hereby certify that the following are the true signatures of:

	Name	Title	Signature
*

IN WITNESS WHEREOF, I hereby sign my name as Joseph Kuhn on behalf of the Company effective as of the 27th day of September, 2017 in Verona, Wisconsin, U.S.A.

CONTRAIL AVIATION SUPPORT, LLC

/s/ Joseph Kuhn

Name: Joseph Kuhn

Title: President and CEO

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

EX-10.3

Exhibit 10.3

PURCHASE AGREEMENT

dated

as of *, 2017

between

*

as Seller,

and

CONTRAIL AVIATION SUPPORT, LLC

as Buyer

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

TABLE OF CONTENTS

		Page
1.	Definitions		1
2.	Sale		1
3.	Purchase Price; Deposit; Purchase Price Adjustment		1
4.	Inspection of Aircraft; Value at Closing; Delivery Condition; Deregistration; Export		2
5.	Representations and Warranties of Seller		3
	(a)   Organization, Etc.		3
	(b)   Organizational Authorization		3
	(c)   No Violation		3
	(d)   Approvals		3
	(e)   Valid and Binding Agreements		3
	(f)   Litigation		4
	(g)   Encumbrances		4
	(h)   Brokers’ Fees		4
	(i) Title to Interests		4
6.	Disclaimer		4
7.	Representations and Warranties of Buyer		5
	(a)   Organization, Etc.		5
	(b)   Authorization		5
	(c)   No Violation		5
	(d)   Approvals		5
	(e)   Valid and Binding Agreements		5
	(f)   Litigation		6
	(g)   Broker’s Fees		6
8.	Conditions Precedent to the Obligations of Seller		6
	(a)   Purchase Price		6
	(b)   Due Authorization, Execution and Delivery		6
	(c)   Representations and Warranties		6
	(d)   Additional Information		6
	(e)   Illegality		6
	(f)   No Proceedings		6
	(g)   Delivery Location		7
	(h)   Approvals, Consents and Notices		7
	(i) Insurance		7

i

9.	Conditions Precedent to the Obligations of Buyer	7
	(a)   Due Authorization, Execution and Delivery	7
	(b)   Representations and Warranties	7
	(c)   Additional Information	7
	(d)   Illegality	7
	(e)   No Proceedings	7
	(f)   Delivery Location	7
	(g)   Material Damage	7
	(h)   Liens	8
10.	International Registry	8
11.	Further Assurances	8
12.	Taxes, Indemnities and Insurance	8
	(a)   Buyer’s Obligations regarding Taxes	8
	(b)   Seller’s Indemnity	8
	(c)   Buyer’s Indemnity	9
	(d)   Withholding	9
	(e)   Contest Resolution	9
	(f)   Cooperation	10
	(g)   Notice of Claims	10
	(h)   Insurance	10
13.	Know Your Customer	11
14.	Miscellaneous	11
	(a)   Notices	11
	(b)   Confidentiality	12
	(c)   Limitation of Liability of Any Party	12
	(d)   Headings	13
	(e)   References	13
	(f)   Governing Law; Jurisdiction; Attorney Fees	13
	(g)   Severability	13
	(h)   Amendments in Writing	13
	(i) Survival	13
	(j) Expenses	13
	(k)   Execution in Counterparts; Signatures	13
	(l) Entire Agreement	14
	(m) Exhibits and Schedules	14
	(n)   Successors and Assigns	14
	(o)   No Third Party Benefit	14
	(P)  Assignment	14
15.	Post-Closing Obligations	14

ii

SCHEDULES:
Schedule  1	Definitions
Schedule 2	Aircraft Description; Purchase Price
Schedule 3	Aircraft Documents
EXHIBITS:
Exhibit A	Acknowledgment of Delivery
Exhibit B	Certificate of Technical Acceptance
Exhibit C	Warranty Bill of Sale

iii

PURCHASE AGREEMENT

THIS PURCHASE AGREEMENT, dated as of September 22, 2017 (this “Agreement”), is entered into between * , a legal entity organized under the laws of * * * * (the “Seller”), and Contrail Aviation Support, LLC, a legal entity organized under the laws of North Carolina, U.S.A. (the “Buyer”).

WHEREAS, subject to the terms and conditions hereof, Seller desires to sell, transfer, and convey to Buyer, and Buyer desires to purchase from Seller, one (1) used Boeing 737-800 Aircraft and related Aircraft Documents (as defined herein).

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and agreements of the parties contained herein and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Seller and Buyer agree as follows:

1. Definitions

Capitalized terms used in this Agreement shall have the meanings set forth in Schedule 1 to this Agreement.

2. Sale

Subject to the terms and conditions of this Agreement, Seller agrees to sell and transfer to Buyer, and Buyer agrees to purchase from Seller, all of Seller’s right, title and interest in, to and under the Aircraft and Aircraft Documents, free and clear of all liens. The Closing of the purchase and sale of the Aircraft shall take place upon satisfaction or waiver of all of the conditions set forth in Section 8 and Section 9 on the Anticipated Closing Date but not later than the respective Final Closing Date, or at such other time as Buyer and Seller may agree in writing.

3. Purchase Price; Deposit: Purchase Price Adjustment

(a) The purchase price for the Aircraft shall be in the amount and allocated (as applicable) as set forth on Schedule 2 hereto (collectively and individually, the “Purchase Price”).

(b) Buyer has previously paid to Seller a security deposit in the amount and allocation (as applicable) as set forth on Schedule 2 hereto (the “Deposit”) which shall be non-refundable to Buyer unless any of the following events occur:

(i) Seller fails to deliver the Aircraft to Buyer on or before the Final Closing Date;

(ii) the Aircraft suffers an Event of Loss or Material Damage between the time of Technical Acceptance and Delivery. “Material damage” shall mean any damage 1) exceeding $100,000 in the total amount; 2) affecting the current non-incident statement; or 3) preventing Buyer from ferrying the Aircraft to the U.S.A. (Buyer shall negotiate in good faith with Seller to resolve concerns over any material damage to the Aircraft before requesting termination of the Purchase Agreement and return of the Deposit.);

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Page 1

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

(iii) Buyer’s or Seller’s material breach of this Agreement;

(iv) Buyer does not issue the Certificate of Technical Acceptance to Seller; or

(v) Seller’s inability to satisfy the Conditions Precedent listed in Section 9 of this Agreement, save where such failure is as a result of Buyer’s breach of the Purchase Agreement.

(c) Prior to Closing, Seller shall provide an original undated signed bill of sale in the form shown on Exhibit C, and Buyer shall provide an original undated signed delivery receipt for the Aircraft in the form shown on Exhibit A, to an escrow agent designated by Buyer, and reasonably acceptable to Seller, to be held by such escrow agent until Seller gives notice that the full Purchase Price has been received by Seller. Said bill of sale shall be delivered (and shall only be delivered) to Buyer by the escrow agent upon receiving Seller’s email confirmation of receipt of the full Purchase Price in cleared funds in Seller’s bank account, which confirmation Seller shall provide immediately upon receiving the Purchase Price.

(d) At Closing, Buyer shall deliver to Seller an amount equal to the Purchase Price (less the Deposit), in immediately available funds, by wire transfer to the following account:

*

4. Inspection of Aircraft; Value at Closing; Delivery Condition; Deregistration; Export

(a) Buyer shall have the opportunity to perform inspections of the Aircraft and Aircraft Documents prior to Closing at * * * (“Inspection”). Buyer shall be entitled to perform a general inspection of the Aircraft, including (i) a physical “walk around” inspection of the Aircraft interiors and exteriors; (ii) review of the engine borescopes and engine performance checks and (iii) an inspection of all Aircraft Documents relating to such Aircraft. Upon Buyer’s confirmation that the Aircraft and Aircraft Documents are in a condition required by this Agreement and as otherwise acceptable to Buyer, Buyer shall execute and deliver to Seller the Certificate of Technical Acceptance.

(b) Seller shall provide to Buyer at the time of delivery all Aircraft records, including but not limited to, the following current documentation: (i) updated disk sheets, and (ii) non-incident statement(s) and non-PMA/DER statement(s), all in the form presented to Buyer in connection with the Inspection.

(c) At Closing, the Aircraft (including the Aircraft Documents) shall be delivered to Buyer in “as-is” “where-is” basis. Seller makes no warranties, guarantees or representations of any kind, either express or implied, statutory or otherwise, as to the condition of the Aircraft.

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

(d) The export and re importation of the Aircraft under this Agreement are subject to the export laws of the State of Registration. Buyer shall be responsible for the post-closing exportation process required for the Aircraft, including any and all costs associated therewith.

5. Representations and Warranties of Seller

On the date hereof and on the Closing Date Seller makes the following representations and warranties.

(a) Organization, Etc.    Seller is duly organized, validly existing and in good standing under the laws of * * * with all requisite organizational power and authority to own, participate in or hold under lease its properties and enter into and perform its obligations under this Agreement and the Transfer Documents to which Seller is or will be a party (collectively, the “Seller Agreements”);

(b) Organizational Authorization.    Seller has taken, or caused to be taken, all necessary organizational action (including, without limitation, the obtaining of any consent or approval of any of its board of directors or committee thereof or any officers required by its charter documents or other organizational agreements) to authorize the execution and delivery of this Agreement and each of the Seller Agreements and the performance of its obligations hereunder and thereunder;

(c) No Violation.    The execution and delivery by Seller of this Agreement and the Seller Agreements, the performance by Seller of its obligations hereunder and thereunder and the consummation by Seller on the date hereof and on the Closing Date of the transactions contemplated hereby and thereby, do not and will not (i) violate or contravene any provision of the charter documents or other organizational agreements of Seller, (ii) violate or contravene any law applicable to or binding on Seller or (iii) violate, contravene or constitute any default under, or result in the creation of any lien upon, any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, lease, loan or other material agreement, instrument or document to which Seller is a party or by which Seller or any of its properties is or may be bound or affected;

(d) Approvals.    The execution and delivery by Seller of this Agreement and the Seller Agreements, the performance by Seller of its obligations hereunder and thereunder and the consummation by Seller on the Closing Date of the transactions contemplated hereby or thereby do not and will not require the consent, approval or authorization of, or the giving of notice to, or the registration with, or the recording or filing of any documents with, or the taking of any other action in respect of any Government Entity;

(e) Valid and Binding Agreements.    This Agreement has, and the Seller Agreements have been or as of the Closing Date will have been, duly authorized, executed and delivered by Seller and, assuming the due authorization, execution and delivery by the other party or parties thereto, this Agreement and, as of the Closing Date, the Seller Agreements constitute the legal, valid and binding obligations of Seller and are enforceable against

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Page 3

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

Seller in accordance with the respective terms thereof, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, receivership, moratorium and other similar laws affecting the rights of creditors generally and general principles of equity, whether considered in a proceeding at law or in equity;

(f) Litigation.    There are no pending or, or to the knowledge of Seller, threatened actions or proceedings against Seller before any court, administrative agency or tribunal which, if determined adversely to Seller, would prohibit or materially adversely affect the ability of Seller to perform its obligations under this Agreement or the Seller Agreements;

(g) Encumbrances.    Seller has not previously sold, assigned, encumbered, transferred or conveyed and, except as contemplated hereby, has no obligation to sell, assign, encumber, transfer or convey, any of its right, title or interest in, to or under the Aircraft;

(h) Brokers’ Fees.    Buyer shall not be liable for the fees of any broker or other Person acting on Seller’s behalf in connection with the transactions contemplated hereby;

(i) Title to Interests.    Seller is the sole owner of the Aircraft and has good title thereto, free and clear of any and all Liens. At Closing, such title shall be transferred to Buyer free and clear of all Liens.

6. Disclaimer

Other than the express representations and warranties of Seller set forth in Section 5 and in any other Transfer Document, the Aircraft is being sold and assigned hereunder, “AS IS, WHERE IS” and BUYER ACKNOWLEDGES AND AGREES THAT NEITHER THE SELLER NOR ANY OF ITS AFFILIATES, OFFICERS, DIRECTORS, MEMBERS, EMPLOYEES OR REPRESENTATIVES HAS MADE OR WILL BE DEEMED TO HAVE MADE ANY TERM, CONDITION, REPRESENTATION, WARRANTY OR COVENANT EXPRESS OR IMPLIED (WHETHER STATUTORY OR OTHERWISE) AS TO, AND BUYER HEREBY WAIVES, RELEASES AND RENOUNCES ANY AND ALL WARRANTIES, OBLIGATIONS AND LIABILITIES, EXPRESS OR IMPLIED (WHETHER STATUTORY OR OTHERWISE) WITH RESPECT TO, (a) THE CAPACITY, AGE, VALUE, QUALITY, DURABILITY, DESCRIPTION (EXCEPT AS TO SERIAL NUMBERS), CONDITION (WHETHER OF THE AIRCRAFT, ANY PART THEREOF OR ITS AIRCRAFT DOCUMENTS), DESIGN, WORKMANSHIP, MATERIALS, MANUFACTURE, CONSTRUCTION, OPERATION, DESCRIPTION, STATE, MERCHANTABILITY, PERFORMANCE, FITNESS FOR ANY PARTICULAR USE OR PURPOSE (INCLUDING THE ABILITY TO OPERATE OR REGISTER THE AIRCRAFT OR USE THE AIRCRAFT IN ANY OR ALL JURISDICTIONS) OR SUITABILITY OF THE AIRCRAFT, OR ANY PART THEREOF, (b) THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, KNOWN OR UNKNOWN, APPARENT OR CONCEALED, EXTERIOR OR INTERIOR, (c) THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK, COPYRIGHT OR OTHER INTELLECTUAL PROPERTY RIGHTS, (d) ANY IMPLIED WARRANTY ARISING FROM THE COURSE OF PERFORMANCE, COURSE OF DEALING OR USAGE OF TRADE OR (e) ANY OTHER REPRESENTATIONS OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT OR ANY PART THEREOF

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OR ITS AIRCRAFT DOCUMENTS, ALL OF WHICH ARE HEREBY EXPRESSLY EXCLUDED, IT BEING UNDERSTOOD THAT NOTHING HEREIN WILL BE DEEMED TO LIMIT THE BUYER FROM AVAILING ITSELF OF ANY WARRANTIES, COVENANTS, AND REPRESENTATIONS OF ANY MANUFACTURER.

7. Representations and Warranties of Buyer

On the date hereof and on the Closing Date, Buyer makes the following representations and warranties as to itself, to Seller:

(a) Organization, Etc.    Buyer is a limited liability company duly organized, validly existing and in good standing under the laws of North Carolina, U.S.A., and has the power and authority to own, participate in or hold under lease its properties and to enter into and perform its obligations under this Agreement and the Transfer Documents to which Buyer is a party (collectively, the “Buyer Agreements”);.

(b) Authorization.    Buyer has taken, or caused to be taken, all necessary action (including, without limitation, the obtaining of any consent or approval of its members required by its certificate of formation or limited liability company agreement) to authorize the execution and delivery of this Agreement and each of the Buyer Agreements, as the case may be, and the performance of its obligations hereunder and thereunder;

(c) No Violation.    The execution and delivery by Buyer of this Agreement and the Buyer Agreements, the performance by Buyer of its obligations hereunder and thereunder and the consummation by Buyer on the Closing Date of the transactions contemplated hereby and thereby, do not and will not (i) violate or contravene any provision of the certificate of formation, limited liability company agreement, other charter documents or other organizational agreements of Buyer, (ii) violate or contravene any law applicable to or binding on Buyer or (iii) violate, contravene or constitute any default under, or result in the creation of any lien upon, any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, lease, loan or other material agreement, instrument or document to which Buyer is a party or by which Buyer or any of its properties is or may be bound or affected;

(d) Approvals.    The execution and delivery by Buyer of this Agreement and the Buyer Agreements, the performance by Buyer of its obligations hereunder and thereunder and the consummation by Buyer on the Closing Date of the transactions contemplated hereby and thereby do not and will not require the consent, approval or authorization of, or the giving of notice to, or the registration with, or the recording or filing of any documents with, or the taking of any other action in respect of, (i) any trustee or other holder of any debt of Buyer and (ii) any Government Entity;

(e) Valid and Binding Agreements.    This Agreement has been and the Buyer Agreements have been or as of the Closing Date will have been duly authorized, executed and delivered by Buyer and, assuming the due authorization, execution and delivery by the other party or parties thereto, this Agreement and, as of the Closing Date, the Buyer Agreements constitute the legal, valid and binding obligations of Buyer and are

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enforceable against Buyer in accordance with the respective terms thereof, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, receivership, moratorium and other similar laws affecting the rights of creditors generally and general principles of equity, whether considered in a proceeding at law or in equity;

(f) Litigation.    There are no pending or, to the knowledge of Buyer, threatened actions or proceedings against Buyer before any court, administrative agency or tribunal which, if determined adversely to Buyer would materially adversely affect the ability of Buyer to perform its obligations under this Agreement or the Buyer Agreements; and

(g) Broker’s Fees.    Seller shall not be liable for the fees of any broker or other person acting on Buyer’s behalf in connection with the transactions contemplated hereby.

8. Conditions Precedent to the Obligations of Seller

The obligation of Seller to sell, transfer, assign and convey the Aircraft to Buyer on the Closing Date is subject to the satisfaction or waiver of the following conditions:

(a) Purchase Price.    Seller shall have received the Purchase Price via wire transfer to Seller’s account as specified in Section 3;

(b) Due Authorization, Execution and Delivery.    This Agreement and each other Transfer Document shall have been duly authorized, executed and delivered by each party thereto other than Seller;

(c) Representations and Warranties.    The representations and warranties of Buyer contained herein and in any other Buyer Agreements shall be true and correct as of Closing in all material respects;

(d) Additional Information.    Seller shall have received such other documents and evidence with respect to Buyer as Seller may reasonably request in order to establish the authority of Buyer to consummate the transactions contemplated by this Agreement and the other Transfer Documents on such date, the taking by Buyer of all appropriate action in connection therewith and compliance by Buyer with the conditions set forth in this Agreement on such date;

(e) Illegality.    The performance on such date of the transactions contemplated hereby, upon the terms and conditions set forth herein, shall not, in the reasonable judgment of Seller, violate, and shall not subject Seller to any penalty or liability under, any law, rule or regulation binding upon Seller;

(f) No Proceedings.    No legal or governmental action, suit or proceeding shall have been instituted or threatened before any court, administrative agency or tribunal, nor shall any order, judgment or decree have been issued or proposed to be issued by any court, administrative agency or tribunal to set aside, restrain, enjoin or prevent the consummation of this Agreement or the transactions contemplated hereby;

(g) Delivery Location.    The Aircraft shall be located at the agreed Delivery Location;

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(h) Approvals, Consents and Notices.    All approvals and consents of, or notices to, any Governmental Entity, any trustee or holder of any indebtedness or obligation of the Seller or any other person, which are required in connection with the transaction contemplated by this Agreement shall have been duly obtained, given or accomplished; and

(i) Insurance.    Seller shall have received the insurance certificate specified in Section 12(h).

9. Conditions Precedent to the Obligations of Buyer

The obligation of Buyer to purchase the Aircraft from Seller on the Closing Date is subject to the satisfaction or waiver of the following conditions:

(a) Due Authorization, Execution and Delivery.    This Agreement and each other Transfer Document shall have been duly authorized, executed and delivered by each party thereto other than Buyer;

(b) Representations and Warranties.    The representations and warranties of Seller contained in the Transfer Documents shall be true and correct as of the Closing Date in all material respects;

(c) Additional Information.    Buyer shall have received such other documents and evidence with respect to Seller as Buyer may reasonably request in order to establish the authority of Seller to consummate the transactions contemplated by this Agreement and other Transfer Documents on such date, the taking by Seller of all appropriate corporate action in connection therewith and compliance by Seller with the conditions set forth in the Transfer Documents on such date;

(d) Illegality.    The performance of the transactions contemplated hereby, upon the terms and conditions set forth herein, shall not, in the reasonable judgment of Buyer, violate, and shall not subject any Buyer to any penalty or liability under, any law, rule or regulation binding upon such Buyer;

(e) No Proceedings.    No legal or governmental action, suit or proceeding shall have been instituted or threatened before any court, administrative agency or tribunal, nor shall any order, judgment or decree have been issued or proposed to be issued by any court, administrative agency or tribunal to set aside, restrain, enjoin or prevent the consummation of this Agreement or the transactions contemplated hereby;

(f) Delivery Location.    The Aircraft shall be located at the agreed Delivery Location;

(g) Material Damage.    No Material Damage (as defined in Section 3) or an Event of Loss with respect to the Aircraft shall have occurred;

(h) Liens.    The Aircraft shall be free and clear of all Liens;

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10. International Registry

At or promptly after Closing, upon request by Buyer, Seller shall provide any consents required to register a contract of sale for the sale of the Aircraft on the International Registry.

11. Further Assurances

Each party agrees, upon the reasonable request of the other party, at any time and from time to time, promptly to execute and deliver all such further documents, and promptly to take and forebear from all such action, as may be reasonably necessary or appropriate in order more effectively to confirm or carry out the provisions of this Agreement. Without limiting the foregoing, Seller shall, at the sole cost and expense of Buyer, do or cause to be done all acts and things as may be required to perfect and preserve the title and interest of Buyer in the Aircraft as Buyer may reasonably request, including, without limitation, that Seller shall, upon request by Buyer and at Buyer’s cost and expense, cause all instruments which shall be executed pursuant to the terms hereof to be kept, filed and recorded in the appropriate office or offices pursuant to applicable laws to perfect, protect and preserve the rights and interests of Buyer hereunder and in the Aircraft.

12. Taxes, Indemnities and Insurance

(a) Buyer’s Obligations regarding Taxes.    Buyer hereby agrees promptly to pay and indemnify each Seller Indemnitee from and against any and all Taxes payable in connection with the sale, transfer and delivery by Seller to Buyer of the Aircraft or in connection with any other transaction to occur on or after the Closing expressly contemplated hereby. The foregoing shall expressly exclude any liability for Taxes on or based on or measured by the gross or net income of Seller or capital gains of Seller or Taxes imposed by a taxing authority in a jurisdiction that would not have been imposed but for the business activity (other than the transactions contemplated hereby) or tax residence of Seller in such jurisdiction. The parties agree to cooperate in taking actions to minimize or eliminate Taxes in connection with this transaction.

(b) Seller’s Indemnity.    Seller hereby covenants and agrees that it will pay and assume liability for, and indemnify, protect, defend, save and keep harmless each Buyer Indemnitee from and against, any and all liabilities, Taxes, obligations, losses, damages, settlements, claims, actions, suits, penalties, costs and expenses (including, without limitation, reasonable fees and expenses of counsel) of whatsoever kind and nature which may at any time or from time to time be imposed upon, incurred by or asserted against any Buyer Indemnitee in any way relating to, resulting from or arising out of (i) any inaccuracy or breach of any representation or warranty made by Seller under this Agreement or any Seller Agreements, (ii) any failure by Seller to have observed or performed any of its obligations under or in connection with this Agreement or any Seller Agreements, or (iii) any claims made after Closing, solely to the extent any such claim is attributable to (A) the gross negligence or willful misconduct of Seller and occurring prior to Closing, or (B) the existence of any Liens on the Aircraft attributable to the period occurring prior to Closing.

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(c) Buyer’s Indemnity.    Buyer hereby covenants and agrees upon demand of Seller to pay and assume liability for, and indemnify, protect, defend, save and keep harmless each Seller Indemnitee from and against, any and all liabilities, Taxes, fees, obligations, losses, damages, settlements, claims, actions, suits, penalties, costs and expenses (including, without limitation, reasonable fees and expenses of counsel) of whatsoever kind and nature which may at any time or from time to time be imposed upon, incurred by or asserted against any Seller Indemnitee in any way relating to, resulting from or arising out of (i) any inaccuracy or breach of any representation or warranty made by Buyer under this Agreement or any Buyer Agreements, (ii) any failure by Buyer to have observed or performed any of its obligations under or in connection with this Agreement or any Buyer Agreements in respect of or to the extent attributable to the period from and after Closing, or (iii) any claims made after Closing, solely to the extent such claim is not attributable (A) to the period occurring prior to Closing or (B) to Seller’s failure to perform its obligations under this Agreement or the Seller Agreements.

(d) Withholding.    If any Tax is required by law to be deducted or withheld from or with respect to any amount paid or payable by Buyer or the Seller pursuant to this Agreement (the “Paying Party”) to the other party hereto (the “Receiving Party”), then the Paying Party shall pay such additional amount as shall be necessary to enable the Receiving Party to receive, after all such withholding (including any withholding from or with respect to such additional amount), the amount that the Receiving Party would have received if such deduction or withholding had not been made.

(e) Contest Resolution.    If a claim is made by any tax authority against a party hereto (the “taxed party”) with respect to any Tax of which another party (the “indemnifying party”) is obligated to indemnify under this Section 12, the taxed party shall promptly notify the indemnifying party of such claim; provided, however, that the failure to give such notice will not prejudice or otherwise affect any of the rights of the taxed party hereunder unless such failure materially and adversely affects the indemnifying party in exercising its contest rights hereunder or to the extent such failure results in any increase in, or fine or penalty with respect to, any amounts claimed to be payable by the indemnifying party to the taxed party pursuant to this Section 12. If reasonably requested by the indemnifying party in writing, the taxed party shall (at the expense and direction of the indemnifying party) contest in the name of the taxed party or indemnifying party (as applicable), the validity, applicability or amount of such Taxes so indemnified by (i) if permitted by applicable law without adverse consequences to the taxed party, resisting payment thereof, (ii) paying under protest, if protest is necessary or proper, and (iii) if payment be made, using reasonable commercial efforts to obtain a refund thereof in appropriate administrative and judicial proceedings. If the taxed party becomes eligible for a refund of any Taxes paid by the indemnifying party, it shall notify the indemnifying party and, if reasonably requested by the indemnifying party and permissible under applicable law, the taxed party shall consider in good faith any request by the indemnifying party to assign such right to the indemnifying party. Should the taxed party obtain a refund of all or any part of the Taxes paid by the indemnifying party, the taxed

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party shall pay the indemnifying party the amount of such refund, plus, any interest thereon (net of any taxes imposed on such interest) obtained by the taxed party from the taxing authority if fairly attributable to such Taxes.

(f) Cooperation.    Seller and Buyer shall reasonably cooperate so as to minimize any potential tax risk to Buyer or Seller as a result of the transactions contemplated hereby. Seller and Buyer shall provide one another with such assistance as may reasonably be required in connection with the preparation of any tax return, any audit or other examination by any taxing authority, or any judicial or administrative proceedings relating to liability for Taxes arising from the transactions contemplated by this Agreement, and shall provide one another upon written request with any records or information that are relevant to such Tax return, audit or examination or proceedings. The party requesting assistance, records or information under the preceding sentence shall reimburse the other for reasonable out-of-pocket expenses incurred by the other in providing such assistance, records or information.

(g) Notice of Claims.    Seller and Buyer agree to provide written notification to the other party promptly after becoming aware of any liability, obligation or claim, whether pending or threatened, that is the subject of indemnification pursuant to this Section 12; unless the failure to provide such notification would not materially and adversely affect the indemnifying party in exercising its contest rights hereunder or result in any increase in, or fine or penalty with respect to, any amounts claimed to be payable by the indemnifying party to the other party pursuant to this Section 12, provided, that the failure by either party to so notify the other party will not in any manner affect either party’s other obligations under this Section 12.

(h) Insurance.    For the earlier of a period of two years after the purchase of the Aircraft or the dismantling of the Aircraft, or the airframe or engine, Buyer shall, or shall cause any subsequent buyer or operator to, at its own cost and expense, maintain and keep in full force and effect an insurance policy(ies) for the Aircraft and Engines providing $10,000,000 of aviation products liability coverage, except in the event that any Engine is returned to service, in which event $500,000,000 of aviation general liability coverage shall be provided with respect to such Engine. Aviation General Liability insurance covering Buyer’s or any operator’s aviation activities shall include Premises Liability, Contractual Liability, Products Liability, War Risks Liability, and including Extended Coverage Endorsement (Aviation Liabilities) AVN52 or equivalent covering War and Allied Perils excluded by War, Hijacking and Other Perils Exclusion Clause AVN48B or any modification or substitution thereof for the time in force. Such policies shall be carried with insurers reasonably acceptable to Seller. Such insurance shall include the Seller and any other Seller Indemnitees as Additional Insureds. Such policies shall include a Waiver of Subrogation Clause, Breach of Warranty Clause, and Severability of Interest Clause in favor of the Additional Insureds. Buyer shall furnish an insurance certificate evidencing the same at Closing, and, upon Seller’s request, at the expiration of an existing certificate.

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Page 10

13. Know Your Customer

Seller and Buyer shall (i) ensure that no Person who owns a controlling interest in or otherwise controls Buyer or Seller is or shall be listed on the Specially Designated Nationals and Blocked Person List or other similar lists maintained by the Office of Foreign Assets Control (“OFAC”), the Department of the Treasury or included in any Executive Orders, (ii) not violate any of the foreign asset control regulations of OFAC or any enabling statute or Executive Order relating thereto, (iii) comply with all applicable Bank Secrecy Act laws and regulations, as amended or (iv) comply with any other applicable national sanctions program. As required by federal law or other applicable law, Seller or Buyer may need to obtain, verify and record certain customer identification information and documentation in connection herewith, and each party hereto shall provide such information as is reasonably requested prior to Closing.

14. Miscellaneous

(a) Notices.

All notices, demands, declarations and other communications required by this Agreement shall be in writing and shall be effective (i) if given by facsimile, when transmitted, (ii) if given by registered or certified mail, three Business Days after being deposited with the U.S. Postal Service or other commercially recognized carrier and (iii) if given by a nationally recognized overnight courier, when received, or, if personally delivered, when so delivered, addressed:

If to Seller, to:

*

or to such other address as Seller shall from time to time designate in writing to Buyer; and

If to Buyer, to:

CONTRAIL AVIATION SUPPORT, LLC

435 Investment Court

Verona, Wisconsin 53593

Attn: Joseph Kuhn, CEO

Fax: (608) 848-8100

Email: Joe@contrail.com

Purchase Agreement

Page 11

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

or to such other address as Buyer may from time to time designate in writing to Seller.

(b) Confidentiality.

(i) Each party hereto shall keep strictly confidential any and all Confidential Information furnished to it or to its Affiliates, or their respective officers, employees, agents, directors or advisers (collectively, “Representatives”) in the course of negotiations relating to this Agreement or any transaction contemplated by this Agreement, and the business and financial reviews and investigation conducted by any party hereto in connection with this Agreement, and each such party has instructed its Representatives having access to such Confidential Information of such obligation of confidentiality. The obligations of confidentiality set forth herein shall not apply to information to the limited extent (v) it is contained in a Transfer Document that is publicly filed as contemplated hereby; (w) it is required to be disclosed by any Governmental Entity or required to be disclosed by applicable law or administrative proceeding, (x) for which a party has received a subpoena or similar demand (provided that such party shall to the extent permitted by applicable law first, as promptly as practicable upon receipt of such subpoena or demand, furnish a copy thereof to the other party), (y) that such information is generally available to the public or in the possession of the receiving party before its disclosure by the disclosing party to the receiving party or (z) that it is given to the receiving party by another Person other than in breach of obligations of confidentiality owed by such Person to the disclosing party. Notwithstanding the foregoing, each party acknowledges and agrees that any party may disclose Confidential Information to (A) regulators, (B) such party’s counsel, Affiliates, beneficiaries, hedging arrangement providers, insurance brokers and providers, reinsurers and auditors provided that such recipients maintain the confidentiality of the Confidential Information and (C) prospective transferees and lenders who agree to keep such Confidential Information confidential.

(ii) Notwithstanding anything herein to the contrary, any party to this Agreement (and any Representative) may disclose to any and all Persons, without limitation of any kind, the tax treatment and tax structure of the transactions contemplated by this Agreement and all materials of any kind (including opinions or other tax analyses) that are provided to it relating to such lax treatment and tax structure; provided, however, that such disclosure may not be made to the extent required to be kept confidential to comply with any applicable federal or state securities laws.

(c) Limitation of Liability of Any Party.    THE PARTIES ACKNOWLEDGE AND AGREE THAT, NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, NO PARTY SHALL BE LIABLE TO ANOTHER PARTY TO THIS AGREEMENT OR ASSERT A CLAIM FOR ANY INCIDENTAL, CONSEQUENTIAL, SPECIAL, OR PUNITIVE DAMAGES, REGARDLESS OF THE NATURE OR THEORY OF ANY UNDERLYING CAUSE OF ACTION THAT MIGHT OTHERWISE APPLY.

Purchase Agreement

Page 12

(d) Headings.    Headings used herein are for convenience only and shall not in any way affect the construction of, or be taken into consideration in interpreting, this Agreement.

(e) References.    Any reference to a specific Section or Section number shall be interpreted as a reference to that Section of this Agreement unless otherwise expressly provided.

(f) Governing Law; Jurisdiction; Attorney Fees.    This Agreement and any other Transfer Documents shall in all respects be governed by, and construed in accordance with, the laws of the State of New York, U.S.A., including all matters of construction, validity and performance, without giving effect to principles of conflicts of law. The federal courts located in the State of New York shall serve as the exclusive forum for any such dispute and the parties irrevocably consent to the jurisdiction of such courts. In the event of a dispute between the parties, the prevailing party shall be entitled to reasonable attorney fees and costs.

(g) Severability.    If any provision hereof should be held invalid, illegal or unenforceable in any respect in any jurisdiction, then, to the fullest extent permitted by law, (i) all other provisions hereof shall remain in full force and effect in such jurisdiction and shall be construed in order to carry out the intentions of the parties hereto as nearly as may be possible, and (ii) such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of such provision in any other jurisdiction.

(h) Amendments in Writing.    No amendment, modification, waiver, termination or discharge of any provision of this Agreement, or any consent to any departure by Seller or Buyer from any provision hereof, shall in any event be effective unless the same shall be in writing and signed by Seller and Buyer, and each such amendment, modification, waiver, termination or discharge shall be effective only in the specific instance and for the specific purpose for which given.

(i) Survival.    Notwithstanding anything contained herein to the contrary, all agreements, indemnities, representations and warranties contained in this Agreement shall survive the Closing Date and the consummation of the transactions contemplated hereby for such date.

(j) Expenses.    Each of Seller and Buyer shall be responsible for its own costs and expenses incurred in connection with the negotiation, preparation, execution and delivery of this Agreement and the Transfer Documents, and shall not have any right of reimbursement or indemnity for such costs and expenses as against the Buyer or Seller, respectively. Notwithstanding anything to the contrary, Buyer shall be responsible for any cost associated with the registration of the transfer of title in the State of Registration including any special aviation counsel fees. [Subject to review by * counsel.]

(k) Execution in Counterparts: Signatures.    This Agreement, the other Transfer Documents and any amendments, waivers or consents hereto or thereto may be executed by Seller and Buyer in separate counterparts (or upon separate signature pages bound together into one or more counterparts), each of which, when so executed and delivered, shall be an original, but all such counterparts shall together constitute one and the same instrument.

Purchase Agreement

Page 13

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

Promptly upon Closing, each Party shall provide executed originals of this Agreement and the Transaction Documents, as applicable, to the other Party. Nevertheless, facsimile and PDF copy signatures shall also be treated as original signatures for all purposes.

(l) Entire Agreement.    This Agreement and the other Transfer Documents constitute the entire agreement of Seller and Buyer with respect to the subject matter hereof or thereof, and all prior or contemporaneous understandings or agreements, whether written or oral, between Seller and Buyer with respect to such subject matter are hereby superseded in their entirety. In the event of a conflict between this Agreement and any other Transfer Document, the terms and conditions of this Agreement shall govern.

(m) Exhibits and Schedules.    The exhibits and schedules attached hereto are incorporated by reference herein and shall have the same force and effect with respect to the provisions set forth therein as though fully set forth in this Agreement.

(n) Successors and Assigns.    This Agreement shall be binding upon, shall inure to the benefit of and shall be enforceable by Seller and Buyer, and their respective successors and assigns.

(o) No Third Party Benefit.    Seller and Buyer agree that except as provided in Section 12 with respect to Seller Indemnitees and Buyer Indemnitees, the provisions of this Agreement, including, without limitation, Section 2, are for the sole benefit of Seller and Buyer and their respective successors and assigns, and are not for the benefit, directly or indirectly, of any other Person.

(p) Assignment.    Neither party shall assign or delegate this Agreement, or any of its rights or obligations hereunder, without the prior written consent of the other party.

15. Post-Closing Obligations.

The parties have determined that ESN * is not serviceable at this time and may not be used for the post-closing ferry flight planned by Buyer. Accordingly, Buyer and Seller have agreed to certain post-closing obligations, which are set forth as Schedule 4 to this Agreement. The parties hereby agree that any breach of the obligations set forth in Schedule 4 shall in no way affect the transfer of ownership of, or the title with respect to, the Aircraft and Engines. Rather, any remedy for a breach of the obligations set forth in Schedule 4 shall be limited to appropriate equitable and injunctive remedies, as well as monetary damages arising from the act or omission which constitutes the breach of a party’s obligation(s) under Schedule 4.

Purchase Agreement

Page 14

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

IN WITNESS WHEREOF, the undersigned have caused this PURCHASE AGREEMENT to be duly executed as of the day and year first written above.

*	Seller
	By:
	Name:
	Title:

CONTRAIL AVIATION SUPPORT, LLC, as Buyer
By:	/s/ Joseph Kuhn
Name:	Joseph Kuhn
Title:	President & CEO

Purchase Agreement

Page 15

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

SCHEDULE 1

DEFINITIONS

(a) Unless the context otherwise indicates, any reference in this Agreement to:

(i) a “part” means any engine, module, component, instrument, furnishing, control, appliance, accessory, reverser, nacelle, equipment or other item or equipment of any kind whether similar to any of the foregoing or not;

(ii) a “regulation” includes any present or future directive, regulation, request or requirement (in each case whether or not having the force of law) but, if not having the force of law, the compliance with which is in accordance with the general practice of the persons to whom it is addressed;

(iii) any “agreement”, “license” or other document includes any agreement, license or other instrument as varied, novated, amended or replaced from time to time (but without prejudice to any restrictions on such variation, novation, amendment or replacement);

(iv) the expressions “hereof, “herein” and similar expressions shall be construed as references to this Agreement as a whole and shall not be limited to the particular clause in which the relevant expressions appear and the expressions “thereof,” “therein” and similar expressions shall be construed in like fashion;

(v) references to any statute or other legislative provision shall be read to include any statutory or legislative modification or re-enactment thereof or any substitution therefor;

(vi) references to a party shall be read to include its successors and permitted assigns;

(vii) a Clause or Schedule shall be construed as a reference to a clause hereof or a schedule hereto;

(viii) a word importing the singular number shall be construed so as to include the plural and vice versa;

(ix) the expression “in writing” includes by facsimile or e-mail; and

(x) the index, clause and sub-clause headings in this Agreement (including their use in cross references) are for ease of reference only and shall not affect the interpretation of this Agreement.

(b) In this Agreement, the following terms have the following meanings:

“Acknowledgment of Delivery” means the Acknowledgment of Delivery substantially in the form attached hereto as Exhibit A.

Schedule 1

Page 1

“Affiliate” means, as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person or which owns, directly or indirectly, more than fifty percent of the outstanding equity interests of such Person. A Person shall be deemed to control another Person if the controlling Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the other Person, whether through the ownership of voting securities, by contract, or otherwise.

“Aircraft” means the Airframe, equipped with the Engines and other items of equipment installed in or attached thereto, and all Aircraft Documents related thereto.

“Aircraft Documents” means full back-to-birth traceability of life limited parts which shall include commercial trace as required to show the part change of ownership from new to current and a non-incident / accident / military / government letter and the manuals and records described in Schedule 3 attached hereto including all inspection, modification and overhaul records required to be maintained under applicable rules and regulations, all records of any third party which has made any modifications to or refurbishments of the Aircraft, and any other technical documents that pertain to the Aircraft including, without limitation, the dirty finger prints for all the shop visits from last performance restoration.

“Airframe” means that certain Boeing 737-800 airframe more specifically described on Schedule 2.

“Anticipated Closing Date” means the date for anticipated Closing for the Aircraft as designated on Schedule 2.

“Bill of Sale” means the Warranty Bill of Sale for the Aircraft.

“Business Day” means any day, other than a Saturday or Sunday, on which banks in New York City and *Taiwan, Republic of China are open for business.

“Certificate of Technical Acceptance” means the Certificate of Technical Acceptance in the form attached hereto as Exhibit B.

“Closing” means the closing of the sale and purchase of the Aircraft pursuant to this Agreement on the Closing Date.

“Closing Date” means the date of the Closing.

“Confidential Information” means any and all information, whether written, in electronic form, or oral concerning or relating in any way to the Aircraft, which is provided by a party hereto or such party’s Affiliates or representatives to the other party hereto or such party’s Affiliates or representatives, and includes, without limitation, all agreements, analyses, compilations, forecasts, studies, capabilities, specifications, program plans, marketing plans, e-commerce strategies, inspection reports, certificates of insurance or other documents which contain or otherwise reflect such information, or any portion thereof or notes or other documents which contain or reflect such information, whether or not marked or specifically identified as “confidential” or “proprietary.”

Schedule 1

Page 2

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

“Delivery Location” * * * *, or such other location as mutually agreed to by the parties.

“Deposit” has the meaning set forth in Section 3 hereof.

“Engines” means those CFM56-7B26 aircraft engines including all parts, components, appliances, accessories, instruments, furnishings, alterations thereto whether or not attached to the Airframe on the Closing Date as more specifically described on Schedule 2.

“Event of Loss” means any of the following events with respect to the Aircraft, including, but not limited to, the Aircraft, the Airframe or any Engine or engine installed on the Airframe: (a) loss of such property or its use due to theft, hijacking or disappearance for a period in excess of sixty (60) consecutive days, or in any event extending beyond the Anticipated Closing Date, or destruction, damage beyond economic repair or rendition of such properly permanently unfit for normal use for any reason whatsoever, (b) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss or on the basis of a compromised or constructive total loss, (c) the condemnation, confiscation, appropriation or seizure of, or requisition of title to, such property by a governmental entity or purported governmental entity, (d) the condemnation, confiscation, appropriation or seizure of the use of such property by or on behalf of the authority of any governmental entity or purported governmental entity, that in any such case shall have resulted in the loss of possession thereof for a period in excess of sixty (60) consecutive days or in any event extending beyond the Anticipated Closing Date or (e) any divestiture of title of such property except as otherwise permitted by the other party.

“Final Closing Date” means the date which is 21 days after the Anticipated Closing Date the Aircraft as designated on Schedule 2.

“Government Entity” means any (i) nation, state, county, city, town, village, district, or other jurisdiction of any nature; (ii) federal, state, local, municipal, foreign, or other government; (iii) governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official, or entity and any court or other tribunal); (iv) multinational organization or body; or (v) body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, regulatory, or taxing authority or power of any nature.

“Inspection” has the meaning set forth in Section 4 hereof.

“International Registry” means the International Registry of Mobile Assets established pursuant to the Convention on International Interests in Mobile Equipment and its Protocol on Matters Specific to Aircraft Equipment, concluded in Cape Town on November 16, 2001.

“Lien” means any pledge, lien, charge, encumbrance, exercise of rights, security interest or claim of any kind or nature.

“OFAC” has the meaning set forth in Section 13 hereof.

Schedule 1

Page 3

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

“Person” means an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Government Entity or other entity of whatever nature.

“Purchase Price” has the meaning set forth in Section 3 hereof.

“Buyer Agreements” has the meaning ascribed in Section 7(a) hereof.

“Buyer Indemnitee” means Buyer and any Buyer’s Affiliates, members, managers, officers, directors, employees, successors and assigns.

“Seller Agreements” has the meaning ascribed to such term in Section 5(a) hereof.

“Seller Indemnitee” means each of the Seller, * * * and any Affiliates of either, and the members, managers, officers, directors, employees, successors and assigns of any of such entities.

“State of Registration” means * * (previous registration) and USA (after sale).

“Taxes” means and includes all present and future income, gains, sales, stamp, documentary, use, value-added, goods and services and other taxes, duties, imposts, levies, deductions, charges and withholdings imposed by any Government Entity and also includes all fines, penalties and interest thereon, and the terms “Tax” and “Taxation” shall be construed accordingly.

“Transfer Documents” means this Agreement, the Bill of Sale, the Acknowledgments of Delivery, the Certificates of Technical Acceptance and any other agreements, documents, certificates and instruments executed and delivered in connection herewith.

“Warranty Bill of Sale” means the warranty bill of sale for the Aircraft, in the form of Exhibit C hereto for the Aircraft.

Schedule 1

Page 4

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

SCHEDULE 2

AIRCRAFT DESCRIPTION; PURCHASE PRICE

MSN	*Chinese Registration Mark	Engine Make and Model	ESNs	Purchase Price	Deposit	Anticipated Closing Date	Final Closing Date
*	**	CFM56-7B26	*	*	*	Sept. 29, 2017	Oct. 16, 2017
			*

Schedule 2

Page 1

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

SCHEDULE 3

AIRCRAFT DOCUMENTS

AIRCRAFT RECORDS

All aircraft technical documents and records relating to the Aircraft in Seller’s possession as

inspected and accepted by Buyer, including non-incident statements from previous operators and

Seller, and including but not limited to the following:

1. Copies of original Certificates delivered by the Manufacturer, such as:

2. Copies of original Documents delivered by the Manufacturer, such as:

3. Letters signed and stamped by Quality Assurance:

a. Current aircraft hours and cycles

b. Current engines hours and cycles, including LLP Disk Sheets

c. Accident and Incident report

d. Summary of Maintenance Program

e. AD compliance

4. Aircraft log books

5. Last weighing report

6. Cabin Configuration drawing (LOPA)

ENGINES RECORDS

1. Life-limited Parts status and traceability

2. AD compliance report

3. Engine Modification / service bulletin / inspection report and applicable forms

4. Last heavy maintenance records for each module

5. Engine log books

6. Engine removal history

7. Last 3 months’ trend monitoring reports

APU RECORDS

1. APU status (FH, FC, limits)

2. Life-limited Part status and traceability

3. AD compliance report

4. Modification status

5. Last heavy maintenance documents

6. APU log books

7. Last test cell report

COMPONENT RECORDS

1. Aircraft component inventory

2. Hard time component inventory

4. Landing Gear status with last Overhaul and life-limited Part status

5. AD compliance report

6. Modification status

SCHEDULE 4

POST-CLOSING OBLIGATIONS

relating to that Boeing 737-800 Aircraft,

manufacturer’s serial number *(the “Aircraft”)

The parties agree to the following post-closing obligations in connection with the sale and purchase of the above-referenced Aircraft.

1. Seller shall procure a complete, serviceable and airworthy engine, of the same model and type of ESN * (the “Temporary Engine”), which is Suitable for the post-closing ferry flight planned by Buyer from * * * * to Pinal Airpark, Marana Arizona (the “Ferry Flight”). On or before the Closing Date, Seller shall install the Temporary Engine on the Aircraft in place of ESN *. Seller shall contemporaneously remove ESN * from the Aircraft and safely store such Engine until the time Seller delivers the Engine to Buyer at Pinal Airpark, Marana, Arizona, U.S.A. within the timeframe specified below. Buyer shall have the right to conduct a walk-around inspection of the Engine (and/or receive photographs of the Engine) prior to removal from the Aircraft and prior to storage of such Engine by Seller as referenced above. Seller’s obligations above shall be undertaken at Seller’s sole expense.

2. Buyer shall perform the Ferry Flight of the Aircraft at Buyer’s sole expense with the Temporary Engine installed on the Aircraft in lieu of ESN *. Buyer shall also have the right to conduct a post-Ferry Flight engine run-up and associated operations.

3. Following arrival of the Aircraft in Marana, Arizona, U.S.A., Buyer shall procure and provide for the removal and perform 30 day preservation and protect all open tube/port by stand plug and cover engine for shipping of the Temporary Engine from the Aircraft and the delivery of the Temporary Engine to Seller’s facility at LAX Airport, Los Angeles California, U.S.A. at Buyer’s sole expense and provide Non-Incident/Accident Statement include flight hour/cycles accumulation at ferry flight. Seller shall have the right to conduct a walk-around inspection of the Engine (and/or receive photographs of the Engine) prior to removal from the Aircraft and prior to storage of such Engine by buyer as referenced above. At Seller’s request. Buyer will procure and provide for removal of the Temporary Engine in serviceable condition (with FAA 8130 serviceable tag), additional preservation of the Temporary Engine, and/or similar activities; provided, however, that Seller shall reimburse Buyer for all costs associated with the same within ten (10) business days of Seller’s receipt of associated invoices. Buyer shall give Seller three (3) days written notice of the time for arrival of the Temporary Engine at the Seller’s facility for the purpose of coordinating the delivery by Seller of ESN * to Buyer. Buyer shall return the Temporary Engine to Seller in “AS-IS” condition, with the understanding that Buyer shall only be responsible for damage to the Temporary Engine arising from Buyer or its contractors’ intentional wrongdoing and gross negligence in connection with the delivery process from Marana, Arizona, U.S.A. to LAX Airport. Buyer shall at its own cost and expense procure and maintain, or shall cause Buyer’s contractors or assignee to procure and maintain, insure liability insurance with a coverage limit of not less than US$3,500,000 in

Schedule 4

Page 1

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

respect of the Temporary Engines, naming the Seller as an additional insured party, for the period beginning with the removal of the Engine from the Aircraft and ending when Seller takes possession of the Temporary Engine in LAX Airport. To avoid disputes regarding the Temporary Engine return condition, Buyer shall provide photos of the exterior of the Temporary Engine to Seller taken at the time of: 1) the removal of the Engine from the Aircraft; 2) the preservation of the Engine; and, 3) the initiation of the shipment of the Engine from Marana, Arizona, U.S.A. to LAX Airport. Buyer shall provide such photos within two (2) business day of the time they are taken.

4. Seller shall, at Seller’s sole expense, procure and provide for the shipping of the Temporary Engine from LAX Airport to *L *, the placement of the ESN * on the engine stand used for return transport of the Temporary Engine, and the transport of ESN * to Pinal Airpark, Marana, Arizona U.S.A., all within twenty (20) days of the arrival of the Temporary Engine at Seller’s facility at LAX Airport Los Angeles California, U.S.A. Seller shall deliver ESN * to Buyer in Marana, Arizona in the same condition as on the Closing Date.

Schedule 4

Page 2

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

ACKNOWLEDGMENT OF DELIVERY

October 18, 2017

By this Acknowledgment of Delivery, * * * (the “Seller”), and Contrail Aviation Support, LLC (the “Buyer”), acknowledge that pursuant to that certain Purchase Agreement dated as of September 29, 2017, among Seller and Buyer, (the “Agreement”), Seller does hereby deliver to Buyer and Buyer does hereby accept the following in all respects under the Agreement:

One Boeing model 737-800 aircraft bearing manufacturers serial number * and equipped with two CFM56-7B26 aircraft engines bearing manufacturer’s serial numbers * and * including all parts, components, appliances, accessories, instruments, furnishings, alterations and other items of equipment installed in or attached thereto, and all Aircraft Documents related thereto (collectively the “Aircraft”).

Buyer has accepted delivery of the Aircraft at 8:00 AM hour Central at * * * Accordingly, as of the date hereof, Seller has delivered the Aircraft to Buyer and that the Closing Date as defined and set forth in the Agreement has occurred. Buyer hereby declares that the Aircraft is acceptable and does conform to the Agreement in all respects.

This Acknowledgment of Delivery may be signed in one or more counterparts with the same effect as if the signatures to each counterpart were upon a single instrument. All counterparts shall, taken together, be considered an original of this Acknowledgment of Delivery. All capitalized terms used herein not otherwise defined shall have the same meaning as that given in the Agreement.

IN WITNESS WHEREOF, the undersigned have duly executed this Acknowledgment of Delivery as of the date first written above.

*	(Seller)
	By:
	Name:
	Title:

By:	/s/ Joseph Kuhn
Name:	Joseph Kuhn
Title:	President and CEO

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

CERTIFICATE OF TECHNICAL ACCEPTANCE

relating to that Boeing 737-800 Aircraft,

manufacturer’s serial number * (the “Aircraft”)

September 22, 2017

This Certificate of Technical Acceptance (this “Certificate”) is delivered on the date set out below by Contrail Aviation Support, LLC (“Buyer”), to *d (“Seller”), pursuant to that certain Purchase Agreement dated September 22, 2017 between Buyer and Seller (the “Agreement”). The capitalized terms used in this Certificate shall have the meaning given to such terms in the Agreement.

(a) Buyer has inspected the Aircraft in accordance with the provisions of Section 4 of the Agreement at * * * and the Aircraft and found the Aircraft to be satisfactory; and

(b) Buyer has received and inspected all of the Aircraft Documents and found them to be complete and satisfactory.

IN WITNESS WHEREOF, Buyer has, by its duly authorized representative, executed this Certificate on the date first written above, accepted the Aircraft and confirmed its compliance with the Agreement in all respects.

Contrail Aviation Support, LLC (Buyer)
By:	/s/ Joseph G. Kuhn
Name:	Joseph G. Kuhn
Title:	CEO

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

WARRANTY BILL OF SALE

relating to that Boeing 737-800 Aircraft,

manufacturer’s serial number *

October 18, 2017

KNOW ALL MEN BY THESE PRESENTS:

THAT for and in consideration of good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, * * * (“Seller”) does, on the date hereof, grant, convey, transfer, bargain, sell, deliver and set over to Contrail Aviation Support, LLC (“Buyer”), all of Seller’s right, title and interest in and to the one Boeing 737-800 aircraft bearing manufacturer’s serial number *, equipped with two CFM56-7B26 aircraft engines bearing manufacturer’s serial numbers * and * including all parts, components, appliances, accessories, instruments, furnishings, alterations and other items of equipment installed in or attached thereto, and all Aircraft Documents related thereto (collectively the “Aircraft”). Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to them in that certain Purchase Agreement dated as of September 29, 2017, among Seller and Buyer (the “Agreement”).

TO HAVE AND TO HOLD said Aircraft unto Buyer, its successors and assigns, for its and their own use forever.

THAT Seller hereby warrants to Buyer, its successors and assigns, that it is the holder of title to the Aircraft and has the right to sell the same as aforesaid and that this Warranty Bill of Sale conveys to Buyer on the date hereof, good title to the Aircraft, free and clear of all Liens, encumbrances and rights of others, and that Seller will warrant and defend such title forever against all claims and demands whatsoever.

This Bill of Sale shall be governed by the laws of New York, U.S.A., without giving effect to its conflicts-of-laws principles.

IN WITNESS WHEREOF, Seller has caused this Warranty Bill of Sale to be executed by its duly authorized officers as of the date first written above.

*	(foreign Seller)
	By:
	Name:
	Title:

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

*

POWER OF ATTORNEY

I, *   * Chairman of *   * (the “Company”), a corporation duly incorporated and existing under the laws of * * * do hereby designate, authorise and empower any and each one of the following named individuals, acting individually or collectively, as the Company’s true and lawful attorney-in-fact (each an “Attorney”) to:

(A) agree, make, sign and execute any and all of the documents (the “Documents”) in connection with the sale of one 737-800 aircraft with MSN *, bearing registration mark * (the Aircraft”) to Contrail Aviation Support, LLC, which is a legal entity organized under the laws of the State of North Carolina, U.S.A.;

(B) to make, give, sign, execute and do all such deeds arrangements, instruments, applications, oaths, affidavits, declarations, notices, confirmations, certificates, approvals, acknowledgements, acceptances, deliveries and all other acts, matters and things whatsoever, in connection with the preparation, signature, execution and delivery of the Documents or any other documents required to be executed by the Company in connection with them or the performance of any acts, matters and things contemplated; and

(C) to acknowledge this Power of Attorney as the act and deed of the Company and generally to do all other acts which may be necessary and desirable for carrying the purpose of this Power of Attorney into effect.

I hereby certify that the following are the true signatures of:

	Name	Title	Signature
*

IN WITNESS WHEREOF, I hereby sign my name as * on behalf of the Company on this     11     day of Oct, 2017 *.

*
	Name:
	Title:

*

^* 

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

Arizona Resale Certificate

• Use this form to purchase tangible personal property for resale in the ordinary course of business.

• Wholesalers must have a Transaction Privilege Tax (“TPT”) or other state’s Sales Tax License to purchase tangible personal property for resale.

This Certificate is prescribed by the Department of Revenue pursuant to A.R.S. § 42-5022. The purpose of the Certificate is to document the purchase of tangible personal property for resale in the purchaser’s regular course of business. It is to be filed out completely by the purchaser and furnished to the vendor. The vendor shall retain this Certificate for single transactions or for specified periods as Indicated below. This Certificate shall be obtained from the purchaser at the time of the sale. Incomplete Certificates are not considered to be accepted in good faith.

A. Business Name and Address: Name *   Address *   City *   Vendor’s Name Contrail Aviation Support, LLC   *TPT/Sales Tax License No. * *                           State                  ZIP Code *                  *   B. Check Applicable Box:   ☒ Single Transaction Certificate   ☐ Period From                      Through                            You must choose specific dates for which certificate will be valid not to exceed a 12 month period.)

C. Precise Nature of Purchaser’s Business:

Aircraft Parts Sales

D. Description of Property Being Purchased:

B737-800 MSN * Airframe

E.

The following sales of tangible personal property do not require the purchaser to provide a TPT or other Sales Tax License (check appropriate box):

☐ Sales to the U.S. government or its departments or agencies for resale (purchased directly by the Federal Government).

☐ Sales to an unlicensed Arizona School District for resale (purchased directly by the school district).

☐ Sales to a nonprofit charitable I.R.C. § 501(c)(3) organization for resale. (Attach I.R.S. determination letter to this form.)

☐ Sales to a nonprofit charitable I.R.C. § 501(c)(3), (c)(4), or (c)(6) organization associated with a major league baseball team or a national professional golfing association for resale. (Attach I.R.S. determination letter to this form.)

☐ Sales to a nonprofit charitable I.R.C. § 501(c)(3), (c)(4), (c)(6), (c)(7), or (c)(8) organization that sponsors a rodeo featuring farm and ranch animals for resale. (Attach I.R.S. determination letter to this form).

☐ Sales to a nonprofit charitable I.R.C. § 501(c)(6) organization that produces, organizes, or promotes a cultural or civic related festival or event - for resale. (Attach I.R.S. determination letter to this form).

F. Certification

A seller that has reason to believe that this Certificate is not accurate, complete, or applicable to the transaction may not accept the Certificate in good faith and the seller will not be relieved of the burden of proving entitlement to the exemption from tax. A seller that accepts a Certificate in good faith will be relieved of the burden of proof and the purchaser may be required to establish the accuracy of the claimed exemption from tax as provided in A.R.S. § 42-5009. Subsequent use or consumption of the tangible personal property by the purchaser other than sale in the ordinary course of business will subject the purchaser to the Arizona use tax. Willful misuse of this Certificate will subject the Purchaser to criminal penalties of a felony pursuant to A.R.S. § 42-1127(B).

I, (print full name) Nick Swenson, hereby certify that these purchases are for resale in the ordinary course of business and that the information on this Certificate is true, accurate and complete. Further, if purchasing as an agent or officer, I certify that I am authorized to execute this Certificate on behalf of the purchaser named above

/s/ Nick Swenson	President	10/27/2017
SIGNATURE OF PURCHASER	TITLE	DATE

ADDR 10316 (10/15)

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

EX-10.4

Exhibit 10.4

Lease Agreement

This Lease Agreement is made as of September 29, 2017 between Contrail Aviation Support, LLC, domiciled at 435 Investment Court Verona (Lessor”) and * (“Lessee”). It refers to and incorporates the terms of Document No 5016-01 (Master Short-Term Engine Lease Agreement, 2012) (“Master Agreement”).

This Lease Agreement modifies the Master Agreement, and, as so modified, constitutes a single contract applicable to the leasing of the Engine (defined below), as contemplated by 2.1.2 of the Master Agreement.

Part I – Referenced Provisions

For purposes of the Master Agreement (“N/A” denotes non-applicability):

1. Engine (clause 2.3.1(i); annex 1, definition) CFM56-7 spare engine bearing Engine Serial Number * Serviceability Tag: Latest EASA Form 1 and FAA Form 8130-3 release certificate or alternatively one EASA Form 1 with FAA dual release or FAA form 8130-3 with EASA dual release.	2A+B. Engine Flight Hours (2A) and Engine Flight Cycles (2B) /Since Last Overhaul (clause 2.3.1(ii); Annex 1, Definitions) Engine Flight Hours since new: as per technical documentation Engine Flight Cycles since new: as per technical documentation
3A+B. Additional Conditions Precedent to Lessee’s Obligations (clause 2.3.1(iii)) (3A) and to Lessor’s Obligations (clause 2.3.3) (3B) 3A Lessee’s Obligations Engine to be in the agreed condition 3B Lessor’s Obligations Lessor’s confirmation of receipt of the Lessee’s first payment of Rent on or prior to the Commencement Date.	4. Conditions Precedent Time Period (clause 2.3.2) From the date of this Lease Agreement to the Commencement Date.
5. Commencement Date (clause 2.4.1; annex 1, definition) Upon Delivery of the Engine to Lessee FCA (Free Carrier on Board) Incoterms 2010 at Air Salvage International, Hangars H1 and H2, Cotswold Airport, Cirecestershire, Gloucestershire GL7 6BA, United Kingdom (“Delivery Location”). This is estimated to be on or about 29th of September 2017 as shall be evidenced by the date of the Acceptance Certificate.	6. Acceptance Certificate (clause 2.4.2; annex 1, definition) An Acceptance Certificate is required (form attached as Appendix A).

1

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

7. Deposit and/or Letter of Credit (clause 3.1) *	8. Rent (clause 3.2; annex 1, definition) US$ * per day, paid in advance for the following month.
9. Rent Payment Date (clause 3.2; annex 1, definition) On the Commencement Date and on the equivalent date of each subsequent calendar month during the Term upon receipt of a corresponding invoice. Invoices shall be sent by Lessor per email to (1) the respective lease manager and to (2) invoice@ *	10. Default Rate (clause 3.5; annex 1, definition) *
11. Agreed Currency (clause 3.7.2; annex 1, definition) United States Dollars ($).	12. Payment Account (clause 3.7.2; annex 1, definition) *
13. Engine Documentation (clause 4.2.1(i)) - Latest EASA Form 1 and FAA Form 8130-3    release certificate or alternatively one    EASA Form 1 with FAA dual release or    FAA form 8130-3 with EASA dual release - serviceable removal tag (as applicable) - LLP status - latest FAA & EASA AD status - latest SB status - last operator NIS - result of last Maximum Power Assurance run (MPA) - last test cell run report - latest BSI report - BSI DVD - last 3 months Cruise & Take-off ECM data - latest zero letter (MPD) check – MPD task compliance status - accessory and QEC status - missing parts list - shipping stand details - ship loose & bypack parts (as applicable) - preservation data (tag, work cards) - engine removal/installation history - carry-forward sheet - oil consumption report - used oil type	14. Engine Reports—Other Information (clause 4.2.4(ii)) By the 10th day of each month, Lessee shall provide a monthly utilization report to Lessor, substantially in the form of Appendix B, for the preceding month that includes: a. the total number of flight hours and flight cycles the Engine was operated the preceding month; and b. engine configuration during preceding month; and c. maintenance performed during preceding month; and d. the average cruise and take-off EGT margins for the preceding month; and e. if Lessor does not receive the flight hours and cycles by the 10th day of each month, Lessor may invoice Lessee for an estimated number of flight hours and flight cycles for the preceding month and reconcile the differences within thirty (30) days after receipt of the applicable monthly utilization report.

- last SV report (as applicable)

- engine pictures

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

15. Engine Installation/Removal Notification Requirements (clause 4.2.6) Within 10 days of each installation or removal of the Engine, Lessee shall report the following in writing: a. operated thrust rating; and b. aircraft serial number and engine position and shall also provide Lessor with off-on LLP disk sheets, all printed on the operator’s letterhead and signed by operator’s quality control department.	16. Certain Lessee Obligations Concerning Indemnitees (clause 4.4.6) If Lessee is not the owner of the aircraft on which the Engine shall be attached to, Lessee shall, at its expense, at the request of Lessor, provide a document signed by the owner of and/or any secured party with respect to the aircraft recognizing the rights of the Engine owner, in form and substance acceptable to Lessor.
17. Consequences of Partial Loss (clause 7.2.1(ii)) The Engine will continue to be leased as set out in clause 7.2.1(ii)(a).	18. Stipulated Amount (clause 7.3.1; annex 1, definition) USD *
19. Reinsurance (clause 8.1) In the event where the Permitted Sub-Lessee is not insured by an insurance company recognized by the London/New York markets, Permitted Sub-Lessee shall provide reinsurances, issued by a re-insurance company recognized by the London/New York markets.	20. Redelivery Location (clause 11.1(i); annex 1, definition) DDP (Delivered Duty Paid) Incoterms 2010 (provided Lessee shall be responsible for unloading the Engine) at * or any other delivery location as mutually agreed by the parties.
21. Redelivery—additional requirement (clause 11.1(ii)) *	22. Final Inspection – other tests (clause 11.3.1(ii)) All inspections, tasks and reports specified in Appendix C.
*

3

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

*
23. Redelivery – Additional Documentation (clause 11.4(viii)) *	24. Transportation – supplemental requirements (clause 11.5) Manufacturer’s published engine transportation manual, specifications/recommendations, including proper equipment tie-down and use of air-ride or air cushion suspension vehicles. On any given shipment, such truck will be dedicated solely to the Engine belonging to Lessor; except that additional items may be transported on such truck, provided that (a) the Engine can and will be off-loaded by Lessor at the Redelivery Location without disturbing any of the additional items and (b) Lessee or its shipper will not handle or reposition any of the additional items on such truck either while the Engine is in transit or when it arrives at the Redelivery Location. Lessor will invoice and Lessee agrees to pay for the cost of inspections and repairs to the Engine and/or transportation stand resulting from the improper movement or transportation of the Engine and/or transportation stand.
25. Additional Amounts – Term Extension (clause 11.6.2) If (1) Lessee retains the Engine beyond the Scheduled Final Date set forth in Section 35; (2) the Engine has not been returned to Lessor in the conditions required by Sections 21, 22, and 23; and (3) does not execute a written lease extension with Lessor, Lessor may at its sole discretion, (a) remedy such defects and deficiencies and recover any costs so incurred from Lessee; and/or (b). continue the Lease and Lessee will pay Lessor * times Rent for each day after the Scheduled Final Date until Lessee either returns the Engine to the Redelivery Location and satisfies all return conditions or executes a written lease extension. All obligations of Lessee under the Lease Agreement shall remain in full force and effect until the return of the Engine in the condition required by the Lease Agreement. This will not be considered a renewal of the Lease Agreement or extension of the Lease Term or waiver of any right of Lessor under the Lease Agreement.	26. Differing Period (clause 14.1(i)) N/A.

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

27. Notices (clause 17.5)	28. Contracting by Fax/Electronic Writing (clause 17.6)
Notices shall be sent by post or fax to the respective parties at the address or fax numbers set out below or as otherwise advised by one party to the other in compliance with clause 16.5: Lessor Address:  Contrail Aviation Support, LLC 435 Investment Court Verona WI 53593 USA Attn:       President Fax:        +1 608 848 8101 Lessee Address:  * Attn:           Fax:	Notices by fax are acceptable as per box 27 or electronic media is permitted.
29. Governing Law (clause 17.7) Laws of the State of New York.	30. Non-exclusive Jurisdiction (clause 17.8.1(i)) Courts of the State of New York and the United States District Court located in the Borough of Manhattan, New York City, New York, United States of America.
31. Additional Indemnitees (annex 1, definition) (for use, inter alia, in definition of “Indemnitees”) Lessor; any person from time to time notified by Lessor to Lessee as providing financing to Lessor or the owner of the Engine for the acquisition, ownership or leasing thereof; together with each of their respective successors and assigns, shareholders, subsidiaries, affiliates, partners, contractors, directors, officers, servants, agents and employees.	32. Business Day (annex 1, definition) Evansville, Indiana, United States of America *Amsterdam, The Netherlands

5

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

33. Use Fee Amount (Cycle) (annex 1, definition) (for use in definition of “Use Fees (Cycle)” US$ * This Use Fee Amount (Cycle) shall be adjusted annually, effective January 1 of each year, based on the OEM published annual escalation rate or escalation percentage for a set of CFM56-7B life limited parts.	34. Use Fee Amount (Flight Hour) (annex 1 definition) (for use in definition of “Use Fees (Flight Hours)”) as per Appendix D Lessee shall not lease the Engine to any operator with its principal place of business in any of the ‘Harsh Environment Countries’ listed in Appendix E.
35. Scheduled Final Date (annex 1, definition (for use in definition of “Final Date”) 12 months – date by which Lessee shall have completed all redelivery conditions, including but not limited to the items specified in Sections 20-23, and returned Engine to the Redelivery Location. Lessee may extend the Term by a period of 12 months by giving written notice to Lessor at least 4 weeks prior to the Scheduled Expiry Date.	36. Principal Taxation Jurisdictions (annex 1, definition) (for use in definition of “Lessor Tax”) USA
37. Calculation Discount Rate (annex 1, definition (for use in definition of Termination Damage Amount)) * *	38. Threshold Amount (annex 1, definition) An Engine repair in the amount of US$ * , either estimated or actual, above which Lessee requires Lessor’s permission before proceeding with the repair.
39. Required Liability Amount (annex 4, clause 4) *	40. Deductibles (annex 4, clause 8) Hull All Insurance—US$ * Spares Insurance—US$    *

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

Part II – Modifications Applicable Where Lessee Is Not an Airline or Other Operator of Engines

Pursuant to 2.1.4 of the Master Agreement, the Master Agreement is modified as follows (“N/A” denotes non-applicability):

The following wording shall be added to Annex 1 – Definitions and Rules of Interpretation:

“Permitted Sub-Lessee” shall mean a licensed airline operator of good standing acceptable to Lessor, acting reasonably;”

Lessee will not operate the Engine, but will be entitled to sub-lease the Engine to sub-lessees;

PROVIDED THAT:

(a) no Event of Default has occurred and is continuing

(b) any such sub-lease agreement:

(i) shall be subject and subordinate in all respects to this Agreement

(ii) shall not be capable of extending beyond the end of the Lease Period;

(c) the relevant Permitted Sub-Lessee covenants directly to the Lessor not to do anything which would prejudice the Lessor’s interests, rights and benefits in the Engine and/or the Insurances and/or under this Agreement or any other lessee document and/or the interests, rights and benefits of the relevant parties in the Engine and/or the Insurances and/or this Agreement under the relevant documents, and agrees directly with the Lessor that such Permitted Sub-Lessee’s rights under such sub-lease shall be subject and subordinate in all respects to the rights of the Lessor under this Agreement; and

(d) the terms of the relevant sub-lease, shall provide that the leasing, chartering or hiring of the Engine to such Permitted Sub-Lessee and that the right of the Permitted Sub-Lessee to the use, possession and enjoyment of the Engine shall terminate simultaneously with the giving by the Lessor of any notice pursuant to this Agreement; and

(e) notwithstanding the foregoing provisions of this clause, no relevant sub-lease permitted under this clause shall involve any transfer of title to or interest in the Engine or any part thereof, nor shall it in any way discharge or diminish any of the Lessee’s obligations to the Lessor under this Agreement or under any other document.

Part III – Other Modification to Master Agreement

As regards this Lease Agreement, the Master Agreement is further modified as follows (“N/A” denotes non-applicability):

1. For purposes of this Agreement, all references to the JAA also include the European Aviation Safety Agency as successor to the JAA (“EASA”). If Part I, point 1 of this Lease Agreement indicates the Engine will be supplied to Lessee with both FAA and JAA serviceability tags, then

(a) Section 4.7.1 of the Master Agreement is modified by, in subparagraph (ii), deleting the words “FAA or JAA” and replacing them with the words “FAA and JAA;”

(b) Section 11.2.1 of the Master Agreement is restated as follows: “The redelivered Engine shall have valid serviceability tags issued by the FAA and JAA, respectively.

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2. The following new definitions are inserted in the correct alphabetical position in annex 1:

“EASA means the European Aviation Safety Agency or any other authority to which its responsibilities have been transferred or reallocated and includes, where the context so requires, a reference to the European Joint Airworthiness Authority.”

“LIBOR means the British Bankers Interest Settlement Rate for the Agreed Currency and period displayed on the relevant Reuters screen or, if that page is unavailable, another page displaying the appropriate rate or if no page is available the arithmetic mean (rounded upward to 4 decimal places) of the rates quoted by the British Banking Association to leading banks in the London interbank market as of 11.00 am on the relevant date for such period as Lessor determines.”

“Operator Exceedance” means any repairs required to the Engine that are attributable to FOD, misuse, mishandling, neglect, negligence or improper operation outside of the specification or procedures laid down in the Manufacturer’s maintenance manual, the AFM and any other operating manuals after Delivery and during the term of the Lease Agreement.

3. A new clause 2.4.3 is added as follows:

“Delivery by Lessee to Lessor of the Acceptance Certificate will be conclusive proof as between Lessor and Lessee that Lessee has examined and investigated the Engine Package, that the Engine Package is satisfactory to Lessee and that Lessee has irrevocably and unconditionally accepted the Engine Package for lease without any reservations whatsoever (except for any discrepancies which may be noted in the Acceptance Certificate). Notwithstanding the foregoing, Lessee may conduct a visual (including borescope) inspection of the Engine to determine whether the Engine is serviceable and in the condition described in the Lease Agreement. Such inspection must take place within four (4) days of receipt of the Engine and may take place either at the Delivery Location or any other location the Engine is being shipped to. If, following such inspection of the Engine, Lessee acting in good faith reasonably determines that the Engine is unserviceable and provides to Lessor a written report as to why Lessee has determined that the Engine is unserviceable and provided that (1) such unserviceability has not resulted from or occurred during the transportation of the Engine to the inspection location, if the inspection has taken place at any other location than the Delivery Location; and (2) Lessor has been given an opportunity to remedy the defect or fault which has rendered the Engine unserviceable having due regard to Lessee’s requirements for the Engine, Lessee will, in the event that the inspection took place at any other location than the Delivery Location, hold the Engine pending shipping instructions from Lessor, at which time Lessee will ship the Engine to Lessor’s designated location at Lessor’s sole expense. Upon receipt of the Engine by Lessor (in the same condition and with the same Parts as on the Delivery Date in respect of such Engine) the Lease Agreement will terminate, all funds previously received by Lessor from Lessee pursuant to this Lease Agreement will be returned to Lessee.”

4. Section 4.6.1 of the Master Agreement is modified by adding the following to the end of the first sentence:

“so as to keep the Engine Package in a serviceable state of repair and in a fully operational and airworthy condition, and otherwise in as good operating and physical condition as at the time of delivery to Lessee, normal wear and tear due to the accumulation of flight hours and flight cycles from ordinary operation excepted, and except that Lessee will not be responsible for replacing life limited parts which are due for replacement solely as the result of life expiration but Lessee shall be responsible for replacing or repair of any LRUs that become unserviceable.”

5. Section 4.6.2 of the Master Agreement is modified by:

(a) replacing subparagraph (iii) thereof with the following:

“(iii) the operation of the Engine beyond the limits outlined in the Applicable Engine Standards,”

and

(b) adding the following new subparagraph (v) at the end thereof:

“or (v) any cause whatsoever, so that the Engine Package is kept in a serviceable state of repair and in a fully operational and airworthy condition, and otherwise in as good operating and physical condition as at the time of delivery to Lessee, reasonable wear and tear from ordinary use excepted; provided, however, that notwithstanding the foregoing, each Engine Package must be redelivered to Lessor in serviceable condition at the end of its Term and in accordance with Section 11 of the Master Agreement, except that Lessee will not be responsible for replacing life limited parts which are due for replacement solely as the result of life expiration but Lessee will be responsible for replacing or repair of any LRUs that become unserviceable.”.

6. Section 8.1 of the Master Agreement is modified by adding the following to the end thereof:

“The parties agree that the insurances described in Annex 4 are as in effect on the date of each Lease Agreement without amendment.”

7. Section 11.4 of the Master Agreement is modified by deleting subparagraph (vii) and replacing it with the following:

“a certificate stating that, during the Term, the Engine was not (a) involved in an accident, incident, fire or a major failure, (b) exposed to stress or heat beyond limits, (c) immersed in salt water or exposed to corrosive agents outside normal operation or (d) operated by a Government Entity; and”

8. Section 17.16 of the Master Agreement is modified by deleting subparagraph (i)(a) and replacing it with the following:

“to an affiliate of Lessor or”

9. Section 17.7 of the Master Agreement shall be deleted entirely and the following shall be added in lieu thereof:

“17.7.1 This Agreement will be governed by and construed in accordance with the Laws of the State of New York, as specified in Part I, point 29 of the Lease Agreement, without application of conflict of laws rules which refer to other Laws.

17.7.2. Lessor may enforce any term of any Section of this Agreement that grants any rights to Lessor.

17.7.3. Lessee may enforce any term of any Section of this Agreement that grants any rights to Lessee.

17.7.4. Any Indemnitee may enforce the terms of Section 10.4 and Sections 10.1 to 10.3 inclusive in accordance with the provisions of this Agreement and the Rights of Third Parties Act.

17.7.5. The parties to this Agreement shall not require the consent of any third party to amend, vary or revoke any clause of this Agreement, including this Section 17.7.”

10. Annex 1 of the Master Agreement is modified by:

(a) deleting the definition of “Applicable Engine Standards” and replacing it with the following:

“Applicable Engine Standards means the original Engine manufacturer’s operating procedures and the original aircraft manufacturer’s operating procedures.”

9

(b) adding the following to the end of the definition of “Aviation Authority”:

“and the FAA, and if Part I, point 1 of this Lease Agreement indicates the Engine will be supplied to Lessee with (i) an FAA or JAA serviceability tag, then at least the FAA or JAA, as applicable and dual serviceability tags if possible and (ii) both FAA and JAA dual serviceability tags, then the FAA and JAA dual serviceability tags.”

(c) adding the following to the end of the definition of “Law”:

“and including the Export Administration Regulations and/or International Traffic-In-Arms Regulations of the United States of America.”

11. Annex 4 of the Master Agreement is modified by adding the following to the end of point 9;

“The Product Liability Insurance shall name each Indemnitee as additional assured, warranted, as to it, no operational interest.”

12. Clause 6 of Annex 4 is modified by inserting before the final sentence the following:

“If the Engine is installed on an aircraft, the agreed value of such aircraft shall automatically be increased by the agreed value of the Engine for the period it is installed.”

As used in this Lease Agreement, the term “this Agreement” refers to the Master Agreement as modified by this Lease Agreement.

Part IV – Appendices

Appendix A: Acceptance Certificate

Appendix B: Monthly Engine Utilization And Status Report

Appendix C: Redelivery Requirements

Appendix D: Use Fee Amount (Flight Hours)

Appendix E: Harsh Environment Countries

Appendix F: Non-Incident Statement

Appendix G hereto is the form of Certification and Representation Regarding Items Subject to Export Contrail Requirements. Lessee agrees that by its signature of this Lease Agreement below, that Lessee certifies that to the best of its knowledge, the information set forth on the attached Appendix G is accurate, current and complete as of the date of this signing and that the signatory to this Agreement is duly authorized by Lessee to provide this certification and representation.

IN WITNESS whereof, the Parties have executed this Lease Agreement on the respective dates specified below.

Contrail Aviation Support, LLC
BY:	/s/ Joseph G. Kuhn
NAME:	Joseph G. Kuhn
TITLE:	CEO
DATE:	9/30/17

*
BY:	*
NAME:	*
TITLE:	*
DATE:

BY:

NAME:

TITLE:

DATE:

*

11

*

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

Acceptance Certificate

Contrail Aviation Support, LLC

435 Investment Court Verona

Wl 53593

USA

Re: Acceptance of Engine Package

Dear Sir/Madam,

Reference is made to the Lease Agreement between you (“Lessor”) and us (“Lessee”) dated September 29, 2017 (“Engine Lease Agreement”) regarding the leasing by Lessee of CFM56-7 bearing manufacturer’s serial number * (“Engine”) Terms used herein without definition

have the meanings assigned in the Engine Lease Agreement.

Lessee hereby confirms to Lessor that:

(i) on October 03 at * at * Lessee accepted delivery of the Engine, as described in Part I, point 1 of the Engine Lease Agreement and the Engine Documentation as described in Part I, point 13 of the Engine Lease Agreement;

(ii) annex 1 hereto lists all Parts and annex 2 lists all Engine Documentation so received by Lessee; and

(iii) the Engine Documentation confirms the Engine Flight Hours and Engine Flight Cycle information and data summarized on annex 3 hereto.

*
	By:
	Date:

*

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

Appendix B – Monthly Engine Utilization And Status Report

MONTHLY LEASE ENGINE UTILIZATION AND STATUS REPORT

UTILIZATION DATA IS DUE NO LATER THAN THE 10^TH DAY OF EACH MONTH

To: Contrail Aviation Support, LLC	From:
Attention:	Name:
E-Mail:	E-Mail

MONTH and YEAR OF REPORTED UTILIZATION:                                    

1)	Engine Type:	2)	Engine Serial No.:
3)	Total Time Since New:		Total Cycles Since New:
4)	Hours Flown During the Preceding Month: (Rounded to nearest whole hour)	5)	Cycles Flown During the Preceding Month:
	Hours:	Total Cycles:
6)	Aircraft:	7)	Thrust Categories Operated Throughout Lease:
	A/C Model:
	Registration:		Rating:                                          Cycles:
	Position:		Rating:                                          Cycles:
			Rating:                          Cycles:
8)	Date Installed:                                      or	9)	Reason for Removal:
	Date Removed:
10)	The average Take-off EGT margin for the month:	11)	The number of hours or percentage of flight hours the Engine was operated in or over the continental United States.
	EGT Margin:		Hours:

13

Appendix C - Redelivery Requirements

1.    Date of Redelivery. Lessee will return the Engine installed on the same engine transportation stand (or as otherwise agreed) as delivered to Lessee at Delivery, to Lessor on the Final Date or on the date of other valid termination of the Lease Agreement in the condition required by the Lease Agreement. The costs for shipping of the Engine to any other location than the designated Redelivery Location will be borne by the Lessor.

2.    Redelivery Inspection. Lessee will perform or cause to be performed at its own cost on the Engine immediately prior to its return to Lessor:

a.    a power assurance test run (test 05) at the thrust rating that the Engine will make power (“MPA”) according to the applicable aircraft maintenance manual requirements, followed by

b.    a full end of lease (“EOL”) inspection as required by the end of lease inspection requirements detailed in Schedule 1 to Appendix C, including an acceptable full video borescope inspection, with written report, of all accessible sections of the Engine within maintenance manual limitations, for continued time/reduced inspections (except in the case of FOD, misuse, neglect, negligence or improper operation). Such borescope inspection shall be performed by Lessor’s representative with consideration or exception given for (i) the findings with respect to the borescope inspection of the Engine provided by Lessor at Delivery and (ii) normal wear and tear during the Lease Term due to the accumulation of flight hours and flight cycles from ordinary operation, and except that Lessee will not be responsible for replacing life limited parts which are due for replacement solely as the result of life expiration but Lessee will be responsible for replacing or repair of LRUs that become unserviceable.

The corresponding MPA and EOL inspection protocols shall be redelivered with the Engine. Lessee will provide Lessor with at least fourteen (14) Business Days advance written notice of such scheduled Engine inspection and test, so that Lessor may have the opportunity to witness same. Should Lessee not inform Lessor in advance of the impending MPA and EOL inspection with at least fourteen (14) days’ notice, and the Lessee elects to perform the scheduled MPA and EOL inspections without Lessor present, Lessor may at its sole discretion disregard the MPA and EOL inspection performed by Lessee and perform a test cell run and corresponding EOL inspection at Lessor’s MRO facility at the cost and risk of Lessee. In the event that the borescope inspection or the MPA or test cell run identifies any defect in the Engine or any item not being within the manufacturer’s limits as stated in the relevant aircraft maintenance manual (“AMM”) or engine maintenance manual (“EMM”), such defect shall be repaired at Lessee’s sole cost and expense provided such defect is not resulting from normal wear and tear due to the accumulation of flight hours and flight cycles from ordinary operation, and except that Lessee will not be responsible for replacing life limited parts which are due for replacement solely as the result of life expiration but Lessee will be responsible for replacing or repair of LRUs that become unserviceable.

3.    Return Conditions. In addition to any other requirements of this Lease, upon return of the Engine to Lessor, Lessee will ensure that:

a.    the Engine is free and clear of all Liens (except Permitted Liens) and shall have installed thereon the Parts installed at Delivery or replacements thereof installed in accordance with the provisions of the Lease Agreement, provided that the title thereto is vested in Lessor;

b.    the Engine is either (i) serviceable or (ii) unserviceable based on (x) being fully time expired or (y) borescope findings beyond maintenance manual limits due to normal wear and tear due to the accumulation of flight hours and flight cycles from ordinary operation, and except that Lessee will not be responsible for replacing life limited parts which are due for replacement solely as the result of life expiration but Lessee will be responsible for replacing or repair of LRUs that become unserviceable, with no evidence of FOD, misuse, abuse or Lessee induced or other Operator Exceedance damage; it is specifically recorded that any reduced inspection interval (not related to FOD, misuse or abuse or Lessee induced or other Operator Exceedance damage) per CFM or maintenance manual shall not be considered a cause to deem the Engine to be unserviceable;

c.    in the event the Engine cannot sustain * pounds of thrust, has damage beyond continued time limitation (not related to FOD, misuse or abuse or Lessee induced or other Operator Exceedance damage) the Lessor shall accept the Engine and repair or dispose of it as Lessor deems fit (in this case the Engine shall be deemed unserviceable and all clauses relating to a serviceable engine shall not apply, however, Lessee shall comply with the MPA (only if it is safe to do so) and EOL inspections referred to in Section 2;

d.    the Engine shall have installed thereon all Parts installed thereon on the Delivery Date or permitted replacements thereof in accordance with the Lease Agreement and the Engine will be configured and licensed by CFM International, Inc. as a CFM56-7B26 engine and in an as good condition as at Delivery, normal wear and tear due to the accumulation of flight hours and flight cycles from ordinary operation excepted, and except that Lessee will not be responsible for replacing life limited parts which are due for replacement solely as the result of life expiration but Lessee will be responsible for replacing or repair of LRUs that become unserviceable and changes and normal rate of performance deterioration excepted;

e.    the Engine and each of its Parts and components, is free of all deferred or carryover maintenance items, including pilot log book reports and defects requiring repetitive inspections and will not be “on watch” or have any reduced interval inspections;

f.    the Engine has affixed a current, valid and effective EASA Form 1 and FAA 81303 Form with full return-to-service statement, if serviceable, at * pounds of thrust;

g.    with reference to the MPA and EOL inspection referred to in Section 2 and together with the Engine’s historical and technical data and condition trend monitoring data for the Engine, Lessor is satisfied:

i.    with the Engine’s status and that there is no indication of an adverse deterioration in the performance of the Engine which is higher than normal based upon Lessee’s maintenance experience in operating engines of the same type and;

h.    prior to returning the Engine to Lessor, Lessee will prepare the Engine for shipment by:

i.    capping and plugging all openings of the Engine;

ii.    preserving the Engine for three hundred sixty-five (365) days storage, according to the engine preservation procedure of the AMM or the relevant EMM; and

iii.    completely covering the Engine with heat shrink wrap and the tarpaulin cover or bag (if provided) at Delivery.

4.    Non-Incident Statement. Upon redelivery, Lessee shall issue a Non-Incident Statement in the form set out in Appendix F.

5.    Redelivery Reports. Upon redelivery of the Engine in accordance with the terms of the Lease Agreement, Lessee will (i) perform the redelivery checks, tasks and inspections specified in Clause A of Schedule 1 to Appendix C, (ii) deliver to Lessor the redelivery documents specified in Clause B of Schedule 1 to Appendix C and (iii) prepare, execute and deliver to Lessor the Engine operational report and a redelivery checks and inspection report in the respective forms of Schedule 1 and Schedule 2 to Appendix C.

15

*

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

6.    Indemnities and Insurance. The indemnities and insurance requirements set forth in Sections 8 and 10 of the Master Agreement, respectively, will apply to Indemnitees and Lessor’s representatives during the return of the Engine, including the redelivery inspection.

SCHEDULE 1 TO APPENDIX C

ENGINE REDELIVERY TASK AND DOCUMENTS

1.1 A Full Performance Test cell run (“TCR”) according to the respective Engine type manual requirements including Engine Water Wash.

or alternatively, only if the TCR is waived in accordance with the provisions of the Lease Agreement:

1.2 An On Wing Performance Test in the form of a Maximum Power Assurance run or similar test as further described in Exhibit E.5 with calculated EGTM result including Engine Water Wash to be performed immediately prior to Engine removal.

1.3 The Engine Fuel and Oil System shall be preserved long term (365 days) per AMM immediately prior to return of the Engine in accordance with the Lease Agreement.

1.4 A full End of Lease Inspection as required by the end of lease inspection requirements detailed in Exhibit E.5 of the Lease Agreement. Or respectively the inspection checks recommended by the OEM comprising all of the tasks listed in the current revision of the applicable aircraft manufacturer’s MPD and applicable to the Engine. The inspection check can be carried out in accordance with Lessee’s Maintenance Program.

1.5 A Full Engine Video/DVD Borescope Inspection (cold and hot section) post test cell/ground run is required in accordance with the AMM including leading edge and trailing edge.

1.6 Completely covering the Engine with the tarpaulin cover provided at Delivery.

1.7 Engine shipment in accordance with the manufacturer’s specifications/recommendations. Any trucks used for shipment of the Engine will be equipped with air ride or air cushion suspension system.

The engine has to be returned on the following SHIPPING STAND:

Base P/N                                         , S/N                                         

Cradle P/N                                         , S/N                                         

17

*

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

2.     End of Lease Documentation

On redelivery of the Engine, Lessee shall provide the following documentation to Lessor:

2.1 Operator certified NON-INCIDENT STATEMENT shall be issued upon redelivery, substantially in the form set out in the attached template printed on Airline headed paper and signed by authorized representative of Operator. (Exhibit E.2 of the Lease agreement).

2.2 Operator certified ETOPS CERTIFICATION at Engine removal. The ETOPS Certification needs to be on Airline letterhead signed by authorized representative of Operator. (Exhibit E.3 of the Lease agreement).

2.3 Complete operator certified ENGINE OPERATIONAL REPORT (Exhibit E.4 of the Lease agreement) printed on Airline headed paper, signed by authorized representative of Operator.

2.4 Operator certified FAA & EASA and Local Air Authority Airworthiness Directive (AD) STATUS current to redelivery date on Airline headed paper. It shall include all applicable AD’s, the Means of compliance for all accomplished AD’s and include the repetitive inspection compliance supporting data (if applicable).

2.5 If any AD’s or SB’s have been performed during the lease period, copies of accomplishment records/documents (job cards, work cards, etc) are required.

2.6 Operator certified LLP DISK SHEET at each Engine Removal. The LLP Sheet needs to be on Airline letterhead signed and dated.

2.7 Operator SERVICEABLE TAG issued in accordance with operator local aviation authority (if applicable). The copy should remain with the Engine. It should state that the Engine was removed in Serviceable Condition and removal reason. It should also state the Total Engine Time and Total Engine Cycles /TET and TEC) and removal date and removal location.

2.8. ENGINE TEST CELL REPORT, which shows Engine parameters at Hot Day Take-off.

2.9 Results of an On Wing Performance Test in the form of a Maximum Power Assurance run (MPA) or similar test (if applicable) with all recorded parameters with calculated and documented EGTM.

2.10 A written and certified BORESCOPE REPORT per each stage, LE and TE, based on the Full Engine Video Borescope Inspection performed after the Test Cell run (or MPA run) and compiled by an approved Air Regulatory Source including two copies of the VIDEO BORESCOPE (DVD or CD-Rom).

2.11 ENGINE TREND MONITORING DATA, including take-off and cruise performance data, cruise mechanical data for the duration of the Engine’s operation throughout the Lease Term.

2.12 END OF LEASE (EOL) INSPECTION check list (refer to attached Inspection Check List Exhibit E.5) completely signed by mechanic/technician and inspector or responsible person within a maintenance organization performing the inspection. Or respectively the inspection checks recommended by the OEM comprising all of the tasks listed in the current revision of the applicable aircraft manufacturer’s MPD and applicable to the Engine. The inspection check can be carried out in accordance with operator’s maintenance program.

2.13 ENGINE ACCESSORY and QEC LIST at Engine redelivery. Engine should be returned with the same inventory as provided at Delivery. Lessee has to send an updated Engine Accessory and QEC List in accordance with the list dated [●] provided with the Engine at Delivery. Any component changes must be supported with adequate records. At minimum date of installation, engine TSN/CSN at component installation. All such replacement parts must be certified with FAA dual or EASA dual release certificate, with back to birth traceability on all LLP’s. In addition, full traceability (TSO/TSR) is required for any significant rotable component. Lessor is entitled to reject a replacement component if it is not in same or higher modification status as original part or satisfied with the standard of the components or the quality of its associated records.

2.14 Engine FAA 8130-3 and EASA FORM ONE RELEASE CERTIFICATE or alternative a EASA DUAL RELEASE CERTIFICATE or FAA 8130-3 DUAL RELEASE CERTIFICATE. The copy should remain with the Engine. It should state the Total Engine Time and Total Engine Cycles /TET and TEC), removal date and that the Engine was removed in Serviceable Condition, reason for removal and mention all inspection/work accomplished. (MPA run or test cell run, preservation and preservation date , BSI, “EOL Inspection Checks”, etc).

2.15 PRESERVATION TAG with date of expiration confirming that the Engine oil system and fuel system was long term preserved for 365 days. All openings of the Engine have to be capped and plugged.

2.16 A copy of signed/stamped Task Card covering Engine long term preservation.

2.17 A copy of operator Aircraft Tech Log Sheet showing Engine installation/removal from wing.

2.18 A copy of signed/stamped Task Card showing Engine installation/removal from wing.

2.19 A copy of maintenance records showing Engine conversion at engine installation/removal from wing (if applicable).

2.20 TECHNICAL LOG PAGES and PILOT REPORTS related to the Engine that occurred throughout the Lease Term including the respective corrective actions.

2.21 UNSCHEDULED MAINTENANCE EVENTS and INSPECTION REPORTS.

2.22 SCHEDULED MAINTENANCE and INSPECTIONS accomplished in accordance with operator APPROVED MAINTENANCE PROGRAM

2.23 OPEN/DEFERRED/CARRY FORWARD items, documentation covering any Open items, Deferred Defects or Carry Forward items.

19

*

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

2.24 DIGITAL PHOTOS of the Engine accessories including Engine data plate prior to covering, and photos of the Engine in bagged condition (Refer to * EOL check list Exhibit E.5).

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

2.25

*
	CFM56-7B20 ESN	*
	ETSN: 41855	ECSN: 31806
	ACCESSORY INVENTORY
	March 06 / 2017

DESCRIPTION	REF EIPC	QTY	PART NUMBER
MW0325 HARNESS FIRE	26-11-00-01 350D	1	325-027-303-0
MW0315 HARNESS FIRE	26-11-00-01 010A	1	325-027-566-0
MW0316 HARNESS FIRE	26-11-00-01 260A	1	325-024-603-0
MW0326 HARNESS FIRE	26-11-00-01 450B	1	325-027-404-0
MW0304 HARNESS / J4	71-51-00-01 010A	1	325-035-201-0
MW0303 HARNESS / J3	71-51-00-01 020	1	325-015-001-0
MW0301 HARNESS / J1	71-51-00-01 030	1	325-035-503-0
MW0302 HARNESS / J2	71-51-00-01 040	1	325-029-902-0
MW0313 HARNESS	71-51-00-01 050	1	NOT VISIBLE
MW0311 HARNESS (FFCCV)	71-51-00-01 060A	1	NOT VISIBLE
MW0312 HARNESS	71-51-00-01 320	1	NOT VISIBLE
CORE HARNESS J9	72-00-00-10 020A	1	325-043-401-0
CORE HARNESS J10	72-00-00-10 040E	1	325-043-501-0
FAN HARNESS J6	72-00-00-10 190A	1	325-035-003-0
FAN HARNESS J5	72-00-00-10 200A	1	325-034-902-0
FAN HARNESS J7	72-00-00-10 240	1	325-025-702-0
FAN HARNESS J8	72-00-00-10 250	1	325-025-803-0
HARNESS CJ9	72-00-00-10 550	1	325-045-201-0
HARNESS CJ10	72-00-00-10 800	1	325-025-401-0
IDENTIFICATION DATA ENTRY PLUG	72-00-00-97 140	1	390-660-101-0
TRANSFER GEARBOX	72-62-00-01 001A	1	340-050-705-0
ACCESSORY GEARBOX	72-63-00-01 002	1	340-046-602-0
MAIN FUEL PUMP	73-11-10-01 010C	1	340-402-105-0
FUEL FILTER ELEMENT	73-11-10-01 185C	1	NOT VISIBLE
FUEL NOZZLE	73-11-40-01 010A	1	1317M47G18
FUEL NOZZLE	73-11-40-01 010A	1	1317M47G18
FUEL NOZZLE	73-11-40-01 010A	1	1317M47G18
FUEL NOZZLE	73-11-40-01 010A	1	1317M47G18
FUEL NOZZLE	73-11-40-01 010A	1	1317M47G18
FUEL NOZZLE	73-11-40-01 010A	1	1317M47G18
FUEL NOZZLE	73-11-40-01 010A	1	1317M47G16
FUEL NOZZLE	73-11-40-01 010A	1	1317M47G16
FUEL NOZZLE	73-11-40-01 010A	1	1317M47G18
FUEL NOZZLE	73-11-40-01 010A	1	1317M47G18
FUEL NOZZLE	73-11-40-01 010A	1	1317M47G18

*

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

FUEL NOZZLE	73-11-40-01 010A	1	1317M47G18
FUEL NOZZLE	73-11-40-01 010A	1	1317M47G18
FUEL NOZZLE	73-11-40-01 010A	1	1317M47G16
FUEL NOZZLE	73-11-40-01 010A	1	1317M47G16
FUEL NOZZLE	73-11-40-01 010A	1	1317M47G18
FUEL NOZZLE	73-11-40-01 020	1	I317M47G18
FUEL NOZZLE	73-11-40-01 020	1	1317M47G18
FUEL NOZZLE	73-11-40-01 020	1	1317M47G18
FUEL NOZZLE	73-11-40-01 020	1	1317M47G18
FUEL FILTER NOZZLE	73-11-45-01 010A	1	340-403-004-0
IDG OIL COOLER	73-11-60-01 010	1	340-403-102-0
BURNER STAGING VALVE	73-11-70-05 010	0	N/R
HYDROMECHANICAL UNIT	73-21-10-01 010G	1	442652
PT25 TEMP SENSOR (CIT)	73-21-20-01 010	1	NOT VISIBLE
ALTERNATOR STATOR	73-21-30-01 010	1	510846-1
ALTERNATOR ROTOR	73-21-30-01 050	1	NOT VISIBLE
T12 TEMPERATURE SENSOR	73-21-40-01 010	0	N/R
ECU SOFTWARE	73-21-60-01 262D	1	1853M78P37
ELECTRONIC CONTROL UNIT	73-21-60-01 012D	1	1853M33P06
HPTCC THERMOCOUPLE	73-21-70-01 010	0	N/R
FUEL FLOW TRANSMITTER	73-31-10-01 010	1	1853M48P02
FUEL DIFF PRESSURE SWITCH	73-34-10-01 010B	1	304-402-706-0
IGNITION EXCITER UPPER	74-00-00-01 010	1	9238M66P11
IGNITION EXCITER LOWER	74-00-00-01 010	1	9238M66P11
SPARK IGNITER MAIN (LOWER)	74-00-00-01 300E	1	NOT VISIBLE
SPARK IGNITER MAIN (UPPER)	74-00-00-01 300E	1	NOT VISIBLE
IGNITION LEAD LH	74-00-00-01 320	1	1853M13P01
IGNITION LEAD RH	74-00-00-01 320	1	1853M13P01
ECU HOSE TUBE (COOLING)	75-00-00-01 630	1	NOT VISIBLE
AIR TRANSIENT BLEED VALVE	75-21-10-01 010A	1	1821M60P04
HPT CLEARANCE CONTROL VALVE	75-22-10-01 010	1	3291186-6
LPT CLEARANCE CONTROL VALVE	75-23-10-01 010	1	340-402-003-0
VSV ACTUATOR LH	75-32-10-01 010A	1	1324M12P10
VSV ACTUATOR RH	75-32-10-01 010A	1	1324M12P10
VBV BALLSCREW ACTUATOR LH	75-32-20-01 010A	1	340-402-653-0/7074-300
VBV BALLSCREW ACTUATOR RH	75-32-20-01 010A	1	340-402-653-0/7074-300
N2 SPEED SENSOR	77-11-10-01 010B	1	320-549-004-0
N1 SPEED SENSOR	77-12-10-01 010	1	320-862-401-0
T/C PROBE T49.5 (UPPER LH)	77-21-10-01 010	1	TC296-02

22	*
*

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

T/C PROBE T49.5 (LOWER LH)	77-21-10-01 010	1	TC296-04
T/C PROBE T49.5 (LOWER RH)	77-21-10-01 010	1	TC296-02
T/C PROBE T49.5 (UPPER RH)	77-21-10-01 010	1	TC296-02
T5 SENSOR	77-22-10-01 010A	0	N/R
T3 SENSOR - COMP.DISCHARGE TEMP	77-23-10-01 010	1	2124M19P01
VIBRATION SENSOR BRG #1	77-31-30-01 010	1	340-031-802-0
VIBRATION FFCC SENSOR	77-31-40-01 010A	1	NOT VISIBLE
OIL TANK	79-11-20-01 010	1	41F5102
LUBRICATION UNIT	79-21-10-01 010	1	340-400-005-0
OIL/FUEL MAIN HEAT EXCHANGER	79-21-20-01 010	1	11-841193-4
SERVO FUEL HEATER	79-21-20-01 050	1	45-731-1382
OIL SCAVENGE FILTER	79-21-40-01 010A	1	NOT VISIBLE
OIL CLOGGING TRANSMITTER	79-21-40-05 010	1	340-402-801-0
OIL ANTI LEAK VALVE	79-21-40-10 010	1	340-400-203-0
DMS JUNCTION BOX	79-21-50-15 020	0	N/R
OIL QUANTITY TRANSMITTER	79-31-00- 01 010	1	340-402-801-0
OIL TEMPERATURE SENSOR	79-31-40-01 010	1	340-402-902-0
OIL PRESSURE TRANSMITTER	79-32-10-01 010	1	FA006310
STARTER AIR TURBINE	80-11-10-01 010H	1	1851M36P10

WHEN P/N OF MISSING / NOT PROVIDED PART COULD NOT BE IDENITIFIED. HIGHEST APPLICABLE P/N IS USED.

			*
CFM56-7B20 ESN		*
ETSN: 41855	ECSN: 31806
ACCESSORY INVENTORY
March 06 / 2017

DESCRIPTION	REF PPBUM	QTY	PART NUMBER
FWD MOUNT SUB-ASSY	2-1 ITEM 15	1	310A2028-11
HANGAR FITTING ASSY	2 1 ITEM 50	1	NOT VISIBLE
AFT MOUNT ASSY	3-1 ITEM 5	1	310A2031-25
BRACKET ASSY	4-1 ITEM 950	1	332A2930-61
BRACKET ASSY	6-1 ITEM 225	1	332A2930-62
BRACKET ASSY	6-1 ITEM 350	1	332A2930-90
TUEL SUPPLY HOSE ASSY	12-1 ITEM 10	1	AE713733-1
12 O’CLOCK STRUT ASSY	13-1 ITEM 5	1	332A2371-1
DUCT ASSY CTAI	13-1 ITEM 10	1	332A2390-45
ROD ASSY	13-1 ITEM 72	1	315A2080-1
TAI TEMPERATURE SOLENOID VALVE	14-1 ITEM 5	1	3205548-2
PRE-COOLER CONTROL VALVE	14-1 ITEM 75	1	3289562-6
COUPLING, PRE-COOLER CONTROL VALVE	14-1 ITEM 120	1	AS1895-4-400

*

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

HIGH STAGE REGULATOR	14-1 ITEM 150	1	107484-7
BLEED AIR REGULATOR	14-1 ITEM 250	1	107492-6
HIGH STAGE REGULATOR TUBE ASSY	15-1 ITEM 5	1	332A2350-9
HIGH STAGE REGULATOR TUBE ASSY	15-1 ITEM 55	1	332A2350-11
HIGH STAGE REGULATOR TUBE ASSY	15-1 ITEM 100	1	332A2350-4
HIGH STAGE REGULATOR HOSE ASSY	15-1 ITEM 175	1	16135-84
LINK ASSY (FOR BLEED DUCT)	16-1 ITEM 10	1	332A2341-4
LINK ASSY (FOR BLEED DUCT)	16-1 ITEM 45	1	332A2341-5
BLEED DUCT ASSY 5TH AND 9TH STAGE	16-1 ITEM 105	1	332A2323-10
HIGH STAGE VALVE	16-1 ITEM 150	1	3214446-4
COUPLING, HIGH STAGE VALVE	16-1 ITEM 180	1	AS1895-1-350
DUCT ASSY 5TH, 9TH STAGE BLEED	16-1 ITEM 200	1	332A2321-10
COUPLING 5TH, 9TH STAGE BLEED	16-1 ITEM 210	1	AS1895-1-350
CHECK VALVE	16-1 ITEM 250	1	3202222-1
COUPLING, CHECK VALVE	16-1 ITEM 260	1	AS1895-4-350
DUCT ASSY, INTERSECTION MANIFOLD	16-1 ITEM 300	1	332A2322-54
COUPLING, INTERSECTION MANIFOLD (2EA)	16-1 ITEM310	2	AS1895-4-350
COUPLING INTERSECTION MANIFOLD	16-1 ITEM 320	1	AS1895-4-175
TUBE ASSY, BLEED CONTROL	17-1 ITEM 5	1	332A2350-5
HOSE ASSY, BLEED CONTROL	17-1 ITEM 50	1	16135-80
HOSE ASSY, BLEED CONTROL	17-1 ITEM 75	1	16135-83
TUBE ASSY, BLEED CONTROL	17-1 ITEM 100	1	332A2350-7
HOSE ASSY, BLEED CONTROL	17-1 ITEM 125	1	16135-81
TUBE ASSY, BLEED CONTROL	17-1 ITEM 150	1	332A2350-14
TUBE ASSY, BLEED CONTROL	17-1 ITEM 200	1	332A2350-12
TUBE ASSY, BLEED CONTROL	17-1 ITEM 225	1	332A2350-13
HOSE ASSY, BLEED CONTROL	17-1 ITEM 275	1	16135-80
PRESS REG SHUTOFF VALVE	18-1 ITEM 5	1	3214552-5
COUPLING, PRSOV	18-1 ITEM 55	1	AS1895-1-350
DUCT ASSY, UPPER 5TH 9TH STAGE	18-1 ITEM 100	1	332A2326-45
COUPLING, UPPER 5TH 9TH STAGE DUCT	18-1 ITEM 110	1	AS1895-1-350
COUPLING, UPPER 5TH 9TH STAGE DUCT	18-1 ITEM 155	0	N/R
HYDRAULIC PUMP ASSY (VICKERS)	20-1 ITEM 15	1	849589
FITTING QUICK RELEASE	20-1 ITEM 20	1	155012-73-20
HYDRAULIC PUMP ADAPTER PLATE	20-1 ITEM 105	1	387999
HYDRAULIC PUMP CLAMP RING	20-1 ITEM 150	1	974219
HYDRAULIC FILTER	21-1 ITEM 5	1	7579078
HOSE ASSY, HYDRAULIC CASE DRAIN	2,-1 ITEM 75	1	155006-06-18
HOSE ASSY, HYDRAULIC CASE DRAIN	21-1 ITEM 200	1	155006 06-16

24	*
*

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

HOSE ASSY, HYDRAULIC PRESSURE	21-1 ITEM 225	1	155012-12-2014
HOSE ASSY, HYDRAULIC SUPPLY	21-1 ITEM 300	1	155016-20-11
LANYARD ASSY, IDG	22-1 ITEM 5	l	332A2600-4
LANYARD ASSY, IDG	22-1 ITEM 10	1	332A2600-5
LANYARD ASSY, IDG	22-1 ITEM 15	1	332A2600-6
IDG	22-1 ITEM 50	1	761574B
QAD ADAPTER KIT, IDG	22-1 ITEM 75	1	762246
IDG AIR/OIL COOLER	23-1 ITEM 5	1	5332A260-1
IDG HOSE / TUBE ASSY	24 1 ITEM 100	1	115096-3
IDG HOSE / TUBE ASSY	24-1 ITEM 200	1	115096-2
LINK ASSY (2EA)	25-1 ITEM 10	2	322U2338-2
LINK ASSY (2EA)	25-1 ITEM 55	2	322U2338-2
LOWER STARTER DUCT ASSY	25-1 ITEM 100	1	332A2313-1
COUPLING, STARTER	25-1 ITEM 110	1	AS1895-4-325
STARTER VALVE ASSY	25-1 ITEM 175	1	3289630-2
COUPLING, LOWER STARTER DUCT	25-1 ITEM 105	1	AS1895-7-300
UPPER STARTER DUCT ASSY	25-1 ITEM 250	1	332A2310-1
COUPLING STARTER VALVE	25-1 ITEM 260	1	30645-300
COUPLING, UPPER STARTER DUCT	25-1 ITEM 305	0	N/R
ANTI-ICE PRESSURE SWITCH	27-1 ITEM 60	1	NOT VISIBLE
TAI DUCT ASSY, FWD	27-1 ITEM 100	1	332A2390-48
TAI TUBE ASSY	27-1 ITEM 145	1	332A2350-1
TAI LINK ASSY	27-1 ITEM 180	1	332A2341-3
TAI LINK ASSY	27-1 ITEM 185	1	332A2341-2
ANTI-ICE VALVE ASSY	27-1 ITEM 225	1	3215618-4
COUPLING, TAI VALVE	27-1 ITEM 235	1	AS 1895-4-200
TAI DUCT ASSY, AFT	27-1 ITEM 250	1	332A2390-12
COUPLING, AFT TAI DUCT	27-1 ITEM 260	1	AS1895-4-175
COUPLING, TAI VALVE	27-1 ITEM 305	1	AS1895-4-200
COUPLING, FWD TAI DUCT	27-1 ITEM 380	1	AS1895-4 200
FIRE DETECTOR, FAN UPPER	28-1 ITEM 5	1	S332T100-44
FIRE DETECTOR, FAN LOWER	28-1 ITEM 10	l	S332T100-30
FIRE DETECTOR, LEFT CORE	28-1 ITEM 15	1	S332T100-43
FIRE DETECTOR, RIGHT CORE	28-1 ITEM 20	1	S332T100-38
W1062 WIRE BUNDLE ASSY	29-1 ITEM 5	1	286A1062-002
ALUMINIUM FOIL MARKER, OIL TANK	30-1 ITEM 5	1	BAC27DAP33
ALUMINIUM FOIL MARKER, OIL TANK	30-1 ITEM 15	1	BAC27DPP466
ALUMINIUM FOIL MARKER, IDG	30-1 ITEM 35	1	BAC27DAP33
THRUST LINK ASSY, LEFT	31-1 ITEM 5	1	310A2041-9
THRUST LINK ASSY, RIGHT	31-1 ITEM 10	1	310A2041-10
PRIMARY PLUG ASSY, LONG	32-1 ITEM 5	1	314A2620 -1
PRIMARY NOZZLE ASSY, LONG	32-1 ITEM 100	1	314A2610-1
GSE BRACKET RH SIDE	32-2 ITEM 130	1	340-180-601-0

*

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

GSE BRACKET, LH SIDE 32-2 ITEM 180 2 340-180-401-0

WHEN P/N OF MISSING / NOT PROVIDED PART COULD NOT BE IDENTIFIED. HIGHEST APPLICABLE P/N IS USED

26	*
*

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

SCHEDULE 2 TO APPENDIX C

END OF LEASE REQUIREMENTS TASK #	TASK DESCRIPTION	BOEING MPD & AMM REFERENCE	REMARKS	INSPECTOR Date/Signature/Stamp
1	ENGINE DOCUMENTATION CHECK
1.1	CHECK MAINTENANCE LOG BOOKS AND PROVIDE PAPERWORK FOR ANY ENGINE RELATED MAINTENANCE REPORTS, PILOT REPORTS AND DEFERRED DEFECTS REPORTED.	N/A	OPERATOR TASK
	NOTE: Not applicable in Shop.
1.2	CHECK AD NOTE STATUS. CHECK FOR REQUIRED FAA-EASA AD AND SB OEM CAT 1, 2 INCORPORATION.	N/A
	NOTE: When Engine in * Shop - SB check per * lease group advice.
1.3	CHECK AIRCRAFT DATA FOR ATA CHAPTER 70-80 CLASS 3 FAULTS.	N/A	OPERATOR TASK
	NOTE: Not applicable in Shop.
2	ENGINE GENERAL INSPECTION
2.1	CLEAN THE ENGINE GAS-PATH WITH PURE WATER. NOTE: Before On-Wing or Test Cell run.	AMM 72-00-00-100-803 EM 72-00-00-100-002 Clean 002
2.2	PERFORM FULL PERFORMANCE TEST CELL RUN TEST 003 AND 009 OR FOLLOWING GROUND TESTS: NO. 3A, 5, 7, 8, 13 AND PROVIDE WRITTEN REPORTS.	AMM 71-00-00-700 (ON-WING-TEST) EM 72-00-00-760 (TEST CELL)
	NOTE: Refer to applicable lease agreement for required Tests (On-Wing or Test Cell).

27

*

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

2.3	PRESERVATION OF AN ENGINE FROM ONE MONTH TO ONE YEAR. ATTACH PRESERVATION INFORMATION LABEL ON ENGINE OIL TANK THAT ENGINE HAS BEEN PRESERVED. NOTE: On-Wing or Test Cell.	AMM 71-00-03-6008-11 (ON WING) ESM 72-00-00-500-001 (TEST CELL)
2.4	PERFORM RECEIVING PHOTO DOCUMENTATION OF ENGINE BUILD CONFIGURATION. (FOLLOWING VIEWS: FRONT, RH FAN MODUL, BOTTOM FAN MODULE, LH FAN MODULE, UPPER FAN MODULE, RH CORE MODULE, BOTTOM CORE MODULE, LH CORE MODULE, UPPER CORE MODULE, REAR, ENGINE DATA PLATE, ENGINE OWNER PLATE, RH SHIPPING STAND GENERAL VIEW, LH SHIPPING STAND GENERAL VIEW, SHIPPING STANDS WHEEL, SHIPPING STAND IDENTIFICATION PLATES, SHIPPING STAND TOWING BARS, SHIPPING STAND BASE AND CRADLE IDENTIFICATION PLATE). NOTE: After Engine removal.	N/A
2.5	VERIFY CURRENT EEC SOFTWARE VERSION ON INSTALLED EEC. NOTE: Pay attention to information on software modification label below EEC identification plate.	EEC P/N:
		EEC S/N:
		Software Version:
2.6	CREATE AND COMPLETE ENGINE INVENTORY LIST. NOTE: Based on * lease group delivered listing.	N/A
2.7	CREATE AND COMPLETE MISSING PARTS LIST AGAINST EIPC AND PPBUM. NOTE: Applicable when engine delivered with Missing parts list. NOTE: When Engine in * Shop - Missing part check per * lease group advice.	N/A
2.8	EXTERNAL GENERAL VISUAL INSPECTION OF ENGINE FOR ANY OBVIOUS DAMAGE THAT MAY HAVE OCCURRED DURING TRANSPORTATION. NOTE: Task should be performed after Engine transportation from removal location to locatin where visual inspections are carried-out.	N/A

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

2.9	GENERAL VISUAL INSPECTION OF ENGINE DRAIN LINES.	AMM 71-71-00-200-802
2.10	OPERATIONALLY CHECK LEFT/RIGHT ENGINE ALL DRAIN LINES. For info only: every 6 years	MPD 71-040-01/02 AMM 71-71-00-700-801
3	ENGINE STAND AND COVER INSPECTION
3.1	PERFORM GENERAL VISUAL INSPECTION OF ENGINE SHIPPING STAND (BASE AND CRADLE) INCLUDING WHEELS, TOW BARS, RIGHT GUARDS FOR ANY DAMAGES AND MISSING PARTS. REPORT TO * LEASE GROUP ANY FINDINGS OR MISSING PARTS.	N/A
3.2	INSPECT ENGINE COVER FOR DAMAGES SUCH AS TEARS AND HOLES.	N/A
4	ENGINE OIL SYSTEM INSPECTION
4.1	DETAILED INSPECTION OF THE LEFT/RIGHT ENGINE FWD SUMP, AFT SUMP, AGB/TGB MAGNETIC CHIP DETECTORS FOR PARTICLES (FOR ENGINES WITH MCD) OR INTERROGATE DMS FOR CHIP DETECTOR STATUS. NOTE: FOR ENGINES WITH DEBRIS MONITORING SYSTEM. For info only: Inspection Threshold 500 FH, Repeat 500 FH.	MPD 72-320-01/02 AMM 79-00-00-200-804 AMM 79-00-00-710-801	CONTAMINATION FOUND: YES NO Note: circle as approprIate.
4.2	REMOVE, INSPECT, AND REPLACE THE LEFT/RIGHT ENGINE OIL SUPPLY FILTER ELEMENT. INSPECT FOR CONTAMINATION AND IDENTIFY AS NECESSARY. REPLACE WITH NEW FILTER AND CONSUMABLES. For info only: Inspection Threshold 7500 FH, Repeat 7500 FH.	MPD 79-010-01/02 AMM 79-21-03-000-802 AMM 79-21-03-400-801	CONTAMINATION FOUND: YES NO Note: circle as appropriate.

	29
*

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

4.3	DETAILED INSPECTION OF THE LEFT/RIGHT ENGINE OIL SUPPLY FILTER POP-OUT INDICATOR.	AMM 79-00-00-200-805
4.4	REMOVE, INSPECT, AND REPLACE THE LEFT/RIGHT ENGINE OIL SCAVENGE FILTER ELEMENT. INSPECT FOR CONTAMINATION AND IDENTIFY IF NECESSARY. REPLACE WITH NEW FILTER AND CONSUMABLES. For info only: Inspection Threshold 7500 FH, Repeat 7500 FH.	MPD 79-040-01/02 AMM 79-21-06-000-801 AMM 79-21-06-400-801	CONTAMINATION FOUND: YES NO Note: circle as appropriate.
4.5	DETAILED INSPECTION OF THE LEFT/RIGHT ENGINE STARTER MAGNETIC CHIP DETECTOR FOR METAL CHIPS. For info only: Inspection Threshold 1600 FC, Repeat 1600 FC	MPD 80-010-01/02 AMM 80-11-01-200-801	CONTAMINATION FOUND: YES NO Note: circle as appropriate.
4.6	EXTERNAL OIL SYSTEM INSPECTION NOTE: applicable to engine areas only.	AMM 79-00-00-200-802
5	ENGINE FUEL SYSTEM INSPECTION
5.1	REMOVE AND REPLACE THE LEFT/RIGHT ENGINE FUEL FILTER . REPLACE WITH NEW FILTER AND CONSUMABLES. NOTE: Do not install Fuel Filters listed in AD 2006-26-01! Record part number of newly installed Fuel Filter. For info only: Inspection Threshold 6000 FH, Repeat 6000 FH	MPD 73-010-01/02 AMM 73-11-02-000-801 AMM 73-11-02-400-801 FAA AD Note 2006-26-01	CONTAMINATION FOUND: YES NO Note: circle as appropriate. New P/N installed:

5.2	IF ENGINE FUEL FILTER IS CONTAMINATED: CHECK FUEL NOZZLE FILTER FOR CONTAMINATION AND REPLACE WITH NEW FILTER ELEMENT.	AMM 73-11-03-000 AMM 73-11-03-400	CONTAMINATION FOUND: YES NO
			Note: circle as appropriate.
5.3	FUEL MANIFOLDS INSPECTION/CHECK.	AMM 73-11-05--700-801 CFMI SB 72-0876
6	FAN/INTERMEDIATE CASE INSPECTION
6.1	DETAILED INSPECTION OF LEFT/RIGHT ENGINE INLET AND FAN BLADES. For info only: Inspection Threshold 2500 FH, Repeat 2500 FH.	MPD 72-020-01/02 AMM 72-21-00-220-801
6.2	RELUBRICATE LEFT/RIGHT ENGINE FAN BLADES DOVETAIL. (FAN BLADES REMOVED) VISUALLY INSPECT REMOVED COMPONENTS AND EXPOSED AREAS (SPINNER CONE, RETAINING RING, PLATFORMS, SPACERS, FAN BLADES, SHIMS, FAN DISK, ETC..). PAY SPECIAL ATTENTION FOR EVIDENCE OF BIRD STRIKE AND/OR FOD DAMAGE. NOTE: To be performed if required and based on last lubrication (* to advise).	MPD 72-025-01/02 AMM 72-21-00-640-801 CFMI CESM 005 AMM 72-21-01-200-801 AMM 72-21-02-200-801 CFMI SB 72-0884
	For Info only: Inspection Threshold 5000 FH or 3000 FC, Repeat 5000 FH or 3000 FC (Whichever occurs first!) SB 72-0884 inspection once a year.
6.3	PREPARE ACTUAL FAN BLADE DISTRIBUTION LIST WHICH INCLUDE ENGINE SERIAL NUMBER, ISSUE DATE, FAN BLADE POSITION, PART NUMBER, SERIAL NUMBER, MOMENT WEIGHT AND TECHNICIAN OR INSPECTOR NAME WITH SIGNATURE. CHECK EFFECTIVITY OF SB 72-0797 FOR EACH FAN BLADE AND RECORD COMPLIANCE. NOTE: Applicable only if Fan Blades are removed.	CFMI SB 72-0797
7	HPC FRONT STATOR/COMBUSTION CASE INSPECTION

	31
*

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

7.1	HPC FRONT STATOR INSPECTION.	AMM 72-32-00-200-801
7.2	COMBUSTION CASE INSPECTION.	AMM 72-41-00-200-801
8	LPT MODULE INSPECTION
8.1	VISUAL CHECK OF THE LEFT/RIGHT ENGINE AFT MOUNTS CLEVIS FOR STRUCTURAL INTERGRITY FAILURE.	MPD 72-300-01/02 AMM 72-56-00-200-802
	For info only: Inspection Threshold 7500 FH, Repeat 7500 FH.
8.2	LOW PRESSURE TURBINE CASE INSPECTION.	AMM 72-54-00-200-801
9	ENGINE EXHAUST SYSTEM INSPECTION
9.1	DETAILED INSPECTION OF THE LEFT/RIGHT ENGINE EXHAUST PLUG DRAIN PAN AND TUBE FOR CONDITION AND SECURITY.	MPD 78-011-01/02 AMM 78-11-00-210-803
	NOTE: Applicable to Engine with Exhaust Plug equipped with Drain Pad and tube system installed. ACCESS NOTE: Engine Exhaust Plug removal required. For info only: Inspection interval every engine change.
9.2	PRIMARY NOZZLE ASSEMBLY AND PRIMARY PLUG ASSEMBLY INSPECTION.	AMM 78-11-00-210-802
9.3	VISUALLY INSPECT PRIMARY EXHAUST NOZZLE LABYRINTH SEALS.	AMM 78-11-00-210-801
10	ACCESSORY GEARBOX MODULE INSPECTION
10.1	VISUAL CHECK OF THE LEFT/RIGHT ENGINE ACCESSORY GEARBOX/TRANSFER GEARBOX MOUNT FLANGES AND FAN CASE AND FAN FRAME ATTACHMENT MOUNTS. For info only: Inspection Threshold 15000 FH, Repeat 15000 FH.	MPD 72-070-01/02 AMM 72-20-00-210-801 AMM 72-60-00-200-801 AMM 72-63-00-200-801
11	FRONT MOUNT, AFT MOUNT, THRUST MOUNTS AND THRUST LINKS INSPECTION

11.1	GENERAL VISUAL INSPECT FORWARD ENGINE MOUNT ASSEMBLY INCLUDING FAN CASE FITTING, SIDE LINKS, HANGER AND LINK PINS. For info only: Inspection Threshold 6 YRS, Repeat 18000 FC whichever comes first.	MPD 54-010-01/02 AMM 51-05-01-210 AMM 54-05-03-210
11.2	GENERAL VISUAL INSPECT LEFT STRUT ATTACH BOLTS AT FORWARD ENGINE MOUNT. For info only: Inspection Threshold 9 YRS, Repeat 18000 FC whichever comes first.	MPD 54-015-01/02 AMM 51-05-01-210 AMM 54-05-03-210
11.3	GENERAL VISUAL INSPECTION OF FORWARD AND AFT ENGINE MOUNT TO STRUT SHEAR PINS. NOTE: Engine off-wing. For info only: Inspection intervall at engine removal.	MPD 54-020-01/02 AMM 51-05-01-210 AMM 54-05-03-210
11.4	GENERAL VISUAL INSPECTION OF AFT ENGINE MOUNT ASSEMBLY INCLUDING THRUST LINKS AND THRUST LINK PINS; MOUNT TO ENGINE LEFT, CENTER AND RIGHT LINKS, INCLUDING LINK PINS; HANGAR AND EVENER BAR; ATTACH BOLTS. For info only: Inspection Threshold 6 YRS, Repeat 18000 FC.	MPD 54-030-01/02 AMM 51-05-01-210 AMM 54-05-03-210
11.5	VISUAL CHECK OF THE LEFT/RIGHT ENGINE ATTACHMENT BOLTS FOR THE THRUST MOUNT FITTINGS. For info only: Inspection Threshold 10000 FC, Repeat 10000 FC.	MPD 72-100-01/02 AMM 72-23-04-200-802
11.6	VISUAL CHECK OF THE LEFT/RIGHT ENGINE THRUST MOUNT FITTINGS. For info only: Inspection Threshold 15000 FH, Repeat 15000 FH.	MPD 72-110-01/02AMM 72-2304-200-801
11.7	THRUST LINKS VISUAL INSPECTION.	AMM 71-21-02-210-802

	33
*

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

11.8	AFT ENGINE MOUNT VISUAL INSPECTION. NOTE: Engine off-wing. NOTE: Ensure Aft Mount and Center Link has correct marking IAW BOEING alert SB 737-71A1462 and that the Center Link is correctly installed on Aft Mount. Please advise to * leasegroup if Center Link was incorrectly installed or if markings are missing from Aft Mount Assy.	AMM 71-21-00-200-805 FAA AD Note 201-118-10 BOEING SB 737- 71A1462 REV.3
12	HYDRAULIC SYSTEM COMPONENTS INSPECTION
12.1	REPLACE EDP CASE DRAIN FILTER ELEMENT. REPLACE WITH NEW FILTER ELEMENT AND CONSUMABLES. NOTE: If you find a large quantity of small metal particles, large metal particles that are not of equal dimensions, or a large quantity of steel particles, then replace the hydraulic pump. Write down the results of the filter inspection and give them to the pump overhaul facility. For info only: Inspection Threshold 2400 FH, Repeat 2400 FH.	MPD 29-050-01/02 AMM 29-11-51-000-801 AMM 29-11-51-400-801	CONTAMINATION FOUND: YES NO Note: circle as appropriate.
13	GENERAL INSPECTION OF IDG (IF INSTALLED)
13.1	CHANGE IDG OIL. For info only: Threshold 1800 FH, Repeat 1800 FH	MPD 24-010-01/02 AMM 12-13-21-600-802
13.2	DETAILED INSPECTION OF IDG DELTA P INDICATOR. NOTE: When the DPI is in the up position and if the DPI resets decal (if installed) shows it is the 4th DPI extension, the IDG must be replaced. For info only: Threshold 800 FH, Repeat 800 FH.	MPD 24-020-01/02 AMM 12-13-21-200-802
13.3	DETAILED INSPECTION OF IDG OIL LEVEL. For info only: Inspection Threshold 800 FH, Repeat 800 FH.	MPD 24-030- 01/02 AMM 12-13-21-200-801

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

13.4	REPLACE IDG CHARGE AND SCAVENGE OIL FILTER INSPECT FOR CONTAMINATION AND IDENTIFY IF NECESSARY. REPLACE WITH NEW FILTER AND CONSUMABLES.	MPD 24-040-01/02 AMM 24-11-41-000-801 AMM 24-11-41-200-801 AMM 24-11-41-400-801	CONTAMINATION FOUND:
	Note: If the scavenge filter and the IDG oil condition are not satisfactory, or the DPI Resets decal (if installed) shows it is the 4th extension, the IDG must be replaced.		YES NO
	For info only: Inspection Threshold 1800 FH, Repeat 1800 FH.		Note: circle as appropriate.
13.5	TORQUE CHECK OF IDG QUICK ATTACH/DETACH (QAD) COUPLING.	MPD 24-050-01/02 AMM 24-11-61-200-801
	For info only: Inspection Threshold 3600 FH, Repeat 3600 FH.
13.6	INSPECT (GVI) THE ENGINE IDG SURFACE AIR COOLED OIL COOLER	MPD 24-060-01/02 AMM 24-11-21-200-801
	For info only: Inspection Threshold 7560 FH, Repeat 7560 FH.
14	INSPECTION OF ELECTRICAL HARNESSES, CABLES
14.1	STANDARD ENGINE WIRING AND EQUIPMENT CHECK.	AMM 70-70-01 -200-801 (without retension test)
	NOTE: The retention test for the connector sockets is not required.
14.2	IGNITION EXCITER INSPECTION.	AMM 74-11-01-200-801
14.3	DETAILED INSPECTION OF BOTH IGNITION PLUGS.	AMM 74-21-02-200-801 CESM 006	IGNITION PLUGS REPLACED:
	Plug Replacement interval 1000 cycle or 2000hr (whichever comes first)		YES NO
			NOTE: circle as appropriate
14.4	DETAILED INSPECTION OF BOTH ENGINE IGNITION LEADS.	MPD 74-020-01/02 AMM 74-21-01-200-801
	For info only: Inspection Threshold 4000 FC, Repeat 4000 FC.

	35
*

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

14.5	DETAILED INSPECTION OF CONNECTORS FOR TIGHTNESS (ALL CONNECTORS ON HARNESS J5, J6, J7, J8, J9, CJ9, J10, CJ10, MW0301, MW0302, MW0303 AND MW0304). For info only: Inspection Threshold 15000 FH, Repeat 15000 FH.	MPD 20-120- 01/02 AMM 05-55-10-220-801
14.6	INSPECT (DETAILED) THE IDG POWER FEEDER WIRING AND CONNECTED EWIS-ENGINE #1/#2 (EZAP). For info only: Inspection Threshold 5500 FC or 30 MO, Repeat 5500 FC or 30 MO (whichever comes first)	MPD 20-470/480-00 AMM 05-42-04-211-801/802 AMM 20-60-03-100-801
15	VIDEO BORESCOPE INSPECTION (TO BE PERFORMED POST GROUND RUN OR POST TEST CELL RUN)
15.1	BORESCOPE INSPECTION PREPARATION.	AMM 72-00-00-200-802
15.2	PERFORM VIDEO BORESCOPE INSPECTION OF BOOSTER STG. 2 THROUGH STG.4 BLADES.	AMM 72-00-00-200-803
	NOTE: Following areas have to be inspected - LE of STG.2 Blades through the inlet to the primary gas path or the booster inlet, TE of STG. 3 Blades through the borescope port S0, LE of STG.4 Blades through the borescope port S0.
15.3	PERFORM VIDEO BORESCOPE INSPECTION OF HPC ROTOR BLADES STG. 1 TROUGH STG.9.	AMM 72-00-00-200-804
	NOTE: Inspect all blades Leading Edge (LE) and Trailing Edge (TE).
15.4	PERFORM VIDEO BORESCOPE INSPECTION OF COMBUSTOR.	AMM 72-00-00-200-805
	NOTE: Do a “complete inspection” (Dome Assy, Inner & Outer Liner, Fuel Nozzles tips, Swirlers) using main igniter plugs and all available combustor borescope plugs. Use fiberscope to view all inspection areas.
15.5	PERFORM VIDEO BORESCOPE INSPECTION OF HPT NOZZLE GUIDE VANES. NOTE: Perform complete 360° fiberscope inspection of LE (concave side) and TE (convex side).	AMM 72-00-00-200-806 (SAC & DAC engines) AMM 72-00-00-200-818 (TI & BE engines)

15.6	PERFORM VIDEO BORESCOPE INSPECTION OF HPT BLADES. NOTE: Perform inspection of LE & TE and Tips of the HPT Blades.	AMM 72-00-00-200-807
15.7	PERFORM VIDEO BORESCOPE INSPECTION OF HPT SHROUDS. NOTE: Perform complete 360° fiberscope inspection of HPT Shrouds from forward side and aft side.	AMM 72-00-00-200-815
15.8	PERFORM VIDEO BORESCOPE INSPECTION OF LPT NOZZLE STG. 1. NOTE: Perform complete 360° fiberscope inspection of LE and TE.	AMM 72-00-00-200-811
15.9	PERFORM VIDEO BORESCOPE INSPECTION OF LPT STG. 1 THROUGH 3 BLADES. NOTE: Perform inspection of LE & TE.	AMM 72-00-00-200-808
15.10	PERFORM VIDEO BORESCOPE INSPECTION OF LPT STG. 4 BLADES. NOTE: Perform inspection of LE & TE.	AMM 72-00-00-200-809
16	POST BSI TASKS
16.1	REINSTALL ALL BSI PLUGS AND REMOVED ‘ACCESS’ HARDWARE.	AMM 72-00-00-200
16.2	HANDCRANKING DRIVE COVER INSTALLATION.	AMM 72-63-01-400-801
16.3	INDENPENDENT INSPECTION OF CORRECT INSTALLATION OF THE HAND-CRANKING COVER. NOTE: Applicable for PRE SB 72-0564 or PRE SB 72-0879 engine.	AMM 72-63-01-400-801 EASA AD 2012-0209 FAA AD Note 2013-26-01 CFMI SB 72-0564, 72-0879
17	ENGINE PREPARATION FOR STORAGE AND SHIPMENT

	37
*	*  The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

17.1	PERFORM OUTGOING PHOTO DOCUMENTATION OF ENGINE BUILD CONFIGURATION. (FOLLOWING VIEWS: FRONT, RH FAN MODUL, BOTTOM FAN MODULE, LH FAN MODULE, UPPER FAN MODULE, RH CORE MODULE, BOTTOM CORE MODULE, LH CORE MODULE, UPPER CORE MODULE, REAR, ENGINE DATA PLATE, ENGINE OWNER PLATE, RH SHIPPING STAND GENERAL VIEW, LH SHIPPING STAND GENERAL VIEW, SHIPPING STANDS WHEEL, SHIPPING STAND IDENTIFICATION PLATES, SHIPPING STAND TOWING BARS, SHIPPING STAND BASE AND CRADLE IDENTIFICATION PLATE). NOTE: After engine (ground run) or test cell run.	N/A
17.2	DRAIN ENGINE FUEL AND OIL SYSTEM FOR AIR TRANSPORTATION AS APPLICABLE. ATTACH INFORMATION LABEL ON ENGINE OIL TANK THAT ENGINE SYSTEMS HAVE BEEN DRAINED.	AMM 12-13-11-600-803 AMM 71-00-03-600
17.3	ENSURE ALL ENGINE OPENINGS ARE SEALED, INCLUDING STRUTS, PIPING AND ACCESSORY OPENINGS WITH CAPS OR PLUGS AND PLASTIC FILM.	AMM 71-00-03-600-811 (ON WING) ESM 72-00-00-500-001 (TEST CELL)
17.4	INSTALL DESICCANT AND ENGINE COVER. CLOSE THE COVER. NOTE: Do not let desiccant touch the engine hardware.	AMM 71-00-03-600-811 (ON WING) ESM 72-00-00-500-001 (TEST CELL)
17.5	PERFORM PHOTO DOCUMENTATION OF COVERED ENGINE INCLUDING SHIPPING STAND. (FOLLOWING OVERALL VIEWS: FRONT, RH SIDE, LH SIDE, REAR)	N/A
17.6	PERFORM EASA FORM ONE WITH FAA DUAL RELEASE OR FAA FORM 8130-3 WITH EASA DUAL RELEASE FOR THE REALIZED END OF LEASE INSPECTION.	N/A

Appendix D – Use Fee Amount (Flight Hour)

Flight Hour to Cycle Ratio

Up to . 87

87 – 1.12

1.12 – 1.37

1.37 – 1.62

1.62 – 1.87

1.87 – 2.12

2.12 – 2.37

2.37 – 2.62

2.62 – 2.87

2.87 – 3.12

More than 3.12

U.S. Dollars ($) per Flight Hour

*

*

*

*

*

*

*

*

*

*

*

NOTE: These amounts are subject to annual escalation at the rate of * per annum commencing on January 1, 2018 (monthly derate above 12%).

39

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

Appendix E – Harsh Environment Countries

Harsh Environment

Countries

Afghanistan

Algeria

Armenia

Azerbaijan

Bahrain

Burkina Faso

Chad

Djibouti

Egypt

Eritrea

Ethiopia

Gambia

Georgia

Guinea

Guinea-Bissau

Iran

Iraq

Israel

Jordan

Kazakhstan

Kuwait

Kyrgyzstan

Lebanon

Libya

Mali

Mauritania

Mongolia

Morocco

Niger

Oman

Pakistan

Palestinian Territories

Qatar

Saudi Arabia

Senegal

Sierra Leone

Somalia

Sudan

Syria

Tajikistan

Tunisia

Turkmenistan

United Arab Emirates

Uzbekistan

Yemen

40

Appendix F – Non-Incident Statement

(Lessee shall submit the following statement on Sub-Lessee’s Letterhead to Lessor upon return of the Engine.)

NON-INCIDENT STATEMENT

Dated:                     

                     (“Operator”) warrants and represents that to the best of its knowledge and belief based upon a reasonable due diligence of the Engine (as herein defined), at the time of the delivery of such engine and/or engine part(s) more particularly described as one CFM International, Inc. model: CFM56-7 aircraft engine, bearing engine serial number:   *   (collectively, the “Engine”), together with the respective records and documentation, to Contrail Aviation Support, LLC (“Lessor”), as of the above referenced date:

Engine first operated by Operator on:
Total Hours as received:	Total Cycles as received:
Engine last operated by Operator on:
Total Hours at return:	Total Cycles at return:
Operated at Thrust Level:

During the period of time Operator operated and maintained the Engine, including the components, parts or materials installed therein or thereon:

1. such Engine was not obtained from any military or government source; and

2. such Engine, was not (i) involved in an accident, incident, fire or a major failure, (ii) exposed to extreme environmental conditions, severe stress or heat beyond limits, (iii) immersed in salt water or exposed to corrosive agents outside normal operation, unless, in each case, the Engine, and/or such components, parts, or materials have been restored to a serviceable condition in accordance with the original engine manufacturer’s approved technical data.

This statement, including the warranty and representations described herein, may be disclosed to customers of Lessor or any other third party recipient of such Engine.

By:                     

Typed Name:                     

Title:                     

Note: An authorized officer or designee of Operator shall sign this statement. A mechanically applied signature is not acceptable.

41

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

Appendix G – Form of Certification and Representation Regarding Items Subject to Export

Control Requirements

Certification and Representation

Regarding Items Subject to Export Control Requirements

The information provided on this certification shall be used by Contrail Aviation Support, LLC (“Contrail”), for the purpose of ensuring compliance with U.S. laws and regulations regarding export controls and economic sanctions. All information provided on this form shall be treated as proprietary and shall not be provided to a third party, other than upon the request of the U.S. Government, without prior authorization from *  (“*”). * understands that items, technical data, and/or services to be provided by Contrail are subject to U.S. Government export control requirements and certifies and represents that *:

(1) Intends that the items, technical data, and/or services provided by Contrail are solely for civil end-use and will not be used for any other purpose or end-use connected with weapons proliferation, satellite usage, military applications, chemical biological or nuclear weapons, or items capable of delivering such weapons unless prior authorization is sought and obtained from the relevant U.S. Government agencies pursuant to the Export Administration Regulations, the International Traffic in Arms Regulations or the relevant sanctions regimes maintained by the U.S. Department of the Treasury’s Office of Foreign Assets Controls;

(2) Understands that the items, technical data and/or services will not be used for any purpose related to a military end-use by the People’s Republic of China;

(3) Understands that the items may not be exported or re-exported for the use of a foreign vessel or aircraft unless, under the EAR, a license exception exists or no license is required to ship the items to: (a) the country in which the vessel or aircraft is located; (b) the country in which the vessel or aircraft is registered (or will be registered if under construction); and (c) the country (or foreign national) which controls, leases, or charters the vessel or aircraft;

(4) Will not transfer, export or re-export items, technical data, and/or services provided by Contrail to destinations subject to a U.S. or U.N. arms embargo, to a destination subject to anti- terrorism export controls, or in a manner otherwise contrary to U.S. law, including, but not limited to Iran, Sudan, North Korea, Syria and Cuba;

(5) Is not debarred, suspended, prohibited or impaired from exporting, re-exporting, receiving, purchasing, procuring, or otherwise obtaining any product, commodity of technical data regulated by any agency of the U.S. Government; and

(6) Will use the item(s), technical data and/or service provided by Contrail for: subleased spare engine for commercial use only.

(7) If other than * or an operator in the United States of America, please identify the ultimate end user(s) and country(ies) of ultimate destination of the item(s), technical data and/or services (Attach a separate sheet if necessary)

Name:

Address:

Ultimate Destination:

(8) In the event there are additions or changes to the information provided above, *  shall provide the new information to Contrail, in writing, as soon as it becomes available.

42

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

* further certifies and represents that item(s), technical data, and/or services to be provided by Contrail, either directly or indirectly:

(9) Will not be transferred to any department, branch, or agency of, or controlled by, the Chinese military;

(10) Will not be used for any purpose related to a military end-use by the People’s Republic of China;

(11) Will not be incorporated into a military item;

(12) Will not be used to operate, install, maintain, repair, overhaul, or refurbish a military item;

(13) Will not be used in the design (including design research, analyses, concepts, configuration design, integration design), pilot production schemes, assembly and testing of prototypes, or layouts related to a military item;

(14) Will not be used in the production of a military item, including product engineering, manufacturing, integration assembly, mounting, testing, assembly, inspection, and quality assurance;

(15) Will not be deployed as a military item, including placed in battle formation or appropriate strategic position; and

(16) In the event there are additions or changes to the information provided above, *shall provide the new information to Contrail, in writing, with the order that will be thereby affected.

43

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

EX-10.5

Exhibit 10.5

PURCHASE AGREEMENT

dated

as of October 9^th, 2017

between

CONTRAIL AVIATION SUPPORT, LLC

as Seller,

and

*

as Buyer

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

TABLE OF CONTENTS

				Page
1.	Definitions			1
2.	Sale			1
3.	Purchase Price; Deposit; Purchase Price Adjustment			1
4.	Inspection of Airframe; Value at Closing; Delivery Condition; Deregistration; Export			2
5.	Representations and Warranties of Seller			3
		(a)	Organization, Etc.	3
		(b)	Organizational Authorization	3
		(c)	No Violation	3
		(d)	Approvals	3
		(e)	Valid and Binding Agreements	3
		(f)	Litigation	4
		(g)	Encumbrances	4
		(h)	Brokers’ Fees	4
		(i)	Title to Interests	4
		(j)	Operation	4
6.	Disclaimer			4
7.	Representations and Warranties of Buyer			5
		(a)	Organization, Etc.	5
		(b)	Authorization	5
		(c)	No Violation	5
		(d)	Approvals	5
		(e)	Valid and Binding Agreements	5
		(f)	Litigation	6
		(g)	Broker’s Fees	6
8.	Conditions Precedent to the Obligations of Seller			6
		(a)	Purchase Price	6
		(b)	Due Authorization, Execution and Delivery	6
		(c)	Representations and Warranties	6
		(d)	Additional Information	6
		(e)	Illegality	6
		(f)	No Proceedings	6
		(g)	Delivery Location	6
		(h)	Approvals, Consents and Notices	7
		(i)	Insurance	7

i

9.	Conditions Precedent to the Obligations of Buyer		7
	(a)	Due Authorization, Execution and Delivery	7
	(b)	Representations and Warranties	7
	(c)	Additional Information	7
	(d)	Illegality	7
	(e)	No Proceedings	7
	(f)	Delivery Location	7
	(g)	Material Damage	7
	(h)	Liens	7
10.	International Registry		8
11.	Further Assurances		8
12.	Taxes, Indemnities and Insurance		8
	(a)	Buyer’s Obligations regarding Taxes	8
	(b)	Seller’s Indemnity	8
	(c)	Buyer’s Indemnity	8
	(d)	Withholding	9
	(e)	Contest Resolution	9
	(f)	Cooperation	10
	(g)	Notice of Claims	10
	(h)	Insurance	10
13.	Know Your Customer		10
14.	Miscellaneous		11
	(a)	Notices	11
	(b)	Confidentiality	11
	(c)	Limitation of Liability of Any Party	12
	(d)	Headings	12
	(e)	References	12
	(f)	Governing Law	12
	(g)	Arbitration/Jurisdiction	13
	(h)	Severability	13
	(i)	Amendments in Writing	13
	(j)	Survival	13
	(k)	Expenses	13
	(1)	Execution in Counterparts	13
	(m)	Entire Agreement	13
	(n)	Exhibits and Schedules	14
	(o)	Successors and Assigns	14
	(p)	No Third Party Benefit	14
	(q)	Assignment	14

ii

SCHEDULES:
Schedule 1	Definitions
Schedule 2	Airframe Description; Purchase Price
Schedule 3	Airframe Documents
EXHIBITS:
Exhibit A	Acknowledgment of Delivery
Exhibit B	Certificate of Technical Acceptance
Exhibit C	Warranty Bill of Sale

iii

PURCHASE AGREEMENT

THIS PURCHASE AGREEMENT, dated as of October         , 2017 (this “Agreement”), is entered into between CONTRAIL AVIATION SUPPORT, LLC, a Wisconsin limited liability company (the “Seller”), and * * * a Company organized under the laws of * (the “Buyer”).

WHEREAS, subject to the terms and conditions hereof, Seller desires to sell, transfer, and convey to Buyer, and Buyer desires to purchase from Seller, one (1) used Boeing 737-800 Airframe and related Airframe Documents (as defined herein).

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and agreements of the parties contained herein and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Seller and Buyer agree as follows:

1. Definitions

Capitalized terms used in this Agreement shall have the meanings set forth in Schedule 1 to this Agreement.

2. Sale

Subject to the terms and conditions of this Agreement, Seller agrees to sell and transfer to Buyer, and Buyer agrees to purchase from Seller, all of Seller’s right, title and interest in, to and under the Airframe and Airframe Documents, free and clear of all liens. The Closing of the purchase and sale of the Airframe shall take place upon satisfaction or waiver of all of the conditions set forth in Section 8 and Section 9 on the Anticipated Closing Date but not later than the respective Final Closing Date, or at such other time as Buyer and Seller may agree in writing.

3. Purchase Price; Deposit; Purchase Price Adjustment

(a) The purchase price for the Airframe shall be in the amount and allocated (as applicable) as set forth on Schedule 2 hereto (collectively and individually, the “Purchase Price”).

(b) Buyer has previously paid to Seller a security deposit in the amount and allocation (as applicable) as set forth on Schedule 2 hereto (the “Deposit”) which shall be non-refundable to Buyer unless any of the following events occur:

(i) Seller fails to deliver the Airframe to Buyer on or before the Final Closing Date;

(ii) the Airframe suffers an Event of Loss or Material Damage between the time of Technical Acceptance and Delivery; or

(iii) Buyer does not issue the Certificate of Technical Acceptance to Seller.

Purchase Agreement

Page 1

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

(c) Prior to Closing, Seller shall provide an original undated signed bill of sale in the form shown on Exhibit C, and Buyer shall provide an original undated signed delivery receipt for the Airframe in the form shown on Exhibit A, to an escrow agent designated by Seller, and reasonably acceptable to Buyer, to be held by such escrow agent until Seller gives notice that the full Purchase Price has been received by Seller. Said bill of sale shall be delivered (and shall only be delivered) to Buyer by the escrow agent upon receiving Seller’s email confirmation of receipt of the full Purchase Price in cleared funds in Seller’s bank account, which confirmation Seller shall provide immediately upon receiving the Purchase Price.

(d) At Closing, Buyer shall deliver to Seller an amount equal to the Purchase Price (less the Deposit), in immediately available funds, by wire transfer in an account designated in writing by Seller.

4. Inspection of Airframe; Value at Closing; Delivery Condition; Deregistration; Export

(a) Buyer has previously had the opportunity to perform inspections of the Airframe and Airframe Documents and has technically accepted the Airframe (by execution of this Agreement) subject only to the right of Final Inspection herein. Buyer will be provided the opportunity for a final inspection of the Airframe while the Airframe is located at *,  and prior to Seller’s purchase of the Airframe from * Buyer shall be entitled to perform such Final Inspection of the Airframe, including (i) a physical “walk around” inspection of the Airframe interiors and exteriors; and (ii) an inspection of all Airframe Documents relating to such Airframe for the sole purpose of confirming that the Airframe and Airframe Documents are in substantially the same condition as at the time of the execution of this Agreement (“Final Inspection”). Upon Buyer’s confirmation that the Airframe and Airframe Documents are in substantially the same condition as at the time of the execution of this Agreement, Buyer shall execute and deliver to Seller the Certificate of Final Technical Acceptance.

(b) Closing shall occur at the Delivery Location. Seller shall provide to Buyer at the time of delivery all Airframe Documents.

(c) At Closing, Seller shall, to the extent existing and assignable by Seller, assign to Buyer all rights in and to all remaining warranties offered by the airframe manufacturers in respect of the Airframe.

(d) The Airframe (including the Airframe Documents) shall be delivered to Buyer in “as-is” “where-is” basis. Seller makes no warranties, guarantees or representations of any kind, either express or implied, statutory or otherwise, as to the condition of the Airframe.

(e) At Closing, Buyer shall pay for half of ferry costs, customs costs, DAR and similar fees to deliver the aircraft of which the Airframe is a part from *Taiwan to the U.S.A,, it being understood that Buyer’s share of any such actual costs which are not known at the time of Closing will be paid by Buyer to Seller promptly upon invoicing of the same.

Purchase Agreement

Page 2

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

5. Representations and Warranties of Seller

On the date hereof and on the Closing Date Seller makes the following representations and warranties.

(a) Organization, Etc. Seller is duly organized, validly existing and in good standing under the laws of the State of Wisconsin, U.S.A. with all requisite organizational power and authority to own, participate in or hold under lease its properties and enter into and perform its obligations under this Agreement and the Transfer Documents to which Seller is or will be a party (collectively, the ‘‘Seller Agreements”);

(b) Organizational Authorization. Seller has taken, or caused to be taken, all necessary organizational action (including, without limitation, the obtaining of any consent or approval of any of its board of directors or committee thereof or any officers required by its charter documents or other organizational agreements) to authorize the execution and delivery of this Agreement and each of the Seller Agreements and the performance of its obligations hereunder and thereunder;

(c) No Violation. The execution and delivery by Seller of this Agreement and the Seller Agreements, the performance by Seller of its obligations hereunder and thereunder and the consummation by Seller on the date hereof and on the Closing Date of the transactions contemplated hereby and thereby, do not and will not (i) violate or contravene any provision of the charter documents or other organizational agreements of Seller, (ii) violate or contravene any law applicable to or binding on Seller or (iii) violate, contravene or constitute any default under, or result in the creation of any lien upon, any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, lease, loan or other material agreement, instrument or document to which Seller is a party or by which Seller or any of its properties is or may be bound or affected;

(d) Approvals. The execution and delivery by Seller of this Agreement and the Seller Agreements, the performance by Seller of its obligations hereunder and thereunder and the consummation by Seller on the Closing Date of the transactions contemplated hereby or thereby do not and will not require the consent, approval or authorization of, or the giving of notice to, or the registration with, or the recording or filing of any documents with, or the taking of any other action in respect of any Government Entity;

(e) Valid and Binding Agreements. This Agreement has, and the Seller Agreements have been or as of the Closing Date will have been, duly authorized, executed and delivered by Seller and, assuming the due authorization, execution and delivery by the other party or parties thereto, this Agreement and, as of the Closing Date, the Seller Agreements constitute the legal, valid and binding obligations of Seller and are enforceable against Seller in accordance with the respective terms thereof, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, receivership, moratorium and other similar laws affecting the rights of creditors generally and general principles of equity, whether considered in a proceeding at law or in equity;

Purchase Agreement

Page 3

(f) Litigation. There are no pending or, or to the knowledge of Seller, threatened actions or proceedings against Seller before any court, administrative agency or tribunal which, if determined adversely to Seller, would prohibit or materially adversely affect the ability of Seller to perform its obligations under this Agreement or the Seller Agreements;

(g) Encumbrances. Seller has not previously sold, assigned, encumbered, transferred or conveyed and, except as contemplated hereby, has no obligation to sell, assign, encumber, transfer or convey, any of its right, title or interest in, to or under the Airframe;

(h) Brokers’ Fees. Buyer shall not be liable for the fees of any broker or other Person acting on Seller’s behalf in connection with the transactions contemplated hereby;

(i) Title to Interests. Seller is the sole owner of the Airframe and has good title thereto, free and clear of any and all Liens. At Closing, such title shall be transferred to Buyer free and clear of all Liens.

6. Disclaimer

Other than the express representations and warranties of Seller set forth in Section 5 and in any other Transfer Document, the Airframe is being sold and assigned hereunder, “AS IS, WHERE IS” and BUYER ACKNOWLEDGES AND AGREES THAT NEITHER THE SELLER NOR ANY OF ITS AFFILIATES, OFFICERS, DIRECTORS, MEMBERS, EMPLOYEES OR REPRESENTATIVES HAS MADE OR WILL BE DEEMED TO HAVE MADE ANY TERM, CONDITION, REPRESENTATION, WARRANTY OR COVENANT EXPRESS OR IMPLIED (WHETHER STATUTORY OR OTHERWISE) AS TO, AND BUYER HEREBY WAIVES, RELEASES AND RENOUNCES ANY AND ALL WARRANTIES, OBLIGATIONS AND LIABILITIES, EXPRESS OR IMPLIED (WHETHER STATUTORY OR OTHERWISE) WITH RESPECT TO, (a) THE CAPACITY, AGE, VALUE, QUALITY, DURABILITY, DESCRIPTION (EXCEPT AS TO SERIAL NUMBER), CONDITION (WHETHER OF THE AIRFRAME, ANY PART THEREOF OR ITS AIRFRAME DOCUMENTS), DESIGN, WORKMANSHIP, MATERIALS, MANUFACTURE, CONSTRUCTION, OPERATION, DESCRIPTION, STATE, MERCHANTABILITY, PERFORMANCE, FITNESS FOR ANY PARTICULAR USE OR PURPOSE (INCLUDING THE ABILITY TO OPERATE OR REGISTER THE AIRFRAME OR USE THE AIRFRAME IN ANY OR ALL JURISDICTIONS) OR SUITABILITY OF THE AIRFRAME, OR ANY PART THEREOF, (b) THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, KNOWN OR UNKNOWN, APPARENT OR CONCEALED, EXTERIOR OR INTERIOR, (c) THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK, COPYRIGHT OR OTHER INTELLECTUAL PROPERTY RIGHTS, (d) ANY IMPLIED WARRANTY ARISING FROM THE COURSE OF PERFORMANCE, COURSE OF DEALING OR USAGE OF TRADE OR (e) ANY OTHER REPRESENTATIONS OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRFRAME OR ANY PART THEREOF OR ITS AIRFRAME DOCUMENTS, ALL OF WHICH ARE HEREBY EXPRESSLY EXCLUDED, IT BEING UNDERSTOOD THAT NOTHING HEREIN WILL BE DEEMED TO LIMIT THE BUYER FROM AVAILING ITSELF OF ANY WARRANTIES, COVENANTS, AND REPRESENTATIONS OF ANY MANUFACTURER.

Purchase Agreement

Page 4

7. Representations and Warranties of Buyer

On the date hereof and on the Closing Date, Buyer makes the following representations and warranties as to itself, to Seller:

(a) Organization, Etc. Buyer is a limited liability company duly organized, validly existing and in good standing under the laws of * U.S.A., and has the power and authority to own, participate in or hold under lease its properties and to enter into and perform its obligations under this Agreement and the Transfer Documents to which Buyer is a party (collectively, the “Buyer Agreements”);.

(b) Authorization. Buyer has taken, or caused to be taken, all necessary action (including, without limitation, the obtaining of any consent or approval of its members required by its certificate of formation or limited liability company agreement) to authorize the execution and delivery of this Agreement and each of the Buyer Agreements, as the case may be, and the performance of its obligations hereunder and thereunder;

(c) No Violation. The execution and delivery by Buyer of this Agreement and the Buyer Agreements, the performance by Buyer of its obligations hereunder and thereunder and the consummation by Buyer on the Closing Date of the transactions contemplated hereby and thereby, do not and will not (i) violate or contravene any provision of the certificate of formation, limited liability company agreement, other charter documents or other organizational agreements of Buyer, (ii) violate or contravene any law applicable to or binding on Buyer or (iii) violate, contravene or constitute any default under, or result in the creation of any lien upon, any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, lease, loan or other material agreement, instrument or document to which Buyer is a party or by which Buyer or any of its properties is or may be bound or affected;

(d) Approvals. The execution and delivery by Buyer of this Agreement and the Buyer Agreements, the performance by Buyer of its obligations hereunder and thereunder and the consummation by Buyer on the Closing Date of the transactions contemplated hereby and thereby do not and will not require the consent, approval or authorization of, or the giving of notice to, or the registration with, or the recording or filing of any documents with, or the taking of any other action in respect of, (i) any trustee or other holder of any debt of Buyer and (ii) any Government Entity;

(e) Valid and Binding Agreements. This Agreement has been and the Buyer Agreements have been or as of the Closing Date will have been duly authorized, executed and delivered by Buyer and, assuming the due authorization, execution and delivery by the other party or parties thereto, this Agreement and, as of the Closing Date, the Buyer Agreements constitute the legal, valid and binding obligations of Buyer and are enforceable against Buyer in accordance with the respective terms thereof, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, receivership, moratorium and other similar laws affecting the rights of creditors generally and general principles of equity, whether considered in a proceeding at law or in equity;

Purchase Agreement

Page 5

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

(f) Litigation. There are no pending or, to the knowledge of Buyer, threatened actions or proceedings against Buyer before any court, administrative agency or tribunal which, if determined adversely to Buyer would materially adversely affect the ability of Buyer to perform its obligations under this Agreement or the Buyer Agreements; and

(g) Broker’s Fees. Seller shall not be liable for the fees of any broker or other person acting on Buyer’s behalf in connection with the transactions contemplated hereby.

(h) Buyer shall disassemble the Airframe following delivery and completion of the ferry flight contemplated hereunder, and shall not place the whole Airframe back in service.

8. Conditions Precedent to the Obligations of Seller

The obligation of Seller to sell, transfer, assign and convey the Airframe to Buyer on each Closing Date is subject to the satisfaction or waiver of the following conditions:

(a) Purchase Price. Seller shall have received the Purchase Price via wire transfer to Seller’s account as specified in Section 3;

(b) Due Authorization. Execution and Delivery. This Agreement and each other Transfer Document shall have been duly authorized, executed and delivered by each party thereto other than Seller;

(c) Representations and Warranties. The representations and warranties of Buyer contained herein and in any other Buyer Agreements shall be true and correct as of Closing in all material respects;

(d) Additional Information. Seller shall have received such other documents and evidence with respect to Buyer as Seller may reasonably request in order to establish the authority of Buyer to consummate the transactions contemplated by this Agreement and the other Transfer Documents on such date, the taking by Buyer of all appropriate action in connection therewith and compliance by Buyer with the conditions set forth in this Agreement on such date;

(e) Illegality. The performance on such date of the transactions contemplated hereby, upon the terms and conditions set forth herein, shall not, in the reasonable judgment of Seller, violate, and shall not subject Seller to any penalty or liability under, any law, rule or regulation binding upon Seller;

(f) No Proceedings. No legal or governmental action, suit or proceeding shall have been instituted or threatened before any court, administrative agency or tribunal, nor shall any order, judgment or decree have been issued or proposed to be issued by any court, administrative agency or tribunal to set aside, restrain, enjoin or prevent the consummation of this Agreement or the transactions contemplated hereby;

(g) Prior Purchase. The successful completion of Seller’s purchase of the Airframe from the existing owner.

Purchase Agreement

Page 6

(h) Delivery Location. The Airframe shall be located at the Delivery Location as defined hereunder;

(i) Approvals, Consents and Notices. All approvals and consents of, or notices to, any Governmental Entity, any trustee or holder of any indebtedness or obligation of the Seller or any other person, which are required in connection with the transaction contemplated by this Agreement shall have been duly obtained, given or accomplished; and

(j) Insurance. Seller shall have received the insurance certificate specified in Section 11(h).

9. Conditions Precedent to the Obligations of Buyer

The obligation of Buyer to purchase the Airframe from Seller on each Closing Date is subject to the satisfaction or waiver of the following conditions:

(a) Due Authorization, Execution and Delivery. This Agreement and each other Transfer Document shall have been duly authorized, executed and delivered by each party thereto other than Buyer;

(b) Representations and Warranties. The representations and warranties of Seller contained in the Transfer Documents shall be true and correct as of the Closing Date in all material respects;

(c) Additional Information. Buyer shall have received such other documents and evidence with respect to Seller as Buyer may reasonably request in order to establish the authority of Seller to consummate the transactions contemplated by this Agreement and other Transfer Documents on such date, the taking by Seller of all appropriate corporate action in connection therewith and compliance by Seller with the conditions set forth in the Transfer Documents on such date;

(d) Illegality. The performance of the transactions contemplated hereby, upon the terms and conditions set forth herein, shall not, in the reasonable judgment of Buyer, violate, and shall not subject any Buyer to any penalty or liability under, any law, rule or regulation binding upon such Buyer;

(e) No Proceedings. No legal or governmental action, suit or proceeding shall have been instituted or threatened before any court, administrative agency or tribunal, nor shall any order, judgment or decree have been issued or proposed to be issued by any court, administrative agency or tribunal to set aside, restrain, enjoin or prevent the consummation of this Agreement or the transactions contemplated hereby;

(f) Delivery Location. The Airframe shall be located at the agreed Delivery Location;

(g) Material Damage. No Event of Loss with respect to the Airframe shall have occurred; and

(h) Liens. The Airframe shall be free and clear of all Liens.

Purchase Agreement

Page 7

10. Further Assurances

Each party agrees, upon the reasonable request of the other party, at any time and from time to time, promptly to execute and deliver all such further documents, and promptly to take and forebear from all such action, as may be reasonably necessary or appropriate in order more effectively to confirm or carry out the provisions of this Agreement. Without limiting the foregoing, Seller shall, at the sole cost and expense of Buyer, do or cause to be done all acts and things as may be required to perfect and preserve the title and interest of Buyer in the Airframe as Buyer may reasonably request, including, without limitation, that Seller shall, upon request by Buyer and at Buyer’s cost and expense, cause all instruments which shall be executed pursuant to the terms hereof to be kept, filed and recorded in the appropriate office or offices pursuant to applicable laws to perfect, protect and preserve the rights and interests of Buyer hereunder and in the Airframe.

11. Taxes, Indemnities and Insurance

(a) Buyer’s Obligations regarding Taxes. Buyer hereby agrees promptly to pay and indemnify each Seller Indemnitee from and against any and all Taxes payable in connection with the sale, transfer and delivery by Seller to Buyer of the Airframe or in connection with any other transaction to occur on or after the Closing expressly contemplated hereby. The foregoing shall expressly exclude any liability for Taxes on or based on or measured by the gross or net income of Seller or capital gains of Seller or Taxes imposed by a taxing authority in a jurisdiction that would not have been imposed but for the business activity (other than the transactions contemplated hereby) or tax residence of Seller in such jurisdiction. The parties agree to cooperate in taking actions to minimize or eliminate Taxes in connection with this transaction.

(b) Seller’s Indemnity. Seller hereby covenants and agrees that it will pay and assume liability for, and indemnify, protect, defend, save and keep harmless each Buyer Indemnitee from and against, any and all liabilities, Taxes, obligations, losses, damages, settlements, claims, actions, suits, penalties, costs and expenses (including, without limitation, reasonable fees and expenses of counsel) of whatsoever kind and nature which may at any time or from time to time be imposed upon, incurred by or asserted against any Buyer Indemnitee in any way relating to, resulting from or arising out of (i) any inaccuracy or breach of any representation or warranty made by Seller under this Agreement or any Seller Agreements, (ii) any failure by Seller to have observed or performed any of its obligations under or in connection with this Agreement or any Seller Agreements, or (iii) any claims made after Closing, solely to the extent any such claim is attributable to (A) the gross negligence or willful misconduct of Seller and occurring prior to Closing, or (B) the existence of any Liens on the Airframe attributable to the period occurring prior to Closing.

(c) Buyer’s Indemnity. Buyer hereby covenants and agrees upon demand of Seller to pay and assume liability for, and indemnify, protect, defend, save and keep harmless each Seller Indemnitee from and against, any and all liabilities, Taxes, fees, obligations, losses,

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damages, settlements, claims, actions, suits, penalties, costs and expenses (including, without limitation, reasonable fees and expenses of counsel) of whatsoever kind and nature which may at any time or from time to time be imposed upon, incurred by or asserted against any Seller Indemnitee in any way relating to, resulting from or arising out of (i) any inaccuracy or breach of any representation or warranty made by Buyer under this Agreement or any Buyer Agreements, (ii) any failure by Buyer to have observed or performed any of its obligations under or in connection with this Agreement or any Buyer Agreements in respect of or to the extent attributable to the period from and after Closing, or (iii) any claims made after Closing, solely to the extent such claim is not attributable (A) to the period occurring prior to Closing or (B) to Seller’s failure to perform its obligations under this Agreement or the Seller Agreements.

(d) Withholding. If any Tax is required by law to be deducted or withheld from or with respect to any amount paid or payable by Buyer or the Seller pursuant to this Agreement (the “Paying Party”) to the other party hereto (the “Receiving Party”), then the Paying Party shall pay such additional amount as shall be necessary to enable the Receiving Party to receive, after all such withholding (including any withholding from or with respect to such additional amount), the amount that the Receiving Party would have received if such deduction or withholding had not been made.

(e) Contest Resolution. If a claim is made by any tax authority against a party hereto (the “taxed party”) with respect to any Tax of which another party (the “indemnifying party”) is obligated to indemnify under this Section 12, the taxed party shall promptly notify the indemnifying party of such claim; provided, however, that the failure to give such notice will not prejudice or otherwise affect any of the rights of the taxed party hereunder unless such failure materially and adversely affects the indemnifying party in exercising its contest rights hereunder or to the extent such failure results in any increase in, or fine or penalty with respect to, any amounts claimed to be payable by the indemnifying party to the taxed party pursuant to this Section 12. If reasonably requested by the indemnifying party in writing, the taxed party shall (at the expense and direction of the indemnifying party) contest in the name of the taxed party or indemnifying party (as applicable), the validity, applicability or amount of such Taxes so indemnified by (i) if permitted by applicable law without adverse consequences to the taxed party, resisting payment thereof, (ii) paying under protest, if protest is necessary or proper, and (iii) if payment be made, using reasonable commercial efforts to obtain a refund thereof in appropriate administrative and judicial proceedings. If the taxed party becomes eligible for a refund of any Taxes paid by the indemnifying party, it shall notify the indemnifying party and, if reasonably requested by the indemnifying party and permissible under applicable law, the taxed party shall consider in good faith any request by the indemnifying party to assign such right to the indemnifying party. Should the taxed party obtain a refund of all or any part of the Taxes paid by the indemnifying party, the taxed party shall pay the indemnifying party the amount of such refund, plus, any interest thereon (net of any taxes imposed on such interest) obtained by the taxed party from the taxing authority if fairly attributable to such Taxes.

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(f) Cooperation. Seller and Buyer shall reasonably cooperate so as to minimize any potential tax risk to Buyer or Seller as a result of the transactions contemplated hereby. Seller and Buyer shall provide one another with such assistance as may reasonably be required in connection with the preparation of any tax return, any audit or other examination by any taxing authority, or any judicial or administrative proceedings relating to liability for Taxes arising from the transactions contemplated by this Agreement, and shall provide one another upon written request with any records or information that are relevant to such Tax return, audit or examination or proceedings. The party requesting assistance, records or information under the preceding sentence shall reimburse the other for reasonable out-of-pocket expenses incurred by the other in providing such assistance, records or information.

(g) Notice of Claims. Seller and Buyer agree to provide written notification to the other party promptly after becoming aware of any liability, obligation or claim, whether pending or threatened, that is the subject of indemnification pursuant to this Section 12; unless the failure to provide such notification would not materially and adversely affect the indemnifying party in exercising its contest rights hereunder or result in any increase in, or fine or penalty with respect to, any amounts claimed to be payable by the indemnifying party to the other party pursuant to this Section 12, provided, that the failure by either party to so notify the other party will not in any manner affect either party’s other obligations under this Section 12.

(h) Insurance. For the earlier of a period of two years after the purchase of the Airframe,, Buyer shall, at its own cost and expense, maintain and keep in full force and effect an insurance policy(ies) for the Airframe providing $10,000,000 of aviation products liability coverage, except in the event that the Airframe is returned to service, in which event $500,000,000 of aviation general liability coverage shall be provided with respect to the Airframe. Seller and Seller’s nominees shall be named as additional insured parties for such two-year period on terms reasonably satisfactory to Seller. Aviation General Liability insurance covering Buyer’s or any operator’s aviation activities shall include Premises Liability, Contractual Liability, Products Liability, War Risks Liability, and including Extended Coverage Endorsement (Aviation Liabilities) AVN52 or equivalent covering War and Allied Perils excluded by War, Hijacking and Other Perils Exclusion Clause AVN48B or any modification or substitution thereof for the time in force. Such policies shall be carried with insurers reasonably acceptable to Seller. Such insurance shall include the Seller and any other Seller Indemnitees as additional insureds. Such policies shall include a Waiver of Subrogation Clause, Breach of Warranty Clause, and Severability of Interest Clause in favor of the additional insureds. Buyer shall furnish an insurance certificate evidencing the same at Closing, and at the expiration of an existing certificate.

12. Know Your Customer

Seller and Buyer shall (i) ensure that no Person who owns a controlling interest in or otherwise controls Buyer or Seller is or shall be listed on the Specially Designated Nationals and Blocked Person List or other similar lists maintained by the Office of Foreign Assets Control (“OFAC”), the Department of the Treasury or included in any Executive Orders, (ii) not violate any of the foreign asset control regulations of OFAC or any enabling statute or Executive Order relating thereto, (iii) comply with all applicable Bank Secrecy Act laws and regulations, as amended or

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(iv) comply with any other applicable national sanctions program. As required by federal law or other applicable law, Seller or Buyer may need to obtain, verify and record certain customer identification information and documentation in connection herewith, and each party hereto shall provide such information as is reasonably requested prior to Closing.

13. Miscellaneous

(a) Notices.

All notices, demands, declarations and other communications required by this Agreement shall be in writing and shall be effective (i) if given by facsimile, when transmitted, (ii) if given by registered or certified mail, three Business Days after being deposited with the U.S. Postal Service or other commercially recognized carrier and (iii) if given by a nationally recognized overnight courier, when received, or, if personally delivered, when so delivered, addressed:

If to Seller, to:

CONTRAIL AVIATION SUPPORT, LLC

435 Investment Court

Verona, Wisconsin 53593

Attn: Joseph Kuhn, CEO

Fax: (608) 848-8100

Email: Joecontrail.com

or to such other address as Seller shall from time to time designate in writing to Buyer; and

If to Buyer, to:

*

or to such other address as Buyer may from time to time designate in writing to Seller.

(b) Confidentiality.

(i) Each party hereto shall keep strictly confidential any and all Confidential Information furnished to it or to its Affiliates, or their respective officers, employees, agents, directors or advisers (collectively, “Representatives”) in the course of negotiations relating to this Agreement or any transaction contemplated by this Agreement, and the business and financial reviews and investigation conducted by any party hereto in connection with this Agreement, and each such party has instructed its Representatives having access to such Confidential

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

Information of such obligation of confidentiality. The obligations of confidentiality set forth herein shall not apply to information to the limited extent (v) it is contained in a Transfer Document that is publicly filed as contemplated hereby; (w) it is required to be disclosed by any Governmental Entity or required to be disclosed by applicable law or administrative proceeding, (x) for which a party has received a subpoena or similar demand (provided that such party shall to the extent permitted by applicable law first, as promptly as practicable upon receipt of such subpoena or demand, furnish a copy thereof to the other party), (y) that such information is generally available to the public or in the possession of the receiving party before its disclosure by the disclosing party to the receiving party or (z) that it is given to the receiving party by another Person other than in breach of obligations of confidentiality owed by such Person to the disclosing party. Notwithstanding the foregoing, each party acknowledges and agrees that any party may disclose Confidential Information to (A) regulators, (B) such party’s counsel, Affiliates, beneficiaries, hedging arrangement providers, insurance brokers and providers, reinsurers and auditors provided that such recipients maintain the confidentiality of the Confidential Information and (C) prospective transferees and lenders who agree to keep such Confidential Information confidential.

(ii) Notwithstanding anything herein to the contrary, any party to this Agreement (and any Representative) may disclose to any and all Persons, without limitation of any kind, the tax treatment and tax structure of the transactions contemplated by this Agreement and all materials of any kind (including opinions or other tax analyses) that are provided to it relating to such tax treatment and tax structure; provided, however, that such disclosure may not be made to the extent required to be kept confidential to comply with any applicable federal or state securities laws.

(c) Limitation of Liability of Any Party. THE PARTIES ACKNOWLEDGE AND AGREE THAT, NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, NO PARTY SHALL BE LIABLE TO ANOTHER PARTY TO THIS AGREEMENT OR ASSERT A CLAIM FOR ANY INCIDENTAL, CONSEQUENTIAL, SPECIAL, OR PUNITIVE DAMAGES, REGARDLESS OF THE NATURE OR THEORY OF ANY UNDERLYING CAUSE OF ACTION THAT MIGHT OTHERWISE APPLY.

(d) Headings. Headings used herein are for convenience only and shall not in any way affect the construction of, or be taken into consideration in interpreting, this Agreement.

(e) References. Any reference to a specific Section or Section number shall be interpreted as a reference to that Section of this Agreement unless otherwise expressly provided.

(f) Governing Law; Jurisdiction; Attorney Fees. This Agreement and any other Transfer Documents shall in all respects be governed by, and construed in accordance with, the laws of the State of New York, U.S.A., including all matters of construction, validity and performance, without giving effect to principles of conflicts of law. The federal courts located in the State of New York shall serve as the exclusive forum for any such dispute and the parties irrevocably consent to the jurisdiction of such courts. In the event of a dispute between the parties, the prevailing party shall be entitled to reasonable attorney fees and costs.

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(g) Severability. If any provision hereof should be held invalid, illegal or unenforceable in any respect in any jurisdiction, then, to the fullest extent permitted by law, (i) all other provisions hereof shall remain in full force and effect in such jurisdiction and shall be construed in order to carry out the intentions of the parties hereto as nearly as may be possible, and (ii) such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of such provision in any other jurisdiction.

(h) Amendments in Writing. No amendment, modification, waiver, termination or discharge of any provision of this Agreement, or any consent to any departure by Seller or Buyer from any provision hereof, shall in any event be effective unless the same shall be in writing and signed by Seller and Buyer, and each such amendment, modification, waiver, termination or discharge shall be effective only in the specific instance and for the specific purpose for which given.

(i) Survival. Notwithstanding anything contained herein to the contrary, all agreements, indemnities, representations and warranties contained in this Agreement shall survive the Closing Date and the consummation of the transactions contemplated hereby for such date.

(j) Expenses. Each of Seller and Buyer shall be responsible for its own costs and expenses incurred in connection with the negotiation, preparation, execution and delivery of this Agreement and the Transfer Documents, and shall not have any right of reimbursement or indemnity for such costs and expenses as against the Buyer or Seller, respectively. Notwithstanding anything to the contrary, Buyer shall be responsible for any cost associated with the registration of the transfer of title in the State of Registration including any special aviation counsel fees.

(k) Execution in Counterparts; Signatures. This Agreement, the other Transfer Documents and any amendments, waivers or consents hereto or thereto may be executed by Seller and Buyer in separate counterparts (or upon separate signature pages bound together into one or more counterparts), each of which, when so executed and delivered, shall be an original, but all such counterparts shall together constitute one and the same instrument. Facsimile and PDF copy signatures shall be treated as original signatures for all purposes.

(l) Entire Agreement. This Agreement and the other Transfer Documents constitute the entire agreement of Seller and Buyer with respect to the subject matter hereof or thereof, and all prior or contemporaneous understandings or agreements, whether written or oral, between Seller and Buyer with respect to such subject matter are hereby superseded in their entirety. In the event of a conflict between this Agreement and any other Transfer Document, the terms and conditions of this Agreement shall govern.

(m) Exhibits and Schedules. The exhibits and schedules attached hereto are incorporated by reference herein and shall have the same force and effect with respect to the provisions set forth therein as though fully set forth in this Agreement.

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(n) Successors and Assigns. This Agreement shall be binding upon, shall inure to the benefit of and shall be enforceable by Seller and Buyer, and their respective successors and assigns.

(o) No Third Party Benefit. Seller and Buyer agree that except as provided in Section 12 with respect to Seller Indemnitees and Buyer Indemnitees, the provisions of this Agreement, including, without limitation, Section 2, are for the sole benefit of Seller and Buyer and their respective successors and assigns, and are not for the benefit, directly or indirectly, of any other Person.

(p) Assignment. Neither party shall assign or delegate this Agreement, or any of its rights or obligations hereunder, without the prior written consent of the other party.

IN WITNESS WHEREOF, the undersigned have caused this PURCHASE AGREEMENT to be duly executed as of the day and year first written above.

CONTRAIL AVIATION SUPPORT, LLC,
as Seller
By:	/s/ Joseph G. Kuhn
Name:	Joseph G. Kuhn
Title:	CEO

*	as Buyer
	By:
	Name:
	Title:

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Page 14

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

SCHEDULE 1

DEFINITIONS

(a) Unless the context otherwise indicates, any reference in this Agreement to:

(i) a “part” means any module, component, instrument, furnishing, control, appliance, accessory, reverser, nacelle, equipment or other item or equipment of any kind whether similar to any of the foregoing or not;

(ii) a “regulation” includes any present or future directive, regulation, request or requirement (in each case whether or not having the force of law) but, if not having the force of law, the compliance with which is in accordance with the general practice of the persons to whom it is addressed;

(iii) any “agreement”, “license” or other document includes any agreement, license or other instrument as varied, novated, amended or replaced from time to time (but without prejudice to any restrictions on such variation, novation, amendment or replacement);

(iv) the expressions “hereof”, “herein” and similar expressions shall be construed as references to this Agreement as a whole and shall not be limited to the particular clause in which the relevant expressions appear and the expressions “thereof”, “therein” and similar expressions shall be construed in like fashion;

(v) references to any statute or other legislative provision shall be read to include any statutory or legislative modification or re-enactment thereof or any substitution therefor;

(vi) references to a party shall be read to include its successors and permitted assigns;

(vii) a Clause or Schedule shall be construed as a reference to a clause hereof or a schedule hereto;

(viii) a word importing the singular number shall be construed so as to include the plural and vice versa;

(ix) the expression “in writing” includes by facsimile or e-mail; and

(x) the index, clause and sub-clause headings in this Agreement (including their use in cross references) arc for ease of reference only and shall not affect the interpretation of this Agreement.

(b) In this Agreement, the following terms have the following meanings:

Schedule 1

Page 1

“Acknowledgment of Delivery” means the Acknowledgment of Delivery substantially in the form attached hereto as Exhibit A.

“Affiliate” means, as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person or which owns, directly or indirectly, more than fifty percent of the outstanding equity interests of such Person. A Person shall be deemed to control another Person if the controlling Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the other Person, whether through the ownership of voting securities, by contract, or otherwise.

“Airframe Documents” means full back-to-birth traceability of life limited parts which shall include commercial trace as required to show the part change of ownership from new to current and a non-incident / accident / military / government letter, among other manuals and records, including all inspection, modification and overhaul records required to be maintained under applicable rules and regulations, all records of any third party which has made any modifications to or refurbishments of the Airframe, and any other technical documents that pertain to the Airframe including, without limitation, the dirty finger prints for all the shop visits from last performance restoration, any of which are in Seller’s possession.

“Airframe” means that certain Boeing 737-800 airframe more specifically described on Schedule 2, excluding engines but including all other items of equipment installed in or attached thereto, including side cowls, inlet cowls, and thrust reversers and all Airframe Documents related thereto.

“Anticipated Closing Date” means the date for anticipated Closing for the Airframe as designated on Schedule 2.

“Bill of Sale” means the Warranty Bill of Sale for the Airframe.

“Business Day” means any day, other than a Saturday or Sunday, on which banks in New York City and *Taiwan, Republic of China are open for business.

“Certificate of Final Technical Acceptance” means the Certificate of Final Technical Acceptance in the form attached hereto as Exhibit B.

“Closing” means the closing of the sale and purchase of the Airframe pursuant to this Agreement on the Closing Date.

“Closing Date” means the date of the Closing.

“Confidential Information” means any and all information, whether written, in electronic form, or oral concerning or relating in any way to the Airframe, which is provided by a party hereto or such party’s Affiliates or representatives to the other party hereto or such party’s Affiliates or representatives, and includes, without limitation, all agreements, analyses, compilations, forecasts, studies, capabilities, specifications, program plans, marketing plans, e-commerce strategies, inspection reports, certificates of insurance or other documents which contain or otherwise reflect such information, or any portion thereof or notes or other documents which contain or reflect such information, whether or not marked or specifically identified as “confidential” or “proprietary.”

Schedule 1

Page 2

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

“Delivery Location” an area reasonably designated by Seller over international waters, over which the aircraft of which the Airframe is a part will fly following departure from  * in connection with the ferry flight contemplated under this Agreement, or such other location as mutually agreed to by the parties.

“Deposit” has the meaning set forth in Section 3 hereof.

“Event of Loss” means any of the following events with respect to the Airframe, including, but not limited to: (a) loss of such property or its use due to theft, hijacking or disappearance for a period in excess of sixty (60) consecutive days, or in any event extending beyond the Anticipated Closing Date, or destruction, damage beyond economic repair or rendition of such property permanently unfit for normal use for any reason whatsoever, (b) any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss or on the basis of a compromised or constructive total loss, (c) the condemnation, confiscation, appropriation or seizure of, or requisition of title to, such property by a governmental entity or purported governmental entity, (d) the condemnation, confiscation, appropriation or seizure of the use of such property by or on behalf of the authority of any governmental entity or purported governmental entity, that in any such case shall have resulted in the loss of possession thereof for a period in excess of sixty (60) consecutive days or in any event extending beyond the Anticipated Closing Date or (e) any divestiture of title of such property except as otherwise permitted by the other party.

“Final Closing Date” means the date which is 30 days after Buyer’s execution of this Agreement.

“Final Inspection” has the meaning set forth in Section 4 hereof.

“Final Technical Acceptance” has the meaning set forth in Section 4 hereof.

“Government Entity” means any (i) nation, state, county, city, town, village, district, or other jurisdiction of any nature; (ii) federal, state, local, municipal, foreign, or other government; (iii) governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official, or entity and any court or other tribunal); (iv) multinational organization or body; or (v) body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, regulatory, or taxing authority or power of any nature.

“International Registry” means the International Registry of Mobile Assets established pursuant to the Convention on International Interests in Mobile Equipment and its Protocol on Matters Specific to Airframe Equipment, concluded in Cape Town on November 16, 2001.

“Lien” means any pledge, lien, charge, encumbrance, exercise of rights, security interest or claim of any kind or nature.

“OFAC” has the meaning set forth in Section 12 hereof.

Schedule 1

Page 3

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

“Person” means an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Government Entity or other entity of whatever nature.

“Purchase Price” has the meaning set forth in Section 3 hereof.

“Buyer Agreements” has the meaning ascribed in Section 7(a) hereof.

“Buyer Indemnitee” means Buyer and any Buyer’s Affiliates, members, managers, officers, directors, employees, successors and assigns.

“Seller Agreements” has the meaning ascribed to such term in Section 5(a) hereof.

“Seller Indemnitees” means each of the Seller, * * *, * * *, and their respective Affiliates, and the members, managers, officers, directors, employees, successors and assigns of any of such entities.

“State of Registration” means *Taiwan (previous registration) and USA (after sale)

“Taxes” means and includes all present and future income, gains, sales, stamp, documentary, use, value-added, goods and services and other taxes, duties, imposts, levies, deductions, charges and withholdings imposed by any Government Entity and also includes all fines, penalties and interest thereon, and the terms “Tax” and “Taxation” shall be construed accordingly.

“Transfer Documents” means this Agreement, the Bill of Sale, the Acknowledgments of Delivery, the Certificates of Technical Acceptance and any other agreements, documents, certificates and instruments executed and delivered in connection herewith.

“Warranty Bill of Sale” means the warranty bill of sale for the Airframe, in the form of Exhibit C hereto for the Airframe.

Schedule 1

Page 4

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

SCHEDULE 2

AIRFRAME DESCRIPTION; PURCHASE PRICE

MSN	*Chinese Registration Mark	Purchase Price	Deposit	Anticipated Closing Date	Final Closing Date
*	*	*	*	October 21, 2017	30 days following execution of this Agreement

Schedule 2

Page 1

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

EXHIBIT A

ACKNOWLEDGMENT OF DELIVERY

            , 2017            

By this Acknowledgment of Delivery, Contrail Aviation Support, LLC (the “Seller”), and * * * (the “Buyer”), acknowledge that pursuant to that certain Sale Agreement dated as of                     , 2017, among Seller and Buyer, (the “Agreement”), Seller does hereby deliver to Buyer and Buyer does hereby accept the following in all respects under the Agreement:

One Boeing model 737-800 airframe bearing manufacturer’s serial number * including all parts, components, appliances, accessories, instruments, furnishings, alterations and other items of equipment installed in or attached thereto, and all Airframe Documents related thereto (collectively the “Airframe”).

Buyer has accepted delivery of the Airframe at              hours G.M.T. at *G.M.T. at Taoyuan International Airport, Taiwan. Accordingly, as of the date hereof, Seller has delivered the Airframe to Buyer and that the Closing Date as defined and set forth in the Agreement has occurred. Buyer hereby declares that the Airframe is acceptable and does conform to the Agreement in all respects.

This Acknowledgment of Delivery may be signed in one or more counterparts with the same effect as if the signatures to each counterpart were upon a single instrument. All counterparts shall, taken together, be considered an original of this Acknowledgment of Delivery. All capitalized terms used herein not otherwise defined shall have the same meaning as that given in the Agreement.

[Signature page follows.]

Exhibit A

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

IN WITNESS WHEREOF, the undersigned have duly executed this Acknowledgment of Delivery as of the date first written above.

Contrail Aviation Support, LLC (Seller)

By:

Name:

Title:

*	(Buyer)
	By:
	Name:
	Title:

Exhibit A

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

EXHIBIT B

CERTIFICATE OF FINAL TECHNICAL ACCEPTANCE

relating to that Boeing 737-800 Airframe,

manufacturer’s serial number * (the “Airframe”)

            , 2017

This Certificate of Technical Acceptance (this “Certificate”) is delivered on the date set out below by * * *  (“Buyer”), to Contrail Aviation Support, LLC (“Seller”), pursuant to that certain Sale Agreement dated             , 2017 between Buyer and Seller (the “Agreement”). The capitalized terms used in this Certificate shall have the meaning given to such terms in the Agreement.

(a) Buyer has inspected the Airframe in accordance with the provisions of Section 4 of the Agreement at the * * Facility in *Taipei, Taiwan and the Airframe and found the Airframe to be satisfactory; and

(b) Buyer has received and inspected all of the Airframe Documents and found them to be complete and satisfactory.

IN WITNESS WHEREOF, Buyer has, by its duly authorized representative, executed this Certificate on the date first written above, accepted the Airframe and confirmed its compliance with the Agreement in all respects.

*	(Buyer)
	By:
	Name:
	Title:

Exhibit B

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

EXHIBIT C

WARRANTY BILL OF SALE

relating to that Boeing 737-800 Airframe,

manufacturer’s serial number  *

            , 2017

KNOW ALL MEN BY THESE PRESENTS:

THAT for and in consideration of good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, Contrail Aviation Support, LLC (“Seller”) does, on the date hereof, grant, convey, transfer, bargain, sell, deliver and set over to * * *  (“Buyer”), all of Seller’s right, title and interest in and to the one Boeing 737-800 airframe bearing manufacturer’s serial number * including all parts, components, appliances, accessories, instruments, furnishings, alterations and other items of equipment installed in or attached thereto, and all Airframe Documents related thereto (collectively the “Airframe”). Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to them in that certain Sale Agreement dated as of             , 2017, among Seller and Buyer (the “Agreement”).

TO HAVE AND TO HOLD said Airframe unto Buyer, its successors and assigns, for its and their own use forever.

THAT Seller hereby warrants to Buyer, its successors and assigns, that it is the holder of title to the Airframe and has the right to sell the same as aforesaid and that this Warranty Bill of Sale conveys to Buyer on the date hereof, good title to the Airframe, free and clear of all Liens, encumbrances and rights of others, and that Seller will warrant and defend such title forever against all claims and demands whatsoever.

This Bill of Sale shall be governed by the laws of New York, U.S.A, without giving effect to its conflicts-of-laws principles.

IN WITNESS WHEREOF, Seller has caused this Warranty Bill of Sale to be executed by its duly authorized officers as of the date first written above.

Contrail Aviation Support, LLC (Seller)

By:

Name:

Title:

Exhibit C

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

EX-10.6

Exhibit 10.6

Lease Agreement

This Lease Agreement is made as of December 27, 2017 between Contrail Aviation Support, LLC, domiciled at 435 Investment Court Verona (“Lessor”) and * (“Lessee”). It refers to and incorporates the terms of Document No 5016-01 (Master Short-Term Engine Lease Agreement, 2012) (“Master Agreement”).

This Lease Agreement modifies the Master Agreement, and, as so modified, constitutes a single contract applicable to the leasing of the Engine (defined below), as contemplated by 2.1.2 of the Master Agreement.

Part I – Referenced Provisions

For purposes of the Master Agreement (“N/A” denotes non-applicability):

1. Engine (clause 2.3.1(i); annex 1, definition) CFM56-7 spare engine bearing Engine Serial Number * Serviceability Tag: Latest EASA Form 1 and FAA Form 8130-3 release certificate or alternatively one EASA Form 1 with FAA dual release or FAA form 8130-3 with EASA dual release.	2A+B. Engine Flight Hours (2A) and Engine Flight Cycles (2B) /Since Last Overhaul (clause 2.3.1(ii); Annex 1, Definitions) Engine Flight Hours since new: as per technical documentation Engine Flight Cycles since new: as per technical documentation
3A+B. Additional Conditions Precedent to Lessee’s Obligations (clause 2.3.1(iii)) (3A) and to Lessor’s Obligations (clause 2.3.3) (3B) 3A Lessee’s Obligations Engine to be in the agreed condition 3B Lessor’s Obligations Lessor’s confirmation of receipt of the Lessee’s first payment of Rent on or prior to the Commencement Date.	4. Conditions Precedent Time Period (clause 2.3.2) From the date of this Lease Agreement to the Commencement Date.
5. Commencement Date (clause 2.4.1; annex 1, definition) Upon Delivery of the Engine to Lessee EXW (Ex Works) Incoterms 2010 at Aircraft Inspection & Management, LLC, FAA & EASA CRS, 2481 W Poppy Ave., Tucson, AZ 85705. T: (520) 399-6489 (“Delivery Location”). This is estimated to be on or about 22 December 2017 as shall be evidenced by the date of the Acceptance Certificate.	6. Acceptance Certificate (clause 2.4.2; annex 1, definition) An Acceptance Certificate is required (form attached as Appendix A).

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

7. Deposit and/or Letter of Credit (clause 3.1) *	8. Rent (clause 3.2; annex 1, definition) US$*  per day, paid in advance for the following month. * * * * * *
9. Rent Payment Date (clause 3.2; annex 1, definition) On the Commencement Date and on the equivalent date of each subsequent calendar month during the Term upon receipt of a corresponding invoice. Invoices shall be sent by Lessor per email to (1) the respective lease manager and to (2) invoice@ *.	10. Default Rate (clause 3.5; annex 1, definition) *
11. Agreed Currency (clause 3.7.2; annex 1, definition) United States Dollars ($).	12. Payment Account (clause 3.7.2; annex 1, definition) Beneficiary:  Contrail Aviation Support, LLC                       435 Investment Court                       Verona, WI 53593
13. Engine Documentation (clause 4.2.1(i)) •  Latest EASA Form 1 and FAA Form 8130-3 release certificate or alternatively one EASA Form 1 with FAA dual release or FAA form 8130-3 with EASA dual release •  serviceable removal tag (as applicable) •  LLP status •  latest FAA & EASA AD status •  latest SB status •  last operator NIS •  result of last Maximum Power Assurance run (MPA) •  last test cell run report •  latest BSI report •  BSI DVD •  last 3 months Cruise & Take-off ECM data •  latest zero letter (MPD) check – MPD task compliance status •  accessory and QEC status	14. Engine Reports—Other Information (clause 4.2.4(ii)) By the 10th day of each month, Lessee shall provide a monthly utilization report to Lessor, substantially in the form of Appendix B, for the preceding month that includes: a. the total number of flight hours and flight cycles the Engine was operated the preceding month; and b. engine configuration during preceding month; and c. maintenance performed during preceding month; and d. the average cruise and take-off EGT margins for the preceding month; and

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

•  missing parts list •  shipping stand details •  ship loose & bypack parts (as applicable) •  preservation data (tag, work cards) •  engine removal/installation history •  carry-forward sheet •  oil consumption report •  used oil type •  last SV report (as applicable) •  engine pictures	e. if Lessor does not receive the flight hours and cycles by the 10th day of each month, Lessor may invoice Lessee for an estimated number of flight hours and flight cycles for the preceding month and reconcile the differences within thirty (30) days after receipt of the applicable monthly utilization report.
15. Engine Installation/Removal Notification Requirements (clause 4.2.6) Within 10 days of each installation or removal of the Engine, Lessee shall report the following in writing: a. operated thrust rating; and b. aircraft serial number and engine position and shall also provide Lessor with off-on LLP disk sheets, all printed on the operator’s letterhead and signed by operator’s quality control department.	16. Certain Lessee Obligations Concerning Indemnitees (clause 4.4.6) If Lessee is not the owner of the aircraft on which the Engine shall be attached to, Lessee shall, at its expense, at the request of Lessor, provide a document signed by the owner of and/or any secured party with respect to the aircraft recognizing the rights of the Engine owner, in form and substance acceptable to Lessor.
17. Consequences of Partial Loss (clause 7.2.1(ii)) The Engine will continue to be leased as set out in clause 7.2.1(ii)(a).	18. Stipulated Amount (clause 7.3.1; annex 1, definition) USD *
19. Reinsurance (clause 8.1) In the event where the Permitted Sub-Lessee is not insured by an insurance company recognized by the London/New York markets, Permitted Sub-Lessee shall provide reinsurances, issued by a re-insurance company recognized by the London/New York markets.	20. Redelivery Location (clause 11.1(i); annex 1, definition) DDP (Delivered Duty Paid) Incoterms 2010 (provided Lessee shall be responsible for unloading the Engine) at Aircraft Inspection & Management, LLC, FAA & EASA CRS, 2481 W Poppy Ave., Tucson, AZ 85705. T: (520) 399-6489 or any other mutually agreed location.
21. Redelivery—additional requirement (clause 11.1(ii)) * * * * * * * * * * * * * * * * * * *	22. Final Inspection – other tests (clause 11.3.1(ii)) All inspections, tasks and reports specified in Appendix C.

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

23. Redelivery – Additional Documentation (clause 11.4(viii))   *   *   *   *   *   *   *   *   *   *   *   *   * 24. Transportation – supplemental requirements (clause 11.5)   Manufacturer’s published engine transportation manual, specifications/recommendations, including proper equipment tie-down and use of air-ride or air cushion suspension vehicles. On any given shipment, such truck will be dedicated solely to the Engine belonging to Lessor; except that additional items may be transported on such truck, provided that (a) the Engine can and will be off-loaded by Lessor at the Redelivery Location without disturbing any of the additional items and (b) Lessee or its shipper will not handle or reposition any of the additional items on such truck either while the Engine is in transit or when it arrives at the Redelivery Location. Lessor will invoice and Lessee agrees to pay for the cost of inspections and repairs to the Engine and/or transportation stand resulting from the improper movement or transportation of the Engine and/or transportation stand.

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

25. Additional Amounts – Term Extension (clause 11.6.2) If (1) Lessee retains the Engine beyond the Scheduled Final Date set forth in Section 35; (2) the Engine has not been returned to Lessor in the conditions required by Sections 21, 22, and 23; and (3) does not execute a written lease extension with Lessor, Lessor may at its sole discretion, (a) remedy such defects and deficiencies and recover any costs so incurred from Lessee; and/or (b). continue the Lease and Lessee will pay Lessor * times Rent for each day after the Scheduled Final Date until Lessee either returns the Engine to the Redelivery Location and satisfies all return conditions or executes a written lease extension. All obligations of Lessee under the Lease Agreement shall remain in full force and effect until the return of the Engine in the condition required by the Lease Agreement. This will not be considered a renewal of the Lease Agreement or extension of the Lease Term or waiver of any right of Lessor under the Lease Agreement.

26. Differing Period (clause 14.1(i)) N/A.

27. Notices (clause 17.5) Notices shall be sent by post or fax to the respective parties at the address or fax numbers set out below or as otherwise advised by one party to the other in compliance with clause 16.5: Lessor Address:  Contrail Aviation Support, LLC       435 Investment Court Verona       WI 53593       USA Attn:    President Fax:   +1 608 848 8101 Lessee Address: *              *               * Attn:    * Fax:   *

28. Contracting by Fax/Electronic Writing (clause 17.6) Notices by fax are acceptable as per box 27 or electronic media is permitted.

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

29. Governing Law (clause 17.7) Laws of the State of New York.	30. Non-exclusive Jurisdiction (clause 17.8.1(i)) Courts of the State of New York and the United States District Court located in the Borough of Manhattan, New York City, New York, United States of America.
31. Additional Indemnitees (annex 1, definition) (for use, inter alia, in definition of “Indemnitees”) Lessor; any person from time to time notified by Lessor to Lessee as providing financing to Lessor or the owner of the Engine for the acquisition, ownership or leasing thereof; together with each of their respective successors and assigns, shareholders, subsidiaries, affiliates, partners, contractors, directors, officers, servants, agents and employees.	32. Business Day (annex 1, definition) Evansville, Indiana, United States of America *Amsterdam, *The Netherlands
33. Use Fee Amount (Cycle) (annex 1, definition) (for use in definition of “Use Fees (Cycle)” US$* This Use Fee Amount (Cycle) shall be adjusted annually, effective January 1 of each year, based on the OEM published annual escalation rate or escalation percentage for a set of CFM56-7B life limited parts.	34. Use Fee Amount (Flight Hour) (annex 1 definition) (for use in definition of “Use Fees (Flight Hours)”) as per Appendix D Lessee shall not lease the Engine to any operator with its principal place of business in any of the ‘Harsh Environment Countries’ listed in Appendix E.
35. Scheduled Final Date (annex 1, definition (for use in definition of “Final Date”) After 12 months or, if earlier, after the Engine becomes unserviceable due to normal wear and tear or LLP expiry, the date by which Lessee shall have completed all redelivery conditions, including but not limited to the items specified in Sections 20-23, and returned Engine to the Redelivery Location. Lessee may extend the Term by a period of 6 months by giving written notice to Lessor at least 2 months prior to the Scheduled Expiry Date.	36. Principal Taxation Jurisdictions (annex 1, definition) (for use in definition of “Lessor Tax”) USA
37. Calculation Discount Rate (annex 1, definition (for use in definition of Termination Damage Amount)) * *	38. Threshold Amount (annex 1, definition) An Engine repair in the amount of US$*, either estimated or actual, above which Lessee requires Lessor’s permission before proceeding with the repair.

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

39. Required Liability Amount (annex 4, clause 4)   * 40. Deductibles (annex 4, clause 8)   Hull All Insurance—US$* Spares Insurance—US$*

Part II – Modifications Applicable Where Lessee Is Not an Airline or Other Operator of Engines

Pursuant to 2.1.4 of the Master Agreement, the Master Agreement is modified as follows (“N/A” denotes non-applicability):

The following wording shall be added to Annex 1 – Definitions and Rules of Interpretation:

“Permitted Sub-Lessee” shall mean a licensed airline operator of good standing acceptable to Lessor, acting reasonably;”

Lessee will not operate the Engine, but will be entitled to sub-lease the Engine to sub-lessees;

PROVIDED THAT:

(a)   no Event of Default has occurred and is continuing

(b)   any such sub-lease agreement:

(i) shall be subject and subordinate in all respects to this Agreement

(ii)  shall not be capable of extending beyond the end of the Lease Period;

(c)   the relevant Permitted Sub-Lessee covenants directly to the Lessor not to do anything which would prejudice the Lessor’s interests, rights and benefits in the Engine and/or the Insurances and/or under this Agreement or any other lessee document and/or the interests, rights and benefits of the relevant parties in the Engine and/or the Insurances and/or this Agreement under the relevant documents, and agrees directly with the Lessor that such Permitted Sub-Lessee’s rights under such sub-lease shall be subject and subordinate in all respects to the rights of the Lessor under this Agreement; and

(d)   the terms of the relevant sub-lease, shall provide that the leasing, chartering or hiring of the Engine to such Permitted Sub-Lessee and that the right of the Permitted Sub-Lessee to the use, possession and enjoyment of the Engine shall terminate simultaneously with the giving by the Lessor of any notice pursuant to this Agreement; and

(e)   notwithstanding the foregoing provisions of this clause, no relevant sub-lease permitted under this clause shall involve any transfer of title to or interest in the Engine or any part thereof, nor shall it in any way discharge or diminish any of the Lessee’s obligations to the Lessor under this Agreement or under any other document.

Part III – Other Modification to Master Agreement

As regards this Lease Agreement, the Master Agreement is further modified as follows (“N/A” denotes non-applicability):

1. For purposes of this Agreement, all references to the JAA also include the European Aviation Safety Agency as successor to the JAA (“EASA”). If Part I, point 1 of this Lease Agreement indicates the Engine will be supplied to Lessee with both FAA and JAA serviceability tags, then

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

(a) Section 4.7.1 of the Master Agreement is modified by, in subparagraph (ii), deleting the words “FAA or JAA” and replacing them with the words “FAA and JAA;”

(b) Section 11.2.1 of the Master Agreement is restated as follows: “The redelivered Engine shall have valid serviceability tags issued by the FAA and JAA, respectively.

2. The following new definitions are inserted in the correct alphabetical position in annex 1:

“EASA means the European Aviation Safety Agency or any other authority to which its responsibilities have been transferred or reallocated and includes, where the context so requires, a reference to the European Joint Airworthiness Authority.”

“LIBOR means the British Bankers Interest Settlement Rate for the Agreed Currency and period displayed on the relevant Reuters screen or, if that page is unavailable, another page displaying the appropriate rate or if no page is available the arithmetic mean (rounded upward to 4 decimal places) of the rates quoted by the British Banking Association to leading banks in the London interbank market as of 11.00 am on the relevant date for such period as Lessor determines.”

“Operator Exceedance” means any repairs required to the Engine that are attributable to FOD, misuse, mishandling, neglect, negligence or improper operation outside of the specification or procedures laid down in the Manufacturer’s maintenance manual, the AFM and any other operating manuals after Delivery and during the term of the Lease Agreement.

3. A new clause 2.4.3 is added as follows:

“Delivery by Lessee to Lessor of the Acceptance Certificate will be conclusive proof as between Lessor and Lessee that Lessee has examined and investigated the Engine Package, that the Engine Package is satisfactory to Lessee and that Lessee has irrevocably and unconditionally accepted the Engine Package for lease without any reservations whatsoever (except for any discrepancies which may be noted in the Acceptance Certificate). Notwithstanding the foregoing, Lessee may conduct a visual (including borescope) inspection of the Engine to determine whether the Engine is serviceable and in the condition described in the Lease Agreement. Such inspection must take place within four (4) days of receipt of the Engine and may take place either at the Delivery Location or any other location the Engine is being shipped to. If, following such inspection of the Engine, Lessee acting in good faith reasonably determines that the Engine is unserviceable and provides to Lessor a written report as to why Lessee has determined that the Engine is unserviceable and provided that (1) such unserviceability has not resulted from or occurred during the transportation of the Engine to the inspection location, if the inspection has taken place at any other location than the Delivery Location; and (2) Lessor has been given an opportunity to remedy the defect or fault which has rendered the Engine unserviceable having due regard to Lessee’s requirements for the Engine, Lessee will, in the event that the inspection took place at any other location than the Delivery Location, hold the Engine pending shipping instructions from Lessor, at which time Lessee will ship the Engine to Lessor’s designated location at Lessor’s sole expense. Upon receipt of the Engine by Lessor (in the same condition and with the same Parts as on the Delivery Date in respect of such Engine) the Lease Agreement will terminate, all funds previously received by Lessor from Lessee pursuant to this Lease Agreement will be returned to Lessee.

Notwithstanding anything to the contrary contemplated herein, in the event that the Engine is rejected by Lessee’s Permitted Sub-Lessee within thirty (30) days after Delivery due to any one or more of the open items set out in Open Item List in Appendix H attached hereto being not acceptable under such Permitted Sublessee’s maintenance program; then Lessee shall have the option to terminate the Lease Agreement effective as of the date the Engine is redelivered to Lessor in accordance with the provisions of the Lease at Lessor’s designated location at Lessee’s sole expense. For the avoidance of doubt, none of the items listed in Appendix H will be considered a defect or fault which has rendered the engine unserviceable and Lessee will continue to pay Rent to Lessor until the Engine has been so redelivered.”

4. Section 4.6.1 of the Master Agreement is modified by adding the following to the end of the first sentence:

“so as to keep the Engine Package in a serviceable state of repair and in a fully operational and airworthy condition, and otherwise in as good operating and physical condition as at the time of delivery to Lessee, normal wear and tear due to the accumulation of flight hours and flight cycles from ordinary operation excepted, and except that Lessee will not be responsible for replacing life limited parts which are due for replacement solely as the result of life expiration but Lessee shall be responsible for replacing or repair of any LRUs that become unserviceable.”

5. Section 4.6.2 of the Master Agreement is modified by:

(a) replacing subparagraph (iii) thereof with the following:

“(iii) the operation of the Engine beyond the limits outlined in the Applicable Engine Standards,”

and

(b) adding the following new subparagraph (v) at the end thereof:

“or (v) any cause whatsoever, so that the Engine Package is kept in a serviceable state of repair and in a fully operational and airworthy condition, and otherwise in as good operating and physical condition as at the time of delivery to Lessee, reasonable wear and tear from ordinary use excepted; provided, however, that notwithstanding the foregoing, each Engine Package must be redelivered to Lessor in serviceable condition at the end of its Term and in accordance with Section 11 of the Master Agreement, except that Lessee will not be responsible for replacing life limited parts which are due for replacement solely as the result of life expiration but Lessee will be responsible for replacing or repair of any LRUs that become unserviceable.”.

6. Section 8.1 of the Master Agreement is modified by adding the following to the end thereof:

“The parties agree that the insurances described in Annex 4 are as in effect on the date of each Lease Agreement without amendment.”

7. Section 11.4 of the Master Agreement is modified by deleting subparagraph (vii) and replacing it with the following:

“a certificate stating that, during the Term, the Engine was not (a) involved in an accident, incident, fire or a major failure, (b) exposed to stress or heat beyond limits, (c) immersed in salt water or exposed to corrosive agents outside normal operation or (d) operated by a Government Entity; and”

8. Section 17.16 of the Master Agreement is modified by deleting subparagraph (i)(a) and replacing it with the following:

“to an affiliate of Lessor or”

9. Section 17.7 of the Master Agreement shall be deleted entirely and the following shall be added in lieu thereof:

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

“17.7.1 This Agreement will be governed by and construed in accordance with the Laws of the State of New York, as specified in Part I, point 29 of the Lease Agreement, without application of conflict of laws rules which refer to other Laws.

17.7.2. Lessor may enforce any term of any Section of this Agreement that grants any rights to Lessor.

17.7.3. Lessee may enforce any term of any Section of this Agreement that grants any rights to Lessee.

17.7.4. Any Indemnitee may enforce the terms of Section 10.4 and Sections 10.1 to 10.3 inclusive in accordance with the provisions of this Agreement and the Rights of Third Parties Act.

17.7.5. The parties to this Agreement shall not require the consent of any third party to amend, vary or revoke any clause of this Agreement, including this Section 17.7.”

10. Annex 1 of the Master Agreement is modified by:

(a) deleting the definition of “Applicable Engine Standards” and replacing it with the following:

“Applicable Engine Standards means the original Engine manufacturer’s operating procedures and the original aircraft manufacturer’s operating procedures.”

(b) adding the following to the end of the definition of “Aviation Authority”:

“and the FAA, and if Part I, point 1 of this Lease Agreement indicates the Engine will be supplied to Lessee with (i) an FAA or JAA serviceability tag, then at least the FAA or JAA, as applicable and dual serviceability tags if possible and (ii) both FAA and JAA dual serviceability tags, then the FAA and JAA dual serviceability tags.”

(c) adding the following to the end of the definition of “Law”:

“and including the Export Administration Regulations and/or International Traffic-In-Arms Regulations of the United States of America.”

11. Annex 4 of the Master Agreement is modified by adding the following to the end of point 9;

“The Product Liability Insurance shall name each Indemnitee as additional assured, warranted, as to it, no operational interest.”

12. Clause 6 of Annex 4 is modified by inserting before the final sentence the following:

“If the Engine is installed on an aircraft, the agreed value of such aircraft shall automatically be increased by the agreed value of the Engine for the period it is installed.”

As used in this Lease Agreement, the term “this Agreement” refers to the Master Agreement as modified by this Lease Agreement.

IN WITNESS whereof, the Parties have executed this Lease Agreement on the respectives dates specified below.

Contrail Aviation Support, LLC
BY:	/s/ Joseph G. Kuhn
NAME:	Joseph G. Kuhn
TITLE:	CEO
DATE:	12/28/17

*
BY:	*
NAME:	*
TITLE:	*
DATE:	*

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

Part IV – Appendices

Appendix A: Acceptance Certificate

Appendix B: Monthly Engine Utilization And Status Report

Appendix C: Redelivery Requirements

Appendix D: Use Fee Amount (Flight Hours)

Appendix E: Harsh Environment Countries

Appendix F: Non-Incident Statement

Appendix G hereto is the form of Certification and Representation Regarding Items Subject to Export Contrail Requirements. Lessee agrees that by its signature of this Lease Agreement below, that Lessee certifies that to the best of its knowledge, the information set forth on the attached Appendix G is accurate, current and complete as of the date of this signing and that the signatory to this Agreement is duly authorized by Lessee to provide this certification and representation.

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

Appendix A – Acceptance Certificate

Contrail Aviation Support, LLC

435 Investment Court Verona

Wl 53593

USA

Re: Acceptance of Engine Package

Dear Sir/Madam,

Reference is made to the Lease Agreement between you (“Lessor”) and us (“Lessee”) dated 27.12.2017 (“Engine Lease Agreement”) regarding the leasing by Lessee of a CFM56-7 bearing manufacturer’s serial number * (“Engine”). Terms used herein without definition have the meanings assigned in the Engine Lease Agreement.

Lessee hereby confirms to Lessor that:

(i) on 11.01.2018 at 1200 GMT at * , Lessee accepted delivery of the Engine, as described in Part I, point 1 of the Engine Lease Agreement and the Engine Documentation, as described in Part I, point 13 of the Engine Lease Agreement;

(ii) annex 1 hereto lists all Parts and annex 2 lists all Engine Documentation so received by Lessee; and

(iii) the Engine Documentation confirms the Engine Flight Hours and Engine Flight Cycle information and data summarized on annex 3 hereto.

*
By:	*
Date:	*

* *

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

Appendix B – Monthly Engine Utilization And Status Report

MONTHLY LEASE ENGINE UTILIZATION AND STATUS REPORT

UTILIZATION DATA IS DUE NO LATER THAN THE 10^TH DAY OF EACH MONTH

To: Contrail Aviation Support, LLC	From:
Attention:	Name:
E-Mail:	E-Mail

MONTH and YEAR OF REPORTED UTILIZATION:                                     

1)	Engine Type:	2)	Engine Serial No.:
3)	Total Time Since New:		Total Cycles Since New:
4)	Hours Flown During the Preceding Month:	5)	Cycles Flown During the Preceding Month:
	(Rounded to nearest whole hour) Hours:	Total Cycles:
6)	Aircraft:	7)	Thrust Categories Operated Throughout Lease:
	A/C Model:
	Registration:		Rating:                                          Cycles:
	Position:		Rating:                                          Cycles:
			Rating:                          Cycles:
8)	Date Installed:                                      or	9)	Reason for Removal:
	Date Removed:
10)	The average Take-off EGT margin for the month:	11)	The number of hours or percentage of flight hours the Engine was operated in or over the continental United States.
	EGT Margin:		Hours:

Appendix C - Redelivery Requirements

1.    Date of Redelivery. Lessee will return the Engine installed on the same engine transportation stand (or as otherwise agreed) as delivered to Lessee at Delivery, to Lessor on the Final Date or on the date of other valid termination of the Lease Agreement in the condition required by the Lease Agreement. The costs for shipping of the Engine to any other location than the designated Redelivery Location will be borne by the Lessor.

2.    Redelivery Inspection. Lessee will perform or cause to be performed at its own cost on the Engine immediately prior to its return to Lessor:

a.    a power assurance test run (test 05) at the thrust rating that the Engine will make power (“MPA”) according to the applicable aircraft maintenance manual requirements, followed by

b.    a full end of lease (“EOL”) inspection as required by the end of lease inspection requirements detailed in Schedule 1 to Appendix C, including an acceptable full video borescope inspection, with written report, of all accessible sections of the Engine within maintenance manual limitations, for continued time/reduced inspections (except in the case of FOD, misuse, neglect, negligence or improper operation). Such borescope inspection shall be performed by Lessor’s representative with consideration or exception given for (i) the findings with respect to the borescope inspection of the Engine provided by Lessor at Delivery and (ii) normal wear and tear during the Lease Term due to the accumulation of flight hours and flight cycles from ordinary operation, and except that Lessee will not be responsible for replacing life limited parts which are due for replacement solely as the result of life expiration but Lessee will be responsible for replacing or repair of LRUs that become unserviceable.

The corresponding MPA and EOL inspection protocols shall be redelivered with the Engine. Lessee will provide Lessor with at least fourteen (14) Business Days advance written notice of such scheduled Engine inspection and test, so that Lessor may have the opportunity to witness same. Should Lessee not inform Lessor in advance of the impending MPA and EOL inspection with at least fourteen (14) days’ notice, and the Lessee elects to perform the scheduled MPA and EOL inspections without Lessor present, Lessor may at its sole discretion disregard the MPA and EOL inspection performed by Lessee and perform a test cell run and corresponding EOL inspection at Lessor’s MRO facility at the cost and risk of Lessee. . In the event that the borescope inspection or the MPA or test cell run identifies any defect in the Engine or any item not being within the manufacturer’s limits as stated in the relevant aircraft maintenance manual (“AMM”) or engine maintenance manual (“EMM”), such defect shall be repaired at Lessee’s sole cost and expense provided such defect is not resulting from normal wear and tear due to the accumulation of flight hours and flight cycles from ordinary operation, and except that Lessee will not be responsible for replacing life limited parts which are due for replacement solely as the result of life expiration but Lessee will be responsible for replacing or repair of LRUs that become unserviceable.

3.    Return Conditions. In addition to any other requirements of this Lease, upon return of the Engine to Lessor, Lessee will ensure that:

a.    the Engine is free and clear of all Liens (except Permitted Liens) and shall have installed thereon the Parts installed at Delivery or replacements thereof installed in accordance with the provisions of the Lease Agreement, provided that the title thereto is vested in Lessor;

b.    the Engine is either (i) serviceable or (ii) unserviceable based on (x) being fully time expired or (y) borescope findings beyond maintenance manual limits due to normal wear and tear due to the accumulation of flight hours and flight cycles from ordinary operation, and except that Lessee will not be responsible for replacing life limited parts which are due for replacement solely as the result of life expiration but Lessee will be

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

responsible for replacing or repair of LRUs that become unserviceable, with no evidence of FOD, misuse, abuse or Lessee induced or other Operator Exceedance damage; it is specifically recorded that any reduced inspection interval (not related to FOD, misuse or abuse or Lessee induced or other Operator Exceedance damage) per CFM or maintenance manual shall not be considered a cause to deem the Engine to be unserviceable;

c.    in the event the Engine cannot sustain * pounds of thrust, has damage beyond continued time limitation (not related to FOD, misuse or abuse or Lessee induced or other Operator Exceedance damage) the Lessor shall accept the Engine and repair or dispose of it as Lessor deems fit (in this case the Engine shall be deemed unserviceable and all clauses relating to a serviceable engine shall not apply, however, Lessee shall comply with the MPA (only if it is safe to do so) and EOL inspections referred to in Section 2;

d.    the Engine shall have installed thereon all Parts installed thereon on the Delivery Date or permitted replacements thereof in accordance with the Lease Agreement and the Engine will be configured and licensed by CFM International, Inc. as a CFM56-7B26 engine and in an as good condition as at Delivery, normal wear and tear due to the accumulation of flight hours and flight cycles from ordinary operation excepted, and except that Lessee will not be responsible for replacing life limited parts which are due for replacement solely as the result of life expiration but Lessee will be responsible for replacing or repair of LRUs that become unserviceable and changes and normal rate of performance deterioration excepted;

e.    the Engine and each of its Parts and components, is free of all deferred or carry-over maintenance items, including pilot log book reports and defects requiring repetitive inspections and will not be “on watch” or have any reduced interval inspections;

f.    the Engine has affixed a current, valid and effective EASA Form 1 and FAA 8130-3 Form with full return-to-service statement, if serviceable, at * pounds of thrust;

g.    with reference to the MPA and EOL inspection referred to in Section 2 and together with the Engine’s historical and technical data and condition trend monitoring data for the Engine, Lessor is satisfied:

i.    with the Engine’s status and that there is no indication of an adverse deterioration in the performance of the Engine which is higher than normal based upon Lessee’s maintenance experience in operating engines of the same type and;

h.    prior to returning the Engine to Lessor, Lessee will prepare the Engine for shipment by:

i.    capping and plugging all openings of the Engine;

ii.    preserving the Engine for three hundred sixty-five (365) days storage, according to the engine preservation procedure of the AMM or the relevant EMM; and

iii.    completely covering the Engine with heat shrink wrap and the tarpaulin cover or bag (if provided) at Delivery.

4.    Non-Incident Statement. Upon redelivery, Lessee shall issue a Non-Incident Statement in the form set out in Appendix F.

5.    Redelivery Reports. Upon redelivery of the Engine in accordance with the terms of the Lease Agreement, Lessee will (i) perform the redelivery checks, tasks and inspections specified in Clause A of Schedule 1 to Appendix C, (ii) deliver to Lessor the redelivery documents specified in Clause B of Schedule 1 to Appendix C and (iii) prepare, execute and deliver to Lessor the Engine operational report and a redelivery checks and inspection report in the respective forms of Schedule 1 and Schedule 2 to Appendix C.

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

6.    Indemnities and Insurance. The indemnities and insurance requirements set forth in Sections 8 and 10 of the Master Agreement, respectively, will apply to Indemnitees and Lessor’s representatives during the return of the Engine, including the redelivery inspection.

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

SCHEDULE 1 TO APPENDIX C

ENGINE REDELIVERY TASK AND DOCUMENTS

1.1 A Full Performance Test cell run (“TCR”) according to the respective Engine type manual requirements including Engine Water Wash.

or alternatively, only if the TCR is waived in accordance with the provisions of the Lease Agreement:

1.2 An On Wing Performance Test in the form of a Maximum Power Assurance run or similar test as further described in Exhibit E.5 with calculated EGTM result including Engine Water Wash to be performed immediately prior to Engine removal.

1.3 The Engine Fuel and Oil System shall be preserved long term (365 days) per AMM immediately prior to return of the Engine in accordance with the Lease Agreement.

1.4 A full End of Lease Inspection as required by the end of lease inspection requirements detailed in Exhibit E.5 of the Lease Agreement. Or respectively the inspection checks recommended by the OEM comprising all of the tasks listed in the current revision of the applicable aircraft manufacturer’s MPD and applicable to the Engine. The inspection check can be carried out in accordance with Lessee’s Maintenance Program.

1.5 A Full Engine Video/DVD Borescope Inspection (cold and hot section) post test cell/ground run is required in accordance with the AMM including leading edge and trailing edge.

1.6 Completely covering the Engine with the tarpaulin cover provided at Delivery.

1.7 Engine shipment in accordance with the manufacturer’s specifications/recommendations. Any trucks used for shipment of the Engine will be equipped with air ride or air cushion suspension system.

The engine has to be returned on the following SHIPPING STAND:

Base P/N                        ,	S/N
Cradle P/N                     ,	S/N

2. End of Lease Documentation

On redelivery of the Engine, Lessee shall provide the following documentation to Lessor:

2.1 Operator certified NON-INCIDENT STATEMENT shall be issued upon redelivery, substantially in the form set out in the attached template printed on Airline headed paper and signed by authorized representative of Operator. (Exhibit E.2 of the Lease agreement).

2.2 Operator certified ETOPS CERTIFICATION at Engine removal. The ETOPS Certification needs to be on Airline letterhead signed by authorized representative of Operator. (Exhibit E.3 of the Lease agreement).

2.3 Complete operator certified ENGINE OPERATIONAL REPORT (Exhibit E.4 of the Lease agreement) printed on Airline headed paper, signed by authorized representative of Operator.

2.4 Operator certified FAA & EASA and Local Air Authority Airworthiness Directive (AD)

STATUS current to redelivery date on Airline headed paper. It shall include all applicable AD’s, the Means of compliance for all accomplished AD’s and include the repetitive inspection compliance supporting data (if applicable).

2.5 If any AD’s or SB’s have been performed during the lease period, copies of accomplishment records/documents (job cards, work cards, etc) are required.

2.6 Operator certified LLP DISK SHEET at each Engine Removal and Installation. The LLP Sheet needs to be on Airline letterhead signed and dated.

2.7 Operator SERVICEABLE TAG issued in accordance with operator local aviation authority (if applicable). The copy should remain with the Engine. It should state that the Engine was removed in Serviceable Condition and removal reason. It should also state the Total Engine Time and Total Engine Cycles /TET and TEC) and removal date and removal location.

2.8. ENGINE TEST CELL REPORT, which shows Engine parameters at Hot Day Take-off.

2.9 Results of an On Wing Performance Test in the form of a Maximum Power Assurance run (MPA) or similar test (if applicable) with all recorded parameters with calculated and documented EGTM.

2.10 A written and certified BORESCOPE REPORT per each stage, LE and TE, based on the Full Engine Video Borescope Inspection performed after the Test Cell run (or MPA run) and compiled by an approved Air Regulatory Source including two copies of the VIDEO BORESCOPE (DVD or CD-Rom).

2.11 ENGINE TREND MONITORING DATA, including take-off and cruise performance data, cruise mechanical data for the duration of the Engine’s operation throughout the Lease Term.

2.12 END OF LEASE (EOL) INSPECTION check list (refer to attached Inspection Check List Exhibit E.5) completely signed by mechanic/technician and inspector or responsible person within a maintenance organization performing the inspection. Or respectively the inspection checks recommended by the OEM comprising all of the tasks listed in the current revision of the applicable aircraft manufacturer’s MPD and applicable to the Engine. The inspection check can be carried out in accordance with operator’s maintenance program.

2.13 ENGINE ACCESSORY and QEC LIST at Engine redelivery. Engine should be returned with the same inventory as provided at Delivery. Lessee has to send an updated Engine Accessory and QEC List in accordance with the list set out in 2.25 herein below provided with the Engine at Delivery. Any component changes must be supported with adequate records. At minimum date of installation, engine TSN/CSN at component installation. All such replacement parts must be certified with FAA dual or EASA dual release certificate, with back to birth traceability on all LLP’s. In addition, full traceability (TSO/TSR) is required for any significant rotable component. Lessor is entitled to reject a replacement component if it is not in same or higher modification status as original part or satisfied with the standard of the components or the quality of its associated records.

2.14 Engine FAA 8130-3 and EASA FORM ONE RELEASE CERTIFICATE or alternative a EASA DUAL RELEASE CERTIFICATE or FAA 8130-3 DUAL RELEASE CERTIFICATE. The copy should remain with the Engine. It should state the Total Engine Time and Total Engine Cycles /TET and TEC), removal date and that the Engine was removed in Serviceable Condition, reason for removal and mention all inspection/work accomplished. (MPA run or test cell run, preservation and preservation date, BSI, “EOL Inspection Checks”, etc).

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

2.15 PRESERVATION TAG with date of expiration confirming that the Engine oil system and fuel system was long term preserved for 365 days. All openings of the Engine have to be capped and plugged.

2.16 A copy of signed/stamped Task Card covering Engine long term preservation.

2.17 A copy of operator Aircraft Tech Log Sheet showing Engine installation/removal from wing.

2.18 A copy of signed/stamped Task Card showing Engine installation/removal from wing.

2.19 A copy of maintenance records showing Engine conversion at engine installation/removal from wing (if applicable).

2.20 TECHNICAL LOG PAGES and PILOT REPORTS related to the Engine that occurred throughout the Lease Term including the respective corrective actions.

2.21 UNSCHEDULED MAINTENANCE EVENTS and INSPECTION REPORTS.

2.22 SCHEDULED MAINTENANCE and INSPECTIONS accomplished in accordance with operator APPROVED MAINTENANCE PROGRAM

2.23 OPEN/DEFERRED/CARRY FORWARD items, documentation covering any Open items, Deferred Defects or Carry Forward items.

2.24 DIGITAL PHOTOS of the Engine accessories including Engine data plate prior to covering, and photos of the Engine in bagged condition (Refer to * EOL check list Exhibit E.5).

*
	CFM56-7B20 ESN	*

ACCESSORY INVENTORY is issued by * dated 23 August 2017, and is set out in Appendix I hereto.

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

SCHEDULE 2 TO APPENDIX C

END OF LEASE REQUIREMENTS TASK #	TASK DESCRIPTION	BOEING MPD & AMM REFERENCE	REMARKS	INSPECTOR Date/Signature/ Stamp
1	ENGINE DOCUMENTATION CHECK
1.1	CHECK MAINTENANCE LOG BOOKS AND PROVIDE PAPERWORK FOR ANY ENGINE RELATED MAINTENANCE REPORTS, PILOT REPORTS AND DEFERRED DEFECTS REPORTED.	N/A	OPERATOR TASK
	NOTE: Not applicable in Shop.
1.2	CHECK AD NOTE STATUS. CHECK FOR REQUIRED FAA-EASA AD AND SB OEM CAT 1, 2 INCORPORATION.	N/A
	NOTE: When Engine in * Shop - SB check per * lease group advice.
1.3	CHECK AIRCRAFT DATA FOR ATA CHAPTER 70-80 CLASS 3 FAULTS.	N/A	OPERATOR TASK
	NOTE: Not applicable in Shop.
2	ENGINE GENERAL INSPECTION
2.1	CLEAN THE ENGINE GAS-PATH WITH PURE WATER.	AMM 72-00-00-100- 803 EM 72-00-00-100-002 Clean 002
	NOTE: Before On-Wing or Test Cell run.
2.2	PERFORM FULL PERFORMANCE TEST CELL RUN TEST 003 AND 009 OR FOLLOWING GROUND TESTS: NO. 3A, 5, 7, 8, 13 AND PROVIDE WRITTEN REPORTS.	AMM 71-00-00-700 (ON-WING-TEST) EM 72-00-00-760 (TEST CELL)
	NOTE: Refer to applicable lease agreement for required Tests (On-Wing or Test Cell).
2.3	PRESERVATION OF AN ENGINE FROM ONE MONTH TO ONE YEAR. ATTACH PRESERVATION INFORMATION LABEL ON ENGINE OIL TANK THAT ENGINE HAS BEEN PRESERVED.	AMM 71-00-03-600- 811 (ON WING) ESM 72-00-00-500-001 (TEST CELL)
	NOTE: On-Wing or Test Cell.

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

2.4	PERFORM RECEIVING PHOTO DOCUMENTATION OF ENGINE BUILD CONFIGURATION. (FOLLOWING VIEWS: FRONT, RH FAN MODUL, BOTTOM FAN MODULE, LH FAN MODULE, UPPER FAN MODULE, RH CORE MODULE, BOTTOM CORE MODULE, LH CORE MODULE, UPPER CORE MODULE, REAR, ENGINE DATA PLATE, ENGINE OWNER PLATE, RH SHIPPING STAND GENERAL VIEW, LH SHIPPING STAND GENERAL VIEW, SHIPPING STANDS WHEEL, SHIPPING STAND IDENTIFICATION PLATES, SHIPPING STAND TOWING BARS, SHIPPING STAND BASE AND CRADLE IDENTIFICATION PLATE). NOTE: After Engine removal.	N/A
2.5	VERIFY CURRENT EEC SOFTWARE VERSION ON INSTALLED EEC. NOTE: Pay attention to information on software modification label below EEC identification plate.	EEC P/N:
		EEC S/N:
		Software Version:
2.6	CREATE AND COMPLETE ENGINE INVENTORY LIST.	N/A
	NOTE: Based on * lease group delivered listing.
2.7	CREATE AND COMPLETE MISSING PARTS LIST AGAINST EIPC AND PPBUM.	N/A
	NOTE: Applicable when engine delivered with Missing parts list. NOTE: When Engine in * Shop - Missing part check per * lease group advice.
2.8	EXTERNAL GENERAL VISUAL INSPECTION OF ENGINE FOR ANY OBVIOUS DAMAGE THAT MAY HAVE OCCURRED DURING TRANSPORTATION.	N/A
	NOTE: Task should be performed after Engine transportation from removal location to locatin where visual inspections are carried-out.
2.9	GENERAL VISUAL INSPECTION OF ENGINE DRAIN LINES.	AMM 71-71-00-200-802
2.10	OPERATIONALLY CHECK LEFT/RIGHT ENGINE ALL DRAIN LINES.	MPD 71-040-01/02 AMM  71-71-00-700-801
	For info only: every 6 years

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

3	ENGINE STAND AND COVER INSPECTION
3.1	PERFORM GENERAL VISUAL INSPECTION OF ENGINE SHIPPING STAND (BASE AND CRADLE) INCLUDING WHEELS, TOW BARS, RIGHT GUARDS FOR ANY DAMAGES AND MISSING PARTS. REPORT TO * LEASE GROUP ANY FINDINGS OR MISSING PARTS.	N/A
3.2	INSPECT ENGINE COVER FOR DAMAGES SUCH AS TEARS AND HOLES.	N/A
4	ENGINE OIL SYSTEM INSPECTION
4.1	DETAILED INSPECTION OF THE LEFT/RIGHT ENGINE FWD SUMP, AFT SUMP, AGB/TGB MAGNETIC CHIP DETECTORS FOR PARTICLES (FOR ENGINES WITH MCD) OR INTERROGATE DMS FOR CHIP DETECTOR STATUS. NOTE: FOR ENGINES WITH DEBRIS MONITORING SYSTEM. For info only: Inspection Threshold 500 FH, Repeat 500 FH.	MPD 72-320-01/02 AMM 79-00-00-200-804 AMM 79-00-00-710-801	CONTAMINATION FOUND: YES NO Note: circle as approprlate.
4.2	REMOVE, INSPECT, AND REPLACE THE LEFT/RIGHT ENGINE OIL SUPPLY FILTER ELEMENT. INSPECT FOR CONTAMINATION AND IDENTIFY AS NECESSARY. REPLACE WITH NEW FILTER AND CONSUMABLES.	MPD 79-010-01/02 AMM 79-21-03-000-802 AMM 79-21-03-400-801	CONTAMINATION FOUND: YES NO
	For info only: Inspection Threshold 7500 FH, Repeat 7500 FH.		Note: circle as approprlate.
4.3	DETAILED INSPECTION OF THE LEFT/RIGHT ENGINE OIL SUPPLY FILTER POP-OUT INDICATOR.	AMM 79-00-00-200-805

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

4.4	REMOVE, INSPECT, AND REPLACE THE LEFT/RIGHT ENGINE OIL SCAVENGE FILTER ELEMENT. INSPECT FOR CONTAMINATION AND IDENTIFY IF NECESSARY. REPLACE WITH NEW FILTER AND CONSUMABLES.	MPD 79-040-01/02 AMM 79-21-06-000-801 AMM 79-21-06-400-801	CONTAMINATION FOUND: YES NO
	For info only: Inspection Threshold 7500 FH, Repeat 7500 FH.		Note: circle as approprlate.
4.5	DETAILED INSPECTION OF THE LEFT/RIGHT ENGINE STARTER MAGNETIC CHIP DETECTOR FOR METAL CHIPS.	MPD 80-010-01/02 AMM 80-11-01-200-801	CONTAMINATION FOUND:
	For info only: Inspection Threshold 1600 FC, Repeat 1600 FC		YES NO
			Note: circle as approprlate.
4.6	EXTERNAL OIL SYSTEM INSPECTION NOTE: applicable to engine areas only.	AMM 79-00-00-200- 802
5	ENGINE FUEL SYSTEM INSPECTION
5.1	REMOVE AND REPLACE THE LEFT/RIGHT ENGINE FUEL FILTER . REPLACE WITH NEW FILTER AND CONSUMABLES. NOTE: Do not install Fuel Filters listed in AD 2006-26-01! Record part number of newly installed Fuel Filter. For info only: Inspection Threshold 6000 FH, Repeat 6000 FH	MPD 73-010-01/02 AMM 73-11-02-000-801 AMM 73-11-02-400-801 FAA AD Note 2006-26-01	CONTAMINATION FOUND: YES NO Note: circle as approprlate. New P/N installed:
5.2	IF ENGINE FUEL FILTER IS CONTAMINATED: CHECK FUEL NOZZLE FILTER FOR CONTAMINATION AND REPLACE WITH NEW FILTER ELEMENT.	AMM 73-11-03-000 AMM 73-11-03-400	CONTAMINATION FOUND: YES NO
			Note: circle as approprlate.
5.3	FUEL MANIFOLDS INSPECTION/CHECK.	AMM 73-11-05--700-801 CFMI SB 72-0876

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

6	FAN/INTERMEDIATE CASE INSPECTION
6.1	DETAILED INSPECTION OF LEFT/RIGHT ENGINE INLET AND FAN BLADES. For info only: Inspection Threshold 2500 FH, Repeat 2500 FH.	MPD 72-020-01/02 AMM 72-21-00-220-801
6.2	RELUBRICATE LEFT/RIGHT ENGINE FAN BLADES DOVETAIL. (FAN BLADES REMOVED) VISUALLY INSPECT REMOVED COMPONENTS AND EXPOSED AREAS (SPINNER CONE, RETAINING RING, PLATFORMS, SPACERS, FAN BLADES, SHIMS, FAN DISK, ETC..). PAY SPECIAL ATTENTION FOR EVIDENCE OF BIRD STRIKE AND/OR FOD DAMAGE. NOTE: To be performed if required and based on last lubrication (* to advise).	MPD 72-025-01/02 AMM 72-21-00-640-801 CFMI CESM 005 AMM 72-21-01-200-801 AMM 72-21-02-200-801 CFMI SB 72-0884
	For Info only: Inspection Threshold 5000 FH or 3000 FC, Repeat 5000 FH or 3000 FC (Whichever occurs first!) SB 72-0884 inspection once a year.
6.3	PREPARE ACTUAL FAN BLADE DISTRIBUTION LIST WHICH INCLUDE ENGINE SERIAL NUMBER, ISSUE DATE, FAN BLADE POSITION, PART NUMBER, SERIAL NUMBER, MOMENT WEIGHT AND TECHNICIAN OR INSPECTOR NAME WITH SIGNATURE. CHECK EFFECTIVITY OF SB 72-0797 FOR EACH FAN BLADE AND RECORD COMPLIANCE. NOTE: Applicable only if Fan Blades are removed.	CFMI SB 72-0797
7	HPC FRONT STATOR/COMBUSTION CASE INSPECTION
7.1	HPC FRONT STATOR INSPECTION.	AMM 72-32-00-200-801
7.2	COMBUSTION CASE INSPECTION.	AMM 72-41-00-200-801
8	LPT MODULE INSPECTION
8.1	VISUAL CHECK OF THE LEFT/RIGHT ENGINE AFT MOUNTS CLEVIS FOR STRUCTURAL INTERGRITY FAILURE.	MPD 72-300-01/02 AMM 72-56-00-200-802
	For info only: Inspection Threshold 7500 FH, Repeat 7500 FH.

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

8.2	LOW PRESSURE TURBINE CASE INSPECTION.	AMM 72-54-00-200-801
9	ENGINE EXHAUST SYSTEM INSPECTION
9.1	DETAILED INSPECTION OF THE LEFT/RIGHT ENGINE EXHAUST PLUG DRAIN PAN AND TUBE FOR CONDITION AND SECURITY.	MPD 78-011-01/02 AMM 78-11-00-210-803
	NOTE: Applicable to Engine with Exhaust Plug equipped with Drain Pad and tube system installed. ACCESS NOTE: Engine Exhaust Plug removal required. For info only: Inspection interval every engine change.
9.2	PRIMARY NOZZLE ASSEMBLY AND PRIMARY PLUG ASSEMBLY INSPECTION.	AMM 78-11-00-210-802
9.3	VISUALLY INSPECT PRIMARY EXHAUST NOZZLE LABYRINTH SEALS.	AMM 78-11-00-210-801
10	ACCESSORY GEARBOX MODULE INSPECTION
10.1	VISUAL CHECK OF THE LEFT/RIGHT ENGINE ACCESSORY GEARBOX/TRANSFER GEARBOX MOUNT FLANGES AND FAN CASE AND FAN FRAME ATTACHMENT MOUNTS. For info only: Inspection Threshold 15000 FH, Repeat 15000 FH.	MPD 72-070-01/02 AMM 72-20-00-210-801 AMM 72-60-00-200-801 AMM 72-63-00-200-801
11	FRONT MOUNT, AFT MOUNT, THRUST MOUNTS AND THRUST LINKS INSPECTION
11.1	GENERAL VISUAL INSPECT FORWARD ENGINE MOUNT ASSEMBLY INCLUDING FAN CASE FITTING, SIDE LINKS, HANGER AND LINK PINS.	MPD 54-010-01/02 AMM 51-05-01-210 AMM 54-05-03-210
	For info only: Inspection Threshold 6 YRS, Repeat 18000 FC whichever comes first.
11.2	GENERAL VISUAL INSPECT LEFT STRUT ATTACH BOLTS AT FORWARD ENGINE MOUNT.	MPD 54-015-01/02 AMM 51-05-01-210 AMM 54-05-03-210
	For info only: Inspection Threshold 9 YRS, Repeat 18000 FC whichever comes first.

11.3	GENERAL VISUAL INSPECTION OF FORWARD AND AFT ENGINE MOUNT TO STRUT SHEAR PINS. NOTE: Engine off-wing. For info only: Inspection intervall at engine removal.	MPD 54-020-01/02 AMM 51-05-01-210 AMM 54-05-03-210
11.4	GENERAL VISUAL INSPECTION OF AFT ENGINE MOUNT ASSEMBLY INCLUDING THRUST LINKS AND THRUST LINK PINS; MOUNT TO ENGINE LEFT, CENTER AND RIGHT LINKS, INCLUDING LINK PINS; HANGAR AND EVENER BAR; ATTACH BOLTS. For info only: Inspection Threshold 6 YRS, Repeat 18000 FC.	MPD 54-030-01/02 AMM 51-05-01-210 AMM 54-05-03-210
11.5	VISUAL CHECK OF THE LEFT/RIGHT ENGINE ATTACHMENT BOLTS FOR THE THRUST MOUNT FITTINGS. For info only: Inspection Threshold 10000 FC, Repeat 10000 FC.	MPD 72-100-01/02 AMM 72-23-04-200802
11.6	VISUAL CHECK OF THE LEFT/RIGHT ENGINE THRUST MOUNT FITTINGS. For info only: Inspection Threshold 15000 FH, Repeat 15000 FH.	MPD 72-110-01/02 AMM 72-2304-200-801
11.7	THRUST LINKS VISUAL INSPECTION.	AMM 71-21-02-210-802
11.8	AFT ENGINE MOUNT VISUAL INSPECTION. NOTE: Engine off-wing. NOTE: Ensure Aft Mount and Center Link has correct marking IAW BOEING alert SB 737-71A1462 and that the Center Link is correctly installed on Aft Mount. Please advise to * leasegroup if Center Link was incorrectly installed or if markings are missing from Aft Mount Assy.	AMM 71-21-00-200-805 FAA AD Note 2011-18-10 BOEING SB 737- 71A1462 REV.3
12	HYDRAULIC SYSTEM COMPONENTS INSPECTION

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

12.1	REPLACE EDP CASE DRAIN FILTER ELEMENT. REPLACE WITH NEW FILTER ELEMENT AND CONSUMABLES. NOTE: If you find a large quantity of small metal particles, large metal particles that are not of equal dimensions, or a large quantity of steel particles, then replace the hydraulic pump. Write down the results of the filter inspection and give them to the pump overhaul facility.	MPD 29-050-01/02 AMM 29-11-51-000-801 AMM 29-11-51-400-801	CONTAMINATION FOUND: YES NO Note: circle as approprlate.
	For info only: Inspection Threshold 2400 FH, Repeat 2400 FH.
13	GENERAL INSPECTION OF IDG (IF INSTALLED)
13.1	CHANGE IDG OIL. For info only: Threshold 1800 FH, Repeat 1800 FH	MPD 24-010-01/02 AMM 12-13-21-600-802
13.2	DETAILED INSPECTION OF IDG DELTA P INDICATOR. NOTE: When the DPI is in the up position and if the DPI resets decal (if installed) shows it is the 4th DPI extension, the IDG must be replaced.	MPD 24-020-01/02 AMM 12-13-21-200-802
	For info only: Threshold 800 FH, Repeat 800 FH.
13.3	DETAILED INSPECTION OF IDG OIL LEVEL. For info only: Inspection Threshold 800 FH, Repeat 800 FH.	MPD 24-030-01/02 AMM 12-1321-200-801
13.4	REPLACE IDG CHARGE AND SCAVENGE OIL FILTER INSPECT FOR CONTAMINATION AND IDENTIFY IF NECESSARY. REPLACE WITH NEW FILTER AND CONSUMABLES. Note: If the scavenge filter and the IDG oil condition are not satisfactory, or the DPI Resets decal (if installed) shows it is the 4th extension, the IDG must be replaced. For info only: Inspection Threshold 1800 FH, Repeat 1800 FH.	MPD 24-040-01/02 AMM 24-11-41-000-801 AMM 24-11-41-200-801 AMM 24-11-41-400-801	CONTAMINATION FOUND: YES NO Note: circle as approprlate.
13.5	TORQUE CHECK OF IDG QUICK ATTACH/DETACH (QAD) COUPLING. For info only: Inspection Threshold 3600 FH, Repeat 3600 FH.	MPD 24-050-01/02 AMM 24-11-61-200-801

13.6	INSPECT (GVI) THE ENGINE IDG SURFACE AIR COOLED OIL COOLER For info only: Inspection Threshold 7560 FH, Repeat 7560 FH.	MPD 24-060-01/02 AMM 24-11-21-200-801
14	INSPECTION OF ELECTRICAL HARNESSES, CABLES
14.1	STANDARD ENGINE WIRING AND EQUIPMENT CHECK. NOTE: The retention test for the connector sockets is not required.	AMM  70-70-01-200-801 (without retension test)
14.2	IGNITION EXCITER INSPECTION.	AMM 74-11-01-200-801
14.3	DETAILED INSPECTION OF BOTH IGNITION PLUGS. Plug Replacement interval 1000cycle or 2000hr (whichever comes first)	AMM 74-21-02-200-801 CESM 006	IGNITION PLUGS REPLACED: YES NO
			NOTE: circle as appropriate
14.4	DETAILED INSPECTION OF BOTH ENGINE IGNITION LEADS. For info only: Inspection Threshold 4000 FC, Repeat 4000 FC.	MPD 74-020-01/02 AMM 74-21-01-200-801
14.5	DETAILED INSPECTION OF CONNECTORS FOR TIGHTNESS (ALL CONNECTORS ON HARNESS J5, J6, J7, J8, J9, CJ9, J10, CJ10, MW0301, MW0302, MW0303 AND MW0304). For info only: Inspection Threshold 15000 FH, Repeat 15000 FH.	MPD 20-120- 01/02 AMM 05-55-10-220-801
14.6	INSPECT (DETAILED) THE IDG POWER FEEDER WIRING AND CONNECTED EWIS-ENGINE #1/#2 (EZAP). For info only: Inspection Threshold 5500 FC or 30 MO, Repeat 5500 FC or 30 MO (whichever comes first)	MPD 20-470/480-00 AMM  05-42-04-211-801/802 AMM 20-60-03-100-801
15	VIDEO BORESCOPE INSPECTION (TO BE PERFORMED POST GROUND RUN OR POST TEST CELL RUN)
15.1	BORESCOPE INSPECTION PREPARATION.	AMM 72-00-00-200-802

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

15.2	PERFORM VIDEO BORESCOPE INSPECTION OF BOOSTER STG. 2 THROUGH STG.4 BLADES. NOTE: Following areas have to be inspected - LE of STG. 2 Blades through the inlet to the primary gas path or the booster inlet, TE of STG. 3 Blades through the borescope port S0, LE of STG. 4 Blades through the borescope port S0.	AMM 72-00-00-200-803
15.3	PERFORM VIDEO BORESCOPE INSPECTION OF HPC ROTOR BLADES STG. 1 TROUGH STG.9. NOTE: Inspect all blades Leading Edge (LE) and Trailing Edge (TE).	AMM 72-00-00-200-804
15.4	PERFORM VIDEO BORESCOPE INSPECTION OF COMBUSTOR. NOTE: Do a “complete inspection” (Dome Assy, Inner & Outer Liner, Fuel Nozzles tips, Swirlers) using main igniter plugs and all available combustor borescope plugs. Use fiberscope to view all inspection areas.	AMM 72-00-00-200-805
15.5	PERFORM VIDEO BORESCOPE INSPECTION OF HPT NOZZLE GUIDE VANES. NOTE: Perform complete 360° fiberscope inspection of LE (concave side) and TE (convex side).	AMM 72-00-00-200-806 (SAC & DAC engines) AMM 72-00-00-200-818 (TI & BE engines)
15.6	PERFORM VIDEO BORESCOPE INSPECTION OF HPT BLADES. NOTE: Perform inspection of LE & TE and Tips of the HPT Blades.	AMM 72-00-00-200-807
15.7	PERFORM VIDEO BORESCOPE INSPECTION OF HPT SHROUDS. NOTE: Perform complete 360° fiberscope inspection of HPT Shrouds from forward side and aft side.	AMM 72-00-00-200-815
15.8	PERFORM VIDEO BORESCOPE INSPECTION OF LPT NOZZLE STG. 1. NOTE: Perform complete 360° fiberscope inspection of LE and TE.	AMM 72-00-00-200-811
15.9	PERFORM VIDEO BORESCOPE INSPECTION OF LPT STG. 1 THROUGH 3 BLADES. NOTE: Perform inspection of LE & TE.	AMM 72-00-00-200-808

15.10	PERFORM VIDEO BORESCOPE INSPECTION OF LPT STG. 4 BLADES. NOTE: Perform inspection of LE & TE.	AMM 72-00-00-200-809
16	POST BSI TASKS
16.1	REINSTALL ALL BSI PLUGS AND REMOVED ‘ACCESS’ HARDWARE.	AMM 72-00-00-200
16.2	HANDCRANKING DRIVE COVER INSTALLATION.	AMM 72-63-01-400-801
16.3	INDENPENDENT INSPECTION OF CORRECT INSTALLATION OF THE HAND-CRANKING COVER. NOTE: Applicable for PRE SB 72-0564 or PRE SB 72-0879 engine.	AMM 72-63-01-400-801 EASA AD 2012-0209 FAA AD Note 2013-26-01 CFMI SB 72-0564, 72-0879
17	ENGINE PREPARATION FOR STORAGE AND SHIPMENT
17.1	PERFORM OUTGOING PHOTO DOCUMENTATION OF ENGINE BUILD CONFIGURATION. (FOLLOWING VIEWS: FRONT, RH FAN MODUL, BOTTOM FAN MODULE, LH FAN MODULE, UPPER FAN MODULE, RH CORE MODULE, BOTTOM CORE MODULE, LH CORE MODULE, UPPER CORE MODULE, REAR, ENGINE DATA PLATE, ENGINE OWNER PLATE, RH SHIPPING STAND GENERAL VIEW, LH SHIPPING STAND GENERAL VIEW, SHIPPING STANDS WHEEL, SHIPPING STAND IDENTIFICATION PLATES, SHIPPING STAND TOWING BARS, SHIPPING STAND BASE AND CRADLE IDENTIFICATION PLATE). NOTE: After engine (ground run) or test cell run.	N/A
17.2	DRAIN ENGINE FUEL AND OIL SYSTEM FOR AIR TRANSPORTATION AS APPLICABLE. ATTACH INFORMATION LABEL ON ENGINE OIL TANK THAT ENGINE SYSTEMS HAVE BEEN DRAINED.	AMM 12-13-11-600-803 AMM 71-00-03-600

31

*

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

17.3	ENSURE ALL ENGINE OPENINGS ARE SEALED, INCLUDING STRUTS, PIPING AND ACCESSORY OPENINGS WITH CAPS OR PLUGS AND PLASTIC FILM.	AMM 71-00-03-600-811 (ON WING) ESM 72-00-00-500-001 (TEST CELL)
17.4	INSTALL DESICCANT AND ENGINE COVER. CLOSE THE COVER. NOTE: Do not let desiccant touch the engine hardware.	AMM 71-00-03-600-811 (ON WING) ESM 72-00-00-500-001 (TEST CELL)
17.5	PERFORM PHOTO DOCUMENTATION OF COVERED ENGINE INCLUDING SHIPPING STAND. (FOLLOWING OVERALL VIEWS: FRONT, RH SIDE, LH SIDE, REAR)	N/A
17.6	PERFORM EASA FORM ONE WITH FAA DUAL RELEASE OR FAA FORM 8130-3 WITH EASA DUAL RELEASE FOR THE REALIZED END OF LEASE INSPECTION.	N/A

Appendix D – Use Fee Amount (Flight Hour)

Flight Hour to Cycle Ratio

.62 - .87

.87 - 1.12

1.12 - 1.37

1.37 - 1.62

1.62 - 1.87

1.87 - 2.12

2.12 - 2.37

2.37 - 2.62

2.62 - 2.87

2.87 - 3.12

> 3.12

AREA 1

*

*

*

*

*

*

*

*

*

AREA 2

*

*

*

*

*

*

*

*

*

AREA 3

*

*

*

*

*

*

*

*

*

NOTE: These amounts are subject to annual escalation at the rate of * per annum commencing on January 1, 2018 (monthly derate above 12%).

AREA 1, AREA 2, and AREA 3 are defined by the following map:

33

*

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

Appendix E – Harsh Environment Countries

Harsh Environment

Countries

Afghanistan

Algeria

Armenia

Azerbaijan

Bahrain

Burkina Faso

Chad

Djibouti

Egypt

Eritrea

Ethiopia

Gambia

Georgia

Guinea

Guinea-Bissau

Iran

Iraq

Israel

Jordan

Kazakhstan

Kuwait

Kyrgyzstan

Lebanon

Libya

Mali

Mauritania

Mongolia

Morocco

Niger

Oman

Pakistan

Palestinian Territories

Qatar

Saudi Arabia

Senegal

Sierra Leone

Somalia

Sudan

Syria

Tajikistan

Tunisia

Turkmenistan

United Arab Emirates

Uzbekistan

Yemen

Appendix F – Non-Incident Statement

(Lessee shall submit the following statement on Sub-Lessee’s Letterhead to Lessor upon return of the Engine.)

NON-INCIDENT STATEMENT

Dated:                         

                                      (“Operator”) warrants and represents that to the best of its knowledge and belief based upon a reasonable due diligence of the Engine (as herein defined), at the time of the delivery of such engine and/or engine part(s) more particularly described as one CFM International, Inc. model: CFM56-7 aircraft engine, bearing engine serial number: * (collectively, the “Engine”), together with the respective records and documentation, to Contrail Aviation Support, LLC (“Lessor”), as of the above referenced date:

Engine first operated by Operator on:
Total Hours as received:	Total Cycles as received:
Engine last operated by Operator on:
Total Hours at return:	Total Cycles at return:
Operated at Thrust Level:

During the period of time Operator operated and maintained the Engine, including the components, parts or materials installed therein or thereon:

1. such Engine was not obtained from any military or government source; and

2. such Engine, was not (i) involved in an accident, incident, fire or a major failure, (ii) exposed to extreme environmental conditions, severe stress or heat beyond limits, (iii) immersed in salt water or exposed to corrosive agents outside normal operation, unless, in each case, the Engine, and/or such components, parts, or materials have been restored to a serviceable condition in accordance with the original engine manufacturer’s approved technical data.

This statement, including the warranty and representations described herein, may be disclosed to customers of Lessor or any other third party recipient of such Engine.

By:

Typed Name:

Title:

Note: An authorized officer or designee of Operator shall sign this statement. A mechanically applied signature is not acceptable.

35

*

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

Appendix G – Form of Certification and Representation Regarding Items Subject to Export

Control Requirements

Certification and Representation

Regarding Items Subject to Export Control Requirements

The information provided on this certification shall be used by Contrail Aviation Support, LLC (“Contrail”), for the purpose of ensuring compliance with U.S. laws and regulations regarding export controls and economic sanctions. All information provided on this form shall be treated as proprietary and shall not be provided to a third party, other than upon the request of the U.S. Government, without prior authorization from * (“*”). * understands that items, technical data, and/or services to be provided by Contrail are subject to U.S. Government export control requirements and certifies and represents that *:

(1) Intends that the items, technical data, and/or services provided by Contrail are solely for civil end-use and will not be used for any other purpose or end-use connected with weapons proliferation, satellite usage, military applications, chemical biological or nuclear weapons, or items capable of delivering such weapons unless prior authorization is sought and obtained from the relevant U.S. Government agencies pursuant to the Export Administration Regulations, the International Traffic in Arms Regulations or the relevant sanctions regimes maintained by the U.S. Department of the Treasury’s Office of Foreign Assets Controls;

(2) Understands that the items, technical data and/or services will not be used for any purpose related to a military end-use by the People’s Republic of China;

(3) Understands that the items may not be exported or re-exported for the use of a foreign vessel or aircraft unless, under the EAR, a license exception exists or no license is required to ship the items to: (a) the country in which the vessel or aircraft is located; (b) the country in which the vessel or aircraft is registered (or will be registered if under construction); and (c) the country (or foreign national) which controls, leases, or charters the vessel or aircraft;

(4) Will not transfer, export or re-export items, technical data, and/or services provided by Contrail to destinations subject to a U.S. or U.N. arms embargo, to a destination subject to anti- terrorism export controls, or in a manner otherwise contrary to U.S. law, including, but not limited to Iran, Sudan, North Korea, Syria and Cuba;

(5) Is not debarred, suspended, prohibited or impaired from exporting, re-exporting, receiving, purchasing, procuring, or otherwise obtaining any product, commodity of technical data regulated by any agency of the U.S. Government; and

(6) Will use the item(s), technical data and/or service provided by Contrail for: subleased spare engine for commercial use only.

(7) If other than * or an operator in the United States of America, please identify the ultimate end user(s) and country(ies) of ultimate destination of the item(s), technical data and/or services (Attach a separate sheet if necessary)

Name:

Address:

Ultimate Destination:

(8) In the event there are additions or changes to the information provided above, * shall provide the new information to Contrail, in writing, as soon as it becomes available.

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

* further certifies and represents that item(s), technical data, and/or services to be provided by Contrail, either directly or indirectly:

(9) Will not be transferred to any department, branch, or agency of, or controlled by, the Chinese military;

(10) Will not be used for any purpose related to a military end-use by the People’s Republic of China;

(11) Will not be incorporated into a military item;

(12) Will not be used to operate, install, maintain, repair, overhaul, or refurbish a military item;

(13) Will not be used in the design (including design research, analyses, concepts, configuration design, integration design), pilot production schemes, assembly and testing of prototypes, or layouts related to a military item;

(14) Will not be used in the production of a military item, including product engineering, manufacturing, integration assembly, mounting, testing, assembly, inspection, and quality assurance;

(15) Will not be deployed as a military item, including placed in battle formation or appropriate strategic position; and

(16) In the event there are additions or changes to the information provided above, * shall provide the new information to Contrail, in writing, with the order that will be thereby affected.

37

*

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

Appendix H – Open Item List

1	Engine Certification	Y*	Signed by Certifying Staff minimum EASA F/FAA 8130-3; verify with customer if other certification required *CAAC, ANAC	FAA 8130-3, LPT Stage 3 Blade blend repair: No OEM reference (CDR) available
2	Carry Forward sheet/items	N	Verify if there are any open items (post blend re-inspection, etc.)	No carry forward sheet provided
6	Last operator S/A TAG	Y*	Stamped and Signed issued under local aviation authority	Last removed as unserviceable due to LPT Stage 3 blade findings. Engine repaired by AIM. *China Airlines removal paperwork DFP available
7	Last ground run test (MPA)	Y*	Stamped and Signed with calculated EGTM (not applicable for V2500) Data Sheet min. per AMM	AIM MPA runsheet available. TO EGTM calculation discrepancy. To be verified by AIM
11	Last operator ECM data	Y*	Take-off Data: take-off EGTM Cruise Perf: Delta EGT; Delta FF Cruise Mechanical: Core Speed; Fan VIB; Core VIB; Oil press., Oil temp.	Last 6 months *China Airlines ECM data. TO EGTM average approx. 25°C- 26°C N1 vib front average approx. 0.65 N2 vib front average approx. Below 0.1 No Oil Temperature/Pressure data available
14	Ship loose parts & Bypack parts	N	Loose parts are certified?	Verify if loose parts are attached to engine or stand—DO NOT ACCEPT LOOSE PART(FO-SH 485), if yes try to store loose parts at MTE to not deliver loose parts to customer
15	Missing part list	N		No missing parts list provided
17	MPD (C- check) compliance status	Y*	AMM Reverence check	*China Airlines MPD Task Summary Sheet available. 17 out of 26 required MPD tasks with no compliance history. Out of the remaining 9 MPD tasks there a 4 with overdue compliances.
23	Preservation Bag details	N	P/N and S/N	No engine cover or bag available
24	ECU (EEC) Software	Y*	Attention to software compatibility with sister engine (to be checked with operator)	Latest EEC Software SB 73-0219 is not embodied. Current EEC Software Status is SB 73-0204.

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

28	DER parts	Y*	Several DER repaired parts installed per *China Airlines DER statement
29	PMA parts	Y*	Several PMA parts installed per *China Airlines PMA statement

39

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

Appendix I – Accessory Inventory issed by *China Airlines dated 23 August, 2017

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

* Engine Major Component List (LRU)

Type: CFM56-7B    S/N: 874771

NO.	Nomenclature	Part Number	Serial Number	TSN		TSO		CSN		CSO
1	ELEMENT - FIRE/OVERHEAT DETECTOR	8870-14	XXX		15507.70		15507.70		6770		6770
2	ELEMENT - FIRE/OVERHEAT DETECTOR	8870-14	XXX		15507.70		15507.70		6770		6770
3	ELEMENT - FIRE/OVERHEAT DETECTOR	8870-14	XXX		15507.70		15507.70		6770		6770
4	ELEMENT - FIRE/OVERHEAT DETECTOR	8870-14	XXX		15507.70		15507.70		6770		6770
5	ELEMENT - FIRE/OVERHEAT DETECTOR	8870-14	XXX		15507.70		15507.70		6770		6770
6	ELEMENT - FIRE/OVERHEAT DETECTOR	8870-14	XXX		15507.70		15507.70		6770		6770
7	ELEMENT - FIRE/OVERHEAT DETECTOR	8870-14	XXX		15507.70		15507.70		6770		6770
8	ELEMENT - FIRE/OVERHEAT DETECTOR	8870-14	XXX		15507.70		15507.70		6770		6770
9	HARNESS	325-027-303-0	CAL0001		44408.70		44408.70		19940		19940
10	HARNESS	325-027-403-0	XXX		15507.70		15507.70		6770		6770
11	HARNESS-ENGINE CORE FIRE DETECTION LOOP B	325-027-605-0	YH350437-9		44642.70		44642.70		20030		20030
12	HARNESS-ENGINE CORE FIRE DETECTION LOOP A	325-027-506-0	XXX		15507.70		15507.70		6770		6770
13	SENSOR-ENGINE ANTI-ICE PRESSURE	21SN41-52	W68217A		15507.70		15507.70		6770		6770
14	KIT - CFM56 QEC	654A0001-8006	874771		48734.70		48734.70		21475		21475
15	HARNESS	325-026-701-0	YH320424-F		45271.70		15507.70		24361		6770
16	HARNESS	325-029-908-0	YH315350H		15507.70		15507.70		6770		6770
17	HARNESS	325-026-90I-0	YH300-606-Y		15507.70		15507.70		6770		6770
18	HARNESS	325-026-801-0	7H326125-7		15507.70		15507.70		6770		6770
19	HARNESS	325-035-501-0	YH295617-2		15507.70		15507.70		6770		6770
20	HARNESS	325-015-001-0	YH302374-1		15507.70		15507.70		6770		6770
21	PUMP	828300-5	YA010331E Photo taken		48499.70		19041.70		23298		8421
22	NOZZLE	6840023EI8	PCY2167J		45253.70		15507.70		15730		6770
23	NOZZLE	6840023E18	PHC642P1		45253.70		15507.70		15730		6770
24	NOZZLE	6840023E18	PHC477L5		45253.70		15507.70		15730		6770
25	NOZZLE	6840023EI8	PHCN4639		45253.70		15507.70		15730		6770
26	NOZZLE	6840023E18	PCY9702C		44370.70		21288.70		19940		9344
27	NOZZLE	6840023EI8	PCY9700C		44370.70		21288.70		19940		9344

TPR20 1/4

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

* Engine Major Component List (LRU)

Type: CFM56-7B    S/N: 874771

NO.	Nomenclature	Part Number	Serial Number	TSN		TSO		CSN		CSO
28	NOZZLE	6840023E18	PCY9005J		45253.70		15507.70		15730		6770
29	NOZZLE	6840023E18	PCY2967K		55278.70		21288.70		15413		9344
30	NOZZLE	6840023E18	PCY2953K		55278.70		21288.70		15413		9344
31	NOZZLE	6840023E18	PCY2166J		45253.70		15507.70		15730		6770
32	NOZZLE	6840023E18	PCY2162J		45253.70		15507.70		15730		6770
33	NOZZLE	6840023E18	PCY2158J		45253.70		15507.70		15730		6770
34	NOZZLE	6840023E18	PCY2156J		45253.70		15507.70		15730		6770
35	NOZZLE	6840023E18	CSDAA859		45253.70		15507.70		15730		6770
36	NOZZLE	6840023E18	PCY2955K		55278.70		21288.70		15413		9344
37	NOZZLE	6840023E18	PCY0292A		45253.70		15507.70		15730		6770
38	NOZZLE - FUEL LARGE	1317M47G16	PHCJJ383		45253.70		15507.70		15730		6770
39	NOZZLE - FUEL LARGE	1317M47G16	PHCFN253		44642.70		44642.70		20030		20030
40	NOZZLE - FUEL LARGE	6840023E16	PHCJP220		47581.70		21288.70		14091		9344
41	NOZZLE - FUEL LARGE	6840023E16	PHCJP217		47581.70		21288.70		14091		9344
42	COOLER - IDG OIL	340-403-102-0	YB910707-0		48913.70		19041.70		21407		8421
43	SENSOR-PT25	RP236-00	YC067661-E		39820.70		39820.70		16949		16949
44	HARNESS	325-025-202-0	YH237314		21288.70		21288.70		9344		9344
45	HARNESS	325-034-802-0	YH240537-R		48306.70		48306.70		21983		21983
46	HARNESS	325-035-003-0	YH220668-8		15507.70		15507.70		6770		6770
47	HARNESS	325-034-902-0	YH216086-8		15507.70		15507.70		6770		6770
48	HARNESS	325-025-702-0	YH653639-2		21288.70		21288.70		9344		9344
49	HARNESS	325-025-803-0	YH230201-6		44370.70		21288.70		19940		9344
50	HARNESS	325-027-701-0	YH245278-7		51513.70		51513.70		23555		23555
51	HARNESS	325-025-401-0	YH250435-U		44642.30		44642.30		20381		20381
52	SENSOR-T3	8TC19AANI	GDBD550C Photo taken		45271.70		45271.70		24361		24361
53	STATOR-ALTERNATOR	87006-9	HTL19023 Photo taken		43310.70		15507.70		11673		6770
54	ROTOR-ALTERNATOR	85465-2	HTLR732B		45520.70		15507.70		11656		6770

TPR20 2/4

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

* Engine Major Component List (LRU)

Type: CFM56-7B     S/N: 874771

NO.	Nomenclature	Part Number	Serial Number	TSN		TSO		CSN		CSO
55	UNIT - HYDROMECHANICAL(HMU)	442369	BECW2016 Photo taken		37667.55		10473.55		16342		4579
56	UNIT - ELECTRONIC ENGINE CONTROL	1853M33P06	LMDN5108 Photo taken		27690.70		27690.70		11774		11774
57	TRANSMITTER-FUEL FLOW	1853M48P01	GDB9614L Photo taken		48913.70		48913.70		21407		21407
58	SWITCH - FUEL FILTER DIFFERENTIALPRESS	QA07995	RA8-3208 Photo taken		613.30		613.30		272		272
59	EXCITER - IGNITION	10-631045-2	UNJBY633 Photo taken		37298.70		37298.70		10569		10569
60	EXCITER - IGNITION	10-631045-2	UNJAK737 Photo taken		42954.70		42954.70		11641		11641
61	LEAD	9059110-1	UNJ11534		40084.70		15507.70		17077		6770
62	LEAD	9059110-1	KG0392		15507.70		15507.70		6770		6770
63	VALVE - HPTACC	3291186-6	GRTG1697C Photo taken		44427.70		15507.70		19946		6770
64	VALVE - LPTACC	340-402-003-0	YR010371-U Photo taken		44642.70		21560.70		20030		9434
65	VALVE - TRANSIENT BLEED	3291390-1	GRTG4497 Photo taken		46691.70		15507.70		20445		6770
66	ACTUATOR - VARIABLE STATOR VANE	1324M12P10	APMMD735 Photo taken		42785.70		16777.70		18753		6992
67	ACTUATOR - VARIABLE STATOR VANE	1211313-010	APMML409 Photo taken		15507.70		15507.70		6770		6770
68	ACTUATOR - VARIABLE BLLED VALVE	1226400	YU024968-A Photo taken		39820.70.		39820.70		16949		16949
69	ACTUATOR - VARIABLE BLLED VALVE	7074-300	YU04861-3 Photo taken		15507.70		15507.70		6770		6770
70	SENSOR-N1 SPEED	320-862-401-0	YJ187647-0 Photo taken		39820.70		39820.70		16949		16949
71	SENSOR-N2 SPEED	320-549-004-0	YJ192145-P		47400.03		6011.39		15306		2635
72	PROBE	TC296-04	YC076456-BR Photo taken		44481.30		5825.30		20138		2580
73	PROBE	TC296-03	YC494300-H Photo taken		31133.70		31133.70		13253		13253
74	PROBE	TC296-04	YC077934-PR		47641.70		47641.70		20803		20803
75	PROBE	TC296-04	YC076673-BR Photo taken		49103.70		49103.70		22022		22022
76	SENSOR	144-186-000-011	YV156641-F		39820.70		39820.70		16949		16949
77	SENSOR	144-187-000-011	YV160151-7		45271.70		45271.70		24361		24361
78	OIL TANK	41F5102	YT012632-P Photo taken		39820.70		39820.70		16949		16949
79	LUBRICATIONUNIT	41F1005	YT005326-N Photo taken		48938.70		15507.70		21856		6770
80	HEATER-SERVO FUEL	301-789-101-0	YB000520-W Photo taken		53912.70		15507.70		20768		6770
81	EXCHANGER-MAIN OIL/FUEL HEAT	11-841193-4	YP027044-T Photo taken		53912.70		15507.70		20768		6770

TPR20 3/4

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

* Engine Major Component List (LRU)

Type: CFM56-7B    S/N: 874771

NO.	Nomenclature	Part Number	Serial Number	TSN		TSO		CSN		CSO
82	FILTER	41F9003	YT122212-C Photo taken		15507.70		15507.70		6770		6770
83	TRANSMITTER - OIL SCAVENGE FILTER CLOG	QA07656ISS1	RX1-5176 Photo taken		15507.70		15507.70		6770		6770
84	SENSOR	8TJ146CFA1	YE012641-L Photo taken		39820.70		39820.70		16949		16949
85	SENSOR	APTE-8A-2000-7BARI	K-19731 Photo taken		15507.70		15507.70		6770		6770
86	PROBE	RP238-00	YC097870-R Photo taken		39820.70		39820.70		16949		16949
87	STARTER	3505945-10	GRTA2383C Photo taken		6495.87		6495.87		2861		2861

*	Prepared By	*
	Reviewed By	*	AUG 23 2017

TPR20 4/4

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

* Engine Major Component List (QEC)

Type: CFM56-7B    S/N: 874771

NO.	Nomenclature	Part Number	Serial Number	TSN		TSO		CSN		CSO
1	GENERATOR-INTEGRATED DRIVE	761574B	2649 Photo taken		36173.70		36173.70		15668		15668
2	COOLER - IDG AIR/OIL	UA538551-3	0319		44650.70		15507.70		20035		6770
3	RING-IDG QUICK ATTACH/DETACH	762246	0695		48777.70		48777.70		21493		21493
4	DETECTOR - ENGINE CORE AFTER FIRE	902862	1513		44924.70		44924.70		24253		24253
5	DETECTOR - ENGINE FAN LOWER FIRE	902016-01	1933		47966.70		47966.70		20845		20845
6	DETECTOR - ENGINE CORE RIGHT	902018-01	1446 Photo taken		44650.70		44650.70		20035		20035
7	DETECTOR - ENGINE FAN UPPER F1RE	902864	9642		15507.70		15507.70		6770		6770
8	PUMP - ENGINE DRIVE HYDRAULIC	66087	K0650 Photo taken		43659.70		43659.70		23243		23243
9	HOSE ASSY	S332A210-21	2941		41499.70		41499.70		17848		17848
10	HOSE ASSY	155016-20-11	XXX		15507.70		15507.70		6770		6770
11	HOSE ASSY	155006-06-23	XXX		15507.70		15507.70		6770		6770
12	VALVE - GROUND THERMAL ANTI - ICE SOLENOID	320548-2	4028 Photo taken		30455.89		10810.04		12837		4700
13	VALVE - ENGINE COWL TAI	3215618-4	402C Photo taken		43401.70		43401.70		19349		19349
14	CHECK VALVE - BLEED AIR 5TH- STAGE	3202222-l	6362 8303 installed		49175.59		19785.59		21381		8710
15	REGULATOR- BLEED AIR	107492-6	6182		41468.70		41468.70		18226		18226
16	VALVE - PRESSURE REGULATING AND SHUTOFF	3214552-6	4222 Photo taken		45505.04		45505.04		23825		23825
17	VALVE - HIGH STAGE	3214446-4	7653 Photo taken		39586.70		39586.70		17005		17005
18	REGULATOR - HIGH STAGE	107484-7 3172347-1	6640 59364 installed		34211.70		34211.70		14182		14182
19	STRUT	332A2371-3	222-4 Photo taken		15507.70		15507.70		6770		6770
20	VALVE	3289562-5	14750 Photo taken		12474.54		12474.54		5557		5557
14	KIT - CFM56 QEC	654A0001-8006	874771		48734.70		48734.70		21475		21475
15	HARNESS	325-026-701-0	YH320424-F		45271.70		15507.70		24361		6770
16	HARNESS	325-029-908-0	YH315350H		15507.70		15507.70		6770		6770
17	HARNESS	325-026-901-0	YH300-606-Y		15507.70		15507.70		6770		6770
18	HARNESS	325-026-801-0	7H326125-7		15507.70		15507.70		6770		6770
19	HARNESS	325-035-501-0	YH295617-2		15507.70		15507.70		6770		6770
20	HARNESS	325-015-001-0	YH305374-1		15507.70		15507.70		6770		6770
21	MOUNT ASSY - ENGINE FWD	310A2020-5	276309E		44378.70		15507.70		19945		6770

TPR20 1/2

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

* Engine Major Component List (QEC)

Type: CFM56-7B    S/N: 874771

NO.	Nomenclature	Part Number	Serial Number	TSN		TSO		CSN		CSO
22	LINK ASSY - LEFT THRUST	310A2041-9	CAL0001		46731.70		15507.70		20016		6770
23	LINK ASSY - RIGIIT THRUST	310A2041-10	CAL891132		39820.70		15507.70		16949		6770
24	MOUNT ASSY - ENGINE AFT	310A2030-11	B639 Photo taken		48734.70		15507.70		21475		6770
25	SENSOR - Tl2	RP235-00	F2276 Photo taken		39820.70		39820.70		16949		16949
26	PLUG - EXHAUST PRIMARY	314A2620-1	0610 Photo taken		48734.70		48734.70		21475		21475
27	NOZZLE - EXHAUST PRIMARY	314A2610-1	0610 Photo taken		48734.70		48734.70		21475		21475
28	VALVE - START	3289630-2	5626 Photo taken		40752.70		40752.70		18276		18276

*	Prepared By	*
	Reviewed By	*	AUG 23 2017

TPR20 2/2

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

EX-10.7

Exhibit 10.7

EXECUTION COPY

ENGINE LEASE AGREEMENT

BETWEEN

CONTRAIL AVIATION SUPPORT, LLC,

as Lessor

and

*,

as Lessee

One (1) CFM International, Inc. Model CFM56-7B26 Aircraft Engine

Bearing Manufacturer’s Serial Number *

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

TABLE OF CONTENTS

SECTION 1.	SCOPE OF LEASE	1
SECTION 2.	TERM	2
SECTION 3.	CONDITIONS PRECEDENT AND DELIVERY	3
SECTION 4.	PAYMENT	5
SECTION 5.	COMPLIANCE WITH LAWS	6
SECTION 6.	USE AND MAINTENANCE	7
SECTION 7.	RECORDS AND INSPECTION	9
SECTION 8.	MODIFICATIONS	11
SECTION 9.	LOSS EVENT	11
SECTION 10.	NO ABATEMENT OR SET OFF	11
SECTION 11.	RELEASE AND INDEMNITY	11
SECTION 12.	LIMITED WARRANTY AND DISCLAIMER	13
SECTION 13.	FORCE MAJEURE	14
SECTION 14.	INSURANCE	14
SECTION 15.	TITLE TO ENGINE	18
SECTION 16.	TAXES	19
SECTION 17.	ASSIGNMENT AND SUBLEASING	20
SECTION 18.	REDELIVERY OF THE ENGINE	21
SECTION 19.	TERMINATION AND ADDITIONAL ASSURANCES	24
SECTION 20.	NOTICES	27
SECTION 21.	RECORDING	28
SECTION 22.	BROKERS/FINDERS	28
SECTION 23.	MISCELLANEOUS	28
SECTION 24.	GOVERNING LAW AND JURISDICTION	29
SECTION 25.	REPRESENTATIONS AND WARRANTIES	31
SECTION 26.	CONFIDENTIALITY	33

i

SCHEDULES

SCHEDULE 1	FORM OF DELIVERY RECEIPT
SCHEDULE 2	FORM OF DELIVERY ACCEPTANCE CERTIFICATE
SCHEDULE 3	FORM OF MONTHLY UTILIZATION REPORT
SCHEDULE 4	FORM OF NON-INCIDENT STATEMENT
SCHEDULE 5	FINANCIAL TERMS
SCHEDULE 6	FORM OF ACKNOWLEDGEMENT OF ENGINE OWNERSHIP
SCHEDULE 7	FORM OF ENGINE OPERATIONAL REPORT
SCHEDULE 8	FORM OF ENGINE REDELIVERY CHECKS & INSPECTIONS REPORT
SCHEDULE 9	FORM OF LEASE TERMINATION AGREEMENT
SCHEDULE 10	END OF LEASE INSPECTION REQUIREMENTS
SCHEDULE 11	FORM OF REDELIVERY ACCEPTANCE CERTIFICATE

ii

This ENGINE LEASE AGREEMENT (“Lease”), dated as of January 10, 2018, is entered between:

CONTRAIL AVIATION SUPPORT, LLC, a limited liability company organized and existing under the laws of the State of North Carolina, United States of America, with its principal place of business at 435 Investment Court, Verona, Wisconsin 53593, as lessor (“Lessor”); and

*, a company duly organized and existing under with the laws of *, and having its principal place of business at  *, as lessee (“Lessee”) (both Lessor and Lessee individually referred to as a “Party” and collectively referred to as the “Parties”).

Recitals

Whereas, the Lessor owns the Engine (hereinafter defined);

Whereas, Lessor and Lessee are willing to enter into this Lease for the leasing of the Engine by Lessee from Lessor; and

for the consideration hereinafter set out, IT IS HEREBY AGREED:

1. SCOPE OF LEASE

The Lessor agrees to lease the following engine, capable of operation at 26,300 pounds thrust at Delivery, together with full QEC, and with FAA 8130-3 certification and EASA Form 1, and copies of all related technical records in English in Lessor’s possession and related engine transportation stand (collectively, the “Engine”) to the Lessee, and the Lessee agrees to lease the Engine from the Lessor, upon the terms set out in this Lease.

1.1.  Type and Model:                              CFM International, Inc., model CFM56-7B26 (described on the International Registry drop down menu as CFM model CFM56-7)
1.2.  Serial Numbers:                               * (also described on the International Registry drop down menu as *)
1.3.  Time Since New:	49,190
1.4.  Cycles Since New:	21649
1.5.  QEC:	installed full QEC
1.6.  Thrust Rating:	26,300 lbs.
1.7.  Cycles remaining at B26___:	3,351
1.8.  Engine Transportation Stand:
a.   Base Serial Number: *12030-4

1

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

b.  Cradle Serial Number: *12030-4

c.   Manufacturer: DAE

2. TERM

2.1. Lease Term. The term of this Lease shall commence on the Lease Commencement Date and shall terminate on the Lease End Date (unless earlier terminated or extended in writing by the Parties) in accordance with the provisions of this Lease (“Lease Term”). On the Lease End Date or other date of valid termination of the Lease, Lessee shall return the Engine to the Redelivery Location in accordance with the terms of this Lease.

2.2. Additional Definitions. In this Lease, the following terms have the following meanings:

*“AACR” means Autoritalea Aeronautica Civila Romana.

“Delivery” means the delivery of the Engine by Lessor to Lessee in accordance with this Lease and which shall be evidenced by execution and delivery of the Delivery Receipt;

“Delivery Acceptance Certificate” means the Delivery Acceptance Certificate in the form of Schedule 2 of the Lease;

“Delivery Date” means the date of the Engine is delivered to Lessee as recorded in the Delivery Receipt;

“Delivery Location” means the facilities of Aircraft Inspection & Management LLC located at 2481 W. Poppy Avenue, Tucson, Arizona 85705, United States of America;

“Delivery Receipt” means the Delivery Receipt to be dated the date of Delivery in the form of Schedule 1 of the Lease;

“Inspection” means a physical inspection of the Engine and a review of Engine records;

“Inspection Deadline” means no later than the later of fifteen calendar (15) days following the Delivery Date and 5 (five) calendar days after the Engine is received at the Lessee’s facility if Lessee has shipped the engine to its facility within fifteen (15) calendar days after the Delivery Date;

“Lease Commencement Date” means January 15, 2018;

“Lease End Date” means the earlier of (i) the thirty sixth monthly anniversary of the Lease Commencement Date and (ii) the date on which the Engine is returned to Lessor at the Redelivery Location due to the earlier of: *

2

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

*

“Redelivery Acceptance Certificate” means the Redelivery Acceptance Certificate in the form of Schedule 11 of the Lease;

“Redelivery Location” means the facilities of Aircraft Inspection & Management LLC located at 2481 W. Poppy Avenue, Tucson, Arizona 85705, United States of America, or subject to clause 18.1, such other location as designated by Lessor; and

“Rent Commencement Date” means the Delivery Date;

3. CONDITIONS PRECEDENT AND DELIVERY

3.1. Conditions Precedent. The obligations of Lessor under the Lease and the transfer of possession of the Engine to Lessee under the Lease are conditional upon Lessor’s receipt, on or before the Delivery, as defined below, and in form and substance satisfactory to Lessor, of each of the following:

a. Lease and Technical Acceptance Certificate: two (2) duly executed originals of this Lease and two (2) duly executed copies of the Delivery Receipt;

b. Insurance: (i) a copy of certificates of insurance and re-insurance as may be required pursuant to the Lease; (ii) an undertaking from brokers (acceptable to Lessor as set out in Section 14); and (iii) any other evidence satisfactory to Lessor evidencing compliance with the insurance provisions of the Lease;

c. Payments: all sums due to Lessor prior to and on Delivery or any other engine lease agreement between Lessor and its affiliates and Lessee and its affiliates, including, without limitation, the first month’s Lease Rate, and the Deposit;

d. Lessee Documents: a copy of the organizational documents of the Lessee, certified by an officer of the Lessee, and other evidence authorizing execution, delivery and performance by Lessee of the Lease and each other document relating thereto to which Lessee is or will be a party;

e. Incumbency Certificate: a certificate signed by an officer of Lessee confirming that the person who is to sign the Lease for and on behalf of Lessee is authorized by Lessee to sign the Lease for and on behalf of Lessee;

f. Process Agent Letter: a letter from the Process Agent (as hereinafter defined) confirming its acceptance of the appointment of agent for service of process by Lessee pursuant to this Lease;

3

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

g. Lease Termination Agreement: a lease termination agreement in the form of Schedule 9 duly executed by Lessee but undated (the “Lease Termination Agreement”);

h. KYC: information and documents requested by Lessor related to Know-Your-Customer or other background checks and verification required by the Office of Foreign Assets Control of the U.S. Department of Treasury (“OFAC”) or other applicable governmental offices and agencies, including those required to verify compliance with Section 5 below; and

i. General: such other documents as Lessor may reasonably request.

3.2. Delivery.

a. Following its receipt of the Deposit and the satisfaction or waiver of the conditions precedent set forth in Section 3.1, Lessor, at Lessee’s expense, will deliver the Engine to Lessee at the Delivery Location. On Delivery, the Engine will have a Federal Aviation Administration (“FAA”) 8130-3 dual release serviceable tag and an EASA Form 1 serviceable tag affixed to it. Immediately upon receipt of the Engine, Lessee shall execute and deliver to Lessor, and Lessor shall acknowledge, a Delivery Receipt for the Engine; provided however, that no later than the Inspection Deadline, Lessee or any of its appointed contractors shall be entitled to perform and, if performed, shall have completed an inspection of the Engine, including, without limitation, an on-wing or test cell power assurance run and a borescope inspection. Notwithstanding the fact that Lessee signed the Delivery Receipt, Lessee may reject the Engine by delivering written notice thereof to Lessor before the Inspection Deadline, if such Engine is not in the condition required under this Agreement. Lessor shall have the right to confirm and correct such deficiencies within five (5) calendar days after its receipt of such notice. Any written rejection of the Engine shall detail the reasons for rejection, which the Lessor shall acknowledge in writing. In such an event, and should Lessor elect not to correct such discrepancy, Lessee shall hold the Engine pending shipping instructions, at which time Lessee shall ship the Engine at Lessor’s cost and expense (including insurance and packing). Upon receipt by Lessor of the Engine, in the same condition and modification status and with the same appliances, parts, accessories, appurtenances, instruments, modules, components, line replacement units (“LRUs”) as when delivered to Lessee and other items of equipment of whatever nature, which may from time to time be incorporated in or installed on the Engine or which, having been removed from the Engine, remain the property of Lessor (collectively, the “Parts”), (i) this Lease shall terminate, (ii) all funds previously received by Lessor from Lessee pursuant to this Lease shall be released to Lessee without any deductions not more than (2) two business days after Lessor confirms such receipt and (iii) neither party shall have any further obligation or liability to the other under this Lease except for the confidentiality clause 26 and those obligations, liabilities and agreements in this Lease which specifically survive the cancellation, expiration or termination of this Lease. If Lessee fails to notify Lessor before the Inspection Deadline, Lessee shall be deemed to have

4

accepted the Engine. In the event that Lessee accepts or is deemed to have accepted the Engine, Lessee shall execute and deliver to Lessor the Delivery Acceptance Certificate within five (5) calendar days after the expiration of the Inspection Period

b. Lessee shall pay for and indemnify, defend, and hold Lessor harmless from and against any and all liabilities, claims, damages, loss, cost or expense arising from or associated with the inspections as set forth in Section 3.2(a). Alternatively the Lessee may elect to use the current Lessor-provided borescope inspection to base its decision on the serviceability of the Engine, in which case any redelivery borescope obligations shall be conducted with consideration or exception given for findings with respect to such Lessor-provided borescope inspection.

c. Immediately upon Delivery and throughout the Lease Term, the Engine will be in every respect at the sole risk of Lessee, who will bear all risk of loss, theft, damage to or destruction of the Engine other than as stipulated in this Lease.

3.3. Aircraft Notification. Within seventy–two (72) hours after installation of the Engine on an aircraft, Lessee will notify Lessor of the type, serial number and registration number of such aircraft and deliver to Lessor a disk sheet (LLP List) in the form required by Lessor, printed on Lessee’s letterhead and signed, stamped and dated by Lessee’s quality control department.

3.4. Recognition of Rights. Prior to installation of the Engine on an aircraft, Lessee shall procure and furnish Lessor assurances in the form of Schedule 6 to the Lease or, if applicable, in such other form as may be requested by and acceptable to Lessor or any lender as notified by Lessor to Lessee as having an interest in the Engine and/or the Lease (“Lender”), from each owner, lessor, mortgagee and lienholder holding any right, title, or interest in the aircraft upon which the Engine is to be installed.

3.5. Delayed Delivery. Lessor shall not be responsible for any losses suffered by or incurred by Lessee or any other person, arising from, or in connection with, any delay in delivery or failure to deliver the Engine under the Lease, unless such losses were suffered as a result of delays directly attributable to willful misconduct and gross negligence by Lessor.

4. PAYMENT

4.1. Additional Definitions. In this Lease, the terms “Lease Rate” and “Supplemental Rent” shall have the meanings ascribed to such terms as set forth in Schedule 5.

4.2. Payments. All payments shall be made by Lessee to Lessor when due without prior demand by wire transfer of immediately available funds to the bank account set forth in Schedule 5.

4.3. Lease Fees. Lessee shall pay to Lessor the Lease Rate and the Supplemental Rents described in Schedule 5 (individually and collectively, the “Lease Fees”) during the Lease Term.

5

4.4. Payment Dates. The Lessee shall pay to Lessor the Lease Rate and the Supplemental Rent on the applicable dates as set forth in Schedule 4 (each a “Due Date”); provided that, if any date on which a payment is due hereunder is not a day on which commercial banks are open in Evansville, Indiana, United States of America and * (a “Business Day”), such payment shall be made on the immediately following Business Day. All Lease Fees are exclusive of all duties, charges and imposts, and any applicable sales, use, excise, transfer, gross receipts, withholding or other taxes or similar charges of any kind (excluding only taxes on the income received by Lessor) (“Taxes”), which shall be paid by Lessee. Lessee shall be responsible for all transportation, insurance, packing charges, registration, import and export fees and customs duty, if any, arising in connection with this Lease.

4.5. Net Lease. This Lease is a net lease and the Lessee’s obligations to pay the Lease Fees and to make all other payments and perform all other obligations in accordance with this Lease shall be absolute and unconditional (except as otherwise expressly provided herein) and irrespective of any contingency whatsoever, including, but not limited to:

a. any right of set-off, counterclaim, recoupment, defense, or other right that Lessee may have in the event that any such set-off, counterclaim, recoupment, defense or other right should apply;

b. any insolvency, bankruptcy, reorganization, arrangement, readjustment of debt, dissolution, liquidation or similar proceedings by or against the Lessor or the Lessee;

c. any invalidity or unenforceability or lack of due authorization of, or other defect in, this Lease; and

d. any other cause which (but for this provision) would or might have the effect of terminating or in any way affecting any obligation of the Lessee hereunder.

4.6. Payments Following Termination. Notwithstanding the foregoing, Lessee shall not be required to continue to pay the Lease Fees if the Lease is terminated prior to the Lease End Date in accordance with the terms hereof; provided, however, that the termination of Lessee’s obligation to pay Lease Fees described in this sentence shall not apply in the event that the Lease is terminated following an Event of Default (hereinafter defined).

5. COMPLIANCE WITH LAWS

This Agreement shall be subject to all United States of America (“United States” or “U.S.”) laws and regulations now or hereafter applicable to the subject matter of this Agreement, including, but not limited to, applicable export control provisions of Title 50 of the United States Code (50 USC App. 2401 et seq.). Lessee will comply in all respects with all laws, ordinances, rules, regulations and orders of all governmental authorities applicable to the installation, operation and maintenance of Engine. Lessee will not cause or permit the Engine to be flown or transported to any airport or country if so doing would cause Lessor to be in violation of any law, rule, regulation or decree of the United States, the European Union, or any other country or

6

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

political sub-division thereof or trans-national body having jurisdiction over Lessee or Lessor or the Engine or any airframe upon which the Engine may, from time to time, be installed upon. To this effect, Lessee acknowledges that the Engine may be subject to export control laws of the United States and Lessee shall not (without limiting the provisions of Section 17 of this Lease) assign this lease or further lease or sublease the Engine to any person that is (i) subject to U.S., European Union, United Kingdom multilateral or other economic or trade sanctions currently in force; (ii) owned or controlled by, or acting on behalf of, any person that is subject to U.S., European Union, or United Kingdom multilateral economic or trade sanctions currently in force, (iii) named, identified or described on any blocked persons list, designated nationals list, prohibited persons list, or other official list of persons with whom U.S. or United Kingdom persons may not conduct business, including, but not limited to, lists published or maintained by OFAC, (B) the U.S. Department of Commerce, or (C) the U.S. Department of State.

6. USE AND MAINTENANCE

6.1. Use. Lessee will not permit the Engine to be stored, maintained, used or operated in violation of any law, or in violation of any airworthiness certificate, or license or registration issued by any government or regulatory authority, or contrary to the operating manuals or instructions for the Engine in effect from time to time. Lessee agrees not to operate the Engine (i) unless the Engine is covered by insurance as required by the provisions hereof, or (ii) contrary to the terms of such insurance. Lessee also agrees not to operate, store or otherwise locate the Engine in any jurisdiction excluded from coverage by an insurance policy issued with respect to the Engine required under this Lease. The Lessee shall use its best efforts to install the engine on an aircraft and to keep the Engine operating during the Lease Term. The Engine shall not be removed from operation for any period exceeding three weeks at a time unless installed on an aircraft undergoing scheduled heavy airframe maintenance.

6.2. Maintenance and Repair.

a. Lessee, at its own cost and expense, shall: (i) perform, or caused to be performed, all mandatory service, inspections, maintenance and testing that can be accomplished on-wing, (A) as may be required under applicable EASA and/or *AACR (the “Aviation Authority”) rules and regulations, including, without limitation, any Manufacturer’s alert service bulletin that has been rendered mandatory by the Aviation Authority by means of an Airworthiness Directive (“AD”) and any AD that has been rendered mandatory by the Aviation Authority and all such ADs shall be performed in strict compliance with the requirements thereof or by application of or utilization of any alternate means of compliance approved by the Aviation Authority at all times and in compliance with a maintenance program for the Engine approved by the Aviation Authority (the “Maintenance Program”), which shall include, but shall not be limited to, routine scheduled and condition monitored line maintenance, and replacement or repair of LRUs and QEC as required, in full compliance with the Aviation Authority requirements in force from time to time, (B) in the same manner and with the same care as shall be the case with similar engines owned by or operated by or on behalf of the Lessee, (C) so as to keep the Engine in as good operating

7

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

condition as on the Delivery Date, reasonable wear and tear excepted, provided, however, Lessee shall be responsible for the replacement or repair of LRUs due to reasonable wear and tear, and (D) such that when installed on a commercial transport aircraft shall at all times be eligible for airworthiness certification; and (ii) maintain, or cause to be maintained, all Engine records, documents and other materials with respect to the Engine (the “Technical Documents”) required by, and in a manner acceptable to, the FAA and EASA and any other governmental entity having jurisdiction. Lessee shall assume and bear, at its own risk and expense, all risk for loss or damage to the Engine and all components and parts from any and every cause whatsoever, other than normal wear and tear except as otherwise provided in this Agreement.

b. Lessor shall not be liable for any on-wing expense whatsoever incurred during the Lease Term other than normal wear and tear except as otherwise provided in this Agreement. For the avoidance of doubt, foreign object damage (“FOD”), misuse, mishandling, neglect, negligence or improper operation shall not constitute ordinary wear and tear for any purposes under the Lease. Quick Access Recorder data shall be utilized to establish whether or not Operator Exceedance, as defined below, shall have occurred.

c. Any repairs required to the Engine that are attributable to FOD, misuse, mishandling, neglect, negligence or improper operation outside of the specifications or procedures as laid down in the Manufacturer’s maintenance and AFM and operating manuals after Delivery and during the Lease Term (“Operator Exceedance”), shall be for Lessee’s account and Lessee hereby indemnifies Lessor in full on demand against the cost of any such repairs both during or after Delivery and during the Lease Term until the date the Redelivery Acceptance Certificate is executed by Lessor except as reserved by the Redelivery Acceptance Certificate. Lessee shall have no responsibility for any damage to the Engine prior to the Delivery Date and for damage and cost of repair resulting from normal wear and tear and LLP life expiration except as otherwise provided in this Agreement.

d. When not installed upon an aircraft, Lessee shall store and inhibit the Engine as required by the Manufacturer’s recommendations.

e. After each Engine removal during the Lease Term, Lessee will provide a completed engine operational report to Lessor substantially in the form of Schedule 7.

f. Lessee shall, if requested by Lessor, provide access to the Lessee’s Maintenance Program for evaluation by Lessor.

g. In the event that a routine borescope inspection performed during the Lease Term discloses that the Engine is unserviceable and can be repaired on-wing (i) Lessee shall perform such repair to restore serviceability in order to continue the Lease Term, providing that indications are that a reasonable 26,300 lbs. operating

8

margin will result from such repair. In the event a reasonable margin at 26,300 lbs. thrust cannot be achieved, and therefore the Lease terminates, then the Lessee shall still perform the on-wing repair (as defined as borescope blending, but does not include module removals) in order to meet the redelivery conditions and issue an EASA Form 1 tag for serviceability at 26,300 lbs. of thrust.

h. Lessee shall monitor the Engine in accordance with its trend monitoring program and follow the procedures of such program to troubleshoot and correct any alarm conditions.

6.3. Replacement Parts. Lessee shall not replace any serviceable Part in the Engine without Lessor’s prior written approval nor replace any unserviceable Part with a part of a lower part number, modification standard and Service Bulletin status than the Part that is unserviceable. In the event that there is a dispute between Lessee and Lessor as to whether or not a Part is unserviceable, Lessee and Lessor agree to submit the dispute to the Engine manufacturer for resolution of such dispute and to abide by the Engine manufacturer’s decision. Lessee shall not install any Part Manufacturer Approval (PMA) parts (without prior written approval from Lessor) and shall not perform Designated Engineering Representative (DER) repairs (without prior written approval from Lessor) on the Engine at any time after Delivery and during the Lease Term. Lessee shall ensure that during such period, no LLP in the Engine is removed or replaced without Lessor’s prior written approval. All replacement Parts will be free and clear of liens and of equal or better value, time since overhaul, remaining useful life, modification status and service bulletin status than the Part replaced, assuming such replaced Part was in the condition required by the Lease. All such replacement Parts must have been last serviced by an FAA / EASA approved repair facility, with back to birth traceability on all LLPs, and such replacement Parts will become the property of Lessor immediately upon their installation on the Engine. All Parts replaced in accordance with the foregoing requirements will become the property of Lessee immediately upon the installation of the replacement Part on the Engine in accordance with this Section 6.3.

7. RECORDS AND INSPECTION

7.1. Maintenance Records. Lessee will maintain complete and accurate records in English for the Engine after Delivery and during the Lease Term and will provide them to Lessor on request. All such records will be deemed to be part of the Engine at the time generated. Within five (5) days after the end of each month, Lessee will report to Lessor the Flight Hours and Flight Cycles of operation and the registration number of the aircraft on which the Engine is installed substantially in the form of Schedule 3. Lessee will provide copies of all significant maintenance tasks performed on the Engine, including both scheduled and unscheduled maintenance. Lessee will also provide copies of trend monitoring data (engine health monitoring on request). Upon redelivery of the Engine to Lessor, Lessee will report to Lessor the total Flight Hours and Flight Cycles operated during the Lease Term.

7.2. Redelivery Records. Upon redelivery of the Engine to Lessor as set out in Section 18, Lessee will return all Technical Documents delivered to Lessee by Lessor, together with all Technical Documents generated by Lessee, including all significant and most recent insignificant maintenance tasks performed after Delivery and during the Lease Term.

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7.3. Parts Installed. With respect to any Part installed by Lessee after Delivery and during the Lease Term and not removed prior to the return of the Engine, the Technical Documents returned to Lessor will include:

a. Part number, description, and serial number (if part is serialized); and

b. historical records, including, but not limited to:

i. serviceability status of the Part at installation;

ii. for a time-controlled Part, time since new (TSN) and cycles since new (CSN), time and cycles since overhaul as may be applicable, and TSN and CSN of the Engine at the time of part installation; and

iii. for a LLP, documentation tracing usage of the part since new in the form of fully certified back to birth history, including, but not limited to:

• history card (overview signed by the last operator or owner) recording movement of a part from one engine/ module to another, from one operator to another, starting from TSN = 0 and CSN =0 until present (installed/removed data);

• non-incident/non-accident/non-military use declaration from operators for every history card step;

• disk sheet (LLP List) with actual removal information (TSN/CSN/removal date) of the Engine in the form required by Lessor, printed on Lessee’s letterhead and signed, stamped and dated by Lessee’s quality control department for each installation and removal of the Engine on to and off of an aircraft during the Lease Term;

• supporting documents (off-on logs, off-on disk sheets) printed on operator’s letterhead and signed from operators for every history card step;

• document indicating authenticity of part by one of the following:

– release certificate new part, or

– purchase order from OEM for new part, or

– OEM specific birth record for engines; and

• Comprehensive current status of FAA and EASA airworthiness directives (ADs) issued against the Engine type signed, by Lessee’s quality control department.

7.4. Inspection. Lessee shall permit representatives of Lessor on request to inspect the Engine and any part thereof without disassembling same, such inspection to include borescope inspection only if such borescope inspection is scheduled, and review and copying of the

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Technical Documents, provided that such representatives shall endeavor not to disrupt Lessee’s commercial operations in doing so.

7.5. Additional Definitions. In this Lease, the following terms have the following meanings: “Flight Cycle” means one take-off and landing of an airframe upon which the Engine is installed; and “Flight Hour” means each hour or fraction thereof, measured to two decimal places, elapsing from the moment the wheels of the airframe upon which the Engine is installed leaves the ground on take-off to the moment when the wheels of the airframe upon which the Engine is installed touches the ground on landing.

8. MODIFICATIONS

Lessee will not make any modifications or alterations to the Engine without Lessor’s prior written consent.

9. LOSS EVENT

In the event of actual or constructive total loss or destruction of the Engine or damage thereto beyond economic repair after Delivery and during the Lease Term (including any event which results in an insurance settlement on the basis of a total loss or a constructive or compromised constructive loss), or the loss of possession or detention of the Engine for more than thirty (30) days by reason of seizure, requisition (including requisition of title of the Engine by or on authority of any governmental entity or by any creditor of Lessee), theft, disappearance, or otherwise (the “Loss Event”), Lessee will immediately notify Lessor and any Lender thereof. In the event of such a Loss Event, Lessee shall upon the earlier of 90 days after the date of such Loss Event and the date of receipt of the insurance proceeds pay Lessor (or Lender, if any) the Agreed Value, together with all other payments owing hereunder through the date of such payment of the Agreed Value and the Lease will terminate upon payment of all such amounts at which point Lessee shall have no further obligations regarding the Lease Rate and Supplemental Rent. Lessor shall subsequently transfer title to the Engine to Lessee, subject to the rights of affected insurance companies. “Agreed Value” shall have the meaning ascribed to such term as set forth in Schedule 5.

10. NO ABATEMENT OR SET OFF

This Lease is a net lease. Lessee’s obligations to pay all charges herein are absolute and unconditional and Lessee will not be entitled to any abatement, reduction of, or set off against, the Lease Rate, Supplemental Rent or other payments due to Lessor under any circumstances or for any reason whatsoever.

11. RELEASE AND INDEMNITY

11.1. INDEMNITY. LESSEE HEREBY RELEASES AND AGREES TO INDEMNIFY, DEFEND AND HOLD EACH OF THE LESSOR, ANY LENDER, ANY SERVICER, AND THEIR RESPECTIVE OFFICERS, DIRECTORS, SHAREHOLDERS, MANAGERS, MEMBERS, EMPLOYEES, AGENTS, SUBCONTRACTORS, ASSIGNEES AND AFFILIATES (COLLECTIVELY THE “INDEMNITEES” AND

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EACH INDIVIDUALLY, AN “INDEMNITEE”) HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, (INCLUDING, WITHOUT LIMITATION, LIABILITIES ARISING OUT OF THE DOCTRINE OF STRICT LIABILITY), OBLIGATIONS, CLAIMS, PENALTIES, FINES, LIENS, DEMANDS, ACTIONS, SUITS, JUDGEMENTS, COSTS, EXPENSES AND DISBURSEMENTS, DAMAGES, AND LOSSES (INCLUDING WITHOUT LIMITATION ALL REASONABLE LEGAL FEES AND EXPENSES, COSTS OF INVESTIGATION AND OTHER EXPENSES IN CONNECTION THEREWITH OR INCIDENT THERETO) OF WHATEVER KIND AND NATURE WHICH MAY BE IMPOSED ON, INCURRED BY OR ASSERTED AGAINST ANY OF THE INDEMNITEES IN ANY WAY RELATING TO OR ARISING OUT OF THIS LEASE, INCLUDING BUT NOT LIMITED TO THE LOSS OR DESTRUCTION OF OR DAMAGE TO ANY PROPERTY OR DEATH OR INJURY OF OR OTHER LOSS OF WHATSOEVER NATURE SUFFERED BY ANY PARTY (INCLUDING WITHOUT LIMITATION LESSEE’S EMPLOYEES), AND FOR LOSS OF OR DAMAGE TO OR DELAY IN THE DELIVERY OF ANY PROPERTY WHATSOEVER (INCLUDING WITHOUT LIMITATION ANY AIRCRAFT ON WHICH ANY ENGINE MAY BE INSTALLED AND LOSS OF USE THEREOF) (COLLECTIVELY, THE “CLAIMS”), IN ANY MANNER CAUSED BY, ARISING OUT OF OR RELATED TO OR IN ANY WAY CONNECTED WITH (IN EACH CASE WHETHER DIRECTLY OR INDIRECTLY) THE DESIGN, MANUFACTURE, TESTING, DELIVERY, IMPORT, EXPORT, LEASING, STORAGE, TRANSPORTATION, INSTALLATION, REMOVAL, INSURANCE, OPERATION, MAINTENANCE, REPAIR, CONDITION, SERVICE, OVERHAUL, MODIFICATION, CHANGE, ALTERATION, USE, CONTROL, POSSESSION, DETACHMENT, DISPOSAL OR REDELIVERY OF THE ENGINE OCCURRING OR ARISING FROM THE PERIOD DURING WHICH THE ENGINE IS LEASED TO LESSEE UNDER THIS LEASE, INCLUDING, WITHOUT LIMITATION, ANY CLAIMS ARISING OUT OF VIOLATIONS OF LAW AND ANY CLAIM FOR PATENT, TRADEMARK OR COPYRIGHT INFRINGEMENT OTHER THAN ANY SUCH CLAIM ARISING THROUGH THE MANUFACTURE OF THE ENGINE.

NONE OF THE INDEMNITEES SHALL BE LIABLE TO LESSEE OR ANY OTHER PARTY, WHETHER IN CONTRACT OR IN TORT FOR ANY UNAVAILABILITY, LOSS OF USE OR SERVICE, LOSS OR DELAY IN CONNECTION WITH THE ENGINE WHATSOEVER, WHETHER ON BOARD A HOST AIRCRAFT OR ELSEWHERE AND IRRESPECTIVE OF WHETHER SUCH OCCURRENCE ARISES DUE TO ANY ACT OR OMISSION OF LESSOR EXCEPT TO THE EXTENT CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF ANY INDEMNITEE WHILE THE ENGINE WAS IN LESSEE’S CONTROL, OR PRIOR TO THE COMMENCEMENT OF THIS AGREEMENT.

11.2. DAMAGES. IN NO EVENT WILL LESSOR BE LIABLE FOR ANY REASON FOR SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES, SUCH AS LOST REVENUES, LOST PROFITS, OR LOSS OF PROSPECTIVE ECONOMIC ADVANTAGE, RESULTING FROM ITS PERFORMANCE OR FAILURE TO PERFORM UNDER THIS LEASE.

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11.3. Waiver. Lessee hereby waives and releases each of the Indemnitees from any Claims (whether now existing or hereafter arising) for or on account of or arising or in any way connected with injury to or death of personnel or any agent of Lessee or loss or damage to property of Lessee or the loss of use of any property which may result from or arise in any manner out of or in relation to the manufacture, purchase, delivery, leasing, condition, use, maintenance, storage, repossession or operation of the Engine, either in the air or on the ground, or which may be caused by any defect in the Engine, from the material or any part used therein or from the design or testing thereof, or use thereof or from any maintenance, service, repair, overhaul or testing of the Engine regardless of when such defect may be discovered, whether or not the Engine is at the time in the possession of the Lessee and regardless of the location of the Engine at any such time except when such injury, death, loss, loss of use or damage results from the gross negligence or the willful misconduct of Lessor.

11.4. Survival. The provisions of Section 11 shall survive the termination of the Lease.

12. LIMITED WARRANTY AND DISCLAIMER

12.1. Lease. Lessor warrants that it is authorized to lease the Engine to Lessee.

12.2. Quiet Enjoyment. Provided no Event of Default has occurred and such event is continuing hereunder, Lessor covenants that neither Lessor nor any of their respective directors, officers, employees, agents or representatives nor any person lawfully claiming through any of them will interfere with Lessee’s quiet, peaceful use and enjoyment of the Engine. Subject to the provisions of this Lease, nothing shall be construed to limit Lessee’s rights and remedies in the event of Lessor’s breach of its covenant of quiet enjoyment set forth in Section 12.2 or to limit the Lessee’s rights and remedies to pursue in a court of Law any claim it may have against Lessor or any other person. [NOTE: Lessor’s breach of the covenant of quiet enjoyment does not give Lessee the right to stop paying rent or exercise any right of offset or any other right or remedy to which it may be entitled in violation of the “net lease” provisions of Section 4.5.]

12.3. “AS IS”. The Engine is leased and accepted by Lessee in its “AS IS, WHERE IS” and “WITH ALL FAULTS” condition at the Delivery Location. Lessor makes no warranties whatsoever with respect to the Engine, express or implied, except as expressly provided in Sections 12.1 and 12.2 above.

12.4. DISCLAIMER. THE WARRANTIES SET FORTH IN THIS SECTION 12 AND THE OBLIGATIONS AND LIABILITIES OF LESSOR THEREUNDER, ARE EXPRESSLY IN LIEU OF, AND LESSEE HEREBY WAIVES AND RELEASES LESSOR FROM ANY AND ALL OTHER WARRANTIES, AGREEMENTS, GUARANTEES, CONDITIONS, DUTIES, OBLIGATIONS, REMEDIES OR LIABILITIES, EXPRESS OR IMPLIED, ARISING BY LAW OR OTHERWISE, INCLUDING WITHOUT LIMITATION ANY WARRANTY OF MERCHANTABILITY AND FITNESS FOR INTENDED USE, WITH RESPECT TO THE ENGINE LEASED HEREUNDER OR LESSOR’S PERFORMANCE HEREUNDER. NO AGREEMENT OR UNDERSTANDING, VARYING, ALTERING, OR EXTENDING LESSOR’S LIABILITY WILL BE BINDING ON LESSOR UNLESS IN WRITING AND SIGNED BY LESSEE’S AND LESSOR’S DULY AUTHORIZED OFFICER(S) OR REPRESENTATIVE(S).

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12.5. Warranties. Upon Lessee’s request, and provided that no Event of Default has occurred and is continuing, Lessor will use commercially reasonable efforts to assist Lessee in processing claims and enforcing rights of Lessor arising under any existing manufacturer’s or overhaul agency warranties for the Engine leased hereunder; provided always that Lessee will indemnify Lessor for any reasonable costs and expenses incurred by Lessor in connection therewith, excluding costs of Lessor’s personnel. With respect to any such warranties, it is understood that, except as specifically provided in this Section 12.5, Lessor will have no further liabilities to Lessee.

13. FORCE MAJEURE

Neither Party, with the exception of any payments due hereunder, will be liable for failure to perform or any delays in performance hereunder to the exception of any payments due hereunder due to acts of God, the public enemy, war or warlike operations, insurrection or riots, floods, explosions, fires, earthquakes, any governmental act, failure of transportation, strike or other labor disputes, acts or omissions of the other Party or any other cause beyond such Party’s control.

14. INSURANCE

14.1. Insurances. Upon Delivery and during the Lease Term (unless a longer duration is specified below), Lessee shall at its own risk and cost procure and maintain, or cause to be procured and maintained, the following insurances (collectively, the “Insurances”) in accordance with normal industry best practices through insurers of international standing, experienced in aviation insurance, in the London or New York markets with an AM Best Rating of A- or better:

a. Comprehensive aviation liability insurance with respect to the Engine (including, without limitation, Contractual Liability, Aircraft Third Party, Passenger, Baggage, Cargo, Mail, Airline General Third Party Liability, Products Liability, and War Liability) for a combined single limit (bodily injury/property damage) no less than that applicable to similar aircraft in its fleet, but in no event less than the Minimum Liability Amount. The “Minimum Liability Amount” shall have the meaning ascribed to such term as set forth in Schedule 5.

b. Hull “All Risks” (including war and allied perils) insurance for the Agreed Value on an “agreed value” basis at all times while the Engine is fitted to an aircraft, removed from the aircraft, and while in transit, on terms such that the Agreed Value of the Engine shall be paid to Lessor (or the Lender, if any) in addition to paying such aircraft’s agreed value to any party financially interested in the aircraft. Any Hull “All Risks” insurance carried in accordance with this Section 14.1 shall not contain any provision for self-insured amounts or a deductible in excess of the Deductible Limit. The “Deductible Limit” shall have the meaning ascribed to such term as set forth in Schedule 5. If separate Hull “All Risk” and “War Risk” insurances are arranged, such insurances shall include a 50/50 provision in accordance with market practice.

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c. Spares all-risk insurance, including engine test and running risks, war and allied perils insurance, and fire extended coverage insurance on the Engine and Parts while removed from an aircraft, in an amount equal to the Agreed Value.

d. Insurances with respect to Lessee’s liability under the indemnities in Section 12 (to the extent of the risks covered in such policies) for a period of * years after the expiry of the Lease Term or until the next full performance restoration shop visit of the Engine, whichever is earlier, under which each Indemnitee shall be named as an additional insured. Lessee’s obligation under this Section 14.1(d) shall not be affected by Lessee ceasing to be lessee or sublessee of the Engine and/or the occurrence of the Lease End Date and/or any of the Indemnitees ceasing to have any interest in respect of the Engine.

14.2. Endorsements. Each and any policy of insurance obtained and maintained pursuant to this Lease, and any policy obtained in substitution or replacement of any such policies, shall contain endorsements satisfactory to Lessor and any Lender that (i) designate Lessor as owner of the Engine covered thereby and as additional named insured and sole loss payee (except in the case of any Lender being named sole loss payee), and designate any Lender and their respective assigns and the other Indemnitees (collectively, the “Additional Insured”) as additional named insured (and any Lender as sole loss payee), but without imposing upon the Additional Insured any obligation imposed upon the insured, including, without limitation, the liability to pay any premiums for any such policies; (ii) expressly provide that, in respect of the interests of Lessor and/or the Additional Insured in such policies, the insurance shall not be invalidated by any action or inaction of Lessee and shall insure Lessor and the Additional Insured regardless of any breach or violation of any warranty, declaration or condition contained in such policies by Lessee; (iii) provide that if such insurance is cancelled by the insurers for any reason whatsoever, or is adversely changed in any way with respect to the interests of Lessor and the Additional Insured, or if such insurance is allowed to lapse for non-payment of premium, such cancellation, adverse change or lapse shall not be effective as to Lessor and the Additional Insured by thirty (30) days (seven (7) days in the case of any war risks or allied perils coverage) after sending to Lessor and the Lender written notice by such insurer or insurers to Lessor and the Lender of such prospective cancellation, change or lapse; (iv) include worldwide territorial limits, except for the countries excluded by aviation war risk underwriters; (v) provide that, as against Lessor and the Additional Insured, the insurer waives any rights of set-off, counterclaim or any other deduction, whether by attachment or otherwise, and waives any rights it may have to be subrogated to any right of any insured against Lessor and the Additional Insured with respect to the Engine; and (vi) provide that in the event of any damage or loss, whether or not a Loss Event hereunder, and which results in a payment, such payment shall be payable solely and directly to the Lessor (or Lender, if any), as sole loss payee, for the account of all interests, provided, however, that if the damage to the Engine does not constitute a Loss Event, and the amount of the payment is less than * United States

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

Dollars ($*), such payment may be payable directly to Lessor. Each such policy shall be primary without right of contribution from any other insurance which may be carried by Lessor and/or the Additional Insured, and shall expressly provide that all of the provisions thereof shall operate in the same manner as if there were a separate policy covering each insured, provided any such policies shall not operate to increase the insurer’s limit of liability. All such Insurances shall include the terms of the Airline Finance/Lease Contract Endorsement - AVN67B (or such replacement for AVN67B as in the future may be generally recognized in the aviation insurance market or shall be acceptable to Lessor and any Lender), and also in respect of liabilities the other Indemnitees, as additional insureds and the “Contract Parties” under such Insurances, and shall otherwise be acceptable to Lessor and any Lender, including without limitation as to the level of self-insured risk.

14.3. Certificates. Prior to Delivery and on each renewal by Lessee of the insurance required hereby, but not less often than annually, Lessee will furnish, or cause to be furnished, to Lessor and any Lender a certificate executed and delivered by an insurance broker who is authorized by an insurer approved by Lessor and any Lender, describing in reasonable detail insurance carried on the Engine and certifying that the insurance then maintained on the Engine complies with the terms of this Lease.

14.4. Brokers Undertaking. An undertaking from the insurance brokers shall be provided to Lessor and any Lender before Delivery. Such undertaking shall include an undertaking to notify Lessor and any Lender promptly on becoming aware of (a) cancellation of, or any material adverse change affecting, the Insurances, (b) any act, omission or event which might invalidate or render unenforceable the Insurances, or (c) non-receipt of renewal instructions at least seven (7) days before the expiration date of any policy, and shall be in form acceptable to Lessor and any Lender.

14.5. Other Requirements. Lessor shall be entitled from time to time to stipulate other reasonable insurance requirements that are in line with market conditions and no more onerous than the requirements stipulated in this Section 14, in addition to or instead of those prescribed in this Section 14, provided that such requirements are consistent with normal industry practice for organizations operating aircraft similar to Lessee’s aircraft in similar circumstances.

14.6. Expiry. If any Insurances are due to expire during, or within fifteen (15) days after expiry of the Lease Term, Lessee shall ensure that the renewal negotiation is commenced at least thirty (30) days prior to expiration of any of the Insurances and confirmation of completion of the renewal is given to Lessor and any Lender prior to expiry date. Certificates of insurance (and where relevant certificates of reinsurance), in the English language, detailing the coverage and confirming the insurers’ (or as the case may be, the reinsurers’) agreement to the specified insurance requirements of the Lease, must be provided to Lessor and the Lender prior to any expiry date which falls during the Lease Term.

14.7. Insurance for Indemnitees. The Insurances prescribed in this Section 14 will in each case include and insure (to the extent of the risks covered by the policies) the Indemnitees.

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

14.8. Assignment of Rights by Lessor. If Lessor assigns all or any of its rights under the Lease or otherwise disposes of any interest in the Engine to any other person, Lessee will, upon request, procure, or cause to be procured, that such person be added as loss payee and/or additional insured in the policies effected hereunder and enjoy the same rights and insurance enjoyed by Lessor under such policies.

14.9. Currency. All proceeds of insurance pursuant to the Lease will be payable in United States Dollars.

14.10. Grounding of Engine. If at any time any of the Insurances required pursuant to this Section 14 and the Lease will cease to be in full force and effect, Lessee will forthwith take the Engine, or cause the Engine to be taken, off-wing and keep the Engine, or cause the Engine to be kept, off-wing until such time as such Insurances are in full force and effect again.

14.11. No Violation of Insurance Policies. Lessee will not use or permit the Engine to be used in any manner or for any purpose, which is not covered by the insurance policies prescribed in this Section 14 after Delivery and during the entire Lease Term.

14.12. Reinsurance. In the event where Lessee is not insured by an insurance company recognized by the London / New York markets, Lessee shall provide reinsurances. The terms of any such required reinsurances shall:

a. be on the same terms as the original insurances (and shall include the provisions set out in this Section 14);

b. contain a “cut-through” clause in the following terms or otherwise satisfactory to Lessor and any Lender:

“The reinsurers hereby agree that in the event of any claim arising under the reinsurances in respect of a Total Loss or other claim where, as provided by the Lease, such claim is to be paid to the person named as sole loss payee under the primary insurances, the reinsurers shall in lieu of payment to the reassured, its successors in interest and assigns, pay to the person named as sole loss payee under the primary insurances effected by the assured that portion of any loss due for which the reinsurers would otherwise be liable to pay the reassured (subject to proof of loss), it being understood and agreed that any such payment by the reinsurers shall (to the extent of such payment) fully discharge and release the reinsurers from any and all further liability in connection therewith. Any payment due under this Clause shall not contravene any law, statute or decree of the Government of Lessee’s jurisdiction”; and

c. provide in the case of any bankruptcy, liquidation, dissolution or similar proceedings of or affecting the reassured that the reinsurers’ liability shall be to make such payments as would have fallen due under the relevant policy of reinsurance in accordance with the cut-through clause referred to above if the reassured had (immediately before such bankruptcy, liquidation, dissolution or similar proceedings) discharged its obligations in full under the original insurance policies in respect of which the then relevant policy of reinsurance had been effected.

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15. TITLE TO ENGINE

15.1. Title to the Engine. Lessee will not permit any lien, claim, mortgage or encumbrance (“Liens”) except Permitted Liens (as defined below) to attach to the Engine. Lessee will indemnify Lessor for any damages suffered by Lessor, including costs and expenses incident thereto, occurring as a result of any such Liens. Lessee’s rights hereunder will be solely those of a lessee and nothing contained herein is intended or will be interpreted as granting to Lessee any other right, title, or interest in or to the Engine, whether legal or equitable. Lessor will affix a placard with details of the owner and any Lender to the Engine and Lessee will assure the placard remains attached to the Engine during the Lease Term.

15.2. Cape Town Convention. If the state in which Lessee is situated has, or at any time brings into force, any legislative or other provisions giving effect to the Cape Town Convention, Lessee, at Lessee’s cost and expense, shall from time to time, do or cause to be done any and all acts and things which Lessor may require of Lessee (in the reasonable opinion of Lessor) to ensure that Lessor and any Lender have the full benefit of the Cape Town Convention in connection with the Engine, including (but not limited to):

a. any matters connected with registering, perfecting, preserving and/or enhancing any international interest(s) vested in Lessor or any Lender with respect to the Engine and constituted by the Lease and/or the Permitted Sublease;

b. entry in to agreements (subordination or otherwise) to protect and/or enhance and/or, improve the priority of any international interest(s) referred to in the foregoing paragraph (a); and

c. excluding, in writing the application of any provisions of the Cape Town Convention that Lessor may deem desirable in connection with the foregoing.

In this Lease the following terms have the following meanings: “Cape Town Convention” means, collectively, the official English language text of (i) the Convention on International Interests in Mobile Equipment, adopted on November 16, 2001, at a diplomatic conference in Cape Town, South Africa, (ii) the Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment, adopted on November 16, 2001, at a diplomatic conference in Cape Town, South Africa, (iii) all rules and regulations adopted pursuant thereto and as in effect in the United States and (iv) with respect to each of the foregoing described in clauses (i) through (iii), all amendments, supplements and revisions thereto as in effect in the United States; “state” has the meaning set forth in the Cape Town Convention; and “state in which Lessee is situated” shall be constructed in accordance with the expression “state in which the debtor is situated in” as set out in Article 4 of the Cape Town Convention.

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15.3. Permitted Liens. “Permitted Lien” means in respect of the Engine:

a. any encumbrance arising from Lessor’s own acts or defaults;

b. any encumbrance for Taxes, except for Taxes based upon the net income of Lessor, either not yet assessed or, if assessed, not yet due and payable or being contested in good faith by appropriate proceedings (and for the payment of which adequate reserves have been set aside) so long as any such proceedings or the continued existence of such encumbrance do not in Lessor’s reasonable opinion involve any likelihood of the sale, forfeiture or loss of, or of any interest in, the Engine; or

c. airport hangar keepers’, mechanics’, material men’s carriers’, employees’ or other encumbrances arising in the ordinary course of business by statute or by operation of law in respect of obligations which are not overdue or which are being contested in good faith by appropriate proceedings (and for the payment of which adequate reserves have been set aside) so long as any such proceedings or the continued existence of such encumbrance do not in Lessor’s reasonable opinion involve any likelihood of the sale, forfeiture or loss of, or of any interest in, the Engine.

16. TAXES

16.1. Tax Indemnity. The charges set forth in the Lease do not include the amount of any Taxes which may be imposed by any governmental authority or jurisdiction in connection with the lease of the Engine. Lessee will indemnify, defend, and hold Lessor and the Indemnitees harmless from and against any and all Taxes, including costs or expenses incurred in connection therewith, except Taxes based on the net income of Lessor, which may be assessed against, chargeable to, or collectible from Lessee or Lessor by any taxing authority, foreign, federal, state, or local, and which are based upon, levied, or assessed with respect to the lease of the Engine or the operation, possession, or use of such Engine while under lease. Upon demand of any governmental authority for payment of any such Tax or charge, Lessor will immediately notify Lessee and Lessee will pay the same, provided, however, that in the event that Lessor is required to pay the same, Lessor will invoice Lessee for the amount of such tax or charge paid by it and Lessee will immediately reimburse Lessor for such amount. Lessee may contest payment of any such Tax or charge or may request Lessor to pay the same under protest on Lessee’s behalf.

16.2. Lessor Tax Residence Certificate. On or before March 30 in each year during the Term, Lessor, upon written request annually, will take steps to obtain as promptly as reasonably possible a certificate issued by the Internal Revenue Service of the United States Department of the Treasury (“IRS”) confirming Lessor’s tax residence in the United States or, if one is not then available from the IRS, other equivalent official evidence of the status of Lessor as a resident of the United States under the applicable tax convention, or in the case of a transferee Lessor, official evidence of the status of such transferee Lessor as a resident under the applicable tax convention; provided, however, in either case, Lessor shall not be responsible for delays arising from governmental processing beyond Lessor’s control. However, Lessor will be relieved of the obligation imposed on it pursuant to this Article 16.2 in the event that a change in law, regulation or

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administrative practice occurring after the date Lessor became the Lessor hereunder prevents Lessor from delivering such certificate or other equivalent official evidence to Lessee; provided that a transferee Lessor shall also be relieved of such obligation to the extent that the transferor Lessor was so relieved at the time of the transfer. In the event that Lessor or such transferee Lessor is not able to provide such certificate or other equivalent official evidence to Lessee due to events such as change of law, regulation or administrative practice, Lessor or such transferee Lessor will provide Lessee with a letter explaining the reasons why it is prevented from delivering such certificate or other equivalent evidence to Lessee.

17. ASSIGNMENT AND SUBLEASING

17.1. Assignment. Lessor shall have the right to novate or assign the Lease, and Lessee, at Lessor’s cost, shall execute such reasonable documents as are necessary to effectuate such novation or assignment, including, without limitation, an estoppel certificate, in the form customarily used for such transactions. The terms and conditions of any such novation or assignment shall not be more onerous than the terms and conditions contained in this Agreement.

17.2. Sublease. Lessee shall not assign the Lease in whole or in part, nor shall Lessee sublease the Engine to any person or otherwise relinquish possession thereof to anyone other than Lessor for any purpose other than with the prior written consent of Lessor in its sole and complete discretion. Any permitted sublease (“Permitted Sublease”) shall be in form and substance acceptable to Lessor and shall expressly provide that the rights of any sublessee shall be expressly subject and subordinate to all the terms of this Lease and Lessor’s rights to repossession pursuant to this Agreement. Lessee shall remain primarily liable hereunder for the performance of all of the terms of this Lease to the same extent as if such Permitted Sublease had not occurred. Lessee will guarantee performance of all terms and conditions of this Lease on behalf of a permitted sublessee under a Permitted Sublease and will be responsible for any costs associated or incurred related to the performance of the Lease. No Permitted Sublease shall in any way discharge or diminish any of Lessee’s obligations to Lessor hereunder or constitute a waiver of Lessor’s rights or remedies hereunder, and Lessor’s rights shall continue as if such Permitted Sublease had not occurred. Any Permitted Sublease shall expressly prohibit any further sub-sublease or assignment or any other similar transfer of the Engine or rights thereto by the sublessee. Lessee shall provide to Lessor: (i) written notice of any Permitted Sublease hereunder (such notice to be given not later than 10 Business Days prior to entering into any sublease); (ii) such evidence as Lessor may require to demonstrate that such airline is solvent at the time that such sublease is entered into; (iii) a copy of the Permitted Sublease; and (iv) if Lessor so requests, an assignment of the Permitted Sublease to Lessor for security and a consent thereto from the Permitted Sublessee, in form and substance reasonably satisfactory to Lessor. Lessee shall be responsible for the reasonable out-of–pocket legal fees and expenses incurred by the Lessor in connection with any Permitted Sublease subject to Lessor providing Lessee with supporting documentation.

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18. REDELIVERY OF THE ENGINE

18.1. Date of Redelivery. Lessee will return the Engine installed, on the same engine transportation stand (or as otherwise agreed) as delivered to Lessee at Delivery, to Lessor at the Redelivery Location on the Lease End Date or on the date of other valid termination of the Lease in the condition required by the Lease and upon Lessor’s confirmation of such return, Lessor shall evidence Lessor’s acceptance of such return of the engine, and any exceptions thereto, by executing and delivering to Lessee the Redelivery Acceptance Certificate. Unless an Event of Default, or an event with the passage of time or the giving of notice would become an Event of Default, has occurred and is continuing, or unless this Lease shall have been terminated by Lessor pursuant to Section 19.1(b)((iv), upon Lessor’s execution and delivery to Lessee of the Redelivery Acceptance Certificate, this Lease shall terminate with neither party hereto having any further liability to the other hereunder except or those obligations, liabilities and agreements under the Lease which specifically survive the expiration or termination of this Lease or are otherwise reserved in accordance with the Redelivery Acceptance Certificate. The costs for shipping of the Engine to any other location than the designated Redelivery Location will be borne by the Lessor.

18.2. Redelivery Inspection. Lessee will perform or cause to be performed at its own cost on the Engine immediately prior to its return to Lessor:

a. a power assurance test run (test 05) at the thrust rating that the Engine will make power (“MPA”) according to the applicable aircraft maintenance manual requirements, followed by

b. a full end of lease (“EOL”) inspection as required by the end of lease inspection requirements detailed in Schedule 10, including an acceptable full video borescope inspection, with written report, of all accessible sections of the Engine within maintenance manual limitations, for continued time/reduced inspections (except in the case of FOD, misuse, neglect, negligence or improper operation). Such borescope inspection shall be performed by Lessor’s representative with consideration or exception given for (i) the findings with respect to the borescope inspection of the Engine provided by Lessor at Delivery and (ii) normal wear and tear during the Lease Term.

The corresponding MPA and EOL inspection protocols shall be redelivered with the Engine. Lessee will provide Lessor with at least fourteen (14) Business Days advance written notice of such scheduled Engine inspection and test, so that Lessor may have the opportunity to witness same. Should Lessee not inform Lessor in advance of the impending MPA and EOL inspection with at least fourteen (14) days’ notice, and the Lessee elects to perform the scheduled MPA and EOL inspections without Lessor present, Lessor may at its sole discretion disregard the MPA and EOL inspection performed by Lessee and perform a test cell run and corresponding EOL inspection at Lessor’s MRO facility at the cost and risk of Lessee. Further, if the MPA or EOL inspection is delayed more than two (2) days from the date that Lessee scheduled same with Lessor, then Lessee will indemnify Lessor for all costs associated with such delay and reimburse Lessor on demand. In the event that the borescope inspection or the MPA or test cell run identifies any defect in the Engine or any item not being within the

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manufacturer’s limits as stated in the relevant aircraft maintenance manual (“AMM”), such defect shall be repaired at Lessee’s sole cost and expense provided such defect is not resulting from normal wear and tear.

18.3. Return Conditions. In addition to any other requirements of this Lease, upon return of the Engine to Lessor, Lessee will ensure that:

a. the Engine is free and clear of all Liens (except Permitted Liens) and shall have installed thereon the Parts installed at Delivery or replacements thereof installed in accordance with the provisions of this Lease, provided that the title thereto is vested in Lessor;

b. the Engine is either (i) serviceable or (ii) unserviceable based on (x) being fully time expired or (y) borescope findings beyond maintenance manual limits due to normal wear and tear, ** it is specifically recorded that any reduced inspection interval * per CFM or maintenance manual shall not be considered a cause to deem the Engine to be unserviceable;

c. in the event the Engine cannot sustain * pounds of thrust without exceeding the limits in the normal operating conditions (not related to FOD, misuse or abuse or Lessee induced or other Operator Exceedance damage), the Lessor shall accept the Engine and repair or dispose of it as Lessor deems fit (in this case the Engine shall be deemed unserviceable and all clauses relating to a serviceable engine shall not apply, however, Lessee shall comply with the MPA (only if it is safe to do so) and EOL inspections referred to in Section 18.2) if not otherwise agreed;

d. the Engine shall have installed thereon all Parts installed thereon on the Delivery Date or permitted replacements thereof in accordance with the Lease and the Engine is in the same configuration and in an as good condition as at Delivery, normal wear and tear and normal rate of performance deterioration excepted;

e. the Engine, except for the parts/components listed in ATA chapter 71 or 72, is free of all deferred or carry-over maintenance items, including pilot log book reports and defects requiring repetitive inspections and will not be “on watch” or have any reduced interval inspections;

f. the Engine has affixed a current, valid and effective EASA Form 1 with full return-to-service statement, if serviceable, at * pounds of thrust;

g. with reference to the MPA and EOL inspection referred to in Section 18.2 and together with the Engine’s historical and technical data and condition trend monitoring data for the Engine, Lessor is satisfied:

i. with the Engine’s status and that there is no indication of an adverse deterioration in the performance of the Engine which is higher than normal based upon Lessee’s maintenance experience in operating engines of the same type and;

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

h. prior to returning the Engine to Lessor, Lessee will prepare the Engine for shipment by:

i. capping and plugging all openings of the Engine;

ii. preserving the Engine for three hundred sixty-five (365) days storage, according to the engine preservation procedure of the AMM or the relevant EMM;

iii. completely covering the Engine with heat shrink wrap and the tarpaulin cover or bag (if provided) at Delivery; and

iv. otherwise preparing the Engine for shipment in accordance with the manufacturer’s specifications/recommendations. Any trucks used for shipment of the Engine will be equipped with air ride or air cushion suspension system. Lessee shall provide Lessor with photos of the Engine that show that it is loaded on a truck with air ride or air cushion suspension or other appropriate equipment and provide evidence that the Engine is properly loaded and secured thereon. On any given shipment, such truck will be dedicated to the Engine belonging solely to Lessor; except that additional items may be transported on such truck, provided that (a) the Engine can and will be off-loaded by Lessor at the Redelivery Location without disturbing any of the additional items and (b) Lessee or its shipper will not handle or reposition any of the additional items on such truck either while the Engine is in transit or when it arrives at the Redelivery Location.

18.4. Redelivery Location. Lessee will return the Engine, installed on the same engine transportation stand (or as otherwise agreed) as delivered to Lessee at Delivery, to Lessor at the Redelivery Location.

18.5. Non-Incident Statement. Upon redelivery, Lessee shall issue a Non-Incident Statement in the form set out in Schedule 4.

18.6. Lessee’s Continuing Obligations. In the event that the Engine is serviceable and Lessee does not dispatch the Engine to Lessor for redelivery on the Lease End Date or other date of valid termination of the Lease, or Lessee does not redeliver the Engine in the condition required by the Lease for any reason (whether or not the reason is within Lessee’s control):

a. All obligations of Lessee under the Lease shall remain in full force and effect until the return of the Engine in the condition required by the Lease. This will not be considered a renewal of the Lease or extension of the Lease Term or waiver of any right of Lessor under the Lease.

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b. Lessor may at its sole discretion:

i. remedy such defects and deficiencies and recover any reasonable costs so incurred from Lessee; and/or

ii. continue the Lease Term and charge a default Lease Rate in the amount of * percent (*%) of the Lease Rate which was payable at the date starting from the 10^th day after which redelivery would otherwise have occurred divided by 30 (the “Default Lease Rate”) for each day the Engine is not dispatched to Lessor and/or until any defects and deficiencies associated with FOD, misuse or abuse or Lessee induced damage are remedied.

18.7. Redelivery Reports. Upon redelivery of the Engine in accordance with the terms of the Lease, Lessee will (i) perform the redelivery checks, tasks and inspections specified in Clause A of Schedule 8, (ii) deliver to Lessor the redelivery documents specified in Clause B of Schedule 8 and (iii) prepare, execute and deliver to Lessor the Engine operational report and a redelivery checks and inspection report in the respective forms of Schedule 7 and Schedule 8.

18.8. Indemnities and Insurance. The indemnities and insurance requirements set forth in Sections 11 and 14, respectively, will apply to Indemnitees and Lessor’s representatives during the return of the Engine, including the redelivery inspection.

19. TERMINATION AND ADDITIONAL ASSURANCES

19.1. Termination.

a. Any of the following shall constitute an event of default under this Lease (“Event of Default”):

i. Lessee shall fail to make payment of any amounts due under this Lease on the date within fourteen (14) days after the date when due; or

ii. Lessee shall fail to observe or perform any covenants or agreement as set forth in Sections 14, 17.2 or 18 hereof; or

iii. Lessee shall fail to perform or observe any other covenant, condition or agreement to be performed or observed by it under this Lease, or in any agreement or certificate furnished to Lessor in connection herewith, and such failure shall continue unremedied for fifteen (15) days after written notice to Lessee (except in case of nonpayment of monies due wherein no notice of such default will be required) by Lessor specifying such failure and demanding the same to be remedied, except for situations when conditions precedent are not satisfied because of events that are not under the Lessee’s control, in which case, Lessor agrees to consider granting a longer grace period, acting reasonably, when the cause of such failure is not under Lessee’s control; or

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

iv. any representation or warranty of Lessee herein or in any document or certificate furnished to Lessor in connection herewith fails to be correct in any material respect which failure continues uncured for fifteen(15) days after written notice thereof to Lessee; or

v. Lessee makes a general assignment for the benefit of creditors, or becomes the subject of voluntary bankruptcy proceedings, or has a receiver or custodian or liquidator appointed for any of its assets, or ceases to conduct the whole or a substantial portion of its business in the manner in which such business was conducted on the date of this Lease, or an involuntary petition in bankruptcy is filed against Lessee and not dismissed or stayed within sixty (60) days; or

vi. Lessee shall have breached any other agreement or obligation as between (i) Lessee or any affiliate of Lessee, and (ii) Lessor or any affiliate of Lessor, whereupon such breach thereunder shall be deemed an Event of Default hereunder; or

vii. not sooner than thirty (30) days prior to the expiration date of any agent for service of process appointment, Lessee has failed to renew such agent for service of process appointment and provide evidence satisfactory to Lessor that such appointment has been renewed or a new appointment has been made by such date or any such agent for service of process appointment shall be terminated or cancelled and no substitute agent for service of process appointment acceptable to Lessor has been made.

b. Upon the occurrence of any Event of Default and at any time thereafter so long as the same shall be continuing, Lessor may, at its option, declare this Lease to be in default and, at any time thereafter so long as Lessee shall not have remedied all outstanding Events of Default, Lessor may exercise one or more of the following remedies as Lessor shall in its sole discretion elect, to the extent available and permitted by, and subject to compliance with any mandatory requirements of any applicable law then in effect:

(i) demand that Lessee, and Lessee shall upon such demand of Lessor and at Lessee’s expense, immediately return the Engine to Lessor at such location as may be directed by Lessor, in the manner specified in such notice, and such return shall not be delayed for the purposes of complying with the return conditions specified in Section 18 hereof (none of which conditions shall be deemed to affect Lessor’s possession of the Engine) or delayed by any other reason, nor shall such demand be deemed Lessor’s waiver of Lessee’s requirement to comply with Section 18 hereof;

(ii) sell at private or public sale, as Lessor may determine, or hold, use, operate or lease to others the Engine as Lessor in its sole discretion may determine, all free and clear of any rights of Lessee;

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(iii) proceed by appropriate court action or actions, either at law or in equity, to enforce performance by Lessee of the applicable covenants of this Lease and to recover damages for the breach thereof and to rescind this Lease;

(iv) terminate this Lease by written notice to Lessee and/or repossess the Engine; and

(v) exercise any other remedy available under applicable law.

c. In effecting any repossession, Lessor, its representatives and agents, to the extent permitted by applicable law shall: (i) have the right to enter upon any premises where it reasonably believes any Engine to be located; (ii) not be liable, in conversion or otherwise, for the taking of any personal property of Lessee which is in or attached to the Engine which is repossessed; provided, however, that Lessor shall return to Lessee all personal property of Lessee which was on the Engine at the time Lessor re-takes possession of the Engine; (iii) not be liable or responsible, in any manner, for any inadvertent damage or injury to any of Lessee’s property in repossessing and holding the Engine, except for that caused by or in connection with Lessor’s willful misconduct; and (iv) have the right to maintain possession of and dispose of the Engine on any premises owned by Lessee or under Lessee’s control.

d. If demanded by Lessor, Lessee, at its sole expense, shall assemble and make the Engine available at such location as may be directed by Lessor. Lessee hereby agrees that, in the event of the return to or repossession by Lessor of the Engine, any rights in any warranty (express or implied) heretofore assigned to Lessee or otherwise held by Lessee shall without further act, notice or writing be assigned or reassigned to Lessor, if assignable. Lessee shall be liable to Lessor for out-of-pocket expenses, disbursements, costs and fees incurred in: (i) repossessing, storing, preserving, shipping, maintaining, repairing and refurbishing the Engine to the return condition required by Section 18 hereof; and (ii) preparing the Engine for sale or lease. Lessor is hereby authorized and instructed, at its option, to make reasonable expenditures which Lessor, in its sole discretion, considers advisable to repair and restore the Engine to the return condition required by Section 18, all at Lessee’s sole expense.

e. Whether or not Lessor shall have exercised, or shall thereafter at any time exercise, any of its rights hereunder with respect to the Engine, on the date on which Lessor shall become entitled to repossession of the Engine (the “Damage Calculation Date”), all sums and all performances due under this Lease shall immediately become due and payable and Lessee shall thereupon be obligated to pay to Lessor as damages for breach hereof an amount equal to the sum of: (1) the Lease Rate and all other amounts that became due and payable hereunder, but were unpaid, as of the Damage Calculation Date; (2) all of the Lease Rate which would have accrued from the Damage Calculation Date through the Lease End Date which would have reasonably been expected to occur, calculated at the Default Lease Rate;); and (3) such additional amount as shall be sufficient to place Lessor in the same economic position, on an after-tax basis, as Lessor would have

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been in if Lessee had timely performed each of its obligations hereunder. In the event that Lessee fails to redeliver the Engine to Lessor following expiration or cancellation of the Lease Term, in lieu of the amount specified in subsection (2) above, Lessee shall be obligated to pay Lessor an amount equal to the Agreed Value of the Engine. All of the foregoing damage amounts shall bear interest, to the extent permitted by applicable law, at the rate of 1.0% per month from the payment date specified pursuant to this Section 19.1 to the date of actual payment of such amount.

f. Whether or not Lessor shall have exercised, or shall thereafter at any time exercise, any of its rights hereunder with respect to the Engine or Lessee upon the occurrence of an Event of Default, Lessee and Lessor hereby stipulate that Lessor shall be entitled to sequester the Engine and Lessee shall deliver the Engine into the custody of Lessor or its designated agents for such purpose, at Lessee’s expense, upon receipt of a written demand from Lessor with respect thereto.

g. No remedy referred to in this Section 19.1 is intended to be exclusive, but, to the extent permissible hereunder or under applicable law, each shall be cumulative and in addition to any other remedy referred to above or otherwise available to Lessor at law or in equity; and the exercise or beginning of exercise by Lessor of any one or more of such remedies shall not preclude the simultaneous or later exercise by Lessor of any or all of such other remedies. No express or implied waiver by Lessor of any default or Event of Default shall in any way be, or be construed to be, a waiver of any future or subsequent default or Event of Default.

20. NOTICES

All notices or requests given in connection with this Lease will be given in writing and sent prepaid by certified mail, return receipt requested, by email or facsimile transmission to the addresses listed below unless either Party notifies the other Party of a different address.

For Lessor:

Contrail Aviation Support, LLC

435 Investment Court

Verona, Wisconsin 53593

United States of America

Attention: President

Email: joe@contrail.com

Telephone: +1 608 848-8100

Facsimile: +1 608 848-8101

For Lessee:

*

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

          *

21. RECORDING

Lessor may record this Lease with the Department of Transportation, Federal Aviation Administration, FAA Engine Registry, Oklahoma City, Oklahoma and register any international interest relating to the Engine, the Lease, or any Permitted Sublease with the International Registry established by the Cape Town Convention (the “International Registry”). Lessee shall assist Lessor with all necessary filings and registrations to be made thereunder. Upon the termination of the Lease for any reason whatsoever, each of the Parties will execute and deliver to the other Party promptly such documents as the other Party may reasonably request in order to file a termination of the Lease with the FAA and/or the discharge of any international interest registered with the International Registry.

22. BROKERS/FINDERS

Lessor and Lessee each represent to the other that it has not involved third parties as brokers or finders with respect to this Lease, and each Party indemnifies the other from liability for fees, commissions, or other intermediary’s claims arising as a result of actions of the indemnifying Party.

23. MISCELLANEOUS

23.1. Entire Agreement. This Lease contains the entire understanding of the Parties with respect to the lease of the Engine and no warranties, representations or undertakings have been made by either Party except as expressly set forth in the Lease.

23.2. Amendments. The Lease may not be amended in whole or in part orally, but only by an express instrument in writing signed by the Parties hereto.

23.3. Successors. The Lease will be binding upon and inure to the benefit of the respective permitted successors and assigns of the Parties.

23.4. Counterparts. The Lease hereunder may be executed in counterparts. Such counterpart documents, when taken together, will constitute one and the same instrument. A facsimile signature on any counterparts will be deemed an original for all purposes. The single fully-executed original of this Lease marked “Chattel Paper Original” on the signature page hereof is the original for chattel paper purposes and all other executed counterparts are duplicates for chattel paper purposes. No security interest in this Lease may be perfected by the possession of any executed counterpart other than the one marked “Chattel Paper Original” on the signature page hereof.

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

23.5. Survival of Terms. The terms contained in the Lease that, by their nature, continue after termination or expiration thereof or redelivery of the Engine to Lessor will survive such termination, expiration, or redelivery and continue in full force and effect.

23.6. Remedies. The remedies afforded a non-breaching Party are cumulative and in addition to all other rights in law, equity or otherwise.

23.7. Attorney Fees. The prevailing party in any litigation to enforce the terms of the Lease will be entitled to recover its reasonable and actual attorney’s fees from the losing party.

23.8. Headings. All Sections, articles and Section headings and captions are purely for convenience and will not affect the interpretation of the Lease. Any reference to a specific Section or article will be interpreted as a reference to such Section or article of the Lease.

23.9. Severability. Any provision of this Lease which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any such jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

23.10. English Language. In the event that this Lease is translated into a language other than English for purposes of registering or recording the same with the Aviation Authority or any other governmental entity, the English language version shall control.

23.11. Schedules. All Schedules attached hereto are incorporated herein by reference and are deemed to be a part hereof.

23.12. Servicer. Lessor may delegate to any person or persons (the “Servicer”) all or any of the rights, powers or discretions vested in it by this Lease or any of the other documents relating thereto, and any such delegation may be made upon such terms and conditions and subject to such regulations (including the power to sub-delegate) as Lessor in its absolute discretion deems fit. Upon notice to the Lessee of the appointment of such a Servicer, such Servicer may act as Lessor’s servicer for all matters related to this Lease and the Engine, and Lessee agrees that it shall communicate with and deal with such Servicer with respect to all such matters as if the Servicer were the Lessor under this Lease.

24. GOVERNING LAW AND JURISDICTION

24.1. Governing Law. THIS LEASE SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, NEW YORK, U.S.A. APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE WITHOUT REGARD FOR CONFLICT OF LAW PRINCIPLES (OTHER THAN THE PROVISIONS OF SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK).

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24.2. Consent to Jurisdiction. Each party hereto hereby irrevocably consents that any legal action or proceeding against it or any of its assets with respect to this Lease may be brought in any jurisdiction where such party or any of its assets may be found, or in any court of the State of New York or any Federal court of the United States of America located in New York, New York, located in the Borough of Manhattan, United States of America, as the other party may elect, and by execution and delivery of this Lease, each party hereto hereby irrevocably submits to and accepts with regard to any such action or proceeding, for itself and in respect of its assets, generally and unconditionally, the jurisdiction of the aforesaid courts.

24.3. Jurisdiction and Forum. Each party hereto agrees that final judgment against such party in any action or proceeding in connection with this Lease shall be conclusive and may be enforced in any other jurisdiction within or outside the United States of America by suit on the judgment, a certified or exemplified copy of which shall be conclusive evidence of the facts determined therein. Each party hereby irrevocably waives, to the fullest extent permitted by Law, any objection which such party may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Lease brought in the State of New York, and hereby further irrevocably waives any claim that any such suit, action or proceeding brought in the State of New York has been brought in an inconvenient forum. To the extent that any party hereto may in any jurisdiction in which proceedings may at any time be taken for the determination of any question arising under or for the enforcement of this Lease (including any interlocutory proceedings or the execution of any judgment or award arising therefrom) be entitled to claim or otherwise be accorded for itself or its property, assets or revenues immunity from suit or attachment (whether in aid of execution, before judgment or otherwise) or other legal process, and to the extent that in any such jurisdiction, there may be attributed to such party, or its property, assets or revenues such immunity (whether or not claimed), each party hereby irrevocably agrees not to claim and waives such immunity to the fullest extent permitted by the Law of such jurisdiction.

24.4. Waiver of Jury Trial. THE LESSEE AND THE LESSOR HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH THEY ARE BOTH PARTIES INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS LEASE, ANY OF THE OPERATIVE DOCUMENTS OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER.

24.5. Process Agent. Without prejudice to any other mode of service, Lessee:

a. appoints and agrees to maintain Corporation Service Company located at 80 State Street, Albany, New York 12207, United States of America as its agent for service of process relating to any proceedings before any court located in the borough of Manhattan, State of New York, United States of America in connection with the Lease (the “Process Agent”);

b. agrees that failure by the Process Agent to notify Lessee of the process shall not invalidate the proceedings concerned; and

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c. consents to the service of process relating to any such proceedings by prepaid mailing, certified or registered, of a copy of the process to the Process Agent at the address identified in clause (a) above or by prepaid mailing, certified or registered, of a copy of the process to Lessee at the address set forth in Section 21.

25. REPRESENTATIONS AND WARRANTIES

Lessee represents and warrants to Lessor with respect to the Lease as follows:

25.1. Status. Lessee is a company duly organized or incorporated and validly existing under the Laws of its jurisdiction of organization or incorporation, has the power to own its assets and carry on its business as it is presently being conducted, and is the holder of all necessary air transportation licenses required in connection therewith and with the use and operation of the Engine.

25.2. Power and Authority. Lessee has the power and authority to enter into and perform, and has taken all necessary action to authorize the entry into, performance and delivery of, this Lease and the transactions contemplated by it.

25.3. Legal Validity. This Lease has been duly authorized, executed and delivered by Lessee, and constitutes a legal, valid and binding obligation of Lessee, enforceable in accordance with its terms, except as may be stated in any of the qualifications to the legal opinion provided by Lessee to Lessor.

25.4. Non-Conflict. The entry into and performance by Lessee of, and the transactions contemplated by, this Lease do not and shall not (i) conflict with any laws binding on Lessee; or (ii) conflict with the constitutional or other organizational documents of Lessee; or (iii) conflict with or result in default under any agreement or instrument which is binding upon Lessee or any of its assets nor result in the creation of any security interest over the Engine.

25.5. Authorization. So far as concerns the obligations of Lessee, all authorizations, consents, registrations and notifications required in connection with the entry into, performance, validity and enforceability of, this Lease and the transactions contemplated by this Lease, have been (or shall on or before the Delivery Date have been) obtained or effected (as appropriate) and are (or shall on their being obtained or effected be) in full force and effect.

25.6. No Default. No Event of Default has occurred and is continuing or might result from the entry into or performance of this Lease.

25.7. Perfection and Protection of Rights.

(i) Except as may be stated in any of the qualifications to the legal opinion provided by Lessee to Lessor, no filing or recording of this Lease or of any other document and no further action, is or shall be necessary under the Laws of Lessee’s Country or any other jurisdiction in order to (A) perfect and protect the Lessor’s title to, and the interest of Lessor in, the Engine, or (B) ensure the validity, effectiveness and enforceability of this Lease.

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(ii) The rights and interests of the Lessor and any Lender in the Engine have been fully established, perfected and protected under the Laws of Lessee’s Country.

25.8. No Immunity.

(i) Lessee is subject to civil commercial law with respect to its obligations under this Lease.

(ii) Neither Lessee nor any of its assets is entitled to any right of immunity, and the entry into and performance of this Lease by Lessee constitute private and commercial acts.

25.9. Suits, Material Adverse Change. No litigation, arbitration or administrative proceedings are pending or to Lessee’s knowledge threatened against Lessee which, if adversely determined, could have a material adverse effect upon its financial condition or business or its ability to perform its obligations under this Lease, and Lessee is not in default under any other agreement to which it is a party or to which it may be bound which would have a material adverse effect on its business, financial condition or its ability to perform under the Lease.

Lessor represents and warrants to Lessee with respect to the Lease as follows:

25.10. Status. Lessor is a limited liability company duly organized and validly existing under the Laws of its jurisdiction of organization and has the power to own its assets and carry on its business as it is presently being conducted.

25.11. Power and Authority. Lessor has the power and authority to enter into and perform, and has taken all necessary action to authorize the entry into, performance and delivery of, this Lease and the transactions contemplated by it.

25.12. Legal Validity. This Lease has been duly authorized, executed and delivered by Lessor, and constitutes a legal, valid and binding obligation of Lessor, enforceable in accordance with its terms.

25.13. Non-Conflict. The entry into and performance by Lessor of, and the transactions contemplated by, this Lease do not and shall not (i) conflict with any laws binding on Lessor; or (ii) conflict with the constitutional or other organizational documents of Lessor; or (iii) conflict with or result in default under any agreement or instrument which is binding upon Lessor or any of its assets.

32

26. CONFIDENTIALITY

Each party hereto (except with the prior written consent of the other party) agrees (i) not to disclose details of this Lease to any third parties other than its financial and legal advisers, its lenders and/or potential lenders and/or as required by governmental regulations; (ii) to maintain confidentiality of all information exchanged between the parties, including pricing information and other proprietary knowledge, and not to use such for the benefit of any third party; and (iii) such confidentiality shall survive for a period of two (2) years following the expiration or earlier termination of this Lease.

33

IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease to be executed under hand, in each case by their respective duly authorized representatives on the date first above written.

CONTRAIL AVIATION SUPPORT, LLC, as Lessor
By:	/s/ Joseph G. Kuhn
Name:	Joseph G. Kuhn
Title:	CEO

*,

as Lessee

*

By:

Name:

Title:

Signature Page

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

SCHEDULE 1

FORM OF DELIVERY RECEIPT

Pursuant to the Engine Lease Agreement, dated as of January 10, 2018 (“Lease”) between CONTRAIL AVIATION SUPPORT, LLC (“Lessor”) and * (“Lessee”), this Delivery Receipt is delivered, on and as of the date set forth below, by Lessee to Lessor. Capitalized terms used but not defined herein shall have the respective meanings set forth in the Lease.

Lessee hereby confirms to Lessor, its successors and assigns that:

1. on this ____ day of ________________ 2018, at the Delivery Location, it has received one CFM International, Inc. model CFM56-7B26 aircraft engine, bearing manufacturer’s serial number * , together with full QEC, installed on an engine transportation stand, with Technical Documents, including FAA 8130-3 certification dual release or EASA Form 1, pursuant to Section 3.2(a) of the Lease and

2. the above equipment and the records required in connection therewith were received by Lessee at the Delivery Location and the Engine, Technical Documents and other equipment have met the conditions of delivery and conform to the Lease in every respect.

IN WITNESS WHEREOF, Lessee has caused this Delivery Receipt to be executed in its name, by its duly authorized officer(s) or representative(s), pursuant to due corporate authority, all as of the date set forth in Section 1 above.

*,

as Lessee

By:

Name:

Title:

Schedule 1

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

SCHEDULE 2

FORM OF DELIVERY ACCEPTANCE CERTIFICATE

Pursuant to the Engine Lease Agreement, dated as of January 10, 2018 (“Lease”) between CONTRAIL AVIATION SUPPORT, LLC (“Lessor”) and * (“Lessee”), this Delivery Acceptance Certificate is delivered, on and as of the date set forth below, by Lessee to Lessor. Capitalized terms used but not defined herein shall have the respective meanings set forth in the Lease.

1. Lessee hereby confirms to Lessor, its successors and assigns, that on the [___] day of [_____________], 2018 (the “Delivery Date”), at the Delivery Location, it received possession of the following:

(a) One CFM International, Inc. model CFM56-7B26 aircraft engine, bearing manufacturer’s serial number *, together with full QEC, and with FAA 8130-3 certification and EASA Form 1.

Thrust Rating:	______ lbs.
Time since new (TSN):	______
Cycles since new (CSN):	______
Time since last Shop Visit:	______
Cycles since last Shop Visit:	______
Cycles remaining:	______

(b) The Engine was fitted on the following engine transportation stand:

Stand Base S/N: ______                             Stand Cradle S/N: ______

(c) List of Technical Documents received:

(i) A valid and current Federal Aviation Administration (FAA) or European Aviation Safety Agency (EASA) approved return to service maintenance release tag.

(ii) LLP status.

(iii) Airworthiness Directive status and Service Bulletin Status.

(iv) Latest Engine performance trend monitoring data (if available).

(v) Results of the most recently performed maximum power assurance (MPA) run or test cell run (TCR) and borescope inspection video recording and

Schedule 2

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

report.

(vi) Current hours and cycles report.

(vii) Accessory and Missing Parts List.

3. Lessee warrants and confirms that:

(a) the execution by Lessee and delivery of this Delivery Acceptance Certificate to Lessor constitutes the full and unconditional acceptance of the Engine in its “AS IS, WHERE IS” and “WITH ALL FAULTS” condition by Lessee for all purposes of the Lease;

(b) the Engine and the Technical Documents have been delivered to and are duly accepted by Lessee as of the Delivery Date and are to Lessee’s full satisfaction and in accordance and subject to the provisions of the Lease;

(c) subject to Section 3.2 of the Lease, Lessee’s duly appointed and authorized technical experts have inspected the Engine and the Technical Documents to ensure that the Engine conforms to Lessee’s requirements;

(d) the Engine is insured in accordance with the terms of the Lease; and

(e) all representations and warranties made by Lessee pursuant to the Lease remain in full force and effect and, if made on this date, would be true and correct in all respects.

[Signature page follows]

Schedule 2

IN WITNESS WHEREOF, Lessee has caused this Delivery Acceptance Certificate to be executed in its name, by its duly authorized officer(s) or representative(s), pursuant to due corporate authority, all as of the date set forth in Section 1 above.

*,

as Lessee

By:

Name:

Title:

Schedule 2

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

SCHEDULE 3

FORM OF MONTHLY UTILIZATION REPORT

Telefax to                                               or email to                                 

This report must be completed by the Lessee for each calendar month of operation of the Engine before the fifth (5^th ) business day of the subsequent month.

REPORT FOR MONTH

[__________], 201_

Aircraft Type:	[__________]
Aircraft Serial Number:	[__________]
Engine Type:	CFM International, Inc. model CFM56-7B26
Engine Serial Number:	*

Engine Installation Data

Date engine installed

Engine TSN at installation

Engine CSN at installation

Aircraft registration

Aircraft serial number

Aircraft owner

Aircraft TSN at installation

Aircraft CSN at installation

Present Position installed

Engine Operation

EFH operated this month

EFC operated this month

Engine TSN

Engine CSN

Engine thrust rating during operation

*,

as Lessee

By:

Name:

Title:

Schedule 3

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

SCHEDULE 4

FORM OF NON-INCIDENT STATEMENT

(Please use Company Letterhead)

NON-INCIDENT STATEMENT

This Non-Incident Statement is to certify that the CFM International, Inc. model CFM56-7B26 engine, bearing manufacturer’s serial number *, together with all accessories and associated components (collectively, the “Engine”), was operated by * (the “Operator”).

This Non-Incident Statement is provided to Contrail Aviation Support, LLC (“Lessor”) pursuant to that certain Engine Lease Agreement, dated as of January 10, 2018, between Contrail Aviation Support, LLC and *, as lessee (the “Lease”). Capitalized terms used but not defined herein shall have the respective meanings set forth in the Lease.

During the period of Operator’s operation of the Engine, the Engine was not involved in any accident, incident, or subjected to severe impact, stress, heat or fire and it was not operated by governmental or military entities, nor have any parts of the Engine which have been installed during such period of Operator’s operation of the Engine been acquired from any government, military or unapproved source. The Engine has not been immersed in salt water or otherwise exposed to corrosive agents outside normal operation during such period of Operator’s operation of the Engine.

Lease Commencement Engine Total Time/ Total Cycles:     [__________]

Lease Termination Engine Total Time/Total Cycles:             [__________]

Dated this [___] day of [__________], 201_.

*,

as Operator

By:

Name:

Title:

Schedule 4

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

SCHEDULE 5

FINANCIAL TERMS

[NOTE: THE TERMS OF THIS SCHEDULE 5 ARE CONFIDENTIAL AND CONTAIN COMMERCIALLY SENSITIVE INFORMATION; THIS SCHEDULE 5 MUST BE REMOVED FROM ANY PUBLIC FILING OF THIS LEASE]

1. Agreed Value. US$*

2. Minimum Liability Amount. US$* or any higher amount as may be required by law wherever the aircraft is operating.

3. Deductible Limit. US$*.

4. Lease Rate. Lessee will pay to Lessor throughout the Lease Term rental (the “Lease Rate”) (i) in the amount of US$* commencing on the Lease Commencement Date and, thereafter, on each monthly anniversary of the Rent Commencement Date up to the twelfth monthly anniversary of the Commencement Date; provided, however, the Lease Rate for the second Rental Period only shall be US$*, (ii) US$* per month commencing on the thirteenth monthly anniversary of the Commencement Date and thereafter on each monthly anniversary of the Commencement Date up to the twenty fourth monthly anniversary of the Commencement Date and (iii) US$* per month commencing on the twenty fifth monthly anniversary of the Commencement Date and thereafter on each monthly anniversary of the Commencement Date up to the thirty sixth monthly anniversary of the Commencement Date (the “Lease Rate Due Date”) continuing until the return of the Engine in accordance with the terms of the Lease. Such Lease Rate shall be payable monthly in advance with respect to the period commencing on the Rent Commencement Date and ending on the date prior to the monthly anniversary of the Rent Commencement Date and, thereafter, commencing on the monthly anniversary of the Rent Commencement Date and ending on the date prior to the following monthly anniversary of the Rent Commencement Date during the Lease Term (each a “Rental Period”). In the event that the Lease End Date is attributable to an Unserviceable Event, Lessee shall give to Lessor written notice of such Unserviceable Event and Lessee shall not be required to pay Lessor the Lease Rate for a period of twenty (20) calendar days commencing on the date of such notice; provided, however, if Lessee fails to return the Engine to Lessor at the Redelivery Location in the condition required by the Lease within such twenty (20) day period, Lessee shall pay the Lease Rate divided by 30 days for each day after such twenty (20) day period that such failure continues.

5. Deposit. Lessee shall pay Lessor a security deposit of US$* (the “Deposit”) prior to Lessor delivering the Engine to Lessee at the Delivery Location. The Deposit shall be held by Lessor as security for the timely performance by Lessee of all of Lessee’s obligations under the Lease. The Deposit may be commingled with other funds of Lessor

Schedule 5

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

and shall be released without interest no later than two business days after Lessee has redelivered the Engine in accordance with the terms of the Lease, provided Lessee has performed all its obligations under the Lease and no Event of Default has occurred and is continuing. If Lessee fails to comply with any provision of the Lease or any other agreement between Lessor and Lessee, or any Event of Default shall have occurred and is continuing, then in addition to all rights and remedies accorded to Lessor elsewhere in the Lease and applicable law, Lessor may immediately or at any time thereafter, without prior notice to Lessee, apply all or part of Deposit towards the payment or discharge of any matured obligation owed by Lessee under the Lease or any other agreement between Lessor and Lessee, in such order as Lessor sees fit (without such application constituting a cure of such default), and Lessee shall, following a demand in writing from Lessor, immediately restore Deposit to the level at which it stood immediately prior to such exercise.

6. Supplemental Rent.

(a) Lessee shall make payments to Lessor in respect of Supplemental Rent in accordance with Section 7(b) below not later than ten (10) days after the last day of each calendar month during the Lease Term (the “Supplemental Rent Due Date”); provided that Lessee’s final payment in respect of Supplemental Rent shall be made on the Lease End Date.

(b) On each Supplemental Rent Due Date, Lessee shall pay Lessor Supplemental Rent in accordance with the following rates which will be charged for each Engine Flight Hour accumulated on the Engine for the preceding month based on Lessee’s actual monthly average Engine Flight Hour to Engine Flight Cycle ratio for the preceding month.

Hours Per Flight Cycle	US$ per Engine Flight Hour
1.30 – 1.61	$*
1.62 – 1.86	$*
1.87 – 2.11	$*
2.12 – 2.36	$*
2.37 – 2.61	$*
2.62 – 2.86	$*
2.87 – 3.12	$*
> 3.12	$*

Schedule 5

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

The rates above are calculated at * lbs. thrust and are subject to (i) annual escalation at a rate of *% per annum effective each January 1 during the Lease Term and (ii) review every * (*) calendar months during the Lease Term to determine if the Engine is operated at an average derate > 10%. In the event that the Engine is operated during such period at an average derate < 10%, Lessee shall pay Lessor Supplemental Rent at an increased rate based on the following table:

Average Derate	Multiplication Factor of Existing Supplemental Rent Rate
0% to 5% 5% to 10% 10% and above	* * *

and the additional amount of Lessor Supplemental Rent payable by Lessee to Lessor with respect to such * (*) month period shall be paid to Lessor by Lessee within fifteen (15) days after the end of such * (*) month period. If the Engine is operated at a different thrust level or if the Engine is not operating in an assumed ICAO operating environment area 1, Lessor reserves the right to charge different rates for that month.

In addition, on each Supplemental Rent Due Date, Lessee shall pay Lessor Supplemental Rent in accordance with a rate per Engine Flight Cycle to be calculated based on the OEM published cost of a complete set of CFM 56-7B LLPs, which rate shall be adjusted annually on January 1 of each year during the Lease Term, for each Engine Flight Cycle accumulated on the Engine for the preceding month.

7. Payment Mode. All payments of Lease Fees will be made by bank transfer of immediately available funds in United States Dollars to the account of Lessor at:

Bank:	Old National Bank
	1 Main Street
	Evansville, Indiana 47708
	United States of America
ABA No.:	086300012
Account:	Contrail Aviation Support, LLC
Account No.:	133788963
SWIFT Code:	OLNAUS44
Ref:	ESN *

8. Interest. If any amount payable by Lessee to Lessor under the Lease is not paid when due, Lessee shall pay Lessor interest on the late balance from the due date until paid in full at the lower of (i) the rate of * percent (*%) per month and (ii) the highest rate permitted by Law.

Schedule 5

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

SCHEDULE 6

FORM OF ACKNOWLEDGEMENT OF ENGINE OWNERSHIP

A SEPARATE ONE TO BE SIGNED BY EACH OWNER, LESSOR, MORTGAGEE AND

SECURED PARTY OF THE AIRFRAME ON WHICH THE ENGINE IS INSTALLED

Date: [__________]

Re: [__________]

Reference is made to the Engine Lease Agreement, dated as of January 10, 2018 (as at any time amended or supplemented, the “Lease”), by and between CONTRAIL AVIATION SUPPORT, LLC (“Lessor”) and * (“Lessee”) pursuant to which the Lessor has agreed to lease to the Lessee one CFM International, Inc. model CFM56-7B26 engine, bearing manufacturer’s serial number *, with full QEC (the “Engine”), on the terms and conditions set forth in the Lease.

The undersigned is the [__________] [list those applicable to you: owner/lessor/mortgagee/secured party] of the airframe (the “Airframe”) on which the Engine is installed. The undersigned understands that under the laws of the country where the airframe is registered (“Registration Country”), the laws of the country where the Lessee is certificated (“Certification Country”), and laws of other countries, (i) the mortgagee or owner of an airframe may be deemed to have certain rights to deal with any engine installed on such airframe in order to enforce its rights as mortgagee or owner of such airframe, (ii) liens and encumbrances on an airframe may attach and extend to engines installed on such airframe, and/or (iii) engines installed on an airframe may not be subject to any liens and encumbrances other than those to which such airframe is subject. The undersigned understands that the Engine is owned by the Lessor [to be added if lender involved: and is subject to a first priority security interest in favor of [__________] (the “Lender”)].

The undersigned hereby agrees and acknowledges that, notwithstanding any provision to the contrary of the laws of the Registration Country, the Certification Country or any other law or any agreement including, without limitation, any conditional sales, security or lease agreement with the Lessee, the installation of the Engine on the Airframe shall not affect title to or liens on the Engine. The undersigned agrees that the Lessor is and shall continue to be the owner of the Engine [insert if applicable: and the Engine is and shall continue to be subject to the liens of the Lender]. The undersigned covenants and agrees that it shall not assert, and hereby waives, any claim against the Lessor [insert if applicable: or Lender] in respect of any right, title or interest in the Engine which is inconsistent with the agreements in this instrument. The undersigned covenants and agrees that it shall not seek to enforce any rights against the Engine under any agreement as a result of the Engine being installed on the Airframe. The undersigned hereby disclaims and waives any ownership interest in the Engine and any security interest in the Engine.

Schedule 6

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

This Acknowledgment is entered into by the undersigned for the benefit of the Lessor [insert if applicable: and Lender, who shall be a third party beneficiary].

This Acknowledgment shall in all respects be governed by, and construed in accordance with, the laws of the State of New York, United States of America, including all matters of construction, validity and performance.

This Acknowledgment is duly signed and dated as of [__________], 201_.

[__________],

a [__________] corporation

        By:

        Name:

        Title:

AS THE
	[OWNER, LESSOR, MORTGAGEE, OR SECURED PARTY]

Schedule 6

SCHEDULE 7

FORM OF ENGINE OPERATIONAL REPORT

(Please use Company Letterhead)

This report must be completed by the operator of the Engine at the time of redelivery or after any Engine removal and certified by its Quality Assurance Manager or equivalent.

Operator:	*
Engine serial number:	*

	Installation Details:	Removal Details:
Date:
Aircraft registration & S/N:
Engine position:
Aircraft total hours:
Aircraft total cycles:
Engine total hours:
Engine total cycles:

Hours run since installation:

Cycles run since installation:

(Note: If Engine was installed during operation on various aircraft, a separate list must be completed noting hours and cycles for each installation/aircraft).

Observations:

This is to certify that Engine type CFM56-7B26 bearing S/N * has been operated at a thrust of 26,300 lbs. and maintained in accordance with the Aircraft Maintenance Manual and any other relevant practices and procedures. Further, no deviations from the manuals and procedures have been accomplished/carried out.

(i) List AD’s and SB’s accomplished during operation period. (If no AD or SB has been accomplished then record “no AD/SB accomplished during operation period”).

Schedule 7

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

(ii) List oil type used and consumption rate (including at least 3 month of trend data).

(iii) List any abnormal engine occurrence, or limitations having been reached or exceeded during the term of operation. (If there were none please note that there were none).

(iv) List any major repairs or alterations accomplished during the term of operation. (If there were none please note that were none).

(v) Confirm that no PMA/non – OEM material(s), or material(s) containing non-OEM repairs have been installed onto the Engine during the term of the operation.

(vi) State if any component(s) or parts that were originally delivered/installed will not be returned with the Engine with the reason for removal. (If there were none please note that there were none).

NOTE: If yes, provide separate list with the components installed as replacement(s). The following is required for component(s) which have been replaced by Lessee – FAA 8130-3 and EASA form one release certificate; TSO/CSO or TSR/CSR, date of installation, Engine TSN/CSN at installation of component/part and component/part Non-incident statement on ATA 106 form.

(vii) State if any deferred items have been noted during the term of the operation. (If there were none please note that there were none):

(viii) Confirm that there are no Open Maintenance items, Deferred Defects, MMEL items and/or Carry Forward items Outstanding on the Engine and its QEC Kit.

Schedule 7

(ix) State if the Engine has experienced any EGT or RPM exceedance. (If there were none please note that there were none).

(x) Confirm the Fuel Type Used during the term of operation.

(xi) Confirm that the Engine has not been operated with fuels or with fuel additives sourced from the C.I.S.

(xii) Confirm that the Engine fuel was not contaminated with Fatty Acid Methyl Ester (FAME). If the Engine was contaminated, advise to the amount and corrective action.

(xiii) Confirm that no LLP’s have been replaced.

(xiv) Confirm that the Engine has been properly stored (if applicable) in accordance with the AMM/Engine Manual.

(xv) Confirm that the Engine has been properly transported in accordance with AMM/Engine Manual during entire lease. (Provide separately photos evidencing engine being properly secured onto air-ride equipment.)

(xvi) Confirm that the Engine has been returned/placed in the ‘as delivered stand’ and the original Engine cover if delivered with the engine.

Stand Base P/N                                  Stand Base S/N                             

Stand Cradle P/N                                  Stand Cradle S/N                             

Note:                                                                           

(xvii) Confirm that the Engine fuel system has been completely emptied of fuel as per the special provision A70 in the IATA Dangerous Goods Regulation and therefore is not subject to IATA Dangerous Goods Regulations.

Schedule 7

(xviii) Confirm ETOPS compliance if applicable.

(xix) Provide date of last fan blade lubrication and next due compliance date.

(xx) Provide date(s) for engine C-check tasks performed and next due compliance date (MPD task compliance status)

Date/Signed:

Print Name:

Title:

Schedule 7

SCHEDULE 8

FORM OF ENGINE REDELIVERY CHECKS & INSPECTIONS REPORT

This report must be completed by the operator of the Engine at the time of redelivery and certified by its Engineering officer.

Operator:	*
Engine serial number:	*
Removal details at Engine Redelivery:
Date:
Aircraft registration & S/N:
Engine position:
Aircraft total hours:
Aircraft total cycles:
Engine total hours:
Engine total cycles:

CLAUSE A: REDELIVERY CHECKS REPORT (APPLICABLE ONLY FOR ENGINE REDELIVERY)

The Lessee hereby confirms to Lessor that the following redelivery checks and inspections have been completed satisfactorily in accordance with the return conditions of the Lease and that the Engine has not operated since completion of these checks:

(tick with ✓ to confirm)	YES	NO
*	*	*
*	*	*
*	*	*
*	*	*
*	*	*
*	*	*

Comments on findings on any of the above checks & inspections:

Schedule 8

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

CLAUSE B: REDELIVERY DOCUMENTS REPORT (APPLICABLE ONLY FOR ENGINE REDELIVERY)

The Lessee hereby confirms that the following redelivery documents have been completed and have been redelivered to Lessor:

(tick with ✓ to confirm)	YES	NO
*	*	*
*	*	*
*	*	*
*	*	*
*	*	*
*	*	*
*	*	*
*	*	*
*	*	*
*	*	*
*	*	*
*	*	*
*
*	*	*
*		*
*
*	*	*
*		*
*
*	*	*
*	*	*
*	*	*
*	*	*
*
*	*	*
*	*	*
*

Schedule 8

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

*
*	*	*
*
*
*	*	*
* *	*	*
*	*	*

Comment on any of the above redelivery documents:

Lessee:
Date
Signed:
Name:	(please print)
Title:

Schedule 8

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

SCHEDULE 9

FORM OF LEASE TERMINATION AGREEMENT

THIS LEASE TERMINATION AGREEMENT (this “Termination Agreement”) is made and entered into as of                              , 201    , between CONTRAIL AVIATION SUPPORT, LLC, a limited liability company organized and existing under the laws of the State of North Carolina, United States of America (the “Lessor”), and *, a company organized and existing under the laws of * (the “Lessee”).

W I T N E S S E T H:

WHEREAS, the Lessor and the Lessee are parties to that certain Engine Lease Agreement, as more particularly described in Annex 1 attached hereto (the “Lease”), with respect to that certain CFM International, Inc. model CFM56-7B26 aircraft engine, bearing manufacturer’s serial number * and related records, together with full QEC and engine transportation stand (collectively, the “Engine”); and

WHEREAS, the Lessor and the Lessee desire to terminate the Lease as provided herein.

NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Lessor and the Lessee agree as follows:

1. Except as otherwise defined herein, capitalized terms used herein shall have the meanings set forth in the Lease.

2. The Lease is hereby terminated effective as of the date set forth on the Termination Notice to Lessee (the “Termination Date”). A copy of such Termination Notice is attached hereto and made part hereof.

3. Effective as of the Termination Date, the Engine is hereby released from all of the terms and conditions of the Lease; provided that the provisions of the Lease that, by their respective terms, are to survive the termination or expiration of the Lease shall survive the termination of the Lease to the extent required thereby for their full observance and performance.

4. This Termination Agreement may be executed in counterparts, each of which when executed and delivered shall be deemed an original and all together shall constitute one and the same instrument.

[Signature page follows]

Schedule 9

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

IN WITNESS WHEREOF, the parties hereto have caused this Termination Agreement to be duly executed as of the date first above written.

CONTRAIL AVIATION SUPPORT, LLC, as Lessor

By:

Name:

Title:

*,

as Lessee

By:

Name:

Title:

Schedule 9

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

Annex I

to Lease Termination

Description of Lease

Engine Lease Agreement, dated as of January 10, 2018, between CONTRAIL AVIATION SUPPORT, LLC (“Lessor”) and * (“Lessee”) which was recorded by the Federal Aviation Administration on [_____________], 2018 and assigned Conveyance No. [_____].

[Note: To be revised accordingly when terminated.]

Schedule 9

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

SCHEDULE 10

END OF LEASE INSPECTION REQUIREMENTS

ITEM	TASK DESCRIPTION	REMARKS	COMPLIED WITH
1	ENGINE DOCUMENTATION CHECK
1.1	CHECK ENGINE IS CLEAR OF ALL LOG BOOKS AND DEFFERED DEFECTS
1.2	CHECK RECORDED CFDS FAULTS FOR ATA CHAPTER 70-80 FAULTS
1.2	CHECK LAST ECM TREND DATA SIGNIFICANT FINDING REPORT
1.3	CHECK FOR COMPLETED POWER ASSURANCE RUN AND ENGINE PRESERVATION/STORAGE
1.4	CHECK AD NOTE STATUS. CHECK FOR REQUIRED SB INCORPORATION
2	ENGINE GENERAL INSPECTION IAW MM 72-00-00
2.1	ENGINE GENERAL INSPECTION IAW MM 72-00-00
2.2	VISUALLY INSPECT ENGINE STAND
2.3	RECORD ENGINE TRANSPORT STAND P/N; S/N
2.4	PERFORM PHOTO DOCUMENTATION OF ENGINE
2.5	COMPLETE ACCESSORY INVENTORY LIST INCLUDING EBU AND COMPARE WITH OUTGOING STATUS WHEN POSSIBLE
2.6	CHECK COMPLETE ENGINE FOR EVIDENCE HOT AIR, FUEL OR OIL LEAKAGES
2.7	CHECK DRAIN LINES FOR BLOCKAGE
3	ENGINE OIL SYSTEM INSPECTION IAW MM 79-00-00
3.1	DRAIN OIL TANK AND GEARBOX
3.2	REMOVE OIL SCAVENGE AND PRESSURE FILTER VISUALLY INSPECT OIL SCAVENGE AND PRESSURE FILTER FOR CONTAMINATION REPORT IMMEDIATELY ANY CONTAMINATION FOUND
3.3	INSTALL NEW OIL SCAVENGE AND PRESSURE FILTER COMPLETE WITH NEW O-RINGS
3.4	CHECK MAGNETIC CHIP DETECTORS FOR METAL CONTAMINATION REPORT IMMEDIATELY ANY CONTAMINATION FOUND ENGINE OIL SYSTEM INSPECTION IAW MM 79-36-00

Schedule 10

3.5	VISUALLY INSPECT THE OILTANK FOR EXTERNAL LEAKAGE, GENERAL CONDITION, SECURITY OF MOUNTING AND CONDITION OF CONNECTED TUBES.
4	ENGINE FUEL SYSTEM INSPECTION IAW MM 73-00-00
4.1	REMOVE MAIN FUEL PUMP FUEL FILTER, FUEL CONTROL FILTER AND FUEL DISTRIBUTION VALVE FILTER
4.2	INSPECT FUEL FILTERS FOR CONTAMINATION REPORT IMMEDIATELY ANY CONTAMINATION FOUND
4.3	INSTALL NEW FUEL FILTERS WITH NEW O- RINGS
4.4	VISUALLY INSPECT FUEL SYSTEM COMPONENTS INCLUDING TUBES, MANIFOLDS AND JOINTS
5	ENGINE FAN FRAME AND CASE ASSEMBLY INSPECTION IAW MM 72-33-00
5.1	PERFORM VISUAL INSPECTION OF FAN CASE FOR OBVIOUS DAMAGE, CRACKS, DENTS AND SCRATCHES.
5.2	PERFORM VISUAL INSPECTION OF FAN EXIT CASE FOR OBVIOUS DAMAGE, CRACKS, DENTS AND SCRATCHES:
6	HPC GENERAL INSPECTION IAW MM 72-37-00, VSV RIG CHECK 75-31-00
6.1	INSPECT VBV BLEED SYSTEM LINKAGE FOR WEAR
6.2	VISUALLY INSPECT VSV ACTUATION LINKAGE FOR ANY DAMAGE AND LOOSENESS. INSPECT ACTUATOR FOR LEAKAGE.
6.4	VISUALLY INSPECT ALL FLANGES FOR CRACKS, MISSING AND/ OR DAMAGED BOLT (CRACKS, CORROSION ETC.)
6.5	VISUALLY INSPECT THE HPC FRONT CASE IGV - VSV UNISON RING FOR GENERAL CONDITION, LOOSENESS AND EXCESSIVE WEAR. INSPECT AS ACCESSIBLE ALL VSV LEVER ARMS FOR GENERAL CONDITION AND LOOSE BOLTS.
7	HPC REAR FRAME AND HPT CASE GENERAL INSPECTION IAM MM 72-40-00, 72-50-00.
7.1	VISUALLY INSPECT THE COMPRESSOR REAR FRAME FOR CRACKS, BURNING ETC.
7.2	VISUALLY INSPECT THE COMPRESSOR REAR FRAME FRONT AND REAR FLANGE FOR BOLT HOLE CRACKS AND DEFORMATION.
7.3	VISUALLY INSPECT HPT CASE FOR GENERAL CONDITION, CRACKS, CORROSION AND ISOLATED EXCESSIVE HEAT DISCOLORATION.
7.4	VISUALLY INSPECT THE FUEL NOZZLES IN SITU.

Schedule 10

7.5	VISUALLY INSPECT ALL EXTERNAL PIPING OF HPT/DIFFUSER AREA FOR SECURITY OF ATTACHMENT, CHAFING MARKS AND/ OR OBVIOUS DAMAGE. PAY SPECIAL ATTENTION TO THE FUEL MANIFOLDS
8	LPT CASE AND TURBINE EXHAUST CASE GENERAL INSPECTION IAW MM 72-54-00.
8.1	VISUALLY INSPECT THE LPT CASE FOR GENERAL CONDITION, CRACKS, CORROSION AND HEAT DISCOLORATION.
8.2	VISUALLY INSPECT THE LPT CASE FRONT AND REAR FLANGES FOR CRACKS, DAMAGES AND MISSING OR LOOSE BOLTS.
8.3	VISUALLY INSPECT THE LPT COOLING MANIFOLDS FOR CRACKS.
9	ACCESSORY GEARBOX MODULE GENERAL INSPECTION IAW MM 72-61-00
9.1	VISUALLY INSPECT THE GEARBOX GROUP FOR GENERAL CONDITION, OBVIOUS DAMAGE/CRACKS, CORROSION AND SIGNS OF OIL LEAKAGE.
9.2	VISUALLY INSPECT THE GEARBOX GROUP MOUNTS FOR GENERAL CONDITION AND CRACKS.
9.3	IF CSD IS REMOVED FOR ANY REASON, PERFORM TORQUE CHECK OF ”CSD QAD RING MOUNT BOLTS
9.4	VISUALLY INSPECT THE FAN EXIT CASE C-FLANGE AT THE GEARBOX MOUNT LOCATION FOR CRACKS.
9,5	CHECK CARBON SEALS FOR SIGNS OF LEAKAGE
9.6	CHECK ACCESSIBLE DRIVE SPLINES FOR WEAR
9.7	VISUALLY INSPECT THE PIPING AROUND ACCESSORY GEARBOX FOR WEAR, CHAFING MARKS AND CORRECT INSTALLATION.
10	INSPECTION OF FWD AND AFT MOUNT IAW MM 71-21-00/71-20-02
10.1	VISUALLY INSPECT MOUNTS FWD AND REAR MOUNTS
11	GENERAL INSPECTION OF ACCESSORIES AND ASSOCIATED COMPONENTS
11.1	INSPECT ALL ACCESSORIES FOR SECURITY OF ATTACHMENT, OBVIOUS DAMAGE OR LEAKS. GIVE SPECIAL ATTENTION TO THE FOLLOWING ACCESSORIES:
11.2	INSPECT L&S PUMP FOR SIGNS OF LEAKAGES AND GENERAL CONDITION
11.3	INSPECT THE MAIN FUEL PUMP FOR EXTERNAL LEAKAGE AND SECURITY OF MOUNTING. LEAKAGE REF. MM 73-12-00
11.3a	INSPECT THE HMU FOR EXTERNAL LEAKAGE, SECURITY OF CONTROL TO PUMP AND ELECTRICAL CONNECTORS. 73-21-00

Schedule 10

11.3b	INSPECT THE FUEL/OIL HEAT EXCHANGER FOR EXTERNAL FUEL OR OIL LEAKAGE. REF.: 73-14-00.
11.4	INSPECT THE FADEC N1 SPEED SENSOR FOR GENERAL CONDITION AND SECURITY OF ELECTRICAL CONNECTOR.
11.5	INSPECT THE FADEC EEC FOR GENERAL CONDITION AND SECURITY OF ELECTRICAL CONNECTORS, MOUNTING AND SENSE TUBES.
12	GENERAL QEC INSPECTION
12.1	INSPECT THE “IDG” FOR GENERAL CONDITION AND LEAKAGE. MM 24-12-00
12.1a	INSPECT THE FILTER ELEMENT FOR CONTAMINATION.
12.1b	INSTALL NEW FILTER ELEMENT.
12.2	INSPECT THE HYDRAULIC PUMP FOR GENERAL CONDITION AND LEAKAGE. REF.: MM 29-11-0.0
12.3	CLEAN THE HYDRAULIC DRAIN TUBE FROM GEARBOX PAD TO DRAIN MAST. USE A BRUSH FOR INTERNAL CLEANING.
12.4	INSPECT THE PNEUMATIC STARTER FOR GENERAL CONDITION AND LEAKAGE. MM 80-12-00
12.5	INSPECT THE FUEL FLOW TRANSMITTER FOR GENERAL CONDITION AND SECURITY OF ELECTRICAL CONNECTOR. MM 73-31-00
12.6	INSPECT THE LOW OIL PRESSURE SWITCH, OIL FILTER DIFFERENCE PRESSURE SWITCH AND OIL DIFFERENCE PRESSURE SWITCH FOR GENERAL CONDITION AND SECURITY OF ELECTRICAL CONNECTORS.
12.7	INSPECT ALL RELATED TUBES AND FLEX HOSES FOR GENERAL CONDITION AND SIGNS OF LEAKAGE.
12.8	INSPECT ALL CABIN AIR SYSTEM DUCTS AND VALVES FOR GENERAL CONDITION AND CORRECT INSTALLATION.
12.9	INSPECT THE PRIMARY EXHAUST NOZZLE AND PLUG FOR GENERAL CONDITION.
13	ELECTRICAL CHECKS IAW CMM ELECTRICAL HARNESSES, CABLES, MM 71-50-00
13.1	PERFORM VISUAL INSPECTION OF ALL ELECTRICAL HARNESSES AND CONNECTORS IN INSTALLED CONDITION
13.2	INSPECT CORE AND GEARBOX FIRE LOOPS FOR GENERAL CONDITION. ENSURE FIRE DETECTOR SYSTEM CLIPPING IS ARRANGED TO PREVENT CHAFING
14	LPC VIDEO BORESCOPE INSPECTION AND FAN BLADE VISUAL INSP. IAW MM 72-00-00- POST TEST RUN
14.1	PERFORM VIDEO BSI OF STAGE ONE FAN ROTOR DISK AND SPOOL
15	HPC VIDEO BORESCOPE INSPECTION IAW MM 72-36-00 -72-37-00 POST TEST RUN
15.1	PERFORM VIDEO BSI OF HPC BLADES STG.l - 9.

Schedule 10

15.2	PERFORM VIDEO BSI OF HPC STATOR VANES.
16	VIDEO BSI OF COMBUSTOR, HPT NOZZLE AND HPT IAW MM 72-43-00 – 72-53-00 POST TEST RUN
16.1	PERFORM VIDEO BSI OF COMBUSTOR
16.2	PERFORM VIDEO BSI OF 1 STG. NOZZLE GUIDE VANES
16.3	PERFORM VIDEO BSI OF HP TURBINE STG. 1 BLADES LE & TE
16.4	PERFORM VIDEO BSI OF HP TURBINE STG. 2 BLADES LE
17	VIDEO BSI OF LPT IAW MM 72-54-00 - POST TEST RUN
17.1	PERFORM VIDEO BSI OF LPT BLADES
18	POST BSI TASKS
18.1	CONFIRM CORRECT INSTALLATION OF B.S.I. PLUGS AND REINSTALLED

NAME

SIGNATURE

DATE

Schedule 10

SCHEDULE 11

FORM OF REDELIVERY ACCEPTANCE CERTIFICATE

Pursuant to the Engine Lease Agreement, dated as of January 10, 2018 (“Lease”), between CONTRAIL AVIATION SUPPORT, LLC (“Lessor”) and  *(“Lessee”), this Redelivery Acceptance Certificate is executed delivered, on and as of the date set forth below, by Lessee and Lessor. Capitalized terms used but not defined herein shall have the respective meanings set forth in the Lease.

Lessor hereby confirms to Lessee, its successors and assigns that:

1. on this ____ day of ________________, 20___, at the Delivery Location, it has received one CFM International, Inc. model CFM56-7B26 aircraft engine, bearing manufacturer’s serial number  *, together with full QEC, installed on an engine transportation stand, with Technical Documents, including FAA 8130-3 certification dual release or EASA Form 1, pursuant to Section 3.2(a) of the Lease.

2. The Aircraft and Aircraft Documents are hereby accepted by Lessor for return under the Lease subject to (i) the provisions of the Lease, and (ii) the correction by Lessee (or procurement by Lessee at Lessee’s cost) within 10 days following the date hereof of the discrepancies specified in Attachment 1 hereto.

3. Subject to the following paragraph, the Lease is hereby terminated without prejudice to Lessee’s continuing obligations and Lessor’s continuing rights under the Lease and this Redelivery Acceptance Certificate.

4. Lessee represents and warrants that during the Lease Term all maintenance and repairs to the Aircraft and each Item of Equipment were performed in accordance with the requirements of the Lease, and acknowledges, confirms and agrees that such representation and warranty shall survive the termination or expiration of the Lease. Lessee further confirms that all of its obligations, liabilities and agreements under the Lease (collectively, the “Obligations”) whether accruing prior to the date hereof or which survive the termination or expiration of the Lease by their terms and accrue after the date hereof, will remain in full force and effect until all such Obligations have been satisfied in full.

5. THIS REDELIVERY ACCEPTANCE CERTIFICATE SHALL IN ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, U.S.A., APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES (OTHER THAN THE PROVISIONS OF SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK).

Schedule 11

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

IN WITNESS WHEREOF, Lessee and Lessor have caused this Redelivery Acceptance Certificate to be executed in its name, by its duly authorized officer(s) or representative(s), pursuant to due corporate authority, all as of the date set forth in Section 1 above.

CONTRAIL AVIATION SUPPORT, LLC,	*,
as Lessor	as Lessee

By:	By:
Name:	Name:
Title:	Title:

Schedule 11

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

EX-10.8

Exhibit 10.8

ENGINE SALE AGREEMENT

between

*

(Seller)

and

Contrail Aviation Leasing, LLC

(Buyer)

in relation to

one CFM International Engine

Model CFM56-5B4 ESN *

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

THIS ENGINE SALE AGREEMENT is dated as of January 25, 2018 and is made between * *, a company organized under the laws of * having its principal place of business at * * (“Seller”) and Contrail Aviation Leasing, LLC, a company organized under the laws of the State of Wisconsin having its principal place of business at 435 Investment Court, Verona, WI 53593 (“Buyer”).

WHEREAS, Buyer desires to purchase the Engine (as defined herein); and

WHEREAS, Seller currently leases the Engine to Lessee (as defined herein) on terms outlined in the Lease;

WHEREAS, Seller desires to sell the Engine (subject to lease) to Buyer, subject to and in accordance with the terms and conditions of this Agreement.

NOW THEREFORE, in consideration of the mutual promises and covenants herein made, and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, Buyer agrees to purchase and Seller agrees to sell the Engine on the terms and conditions set forth below:

1. Definitions

1.1 “Acceptance Certificate” shall mean a certificate in the form of Schedule B attached hereto, evidencing Buyer’s acceptance of the Engine at the Delivery Location.

1.2 “Agreement” shall mean this Engine Sale Agreement, as the same may be amended or supplemented from time to time.

1.3 “Assignment, Assumption and Amendment Agreement” shall mean that certain Assignment, Assumption and Amendment Agreement dated as of January     , 2018 entered into between (i) * (ii) Contrail Aviation Leasing, LLC; and (iii) * * *.

1.4 “Bill of Sale” shall mean the form bill of sale at Schedule A attached hereto which shall transfer title and risk of loss or damage to the Engine from Seller to Buyer.

1.5 “Cape Town Convention” means the official English language texts of The Convention on International Interests in Mobile Equipment and The Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment which were signed in Cape Town, South Africa on May 16, 2001.

1.6 “Closing Date” shall mean the date on which Delivery shall occur.

1.7 “Delivery” shall mean the delivery of the Engine to Buyer at the Delivery Location on the Closing Date, as evidenced by Seller’s delivery to Buyer of the Bill of Sale.

1.8 “Delivery Location” shall mean *, U.S.A. or such other location as agreed between the Parties.

1.9 “Deposit” means a deposit in an amount of US$ *.

1.10 “Economic Closing Date” shall mean December 1, 2017.

1.11 “Engine” shall mean one (1) used CFM International aircraft engine model CFM56-5B4 having engine serial number *, in its current QEC configuration but excluding nose cowl and thrust reverser, together with all data, documents, reports and records belonging to or relating thereto current at the time of the Delivery.

Engine Sale Agreement

Engine Model CFM56-5B4 ESN *.

SELLER *

BUYER Contrail Aviation Leasing, LLC Page 2

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

1.12 “Engine Stand” shall mean one (1) engine transportation stand bearing cradle part number 403 and base serial number *.

1.13 “Event of Loss” shall mean any of the following with respect to the Engine: (a) any actual, constructive, or agreed total loss; or (b) requisition of title, confiscation or forfeiture depriving an owner of title or right of use.

1.14 “FAA” shall mean the U.S. Federal Aviation Administration.

1.15 “Final Delivery Date” shall mean February 15, 2018, or such other date as may be agreed between Buyer and Seller in writing.

1.16 “International Registry” shall have the meaning assigned to the term “International registry” in the Cape Town Convention.

1.17 “Lease” shall mean that certain Lease Agreement ESN * dated as of September 29, 2017 between * (as lessor) and * *) (as lessee) incorporating the terms of the Master Short-Term Engine Lease Agreement (2012 Revision), prepared by the International Air Transport Association in conjunction with the Aviation Working Group.

1.18 “Lessee” shall mean * * a * company having its principal place of business at * * * * * * * * *.

1.19 “Liens” shall mean all liens, charges, encumbrances and security interests.

1.20 “Party” shall mean Buyer or Seller individually.

1.21 “Parties” shall mean Buyer and Seller collectively.

1.22 “Purchase Price” shall mean the price Buyer shall pay Seller for the Engine and shall be in the amount of US$* or US$* in the event that the Closing Date occurs anytime after January 1, 2018.

1.23 “Scheduled Delivery Date” shall mean January 31, 2018, or such other date as may be agreed between Buyer and Seller in writing, but in no event later than the Final Delivery Date.

1.24 “Technical Acceptance” means acceptance based upon Buyer’s inspection of the Engine and review of records provided by Seller prior to execution of this Agreement.

1.25 “Transaction Documents” means this Agreement, the Bill of Sale and the Acceptance Certificate.

1.26 “Transfer Taxes” shall mean any and all present and future sales, use, personal property, ad valorem, value-added, withholding, transfer, VAT, stamp, documentary or other similar taxes, levies, imposts, fees or withholdings, together with any penalties, fines, surcharges or interest thereon and “Taxation” shall be construed accordingly.

Engine Sale Agreement

Engine Model CFM56-5B4 ESN *.

SELLER *

BUYER Contrail Aviation Leasing, LLC Page 3

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

1.27 “US$” shall mean United States of America Dollars, and shall be the currency which all payments under this Agreement are to be made.

2. Sale of Engine

Subject to the terms and conditions of this Agreement, Seller agrees to sell, deliver, transfer and convey to Buyer the Engine on the Closing Date, and Buyer agrees to purchase the Engine from Seller on the Closing Date, in an “as is, where is” condition at the Delivery Location for the Purchase Price.

3. Scheduled Delivery Date; Conditions Precedent; Final Delivery Date

This Agreement becomes effective on the date that it is signed and delivered by both Parties hereto. Seller and Buyer intend, and shall use good faith efforts to arrange, for Delivery to occur on the Scheduled Delivery Date, and shall prepare and coordinate accordingly, including as to preparation for timely delivery of all conditions precedent. Seller’s obligation to sell the Engine is subject to fulfilment of the conditions precedent set out in Schedule C (Conditions Precedent) on or before Delivery. Seller may, however, waive or defer any of the conditions precedent in its absolute discretion. If any of the conditions precedent are not satisfied (or waived or deferred by Seller in its absolute discretion) on or before the Final Delivery Date for reasons other than Seller’s default of its obligations hereunder. Seller may terminate this Agreement by written notice to Buyer and retain the Deposit in accordance with Section 4.2, and the Parties shall have no further obligations to each other under this Agreement. Buyer’s obligation to buy the Engine is subject to fulfilment of the conditions precedent set out in Schedule C-1 (Buyer’s Conditions Precedent) on or before Delivery. Buyer may, however, waive or defer any of the conditions precedent in its absolute discretion. If any of the conditions precedent are not satisfied (or waived or deferred by Buyer in its absolute discretion) on or before the Final Delivery Date for reasons other than Buyer’s default of its obligations hereunder, Buyer may terminate this Agreement by written notice to Seller, whereupon Seller shall promptly return the Deposit to Buyer and the Parties shall have no further obligations to each other under this Agreement.

4. Deposit, Purchase Price and Payment

4.1 Deposit

Buyer has paid to Seller the Deposit and Seller acknowledges receipt of such payment.

4.2 Refund of Deposit

4.2.1 The Deposit shall be non-refundable by Seller unless one of the following events or circumstances shall occur (each, a “Deposit Refund Event”), in which case Seller shall, refund the Deposit in full to Buyer without interest within five (5) business days of Buyer’s written request:

(a) the Engine suffers a Total Loss prior to delivery;

(b) delivery does not occur by reason of action or inaction of Seller where such action or, as the case may be, inaction is in breach of Seller’s obligations hereunder and Buyer has notified Seller of its intent not to proceed with the purchase of the Engine; or

Engine Sale Agreement

Engine Model CFM56-5B4 ESN *.

SELLER *

BUYER Contrail Aviation Leasing, LLC Page 4

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

(c) A condition precedent in Schedule C-1 is not satisfied or waived by Buyer, or if this transaction fails to close due to any inaction by Seller and Buyer gives Seller five (5) business days notice of its intent to terminate this transaction.

4.2.2 Intentionally omitted.

4.2.3 Buyer acknowledges that Seller has incurred and will incur costs and expenses in connection with the sale of the Engine hereunder. If the sale of the Engine to Buyer is not completed on or before the Final Delivery Date, the Deposit shall (unless a Deposit Refund Event shall have occurred) be forfeited to and retained by Seller as an agreed estimate of the losses incurred by Seller constituting liquidated damages and not a penalty.

Upon any return of the Deposit from Seller to Buyer pursuant to Clause 4.2, neither Seller nor Buyer shall have any further obligation or liability toward each other with respect to the transactions contemplated hereby.

4.3 The Purchase Price, less any Seller accredited Deposit amount, shall be paid on or before the Closing Date by Buyer to Seller. The Purchase Price shall be transmitted via wire transfer (or other mutually agreed upon means) in immediately available funds to Seller’s * account number as follows:

Bank Name:	*
Bank Address:
WIRE ABA:
Account Number:
Beneficiary:
Reference:
SWIFT:

or to such other account as Seller may specify in advance in writing.

5. Acceptance; Inspection

Buyer hereby issues Technical Acceptance of the Engine in accordance with the terms and conditions of this Agreement, and Buyer’s delivery on the Closing Date of the Acceptance Certificate will evidence Buyer’s acceptance of Delivery of the Engine in accordance with the terms and conditions of such Acceptance Certificate and of this Agreement.

6. Delivery Location; Transfer of Title

6.1 Seller shall deliver the Engine to Buyer at the Delivery Location.

6.2 Subject to the terms of this Agreement, including but not limited to Schedule C-1, on the Closing Date Buyer shall:

(i) pay Seller the Purchase Price;

(ii) deliver to Seller the insurance certificate in the form required by Section 9 herein; and

(iii) deliver to Seller the Acceptance Certificate duly executed by Buyer.

Engine Sale Agreement

Engine Model CFM56-5B4 ESN *.

SELLER *

BUYER Contrail Aviation Leasing, LLC Page 5

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

6.3 Immediately upon Seller’s receipt of all of Buyer’s deliverables set forth in Schedule C and the Engine being located in the Delivery Location, Seller shall deliver to Buyer the Bill of Sale duly executed by Seller transferring to Buyer (i) title to the Engine free and clear of all Liens except for any arising by virtue of the Lease and (ii) risk of loss or damage to the Engine. An electronic copy of the Bill of Sale shall be provided to Buyer on the Closing Date, with the original to follow promptly thereafter.

6.4 Upon receipt of the Purchase Price from Buyer, Seller shall cause to be discharged both the International Registry international interest and from the FAA registry in Oklahoma City, Oklahoma the registered interest of * arising under * dated as of * *, as supplemented from time to time, by and between Seller and * and the other lender parties thereto.

6.5 Seller shall deliver the Engine (except for the records to be delivered elsewhere pursuant to this Agreement) at the Delivery Location. The Engine Stand will be delivered to Buyer upon redelivery of the Engine from the Lessee in accordance with the terms of the Lease.

6.6 In the event that the Engine suffers an Event of Loss for any reason prior to Delivery, Seller shall notify Buyer of such Event of Loss and return the Deposit to Buyer, whereupon this Agreement shall terminate, and the Parties shall have no further rights or obligations hereunder.

6.7 The Parties hereby acknowledge that (i) all rent paid by Lessee to Lessor attributable to the period commenceing on the Economic Closing Date and (ii) all maintenance reserves paid by Lessee to Lessor from the Economic Closing Date shall be for Buyer’s benefit, Seller shall transfer to Buyer within five (5) business days, any and all such funds, without interest, received by Seller, in its capacity as lessor to an account specified by Buyer. This Section is conditional upon both Parties consummating the transactions contemplated by this Agreement by Buyer executing the Acceptance Certificate and Seller executing the Bill of Sale on the Closing Date.

7. Covenants; Representations and Warranties

7.1 Seller agrees to ship, following delivery of the Engine on the Closing Date, all existing Engine records, including but not limited to those records provided to Buyer for review in connection with Technical Acceptance, to a location and party designated pursuant to written instructions provided by Buyer.

7.2 Seller hereby agrees to cooperate with Buyer to effect, maintain and discharge any and all filings and registrations as may be necessary to protect Buyer’s right, title or interest in and to the Engine which may be necessary or desirable to be filed or registered in relation to the Convention on International Interests. In Mobile Equipment, and the Aircraft Protocol thereto and matters specific to aircraft equipment signed at Capetown on 16 November 2001. In this regard, Seller specifically acknowledges that it shall consent to the registration of the contract of sale of the Engine on the International Registry requested by Buyer at Delivery of the Engine.

7.3 Seller represents and warrants that as of the date hereof and as of the Closing Date, that:

(a) Seller is a an entity duly formed, validly existing and in good standing under the laws of * and has the power and authority to carry on its business as presently conducted and to enter into this Agreement and perform its obligations hereunder;

Engine Sale Agreement

Engine Model CFM56-5B4 ESN *.

SELLER *

BUYER Contrail Aviation Leasing, LLC Page 6

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

(b) The signing and delivering of this Agreement and the performance of the obligations of Seller under this Agreement are within the powers of Seller, have been duly authorized by all necessary action, and do not and will not (i) require the consent or approval or other action by, notice to, or filing with any person, body, or governmental authority, (ii) contravene any provision of its organization documents or resolutions, (iii) violate any law, rule, regulation, order, writ, judgment, injunction, decree, determination, or award binding upon it or its property or applicable to this Agreement or the Engine, (iv) violate, or constitute a default under, any indenture, agreement, document, or instrument to which it is a party or by which it or its property is bound, or (v) result in, or require the creation of, any imposition, mortgage, deed of trust, pledge, lien, security interest, or other charge or encumbrance of any nature upon, or with respect to, any of its property; and

(c) This Agreement has been duly executed and delivered by it and, upon execution and delivery by Seller, will constitute its legal, valid, and binding obligations, enforceable in accordance with their respective terms, except as may be limited by the effect of bankruptcy, insolvency and other similar laws of general application now or hereafter in effect relating to the enforcement of the rights of creditors in general

7.4 Buyer represents and warrants that as of the date hereof and as of the Closing Date, that:

(a) Buyer is an entity validly existing and in good standing under the laws of Wisconsin and has the power and authority to carry on its business as presently conducted and to enter into this Agreement and perform its obligations hereunder;

(b) The signing and delivering of this Agreement and the performance of the obligations of Buyer under this Agreement are within the powers of Buyer, have been duly authorized by all necessary action, and do not and will not (i) require the consent or approval or other action by, notice to, or filing with any person, body, or governmental authority, (ii) contravene any provision of its organization documents or resolutions, (iii) violate any law, rule, regulation, order, writ, judgment, injunction, decree, determination, or award binding upon it or its property or applicable to this Agreement, the other Sale Documents or the Engine, (iv) violate, or constitute a default under, any indenture, agreement, document, or instrument to which it is a party or by which it or its property is bound, or (v) result in, or require the creation of, any imposition, mortgage, deed of trust, pledge, lien, security interest, or other charge or encumbrance of any nature upon, or with respect to, any of its property; and

(c) This Agreement has been duly executed and delivered by it, and, upon execution and delivery by Buyer, will constitute its legal, valid, and binding obligations, enforceable in accordance with their respective terms, except as may be limited by the effect of bankruptcy, insolvency and other similar laws of general application now or hereafter in effect relating to the enforcement of the rights of creditors in general.

Engine Sale Agreement

Engine Model CFM56-5B4 ESN *.

SELLER *

BUYER Contrail Aviation Leasing, LLC Page 7

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

8. Limited Warranty and Disclaimer

8.1 Seller warrants that, on or before Delivery, it will own the Engine, and that it will deliver good and marketable title, free and clear of all Liens (except for any arising by, through or under Buyer) on the Closing Date. Seller agrees to defend, hold harmless, and indemnify Buyer with respect to any claims of ownership or Liens asserted by any third party after the Closing Date relating to claims arising prior to the Closing Date, except for any arising by, through or under Buyer.

8.2 Seller hereby assigns to Buyer all warranties, service policies and guarantees (to the extent that they are assignable) it holds with regard to the Engine, with effect from, and simultaneously with, Delivery. To the extent that such rights are not assignable, Buyer is hereby subrogated to all such rights of Seller, and Seller agrees to use reasonable efforts to give Buyer the benefit of any such warranties or other compensation by giving notice to, and using reasonable efforts to obtain the consent of, the applicable manufacturer for this purpose. Seller agrees to execute and deliver such further documents and instruments as Buyer may reasonably request to evidence the assignments and transfers contemplated hereby.

8.3 THE ENGINE, INCLUDING THE COMPONENT PARTS THEREOF AND THE RECORDS, ARE BEING SOLD ON AN “AS IS” AND “WHERE IS” AND WITH “ALL FAULTS” BASIS. EXCEPT AS SPECIFICALLY PROVIDED IN THIS AGREEMENT SELLER MAKES NO WARRANTIES, GUARANTEES OR REPRESENTATIONS OF ANY KIND, EITHER EXPRESS OR IMPLIED, STATUTORY OR OTHERWISE AND SELLER HEREBY DISCLAIMS ALL EXPRESS OR IMPLIED WARRANTIES OR REPRESENTATIONS OF ANY KIND OR NATURE WHATSOEVER, INCLUDING MERCHANTABILITY, FITNESS FOR USE, CONDITION, DESIGN, OPERATION, WORKMANSHIP, AS TO ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, AS TO THE ABSENCE OF ANY INFRINGEMENT, OF ANY PATENT, TRADEMARK OR COPYRIGHT AND, EXCEPT AS SPECIFICALLY PROVIDED IN THIS AGREEMENT, SELLER FURTHER DISCLAIMS ANY LIABILITY FOR OBLIGATIONS BASED IN TORT, INCLUDING STRICT LIABILITY OR NEGLIGENCE, ACTUAL OR IMPUTED, OR ARISING FROM COURSE OF PERFORMANCE, COURSE OF DEALING OR USEAGE OF TRADE OR FOR ANY LOSS OF USE, REVENUE OR PROFIT, OR ANY OTHER INCIDENTAL OR CONSEQUENTIAL DAMAGES, AND BUYER HEREBY WAIVES ALL SUCH OTHER WARRANTIES, REMEDIES OR LIABILITIES, EXPRESS OR IMPLIED, ARISING BY LAW OR OTHERWISE.

9. Indemnifications and Insurance

9.1 Buyer shall indemnify, defend and hold harmless Seller. Seller’s affiliates, * * * as Administrative Agent and Lender under the Credit Agreement between itself and Seller and the other Lenders thereto, and each of their respective subsidiaries, shareholders, partners, officers, directors, and employees or agents together with their affiliates and each of its and their respective successors, assigns, owners, officers, employees, and affiliates (individually each an “Indemnitee” and collectively “Indemnitees”) in full on demand in respect of all losses, liabilities, claims, proceedings, penalties, judgments, damages, costs and expenses, including reasonable

Engine Sale Agreement

Engine Model CFM56-5B4 ESN *.

SELLER *

BUYER Contrail Aviation Leasing, LLC Page 8

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

attorneys’ fees and expenses (collectively, “Losses”) suffered or incurred by any such party as a result of a third-party claim (regardless of when the same are suffered or incurred) arising out of or connected in any way with (a) the purchase, manufacture, ownership, possession, registration, performance, transportation, management, sale, control, inspection, use or operation, design, condition, testing, delivery, leasing, maintenance, repair, service, modification, overhaul, replacement or removal of the Engine, (b) any loss of or damage to the Engine, (c) any breach by Buyer of any of its representations, warranties or covenants in this Agreement, or (d) otherwise in connection with the Engine or relating to loss or destruction of or damage to any property, or death or injury to any person caused by, relating to or arising from or out of (in each case whether directly or indirectly) any of the foregoing matters;

Notwithstanding the foregoing, the indemnities contained in this sub section shall not extend to Losses:

(i) to the extent that such Losses arise, or are based upon acts or omissions occurring, before Delivery;

(ii) to the extent that such Losses are caused by the willful misconduct or gross negligence of Seller or any of its employees, servants or agents;

(iii) to the extent that such Losses are the result of failure by Seller to comply with any of its express obligations under this Agreement (unless such failure is caused by failure by Buyer to comply with any of its express obligations under this Agreement) or any representation or warranty given by Seller not being true and correct;

(iv) to the extent such Losses arise from an act or omission of Seller or a Seller Indemnitee as a manufacturer, repairer or servicer of aviation products; or

(v) which are required to be borne by Seller in accordance with any other express provision contained in this Agreement.

9.2 Seller shall indemnify, defend and hold harmless Buyer, Buyer’s affiliates, and Buyer’s lender and each of their respective subsidiaries, shareholders, partners, officers, directors, employees or agents together with their affiliates and each of its and their respective successors and assigns, owners, officer’s employees, and affiliates (individually each an “Buyer Indemnitee” and collectively “Buyer Indemnitees”) in full on demand in respect of all losses, liabilities, claims, proceedings, penalties, judgments, damages, costs and expenses, including reasonable attorneys’ fees and expenses (collectively, “Seller Losses”) suffered or incurred by any such party (regardless of when the same are suffered or incurred) arising out of or connected in any way with (a) the sale, manufacture, ownership, possession, registration, performance, transportation, management, sale, control, inspection, use or operation, design, condition, testing, delivery, leasing, maintenance, repair, service, modification, overhaul, replacement or removal of the Engine, (b) any loss of or damage to the Engine, (c) any breach by Seller of any of its representations, warranties or covenants in this Agreement, or (c) otherwise in connection with the Engine or relating to loss or destruction of or damage to any property, or death or injury to any person caused by, relating to or arising from or out of (in each case whether directly or indirectly) any of the foregoing matters;

Engine Sale Agreement

Engine Model CFM56-5B4 ESN *.

SELLER *

BUYER Contrail Aviation Leasing, LLC Page 9

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

Notwithstanding the foregoing, the indemnities contained in this sub section shall not extend to Seller Losses:

(i) to the extent that such Seller Losses are based upon acts or omissions occurring, after Delivery;

(ii) to the extent that such Seller Losses are caused by the willful misconduct or gross negligence of Buyer or any of its employees, servants or agents;

(iii) to the extent that such Seller Losses are the result of failure by Buyer to comply with any of its express obligations under this Agreement (unless such failure is caused by failure by Seller to comply with any of its express obligations under this Agreement) or any representation or warranty given by Buyer not being true and correct;

(iv) to the extent such Seller Losses arise from an act or omission of Buyer or a Buyer Indemnitee as a manufacturer, repairer or servicer of aviation products; or

(v) which are required to be borne by Buyer in accordance with any other express provision contained in this Agreement.

9.3 Buyer shall maintain, or cause any operator of the Engine to maintain, at its own expense aviation liability insurance coverage in respect of the Engine for a period no less than two (2) years commencing on the Closing Date of the Engine with Seller and the Indemnities named on such policy(ies) as an additional insured(s). The insurance amount shall be no less than Seven Hundred Fifty Million United States Dollars (US$750,000,000) combined single property and bodily injury limit for each occurrence (and non-passenger personal injury limited to Twenty-Five Million United States Dollars (US$25,000,000) for each and every occurrence and in the aggregate). In the event that the Engine is permanently removed from service during such period, the sole insurance coverage required hereunder shall be aviation products liability insurance for no less than Twenty Million United States Dollars (US$20,000,000). On the Closing Date, and upon each subsequent insurance renewal date during such two-year period, Buyer shall deliver to Seller a certificate of insurance in a form reasonably acceptable to Seller issued by its insurance brokers to Seller, in respect of the required insurance over the required period. Such insurance certificate will constitute a satisfactory discharge of Buyer’s obligations under this Section 9.3 while such coverage remains in effect.

9.3 Buyer shall provide to Seller before the Scheduled Delivery Date, so as to allow adequate review, a certificate of insurance in form and substance satisfactory to Seller that shall include provisions whereby: (i) the Indemnitees are named as additional insureds for their respective rights and interests; (ii) the insurers under any hull policy for the Engine shall waive all rights of subrogation against the Indemnitees in respect of the interests of each Indemnitee in such policies; (iii) the insurance shall not be invalidated by any act or omission (including misrepresentation and non-disclosure) of Buyer or any other person (other than, as to any Indemnitee, such Indemnitee) which results in a breach of any term, condition, warranty or other provision of such policies; (iv) none of the Indemnitees shall have responsibility for the payment of premiums or any other amounts payable under such policies; (v) if such insurance is cancelled or allowed to lapse for any reason whatsoever,

Engine Sale Agreement

Engine Model CFM56-5B4 ESN *.

SELLER *

BUYER Contrail Aviation Leasing, LLC Page 10

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

or if any material change is made in such insurance that adversely affects the interest of any Indemnitee, such cancellation, lapse or change shall not be effective as to any Indemnitee for 30 days (or 7 days or such other period as is then customarily obtainable in the industry in the case of any war and allied perils liability coverage) after giving notice from such insurers or Buyer’s appointed insurance broker to Seller.

10. Taxes

Buyer shall be responsible for Transfer Taxes levied or imposed as a result of execution of this Agreement and the sale of the Engine. Notwithstanding the previous sentence, Buyer shall not be responsible for taxes levied or imposed on the income of Seller. The Parties agree to fully cooperate in providing one another with any and all documents that may be used to obtain an exemption on taxes and duties levied on the sale of the Engine.

Each of Seller and Buyer shall co-operate and use reasonable efforts to avoid or minimize any and all Transfer Taxes or other taxes (such as taxes based on gross or net income, profits or revenue, or franchise or doing business) imposed on or arising out of the sale of the Engine to Buyer by Seller or otherwise imposed on the transactions contemplated by this Agreement. Notwithstanding the foregoing, any and all Transfer Taxes arising out of the sale and/or delivery of the Engine or any Part thereof shall be the sole responsibility and liability of Buyer.

Seller shall remain responsible for all taxes, duties and fees arising during Seller’s ownership of the Engine.

11. Tax Indemnity

Buyer will indemnify and hold Seller harmless on demand from and against any and all Transfer Taxes levied or imposed against or upon Seller or Buyer and relating to or attributable to Buyer, this Agreement or the sale and/or purchase of the Engine pursuant to this Agreement, and any taxes and expenses of any kind whatsoever assessed against Seller which are attributable to any payment made by Buyer pursuant to this Agreement, except as provided in Section 10 above.

12. Notices

Any notices required or permitted under this Agreement shall be in writing. Notices shall be provided to the Parties as follows, or at any other address either Party subsequently designates in writing:

If to Buyer		Contrail Aviation Leasing, LLC
		435 Investment Court
		Verona, WI 53593
		Attention: Mr. Joe Kuhn
		Email: joe@contrail.com
If to Seller:	*

Actual receipt of notice copies shall not determine or affect the effectiveness of the primary notice.

Engine Sale Agreement

Engine Model CFM56-5B4 ESN *

SELLER *

BUYER Contrail Aviation Leasing, LLC Page 11

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

13. Further Assurances

Each Party agrees to take further actions as are reasonably necessary, including furnishing documentation as requested, in order to carry out the intent of the Parties as expressed in this Agreement.

14. Governing Law; Dispute Resolution

THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAW (OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW).

Each Party to this Agreement irrevocably agrees that any legal action or proceedings in connection with this Agreement against either Party or any of its assets shall be brought in the Southern District of New York, which shall have jurisdiction to settle any disputes arising out of or in connection with this Agreement and each Party hereby irrevocably and unconditionally submits to the exclusive jurisdiction of the Federal court in the Southern District of New York.

In the event of any dispute between the Parties under this Agreement, or the Assigment, Assumption and Amendment Agreement, the prevailing party shall be entitled to recover attorney’s fees from the other Party.

15. Brokers

(a) Each of the Parties represents and warrants to the other that it has not paid or agreed to pay or cause to be paid directly or indirectly in any form, any commission, percentage, contingency fee, brokerage or other similar payments of any kind in connection with the establishment or operation of this Agreement, to any person (other than fees payable to its legal advisors).

(b) Each of the Parties agrees to indemnify the other Party against any and all claims, suits, damages, costs and expenses (including reasonable legal fees) asserted by any agent, broker or other third party for any commission or compensation of any nature whatsoever based upon any Transaction Document to the Engine if such claim, suit, damage, cost or expense arises out of breach by the indemnifying Party, its employees or agents of this Section 15.

16. Confidentiality

(a) Each Party undertakes that it will not at any time disclose to any person any confidential information concerning the Transaction Documents and the transaction contemplated by the Transaction Documents except as permitted by Section 16 (b).

(b) Each Party may disclose the other Party’s confidential information to:

(i) to its employees, officers, representatives or advisors who need to know such information for the purposes of carrying out the Party’s obligations under this Agreement. Each Party will ensure that its employees, officers, representatives or advisors to whom it discloses the other Party’s confidential information complying with this Section 16; and

(ii) as may be required by law, court order or any governmental or regulatory authority.

Engine Sale Agreement

Engine Model CFM56-5B4 ESN *.

SELLER *

BUYER Contrail Aviation Leasing, LLC Page 12

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

17. Entire Agreement

This Agreement, including referenced attachments and exhibits, contains the entire agreement of the Parties regarding the transaction described herein. This Agreement supersedes any prior negotiations, understandings, and oral or written agreements concerning this transaction. This Agreement may not be modified or amended in any way except by a subsequent written agreement executed by authorized representatives of both Parties.

18. Language

All notices given under this Agreement will be in English. All documents, including the records for the Engine, delivered to Buyer pursuant to this Agreement will be in English, or if not in English, will be accompanied by a duly certified English translation.

19. Expenses

Each Party will bear its own costs in relation to the negotiation, preparation and execution of the Transaction Documents save for as outlined in this Agreement. Buyer shall be responsible for the costs (including legal fees and the costs for legal opinions of external counsel, if any) of registering International Interests reflecting this sale and any subsequent interests on the International Registry if, and when, such registrations can be completed in respect of the Engine, this Agreement and any other Transaction Document.

20. Miscellaneous

20.1 Section headings are included for convenience and reference only and are not intended to define or limit the scope of any provisions of this Agreement.

20.2 This Agreement shall be binding on and inure to the benefit of the respective successors and assigns (if permitted) of the Parties.

20.3 Performance under this Agreement may not be assigned by Buyer, except with prior written consent of the other Party; provided, however, Buyer may assign all of its rights and interests in and to this Agreement to Contrail Aviation Leasing LLC, a wholly-owned subsidiary of Buyer, without the written consent of Seller.

20.4 Each Party warrants that it has performed all acts necessary for its performance under this Agreement, that it has the necessary authority to enter into this Agreement, and that the individual executing this Agreement has the authority to bind such Party.

20.5 Each Party warrants that when executed, this Agreement shall constitute a legal, valid, and binding obligation of both Parties.

20.6 This Agreement may be executed in counterparts and facsimile and/or PDF signatures transmitted by electronic mail shall be accepted as originals. However, both Parties request that all such counterparts be followed up with hard copy originals.

20.7 All warranties and representations made by any Party in this Agreement shall survive the closing of the transaction and the delivery of the Engine.

Engine Sale Agreement

Engine Model CFM56-5B4 ESN *.

SELLER *

BUYER Contrail Aviation Leasing, LLC Page 13

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

20.8 Any provision of this Agreement, which is deemed to be in violation of any law or is otherwise rendered unenforceable, shall not invalidate the remaining provisions hereof.

[Signature page follows]

Engine Sale Agreement

Engine Model CFM56-5B4 ESN *.

SELLER *.

BUYER Contrail Aviation Leasing, LLC Page 14

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

This Agreement has been duly executed by the Parties as of the date first written above.

FOR:

*
	By:
	Name:
	Title:

FOR:

CONTRAIL AVIATION LEASING, LLC.
By:
Name:	Joseph Kuhn
Title:	CEO

Signature Page to Engine Sale Agreement relating to ESN *

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

This Agreement has been duly executed by the Parties as of the date first written above.

FOR:

*
	By:
	Name:
	Title:

FOR:

CONTRAIL AVIATION LEASING, LLC.
By:	/s/ Joseph Kuhn
Name:	Joseph Kuhn
Title:	CEO

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

ENGINE WARRANTY BILL OF SALE

KNOW ALL MEN BY THESE PRESENTS:

* (“Seller”), for good and valuable consideration the sufficiency and receipt of which are hereby acknowledged, does hereby sell, grant, convey, transfer, bargain, deliver and set over unto Contrail Aviation Support, LLC. (“Buyer”) and unto its successors and assigns forever, all of Seller’s right, title and interest in and to:

One (1) used CFM International aircraft engine model CFM56-5B4 having engine serial number * in full QEC configuration, less nose cowl and thrust reversers including one (1) engine transportation stand bearing cradle number 403, and base serial number * and together with all records belonging to or relating to such engine current at the time of the delivery (collectively, the “Engine”).

Seller represents and warrants that Seller does hereby sell, grant, convey, transfer, bargain, deliver and set over to Buyer, and its successors and assigns, good and marketable title to the Engine free and clear of all liens, charges. encumbrances and security interests of any kind (except for any arising by, through or under Buyer), and that Seller will defend such title against all such claims forever.

THE ENGINE, INCLUDING THE COMPONENT PARTS THEREOF AND THE RECORDS, ARE BEING SOLD ON AN “AS IS” AND “WHERE IS” AND WITH “ALL FAULTS” BASIS. EXCEPT AS SPECIFICALLY PROVIDED IN THIS AGREEMENT SELLER MAKES NO WARRANTIES, GUARANTEES OR REPRESENTATIONS OF ANY KIND, EITHER EXPRESS OR IMPLIED, STATUTORY OR OTHERWISE AND SELLER HEREBY DISCLAIMS ALL EXPRESS OR IMPLIED WARRANTIES OR REPRESENTATIONS OF ANY KIND OR NATURE WHATSOEVER, INCLUDING MERCHANTABILITY, FITNESS FOR USE, CONDITION, DESIGN, OPERATION, WORKMANSHIP, AS TO ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, AS TO THE ABSENCE OF ANY INFRINGEMENT, OF ANY PATENT, TRADEMARK OR COPYRIGHT AND, EXCEPT AS SPECIFICALLY PROVIDED IN THIS AGREEMENT, SELLER FURTHER DISCLAIMS ANY LIABILITY FOR OBLIGATIONS BASED IN TORT, INCLUDING STRICT LIABILITY OR NEGLIGENCE, ACTUAL OR IMPUTED, OR ARISING FROM COURSE OF PERFORMANCE, COURSE OF DEALING OR USAGE OF TRADE OR FOR ANY LOSS OF USE, REVENUE OR PROFIT, OR ANY OTHER INCIDENTAL OR CONSEQUENTIAL DAMAGES, AND BUYER HEREBY WAIVES ALL SUCH OTHER WARRANTIES, REMEDIES OR LIABILITIES, EXPRESS OR IMPLIED, ARISING BY LAW OR OTHERWISE.

THIS BILL OF SALE SHALL IN ALL RESPECTS, INCLUDING MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS AND IN THE FEDERAL COURTS SITUATED IN THE SOUTHERN DISTRICT OF THE STATE OF NEW YORK, U.S.A. WITHOUT REGARD TO ITS CONFLICT OF LAWS PRINCIPLES WHICH MAY APPLY THE LAWS OF ANY OTHER JURISDICTION.

IN WITNESS WHEREOF, Seller has caused this instrument to be executed in its name as of February 23, 2018

*
	By:
	Name:
	Title:

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

ACCEPTANCE CERTIFICATE

Reference is made to that certain Engine Sale Agreement, dated as of January 25, 2018 (the “Agreement”), between * (“Seller”) and Contrail Aviation Leasing, LLC (“Buyer”) with respect to that certain CFM International aircraft engine model CFM56-5B4 having engine serial number * and related records (the “Engine”).

Buyer hereby acknowledges that the Engine (i) has been inspected by Buyer and (ii) has been accepted in its “AS IS, WHERE IS” and “WITH ALL FAULTS” condition on the date set forth above and is irrevocably accepted by Buyer for all purposes of the Agreement.

This Acceptance Certificate shall be interpreted in accordance with, and governed by, the laws of the State of New York, U.S.A, without regard to its conflict of laws principles which may apply the laws of any other jurisdiction.

CONTRAIL AVIATION LEASING, LLC
By:	/s/ Joseph G. Kuhn
Name:	Joseph G. Kuhn
Title:	President and CEO
Date:	January 23, 2018

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

SCHEDULE C

CONDITIONS PRECEDENT

1. Seller must have received each of the following documents and evidence, and the following conditions shall be satisfied:

(a) A certificate of an authorized signatory of Buyer, dated on or before the Delivery Date:

(i) Certifying and identifying the persons authorized on behalf of Buyer to execute the Transaction Documents to which it is a party or to sign or send any document or notice in connection with any Transaction Document and to accept delivery of the Engine on its behalf; and

(ii) Attaching and certifying the resolutions of the board of directors of Buyer approving the terms of, the transactions contemplated by, and the execution, delivery and performance of the Transaction Documents to which it is a party and confirming that the representations and warranties to be made by it are correct at the Delivery Date.

(b) The Acceptance Certificate duly executed by Buyer

(c) The insurance certificate specified in Section 9.3 and 9.4.

2. Seller must have received the Purchase Price.

3. Seller must have received a signed and dated PDF copy of that certain Assignment, Assumption and Amendment Agreement by each of Lessee and Buyer (or Contrail Aviation Leasing, LLC, a wholly-owned subsidiary of Buyer) with four (4) originals to follow in form and substance satisfactory to Seller.

4. Buyer’s representations and warranties set forth in Section 7.4 are true and correct as of Closing.

5. No Event of Loss has occurred with respect to the Engine.

SCHEDULE C-1

BUYER’S CONDITIONS PRECEDENT

Buyer must have received each of the following documents and evidence and the following conditions shall be satisfied:

1. a copy of this Agreement duly executed by Seller;

2. The Engine shall be free and clear of all Liens other than the Lease or those agreed to in writing by the Parties. In the event of such agreement, Buyer shall receive an undertaking(s) or other document(s) reasonably satisfactory to Buyer’s counsel, which commits Seller’s lender(s) to discharge all security interests promptly in connection with Closing.

3. Buyer must have received a signed and dated PDF copy of that certain Assignment, Assumption and Amendment Agreement by each of Lessee and Seller with one (1) original copy to follow in form and substance satisfactory to Buyer.

4. the Engine is at the Delivery Location;

5. Seller’s representations and warranties set forth in Section 7.3 are true and correct as of Closing; and

6. No Event of Loss has occurred with respect to the Engine.

7. No change in the condition of the Engine, except as to ordinary wear and tear, shall have occurred between the time of Technical Acceptance and Delivery.

8. A certificate of an authorized signatory of Seller, dated on or before the Delivery Date;

(i) Certifying and identifying the persons authorized on behalf of Seller to execute the Transaction Documents to which it is a party or to sign or send any document or notice in connection with any Transaction Document and to accept delivery of the Engine on its behalf; and

(ii) Confirming that Seller has taken all necessary corporate actions required to approve the entry into, and performance of the transaction contemplated by this Agreement and that such actions have not been amended or rescinded in any way and that the representations and warranties made by it are correct at the Delivery Date.

EX-10.9

Exhibit 10.9

AIRCRAFT SALE & PURCHASE AGREEMENT

Dated      FEBRUARY 2018

****

as Seller

Contrail Aviation Support, LLC

as Purchaser

relating to one B737-700 Aircraft

manufacturer’s serial number *

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

CONTENTS

Clause			Page
1.	Interpretation		1
2.	Representations And Warranties		1
3.	Agreement To Sell And Purchase		1
4.	Conditions Precedent		2
5.	Purchase Price		2
6.	Inspection And Delivery		5
7.	Aircraft Condition & Warranties		6
8.	Registration Fees		7
9.	Indemnities & Liability Insurance		7
10.	Further Provisions		8
11.	Law And Jurisdiction		9
12.	Brokers And Other Third Parties		10
Schedule 1    12
Part A		12
Part B    12
Delivery Condition Requirements		12
Schedule 2    13
Schedule 3    CONDITIONS PRECEDENT			16
Part A    Seller Conditions Precedent		16
Part B    Purchaser Conditions Precedent		16
Schedule 4    REPRESENTATIONS AND WARRANTIES			17
Part A    Seller’s Representations And Warranties		17
Part B    Purchaser’s Representations And Warranties		17
Schedule 5    BILL OF SALE			19
Schedule 6    TECHNICAL/ACCEPTANCE CERTIFICATE			20
Schedule 7    FINAL ACCEPTANCE CERTIFICATE			21

7.	AIRCRAFT CONDITION & WARRANTIES	1
8.	REGISTRATION FEES	1
9.	INDEMNITIES & LIABILITY INSURANCE	1
10.	FURTHER PROVISIONS	1
11.	LAW AND JURISDICTION	1
12	BROKERS AND OTHER THIRD PARTIES	1

Schedule 1	DESCRIPTION OF AIRCRAFT & DELIVERY CONDITION-REQUIREMENTS	1
Schedule 2	DEFINITIONS	1
Schedule 3	CONDITIONS PRECEDENT	1
Schedule 4	REPRESENTATIONS AND WARRANTIES	1
Schedule 5	BILL OF SALE	1
Schedule 6	FORM OF TECHNICAL/ACCEPTANCE CERTIFICATE	1

THIS AGREEMENT is made on      February 2018

BETWEEN:

**** a company incorporated in * with its address at ****

*** (“Seller”); and

Contrail Aviation Support, LLC, a company incorporated in State of North Carolina with its address at 435 Investment Court, Verona. Wisconsin 53593, United States of America (“Purchaser”).

IT IS AGREED as follows.

I. INTERPRETATION

1.1 Definitions: Capitalised words and expressions are defined in Schedule 2.

1.2 Construction: Headings are to be ignored in construing this Agreement and unless the contrary intention is stated, a reference to:

(a) each of “Seller”, “Purchaser” or any other Person includes any permitted successors and assignees;

(b) words importing the plural shall include the singular and vice versa;

(c) any document shall include that document as amended, novated, assigned or supplemented;

(d) a Clause or a Schedule is to a clause of or a schedule to this Agreement;

(e) any Law, or to any specified provision of any Law, is a reference to such Law or provision as amended, substituted or re-enacted.

2. REPRESENTATIONS AND WARRANTIES

Seller represents and warrants to Purchaser in accordance with Part A of Schedule 4 and Purchaser represents and warrants to Seller in accordance with Part B of Schedule 4.

3. AGREEMENT TO SELL AND PURCHASE

3.1 On and subject to the terms of this Agreement:

(a) the Aircraft will be sold by the Seller and purchased by the Purchaser on the Delivery Date in an “as is, where is” condition; and

(b) Seller shall pass to Purchaser upon Delivery good and marketable title to the Aircraft clear of all liens and encumbrances other than any liens created by Purchaser which by their express terms become effective upon passage of title to Purchaser.

3.2 Delivery Documents: Upon Delivery , Seller shall deliver to Purchaser the Bill of Sale duly executed by Seller

3.3 Security Interests: The Aircraft shall upon Delivery be free and clear of any Security Interests other than Permitted Liens.

3.4 Passage of Title & Risk: Title to the Aircraft shall pass to Purchaser when the Delivery Documents are delivered to Purchaser. Risk of loss, destruction of, or damage to the Aircraft shall pass to Purchaser simultaneously with transfer of title

- 1 -

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

3.5 Material Damage or Event of Loss before Delivery:

If before Delivery any Event of Loss of the Aircraft, or Material Damage to the Aircraft for which the likely cost of repair would exceed US$1,000,000 (One Million Dollars), Seller and Purchaser shall each have the right to terminate this agreement upon written notice to the other party. In event of such termination, the rights and obligations of the parties hereunder shall be discharged so that neither party shall be liable to the other, save that Seller shall refund the Purchaser Deposit to Purchaser within five (5) Business Days of such termination.

4. CONDITIONS PRECEDENT

4.1 Seller Conditions:

Seller’s obligation to sell the Aircraft to Purchaser shall be subject to fulfilment of the Seller Conditions Precedent on or before the Delivery Date (except to the extent that Seller agrees in writing in its absolute discretion to waive or defer any such condition).

The Seller Conditions Precedent have been inserted for Seller’s benefit and may be waived in writing, in whole or in part and with or without conditions, by Seller without prejudicing its right to receive fulfilment of such conditions, in whole or in part, at any later time.

If any of the Seller Conditions Precedent remain outstanding on the Final Delivery Date and are not waived or deferred in writing by Seller, Seller may at any time after close of business in New York on the Final Delivery Date terminate its obligation to sell the Aircraft by notice to Purchaser. Whereupon the rights and obligations of the parties hereunder shall cease and be discharged without further liability on the part of either Seller or Purchaser, save that where the failure to provide the Seller Conditions Precedent occurs through no fault of the Purchaser Seller shall refund the Purchaser Deposit to Purchaser within five (5) Business Days of such notice.

4.2 Purchaser Conditions:

Purchaser’s obligation to purchase the Aircraft shall be subject to fulfilment of each of the Purchaser Conditions Precedent on or before the Delivery Date (except to the extent that Purchaser agrees in writing in its absolute discretion to waive or defer any such condition).

The Purchaser Conditions Precedent have been inserted for Purchaser’s benefit and may be waived in writing, in whole or in part and with or without conditions, by Purchaser without prejudicing its right to receive fulfilment of such conditions, in whole or in part at any later time.

If any of the Purchaser Conditions Precedent remain outstanding on the Final Delivery Date and are not waived or deferred in writing by Purchaser, Purchaser may at any time after close of business in New York on the Final Delivery Date terminate its obligation to purchase the Aircraft by notice to Seller, whereupon the rights and obligations of the parties hereunder shall cease and be discharged without further liability on the part of either Seller or Purchaser, save that Seller shall refund the Purchaser Deposit to Purchaser within five (5) Business Days of such notice.

5. PURCHASE PRICE

5.1 Amount: The purchase price for the Aircraft shall be US$ ******** the “Purchase Price”).

5.2 Purchaser Deposit: Upon execution of this Agreement and receipt by Purchaser of an invoice from Seller, Purchaser shall pay to Seller a deposit in the amount of US$ *(the “Purchaser Deposit”).

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

5.3 Refundability of Purchaser Deposit: The Purchaser Deposit shall be irrevocable and non-refundable, except in the following circumstances:

• Seller’s material breach of the terms of this Agreement; or

• Lessee’s failure to perform its obligations under the Lease Termination Agreement or to meet the requirements of Clause 5.4 below; or

• Lessee’s material breach or failure to fulfil a condition precedent (prior to the Ferry Flight) of the terms of the Side Agreement; or

• Purchaser notifies Seller within eight (8) Business Days after completing the Inspection that it has rejected the Aircraft due to the Aircraft’s failure to pass the inspection under the Side Agreement and wishes not to proceed with the sale contemplated herein; or

• An Event of Loss or Material Damage to the Aircraft prior to Delivery and Purchaser exercises its right to terminate this Agreement pursuant to Clause 3.5; or

• Seller’s inability to satisfy a Purchaser Condition Precedent save where such failure is the result of Purchaser’s breach of the terms of this Agreement; or

• Delivery fails to occur on or prior to the Final Delivery Date save where such failure is a result of Purchaser’s breach of this Agreement or the Side Agreement.

Notwithstanding any other provision of this Agreement or the Transaction Documents, Purchaser’s Deposit shall, unless otherwise agreed by Purchaser in writing, be refunded to Purchaser by Seller within five (5) Business Days following the occurrence of any of the events set forth above.

5.4 Lessee Contribution to Aircraft Condition: Lessee shall pay to Seller the amount of US$ * (the “Lessee Contribution to Aircraft Condition”) within three (3) Business Days after the Technical Acceptance Date (but in any case prior to commencement of the Ferry Flight) which amount shall, together with the balance to be paid by the Purchaser, constitute a pro tanto portion of the Purchase Price.

5.5 Non-Refundability of Lessee Contribution to Aircraft Condition. The payments of the Lessee Contribution to Aircraft Condition pursuant to Clause 5.4 shall, except as set forth in Clause 2.4 of the Lease Termination Agreement, be irrevocable and non-refundable. If for any reason the sale of the Aircraft does not occur on or before the Final Delivery Date, Seller shall retain such amounts and set them off against any amounts payable by Lessee to Seller in its capacity as Lessor of the Aircraft under the Lease Agreement (as amended by the Aircraft Lease Termination Agreement). For the avoidance of doubt, Seller’s acceptance of the Lessee Contribution to Aircraft Condition shall not constitute a waiver or diminution of any of Seller’s rights or Lessee’s obligations under the Lease Agreement as amended by the Aircraft Lease Termination Agreement until such time as the sale has occurred hereunder and legal title to the Aircraft has been conveyed to Purchaser in accordance with the terms hereof.

5.6 Time for Payment: Subject to the terms of this Agreement, promptly upon Purchaser’s receipt of email confirmation that Seller has received from Lessee the Lessee Contribution to Aircraft Condition and the Redelivery Maintenance Payment Amounts, and on or prior to the commencement of the Ferry Flight (but in any event for value in New York City prior to commencement of the Ferry Flight), Purchaser shall pay to Seller an amount (the “Net Purchase Amount”) equal to the Purchase Price less (i) the amount of the Purchaser Deposit paid pursuant to Clause 5.2, (ii) the amount of the Lessee Contribution to Aircraft Condition, and (iii) the amount of the Lessee Contribution to Aircraft Condition Deposit (if any). For the avoidance of doubt, Seller shall not be obliged to convey legal title

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

to the Aircraft to Purchaser until it shall have received the total Purchase Price and the other amounts expressly stated to be paid by Lessee under the Lease Termination Agreement. The breakdown of amounts comprising the Purchase Price is set forth below:

MSN	Purchase Price	Purchaser to Pay	Lessee Contribution to Aircraft Condition	Purchaser Deposit	Lessee Contribution to Aircraft Condition Deposit
*	*)	*)	*)	**	*

After Seller has paid the Net Purchase Amount as aforesaid, if Seller for any reason fails to authorize the dating and release of the Bill of Sale to the Purchaser or otherwise fails to consummate the sale of the Aircraft contemplated herein immediately upon the Aircraft reaching the Expected Delivery Location, the Seller shall within five (5) Business days refund to Purchaser the Purchaser Deposit and the Net Purchase Amount in full. If within five (5) Business Days of Seller’s receipt of the Net Purchase Amount from Purchaser the sale of the Aircraft contemplated herein has not been consummated for any reason other than a breach of this Agreement by Purchaser, the Seller will refund to Purchaser the Deposit and Net Purchase Amount within two (2) Business Days thereafter.

5.7 Seller’s Account: The Net Purchase Amount shall be paid in Dollars to Seller’s account as set forth below:

*

5.8 Payment of Taxes, Tax Indemnities:

(a) Purchaser will indemnify and hold Seller harmless from any and all Taxes and expenses assessed against Seller or the Aircraft or any part thereof by any Government Entity resulting from or arising in connection with the sale of the Aircraft hereunder, and any Taxes and expenses assessed against Seller which are attributable to any payment made by Purchaser under this Agreement, other than:

(i) any Taxes (including without limitation capital gains Taxes, minimum Taxes and doing business or franchise Taxes) imposed on the overall income, profits or gains of Seller;

(ii) any Taxes imposed as a result of Seller’s failure to comply with this Agreement or non-performance in relation to any applicable laws governing Seller’s obligations hereunder; and

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

(iii) any Taxes arising as a result of the gross negligence or wilful misconduct of Seller.

(c) All payments to be made by Purchaser under this Agreement shall be made in full without set off or counterclaim whatsoever and shall be made in full without any deduction or withholding whatsoever. If however a deduction or withholding for Taxes is required by law, Purchaser shall:

(i) ensure that the deduction or withholding does not exceed the minimum amount legally required;

(ii) immediately pay to Seller such additional amount so that the net amount received by Seller will equal the full amount which would have been received by it had no such deduction or withholding been made;

(iii) pay to the relevant taxation authority or other authorities within the time allowed by law the full amount of the deduction or withholding (including, but without prejudice to the generality of the foregoing, the full amount of any deduction or withholding from any additional amount paid pursuant to this sub-clause); and

(iv) provide Seller within the period for payment permitted by the relevant law with an official receipt of the relevant taxation authorities for all amounts so deducted or withheld or if such receipts are not issued by the taxation authorities concerned, a certificate of deduction or equivalent evidence of the relevant deduction or withholding.

6. INSPECTION AND DELIVERY

6.1 Inspection: Seller grants permission to Purchaser to conduct the inspection of the Aircraft and the inspection of all documents and records relating to the Aircraft that are the property of Seller and in the possession of Lessee, arranged between the Purchaser and the Lessee pursuant to the Side Agreement, and Seller shall not interfere or delay such inspection in any manner.

6.2 Delivery: Subject to satisfaction (or waiver or deferral with the agreement in writing of Seller) of the Seller Conditions Precedent, Seller shall transfer title to the Aircraft and the Aircraft Documents to Purchaser on the Delivery Date and duly execute and deliver the Bill of Sale to Purchaser on the Delivery Date.

6.3 Delivery Date: The parties currently anticipate that Delivery will take place on the Expected Delivery Date and shall each use reasonable efforts so that Delivery does then take place but in any event Delivery shall occur no later than close of business in New York on the Final Delivery Date.

6.4 Delivery Location: The Bill of Sale shall be delivered to Purchaser and the Acceptance Certificate shall be delivered to Seller while the Aircraft is located in international airspace during the Ferry Flight (the “Delivery Location”). Such documents, together with the Certificate of Acceptance under and as defined in the Lease Agreement, will be tabled (signed and undated) at the offices of legal counsel for the Seller in Oklahoma City so that after Purchaser has confirmed receipt of the full Purchase Price and immediately upon the Aircraft reaching the Expected Delivery Location on the Ferry Flight such documents will be dated, released and exchanged.

6.5 Flight Schedule: Seller and Purchaser shall confer regarding the intended flight schedule for the Aircraft during the period prior to the Delivery Date and with respect to the Ferry Flight.

6.6 Final Acceptance: Provided the Aircraft meets the Delivery Conditions Requirements, all of the Purchaser Conditions Precedent have been satisfied, Seller has not breached this Agreement and the Purchaser has not otherwise terminated this Agreement in accordance with the terms hereof, Purchaser will accept the Aircraft by dating and delivering the Acceptance Certificate to Seller. Any delivery conditions separately agreed by the Purchaser and Lessee in the Side Agreement shall

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be strictly between such parties and Seller shall not be liable for the performance or satisfaction of such conditions, provided that Seller hereby acknowledges Purchaser’s right to terminate this Agreement and receive a return of the Purchaser Deposit in the circumstances described in clause 5.3.

7. AIRCRAFT CONDITION & WARRANTIES

7.1 Acceptance Certificate: Delivery of the Technical Acceptance Certificate by Purchaser to Seller following Purchaser’s inspection shall be conclusive proof that Purchaser has examined and investigated the Aircraft and that it is in every way satisfactory to Purchaser at such time. Delivery of the Acceptance Certificate by Purchaser to Seller shall be conclusive proof that Purchase has made final acceptance of the Aircraft in connection with Delivery.

7.2 Assignment of Warranties; Further Assurance: Seller hereby assigns to Purchaser, effective upon Delivery, all Seller’s rights, title and interest (to the extent that any such warranties continue to exist) in all agreements with the Manufacturer relating to the Aircraft. Seller agrees on request by Purchaser to give notice of such assignment to any relevant manufacturer and to use reasonable efforts to obtain their consent to such assignment and take such other action as Purchaser may reasonably request in that regard.

7.4 Disclaimers: THE AIRCRAFT (AS DEFINED) IS BEING SOLD AND DELIVERED TO PURCHASER “AS IS” AND “WHERE IS”, AND WITHOUT ANY REPRESENTATION, GUARANTEE OR WARRANTY OF SELLER EXPRESS OR IMPLIED, OF ANY KIND, ARISING BY LAW OR OTHERWISE.

WITHOUT LIMITING THE GENERALITY OF THE ABOVE, PURCHASER UNCONDITIONALLY AGREES THAT THE AIRCRAFT (AS DEFINED) IS TO BE SOLD AND PURCHASED IN AN AS IS WHERE IS CONDITION AS AT THE DELIVERY DATE, AND NO TERM, CONDITION, WARRANTY, REPRESENTATION OR COVENANT OF ANY KIND HAS BEEN ACCEPTED, MADE OR IS GIVEN OR SHALL BE DEEMED AS HAVING BEEN GIVEN BY SELLER OR ITS SERVANTS OR AGENTS IN RESPECT OF THE AIRWORTHINESS, VALUE, QUALITY, DURABILITY, DATE PROCESSING, CONDITION, DESIGN, OPERATION, DESCRIPTION (EXCEPT AS TO SERIAL NUMBERS), MERCHANTABILITY OR FITNESS FOR USE OR PURPOSE OF THE AIRCRAFT OR ANY PART THEREOF, AS TO THE ABSENCE OF LATENT, INHERENT OR OTHER DEFECTS (WHETHER OR NOT DISCOVERABLE), AS TO THE COMPLETENESS OR CONDITION OF THE AIRCRAFT DOCUMENTS, AND/OR AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, COPYRIGHT, DESIGN, OR OTHER PROPRIETARY RIGHTS. ALL TERMS, CONDITIONS, WARRANTIES AND REPRESENTATIONS (OR OBLIGATION OR LIABILITY, IN CONTRACT OR IN TORT) IN RELATION TO ANY ONE OR MORE OF THOSE MATTERS, EXPRESSED OR IMPLIED, STATUTORY OR OTHERWISE, ARE EXPRESSLY EXCLUDED.

For the avoidance of doubt, Seller shall not be responsible for any losses suffered or incurred resulting from any delay or non-delivery of the Aircraft. Provided the Aircraft is duly tendered by Seller on or prior to the Final Delivery Date, Purchaser shall not be entitled to reject the Aircraft because of delay.

The parties have considered and negotiated the terms of this Agreement and agreed the Purchase Price based on the responsibilities and obligations of Seller expressly undertaken and those which are excluded or limited. Purchaser acknowledges that (a) Seller is not in the business of operating or maintaining aircraft and (b) if Seller were to be required to accept any greater responsibility or obligation other than those expressly set out in this Agreement, Seller would either have declined to enter into this Agreement or would have charged a higher price. The parties consider the terms of this Agreement to be fair and reasonable in all the circumstances.

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8. REGISTRATION FEES

Purchaser shall bear any duties or fees payable to the Air Authority in connection with the transfer of title to the Aircraft from Seller to Purchaser. Seller confirms that the Purchaser shall not be responsible for any costs, duties or fees payable to the Air Authority or any other governmental authority in connection with termination of the Lease.

9. INDEMNITIES & LIABILITY INSURANCE

9.1 Purchaser’s Indemnity: Purchaser shall indemnify Seller in full on demand in respect of all Losses suffered or incurred by Seller or any of its officers, employees or agents (regardless of when the same are suffered or incurred) arising out of or connected in any way with:

(a) the purchase, manufacture, ownership, possession, registration, performance, transportation, management, sale, control, inspection, use or operation, design, condition, testing, delivery, leasing, maintenance, repair, service, modification, overhaul, replacement, removal or redelivery of the Aircraft, or any loss of or damage to the Aircraft, or otherwise in connection with the Aircraft or relating to loss or destruction of or damage to any property, or death or injury to any person caused by, relating to or arising from or out of (in each case whether directly or indirectly) any of the foregoing matters and regardless of when the same arises or occurs, or whether it arises out of or is attributable to any act or omission, negligent or otherwise of Seller; or

(b) any design, article or material in the Aircraft or the operation or use thereof constituting an infringement of patent, copyright, trademark, design or other proprietary right or a breach of any obligation of confidentiality owed to any person;

Provided that the indemnities contained in this sub clause shall not extend to Losses:

(i) to the extent that such Losses arise out of any act, omission, event or circumstance occurring before Delivery;

(ii) to the extent that such Losses are caused by the wilful misconduct or gross negligence of Seller or any of its employees, servants or agents;

(iii) to the extent that such Losses are the result of failure by Seller to comply with any of its express obligations under this Agreement (unless such failure is caused by failure by Purchaser to comply with any of its express obligations under this Agreement) or any representation or warranty given by Seller not being true and correct;

(iv) to the extent that such Losses represent a Tax or loss of tax benefits;

(v) which are ordinary or usual operating or overhead expenses of Seller, except to the extent that the same arise on the occurrence of any breach by Purchaser of its obligations under this Agreement; or

(vi) which are required to be borne by Seller in accordance with any other express provision contained in this Agreement; or

(vii) to the extent that such Losses arise out of any act or omission of Seller as a manufacturer, repairer, or technical servicer of aviation products.

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9.2 Liability Insurance: Purchaser shall maintain or procure that Aircraft Third Party, Property Damage, Passenger, Baggage, Cargo and Mail and Airline General Third Party (including Products) Legal Liability for a combined single limit (bodily injury/property damage) of an amount not less than US$ 600,000,000.00 (Six Hundred Million Dollars) for any one occurrence (but in respect of products and personal injury liability, this limit may be an aggregate limit for any and all losses occurring during the currency of the policy) is maintained in respect of the Aircraft with the Additional Insureds each named as an additional insured for two years after the Delivery Date. On or before Delivery, and upon each renewal Purchaser shall deliver to Seller a certificate in a form reasonably acceptable to Seller issued by the insurance brokers to Purchaser, in respect of this liability insurance over such two-year period, subject to the following provisions regarding replacement coverage. Should any airframe or engine be removed from service during the two-year period referenced above, the Purchaser will cause to be maintained US$l0,000,000 in Aviation Products Liability coverage in place of the insurance requirements above. Such policies shall include a waiver of subrogation clause, breach of warranty clause and severability of interest clause in favour of the Additional Insureds.

10. FURTHER PROVISIONS

10.1 Side Agreement. Seller acknowledges that Purchaser and Lessee have entered into the Side Agreement. The Purchaser acknowledges that Seller is not a party to the Side Agreement and, accordingly, has not reviewed the terms of such agreement, has no rights or obligations thereunder and is not bound by the terms thereof. Purchaser agrees that it shall give Seller prompt notice of any breach or failure of Lessee to perform its obligations under the terms of the Side Agreement that may give rise to Purchaser’s right to terminate the sale hereunder and request a return of the Purchaser Deposits pursuant to Clause 5.3. It is understood that the Side Agreement shall not impose upon the Lessee and/or the Aircraft any greater technical conditions than those reflected at the time of Purchaser’s execution of the Technical Acceptance Certificate (subject, however, to Clause 3.5 above) and that Lessee’s principal responsibilities after the Technical Acceptance Date shall be executing the Ferry Flight and providing certain post-title-transfer paperwork after the Ferry Flight is completed. Lessee’s failure to provide such documentation shall give rise to a cause of action by Purchaser against Lessee under the Side Agreement, but shall not give rise to a refund or return of the Deposits. The Lessee Contribution to Aircraft Condition payments shall not, except to the extent otherwise agreed between Lessor and Lessee in writing, be refundable in any circumstances and shall, should the sale of the Aircraft contemplated herein not be consummated, be applied to amounts owing by Lessee to Seller in connection with termination of the Lease as set forth in the Aircraft Lease Termination Agreement.

10.2 Benefit of Agreement: Purchaser shall not assign or transfer all or any of its rights and/or obligations under this Agreement without the prior written consent of Seller, except that Purchaser may assign its rights and obligations under this Agreement to its wholly-owned subsidiary, Contrail Aviation Leasing, LLC, provided that Purchaser and such assignee shall be jointly and severally Iiable for Purchaser’s obligations hereunder the event of such assignment.

10.3 Counterparts: This Agreement may be executed in any number of separate counterparts and each counterpart shall when executed and delivered be an original document but all counterparts shall together constitute one and the same instrument. Delivery of an executed counterpart of this Agreement by fax or email will be deemed as effective as delivery of an originally executed version. Accordingly, a PDF copy and facsimile signatures shall be treated as original signatures for all purposes with respect to all Transaction Documents. Any party delivering an executed version of this Agreement by fax or email shall, upon the request of the other party, also deliver an originally executed counterpart but the failure to do so will not affect the validity or effectiveness of this Agreement.

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10.4 Waivers and Variation: Rights of a party, arising under this Agreement or the general law, shall not be waived or varied unless done so expressly in writing and only then in that specific case, on that specific occasion and on any terms specified.

10.5 Notices: Any notice in connection with this Agreement shall be given in writing and may be conveyed by digital means (fax/email). The address for notices of each party follows:

to Seller at:

*

to Purchaser at:

Contrail Aviation Support LLC

435 Investment Court

Verona, Wisconsin 53593

United States of America

Attention: Mr. Steve Williamson

Fax/Email: steve@contraiI.com

10.6 Invalidity of any Provision: If any part of this Agreement becomes invalid, illegal or unenforceable under any applicable law, the validity, legality and enforceability of the remaining provisions shall not in any way be affected.

10.7 Entire Agreement: This Agreement constitutes the entire agreement between the parties hereto in relation to the sale and purchase of the Aircraft and supersedes all previous proposals, representations, agreements and other written and oral communications in relation thereto.

10.8 Costs and Expenses: Except where this Agreement states differently, each party shall bear its own fees, costs and expenses arising out of or connected with this Agreement. For the avoidance of doubt, Seller shall not be responsible for any broker’s fees, commissions or expenses relating to the sale of the Aircraft.

10.9 Cape Town Convention: Once legal title to the Aircraft has duly passed to Purchaser pursuant to this Agreement and the Bill of Sale, Seller will provide its consent to the registration of the Purchaser’s ownership at the international Registry. Until legal title to the Aircraft has so passed, Purchaser shall not seek, nor be entitled, to register any interest in the Aircraft or this Agreement at the International Registry or elsewhere.

11. LAW AND JURISDICTION

11.1 Governing Law: This Agreement in all respects and any non-contractual obligations arising out of or in connection with it shall be governed by, and construed in accordance with, the laws of the State of New York. The U.N. Convention on Contracts for the International Sales of Goods is not applicable to this Agreement.

11.2 Dispute Resolution: The US Federal Circuit Court for the Southern District of New York, sitting in the Borough of Manhattan, shall have jurisdiction to settle any disputes arising out of or relating

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

to this Agreement and the parties submit themselves and their assets to the non-exclusive jurisdiction of that court in relation to such disputes. A judgment or order of such court in connection with this Agreement is conclusive and binding and may be enforced in the courts of any other jurisdiction. Neither party will seek nor be entitled to, contest and/or delay and/or obstruct registration or enforcement of such judgment and/or order. The parties agree that the prevailing party shall be entitled to an award of reasonable attorney fees in the event of any court action arising under or in connection with this Agreement.

11.3 Process: Without prejudice to any other mode of service each party consents to the service of process relating to any proceedings under Clause 11.2 at its address set forth in Clause 10.5 provided a copy of the process is also sent by email to such party.

11.4 Waivers: Each party waives to the fullest extent permitted by law any objection which it may now or hereafter have to (i) the courts referred to in Clause 11.2 on grounds of inconvenient forum or otherwise as regards proceedings in connection with this Agreement and/or (ii) the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement brought in those courts.

12. BROKERS AND OTHER THIRD PARTIES

12.1 No Brokers: Each party represents and warrants to the other that it has not paid, agreed to pay or caused to be paid directly or indirectly in any form, any commission, percentage, contingent fee, brokerage or other similar payments of any kind, in connection with the establishment or operation of this Agreement, to any Person (other than fees payable by each party to its legal advisers and, as to Purchaser, fees payable to ** ).

12.2 Indemnity: Each party agrees to indemnify and hold the other harmless from and against any and all claims, suits, damages, costs and expenses (including, but not limited to reasonable attorneys’ fees) asserted by any agent, broker or other third party for any commission or compensation of any nature whatsoever based upon this Agreement or the Transaction Documents or the Aircraft, if such claim, suit, damage, cost or expense arises out of any breach by the indemnifying party, its employees or agents of Clause 12.1.

IN WITNESS whereof this Agreement has been signed on the day and year first above written.

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

EXECUTION PAGE

Seller
*
	By:
	Name:
	Title:
	Signed in

Purchaser

Contrail Aviation Support, LLC

By:

Title:

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

EXECUTION PAGE

Seller

*
	By:
	Title:
	Signed in

Purchaser

Contrail Aviation Support, LLC

By:	/s/ Joseph G. Kuhn
Title:	Joseph G. Kuhn CEO

- 11 -

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

SCHEDULE 1

Part A

MSN	*
Aircraft Type	737-700
Engine Type	CFM56-7B22
MTOW	**
MLW	**
MZFW	**
Engine Serial Numbers	**

PART B

Delivery Condition Requirements

“As is, where is”

Any conditions separately agreed by the Purchaser and Lessee in the Side Agreement shall be strictly between such parties and Seller shall not be liable for the performance or satisfaction of any such conditions, provided that Seller acknowledges Purchaser’s right to terminate the transactions contemplated herein and receive the return of the Purchaser Deposit in the circumstances described in Clause 5.3.

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

SCHEDULE 2

DEFINITIONS

“Acceptance Certificate” means the certificate to be executed by the Purchaser acknowledging final acceptance of the Aircraft in substantially the form of Schedule 6 (including sub-clause (d));

“Additional Insureds” mean Seller, *********

*************

*;

“Air Authority” means the civil aviation authority of the State of Registration;

“Aircraft” means the aircraft described in Schedule 1 (which term includes, where the context admits, a separate reference to all Engines, Parts and Aircraft Documents);

“Aircraft Documents” means all technical records and documents provided to Purchaser by Seller and/or Lessee within Lessee’s or Seller’s possession (at a minimum such records and documents as Purchaser has received for review) on or prior to the Technical Acceptance Date and any and all additions, renewals and replacements made thereto prior to Delivery;

“Aircraft Lease Termination Agreement” means the Aircraft Lease Termination Agreement dated on or about the date hereof between Seller and Lessee in respect of the Lease Agreement.

“Bill of Sale” means a bill of sale executed by Seller in respect of the Aircraft substantially in the form of Schedule 5;

“Business Day” means a day (other than a Saturday or Sunday) on which banks are open for business in New York and *London;

“Cape Town Convention” means the Convention on International Interests in Mobile Equipment and its Protocol on Matters Specific to Aircraft Equipment, concluded in Cape Town on 16 November 2001.

“Delivery” means the transfer of title of the Aircraft by Seller to Purchaser hereunder as evidenced by the duly completed Bill of Sale which has been delivered to Purchaser;

“Delivery Condition Requirements” means the requirements set out in Part B of Schedule 1;

“Delivery Date” means the date on which Delivery occurs;

“Delivery Documents” is defined in Clause 3.2;

“Delivery Location” is defined in Clause 7.3(a);

“Engines” means the engines specified in Schedule 1 together with all equipment and accessories belonging to, Installed in, or appurtenant to, such engines;

“Event of Loss” means with respect to the Aircraft (including for the purposes of this definition the Airframe);

(a) the actual or constructive total loss of the Aircraft (including any damage to the Aircraft which results in an insurance settlement on the basis of a total loss, for requisition for use or hire which results in an insurance settlement on the basis of a total loss); or

(b) the Aircraft being destroyed, damaged beyond economic repair or permanently rendered unfit for normal use for any reason whatsoever; or

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

(c) the requisition of title or other compulsory acquisition of title for any reason of the Aircraft by the government of the State of Registration or any other authority (whether de jure or dc facto); or

(d) the hijacking, theft, disappearance, condemnation, confiscation, seizure, grounding, restriction, detention or requisition for use or hire of the Aircraft which deprives Seller or any Person permitted by Seller to have possession and/or use of the Aircraft of its possession and/or use (including for the Ferry Flight) for (i) more than 15 days (or 30 days, in the ease of detention, grounding or restriction or requisition for use or hire by any governmental entity) or (ii) if earlier, a period ending on or after the Final Delivery Date;

“Expected Delivery Date” means 15 February 2018;

“Expected Delivery Location” means a location in International Airspace through which the Aircraft will travel during the Ferry Flight;

“Ferry Flight” means the ferry flight of the Aircraft to be undertaken by ***** from the Technical Acceptance Location to Marana, Arizona, USA;

“Final Delivery Date” means 30 April 2018;

“Government Entity” means:

(a) any national government, political subdivision thereof, or local jurisdiction therein;

(b) any instrumentality, board, commission, court, or agency of any of the above, however constituted; and

(c) any association, organisation, or institution of which any of the above is a member or to whose jurisdiction any thereof is subject or in whose activities any of the above is a participant;

“International Registry” means the registry established pursuant to the Cape Town Convention.

“Law” includes (a) any statute, decree, constitution, regulation, order, judgment of other directive of any Government Entity; (b) any treaty, pact, compact or other agreement to which any Government Entity is a signatory or party; (c) any judicial or administrative interpretation or application of any Law described in (a) or (b) above; and (d) any amendment or revision of any Law described in (a), (b) or (c) above;

“Lease Agreement” means that Aircraft Specific Lease Agreement in respect of the Aircraft dated 8 December 2001 between ***, as lessor, and Lessee, as amended, acceded to, novated and supplemented from time to time.

“Lease Termination Agreement” means that Aircraft Lease Termination Agreement dated on or about the date hereof between ***, as lessor, and Lessee in respect of the Aircraft.

“Lease” means *** and ****, in their capacity as joint and several “Lessee” under the Lease Agreement.

“Lessee Contribution to Aircraft Condition” is defined in Clause 5.4.

“Lessee Contribution to Aircraft Condition Deposit” is defined in Clause 5.5.

“Losses” means losses, liabilities, claims, proceedings, penalties, judgments, damages, costs and expenses;

“Manufacturer” means *;

“Material Damage” means damage to the Aircraft for which the likely cost of repair would exceed US$1,000,000 (one Million United States Dollars).

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

“Net Purchase Amount” is defined in Clause 5.4;

“Part” means, whether or not installed on the Aircraft, any component, furnishing or equipment (other than a complete Engine) furnished with the Aircraft on the Delivery Date;

“Permitted Liens” means any Security Interest created by or resulting from debts or liabilities or actions of Purchaser;

“Person” means any individual person, corporation, partnership, firm, joint stock company, joint venture, trust, estate, unincorporated organisation, association, Government Entity, or organisation or association of which any of the above is a member or a participant;

“Purchase Price” is defined in Clause 5.1;

“Purchaser Conditions Precedent” means the conditions set out in Part B of Schedule 3;

“Purchaser Deposit” is defined in Clause 5.2;

“Purchaser Inspection” or “Inspection” means the inspection of the Aircraft carried out by Purchaser pursuant to Clause 6.1;

“Security Interest” means any mortgage, charge, pledge, lien, encumbrance, assignment, hypothecation, right of set-off or any other agreement or arrangement having the effect of conferring security;

“Seller Conditions Precedent” means the conditions specified in Part A of Schedule 3;

“Side Agreement” means the separate agreement dated on or about the date hereof between Purchase and Lessee relating to the Aircraft, the Ferry Flight and other matters.

“State of Registration” means the **;

“Taxes” means any and all present and future taxes, duties, withholdings, levies, assessments, imposts, fees and other governmental charges of all kinds (including without limitation any value added or similar tax and any stamp, documentary, registration or similar tax), together with any penalties, fines, surcharges and interest thereon and any additions thereto;

“Technical Acceptance Certificate” means the acceptance certificate executed by Purchaser in substantially the form of Schedule 6.

“Technical Acceptance Dale” means the date reflected in the Technical Acceptance Certificate as the date on which Purchaser made technical acceptance of the Aircraft;

“Technical Acceptance Location” means ***;

“Transaction Documents” means this Agreement, the Bill of Sale, the Technical Acceptance Certificate, the Acceptance Certificate and any agreement amending or supplementing any of the foregoing documents;

“US$” and “Dollars” means the lawful currency of the United States of America, and (in relation to all payments in dollars to be made under this Agreement) same day funds.

- 15 -

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

SCHEDULE 3

CONDITIONS PRECEDENT

Part A

Seller Conditions Precedent

1. Seller shall have received each of the following:

• The Technical Acceptance Certificate duly executed by Purchaser;

• The Acceptance Certificate duly executed by Purchaser;

• The insurance certificate required under Clause 10.3

• The Net Purchase Amount

• The Redelivery Maintenance Payment Amount set forth in Schedule 2 of the Lease Termination Agreement.

2. The Purchaser shall not. be in material default of its obligations under this Agreement.

Part B

Purchaser Conditions Precedent

1. Purchaser shall have received the Bill of Sale duly executed by Seller;

3. The Aircraft shall not have suffered an Event of Loss or Material Damage on or prior to the Delivery Date;

4. The representations given by Seller in Part A of Schedule 4 being true and accurate on the Delivery Date;

5. The Seller shall not be in in material default of its obligations under this Agreement.

6. The Purchaser shall have completed, or shall have waived its right in writing to conduct, a walk-around inspection of the interior and exterior of the Aircraft within 48 hours prior to the departure of the Ferry Flight to confirm that the Aircraft shall not have suffered Material Damage or an Event of Loss since the time of Technical Acceptance and shall confirmed the same in writing to Seller.

7. The Purchaser shall have received written confirmation from Seller that Seller has received the Lessee Contribution to Purchase Price and the Redelivery Maintenance Payments required to be paid by Lessee under the Lease Termination Agreement and the Lease Agreement, respectively.

8. Purchaser shall have received evidence from searches undertaken by their PRC legal counsel, and based on information available, as to the absence or liens or other encumbrances on the Aircraft.

9. Purchaser shall have received the executed agreement relating to the Ferry Flight between Purchaser and Lessee in form and substance satisfactory to Purchaser.

- 16 -

SCHEDULE 4

REPRESENTATIONS AND WARRANTIES

Part A

Seller’s Representations and Warranties

1. General Representations and Warranties: Seller represents and warrants to Purchaser as follows

• Seller duly exists under the laws of *Ireland and has the power to enter into and implement the transactions contemplated by the Transaction Documents to which it is a party;

• the execution, delivery and performance of the Transaction Documents to which it is a party have been duly authorised by all necessary corporate action on the part of Seller;

• the Transaction Documents to which it is a party constitute legal, valid and binding obligations of Seller;

• each consent required by Seller to authorise, or required by it in connection with the execution, delivery, performance, legality, validity or enforceability of the Transaction Documents to which it is a party has been obtained and is in full force and effect, and there is no default in the observance or performance of any of the conditions and restrictions (if any) imposed on or in connection therewith; and

• the execution, delivery and performance by Seller of the Transaction Documents to which it is a party will not (i) conflict with, or result in any material breach of, any of the terms of, or constitute a default under, any agreement or document to which it is a party or by which it or any of its property or assets may be bound or (ii) contravene or conflict with the provisions of its constitutive documents.

Part B

Purchaser’s Representations and Warranties

Purchaser represents and warrants to Seller that the following statements are true and accurate:

• Purchaser duly exists under the laws of the State of Wisconsin, USA and has the power to enter into and implement the transactions contemplated by the Transaction Documents to which it is a party;

• the execution, delivery and performance of the Transaction Documents to which it is a party have been duly authorised by all necessary corporate action on the part of Purchaser:

• the Transaction Documents to which it is a party constitute legal, valid and binding obligations of Purchaser;

• each consent required by Purchaser to authorise, or required by it in connection with the execution, delivery, performance, legality, validity or enforceability of the Transaction Documents to which it is a party has been obtained and is in full force and effect (or will be obtained and in full force and effect prior to Delivery), and there is no default in the observance or performance of any of the conditions and restrictions (if any) imposed on or in connection therewith; and

- 17 -

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

• the execution, delivery and performance by Purchaser of the Transaction Documents to which it is a party will not (i) conflict with, or result in any material breach of, any of the terms of, or constitute a default under any agreement or document to which it is a party or by which it or any of its property or assets may be bound or (ii) contravene or conflict with the provisions of its constitutive documents.

- 18 -

BILL OF SALE

This Bill of Sale confirms that for valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Contrail Aviation Support, LLC (“Seller”), owner of the airframe and documents described below (hereinafter referred to as the (“Airframe”):

• B737-700 airframe bearing manufacturer’s serial number * and

• the Airframe Documents,

does hereby, by way of delivery at 11:00 a.m p.m. sell, grant, transfer and deliver all its right, title and interest in and to the Airframe, subject to Permitted Liens, to * (“Purchaser”) under an Airframe Sale and Purchase Agreement dated February 20, 2018 between Seller and Purchaser (the “Agreement”), to have and to hold the Airframe forever. Seller hereby warrants to Purchaser, and its successors and assigns, that there is hereby conveyed to Purchaser good and marketable title to the Airframe, free and clear of any Security Interests other than Permitted Liens.

The terms “Security Interests”, “Permitted Liens” and “Airframe Documents” are defined in the Agreement.

The Airframe is sold in AS IS and WHERE IS condition.

This Bill of Sale is and all rights and obligations (contractual or otherwise) arising in connection with it, are in all respects governed by the laws of the State of New York. Seller gives no warranty as to the effect or impact of any other law, including the lex situs at time of transfer. Any disputes arising out of or in connection with this Bill of Sale shall be resolved in accordance with the dispute resolution provisions of the Agreement.

IN WITNESS whereof, Seller has caused this Bill of Sale to be duly executed as of this 22^nd day of February, 2018.

CONTRAIL AVIATION SUPPORT, LLC
By:	/s/ Joseph G. Kuhn
Its:	CEO

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

TECHNICAL ACCEPTANCE CERTIFICATE

relating to that B737-700 Aircraft,

manufacturer’s serial number *(the “Aircraft”)

Contrail Aviation Support, LLC (the “Purchaser”) hereby certifies that pursuant to, and subject to, the Aircraft Sale and Purchase Agreement dated 9^th February 2018 between *(the “Seller”) and Purchaser (the “Agreement”):

(a) Purchaser has inspected the Aircraft, and the Aircraft conforms with the description and is in the condition and equipped as required by the Purchase Agreement as of the date here, subject to Purchaser’s rights pursuant to Clause 3.5 of the Agreement; and,

(b) Purchaser has received and inspected all of the Aircraft Documents and found them to be complete and satisfactory.

Date: 16^th day of February, 2018

Duly executed for the Purchaser by:

CONTRAIL AVIATION SUPPORT, LLC
By:	/s/ Joseph G. Kuhn
Title:	CEO

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

SCHEDULE 7

FINAL ACCEPTANCE CERTIFICATE

relating to that B737-700 Aircraft,

manufacturer’s serial number *(the “Aircraft”)

Contrail Aviation Support, LLC (the “Purchaser”) hereby certifies that pursuant to, and subject to, the Aircraft Sale and Purchase Agreement dated 9^th February 2018 between *(the “Seller”) and Purchaser (the “Agreement”):

(a) Purchaser has inspected the Aircraft, and the Aircraft conforms with the description and is in the condition and equipped as required by the Purchase Agreement as of the date here, subject to Purchaser’s rights pursuant to Clause 3.5 of the Agreement;

(b) Purchaser has received and inspected all of the Aircraft Documents and found them to be complete and satisfactory;

(c) Purchaser acknowledges that it has no rights or claims whatsoever against Seller in respect of the condition of the Aircraft or the Aircraft Documents or any of the other matters referred to in Clause 3.5 or Clause 7.4 of the Agreement; and,

(d) Purchaser has irrevocably accepted delivery of the Aircraft.

Date: 18 day of February, 2018

Duly executed for the Purchaser by:

CONTRAIL AVIATION SUPPORT, LLC
By:	/s/ Joseph G. Kuhn
Title:	CEO

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

EX-10.10

Exhibit 10.10

Aircraft Sale Agreement

Two used A319-100 MSN * and MSN *

Execution Version

AIRCRAFT SALE AGREEMENT

Dated as of August 3, 2018

BETWEEN

CONTRAIL AVIATION SUPPORT, LLC

as Buyer

and

* AS TRUSTEE FOR AIRCRAFT 32A-* )

and

* AS TRUSTEE FOR AIRCRAFT 32A-* )

as Sellers

Aircraft Make and Model:	Two used Airbus A319-100
Aircraft Manufacturer’s Serial Number:	MSN * and MSN *
Make and Model of Engines:	IAE, V2524-A5
Serial Numbers of Engines:	* , * and * *

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

Aircraft Sale Agreement

Two used A319-100 MSN * and MSN *

Execution Version

TABLE OF CONTENTS

ARTICLE 1: DEFINITIONS	2
ARTICLE 2: AGREEMENT TO SELL AND TO PURCHASE	7
ARTICLE 3: SALE PRICE, DEPOSIT AND OTHER PAYMENTS	9
ARTICLE 4: DISCLAIMER	11
ARTICLE 5: BILL OF SALE AND OTHER DOCUMENTARY REQUIREMENTS	12
ARTICLE 6: SELLER ASSIGNMENT OF RIGHTS AND WARRANTIES	14
ARTICLE 7: EXPENSES AND TAXES	14
ARTICLE 8: INDEMNITIES	16
ARTICLE 9: INSURANCE	19
ARTICLE 10: REPRESENTATIONS AND WARRANTIES OF BUYER	19
ARTICLE 11: REPRESENTATIONS AND WARRANTIES OF SELLER	21
ARTICLE 12: NOTICES	22
ARTICLE 13: GOVERNING LAW AND JURISDICTION	23
ARTICLE 14: MISCELLANEOUS	24

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

AIRCRAFT SALE AGREEMENT

THIS AIRCRAFT SALE AGREEMENT is made and entered into as of August 3, 2018 between:

(1) CONTRAIL AVIATION SUPPORT, LLC, whose address and principal place of business is at 435 Investment Court, Verona, WI 53593, U.S.A. (“Buyer”);

(2) * * * * * * * * * * * AS TRUSTEE FOR AIRCRAFT 32A-* * ) * whose address and principal place of business is at * * * * (“Seller 1”);

(3) * * * * * * * * * * AS TRUSTEE FOR AIRCRAFT 32A-* * * ) whose address and principal place of business is at * * * * (“Seller 2”);

(together referred to as “Sellers”)

The subject matter of this Agreement are two used aircraft and the engines attached thereto, as further described herein, which Sellers desire to sell to Buyer or the relevant Buyer’s Nominee and Buyer is willing to purchase or cause the relevant Buyer’s Nominee to purchase each of the aircraft (as defined herein) from Sellers.

In consideration of and subject to the mutual covenants, terms and conditions contained in this Agreement, Sellers hereby agrees to sell to Buyer or Buyer’s Nominee and Buyer hereby agrees to purchase or cause the relevant Buyer’s Nominee to purchase each of the aircraft from Sellers the above-mentioned aircraft and Sellers and Buyer further agree as follows:

ARTICLE 1: DEFINITIONS

Except where the context otherwise requires, the following words have the following meanings for all purposes of this Agreement. The definitions are equally applicable to the singular and plural forms of the words. Any agreement defined below includes each amendment, modification, supplement and waiver thereto in effect from time to time.

1.1 General Definitions.

“Acceptance Certificate” means the acceptance certificate in the form set forth in Exhibit E.

“Aircraft” means each of, or as the context may require, any of Aircraft 1 or Aircraft 2.

“Aircraft 1” means the Airframe and the Engines described in row number 1 in the table set forth in Exhibit A and the Parts and the Aircraft Documentation relating thereto.

“Aircraft 2” means the Airframe and the Engines described in row number 2 in the table set forth in Exhibit A and the Parts and the Aircraft Documentation relating thereto.

“Aircraft Activity” means the ownership, possession, use, import, export, registration, re-registration, deregistration, non-registration, manufacture, performance, transportation, management, location, movement, acquisition, disposal, transfer, exchange, control, design, condition, defect, testing, inspection, acceptance, delivery, redelivery, leasing, subleasing, wetleasing, pooling, interchange, maintenance, repair, loss, damage, emissions, refurbishment, insurance, reinsurance, service,

2

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

modification, overhaul, replacement, alteration, storage, removal or operation of the Aircraft, the Airframe, any Engine or any Part (whether in the air or on the ground or otherwise).

“Aircraft Documentation” means all log books, Aircraft records, manuals and other documents provided by Seller at Sale, including but not limited to historic bills of sale.

“Airframe” means each of the airframes described in Exhibit A together with all Parts relating thereto (except Engines or engines).

“Aviation Authority” means in relation to an Aircraft, each aviation authority or applicable Government Entity which under the Laws of the State of Registration from time to time has control over civil aviation and/or the registration, airworthiness or operation of aircraft.

“Base Purchase Price” means:

(a) in respect of Aircraft 1, an amount of $ * ;

(b) in respect of Aircraft 2, an amount of $ * ).

“Bill of Sale” means a bill of sale in form and substance as provided in Exhibit F.

“Business Day” means a day, other than a Saturday or Sunday, on which the banks in New York, New York and * are open for the transaction of business.

“Buyer Indemnitee” means Buyer and each Buyer Related Person and each of their respective officers, directors, employees, agents, shareholders and members.

“Buyer’s Nominee” means in relation to an Aircraft, the Person, which shall be a fully owned subsidiary of Buyer, identified as such for that Aircraft in the table set out in Exhibit C.

“Buyer Related Person” means in relation to an Aircraft, each of, or as the context may require, any of Buyer, the relevant Buyer’s Nominee, the relevant New Lessor and each other Person (if any) listed as such for that Aircraft in the table set forth in Exhibit C.

“Cape Town Convention” means the Cape Town Convention on International Interest in Mobile Equipment adopted in Cape Town, South Africa on November 16, 2001 and the Protocol thereto on Matters Specific to Aircraft Equipment.

“Contractual Interest Rate” means a fixed rate of * % per annum, calculated based upon a 365 day year.

“Default Interest Rate” means * * * * * * * * * * *

“Deposit” means:

• in respect of Aircraft 1, an amount of $ * ; and

• in respect of Aircraft 2, an amount of $ *

“Deposit Return Event” means, in relation to an Aircraft, a termination of this Agreement in as far as it relates to that Aircraft pursuant to Article 2.5, Article 2.6 or Article 2.7 (other than paragraphs (a) and (b) of Article 2.7.1) and any other circumstances in which sale and associated lease transfer does not complete for reasons not attributable to the Buyer’s default under this Aircraft Sale Agreement or the relevant Lease Transfer Agreement on or before the Final Sale Date, provided, however, that the

3

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

parties agree to discuss a good faith extension to the Final Sale Date as provided in Article 2.7.3 should the circumstances therein arise.

“Dollars” and “$” means the lawful currency of the United States of America.

“Engine” means in relation to an Aircraft, each of the engines identified for that Aircraft in the table set forth in Exhibit A or any other engines which are substituted therefor in accordance with the terms of the Lease related to that Aircraft and title to which will, immediately prior to the Sale, be vested in the Seller, as shall be identified in the relevant Acceptance Certificate and Bill of Sale together with Parts relating thereto.

“Economic Closing Date” means 15 July, 2018.

“Existing Lessor” means, as provided in the table set forth in Exhibit B, in relation to Aircraft 1 and related Lease, Seller 1 and in relation to Aircraft 2 and related Lease, Seller 2.

“Final Sale Date” means October 17, 2018 or such other date as the parties may agree in writing.

“Force Majeure Event” means any (a) acts of God; (b) flood, fire, earthquake or explosion; (c) war, invasion, hostilities (whether war is declared or not), terrorist threats or acts, riot or other civil unrest; (d) action, inaction or purported action of any Government Entity; (e) actions, embargoes or blockades in effect on or after the date of this Agreement; (f) national or regional emergency; (g) strike, boycott, labour stoppage, slowdown, blockade or other industrial disturbance; or (h) other cause outside the reasonable control of the parties to this Agreement.

“Government Entity” means any (a) national, state, provincial, municipal or local government, (b) board, commission, authority, department, division, instrumentality, court, agency or political subdivision or official thereof or (c) association, organization or institution of which any of the entities listed in (a) or (b) is a member or to whose jurisdiction any such entity is subject.

“Governing Jurisdiction” means the courts of the State of New York in the County of New York or any Federal court of the United States of America sitting in such County.

“Governing Law” means the laws of the State of New York, United States of America without regard conflict of law principles other than Section 5-1401 of the New York General Obligations Law.

“International Registry” and “international interest” have meanings given to such expressions in The Cape Town Convention.

“Law” means any (a) law, statute, decree, constitution, regulation, judgment, injunction, order or directive of any Government Entity, (b) treaty, pact, compact or other agreement to which any Government Entity is a signatory or party, (c) judicial or administrative interpretation or application of any of the foregoing or (d) any binding judicial precedent having the force of law.

“Lease” means, in relation to an Aircraft, the Lease for that Aircraft listed in the table set forth in Exhibit D, together with the related Lease Documents.

“Lease Documents” means, in relation to an Aircraft, the documents listed as such for that Aircraft in the table set out in Exhibit D.

“Lease Transfer Agreement” means a novation and amendment or an assignment, assumption and amendment agreement between Buyer, the relevant Existing Lessor the relevant New Lessor and the Lessee party to such Lease which transfers to the relevant New Lessor that Existing Lessor’s rights, title, interests and obligations under such Lease, in the form agreed by Seller and Buyer and the Lessee.

4

“Lessee” means * * .

“Loss” means any and all liabilities, obligations, losses, damages, penalties, claims, actions, suits, costs, disbursements and expenses (including legal fees, costs and related expenses) of every kind and nature.

“Manufacturer” means Airbus.

“Material Damage” means, in relation to an Aircraft, damage to an Aircraft or the Engines costing more than US$1,000,000 to repair or replace.

“Net Sale Price” means the Sale Price:

(i) less the sum of:

(ii) in respect of the second Aircraft to be sold only, the amount of the Total Deposit;

(iii) the amount of all Rent (as defined in the related Lease) due and received by the relevant Existing Lessor pursuant to the related Lease to the extent attributable to the period commencing on the Economic Closing Date and continuing thereafter; and

(iv) the balance of any cash “Deposit” (as defined in the related Lease) held by the relevant Existing Lessor pursuant to the Lease related to that Aircraft.

(v) the balance of any “Reserves” (as defined in the related Lease) held by the relevant Existing Lessor pursuant to the Lease related to that Aircraft.

in the case of (ii) and (iii) and (iv) above as of the Sale Date of such Aircraft; and

(vi) plus interest on the Base Purchase Price for that Aircraft for the period from (and including) the Economic Closing Date to (but excluding) the Sale Date of such Aircraft which will accrue at the Contractual Interest Rate and be calculated on the actual number of days elapsed during such period and a 365 day year.

“New Lessor” means, in relation to an Aircraft and a Lease, the Person identified as such for that Aircraft and the Lease related to that Aircraft in the table set forth in Exhibit C.

“Owner Participant” means * * * * , as the exclusive holder of 100% of the beneficial interest in the trust estates of Seller 1 and Seller 2.

“Part” means any part, component, appliance, system, accessory, instrument, communications equipment, furnishing, module, Seller furnished equipment or other item of equipment (other than complete Engines or engines) installed in or attached to the Airframe or any Engine.

“Person” means any individual, firm, partnership, joint venture, trust, corporation, company, Government Entity, committee, department, authority or any body or entity, incorporated or unincorporated, whether having distinct legal personality or not.

“Sale” means, in relation to an Aircraft, the sale of that Aircraft by the Seller to Buyer or the relevant Buyer’s Nominee and the purchase of that Aircraft by Buyer or the relevant Buyer’s Nominee’s from the Seller in accordance with Article 3.1 and the novation of the Lease, pursuant to the Lease Transfer Agreement.

5

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

“Sale Date” means, in relation to an Aircraft, the date on which the Sale takes place.

“Sale Documents” means this Aircraft Sale Agreement, together with all Exhibits hereto, each Acceptance Certificate, each Bill of Sale, the Seller Guarantee, each Lease Transfer Agreement and each effective time notice thereunder (howsoever described pursuant thereto), together with any other document agreed in writing by Seller and Buyer to constitute a Sale Document for the purposes of this Agreement.

“Sale Location” means in relation to an Aircraft, international airspace, the * * * : in the * * * * ; * , or such other location as Sellers and Buyer may mutually agree in writing.

“Scheduled Sale Date” means, in relation to an Aircraft, such date as Seller shall notify Buyer in writing reasonably in advance, provided that the Sale Date for the Aircraft shall not take place prior to 20 August, 2018 (or earlier to the extent mutually agreed in writing by the parties hereto).

“Seller Guarantee” means the guarantee in the form set out in Exhibit G between Seller Guarantor as guarantor and Buyer as beneficiary, in relation to the obligations of Seller under the Sale Documents.

“Seller Guarantor” means * .

“Security Interest” means any encumbrance or security interest, however and wherever created or arising including (without prejudice to the generality of the foregoing) any right of ownership, security, mortgage, pledge, charge, encumbrance, lease, lien, international interest, statutory or other right in rem, hypothecation, title retention, attachment, levy, claim or right of possession, seizure or detention.

“Seller’s Bank” means Seller’s bank account specified in Article 3.3 or such other bank account as Seller may from time to time designate by written notice to Buyer.

“Seller Indemnitee” means Seller and each Seller Related Person and each of their respective officers, directors, employees, agents, shareholders and members.

“Seller Related Persons” means, in relation to an Aircraft, each of, or as the context may require, any of Seller, the relevant Existing Lessor, and each other Person (if any) listed as such for that Aircraft in the table set forth in Exhibit B.

“State of Registration” means * * * * .

“Taxes” has the meaning given to such expression in Article 7.2.

“Tax Indemnitee” means each Seller Related Person and each of their respective officers, directors, employees, agents and shareholders.

“Total Deposit” means the aggregate of the Deposits for each Aircraft.

“Total Loss” means the destruction, damage beyond repair, or permanent rendering unfit for normal use for any reason whatsoever of the Aircraft, or the constructive total loss of the Aircraft.

“Warranted Security Interests” means, in relation to an Aircraft, at the time of Sale of that Aircraft, any Security Interests in respect of that Aircraft (other than the related Lease, the related Lease Transfer Agreement, any Permitted Lien other than Lessor’s Liens as such terms are defined in the related Lease and any international interest registered (i) in connection with the related sale

6

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

transaction contemplated by this Agreement or (ii) on or prior to the time of Sale which are to be removed pursuant to Article 5.3.3).

ARTICLE 2: AGREEMENT TO SELL AND TO PURCHASE

2.

2.1 Agreement to Sell and to Purchase.

In consideration of and subject to the mutual covenants, terms and conditions contained in this Agreement, the Sellers of each Aircraft agree to sell such Aircraft to Buyer or the relevant Buyer’s Nominee and Buyer hereby agrees to purchase or cause the relevant Buyer’s Nominee to purchase each of the Aircraft from the Sellers.

2.2 Location of Sale.

Sellers will tender each Aircraft for sale to Buyer or the relevant Buyer’s Nominee at the Sale Location. Sellers will not be required to physically tender or deliver an Aircraft to Buyer or the relevant Buyer’s Nominee, and Buyer or the relevant Buyer’s Nominee agree the Sale will not disturb Lessee’s quiet use, possession and enjoyment of an Aircraft in accordance with the terms of the Lease related to that Aircraft. If necessary to accommodate flight schedules, the Sale of an Aircraft and its respective Engines may be effected in different Sale Locations agreed by relevant Seller and Buyer (each acting reasonably).

2.3 Scheduled Sale Date.

The Sale of an Aircraft by the relevant Seller to Buyer or the relevant Buyer’s Nominee shall take place on the Scheduled Sale Date for that Aircraft. If necessary to accommodate flight schedules, the Sale of an Aircraft and its respective Engines may be effected at different times or on different dates in a manner and on terms agreed by relevant Seller and Buyer (each acting reasonably).

2.4 Risk of Loss and obligations post-sale.

On and from the Sale of an Aircraft, all risk of loss and damage to that Aircraft will pass from the relevant Seller to Buyer or the relevant Buyer’s Nominee. If the Sale of an Aircraft and its respective Engines are to be effected at different times or on different dates, all risk of loss and damage to the relevant Airframe or, as the case may be, the relevant Engine will pass from the relevant Seller to Buyer or the relevant Buyer’s Nominee at the time of Sale of that Airframe or, as the case may be, that Engine.

With effect from the Sale of an Aircraft, the Buyer or the relevant Buyer Nominee or New Lessor shall be obligated to pay the Lessee pursuant to the terms of the related Lease for any maintenance event, reimbursement or contribution claims (as defined in the related Lease) made by such Lessee, including without limitation and for the avoidance of doubt, any claims made or arising by the Lessee prior to the Sale Date for such Aircraft which have not been paid out as of such Sale Date provided that the Seller shall have notified the Buyer in writing the details and amounts of all such outstanding claims.

2.5 Total Loss prior to Sale.

If an Aircraft suffers a Total Loss prior to the Sale of that Aircraft, relevant Seller shall as soon as reasonably practicable after having been notified by Lessee of the same notify Buyer in writing and this Agreement shall terminate in as far as it relates to that Aircraft and none of the parties will have any further obligation or liability to the others in respect of that Aircraft

7

except in respect of any breach of its obligations under any Sale Document prior to such termination, any obligations expressed to survive such termination and the obligation of Seller to make any payment to the Buyer in accordance with Article 3.2 but this Agreement shall continue in full force and effect for the remaining Aircraft.

2.6 Material Damage to Aircraft.

If, after the date of this Agreement but prior to the Sale Date, an Aircraft suffers Material Damage that has not been repaired or otherwise remedied to Buyer’s satisfaction (in its sole discretion), Seller and Buyer will discuss in good faith a revised Sale Price. If Seller and Buyer are unable to agree on a revised Sale Price in the course of such discussions, either Seller or Buyer may elect by written notice to terminate this Agreement, in which case neither party will have any further liability to the other except that Seller will return to Buyer the Deposit for that Aircraft in accordance with Article 3.2.

2.7 Cancellation for Delay.

2.7.1 If the Sale of an Aircraft has not occurred by 5:00 p.m. New York time on the Final Sale Date as a result of:

(a) the material breach by Buyer or any Buyer Related Person of its obligation(s) under any Sale Document except where such breach is caused by an act or omission of relevant Seller or any Seller Related Person; or

(b) a failure by Buyer or any Buyer Related Person to provide any condition precedent which is within its reasonable control to any other party under any Sale Document (and where such other party has not caused in whole or in part such failure) except where such condition precedent has been waived or deferred in writing by the relevant party entitled thereto,

or for any reason whatsoever other than the circumstances described in Article 2.7.2 and Article 2.7.3 below, then relevant Seller may at any time following such time, by service of written notice on Buyer, terminate this Agreement in as far as it relates to that Aircraft and any other Aircraft in respect of which the Sale has not already occurred.

2.7.2 If the Sale of an Aircraft has not occurred by 5:00 p.m. New York time on the Final Sale Date as a result of:

(a) the material breach by relevant Seller or any Seller Related Person of its obligations under any Sale Document except where such breach is caused by an act or omission of Buyer or any Buyer Related Person; or

(b) a failure by relevant Seller or any Seller Related Person to provide any condition precedent which is within its reasonable control to any other party under any Sale Document (and where such other party has not caused in whole or in part such failure) except where such condition precedent has been waived or deferred in writing by the relevant party entitled thereto,

or for any other reason whatsoever other than the circumstances described in Article 2.7.1 above and Article 2.7.3 below, then Buyer may at any time following such time, by service of written notice on relevant Seller, terminate this Agreement in as far as it relates to that Aircraft and any other Aircraft in respect of which the Sale has not already occurred.

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2.7.3 If the Sale of an Aircraft has not occurred by 5:00 p.m. New York time on the Final Sale Date due to:

(a) the occurrence of a Force Majeure Event;

(b) the failure by the Lessee to enter into a Lease Transfer Agreement for the Lease related to that Aircraft or any condition precedent to the effective time thereunder not having been met, in each case to the extent not attributable to a failure by relevant Seller or Buyer.

Relevant Seller and Buyer shall discuss in good faith an extension to the Final Sale Date for that Aircraft. If Seller and Buyer cannot agree on an extension to the Final Sale Date for that Aircraft or the Sale of that Aircraft has not occurred by 5:00 p.m. New York time on such extended Final Sale Date then this Agreement shall terminate in as far as it relates to that Aircraft, but this Agreement shall continue in full force and effect for the remaining Aircraft.

2.7.4 In the case of a termination under this Article 2.7, none of the parties will have any further obligation or liability to the others in respect of the relevant Aircraft except in respect of any breach of its obligations under any Sale Document prior to such termination, any obligations expressed to survive such termination, and the obligation of Seller to make any payment to the Buyer in accordance with Article 3.2., but this Agreement shall continue in full force and effect for the remaining Aircraft (if any).

ARTICLE 3: SALE PRICE, DEPOSIT AND OTHER PAYMENTS

3.

3.1 Sale Price.

On the Scheduled Sale Date for an Aircraft, provided that Buyer’s conditions precedent in Article 5.1 relating to that Aircraft have been satisfied (or waived by Buyer), Buyer will pay to relevant Seller the Net Sale Price for that Aircraft and, upon receipt thereof, provided that relevant Seller’s conditions precedent relating to that Aircraft have been satisfied (or waived by Seller) that Seller will immediately execute and deliver an electronic copy of the Bill of Sale in respect of that Aircraft to Buyer or the relevant Buyer’s Nominee.

3.2 Deposit.

3.2.1 Buyer has paid the Total Deposit for the account of Owner Participant on behalf of the Sellers, which payment is hereby acknowledged by each Seller.

3.2.2 The Buyer hereby acknowledges that the Total Deposit is the sole unencumbered property of the respective Sellers, is held by the Owner Participant, and is refundable only as provided in this Agreement. The Total Deposit may be commingled with the general funds of Sellers or any affiliate of Sellers and any interest earned on the Total Deposit will be for each Seller’s account. The Total Deposit will serve as security for the performance by Buyer of its obligations under this Agreement and may be applied by Seller upon a breach by Buyer of its obligations under this Agreement.

3.2.3 If a Deposit Return Event occurs with respect to an Aircraft, relevant Seller shall within five (5) Business Days after receipt of a written demand therefor from the Buyer, pay to Buyer an amount equal to the Deposit received by Sellers for that Aircraft.

3.2.4 On Sale of the second Aircraft to be sold, the Total Deposit received by the Sellers shall be taken into account in calculating the Net Sale Price for that Aircraft in accordance with this Agreement.

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3.3 Sellers’ Bank Account.

All payments to be made under this Agreement will be paid by wire transfer of immediately available Dollar funds to each Seller’s bank account at:

  *  

or such other bank account as a Seller may from time to time designate by written notice to Buyer.

When it is stated in this Agreement that an instalment of the Total Deposit or any other payment is due or must be paid or made by Buyer by a specific date, then such payment actually must be received by relevant Seller’s Bank on or before such specific date, even if, in order for such payment to be received by Seller’s Bank by such specific date, Buyer must initiate the wire transfer prior to such specific date.

3.4 Payments.

All payments to be made by Buyer under this Agreement (1) will be made without set off or counterclaim whatsoever and (2) will be made in full without any deduction or withholding in respect of Taxes, duties, withholdings, deductions or fees or otherwise unless the deduction is required by Law, in which event Buyer will:

(a) ensure that the deduction or withholding does not exceed the minimum amount legally required;

(b) forthwith pay to Seller such additional amount so that the net amount received by Seller will equal the full amount which would have been received by Seller had no such deduction or withholding been made;

(c) pay to the relevant taxation authority or other Government Entity within the period for payment permitted by Law the full amount of the deduction or withholding (including, but without prejudice to the generality of the foregoing, the full amount of any deduction or withholding from any additional amount paid pursuant to this Article 3.4); and

(d) furnish to Seller, within the period for payment permitted by the relevant Law, an official receipt of the relevant taxation authority or other Government Entity in respect of all amounts so deducted or withheld or, if such receipts are not customarily issued by such authority or other Government Entity in respect of payment of amounts so deducted or withheld, a certificate of deduction or equivalent evidence of the relevant deduction or withholding in form and substance satisfactory to Seller.

3.5 Lease Payments.

3.5.1 Buyer agrees for the benefit of each Seller Related Person that, to the extent it or any Buyer Party receives any payment or benefit under the Lease to which any Seller Related Person is entitled in accordance with the terms of the Lease Transfer Agreement, it shall ensure that such

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

payment or benefit is held on trust for the relevant Seller Related Person and that such payment or benefit is promptly remitted to relevant Seller.

3.5.2 Sellers agree for the benefit of the Buyer or relevant Buyer Nominee that, to the extent it or any Seller Related Person receives any payment or benefit under the Lease to which Buyer or relevant Buyer Nominee is entitled in accordance with the terms of the Lease Transfer Agreement and which has not otherwise been accounted for pursuant to this Agreement, it shall ensure that such payment or benefit is held on trust for the relevant Buyer and that such payment or benefit is promptly remitted to Buyer.

3.6 Default Interest.

Any amount due or payable by Buyer under this Agreement will, if not paid when due, bear interest at the Default Interest Rate from the date such amount is due until the date of actual payment. Such interest will accrue on a day-to-day basis. All amounts of interest payable under this Article 3.6 will be calculated on the basis of the actual number of days elapsed (from the applicable due date until and including the date of payment in full by Buyer) and a 365 day year.

ARTICLE 4: DISCLAIMER

4.

4.1 Disclaimer.

WITHOUT LIMITING SELLER’S WARRANTY SET FORTH IN ARTICLE 11.1.9, EACH AIRCRAFT AND EACH PART THEREOF IS SOLD IN “AS IS, WHERE IS” CONDITION WITH ALL FAULTS, WITHOUT ANY REPRESENTATION, WARRANTY OR GUARANTEE OF ANY KIND BEING MADE OR GIVEN BY SELLER, ITS SERVANTS OR AGENTS, EXPRESS OR IMPLIED, ARISING BY LAW OR OTHERWISE.

4.1.1. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, SELLER SPECIFICALLY DISCLAIMS, AND EXCLUDES HEREFROM (a) ANY WARRANTY AS TO THE AIRWORTHINESS, VALUE, DESIGN, QUALITY, MANUFACTURE, OPERATION, OR CONDITION OF AN AIRCRAFT; (b) ANY EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY OF MERCHANTABILITY OR FITNESS FOR USE OR FOR A PARTICULAR PURPOSE; (c) ANY EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY OF FREEDOM FROM ANY RIGHTFUL CLAIM BY WAY OF INFRINGEMENT OR THE LIKE; (d) ANY IMPLIED REPRESENTATION OR WARRANTY ARISING FROM COURSE OF PERFORMANCE, COURSE OF DEALING OR USAGE OF TRADE; (e) ANY EXPRESS OR IMPLIED WARRANTY REGARDING THE CONDITION OF AN AIRCRAFT; AND (f) ANY OBLIGATION OR LIABILITY OF SELLER ARISING IN CONTRACT OR IN TORT (INCLUDING STRICT LIABILITY OR SUCH AS MAY ARISE BY REASON OF SELLER’S NEGLIGENCE) ACTUAL OR IMPUTED, OR IN STRICT LIABILITY, INCLUDING ANY OBLIGATION OR LIABILITY FOR LOSS OF USE, REVENUE OR PROFIT WITH RESPECT TO AN AIRCRAFT OR FOR ANY LIABILITY OF BUYER TO ANY THIRD PARTY OR ANY OTHER DIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGE WHATSOEVER.

4.1.2 DELIVERY BY BUYER TO SELLER OF THE ACCEPTANCE CERTIFICATE WILL BE CONCLUSIVE PROOF AS BETWEEN SELLER AND BUYER THAT BUYER’S TECHNICAL EXPERTS HAVE EXAMINED AND INVESTIGATED TO THEIR SATISFACTION AN AIRCRAFT AND EACH PART THEREOF AND THAT THEY ACCEPT SUCH AIRCRAFT AND EACH PART THEREOF AS AIRWORTHY AND IN GOOD WORKING ORDER AND REPAIR, WITHOUT DEFECT (WHETHER OR NOT DISCOVERABLE ON THE SALE DATE) AND IN EVERY WAY SATISFACTORY TO BUYER.

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4.1.3. BUYER HAS MADE ITS OWN INDEPENDENT INVESTIGATION OF LESSEE AND ITS OPERATIONS AND FINANCIAL CONDITION AND OF THE PROVISIONS OF THE LEASES AND NO SELLER INDEMNITEE WILL HAVE ANY LIABILITY (IN CONTRACT, TORT OR OTHERWISE) WITH RESPECT TO SUCH MATTERS.

4.2 Deficiencies.

Buyer agrees that from and after the time of Sale of an Aircraft no Seller Related Person will be liable for any Loss caused directly or indirectly by that Aircraft, by any inadequacy of that Aircraft for any purpose or any deficiency or defect therein, by the use or performance of that Aircraft, by any maintenance or repairs to that Aircraft (except as to a Seller Related Person’s acts or omissions as a manufacturer or repairer of the Aircraft or Aircraft components, which acts or omissions occur following the Sale Date for such Aircraft, to the extent that such acts or omissions cause such Loss), by any interruption or loss of service or use of that Aircraft or by any loss of business or other consequential damage or any other damage whatsoever caused directly or indirectly by that Aircraft.

ARTICLE 5: BILL OF SALE AND OTHER DOCUMENTARY REQUIREMENTS

5.

5.1 Conditions to Buyer’s Obligations.

The following are conditions precedent to Buyer’s obligation to purchase or cause the relevant Buyer’s Nominee to purchase the Aircraft from Seller (which may be waived in writing in full or in part by Buyer at its sole discretion):

5.1.1 The related Lease Transfer Agreement and the effective time notice thereunder (howsoever described pursuant thereto) will have been executed and delivered by all parties thereto (other than the relevant Buyer Related Persons) and all of the conditions precedent set forth in Article 5.1 of the Lease Transfer Agreement will have been satisfied (or waived by Buyer in its sole discretion);

5.1.2 Seller will have delivered to Buyer evidence reasonably satisfactory to Buyer that each relevant Seller Related Person has all necessary corporate or other authorization to enter into and perform its obligations under the Sale Documents;

5.1.3 The relevant Aircraft is at the Sale Location;

5.1.4 The relevant Aircraft has not suffered a Total Loss or Material Damage which has not otherwise been or will be remedied in accordance with Article 2.6;

5.1.5 The Seller Guarantee will have been duly signed and delivered to the Buyer;

5.1.6 No relevant Seller Related Person is in material breach of any of its obligations under the Sale Documents at such time;

5.1.7 Each of the representations and warranties by each relevant Seller Related Person and the Lessee under the Sale Documents that relate to the relevant Aircraft are true and correct in all material respects at such time;

5.1.8 Buyer will have had sight of the signed but undated Bill of Sale and in respect of the relevant Aircraft, to be dated and released by the Seller upon Sale in accordance with Article 3.1.

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Relevant Seller shall use reasonable efforts to provide all conditions precedent under the Sale Documents which are within its or any Seller Related Persons’ control as soon as practicable after the date hereof.

5.2 Conditions to Seller’s Obligations.

The following are conditions precedent to Seller’s obligation to sell the Aircraft to Buyer (which may be waived in writing in full or in part by Seller at its sole discretion):

5.2.1 The related Lease Transfer Agreement and the effective time notice thereunder (howsoever described pursuant thereto) will have been executed and delivered by all parties thereto (other than the relevant Seller Related Persons) and all of the conditions precedent set forth in Article 5.3 of the Lease Transfer Agreement will have been satisfied (or waived by Seller in its sole discretion);

5.2.2 Buyer will have delivered to Seller evidence reasonably satisfactory to Seller that each relevant Buyer Related Person has all necessary corporate or other authorization to enter into and perform its obligations under the Sale Documents;

5.2.3 The relevant Aircraft is at the Sale Location;

5.2.4 The relevant Aircraft has not suffered a Total Loss or Material Damage which has not otherwise been or will be remedied in accordance with Article 2.6;

5.2.5 No relevant Buyer Related Person is in material breach of any of its obligations under the Sale Documents at such time;

5.2.6 Each of the representations and warranties by each relevant Buyer Related Person and the Lessee under the Sale Documents that relate to the relevant Aircraft are true and correct in all material respects at such time;

5.2.7 Relevant Seller will have received a certificate of insurance and broker’s letter undertaking evidencing compliance with Article 9;

5.2.8 Relevant Seller will have had sight of the signed undated Acceptance Certificate in respect of the relevant Aircraft, to be dated and released by Buyer and the relevant Buyer’s Nominee upon Sale in accordance with Article 3.1.

5.2.9 Relevant Seller will have received from Buyer the Net Purchase Price for the relevant Aircraft in accordance with Article 3.1.

5.3 Post-Sale Actions.

5.3.1 Within five (5) Business Days of the Sale of an Aircraft, Buyer shall have received the original Bill of Sale for such Aircraft.

5.3.2 Within ten (10) Business Days of the Sale of an Aircraft, Buyer shall have received complete, original counterparts (or, in the event the relevant Seller, Existing Lessor, or its financiers are not in possession of such original counterparts, certified true and correct copies) of the executed Lease Documents for such Aircraft.

5.3.3 Relevant Seller will within five (5) Business Days after the Sale of an Aircraft (i) remove or cause the discharge of, any international interests recorded, as of the time of Sale (for avoidance of doubt excluding any historic contracts of sale), with the International Registry,

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except international interests constituting or arising as a result of this Agreement, the Lease or the Lease Transfer Agreement, (ii) consent to the interests constituted by the Bill of Sale on the International Registry.

5.3.4 Any Letters of Credit which shall have been received by the relevant Existing Lessor in accordance with the terms of the lease in lieu of any cash security deposit and/or maintenance and any other supplemental rent (as defined in the related Lease) in accordance with the terms of the relevant lease shall be transferred to Buyer or the relevant Buyer Nominee or New Lessor in connection with the Sale.

ARTICLE 6: SELLER ASSIGNMENT OF RIGHTS AND WARRANTIES

6.

6.1 Assignable Warranties.

Effective on the Sale Date, any assignable warranties and indemnities given to relevant Seller by Manufacturer and the Engine manufacturer are hereby assigned to Buyer. Effective on the Sale Date, all other assignable vendor warranties with respect to the Aircraft are hereby assigned by relevant Seller to Buyer.

6.2 Non-Assignable Warranties.

To the extent that any warranty or indemnity given to Seller by Manufacturer or any other Person with respect to the Aircraft cannot be assigned, Buyer will be entitled to take such action to enforce such warranty or indemnity in the name of Seller against Manufacturer or such other Person as Buyer reasonably sees fit, but subject to Buyer’s first ensuring that Seller is indemnified and secured to Seller’s satisfaction against all losses, damages, costs, expenses and liabilities thereby incurred or reasonably expected to be incurred.

ARTICLE 7: EXPENSES AND TAXES

7.

7.1 Costs and Expenses of Sale.

7.1.1. Seller will be responsible for its own costs, fees and expenses and the costs, fees and expenses of each other Seller Related Person and Buyer will be responsible for its own costs, fees and expenses and the costs, fees and expenses of each other Buyer Related Person relating, in each case, to the negotiation, documentation and closing of the Sale Documents and the transactions contemplated by the Sale Documents, including their respective due diligence.

7.1.2 Sellers will be responsible for all costs, fees and expenses associated with releasing and discharging any Warranted Security Interests in accordance with Article 5.3.3 and Buyer will be responsible for all costs, fees and expenses associated with any new financing or Security Interests to be put in place by Buyer or any Buyer Related Person with respect to an Aircraft.

7.1.3 Buyer will be responsible for all de-registration, registration or filing costs incurred by the Lessee and all costs incurred by the Lessee with respect to the Lease Transfer Agreement and shall communicate directly with Lessee regarding the payment of same.

7.1.4 In case of a dispute arising under this Agreement, the prevailing party shall be entitled to reimbursement of reasonable costs and attorney fees.

7.2. Taxes.

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The Deposits, Base Purchase Price and Net Purchase Price are in each case stated exclusive of all Taxes. Except as set forth in Article 7.3, Buyer agrees to pay promptly when due, and to indemnify and hold harmless each Tax Indemnitee on a full indemnity basis, on demand, from all license and registration fees and all taxes, fees, levies, imposts, duties, charges, deductions or withholdings of any nature (including any value added, franchise, transfer, sales, gross receipts, income, use, business, excise, customs, turnover, personal property, stamp or other tax) together with any assessments, penalties, fines, additions to tax or interest thereon, however or wherever imposed (and whether imposed upon Buyer, Buyer’s Nominee, any other Buyer Related Person or any Tax Indemnitee or in respect of all or part of an Aircraft, the related Airframe, its Engines, any Part thereof or otherwise), by any Government Entity or taxing authority in connection with this Agreement, the other Sale Documents, the sale, purchase, export, import, disposition, delivery, transfer of title and/or deregistration of the Aircraft in connection with or following its Sale or any of the other transactions contemplated by the Sale Documents (collectively, “Taxes”).

7.3. Exceptions to Tax Indemnity.

The indemnity in Article 7.3 will not extend to Taxes to the extent such Taxes:

(a) are imposed on the overall net income or profits of a Tax Indemnitee in the jurisdiction of its organisation; or

(b) are attributable to a Tax Indemnitee’s gross negligence or wilful misconduct.

7.4. After Tax Basis.

The amount which Buyer is required to pay with respect to any Taxes indemnified against under Article 7.2 is an amount sufficient to restore the applicable Tax Indemnitee on an after tax basis to the same position such Tax Indemnitee would have been in had such Taxes not been incurred.

7.5. Timing of Payment.

Any amount payable to a Tax Indemnitee pursuant to this Article 7 will be paid within 10 days after receipt of a written demand therefor from such Tax Indemnitee accompanied by a written statement describing in reasonable detail the basis for such indemnity and the computation of the amount so payable provided, however, that such amount need not be paid by Buyer prior to the earlier of (a) the date any Tax is payable to the appropriate Government Entity or taxing authority or (b) in the case of amounts which are being contested by Buyer in good faith or by such Tax Indemnitee pursuant to Article 7.7, the date such contest is finally resolved.

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7.6. Contests.

If a claim is made against a Tax Indemnitee for Taxes with respect to which Buyer is liable for a payment or indemnity under this Agreement, such Tax Indemnitee will give Buyer notice in writing of such claim within 60 days; provided, however, that such Tax Indemnitee’s failure to give notice will not relieve Buyer of its obligations hereunder unless such failure materially impairs or precludes Buyer’s ability to contest the claim. So long as (a) a contest of such Taxes does not involve any material risk of the sale, forfeiture or loss of the Aircraft or any interest therein, (b) if such Tax Indemnitee so requests, Buyer has provided such Tax Indemnitee with an opinion of independent and reputable tax counsel that a reasonable basis exists for contesting such claim and (c) adequate reserves have been made for such Taxes or, if required, an adequate bond has been posted, then such Tax Indemnitee at Buyer’s written request will in good faith, with due diligence and at Buyer’s expense, contest (or permit Buyer to contest in the name of Buyer or such Tax Indemnitee) the validity, applicability or amount of such Taxes.

7.7. Refunds.

Upon receipt by a Tax Indemnitee of a refund of all or any part of any Taxes which Buyer has paid, such Tax Indemnitee will pay to Buyer the net amount of such Taxes refunded.

7.8. Cooperation in Filing Tax Returns.

Buyer and each Tax Indemnitee will cooperate with one another in providing information which may be reasonably required to fulfil each party’s tax filing requirements and any audit information request arising from such filing.

7.9. Tax Documents.

If requested by a Tax Indemnitee, Buyer will provide to such Tax Indemnitee any documents that such Tax Indemnitee reasonably deems necessary or desirable in connection with the tax treatment of this Agreement or the transaction contemplated herein (including any exemption or reduction of any Taxes arising a result of this Agreement or the transactions contemplated by this Agreement); provided however, that Buyer will not be required to provide such Tax Indemnitee with a copy of Buyer’s income tax returns.

ARTICLE 8: INDEMNITIES

8.

8.1 Sellers’ General Indemnity.

Except as set forth in Article 8.3, relevant Seller agrees to indemnify and hold harmless each Buyer Indemnitee from any Loss imposed on, incurred by or asserted against any Buyer Indemnitee with respect to:

(a) any Aircraft Activity prior to Sale, but only to the extent the claim relates to Aircraft Activity occurring prior to Sale;

(c) any claim to the extent arising prior to Sale that any design, article or material in the Aircraft or that any Aircraft Activity prior to Sale constitutes an infringement of a patent, trademark, copyright infringement, design or other proprietary right; or

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(d) any non-compliance by Seller with any term of this Agreement or the falsity or inaccuracy of any representation or warranty of Seller set forth herein.

The foregoing indemnity by Seller is intended to include and cover any Loss to which a Buyer Indemnitee may be subject (in contract, tort, strict liability or under any other theory) regardless of the negligence, whether active or passive or of any other type, of such Buyer Indemnitee, so long as such Loss does not fall within any of the exceptions listed in Article 8.3.

8.2 Buyer’s General Indemnity.

Except as set forth in Article 8.3, Buyer agrees to indemnify and hold harmless each Seller Indemnitee from any Loss imposed on, incurred by or asserted against any Seller Indemnitee with respect to:

(a) any Aircraft Activity occurring after the Sale;

(b) any claim, whenever made or arising, that any design, article or material in an Aircraft that any design, article or material in an Aircraft or any Aircraft Activity in respect of that Aircraft on or after the Sale of that Aircraft constitutes an infringement of a patent, trademark, copyright, design or other proprietary right.

(c) any non-compliance by Buyer with any term of this Agreement or the falsity or inaccuracy of any representation or warranty of Buyer set forth herein; or

(d) any failure of payment by Buyer of any sum to be paid by Buyer when due under this Agreement.

The foregoing indemnity by Buyer is intended to include and cover any Loss to which a Seller Indemnitee may be subject (in contract, tort, strict liability or under any other theory) regardless of the negligence, whether active or passive or of any other type, of such Seller Indemnitee, so long as such Loss does not fall within any of the exceptions listed in Article 8.3.

8.3 Exceptions to General Indemnities.

The indemnities in Articles 8.1 and 8.2:

(a) will not extend to a Loss which Buyer and Seller mutually agree in writing or, absent mutual agreement, are judicially determined to have resulted from the wilful misconduct or gross negligence of the claimant;

(b) will not extend to a Loss which constitutes Taxes for which Buyer is liable under Article 7.2;

(c) will not extend to a Loss which relates to (i) a Seller Related Person’s acts or omissions as a manufacturer or repairer of the Aircraft or Aircraft components, which acts or omissions occur following the Sale Date for such Aircraft, to the extent that such acts or omissions cause such Loss or (ii) Security Interests (Seller’s liability for which, to the extent thereof, is set forth in Article 11.1.4); and

(d) are given subject and without prejudice to the disclaimers, limitations and provisions of Article 4.

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8.4 After Tax Basis.

The amount which Buyer or relevant Seller, as applicable, in its capacity as an indemnitor under this Article 8 (in such capacity, each an “Indemnitor”) will be required to pay with respect to any Loss indemnified against under Articles 8.1 or 8.2 will be an amount sufficient to restore the Seller Indemnitee or the Buyer Indemnitee, as the case may be, on an after tax basis to the same position it would have been in had such Loss not been incurred.

8.5 Timing of Payment.

It is the intent of the parties that each Seller Indemnitee and Buyer Indemnitee will have the right to indemnification for Loss hereunder as soon as a claim is made and as soon as any Loss is incurred, whether or not such claim is meritorious and whether or not liability is established (but subject to Article 8.9). Buyer or Seller, as the case may be, will pay the relevant Seller Indemnitee or Buyer Indemnitee for Loss pursuant to this Article 8 within 30 days after receipt of a written demand therefor from such Seller Indemnitee or Buyer Indemnitee, as the case may be, accompanied by a written statement describing in reasonable detail the basis for such indemnity.

8.6 Subrogation.

Upon the payment in full of any indemnity pursuant to this Article 8 by an Indemnitor, such Indemnitor will be subrogated to any right of the relevant Seller Indemnitee or Buyer Indemnitee (as the case may be) in respect of the matter against which such indemnity has been made.

8.7 Notice.

Each Seller Indemnitee and each Buyer Indemnitee will give prompt written notice to the relevant Indemnitor of any liability of which such party has knowledge for which an Indemnitor is, or may be, liable under this Article 8 provided, however, that failure to give such notice will not terminate or affect any of the rights of the Seller Indemnitee or the Buyer Indemnitee under this Article 8 except to the extent the Indemnitor is materially prejudiced by the failure to provide such notice.

8.8 Refunds.

If any Seller Indemnitee or any Buyer Indemnitee obtains a recovery of all or any part of any amount which an Indemnitor has paid to it, the relevant Seller Indemnitee or Buyer Indemnitee, as the case may be, will pay to such Indemnitor the net amount recovered by it.

8.9 Defense of Claims.

An Indemnitor and its insurers will have the right (in each such case at such Indemnitor’s sole expense) to investigate or, provided that such Indemnitor or its insurers have not reserved the right to dispute liability with respect to any insurance policies pursuant to which coverage is sought, defend or compromise any claim covered by insurance for which indemnification is sought pursuant to this Article 8 and each Seller Indemnitee and Buyer Indemnitee will reasonably cooperate with such Indemnitor or its insurers with respect thereto. If the Indemnitor or its insurers are retaining attorneys to handle such claim, such counsel must be reasonably satisfactory to the applicable Seller Indemnitees or, as the case may be, the Buyer Indemnitees. If not, the Seller Indemnitees or the Buyer Indemnitees as the case may be will have the right to retain counsel of their choice at the relevant Indemnitor’s expense.

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8.10 Other Indemnification.

Each Indemnitor will be obligated to indemnify and hold harmless the relevant Seller Indemnitee or Buyer Indemnitee, as applicable, in accordance with the terms of this Article 8 and any Seller Indemnitee or Buyer Indemnitee may invoke an Indemnitor’s obligations hereunder even if such Seller Indemnitee or Buyer Indemnitee, as the case may be, also has received an agreement to indemnify and hold harmless with respect to the same matters by another Person.

ARTICLE 9: INSURANCE

9.

9.1 Liability Insurance.

Buyer shall, or shall cause the Lessee or any subsequent owner, lessee or other operator of an Aircraft, to include each of the Seller Indemnitees for that Aircraft (for their respective rights and interests) as additional insureds on all aviation and airline legal liability insurances (including products liability) in respect of that Aircraft for a period of two (2) years from the Sale Date of that Aircraft or, if earlier, until the next major overhaul of that Aircraft.

ARTICLE 10: REPRESENTATIONS AND WARRANTIES OF BUYER

10.

10.1 Representations and Warranties.

Buyer represents and warrants the following to Seller as of the date hereof and as of the Sale Date:

10.1.1   Corporate Status. Buyer, each Buyer’s Nominee and each New Lessor is a corporation duly organized, validly existing and in good standing under the Laws of its jurisdiction of incorporation and each has the power and authority to carry on its business as presently conducted and to perform its obligations under the Sale Documents to which it is a party.

10.1.2   Governmental Approvals. No authorization, approval, consent, license or order of, or registration with, or the giving of notice to the Aviation Authority or any other Government Entity is required for the valid authorization, execution, delivery and performance by Buyer, each Buyer’s Nominee and each New Lessor of the Sale Documents to which it is a party, except as will have been duly effected as of the Sale Date.

10.1.3   Binding. Buyer, each Buyer’s Nominee and each New Lessor has been duly authorized to enter into the Sale Documents to which it is a party and each Sale Document has been duly executed and delivered by each Buyer, each Buyer’s Nominee and each New Lessor, to the extent that such is a party thereto, and represents its valid, binding and enforceable obligations except as enforceability may be limited by bankruptcy, insolvency, reorganisation or other Laws of general application affecting the enforcement of creditors’ rights.

10.1.4   Licenses. Buyer, each Buyer’s Nominee and each New Lessor holds all licenses, certificates and permits from applicable Government Entities in its jurisdiction of organization for the performance of its obligations under the Sale Documents.

10.1.5   No Suits. There are no suits, arbitrations or other proceedings pending or threatened against Buyer, any Buyer’s Nominee or any New Lessor before any court or administrative agency against or affecting Buyer which, if adversely determined, would have a material adverse effect on the business, assets or condition (financial or otherwise) of Buyer or its ability to perform under the Sale Documents to which it is a party.

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10.1.6 No Withholding. Buyer, any Buyer’s Nominee or any New Lessor will not be required to deduct any withholding or other Tax from any payment it may make under the Sale Documents to which it is a party.

10.1.7 No Restrictions on Payments. Under the Laws of its jurisdiction of organization, there are no present restrictions on Buyer, any Buyer’s Nominee or any New Lessor making the payments required by the Sale Documents to which it is a party.

10.1.8 General Obligations. The obligations of Buyer, each Buyer’s Nominee and each New Lessor under the Sale Documents to which it is a party are its direct, general and unconditional obligations and rank or will rank at least pari passu with all other present and future unsecured and unsubordinated obligations (including contingent obligations) of Buyer, with the exception of such obligations as are mandatorily preferred by law and not by reason of any encumbrance.

10.1.9 No Sovereign Immunity. Buyer, each Buyer’s Nominee and each New Lessor, under the Laws of its jurisdiction of incorporation or of any other jurisdiction affecting it, is subject to private commercial law and suit. None of Buyer nor any Buyer’s Nominee nor any New Lessor nor its properties or assets is entitled to sovereign immunity under any such Laws. Buyer’s, each Buyer’s Nominee’s and each New Lessor’s performance of its obligations hereunder constitute commercial acts done for commercial purposes.

10.1.10 No Breach. The execution and delivery of the Sale Documents to which Buyer, any Buyer’s Nominee or any New Lessor is a party, the consummation by it of the transactions contemplated herein and therein and compliance by it with the terms and provisions hereof and thereof do not and will not contravene any Law applicable to it, or result in any breach by it of or constitute any default by it under any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, bank loan or credit agreement, corporate charter, by law or other agreement or instrument to which it is a party or by which its or its properties or assets may be bound or affected.

10.1.11 Lease Transfer Conditions. Each New Lessor shall (i) comply in full with all lease transfer requirements applicable to it under the relevant Lease, including any transferee net worth requirement unless waived by the Lessee in its sole discretion and (ii) Buyer and relevant Buyer Nominee acknowledge and agree that it shall not be a condition precedent to the closing of the sale of an Aircraft under this Agreement or the Lease Transfer Agreement that Buyer or relevant Buyer Nominee agree on a return condition redelivery buyout in respect of an Aircraft, and that neither this Agreement nor the Lease Transfer Agreement will contain any amendments to the relevant Lease in respect of the Aircraft return conditions.

10.1.12 Compliance with Laws. No Buyer Indemnitee (i) is (nor is owned or controlled by) a listed person under any United States, European Union or United Nations export control or economic sanction and (ii) will at any time use, operate, transfer, sell or otherwise make available the Aircraft in violation of any applicable United States, European Union or United Nations export control or economic sanction. Buyer acknowledges that in respect of its purchase, use, exportation or transfer of the Aircraft, compliance with the applicable Laws of all applicable jurisdictions after the Sale Date is the sole responsibility of Buyer.

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10.1.13 Due Diligence. Buyer has conducted its own due diligence with respect to both Aircraft, the Lessee and the Lease Documents and the Lease Documents were found to be in every way acceptable to Buyer and the relevant Buyer’s Nominee.

ARTICLE 11: REPRESENTATIONS AND WARRANTIES OF SELLER

11.

11.1 Representations and Warranties.

Each Seller represents and warrants the following to Buyer as of the date hereof and as of the Sale Date (with respect to the related Aircraft and related Lease only):

11.1.1 Corporate Status. Each Seller and Existing Lessor is a company duly organized or incorporated (as applicable), validly existing under the Laws of its jurisdiction of incorporation and each has the power and authority to carry on its business as presently conducted and to perform its obligations under the Sale Documents to which it is a party.

11.1.2 Governmental Approvals. No authorisation, approval, consent, license or order of, or registration with, or the giving of notice to any Government Entity under the Laws of its jurisdiction of incorporation is required for the valid authorisation, execution, delivery and performance by Seller of the Sale Documents to which it is a party, except as will have been duly effected as of the relevant Sale Date.

11.1.3 Licenses. Each Seller and Existing Lessor holds all licenses, certificates and permits from applicable Government Entities in its jurisdiction of organization for the performance of its obligations under the Sale Documents.

11.1.4 No Suits. There are no suits, arbitrations or other proceedings pending or threatened against Each Seller and Existing Lessor before any court or administrative agency against or affecting Seller which, if adversely determined, would have a material adverse effect on the business, assets or condition (financial or otherwise) of Seller or its ability to perform under the Sale Documents to which it is a party.

11.1.5 No Sovereign Immunity. Each Seller and Existing Lessor, under the Laws of its jurisdiction of incorporation or of any other jurisdiction affecting it, is subject to private commercial law and suit. Neither any Seller nor Existing Lessor nor their respective properties or assets is entitled to sovereign immunity under any such Laws. Each Seller and Existing Lessor’s performance of its obligations hereunder constitute commercial acts done for commercial purposes.

11.1.6 Compliance with Laws. No Seller Indemnitee is a listed person under any United States, European Union or United Nations export control or economic sanction.

11.1.7 Binding. Each Seller and Existing Lessor has been duly authorised to enter into the Sale Documents to which it is a party and each Sale Document has been duly executed and delivered by Seller, to the extent that it is a party thereto, and represents its valid, enforceable and binding obligations except as enforceability may be limited by bankruptcy, insolvency, reorganisation or other Laws of general application affecting the enforcement of creditors’ rights.

11.1.8 No Breach. The execution and delivery of the Sale Documents to which Seller or Existing Lessor is a party, the consummation by Seller or Existing Lessor of the transactions contemplated herein and compliance by Seller or Existing Lessor with

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the terms and provisions hereof do not and will not contravene any Law applicable to Seller or Existing Lessor, or result in any breach of or constitute any default under or result in the creation of any Security Interest upon any property of Seller pursuant to any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, bank loan or credit agreement, corporate charter, by law or other agreement or instrument to which Seller is a party or by which Seller or its properties or assets may be bound or affected.

11.1.9 Title to Aircraft. As of the time of Sale of an Aircraft, Seller will have good and valid title to the Aircraft to transfer to Buyer, free and clear of all Warranted Security Interests but subject to any other Security Interests.

ARTICLE 12: NOTICES

12.

12.1 Manner of Sending Notices.

Any notice, request or information required or permissible under this Agreement will be in writing and in English. Notices will be delivered in person or sent by fax, e-mail or letter (mailed airmail, certified and return receipt requested) or by express courier addressed to the parties as set forth in Article 12.2. In the case of a fax, notice will be deemed received upon actual receipt (the date of actual receipt will be deemed to be the date set forth on the confirmation of receipt produced by the sender’s fax machine immediately after the fax is sent). In the case of an e-mail, notice will be deemed received by the recipient at the time the sender sends such email, unless the sender receives an automated e-mail error message. In the case of a mailed letter, notice will be deemed received on the 10th day after mailing. In the case of a notice sent by express courier, notice will be deemed received on the date of delivery set forth in the records of the Person which accomplished the delivery. If any notice is sent by more than one of the above listed methods, notice will be deemed received on the earliest possible date in accordance with the above provisions.

12.2 Notice Information.

All notices connected with this Agreement will be sent:

If to Seller 1:

*  

If to Seller 2:

*  

22

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

in each case with a copy to:

                                           *  

If to Buyer:         CONTRAIL AVIATION SUPPORT, LLC

        435 Investment Court

        Verona, Wisconsin 53593

        Attention:             Joseph G. Kuhn

        Facsimile:            (608) 848-8101

        E-mail:                 Joe@contrail.com

or to such other places and numbers as either party directs in writing to the other party.

ARTICLE 13: GOVERNING LAW AND JURISDICTION

13.

13.1 Governing Law and Jurisdiction.

This Agreement (and any non-contractual obligations associated with it) will be governed by, and construed in accordance with, the Governing Law. The Governing Jurisdiction will have exclusive jurisdiction to settle any dispute arising out of or in connection with this Agreement.

13.2 Service of Process.

Without prejudice to any other mode of service:

13.2.1 Buyer hereby consents to the service of process relating to any proceedings before the Governing Jurisdiction in connection with this Agreement by prepaid mailing by certified or registered mail of a copy of the process to Buyer at the address set forth in Article 12 or by any other method of service allowed by applicable Law;

13.2.2 Seller hereby consents to the service of process relating to any proceedings before the Governing Jurisdiction in connection with this Agreement by prepaid mailing certified or registered mail of a copy of the process to Seller at the address set forth in Article 12 or by any other method of service allowed by applicable Law;

13.3 Prevailing Party in Dispute.

If any legal action or other proceeding is brought in connection with or arises out of any provisions in this Agreement, the prevailing party will be entitled to recover reasonable attorneys’ fees and other costs incurred in such action or proceedings. The prevailing party will also, to the extent permissible by Law, be entitled to receive pre and post judgment interest at the Default Interest Rate.

23

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

13.4 Conflict of Laws.

Any warranty, representation or other provision herein made by either party with respect to the Aircraft or title therein or Security Interests with respect thereto is made pursuant to the Governing Law and is subject to any Law in or of the Sale Location.

13.5 Waiver.

Each party irrevocably and unconditionally waives any right it may have, in any forum, to jury trial in respect of any dispute or proceedings in connection with this Agreement. The aforesaid may be filed as a written consent to trial by the court.

ARTICLE 14: MISCELLANEOUS

14.

14.1 No Brokers.

The Aircraft is being sold and purchased without a broker involved in the negotiations between Buyer and Seller. If any Person asserts any claim against any Seller Related Person or Buyer Related Person for fees or commissions by reason of any alleged agreement to act as a broker for either Seller Related Person or Buyer Related Person in this transaction, the party for which said person claims to have acted will on demand defend, indemnify and hold harmless the other party from and against all claims, demands, liabilities, damages, losses, judgments and expenses of every kind (including legal fees, costs and related expenses) arising out of such claim.

14.2 Confidentiality.

This Agreement and all non-public information obtained by either party about the other are confidential and are between Sellers and Buyer only and will not be disclosed by a party to third parties (other than to such party’s owners, lenders, auditors, legal or technical advisors (provided that such third parties are bound to the disclosing party by either a duty of confidentiality or written confidentiality agreement) or as required by applicable Law) without the prior written consent of the other party. If disclosure is required as a result of applicable Law, Buyer and Sellers will cooperate with one another to obtain confidential treatment as to the commercial terms and other material provisions of this Agreement.

14.3 Rights of Parties.

Subject and without prejudice to Article 4.3, (a) the rights of the parties hereunder are cumulative, not exclusive, may be exercised as often as each party considers appropriate and are in addition to its rights under general Law, (b) the rights of one party against the other party are not capable of being waived or amended except by an express waiver or amendment in writing and (c) any failure to exercise or any delay in exercising any of such rights will not operate as a waiver or amendment of that or any other such right, any defective or partial exercise of any such rights will not preclude any other or further exercise of that or any other such right and no act or course of conduct or negotiation on a party’s part or on its behalf will in any way preclude such party from exercising any such right or constitute a suspension or any amendment of any such right.

14.4 Further Assurances.

Each party agrees from time to time to do and perform such other and further acts and execute and deliver any and all such other instruments as may be required by Law, reasonably requested by the auditors of the other party or requested by the other party to establish,

24

maintain or protect the rights and remedies of the requesting party or to carry out and effect the intent and purpose of this Agreement.

14.5 Use of Word “including”.

The term “including” is used herein without limitation and by way of example only.

14.6 Headings.

All article and paragraph headings and captions are purely for convenience and will not affect the interpretation of this Agreement. Any reference to a specific article, paragraph or section will be interpreted as a reference to such article, paragraph or section of this Agreement.

14.7 Invalidity of any Provision.

If any of the provisions of this Agreement become invalid, illegal or unenforceable in any respect under any Law, the validity, legality and enforceability of the remaining provisions will not in any way be affected or impaired.

14.8 Time is of the Essence.

Time is of the essence in the performance of all obligations of the parties under this Agreement and, consequently, all time limitations set forth in the provisions of this Agreement will be strictly observed.

14.9 No Buyer Security Interest.

Prior to Sale, Buyer will not create any Security Interest (including any international interest or any prospective international interest) in or over any of the Aircraft.

14.10 Amendments in Writing.

The provisions of this Agreement may only be amended or modified by a writing executed by Sellers and Buyer.

14.11 Counterparts; PDF Signatures.

This Agreement may be executed in any number of identical counterparts, each of which will be deemed to be an original, and all of which together will be deemed to be one and the same instrument when each party has signed and delivered one such counterpart to the other party. PDF copy signatures shall be treated as original signatures for all purposes.

14.12 Assignment.

Buyer and Sellers may not assign or transfer any of its/their rights, title, interests, obligations or duties pursuant to this Agreement except with the prior written consent of the other party.

14.13 Delivery of Documents by E-mail (PDF) or Fax.

Delivery of an executed counterpart of this Agreement or any related documents by email attachment (PDF) or by fax will be deemed as effective as delivery of an originally executed counterpart. Any party delivering an executed counterpart of this Agreement or any related documents by email attachment (PDF) or by fax will also deliver an originally executed counterpart, but the failure of any party to deliver an originally executed counterpart of this

25

Agreement or any related documents will not affect the validity or effectiveness of this Agreement or the related document(s).

14.14 Third Parties.

Any Buyer Indemnitee and/or any Seller Indemnitee may enforce the provisions of Article 8. Except as set forth in the foregoing sentence, no term of this Agreement will be enforceable by any Person who is not a party to this Agreement. Notwithstanding any term of this Agreement, the consent of any Person who is not a party to this Agreement is not required in order to rescind or vary this Agreement at any time.

14.15 Entire Agreement.

This Agreement constitutes the entire agreement between the parties in relation to the sale of the Aircraft by Sellers to Buyer and relevant Buyer Nominee and the purchase of the Aircraft by Buyer and the relevant Buyer Nominee from Sellers and supersedes all previous proposals, agreements and other written and oral communications in relation hereto. The parties acknowledge that there have been no representations, warranties, promises, guarantees or agreements, express or implied, except as set forth herein.

IN WITNESS WHEREOF, Sellers and Buyer executed this Agreement as of the date shown at the beginning of this Agreement.

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SIGNATURES

Buyer:

CONTRAIL AVIATION SUPPORT, LLC

/s/ Joseph G. Kuhn

By: Joseph G. Kuhn

Its: CEO

35

	Sellers:
*
	By:
	Its:
*
	By:
	Its:

36

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

EXHIBIT A

AIRCRAFT DESCRIPTION

Aircraft	Airframe Model	Manufacturer’s Serial Number	Engine Model	Engine Serial Number	Lessee	State of Registration
1	Airbus A319-100	*	IAE, V2524-A5	* * and *	* * * *	*
2	Airbus A3I9-IOO	*	IAE, V2524-A5	* * and *	* * * *	*

27

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

EXHIBIT B

THE SELLERS, EXISTING LESSORS AND OTHER SELLER RELATED PERSONS

Aircraft		Seller	Existing Lessor	Other Seller Related Persons
1	*
2

28

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

EXHIBIT C

THE BUYER’S NOMINEES, NEW LESSORS AND OTHER BUYER RELATED PERSONS

Aircraft	Buyer’s Nominee	New Lessor	Other Buyer Related Persons
1	Contrail Aviation Leasing, LLC	Contrail Aviation Leasing, LLC	Contrail Aviation Leasing, LLC; Old National Bank, NA
2	Contrail Aviation Leasing, LLC	Contrail Aviation Leasing, LLC	Contrail Aviation Leasing, LLC; Old National Bank, NA

29

EXHIBIT D

LEASE DOCUMENTS

AIRCRAFT 1:

1. Aircraft Lease Agreement dated as of 26 October 2001 by and between * * * and * * .

2. Side Letter Number One to Aircraft Lease Agreement dated 26 October 2001 by and between * * and * * .

3. Estoppel and Acceptance Certificate dated 25 June 2002.

4. Amendment No.1 to Aircraft Lease Agreement dated 25 June 2002 by and between * * and * * .

5. Global Side Letter to Aircraft Lease Agreements dated 30 January 2004 (only in respect of Aircraft 1) by and between * * * and * * .

6. Global Side Letter #2 to Aircraft Lease Agreements dated 4 November 2011 (only in respect of Aircraft 1) by and between * and * * * .

7. Assignment, Assumption and Amendment Agreement dated 4 November 2011 by and between * * , * * * * * * * * * as trustee for Aircraft 32A- * * ) * and * *

8. Confirmation of Effective Time dated 30 May 2012 to * * * from * * and * * * * * ; * * * * as trustee for Aircraft 32A- * * * .

9. Global Amendment #01 to Aircraft Lease Agreements dated 29 June 2016 (only in respect of Aircraft 1) by and between * * * * * * * * * * as trustee for Aircraft 32A- * * and * * * .

30

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

AIRCRAFT 2:

1. Aircraft Lease Agreement dated as of 26 October 2001 by and between * * * and * * .

2. Side Letter Number One to Aircraft Lease Agreement dated 26 October 2001 by and between * * * * and * * .

3. Estoppel and Acceptance Certificate dated 19 August 2002.

4. Amendment No.1 to Aircraft Lease Agreement dated 19 August 2002 by and between * * * and * * .

5. Global Side Letter to Aircraft Lease Agreements dated 30 January 2004 (only in respect of Aircraft 2) by and between * * * and * * * .

6. Global Side Letter #2 to Aircraft Lease Agreements dated 4 November 2011 (only in respect of Aircraft 2) by and between * and * * * .

7. Assignment, Assumption and Amendment Agreement dated 4 November 2011 by and between * * , * * * * * * * * * as trustee for Aircraft 32A * * * and * * .

8. Confirmation of Effective Time dated 30 May 2012 to * * * from * * and * * * * * * ; * * * as trustee for Aircraft 32A- * * .

9. Confirmation Letter dated 17 December 2015 from * * * * * * * * ; * * * as trustee for Aircraft 32A- * * and * * .

10. Confirmation of Title dated 21 July 2016 from * * to * * * * * * * * * * as trustee for Aircraft 32A- * * .

11. Confirmation of Title dated 21 July 2016 from * * * * * * * * * * * * * as trustee for Aircraft 32A- * * to * .

12. Global Amendment #01 to Aircraft Lease Agreements dated 29 June 2016 (only in respect of Aircraft 2) by and between * * * * * * * * * as trustee for Aircraft 32A- * * * and * * * .

31

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

EXHIBIT G

FORM OF SELLER GUARANTEE

34

Execution Version

GUARANTEE

GUARANTEE (this “Guarantee”), dated as of August 3 2018, of * * , a private company limited by shares incorporated in * under registered number * (“Guarantor”) in favor of CONTRAIL AVIATION SUPPORT, LLC., a North Carolina limited liability company (“Buyer”).

WHEREAS, Buyer (as buyer), * * * * * * * * * * * as trustee for Aircraft 32A * * * (“Seller 1”) and Aircraft 32A * * (“Seller 2”), as sellers (collectively the “Sellers”) have entered into an Aircraft Sale Agreement dated as of the date hereof (the “Sale Agreement”);

WHEREAS, as a condition precedent to the Buyer’s obligations under the Sale Agreement, Guarantor has agreed to provide this Guarantee.

NOW, THEREFORE, in consideration of the premises and other consideration, the receipt and sufficiency of which are hereby acknowledged by the Guarantor, the Guarantor hereby agrees as follows:

1. Definitions. For purposes of this Guarantee, unless otherwise defined herein or unless the context otherwise requires, all terms used herein which are defined in the Sale Agreement shall have the respective meanings given to them in the Sale Agreement.

2. Guarantee. Guarantor hereby absolutely and unconditionally guarantees to Buyer the due and punctual payment and performance by each Seller of all of such Seller’s obligations under the Sale Agreement (the “Guaranteed Obligations”); provided, however, that Guarantor shall not be liable to make any payment until three Business Days following receipt by Guarantor of written notice from the Buyer that a payment of an amount is due under the Sale Agreement. Guarantor agrees that its obligations hereunder shall not be limited, altered, modified or impaired in any way, irrespective of the validity, regularity or enforceability of the Sale Agreement, any change in or amendment thereto, the absence of any action to enforce the same, any waiver or consent by the Buyer with respect to any provision thereof, any other action, omission or occurrence or circumstance whatsoever which may in any manner or to any extent vary the risk or effect discharge of Guarantor hereunder as a matter of law or otherwise or any other occurrence or circumstance whatsoever which might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor (other than the defense of payment or performance in full of such obligation or that such obligation is not due and owing in accordance with the express terms of the Sale Agreement) and this Guarantee shall in no way be conditioned or contingent upon any obligation of Buyer to collect from or seek performance by any Seller; provided that (i) the foregoing shall not constitute, or be interpreted as, a waiver by Guarantor of any defense with respect to the Guaranteed Obligations (other than a defense existing solely as a result of a Seller’s bankruptcy, insolvency or similar proceeding under applicable Law, an “Insolvency Event”) that a Seller may have in respect of the Guaranteed Obligations and shall be limited to, and only have effect as, a waiver of suretyship defenses that Guarantor may have in respect of the Guaranteed Obligations, (ii) except to the extent that a Guaranteed Obligation is stayed or reduced as a result of an Insolvency Event in respect of a Seller, Guarantor’s obligations in respect of and liability for the Guaranteed Obligations shall be no greater than the

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

obligations and liabilities of the relevant Seller in respect of such Guaranteed Obligations, (iii) nothing contained herein shall be deemed to constitute a waiver by Guarantor of presentment or demand of payment or notice to Guarantor with respect to the Sale Agreement and the obligations evidenced thereby or hereby. Guarantor covenants that this Guarantee will not be discharged except by complete performance of the obligations contained in the Sale Agreement, and in this Guarantee.

3. Guarantor shall be subrogated to all rights of the Buyer in respect of any amounts paid by Guarantor pursuant to the provisions of this Guarantee; provided, however, that Guarantor shall be entitled to enforce, or to receive any payments arising out of or based upon, such right of subrogation only after the amounts owed to the Buyer under the Sale Agreement or under this Guarantee have been paid in full.

4. Termination. This Guarantee shall continue in full force and effect until, and shall terminate automatically, upon the date of irrevocable payment and performance in full of all the Guaranteed Obligations.

5. Notices. All notices and other communications under, or in connection with, this Guarantee will, unless otherwise stated, be given and will become effective in the same manner as provided in Article 12 of the Sale Agreement.

The notice details of Guarantor are as follows:

Address:	*
Attention:	Company Secretary

6. Governing Law. THIS GUARANTEE IS DELIVERED IN NEW YORK AND THIS GUARANTEE (AND ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS GUARANTEE OR THE RELATIONSHIP ESTABLISHED HEREUNDER) SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES (OTHER THAN THE PROVISIONS OF SECTION 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK, WHICH THE PARTIES AGREE SHALL APPLY TO THIS AGREEMENT).

7. Consent to Jurisdiction. Each of Guarantor and Buyer hereby irrevocably consents that any legal action or proceeding against such party or any of its assets with respect to this Guarantee may be brought in any jurisdiction where such party or any of its assets may be found, or in any court of the State of New York or any Federal court of the United States of America located in the Borough of Manhattan, New York, New York, United States, as Buyer or Guarantor may elect, and by execution and delivery’ of this Agreement each of Buyer and

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

Guarantor hereby irrevocably submits to and accepts with regard to any such action or proceeding, for itself and in respect of its assets, generally and unconditionally, the jurisdiction of the aforesaid courts.

8. Jurisdiction and Forum. Each of Guarantor and Buyer agrees that final judgment against such party in any action or proceeding in connection with this Guarantee shall be conclusive and may be enforced in any other jurisdiction within or outside the U.S. by suit on the judgment, a certified or exemplified copy of which shall be conclusive evidence of the fact and the amount of such party’s indebtedness. Each of Guarantor and Buyer hereby irrevocably waives, to the fullest extent permitted by Law, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Guarantee brought in the courts in the State of New York described above, and hereby further irrevocably waives any claim that any such suit, action or proceeding brought in the courts in the State of New York described above has been brought in an inconvenient forum.

9. Waiver of Jury Trial. EACH OF GUARANTOR AND BUYER HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH IT IS A PARTY INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS GUARANTEE OR THE RELATIONSHIP ESTABLISHED HEREUNDER.

10. Waiver of Immunity. Each of Guarantor and Buyer agrees that in any legal action or proceedings against it or its assets in connection with this Guarantee no immunity from such legal action or proceedings (which shall include, without limitation, suit, attachment prior to judgment, other attachment, the obtaining of judgment, execution or other enforcement) shall be claimed by or on behalf of it or with respect to its assets, irrevocably waives any such right of immunity which it or its assets now have or may hereafter acquire or which may be attributed to it or its assets and consents generally in respect of any such legal action or proceedings to the giving of any relief or the issue of any process in connection with such action or proceedings including, without limitation, the making, enforcement or execution against any property whatsoever (irrespective of its use or intended use) of any order or judgment which may be made or given in such action or proceedings.

11. Headings. All section and paragraph headings and captions are purely for convenience and will not affect the interpretation of this Guarantee. Any reference to a specific section or paragraph will be interpreted as a reference to such section or paragraph of this Guarantee.

12. No Set-off. By acceptance of this GuaranteeBuyer shall be deemed to have waived any right to set-off, combine, consolidate, or otherwise appropriate and apply, any indebtedness at any time held or owing by the Buyer against, or on account of, any obligations or liabilities of Guarantor under this Guarantee.

13. Invalidity of any Provision. If any of the provisions of this Guarantee become invalid, illegal or unenforceable in any respect under any law, the validity, legality and enforceability of the remaining provisions will not in any way be affected or impaired.

14. Currency of Payment. Any payment to be made by Guarantor shall be made in the same currency as designated for payment in the Sale Agreement and such designation of the currency of payment is of the essence.

15. Assignment. This Agreement will be binding upon and inure to the benefit of each party hereto and its respective successors and assigns.

[Signature Page Follows]

* as
Guarantor
By:
	Name:
	Title:
Acknowledged and agreed:
CONTRAIL AVIATION SUPPORT, LLC,
as Buyer
By:
	Name:
	Title:

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

* , as Guarantor
By:
	Name:
	Title:
Acknowledged and agreed:
CONTRAIL AVIATION SUPPORT, LLC, as Buyer
By:	/s/ Joseph G. Kuhn
	Name: Joseph G. Kuhn
	Title: CEO

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

EFFECTIVE TIME SUPPLEMENT

(1) * (“Lessee”)

(2) * t * as trustee under the Trust Agreement (“Existing Lessor”)

(3) Contrail Aviation Leasing, LLC (“New Lessor”)

Existing Lessor, New Lessor and Lessee hereby agree as follows:

1. This Effective Time Supplement (this “Supplement”) is entered into for purposes of the Novation and Amendment Agreement dated September 4, 2018 between the parties to this Supplement (the “Agreement”) relating to the one Airbus A319-100 aircraft bearing manufacturer’s serial number * together with two (2) IAE V2524-A5 engines with manufacturer’s serial numbers * and * (the “Aircraft”).

2. Terms used in this Supplement shall have the meanings given to them in the Agreement and the Novated Lease.

3. Lessee, Existing Lessor and New Lessor confirm that the conditions precedent for its benefit contained in the Agreement have been satisfied, deferred or waived and that the novation and amendment contemplated in the Agreement has occurred and the Effective Time was 17:14 p.m. * time on this 17^th day of September 2018 while the aircraft with manufacturer’s serial number * was located at * .

4. Lessee, Existing Lessor and New Lessor confirm that the representations and warranties made by it in the Agreement are true and correct at the Effective Time.

5. New Lessor and Existing Lessor hereby notify Lessee that at the Effective Time ownership in the Aircraft has been transferred to New Lessor.

6. The amount of the Security Deposit held by Existing Lessor and transferred to New Lessor at the Effective Time is $ *

7. The balance of the Reserves held by Existing Lessor less any amounts reimbursed by Existing Lessor to Lessee under the Lease or otherwise accounted for under the Lease are as at the date hereof as follows and such amounts have been transferred by Existing Lessor to New Lessor at the Effective Time:

(a) in respect of the Airframe 6Y Check Reserves: US$ * ;

(b) in respect of the Airframe 12Y Check Reserves: US$ * ;

(c) in respect of the Engine LLP Reserves (ESN * ): US$ * ;

(d) in respect of the Engine LLP Reserves (ESN * : US$ * 0;

(e) in respect of Engine Performance Restoration Reserves (ESN * ): US$ * ;

1

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

(f) in respect of Engine Performance Restoration Reserves (ESN * ): US$ * ;

(g) in respect of the Landing Gear Reserves: US$ * ; and

(h) in respect of the APU Reserves: US$ * .

8. This Effective Time Supplement and all non-contractual obligations arising from or in connection with it are governed by and shall be construed in accordance with the Laws of New York.

[Signature Page follows]

2

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

SIGNATURES

Existing Lessor

  *  

By:        

Name:   

Title:     

New Lessor

Contrail Aviation Leasing, LLC

By:

Name:

Title:

Lessee

  *  

By:

Name:

Title:

3

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

SIGNATURES

Existing Lessor

  *  

By:                                                                          

Name:                                                                          

Title:                                                                        

New Lessor

Contrail Aviation Leasing, LLC
By: /s/ Joseph G. Kuhn
Name:	Joseph G. Kuhn
Title:	CEO
Lessee

  *  

By:

Name:

Title:

3

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

EFFECTIVE TIME SUPPLEMENT

(1) * (“Lessee”)

(2) *  * as trustee under the Trust Agreement (“Existing Lessor”)

(3) Contrail Aviation Leasing, LLC (“New Lessor”)

Existing Lessor, New Lessor and Lessee hereby agree as follows:

1. This Effective Time Supplement (this “Supplement”) is entered into for purposes of the Novation and Amendment Agreement dated September 4, 2018 between the parties to this Supplement (the “Agreement”) relating to the one Airbus A319-100 aircraft bearing manufacturer’s serial number *  together with two (2) IAE V2524-A5 engines with manufacturer’s serial numbers * and * (the “Aircraft”).

2. Terms used in this Supplement shall have the meanings given to them in the Agreement and the Novated Lease.

3. Lessee, Existing Lessor and New Lessor confirm that the conditions precedent for its benefit contained in the Agreement have been satisfied, deferred or waived and that the novation and amendment contemplated in the Agreement has occurred and the Effective Time was 17:14 p.m. *  time on this 17^th day of September 2018 while the aircraft with manufacturer’s serial number * was located at * .

4. Lessee, Existing Lessor and New Lessor confirm that the representations and warranties made by it in the Agreement are true and correct at the Effective Time.

5. New Lessor and Existing Lessor hereby notify Lessee that at the Effective Time ownership in the Aircraft has been transferred to New Lessor.

6. The amount of the Security Deposit held by Existing Lessor and transferred to New Lessor at the Effective Time is $ * .

7. The balance of the Reserves held by Existing Lessor less any amounts reimbursed by Existing Lessor to Lessee under the Lease or otherwise accounted for under the Lease are as at the date hereof as follows and such amounts have been transferred by Existing Lessor to New Lessor at the Effective Time:

(a) in respect of the Airframe 6Y Check Reserves: US$ * ;

(b) in respect of the Airframe 12Y Check Reserves: US$ * ;

(c) in respect of the Engine LLP Reserves (ESN * ): US$ * ;

(d) in respect of the Engine LLP Reserves (ESN * ): US$ * ;

(e) in respect of Engine Performance Restoration Reserves (ESN * ): US$ * ;

1

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

(f) in respect of Engine Performance Restoration Reserves (ESN * ): US$ * ;

(g) in respect of the Landing Gear Reserves: US$ * ; and

(h) in respect of the APU Reserves: US$ * ;

8. This Effective Time Supplement and all non-contractual obligations arising from or in connection with it are governed by and shall be construed in accordance with the Laws of New York.

[Signature Page follows]

2

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

SIGNATURES

Existing Lessor

  *  

By:

Name:

Title:

New Lessor

Contrail Aviation Leasing, LLC

By:

Name:

Title:

Lessee

  *  

By:

Name:

Title:

3

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

SIGNATURES

  Existing Lessor

  *  

  By:                                                                          

  Name:                                                                          

  Title:                                                                        

  New Lessor

Contrail Aviation Leasing, LLC
By: /s/ Joseph G. Kuhn
Name:	Joseph G. Kuhn
Title:	CEO

  Lessee

  *  

By:

Name:

Title:

3

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

REPLACEMENT POWER OF ATTORNEY

* hereby irrevocably appoints CONTRAIL AVIATION LEASING, LLC (“CONTRAIL AVIATION LEASING, LLC”), organized and existing under the laws of the State of North Carolina, United States of America whose principal place of business office is at 435 Investment Court, Verona, Wisconsin 53593, United States of America as * true and lawful attorney so that CONTRAIL AVIATION LEASING, LLC may take any of the following actions in the name of and for * with respect to the A319-100 aircraft bearing manufacturer’s serial number * (the “Aircraft”) leased by CONTRAIL AVIATION LEASING, LLC to * pursuant to an Aircraft Lease Agreement dated as of October 26, 2001, as assigned and amended from time to time and as novated and amended pursuant to the Novation and Amendment Agreement dated as of     September 4, 2018             (the “Lease”):

1. Pursuant to the Lease, * has procured and is maintaining insurances for the Aircraft. CONTRAIL AVIATION LEASING, LLC has been named sole loss payee on the all risk hull and war risk insurances for the Aircraft. In the event of a total loss or constructive total loss of the Aircraft, CONTRAIL AVIATION LEASING, LLC is entitled to receive insurance proceeds in an amount equal to the Agreed Value (as defined in the Lease). CONTRAIL AVIATION LEASING, LLC may take all action and sign all documents otherwise required to be performed by * including execution on behalf of * of an appropriate form of discharge/release document, in order for CONTRAIL AVIATION LEASING, LLC to collect such insurance proceeds.

2. In the exercise of the rights of CONTRAIL AVIATION LEASING, LLC under the Lease to recover the Aircraft from * and * after termination of the Lease due to an Event of Default (as defined in the Lease) under the Lease or for termination of the Lease due to any other reason, CONTRAIL AVIATION LEASING, LLC may take all action otherwise required to be performed by * before the authorities and courts in * in order to cause the Aircraft to be repossessed by CONTRAIL AVIATION LEASING, LLC, deregistered from the * and/or the *  or any successor thereof, and any other person or Government Entity (as defined in the Lease) which from time to time has control over civil aviation or the registration, airworthiness or operation of aircraft in *  (the “Aeronautics Authorities”), operated and exported from *

3. In the exercise of the rights mentioned in paragraphs 1 to 2, CONTRAIL AVIATION LEASING, LLC may make any declarations or statements and sign any public or private documents which may be considered necessary or appropriate.

4. CONTRAIL AVIATION LEASING, LLC may delegate the powers conferred hereby, in whole or in part, to any individual(s), including but not limited to employees of CONTRAIL AVIATION LEASING, LLC or legal counsel in *

CONTRAIL AVIATION LEASING, LLC is empowered to determine in its sole discretion when to exercise the powers conferred upon CONTRAIL AVIATION LEASING, LLC pursuant to this Power of Attorney. Any person, agency or company relying upon this Power of Attorney need not and will not make any determination or require any court judgment as to whether an Event of Default (as defined in the Lease) is outstanding under the Lease or whether the Lease has been terminated.

* hereby waives any claims against (a) any person acting on the instructions given by CONTRAIL AVIATION LEASING, LLC or its designee pursuant to this Power of Attorney and (b) any person designated by CONTRAIL AVIATION LEASING, LLC or an officer of CONTRAIL AVIATION LEASING, LLC to give instructions pursuant to this Power of Attorney. * also agrees to indemnify and hold harmless any person, agency or company which may act in reliance upon this Power of Attorney and pursuant to instructions given by CONTRAIL AVIATION LEASING, LLC or its designee.

1

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

  * expressly declares that CONTRAIL AVIATION LEASING, LLC may use this power of attorney to do business with “itself”.

This Power of Attorney is irrevocable as it is granted for the benefit of CONTRAIL AVIATION LEASING, LLC in accordance with Articles * of the * Civil Code, and may only be revoked with the approval of CONTRAIL AVIATION LEASING, LLC or when the Aircraft has been returned to the possession of CONTRAIL AVIATION LEASING, LLC, deregistered and exported from *

* has made and delivered this Power of Attorney on 17 Sep 2018 in * .

*

By:

Title:

2

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

REPLACEMENT POWER OF ATTORNEY

* * hereby irrevocably appoints CONTRAIL AVIATION LEASING, LLC (“CONTRAIL AVIATION LEASING, LLC”), organized and existing under the laws of the State of North Carolina, United States of America whose principal place of business office is at 435 Investment Court, Verona, Wisconsin 53593, United States of America as * true and lawful attorney so that CONTRAIL AVIATION LEASING, LLC may take any of the following actions in the name of and for * with respect to the A319-100 aircraft bearing manufacturer’s serial number * (the “Aircraft”) leased by CONTRAIL AVIATION LEASING, LLC to * pursuant to an Aircraft Lease Agreement dated as of October 26, 2001, as assigned and amended from time to time and as novated and amended pursuant to the Novation and Amendment Agreement dated as of    September 4, 2018             (the “Lease”):

I. Pursuant to the Lease, * has procured and is maintaining insurances for the Aircraft. CONTRAIL AVIATION LEASING, LLC has been named sole loss payee on the all risk hull and war risk insurances for the Aircraft. In the event of a total loss or constructive total loss of the Aircraft, CONTRAIL AVIATION LEASING, LLC is entitled to receive insurance proceeds in an amount equal to the Agreed Value (as defined in the Lease). CONTRAIL AVIATION LEASING LLC may take all action and sign all documents otherwise required to be performed by * including execution on behalf of * of an appropriate form of discharge/release document, in order for CONTRAIL AVIATION LEASING, LLC to collect such insurance proceeds.

2. In the exercise of the rights of CONTRAIL AVIATION LEASING, LLC under the Lease to recover the Aircraft from * and * after termination of the Lease due to an Event of Default (as defined in the Lease) under the Lease or for termination of the Lease due to any other reason, CONTRAIL AVIATION LEASING, LLC may take all action otherwise required to be performed by * before the authorities and courts in * in order to cause the Aircraft to be repossessed by CONTRAIL AVIATION LEASING, LLC, deregistered from the * and/or the * , or any successor thereof, and any other person or Government Entity (as defined in the Lease) which from time to time has control over civil aviation or the registration, airworthiness or operation of aircraft in * (the “Aeronautics Authorities”), operated and exported from *

3. In the exercise of the rights mentioned in paragraphs 1 to 2, CONTRAIL AVIATION LEASING, LLC may make any declarations or statements and sign any public or private documents which may be considered necessary or appropriate.

4. CONTRAIL AVIATION LEASING, LLC may delegate the powers conferred hereby, in whole or in part, to any individual(s), including but not limited to employees of CONTRAIL AVIATION LEASING, LLC or legal counsel in *

CONTRAIL AVIATION LEASING, LLC is empowered to determine in its sole discretion when to exercise the powers conferred upon CONTRAIL AVIATION LEASING, LLC pursuant to this Power of Attorney. Any person, agency or company relying upon this Power of Attorney need not and will not make any determination or require any court judgment as to whether an Event of Default (as defined in the Lease) is outstanding under the Lease or whether the Lease has been terminated.

* hereby waives any claims against (a) any person acting on the instructions given by CONTRAIL AVIATION LEASING, LLC or its designee pursuant to this Power of Attorney and (b) any person designated by CONTRAIL AVIATION LEASING, LLC or an officer of CONTRAIL AVIATION LEASING, LLC to give instructions pursuant to this Power of Attorney.* also agrees to indemnify and hold harmless any person, agency or company which may act in reliance upon this Power of Attorney and pursuant to instructions given by CONTRAIL AVIATION LEASING, LLC or its designee.

1

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

* expressly declares that CONTRAIL AVIATION LEASING, LLC may use this power of attorney to do business with “itself”.

This Power of Attorney is irrevocable as it is granted for the benefit CONTRAIL AVIATION LEASING, LLC in accordance with Articles * of the * Civil Code, and may only be revoked with the approval of CONTRAIL AVIATION LEASING, LLC or when the Aircraft has been returned to the possession of CONTRAIL AVIATION LEASING, LLC, deregistered and exported from *

* has made and delivered this Power of Attorney on 17 Sep 2018 in *                                            .

*

By:

Title:

2

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

ACCEPTANCE CERTIFICATE

CONTRAIL AVIATION SUPPORT, LLC. (“Buyer”) and CONTRAIL AVIATION LEASING, LLC. (“Buyer’s Nominee”) do hereby represent, acknowledge, warrant and agree in favour of * AS TRUSTEE FOR AIRCRAFT 32A- * (“Seller”) as follows:

1. Buyer’s Nominee has at 17:14 hours * time) this 17th day of     September         2018 accepted from Seller the following equipment, all as further described in the Aircraft Sale Agreement dated 3 August 2018 (“Sale Agreement”) between, inter alios, Seller and Buyer (collectively the “Aircraft”):

(a) one (1) used Airbus A319-100 aircraft bearing manufacturer’s serial number *

(b) two (2) used IAE V2524-A5 Engines bearing manufacturer’s serial numbers * and * and

(c) and all Parts and Aircraft Documentation.

2. All of the foregoing equipment has been accepted on the date set forth above to Buyer’s and Buyer’s Nominee’s full satisfaction pursuant to the terms and provisions of the Sale Agreement when the Aircraft was located at   *                           .

3. The Aircraft, Engines, Parts and Aircraft Documentation have been fully examined by Buyer and Buyer’s Nominee and have been received in a condition fully satisfactory to Buyer and Buyer’s Nominee and in full conformity with the Sale Agreement in every respect.

4. Buyer and Buyer’s Nominee agrees that it is purchasing the Aircraft “AS IS, WHERE IS AND WITH ALL FAULTS” and subject to the terms and conditions of the Sale Agreement.

Unless otherwise defined herein, capitalised terms used in this acceptance certificate have the same meaning as those used in the Sale Agreement.

IN WITNESS WHEREOF Buyer and Buyer’s Nominee have executed this acceptance certificate on the date set forth above.

CONTRAIL AVIATION SUPPORT, LLC

/s/ Joseph G. Kuhn

By: Joseph G. Kuhn

Its: CEO

CONTRAIL AVIATION LEASING, LLC

/s/ Joseph G. Kuhn

By: Joseph G. Kuhn

Its: CEO

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

ACCEPTANCE CERTIFICATE

CONTRAIL AVIATION SUPPORT, LLC. (“Buyer”) and CONTRAIL AVIATION LEASING, LLC. (“Buyer’s Nominee”) do hereby represent, acknowledge, warrant and agree in favour of * AS TRUSTEE FOR AIRCRAFT 32A- * (“Seller”) as follows:

1. Buyer’s Nominee has at 17:14 hours * time) this 17th day of   September         2018 accepted from Seller the following equipment, all as further described in the Aircraft Sale Agreement dated 3 August 2018 (“Sale Agreement”) between, inter alios, Seller and Buyer (collectively the “Aircraft”):

(a) one (1) used Airbus A319-100 aircraft bearing manufacturer’s serial number * ;

(b) two (2) used IAE V2524-A5 Engines bearing manufacturer’s serial numbers * and * ; and

(c) and all Parts and Aircraft Documentation.

2. All of the foregoing equipment has been accepted on the date set forth above to Buyer’s and Buyer’s Nominee’s full satisfaction pursuant to the terms and provisions of the Sale Agreement when the Aircraft was located at     *                              .

3. The Aircraft, Engines, Parts and Aircraft Documentation have been fully examined by Buyer and Buyer’s Nominee and have been received in a condition fully satisfactory to Buyer and Buyer’s Nominee and in full conformity with the Sale Agreement in every respect.

4. Buyer and Buyer’s Nominee agrees that it is purchasing the Aircraft “AS IS, WHERE IS AND WITH ALL FAULTS” and subject to the terms and conditions of the Sale Agreement.

Unless otherwise defined herein, capitalised terms used in this acceptance certificate have the same meaning as those used in the Sale Agreement.

IN WITNESS WHEREOF Buyer and Buyer’s Nominee have executed this acceptance certificate on the date set forth above.

CONTRAIL AVIATION SUPPORT, LLC
/s/ Joseph G. Kuhn
By:	Joseph G. Kuhn
Its:	CEO

CONTRAIL AVIATION LEASING, LLC
/s/ Joseph G. Kuhn
By:	Joseph G. Kuhn
Its:	CEO

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

BILL OF SALE

*  AS TRUSTEE FOR AIRCRAFT 32A- * , a company incorporated under the laws of * (“Seller”), is the owner of the following equipment, all as further described in the Aircraft Sale Agreement dated 3 August, 2018 (“Sale Agreement”) between, inter alias, Seller and Contrail Aviation Support, LLC (collectively the “Aircraft”):

1. one (1) used Airbus A319-100 aircraft bearing manufacturer’s serial number * ;

2. two (2) used IAE V2524-A5 Engines bearing manufacturer’s serial numbers * and * ; and

3. and all Parts and Aircraft Documentation.

For and in consideration of the sum of * and other valuable consideration, receipt of which is hereby acknowledged, Seller does hereby sell, grant, transfer, deliver and set over to Contrail Aviation Leasing, LLC (“Buyer”) and its successors and assignees forever all of Seller’s right, title and interest in and to the Aircraft, to have and to hold the Aircraft for its and their use forever.

Seller hereby warrants to Buyer and its successors and assigns that there is hereby conveyed to Buyer full legal and beneficial good and marketable title to the Aircraft save as to freedom from Security Interests in relation to which Seller warrants only that the Aircraft is free of Warranted Security Interests, and that Seller will warrant and defend such title forever against all claims and demands.

Unless otherwise defined herein, capitalised terms used in this bill of sale have the same meaning as those used in the Sale Agreement.

This bill of sale will be governed by, and construed in accordance with, the Governing Law. The Governing Jurisdiction will have exclusive jurisdiction to settle any dispute arising out of or in connection with this bill of sale.

IN WITNESS WHEREOF Seller has executed this bill of sale as a deed at 17:14 hours * time) this 17th day of September 2018.

Seller: * AS TRUSTEE FOR AIRCRAFT 32A- *

	SIGNED and DELIVERED as a DEED by
*
	as duly appointed attorney for and on behalf of *
	AS TRUSTEE FOR AIRCRAFT 32A- *

In the presence of:

*
Witness signature
Witness name: *
Witness address:
Witness occupation: *	*

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

BILL OF SALE

* * AS TRUSTEE FOR AIRCRAFT 32A- * , a company incorporated under the laws of * (“Seller”), is the owner of the following equipment, all as further described in the Aircraft Sale Agreement dated 3 August, 2018 (“Sale Agreement”) between, inter alios, Seller and Contrail Aviation Support, LLC (collectively the “Aircraft”):

1. one (1) used Airbus A319-100 aircraft bearing manufacturer’s serial number * ;

2. two (2) used IAE V2524-A5 Engines bearing manufacturer’s serial numbers * and * ; and

3. and all Parts and Aircraft Documentation.

For and in consideration of the sum of * and other valuable consideration, receipt of which is hereby acknowledged, Seller does hereby sell, grant, transfer, deliver and set over to Contrail Aviation Leasing, LLC (“Buyer”) and its successors and assignees forever all of Seller’s right, title and interest in and to the Aircraft, to have and to hold the Aircraft for its and their use forever.

Seller hereby warrants to Buyer and its successors and assigns that there is hereby conveyed to Buyer full legal and beneficial good and marketable title to the Aircraft save as to freedom from Security Interests in relation to which Seller warrants only that the Aircraft is free of Warranted Security Interests, and that Seller will warrant and defend such title forever against all claims and demands.

Unless otherwise defined herein, capitalised terms used in this bill of sale have the same meaning as those used in the Sale Agreement.

This bill of sale will be governed by, and construed in accordance with, the Governing Law. The Governing Jurisdiction will have exclusive jurisdiction to settle any dispute arising out of or in connection with this bill of sale.

IN WITNESS WHEREOF Seller has executed this bill of sale as a deed at                  hours (          time) this 17th day of September 2018.

Seller: * AS TRUSTEE FOR AIRCRAFT 32A- *

SIGNED and DELIVERED as a DEED by

  *  

as duly appointed attorney for and on behalf of *

* AS TRUSTEE  FOR AIRCRAFT 32A- *

In the presence of:

*
Witness signature
Witness name: *
Witness address:
Witness occupation: *	*

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

EX-10.11

Exhibit 10.11

Dated as of 4 September 2018

* 

* as trustee under the Trust Agreement

as Existing Lessor

* 

as Lessee

and

Contrail Aviation Leasing, LLC

as New Lessor

NOVATION AND AMENDMENT AGREEMENT

relating to an

Aircraft Lease Agreement dated 26 October 2001 in respect of

One (1) Airbus A319-100 aircraft with manufacturer’s serial no. * 

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

CONTENTS

Article		Page
1.	Definitions and Interpretation		1
2.	Novation		3
3.	Lease Amendments		4
4.	Relevant Interests		7
5.	Conditions Precedent		8
6.	Conditions Subsequent and Undertakings		9
7.	Further Assurances		10
8.	Representations and Warranties		11
9.	Effective Time		13
10.	No Greater Obligation		14
11.	Miscellaneous		14
12.	Filings, Registrations, Documentary Taxes and Costs and Expenses		16
13.	Confidentiality		16
14.	Assignment		17
15.	Governing Law		17

Schedule 1	Form of Effective Time Supplement
Schedule 2	Lease Documents
Schedule 3	Form of Replacement Power of Attorney

Novation and Amendment Agreement (*  MSN *  CONTENTS            

* 

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

THIS NOVATION AND AMENDMENT AGREEMENT (this “Agreement”) is made as of 4 September    2018

BETWEEN:

(1) *  a private limited company organised under the laws of *  whose address is at *  *  as trustee under the Trust Agreement (the “Existing Lessor”);

(2) *  a *  company whose principal place of business is at *  (the “Lessee”); and

(3) CONTRAIL AVIATION LEASING, LLC, a limited liability company organised and existing under the laws of the State of Wisconsin, United States of America whose principal place of business is at 435 Investment Court, Verona, Wisconsin 53593, United States of America (the “New Lessor”).

WHEREAS:

(A) By an Aircraft Lease Agreement dated as of 26 October 2001 between the Original Lessor and the Lessee (as supplemented, assigned, assumed and amended from time to time prior to the Effective Time pursuant to the Lease Documents, the “Lease”), the Existing Lessor agreed to lease and the Lessee agreed to take on lease one (1) Airbus A319-100 aircraft bearing manufacturer’s serial number *  (as more particularly described in the Lease, the “Aircraft”) on the terms and subject to the conditions contained in the Lease.

(B) Pursuant to an aircraft sale agreement dated 3 August 2018 between the Existing Lessor as seller 1, *  *  as trustee for Aircraft 32A-*  as seller 2 and Contrail Aviation Support, LLC (“Contrail”) as buyer (the “Sale Agreement”), Contrail has agreed to cause the New Lessor, the wholly-owned subsidiary of Contrail, to purchase the Aircraft on the terms and subject to the conditions set out therein.

(C) The parties hereto have agreed that the New Lessor will assume the rights, liabilities and obligations of the Existing Lessor under the Lease and that the Existing Lessor should be released from its liabilities and obligations under the Lease on the terms and conditions set out herein.

NOW, THEREFORE, in consideration of the provisions and mutual covenants herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged,

IT IS AGREED as follows:

1. DEFINITIONS AND INTERPRETATION

In this Agreement the following expressions shall have the following meanings:

“Aircraft” has the meaning ascribed to it in the recitals hereto.

“Bill of Sale” means the bill of sale for the Aircraft dated the Effective Time and delivered by the Existing Lessor to the New Lessor for registration purposes.

Novation and Amendment Agreement *  MSN * ) Page 1

* 

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

“Effective Time” has the meaning ascribed to it in Article 9 (Effective Time).

“Effective Time Supplement” means the Effective Time Supplement in the form of Schedule 1 (Form of Effective Time Supplement) to be executed by the Existing Lessor, the New Lessor and the Lessee.

“Existing DPoA” means the power of attorney dated 28 May 2012 granted by the Lessee in favour of the Existing Lessor and * , relating to the Aircraft.

“Global Side Letter #2” means Global Side Letter #2 to Aircraft Lease Agreements dated 4 November 2011 by and between *  and * 

“Lease” has the meaning ascribed to it in the recitals hereto.

“Lease Documents” means the documents (or, as applicable, the specific paragraph(s) of the documents) listed in Schedule 2 (Lease Documents).

“Novated Lease” means the Lease as novated and amended pursuant to this Agreement.

“Novated Lease Documents” means the Lease Documents as novated and amended pursuant to this Agreement.

“Novation Documents” means this Agreement, the Effective Time Supplement and the Replacement Power of Attorney.

“Original Lessor” means * 

“Relevant Interest” has the meaning ascribed to it in Article 4.1 (Relevant Interests).

“Replacement Power Attorney” means a replacement power of attorney, duly notarised and executed in *  (with an English translation), to be granted by the Lessee in favour of the New Lessor substantially in the form of Schedule 3.

“Trust Agreement” means that certain Declaration of Trust (Aircraft 32A-*  Trust) dated as of October 28, 2011 between the Existing Lessor as trustee and *  as beneficial owner.

1.1 Defined Terms in Lease

Capitalised terms used, but not defined, in this Agreement shall have the respective meanings assigned to them in the Lease.

1.2 Interpretation

In this Agreement, unless the context otherwise requires:

1.2.1 a reference to an Article or a Schedule is a reference to an Article of or Schedule to this Agreement;

1.2.2 a reference to a person includes its successors and permitted assigns;

1.2.3 words importing the plural shall include the singular, and vice versa;

1.2.4 headings are to be ignored in construing this Agreement;

Novation and Amendment Agreement (*  MSN * ) Page 2

* 

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

1.2.5 references to any statutory or other legislative provision shall be construed as including any statutory or legislative modification or re-enactment thereof, or any provision enacted in substitution therefor; and

1.2.6 references to an “agreement” also include a concession, contract, franchise, licence, treaty or undertaking.

2. NOVATION

2.1 Releases and Assumptions

As of and with effect from the Effective Time, and subject to the provisions of Article 2.3 (Pre-Effective Time Rights and Remedies; Indemnities):

2.1.1 the Existing Lessor releases and discharges the Lessee from all of its obligations, duties, undertakings and liabilities to the Existing Lessor under the Lease Documents, and the Existing Lessor agrees that it has no further rights, benefits and interests against the Lessee under the Lease Documents;

2.1.2 the Lessee releases and discharges the Existing Lessor from all its obligations, duties, undertakings and liabilities to the Lessee under the Lease Documents, and the Lessee agrees that it has no further rights, benefits and interests against the Existing Lessor under the Lease Documents;

2.1.3 the New Lessor agrees to assume the rights, benefits, interests and obligations, duties and liabilities of “Lessor” under the Novated Lease Documents arising from and after the Effective Time and to perform the obligations of “Lessor” under the Novated Lease Documents arising from and after the Effective Time;

2.1.4 the Lessee consents to and accepts the assumption by the New Lessor of the rights, benefits, interests, obligations, duties and liabilities of “Lessor” under the Novated Lease Documents and the New Lessor’s agreement to perform the obligations of “Lessor” under the Novated Lease Documents (for the avoidance of doubt, other than the obligations, duties and liabilities required to be performed prior to the Effective Time);

2.1.5 the Lessee agrees that it will not assert against the New Lessor any claim (save for Relevant Claims as defined under Article 2.3) or defence which it may have or have had against the Existing Lessor under the Lease Documents prior to the Effective Time; and

2.1.6 the Lessee acknowledges that its obligations, duties, undertakings and liabilities to “Lessor” under the Novated Lease Documents arising from and after the Effective Time are owed to, and are to be performed for the benefit of, the New Lessor, and agrees with the New Lessor to perform such obligations under the Novated Lease Documents in favour of the New Lessor.

Each of the foregoing events and agreements is conditional upon the happening of the others and shall occur simultaneously at the Effective Time.

2.2 Effect

The parties accordingly agree that, as and with effect from and after the Effective Time (subject to the satisfaction (or the waiver in accordance with Article 5.4 (Waiver or Deferral of Conditions Precedent)) of the conditions precedent set out in Article 5 (Conditions

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

Precedent)) the Lease Documents are novated and constitute agreements between the New Lessor as lessor and owner and the Lessee as lessee on the terms and conditions of the Novated Lease Documents.

2.3 Pre-Effective Time Rights and Remedies; Indemnities

The Lessee and the Existing Lessor agree that they shall have the same rights and remedies against each other as each would have had under the Lease Documents in respect of any losses, liabilities or claims suffered or incurred or brought against or payments due to each other in respect of or attributable to the period prior to the Effective Time as if the Existing Lessor had remained the Lessor under the Lease Documents, and the New Lessor shall not be responsible to either the Lessee or the Existing Lessor in respect of any such losses, liabilities or claims, nor shall the Lessee exercise any set off or counterclaim in respect of any such losses, liabilities or claims against the New Lessor, save that the New Lessor shall be responsible for the application and payment of Reserves in accordance with the Lease (as novated and amended pursuant to this Agreement and as further amended from time to time) (“Relevant Claims”), whether or not those Relevant Claims are attributable to periods arising prior to or on and after the Effective Time.

The Lessee and the Existing Lessor agree the indemnities set out in articles 16 and 17 of the Lease shall survive the termination of the Lease and after the Effective Time.

2.4 Delivery of Aircraft

The Lessee acknowledges that the Aircraft was delivered by the Original Lessor to the Lessee on 25 June 2002 in accordance with the terms of the Lease, that the Lessee is in possession of the Aircraft and that the New Lessor may rely on the Estoppel and Acceptance Certificate dated 25 June 2002 (“Estoppel and Acceptance Certificate”) issued by the Lessee to the Original Lessor as though it had been issued to the New Lessor by the Lessee; and it is acknowledged by all parties hereto that no further physical delivery of the Aircraft by the New Lessor is required or contemplated as a result of this Agreement.

3. LEASE AMENDMENTS

3.1 Amendments

As of, and with effect from and after, the Effective Time the Lease Documents as novated hereby shall be (and is hereby) amended as follows and as so amended shall constitute the Novated Lease Documents:

3.1.1 the expressions “this Lease” and “the Lease” shall be construed, wherever they appear in the Lease as so novated and amended and wherever the context so permits, as if they referred to the Novated Lease (and as supplemented by the Novated Lease Documents);

3.1.2 the expression “LESSOR” shall be construed, wherever it appears in the Lease Documents and where appropriate, as if it referred to the New Lessor, save and except in the definition of Delivery, in any references to any act taken by, or any delivery of a document or notice by or to, the Existing Lessor under the Lease prior to the Effective Time, and in any condition precedent in favour of, or representation and warranty made by, the Existing Lessor under the Lease prior to the Effective Time;

3.1.3 in the title page to the Lease the words *  as Trustee” shall be deleted in their entirety and shall be replaced by the words “CONTRAIL AVIATION LEASING, LLC”;

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

3.1.4 on page 1 of the Lease the words *  a private limited company duly incorporated under the laws of *  (registered number * ), whose address is * , *  as Trustee under the Trust Agreement (“LESSOR”)” shall be deleted and replaced with the words “CONTRAIL AVIATION LEASING, LLC, a limited liability company organized under the laws of the State of Wisconsin, United States of America whose principal place of business is at 435 Investment Court, Verona, Wisconsin 53593, United States of America (“LESSOR”)”;

3.1.5 in article 2.1 of the Lease the definitions of “Beneficial Owner”, * , “Servicer” and “Trust Agreement” and all references thereto in the Lease, shall be deleted;

3.1.6 in article 2.1 of the Lease the definition of “LESSOR Party” shall be deleted and all references thereto in the Lease shall be deemed to be a reference to the Lessor;

3.1.7 the definition of “LESSOR’s Lender” in article 2.1 of the Lease shall be deleted in its entirety and replaced with the following:

““LESSOR’s Lender” means one or more banks or financial institutions or other Persons as notified in writing to LESSEE from time to time that provide financing directly or indirectly to LESSOR or any Affiliate of LESSOR in relation to LESSOR’s acquisition, continuing ownership or leasing of the Aircraft and will include any collateral agent or security trustee and any Person acting as agent or security trustee for one or more LESSOR’S Lenders.”;

3.1.8 the definition of “LESSOR’s Lien” in article 2.1 of the Lease shall be amended by replacing the words “LESSOR and/or Beneficial Owner” with the word “LESSOR”;

3.1.9 article 5.1.2 of the Lease is amended by replacing:

(a) the words “LESSOR’S or * ” with the word “LESSOR’s”; and

(b) the words “LESSOR, *  or any subsidiary of *  (including trusts in which *  or any subsidiary of *  is the beneficiary of such trust)” with the word “LESSOR”;

3.1.10 article 5.1.3 of the Lease is amended by replacing the words “LESSOR, *  or any subsidiary of *  (including trusts in which *  or any subsidiary of *  is the beneficiary of such trust)” with the word “LESSOR”;

3.1.11 in articles 1.10 and 5.5 of the Lease the LESSOR’s Bank Account details shall be deleted and replaced with the words “Such bank account notified in writing to the Lessee with ten (10) Business Days’ prior written notice”;

3.1.12 article 15.1 of the Lease shall be amended by deleting and replacing the description of the legend on the Airframe identification plates with the following:

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

“THIS AIRCRAFT IS OWNED BY CONTRAIL AVIATION LEASING, LLC

MANUFACTURER’S SERIAL NO: * 

OWNER’S ADDRESS: 435 INVESTMENT COURT, VERONA, WISCONSIN 53593, UNITED STATES OF AMERICA”;

3.1.13 article 15.2 of the Lease shall be amended by deleting and replacing the description of the legend on the Engine identification plates with the following:

“THIS ENGINE IS OWNED BY CONTRAIL AVIATION LEASING, LLC

MANUFACTURER’S SERIAL NO: * 

OWNER’S ADDRESS: 435 INVESTMENT COURT, VERONA, WISCONSIN 53593, UNITED STATES OF AMERICA”;

3.1.14 article 16.1 of the Lease is amended by replacing the words “LESSOR, *  and Beneficial Owner (individually a “Tax Indemnitee” and collectively “Tax Indemnitees”)” with the word “LESSOR”;

3.1.15 article 16 of the Lease shall be amended throughout to delete each reference to (i) “any Tax Indemnitee”, “the relevant Tax Indemnitee”, “a Tax Indemnitee” and “such Tax Indemnitee” and replace each such reference with the word “LESSOR”; (ii) “in * ” and replace such reference with the words “in *  and in the U.S.”; and (iii) *  and replace such reference with the words “*  and Verona, Wisconsin, United States of America’’;

3.1.16 article 17.1 of the Lease is amended by replacing the words “each LESSOR Party, Servicer and any LESSOR’s Lender” in the first sentence thereof with the words “LESSOR and any LESSOR’s Lender”;

3.1.17 article 25.2(q) of the Lease is amended by replacing the text “lease or agreement between LESSEE and LESSOR, *  or any subsidiary of *  (including trusts in which *  or any subsidiary of *  is the beneficiary of such trust)” with the text “lease or agreement between LESSEE and LESSOR or any subsidiary of LESSOR (including trusts in which LESSOR or any subsidiary of LESSOR is the beneficiary of such trust)”;

3.1.18 article 25.3(f) of the Lease is amended by replacing the words “LESSOR, *  or any subsidiary of *  (including trusts in which *  or any subsidiary of *  is the beneficiary of such trust)” with the word “LESSOR”;

3.1.19 in article 26.1 of the Lease references to “telex” shall be deleted and replaced with references to “e-mail”;

3.1.20 in article 26.2 of the Lease the notice details for the LESSOR (including as to the notice being copied to other persons) shall be deleted and replaced with the following:

“Contrail Aviation Leasing, LLC

435 Investment Court

Verona, Wisconsin 53593

United States of America

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

Attention :	President
Facsimile :	+ 1 608 848-8101
Telephone :	+ 1 608 848-8100
E-mail :	joe@contrail.com

3.1.21 article 28.5 of the Lease is amended by replacing the text “this Lease or under any other agreement between LESSEE and LESSOR, *  or any subsidiary of *  (including trusts in which *  or any subsidiary of *  is the beneficiary of such trust)” with the text “this Lease or under any other agreement between LESSEE and LESSOR or any subsidiary of LESSOR (including trusts in which LESSOR or any subsidiary of LESSOR is the beneficiary of such trust)”;

3.1.22 the first sentence in article 28.7 shall be amended to include * 

3.1.23 article 28.9 of the Lease shall be amended to permit disclosure of the Operative Documents and all non-public information obtained by either party to any Lessor’s Lender; and

3.1.24 Exhibit H of the Lease shall be replaced with the Replacement Power of Attorney and the original power of attorney granted in favour of the Existing Lessor will be cancelled.

3.2 With effect from the Effective Time: (a) all references to the Lease Documents contained in any documents delivered under or pursuant to the Lease Documents or any other Operative Document shall be construed as references to the Novated Lease Documents (as they may be further amended from time to time); and (b) this Agreement shall be an Operative Document (as defined in the Novated Lease).

4. RELEVANT INTERESTS

4.1 Relevant Interests

As a result of the events referred to in the Recitals and Articles 2 (Novation) and 3 (Lease Amendments), as of the Effective Time, the following interests (each a “Relevant Interest”) will exist in relation to the Aircraft:

4.1.1 the New Lessor will be the legal and beneficial owner of the Aircraft; and

4.1.2 the New Lessor will lease the Aircraft to the Lessee pursuant to the Novated Lease.

4.2 Existing Lessor Insurances

The Lessee shall maintain or procure that liability insurance is maintained in respect of the Aircraft with each Indemnitee (as defined in article 17 of the Lease prior to its amendment hereunder) as additional assureds, from the Effective Time until the second anniversary of the Effective Time. The cover shall be on terms and for amounts required by the Lease prior to the Effective Time. The Lessee shall deliver a copy of a certificate of such insurances in relation to the Aircraft to the Existing Lessor prior to the Effective Time and at each annual renewal, a copy of such liability insurances until the expiration of such two-year period as required under this Article 4.2 (Existing Lessor Insurances).

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

5. CONDITIONS PRECEDENT

5.1 New Lessor’s Conditions Precedent

The obligation of the New Lessor to execute and deliver the Effective Time Supplement shall be subject to receipt by the New Lessor of the following in form and substance reasonably satisfactory to the New Lessor:

5.1.1 an executed copy of the Novation Documents (other than the Effective Time Supplement) duly executed by the parties hereto and thereto (other than the New Lessor);

5.1.2 evidence reasonably satisfactory to the New Lessor that the Lessee has all necessary corporate or other authorisation to enter into and perform its obligations under this Agreement and the other Novation Documents to which it is a party;

5.1.3 evidence reasonably satisfactory to the New Lessor that the Existing Lessor has all necessary corporate or other authorisation to enter into and perform its obligations under this Agreement and the other Novation Documents to which it is a party;

5.1.4 copies of certificates of insurance and reinsurance and brokers’ letters of undertaking relating to the insurances and reinsurances in compliance with the insurance and reinsurance requirements of Article 4.2 (Existing Lessor Insurances) and the Novated Lease;

5.1.5 each of the confirmations, representations and warranties of the Existing Lessor and the Lessee in this Agreement and the other Novation Documents to which they are a party shall be true and accurate at the Effective Time, in each case as to the facts and circumstances then existing and as if made at the Effective Time (and, for the avoidance of doubt, no party hereto shall be required to provide any certificates in connection therefor): and

5.1.6 each of the conditions precedent set out in clause 5.1 of the Sale Agreement shall have been satisfied or waived or postponed in accordance with the terms of the Sale Agreement.

5.2 Lessee’s Conditions Precedent

The obligation of the Lessee to execute and deliver the Effective Time Supplement will be subject to the receipt by the Lessee of the following in form and substance reasonably satisfactory to the Lessee:

5.2.1 an executed copy of the Novation Documents (other than the Effective Time Supplement) duly executed by the parties hereto and thereto (other than the Lessee);

5.2.2 evidence reasonably satisfactory to the Lessee that the New Lessor has all necessary corporate or other authorisation to enter into and perform its obligations under this Agreement and the other Novation Documents to which it is a party;

5.2.3 evidence reasonably satisfactory to the Lessee that the Existing Lessor has all necessary corporate or other authorisation to enter into and perform its obligations under this Agreement and the other Novation Documents to which it is a party; and

5.2.4 each of the representations and warranties of the Existing Lessor and the New Lessor in this Agreement and the other Novation Documents to which they are a party shall be true and accurate at the Effective Time, in each case as to the facts and circumstances then existing and as if made at the Effective Time.

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

5.3 Existing Lessor’s Conditions Precedent

The obligation of the Existing Lessor to execute and deliver the Effective Time Supplement will be subject to the receipt by the Existing Lessor of the following in form and substance reasonably satisfactory to the Existing Lessor:

5.3.1 an executed copy of this Agreement and the other Novation Documents (other than the Effective Time Supplement) duly executed by the parties hereto (other than the Existing Lessor);

5.3.2 evidence reasonably satisfactory to the Existing Lessor that the Lessee has all necessary corporate or other authorisation to enter into and perform its obligations under this Agreement and the other Novation Documents to which it is a party;

5.3.3 evidence reasonably satisfactory to the Existing Lessor that the New Lessor has all necessary corporate or other authorisation to enter into and perform its obligations under this Agreement and the other Novation Documents to which it is a party;

5.3.4 copies of certificates of insurance and broker’s letter of undertaking relating to the insurances in compliance with Article 4.2 (Existing Lessor Insurances);

5.3.5 the Lessee will have delivered to the Existing Lessor its signature to the termination agreement relating to the guarantee dated May 30, 2012 granted by * in favour of the Lessee;

5.3.6 each of the representations and warranties of the New Lessor and the Lessee in this Agreement and the other Novation Documents to which they are a party shall be true and accurate at the Effective Time, in each case as to the facts and circumstances then existing and as if made at the Effective Time; and

5.3.7 each of the conditions precedent set out in clause 5.2 of the Sale Agreement shall have been satisfied or waived or postponed in accordance with the terms of the Sale Agreement.

5.4 Waiver or Deferral of Conditions Precedent

Each of the New Lessor, the Lessee and the Existing Lessor may waive or defer any of such conditions precedent to their own obligations as contemplated in Article 5.1 (New Lessor’s Conditions Precedent), Article 5.2 (Lessee’s Conditions Precedent) or Article 5.3 (Existing Lessor’s Conditions Precedent) respectively, upon such further terms and subject to such further conditions as the Existing Lessor, the New Lessor and the Lessee, as the case may be, think fit.

6. CONDITIONS SUBSEQUENT AND UNDERTAKINGS

6.1 Fireproof Plates

After the Effective Time, the Lessee will (a) prepare new identification plates for the Aircraft as set forth in article 15 of the Novated Lease, (b) as soon as practicable after the Effective Time and in any event no later than 60 days after the Effective Time, remove the existing identification plates and install the replacement identification plates on the Aircraft and (c) notify the New Lessor of such replacement. The New Lessor agrees to pay or reimburse all of the Lessee’s reasonable out-of-pocket costs and expenses incurred by the Lessee in connection with this Article 6.1 (Fireproof Plates).

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

6.2 Aircraft Location

The parties will cooperate with one another in order to close the sale of the Aircraft and each Engine at a convenient time when the Aircraft and/or the relevant Engine is in a jurisdiction acceptable to the Existing Lessor and the New Lessor, or over international waters. The Existing Lessor and the New Lessor will notify the Lessee of the dates that are scheduled to be the date of the Effective Time reasonably in advance of Effective Time and the Lessee will provide the Existing Lessor and the New Lessor with the scheduled route of the Aircraft (or any other aircraft on which the relevant Engine is installed) on those dates to the extent such schedule is available at the time of such notification, otherwise as soon as such schedule becomes available.

6.3 Aircraft Documents

The Lessee undertakes to provide to the New Lessor, as soon as practicable but in any event within 30 days following the Effective Time, a copy of the Aircraft Station Licence for the Aircraft and a copy of the Certificate of Registration issued by the * each with the name of the New Lessor noted thereon as owner of the Aircraft.

6.4 Aviation Authority Filings

6.4.1 Promptly following the Effective Time, the Lessee, the Existing Lessor and the New Lessor will each make available an original counterpart of this Agreement and the Effective Time Supplement (in the case of the Existing Lessor, each notarised and apostilled) for the purpose of filing the same with the *

6.4.2 The New Lessor agrees that the Lessee shall have no obligation to provide (and has not provided) any advice to the New Lessor in connection with the sale and/or purchase of the Aircraft pursuant to the Sale Agreement or in connection with the transactions contemplated under this Agreement (collectively, the “Transaction”) or the registration of the Transaction with the * or the * (the “Registration”).

6.4.3 The New Lessor agrees that the New Lessor is solely responsible for any costs, taxes and fines imposed on the Lessee in connection with the Registration and agrees to indemnify the Lessee should any cost, tax or fine be imposed on the Lessee in relation thereto unless such costs, taxes and fines are imposed as a result of the Lessee undertaking the Registration without the prior written consent of the New Lessor.

7. FURTHER ASSURANCES

At the New Lessor’s cost and to the extent required under the Novated Lease, the Lessee shall perform and do all such other and further acts and things and execute and deliver any and all such other instruments (including any notification to the * of changes in the ownership structure of the Aircraft) as the New Lessor may reasonably require to reflect the change in the identity of the owner and lessor of the Aircraft recited in this Agreement (including, but not limited to, the documents and other evidence specified in Articles 6.3 (Aircraft Documents) and 6.4 (Aviation Authority Filings)) and to perfect or protect the interests of the New Lessor and any other person having a Relevant Interest, and for the purpose of carrying out the intent of and giving the New Lessor the full benefit of the novation effected by this Agreement.

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

Each of the New Lessor and the Existing Lessor shall, at its own cost, perform and do all such other and further acts and things and execute and deliver any and all such other instruments as may be reasonably required to carry out the intent of this Agreement.

8. REPRESENTATIONS AND WARRANTIES

8.1 Lessee’s Representations and Warranties

The Lessee represents and warrants to the New Lessor and the Existing Lessor that, as of the date of this Agreement and as of the Effective Time (in each case by reference to the facts and circumstances then existing):

8.1.1 it is duly incorporated and validly existing and in good standing under the laws of *  and has the power and authority to (a) carry on its business as presently conducted and (b) enter into and perform its obligations under the Novated Lease Documents and the Novation Documents to which it is a party;

8.1.2 it is subject to civil commercial law with respect to its obligations under the Novated Lease Documents and the Novation Documents to which it is a party and neither it nor any of its assets is entitled to any right of immunity and the entry into and performance of the Novated Lease Documents and the Novation Documents to which it is a party by it constitute private and commercial acts;

8.1.3 this Agreement and the other Novation Documents to which it is a party have been duly authorised by all necessary corporate action on its part, have been duly executed and delivered by it and constitute its valid, legal and binding obligations enforceable against it in accordance with their terms except insofar as enforceability may be limited by (i) applicable bankruptcy and similar laws affecting creditors’ rights generally or (ii) general principles of equity;

8.1.4 no authorisation, approval, consent, licence or order of, or registration with, or the giving of notice to any Government Entity is required for the valid authorisation, execution, delivery and performance by it of the Novated Lease Documents and the Novation Documents to which it is a party, except as will have been duly effected as of the Effective Time;

8.1.5 the entry into and performance by it of, and the transactions contemplated by, this Agreement and the other Novation Documents to which it is a party do not and will not: (i) conflict with any laws binding on it; or (ii) conflict with its constitutional documents; or (iii) conflict with or result in any default under any document which is binding upon it or any of its assets;

8.1.6 save as disclosed by the Lessee in writing (after the date hereof in relation to any such matters arising after the date hereof) to the Existing Lessor and the New Lessor, no loss, damage or destruction exceeding US$1,000,000.00 has occurred in respect of the Aircraft or any Engine since Delivery;

8.1.7 the Lease has not been terminated and, save as disclosed by the Lessee in writing (after the date hereof in relation to any such matters arising after the date hereof) to the Existing Lessor and the New Lessor, no Event of Default has occurred and is continuing;

8.1.8 no Total Loss has occurred with respect to the Aircraft; and

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

8.1.9 save as disclosed in writing to the Existing Lessor and the New Lessor, the Aircraft has not been requisitioned, is not subject to a sublease or wetlease nor has any agreement in relation to subleasing or wetleasing of the Aircraft been entered into between the Existing Lessor and the Lessee.

8.2 New Lessor’s Representations and Warranties

The New Lessor represents and warrants to the Lessee and the Existing Lessor that, as of the date of this Agreement and as of the Effective Time:

8.2.1 it is a company duly formed and validly existing under the laws of its jurisdiction of incorporation and has the power and authority to (a) carry on its business as presently conducted and (b) enter into and to perform its obligations under the Novated Lease and the Novation Documents to which it is a party;

8.2.2 it is subject to civil commercial law with respect to its obligations under the Novated Lease Documents and the Novation Documents to which it is a party and neither it nor any of its assets is entitled to any right of immunity and the entry into and performance of the Novated Lease Documents and the Novation Documents to which it is a party by it constitute private and commercial acts;

8.2.3 it has corporate power and authority to enter into and perform this Agreement and the other Novation Documents to which it is party and this Agreement and the other Novation Documents to which it is a party have been duly authorised by all necessary corporate action on its part and constitute its valid, legal and binding obligations enforceable against it in accordance with their terms except insofar as enforceability may be limited by (i) applicable bankruptcy and similar laws affecting creditors’ rights generally or (ii) general principles of equity;

8.2.4 no authorisation, approval, consent, licence or order of, or registration with, or the giving of notice to any Government Entity is required for the valid authorisation, execution, delivery and performance by it of the Novated Lease Documents and the Novation Documents to which it is a party, except as will have been duly effected as of the Effective Time;

8.2.5 the entry into and performance by it of, and the transactions contemplated by, this Agreement and the other Novation Documents to which it is a party do not and will not: (i) conflict with any laws binding on it; or (ii) conflict with its constitutional documents; or (iii) conflict with or result in any default under any document which is binding upon it or any of its assets; and

8.2.6 it is the wholly-owned subsidiary of Contrail Aviation Support, LLC.

8.3 Existing Lessor’s Representations and Warranties

The Existing Lessor hereby represents and warrants to the Lessee and the New Lessor that, as of the date of this Agreement and as of the Effective Time:

8.3.1 it is a company duly incorporated and validly existing under the laws of its jurisdiction of incorporation and has the corporate power and authority to (a) carry on its business as presently conducted and (b) enter into and to perform its obligations under the Novation Documents to which it is a party;

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

8.3.2 it is subject to civil commercial law with respect to its obligations under the Novated Lease Documents and the Novation Documents to which it is a party and neither it nor any of its assets is entitled to any right of immunity and the entry into and performance of the Novated Lease Documents and the Novation Documents to which it is a party by it constitute private and commercial acts;

8.3.3 it has corporate power and authority to enter into and perform this Agreement and the other Novation Documents to which it is party and this Agreement and the other Novation Documents to which it is a party have been duly authorised by all necessary corporate action on its part and constitute its valid, legal and binding obligations enforceable against it in accordance with their terms except insofar as enforceability may be limited by (i) applicable bankruptcy and similar laws affecting creditors’ rights generally or (ii) general principles of equity;

8.3.4 no authorisation, approval, consent, licence or order of, or registration with, or the giving of notice to any Government Entity is required for the valid authorisation, execution, delivery and performance by it of the Novation Documents to which it is a party, except as will have been duly effected as of the Effective Time; and

8.3.5 the entry into and performance by it of, and the transactions contemplated by, this Agreement and the other Novation Documents to which it is a party do not and will not: (i) conflict with any laws binding on it; or (ii) conflict with its constitutional documents; or (iii) conflict with or result in any default under any document which is binding upon it or any of its assets.

9. EFFECTIVE TIME

9.1 Subject to the satisfaction or waiver or deferral, in accordance with Article 5.4 (Waiver or Deferral of Conditions Precedent), of the conditions precedent set out in Articles 5.1 (New Lessor’s Conditions Precedent), 5.2 (Lessee’s Conditions Precedent) and 5.3 (Existing Lessor’s Conditions Precedent), the novation of the Lease Documents contemplated by Article 2 (Novation) and the amendments to the Lease Documents so novated shall become effective at a time (the “Effective Time”), as evidenced by the Effective Time Supplement duly executed by each of the parties thereto and substantially in the form of Schedule 1 (Form of Effective Time Supplement) hereto. At any time before the Effective Time, the Existing Lessor and the New Lessor may serve notice on the Lessee that this Agreement is to be cancelled and not have any effect and upon service of such notice this Agreement shall terminate and be of no effect; provided that Articles 12.3 (Costs and Expenses), 13 (Confidentiality) and 15 (Governing Law) hereof shall survive any such termination.

9.2 Confirmations and Agreements

Each of the Lessee and the Existing Lessor confirms and agrees that:

9.2.1 the amount of monthly Rent payable by the Lessee as at the date of this Agreement is US$ * per month and is payable on the twenty-fifth (25th) day of each month. No rebate arrangements in respect of the Rent are in place and as at the date of this Agreement the Lessee has not pre-paid any Rent;

9.2.2 the Lease Documents (as novated and amended hereby) (i) constitute the entire agreement between the New Lessor and the Lessee with respect to the Aircraft that will be in effect following the Effective Time and (ii) are in full force and effect;

9.2.3 the Agreed Value as at the date of this Agreement is US$ *

9.2.4 the Reserves rates in effect as at the date of this Agreement under the Lease are as specified in Article 9.2.5 below and the balance of the Reserves shall be set out in the Effective Time Supplement at the Effective Time or any other date as agreed by the New Lessor, the Existing Lessor and the Lessee;

Novation and Amendment Agreement * ( MSN * Page 13

*

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

9.2.5 the current Reserve rates under the Lease are:

(a) Airframe Reserves rate for Airframe 6Y Check $ * month;

(b) Airframe Reserves rate for Airframe 12Y Check $ * / month;

(c) Engine Performance Restoration Reserves (ESN * ) rate $ * / engine flight hour;

(d) Engine LLP Reserves (ESN * ) rate $ * / engine flight cycle;

(e) Engine Performance Restoration Reserves (ESN * ) rate $ * / engine flight hour;

(f) Engine LLP Reserves (ESN * ) rate $ * engine flight cycle;

(g) Landing Gear Group Reserves rate $ * / month; and

(h) APU Reserves rate $ * / APU Hour;

9.2.6 the amount of the Security Deposit held by the Existing Lessor as cash is US$ *

9.2.7 the scheduled Expiration Date is June 24, 2019; and

9.2.8 the Early Return Option (as defined in Global Side Letter #2) was not exercised with respect to the Aircraft.

10. NO GREATER OBLIGATION

10.1.1 The Lessee will not be obligated to pay any greater amount following the novation of the Lease pursuant to this Agreement and the sale of the Aircraft to the New Lessor pursuant to the Sale Agreement than it would have had to pay but for such novation and sale and the New Lessor will indemnify the Lessee on demand for any loss suffered or cost incurred from the Effective Time as a result of such assignment or sale (provided that the foregoing shall not apply (a) to any additional risk or cost associated with the insurances to be carried by the Lessee under the Novated Lease or (b) to the Lessee’s indemnity obligations under the Novated Lease).

10.1.2 For the avoidance of doubt, the costs incurred by the Lessee described in Article 12.3.2(a) and 12.3.2(b) will be paid for by the New Lessor in accordance with such Articles.

11. MISCELLANEOUS

11.1 Continuing Effect

Save as provided for herein, the Novated Lease Documents and all provisions thereof shall continue in full force and effect as the legal, valid and binding rights and obligations of each of the New Lessor and the Lessee enforceable in accordance with their respective terms. All representations, warranties and agreements contained in this Agreement shall survive the execution of this Agreement.

Novation and Amendment Agreement * ( MSN * ) Page 14

*

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

11.2 Variation

The provisions of this Agreement shall not be varied otherwise than by an instrument in writing executed by or on behalf of all the parties; provided that the New Lessor and the Lessee shall be entitled to amend, modify or vary the terms of the Novated Lease Documents after the Effective Time without reference to the Existing Lessor.

11.3 Notices

Every notice, request, direction or other communication under this Agreement shall be made in accordance with article 26 of the Lease and shall be sent:

11.3.1 to the New Lessor to:

Contrail Aviation Leasing, LLC

435 Investment Court

Verona, Wisconsin 53593

United States of America

Attention :	President
Facsimile :	+ 1 608 848-8101
Telephone :	+ 1 608 848-8100
E-mail :	joe@contrail.com

11.3.2 to the Existing Lessor and the Lessee to such address and fax number as specified for that party in the Lease immediately prior to the Effective Time, and in respect of e-mail, to the following e-mail addresses:

Existing Lessor:	*
Lessee:	* *

11.4 Counterparts

This Agreement may be executed in any number of counterparts and by any party hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which, when taken together, shall constitute one and the same agreement.

11.5 Lease Provisions

The provisions of article 28.14 of the Lease shall apply to this Agreement as if set out in full herein and as if references therein to this Agreement were to this Agreement.

11.6 Entire Agreement

This Agreement, the other Novation Documents and the Novated Lease Documents together constitute the sole and entire agreement between the parties hereto in relation to the novation of the Lease.

Novation and Amendment Agreement * ( MSN * Page 15

*

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

12. FILINGS, REGISTRATIONS, DOCUMENTARY TAXES AND COSTS AND EXPENSES

12.1 Filings and Registrations

To the extent required under the Novated Lease, the Existing Lessor, the New Lessor and the Lessee shall co-operate, at the cost of the New Lessor, to make all necessary filings and registrations in connection with the Novation Documents required under the laws of * .

12.2 Documentary Taxes

If stamp duty in respect of this Agreement is actually imposed on the Lessee in *  (which stamp duty would not have otherwise been imposed but for the novation under this Agreement) and is in addition to stamp duty already imposed on the Lease (which is payable by the Lessee), such stamp duty shall be for the account of the New Lessor unless such stamp duty is levied as a result of the Lessee registering or filing any of the Novated Lease Documents or any of the Novation Documents with the * without the prior written consent of the New Lessor.

12.3 Costs and Expenses

12.3.1 Except as expressly provided otherwise in this Agreement, the Existing Lessor and the New Lessor shall bear their own costs, fees and expenses (including legal fees) in connection with the negotiation, preparation and completion of this Agreement and performance of the transactions contemplated hereby.

12.3.2 In respect of costs incurred by the Lessee in connection with the transactions contemplated by this Agreement:

(a) The New Lessor shall be responsible for all registration or filing costs incurred by the Lessee including, if applicable, all costs, fees and expenses associated with the deregistration of the Aircraft in the name of the Existing Lessor and the re-registration of the Aircraft in the name of the New Lessor and any new financing with respect to the Aircraft to be put in place by the New Lessor; and

(b) The New Lessor shall be responsible for all other costs, fees and expenses incurred by the Lessee relating to the negotiation, documentation and closing of the transactions contemplated by this Agreement.

13. CONFIDENTIALITY

This Agreement and all non-public information obtained by any party about the another party are confidential and are between the parties to this Agreement only and will not be disclosed by a party to third parties (other than to such party’s auditors or legal advisors; as required in connection with any filings of this Agreement or the Novated Lease Documents, in connection with a financing of the Aircraft, as required for enforcement by any party of its rights and remedies with respect to this Agreement or the Novated Lease Documents or as required by applicable law or for the purposes of any applicable filings and registrations) without the prior written consent of the other parties. If any disclosure will result in this Agreement or the Novated Lease Documents becoming publicly available, the parties will cooperate with one another to obtain confidential treatment as to the commercial terms and other material provisions of this Agreement or the Novated Lease Documents (as applicable).

Novation and Amendment Agreement * MSN * Page 16

*

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

14. ASSIGNMENT

No party may assign any of its respective rights or obligations hereunder or the benefit of this Agreement, save that the New Lessor may assign any of its rights or the benefit of this Agreement in accordance with article 24 of the Novated Lease.

15. GOVERNING LAW AND JURISDICTION

The provisions of article 27 of the Lease with respect to governing law, jurisdiction and legal proceedings are incorporated in this Agreement as if such provisions were set forth herein, mutatis mutandis.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorised representatives as of the day and year first herein written.

Novation and Amendment Agreement * ( MSN * Page 17

*

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

SCHEDULE 1

FORM OF EFFECTIVE TIME SUPPLEMENT

(1) * (“Lessee”)

(2) * as trustee under the Trust Agreement (“Existing Lessor”)

(3) Contrail Aviation Leasing, LLC (“New Lessor”)

Existing Lessor, New Lessor and Lessee hereby agree as follows:

1. This Effective Time Supplement (this “Supplement”) is entered into for purposes of the Novation and Amendment Agreement dated                      2018 between the parties to this Supplement (the “Agreement”) relating to the one Airbus A319-100 aircraft bearing manufacturer’s serial number * together with two (2) IAE V2524-A5 engines with manufacturer’s serial numbers * and * (the “Aircraft”).

2. Terms used in this Supplement shall have the meanings given to them in the Agreement and the Novated Lease.

3. Lessee, Existing Lessor and New Lessor confirm that the conditions precedent for its benefit contained in the Agreement have been satisfied, deferred or waived and that the novation and amendment contemplated in the Agreement has occurred and the Effective Time was                     [a.m.][p.m.] local time on this              day of [●] 2018 while the aircraft with manufacturer’s serial number * was located at                     .

4. Lessee, Existing Lessor and New Lessor confirm that the representations and warranties made by it in the Agreement are true and correct at the Effective Time.

5. New Lessor and Existing Lessor hereby notify Lessee that at the Effective Time ownership in the Aircraft has been transferred to New Lessor.

6. The amount of the Security Deposit held by Existing Lessor and transferred to New Lessor at the Effective Time is $            .

7. The balance of the Reserves held by Existing Lessor less any amounts reimbursed by Existing Lessor to Lessee under the Lease or otherwise accounted for under the Lease are as at the date hereof as follows and such amounts have been transferred by Existing Lessor to New Lessor at the Effective Time:

(a) in respect of the Airframe 6Y Check Reserves: US$[●];

(b) in respect of the Airframe 12Y Check Reserves: US$[●];

(c) in respect of the Engine LLP Reserves (ESN * ): US$[●];

(d) in respect of the Engine LLP Reserves (ESN * ): US$[●];

(e) in respect of Engine Performance Restoration Reserves (ESN * ): US$[●];

(f) in respect of Engine Performance Restoration Reserves (ESN * ): US$[●];

Novation and Amendment Agreement * MSN * SCHEDULE 1 - Page 1

*

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

(g) in respect of the Landing Gear Reserves: US$[●]; and

(h) in respect of the APU Reserves: US$[●].

8. This Effective Time Supplement and all non-contractual obligations arising from or in connection with it are governed by and shall be construed in accordance with the Laws of New York.

[Signature Page follows]

Novation and Amendment Agreement * MSN * SCHEDULE 1 - Page 2

*

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

SIGNATURES

Existing Lessor

* 

* 

* 

* 

* 

* 

By:

Name:

Title:

New Lessor

Contrail Aviation Leasing, LLC

By:

Name:

Title:

Lessee

* 

* 

By:

Name:

Title:

Novation and Amendment Agreement * ( MSN * ) SCHEDULE 1 - Page 3

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

SCHEDULE 2

LEASE DOCUMENTS

1. Aircraft Lease Agreement dated as of October 26, 2001, between * and *  (also known as ).

2. Estoppel and Acceptance Certificate dated June 25, 2002 executed by * (also known as * ).

3. Side Letter dated as of October 26, 2001 between * and *  (also known as * ).

4. Amendment No. 1 dated as of June 25, 2002, between *  and *  (also known as * ).

5. Global Side Letter No. 1 dated as of January 30, 2004, between *  and *  (also known as *  only insofar as it relates to the Aircraft.

6. Assignment, Assumption and Amendment Agreement dated as of November 4, 2011, between * , * and * .

7. Global Side Letter No. 2 dated as of November 4, 2011, between *  and *  only insofar as it relates to the Aircraft.

8. Global Amendment No. 1 dated as of June 29, 2016, between *  and *  only insofar as it relates to the Aircraft.

Novation and Amendment Agreement * ( MSN * ) SCHEDULE 2 - Page 1

*

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

SCHEDULE 3

FORM OF REPLACEMENT POWER OF ATTORNEY

* hereby irrevocably appoints CONTRAIL AVIATION LEASING, LLC (“CONTRAIL AVIATION LEASING, LLC”), organized and existing under the laws of the State of Wisconsin, United States of America whose principal place of business office is at 435 Investment Court, Verona, Wisconsin 53593, United States of America as *  true and lawful attorney so that CONTRAIL AVIATION LEASING, LLC may take any of the following actions in the name of and for *  with respect to the A319-100 aircraft bearing manufacturer’s serial number *  (the “Aircraft”) leased by CONTRAIL AVIATION LEASING, LLC to *  pursuant to an Aircraft Lease Agreement dated as of October 26, 2001, as assigned and amended from time to time and as novated and amended pursuant to the Novation and Amendment Agreement dated as of [●] (the “Lease”):

1.    Pursuant to the Lease, *  has procured and is maintaining insurances for the Aircraft. CONTRAIL AVIATION LEASING, LLC has been named sole loss payee on the all risk hull and war risk insurances for the Aircraft. In the event of a total loss or constructive total loss of the Aircraft. CONTRAIL AVIATION LEASING, LLC is entitled to receive insurance proceeds in an amount equal to the Agreed Value (as defined in the Lease). CONTRAIL AVIATION LEASING, LLC may take all action and sign all documents otherwise required to be performed by *  including execution on behalf of *  of an appropriate form of discharge/release document, in order for CONTRAIL AVIATION LEASING, LLC to collect such insurance proceeds.

2.    In the exercise of the rights of CONTRAIL AVIATION LEASING. LLC under the Lease to recover the Aircraft from *  and *  after termination of the Lease due to an Event of Default (as defined in the Lease) under the Lease or for termination of the Lease due to any other reason. CONTRAIL AVIATION LEASING, LLC may take all action otherwise required to be performed by *  before the authorities and courts in *  in order to cause the Aircraft to be repossessed by CONTRAIL AVIATION LEASING, LLC, deregistered from the *  and/or the *  or any successor thereof, and any other person or Government Entity (as defined in the Lease) which from time to time has control over civil aviation or the registration, airworthiness or operation of aircraft in *  (the “Aeronautics Authorities”), operated and exported from * 

3.    In the exercise of the rights mentioned in paragraphs 1 to 2, CONTRAIL AVIATION LEASING, LLC may make any declarations or statements and sign any public or private documents which may be considered necessary or appropriate.

4.    CONTRAIL AVIATION LEASING, LLC may delegate the powers conferred hereby, in whole or in part, to any individual(s), including but not limited to employees of CONTRAIL AVIATION LEASING, LLC or legal counsel in * 

CONTRAIL AVIATION LEASING, LLC is empowered to determine in its sole discretion when to exercise the powers conferred upon CONTRAIL AVIATION LEASING, LLC pursuant to this Power of Attorney. Any person, agency or company relying upon this Power of Attorney need not and will not make any determination or require any court judgment as to whether an Event of Default (as defined in the Lease) is outstanding under the Lease or whether the Lease has been terminated.

* hereby waives any claims against (a) any person acting on the instructions given by CONTRAIL AVIATION LEASING, LLC or its designee pursuant to this Power of Attorney and (b) any person designated by CONTRAIL AVIATION LEASING, LLC or an officer of CONTRAIL AVIATION LEASING, LLC to give instructions pursuant to this Power of Attorney. *  also

Novation and Amendment Agreement * ( MSN * SCHEDULE 5 - Page 1

*

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

agrees to indemnify and hold harmless any person, agency or company which may act in reliance upon this Power of Attorney and pursuant to instructions given by CONTRAIL AVIATION LEASING, LLC or its designee.

* expressly declares that CONTRAIL AVIATION LEASING, LLC may use this power of attorney to do business with “itself”.

This Power of Attorney is irrevocable as it is granted for the benefit of CONTRAIL AVIATION LEASING, LLC in accordance with Articles *  of the *  Civil Code, and may only be revoked with the approval of CONTRAIL AVIATION LEASING, LLC or when the Aircraft has been returned to the possession of CONTRAIL AVIATION LEASING, LLC, deregistered and exported from * 

* has made and delivered this Power of Attorney on                  in [●].

*

By:

Title:

Novation and Amendment Agreement * MSN * SCHEDULE 5 - Page 2

* 

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

SIGNATURES

EXISTING LESSOR *  *  *  *
By:
Name:
Title:
NEW LESSOR
Contrail Aviation Leasing, LLC
By:	/s/ JOSEPH G. KUHN
Name:	JOSEPH G. KUHN
Title:	CEO
LESSEE *
By:	*                              *
Name:	*
Title:	*

Novation and Amendment Agreement * MSN * ) SIGNATURES

*

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

SIGNATURES

EXISTING LESSOR *  *  *  *
By:	*  *
Name:	*
Title:	*
NEW LESSOR
Contrail Aviation Leasing, LLC
By:
Name:
Title:
LESSEE *  *
By:
Name:
Title:

Novation and Amendment Agreement * MSN * ) SIGNATURES

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

ACL01.78-C.wpd

1 new A319-100 (June 2002)

AIRCRAFT LEASE AGREEMENT

Dated as of October 26, 2001

BETWEEN

* 

as LESSEE

and

* 

as LESSOR

Aircraft Make and Model:	New Airbus A319-100
Aircraft Manufacturer’s Serial Number:	Per Estoppel and Acceptance Certificate
Aircraft Registration Mark:	Per Estoppel and Acceptance Certificate
Make and Model of Engines:	IAE V2524-A5
Serial Numbers of Engines:	Per Estoppel and Acceptance Certificate

NEW AIRCRAFT NO. 1

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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1 new A319-100 (June 2002)

TABLE OF CONTENTS

ARTICLE 1	SUMMARY OF TRANSACTION	2
1.1	Description of Aircraft	2
1.2	Scheduled Delivery Date and Location	2
1.3	Lease Term	2
1.4	Security Deposit	2
1.5	Rent During Lease Term	2
1.6	Reserves	3
1.7	Country of Aircraft Registration	3
1.8	Maintenance Program	3
1.9	Agreed Value of Aircraft	3
1.10	LESSOR’s Bank Account	3
ARTICLE 2	DEFINITIONS	4
2.1	General Definitions	4
2.2	Specific Definitions	8
ARTICLE 3	PLACE AND DATE OF DELIVERY	9
3.1	Place of Delivery	9
3.2	Scheduled Delivery Date	9
3.3	Delivery subject to Manufacturer Delivery	9
3.4	No LESSOR Liability	9
3.5	Total Loss of Aircraft prior to Delivery	9
3.6	Cancellation for Anticipatory Delay	9
3.7	Cancellation for Delay	9
ARTICLE 4	LEASE TERM	11
4.1	Lease Term	11
4.2	“Expiration Date”	11
4.3	“Termination Date”	11
ARTICLE 5	SECURITY DEPOSIT, RENT, RESERVES AND OTHER PAYMENTS	12
5.1	Security Deposit	12
5.2	LESSOR Costs	13
5.3	Rent	13
5.4	Reserves	13
5.5	LESSOR’s Bank Account	14

i TABLE OF CONTENTS

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1 new A319-100 (June 2002)

5.6	Default Interest	15
5.7	No Deductions or Withholdings	15
5.8	Value Added Taxes	15
5.9	Wire Transfer Disbursement Report	15
5.10	Net Lease	15
5.11	Currency Indemnity	16
5.12	LESSOR Performance of LESSEE Obligation	17
5.13	Consideration for Rent and other Amounts	17
ARTICLE 6	INVOLVEMENT WITH AIRCRAFT MANUFACTURER	18
6.1	LESSEE Selection of Aircraft	18
6.2	Participation Agreement	18
6.3	Procurement of BFE	18
6.4	Assignment of Training	18
6.5	LESSEE Inspection of Aircraft	18
6.6	Aircraft at Delivery	18
6.7	Delivery of the Aircraft to LESSEE	19
6.8	LESSEE Acceptance of Aircraft	19
ARTICLE 7	PRE-DELIVERY, DELIVERY AND POST-DELIVERY DOCUMENTARY AND OTHER REQUIREMENTS	20
7.1	Pre-Delivery Requirements	20
7.2	Delivery Requirements	21
7.3	Post-Delivery Requirements	22
7.4	LESSOR Delivery Requirements	22
ARTICLE 8	DISCLAIMERS	24
8.1	“As Is, Where Is”	24
8.2	Waiver of Warranty of Description	24
8.3	LESSEE Waiver	25
8.4	Conclusive Proof	25
8.5	No LESSOR Liability for Losses	25
8.6	No Liability to Repair or Replace	25
8.7	No Waiver	26
ARTICLE 9	MANUFACTURERS’ AND VENDORS’ WARRANTIES	27
9.1	Warranties	27
9.2	Reassignment	27
9.3	Warranty Claims	27

ii TABLE OF CONTENTS

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1 new A319-100 (June 2002)

ARTICLE 10	OPERATION OF AIRCRAFT	28
10.1	Costs of Operation	28
10.2	Compliance with Laws	28
10.3	Training	28
10.4	No Violation of Insurance Policies	28
10.5	Flight Charges	28
ARTICLE 11	SUBLEASES	30
11.1	No Sublease without LESSOR Consent	30
11.2	Subleasing Proposal Fee	30
11.3	Any Approved Sublease	29
11.4	Assignment of Sublease	29
11.5	Continued Responsibility of LESSEE	29
ARTICLE 12	MAINTENANCE OF AIRCRAFT	30
12.1	General Obligation	30
12.2	Specific Obligations	30
12.3	Replacement of Parts	32
12.4	Removal of Engines	32
12.5	Pooling of Engines and Parts	33
12.6	Installation of Engines on other aircraft	33
12.7	Engine Thrust Rating	34
12.8	Modifications	34
12.9	Performance of Work by Third Parties	35
12.10	Reporting Requirements	35
12.11	Information Regarding Maintenance Program	36
12.12	LESSOR Rights to Inspect Aircraft	36
ARTICLE 13	USE OF RESERVES	37
13.1	Airframe Reserves	37
13.2	Engine Performance Restoration Reserves	37
13.3	Engine LLP Reserves	37
13.4	Reimbursement	38
13.5	Reimbursement Adjustment	38
13.6	Costs in Excess of Reserves	38
13.7	Reimbursement after Termination Date	38
ARTICLE 14	TITLE AND REGISTRATION	39
14.1	Title to the Aircraft During Lease Term	39
14.2	Registration of Aircraft	39
14.3	Filing of this Lease	39
14.4	Evidence of Registration and Filings	39

iii TABLE OF CONTENTS

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1 new A319-100 (June 2002)

ARTICLE 15	IDENTIFICATION PLATES	40
15.1	Airframe Identification Plates	40
15.2	Engine Identification Plates	40
ARTICLE 16	TAXES	40
16.1	General Obligation of LESSEE	41
16.2	Exceptions to Indemnity	41
16.3	After-Tax Basis	42
16.4	Timing of Payment	42
16.5	Contests	42
16.6	Refunds	42
16.7	Cooperation in Filing Tax Returns	43
16.8	Survival of Obligations	43
ARTICLE 17	INDEMNITIES	44
17.1	General Indemnity	44
17.2	Exceptions to General Indemnities	45
17.3	After-Tax Basis	45
17.4	Timing of Payment	46
17.5	Subrogation	46
17.6	Notice	46
17.7	Refunds	46
17.8	Defense of Claims	46
17.9	Survival of Obligation	46
ARTICLE 18	INSURANCE	48
18.1	Categories of Insurance	48
18.2	Write-back of any Date Recognition Exclusion	48
18.3	Insurance for Indemnities	48
18.4	Insurance for Wet Lease Operations	48
18.5	Renewal	48
18.6	Assignment of Rights by LESSOR	48
18.7	Deductibles	49
18.8	Other Insurance	49
18.9	Information	49
18.10	Currency	49
18.11	Grounding of Aircraft	49
18.12	Failure to Insure	49
18.13	Reinsurance	49
18.14	Limit on Hull in favor of LESSEE	50

iv TABLE OF CONTENTS

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1 new A319-100 (June 2002)

ARTICLE 19	LOSS, DAMAGE AND REQUISITION	51
19.1	Definitions	51
19.2	Notice of Total Loss	52
19.3	Total Loss of Aircraft or Airframe	52
19.4	Surviving Engine(s)	53
19.5	Total Loss of Engine and not Airframe	54
19.6	Other Loss or Damage	55
19.7	Copy of Insurance Policy	55
19.8	Government Requisition	55
19.9	LESSOR Retention of Reserves	56
ARTICLE 20	REPRESENTATIONS, WARRANTIES AND COVENANTS OF LESSEE	57
20.1	Representations and Warranties	57
20.2	Covenants	59
ARTICLE 21	REPRESENTATIONS, WARRANTIES AND COVENANTS OF LESSOR	61
21.1	Representations and Warranties	61
21.2	Covenant of Quiet Enjoyment	61
ARTICLE 22	FINANCIAL AND RELATED INFORMATION	62
ARTICLE 23	RETURN OF AIRCRAFT	63
23.1	Date of Return	63
23.2	Technical Reporting	63
23.3	Return Location	63
23.4	Full Aircraft Documentation Review	63
23.5	Aircraft Inspection	63
23.6	Certificate of Airworthiness Matters	64
23.7	General Condition of Aircraft at Return	65
23.8	Checks Prior to Return	67
23.9	Part Lives	69
23.10	Export and Deregistration of Aircraft	70
23.11	LESSEE’S Continuing Obligations	71
23.12	Airport and Navigation Charges	72
23.13	Return Acceptance Certificate	72
23.14	Indemnities and Insurance	72
23.15	Storage	72

v TABLE OF CONTENTS

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1 new A319-100 (June 2002)

ARTICLE 24	ASSIGNMENT	73
24.1	No Assignment by LESSEE	73
24.2	Sale or Assignment by LESSOR	73
24.3	LESSOR’s Lender	73
24.4	LESSEE Cooperation	73
24.5	Protections	73
ARTICLE 25	DEFAULT OF LESSEE	75
25.1	LESSEE Notice to LESSOR	75
25.2	Events of Default	75
25.3	LESSOR’s General Rights	77
25.4	Deregistration and Export of Aircraft	77
25.5	LESSEE Liability for Damages	77
25.6	Waiver of Default	78
25.7	Present Value of Payments	78
25.8	Use of “Termination Date”	79
ARTICLE 26	NOTICES	80
26.1	Manner of Sending Notices	80
26.2	Notice Information	80
ARTICLE 27	GOVERNING LAW AND JURISDICTION	81
27.1	California Law	81
27.2	Non-Exclusive Jurisdiction in California	81
27.3	Service of Process	81
27.4	Prevailing Party in Dispute	81
27.5	Waiver	81
ARTICLE 28	MISCELLANEOUS	82
28.1	Transportation of Personnel	82
28.2	Press Releases	82
28.3	Power of Attorney	82
28.4	LESSOR Performance for LESSEE	82
28.5	LESSOR’s Payment Obligations	82
28.6	Application of Payments	82
28.7	Usury Laws	82
28.8	Delegation by LESSOR	83
28.9	Confidentiality	83
28.10	Rights of Parties	83
28.11	Further Assurances	83
28.12	Use of Word “including”	83

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28.13	Headings	83
28.14	Invalidity of any Provision	83
28.15	Negotiation	84
28.16	Time is of the Essence	84
28.17	Amendments in Writing	84
28.18	Counterparts	84
28.19	Delivery of Documents by Fax	84
28.20	Entire Agreement	84
28.21	Witness	84
EXHIBIT A	AIRCRAFT DESCRIPTION	86
EXHIBIT B	PARTICIPATION AGREEMENT	87
EXHIBIT C	CERTIFICATE OF INSURANCE	88
EXHIBIT D	BROKERS’ LETTER OF UNDERTAKING	94
EXHIBIT E	AVIATION AUTHORITY UNDERTAKING LETTER	96
EXHIBIT F	ESTOPPEL AND ACCEPTANCE CERTIFICATE	97
EXHIBIT G	OPINION OF COUNSEL	99
EXHIBIT H	FORM OF POWER OF ATTORNEY	102
EXHIBIT I	ASSIGNMENT OF RIGHTS (AIRFRAME)	104
EXHIBIT J	ASSIGNMENT OF RIGHTS (ENGINES)	105
EXHIBIT K	RETURN ACCEPTANCE RECEIPT	106
EXHIBIT L	MONTHLY REPORT	112
EXHIBIT M	TECHNICAL EVALUATION REPORT	115

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AIRCRAFT LEASE AGREEMENT

THIS AIRCRAFT LEASE AGREEMENT is made and entered into as of October 26, 2001.

BETWEEN:

* , a * corporation whose address and principal place of business is at *  (“LESSEE”) and

* , a * corporation whose address and principal place of business is at *  (“LESSOR”).

The subject matter of this Lease is one (1) new Airbus A319-100 aircraft. In consideration of and subject to the mutual covenants, terms and conditions contained in this Lease, LESSOR hereby agrees to lease to LESSEE and LESSEE hereby agrees to lease from LESSOR the Aircraft for the Lease Term and the parties further agree as follows:

1 RECITALS

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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ARTICLE 1         SUMMARY OF TRANSACTION

The following is a summary of the lease transaction between LESSEE and LESSOR. It is set forth for the convenience of the parties only and will not be deemed in any way to amend, detract from or simplify the other provisions of this Lease.

1.1 Description of Aircraft

One new Airbus A319-100

1.2 Scheduled Delivery Date and Location

In the month of June 2002, at Hamburg, Germany

1.3 Lease Term

10 years

1.4 Security Deposit

US$ * , payable as follows (in U.S. Dollars):

Received	*
Within 5 business days following execution of the Lease	*
3 business days prior to scheduled delivery date	*

1.5 Rent During Lease Term

Payable monthly in advance and equal to *  U.S. Dollars (US$ *  for a MTOW of 70 tonnes, or *  U.S. Dollars (US$ * ) for a MTOW of 64 tonnes.

2 ARTICLE 1 SUMMARY OF TRANSACTION

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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1.6 Reserves

A total of US$ *  per flight hour, as follows:

Airframe Reserves:	US$ *  per airframe flight hour
Engine Performance Restoration Reserves:	US$ *  per engine flight hour for each engine
Engine LLP Reserves:	US$ *  per engine flight hour for each engine

1.7 Country of Aircraft Registration

* 

1.8 Maintenance Program

LESSEE’s Maintenance Program

1.9 Agreed Value of Aircraft

* % of Airbus’s list price for the Aircraft and any additional LESSEE specified changes and LESSOR purchased equipment (BFE) on the date LESSEE takes delivery of the Aircraft, based upon the invoice provided by Airbus. Such agreed value shall decline by * % on each anniversary of the date LESSEE takes delivery of the Aircraft.

1.10 LESSOR’s Bank Account

* 

Account No. * 

Chase Manhattan Bank

55 Water Street

New York, NY 10041

ABA# 021000021

3 ARTICLE 1 SUMMARY OF TRANSACTION

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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ARTICLE 2        DEFINITIONS

Except where the context otherwise requires, the following words have the following meanings for all purposes of this Lease. The definitions are equally applicable to the singular and plural forms of the words. Any agreement defined below includes each amendment, modification, supplement and waiver thereto in effect from time to time.

2.1 General Definitions.

“Aircraft” means the Airframe, the two (2) Engines, the Parts and the Aircraft Documentation, collectively. As the context requires, “Aircraft” may also mean the Airframe, any Engine, any Part, the Aircraft Documentation or any part thereof individually. For example, in the context of return to LESSOR the term “Aircraft” means the Airframe, Engines, Parts and Aircraft Documentation collectively, yet in the context of LESSEE not creating any Security Interests other than Permitted Liens on the Aircraft, the term “Aircraft” means any of the Airframe, any Engine, any Part or the Aircraft Documentation individually.

“Aircraft Documentation” means all (a) log books, Aircraft records, manuals and other documents provided to LESSEE in connection with the Aircraft, (b) documents listed in Exhibits K and (c) any other documents required to be maintained during the Lease Term by the Aviation Authority, LESSEE’s Maintenance Program and this Lease.

“Airframe” means the airframe described in Exhibit A together with all Parts relating thereto (except Engines or engines).

“Airworthiness Directives” or “ADs” means all airworthiness directives (or equivalent) and other instructions of the FAA and the Aviation Authority applicable to the Aircraft.

“APU” means (a) the auxiliary power unit of the Aircraft.

“Aviation Authority” means the Civil Aviation Authority of *  or any Government Entity which under the Laws of *  from time to time has control over civil aviation or the registration, airworthiness or operation of aircraft in *  If the Aircraft is registered in a country other than * , “Aviation Authority” means the agency which regulates civil aviation in such other country.

“Aviation Documents” means any or all of the following which at any time may be obtainable from the Aviation Authority: (a) if required, a temporary certificate of airworthiness from the Aviation Authority allowing the Aircraft to be flown after Delivery to the State of Registration, (b) an application for registration of the Aircraft with the appropriate authority in the State of

4 ARTICLE 2 DEFINITIONS

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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Registration, (c) the certificate of registration for the Aircraft issued by the State of Registration, (d) a full certificate of airworthiness for the Aircraft specifying transport category (passenger), (e) an air transport license, (f) an air operator’s certificate, (g) such recordation of LESSOR’s title to the Aircraft and interest in this Lease as may be available in the State of Registration and (h) all such other authorizations, approvals, consents and certificates in the State of Registration as may be required to enable LESSEE lawfully to operate the Aircraft.

“BFE” means any equipment which is to be provided by the purchaser of the Aircraft (whether actually provided by LESSOR as buyer-furnished equipment or Manufacturer as seller-purchased equipment).

“Business Day” means a day other than a Saturday or Sunday on which the banks in *  and the city where LESSOR’s Bank are located are open for the transaction of business of the type required by this Lease.

“Creditor” means any lessor, owner, bank, lender, mortgagee or other Person which is the owner of or has any interest in an aircraft engine or aircraft operated by LESSEE.

“Creditor Agreement” means the applicable agreement between a Creditor and LESSEE or between Creditors pursuant to which such Creditor owns, leases or has an interest in either an aircraft operated by LESSEE on which an Engine may be installed or in an aircraft engine which may be installed on the Airframe.

“Default” means any event which, upon the giving of notice, the lapse of time and/or a relevant determination, would constitute an Event of Default.

“Delivery” means the delivery of the Aircraft from LESSOR to LESSEE pursuant to Articles 3 and 6.

“Delivery Date” means the date on which Delivery takes place.

* 

“Dollars” and “$”means the lawful currency of the U.S.

“Engine” means (a) each of the engines listed on the Estoppel and Acceptance Certificate; (b) any replacement engine acquired by LESSOR and leased to LESSEE pursuant to Article 19.5 following a Total Loss of an Engine; and (c) all Parts installed in or on any of such engines at Delivery (or substituted, renewed or replacement Parts in accordance with this Lease) so long as title thereto is or remains vested in LESSOR in accordance with the terms of Article 12.3.

5 ARTICLE 2 DEFINITIONS

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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“Event of Default” means any of the events referred to in Article 25.2.

“FAA” means the Federal Aviation Administration of the Department of Transportation or any successor thereto under the Laws of the U.S.

“FARs” means the U.S. Federal Aviation Regulations embodied in Title 14 of the U.S. Code of Federal Regulations, as amended from time to time, or any successor regulations thereto.

“Geneva Convention” means the Convention on the International Recognition of Rights in Aircraft signed in Geneva, Switzerland on June 19, 1948.

“Government Entity” means any (a) national, state or local government, (b) board, commission, department, division, instrumentality, court, agency or political subdivision thereof and (c) association, organization or institution of which any of the entities listed in (a) or (b) is a member or to whose jurisdiction any such entity is subject.

“Landing Gear” means the installed main and nose landing gear, components and their associated actuators, side braces and parts.

“Law” means any (a) statute, decree, constitution, regulation, order or any directive of any Government Entity, (b) treaty, pact, compact or other agreement to which any Government Entity is a signatory or party and (c) judicial or administrative interpretation or application of any of the foregoing.

“Lease” means this Aircraft Lease Agreement, together with all Exhibits hereto.

“LESSOR’s Lien” means any Security Interest created by or through LESSOR.

“Maintenance Program” means LESSEE’s maintenance program as approved by the Aviation Authority or such other maintenance program as LESSOR may, in its discretion, accept in writing.

“Manufacturer” means Airbus Industrie, a “Groupement d’Interet Economique” established under Ordonnance No. 67-821 dated September 23, 1967 of the republic of France.

“MPD” means the Maintenance Planning Document published by the Manufacturer and applicable to the Aircraft.

“Overhaul” means the full reconditioning of the Aircraft, an Engine, APU, Landing Gear, module or Part, as the case may be, in which such equipment has been fully disassembled; cleaned; thoroughly inspected; and returned to the highest standard specified by the applicable manufacturer’s manual.

6 ARTICLE 2 DEFINITIONS

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“Part” means any part, component, appliance, system module, engine module, the APU, accessory, material, instrument, communications equipment, furnishing, LESSEE-furnished or LESSOR-purchased equipment or other item of equipment (other than complete Engines or engines or the APU) for the time being installed in or attached to the Airframe, any Engine or which, having been removed from the Airframe, any Engine, remains the property of LESSOR.

“Permitted Lien” means (a) LESSOR’s Liens; (b) Security Interests arising in the ordinary course of LESSEE’s business for Taxes either not yet assessed or, if assessed, not yet due or being contested in good faith in accordance with Article 16.5 or (c) materialmen’s, mechanics’, workmen’s, repairmen’s, employees’ liens or similar Security Interests arising by operation of Law after the Delivery Date in the ordinary course of LESSEE’s business for amounts which are either not yet due or are being contested in good faith by appropriate proceedings (and for which adequate reserves have been made or, when required in order to pursue such proceedings, an adequate bond has been provided) so long as such proceedings do not involve any danger of sale, forfeiture or loss of the Aircraft.

“Person” means any individual, firm, partnership, joint venture, trust, corporation, Government Entity, committee, department, authority or any body, incorporated or unincorporated, whether having distinct legal personality or not.

“Prime Rate” means the rate of interest from time to time announced by Chase Manhattan Bank in New York as its prime commercial lending rate.

“Prohibited Country” means any country to which the export and/or use of an A319 aircraft with IAE engines attached thereto is not permitted under (a) any United Nations sanctions, (b) the U.K. Export of Goods Control Order 1992, (c) the United States Export Administration Act 1979 (as amended) or any successor legislation and/or the Export Administration Regulations promulgated thereunder, (d) where applicable, the various regulations administered from time to time by the Office of Foreign Assets Control of the U.S. Treasury Department, (e) any similar or corresponding legislation then in effect in the U.S., the United Kingdom, France, Spain or Germany or (f) any subsequent United Nations Sanctions Orders the effect of which prohibits or restricts the export and/or use of A319 aircraft with IAE engines attached thereto to such country.

“Security Interest” means any encumbrance or security interest, however and wherever created or arising including (without prejudice to the generality of the foregoing) any right of ownership, security, mortgage, pledge, charge, encumbrance, lease, lien, statutory or other right in rem, hypothecation, title retention, attachment, levy, claim or right of possession or detention.

7 ARTICLE 2 DEFINITIONS

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“State of Registration” means *  or such other country or state of registration of the Aircraft as LESSOR may, in its absolute discretion, approve in writing.

“U.S.” means the United States of America.

2.2 Specific Definitions. The following terms are defined in the Articles referenced below:

Terms	Article
Agreed Value		19.1
Airframe Reserves		5.4.1
Default Interest		5.6
Delivery Location		3.1
Engine LLP Reserves		5.4.1
Engine Performance		5.4.1
Restoration Reserves
Expenses		17.1
Expiration Date		4.2
Indemnitees		17.1
Lease Term		4.1
LESSOR’s Assignee		24.2
LESSOR’s Bank		5.5
LESSOR’s Lender		24.3
Modification		12.8.1
Net Total Loss Proceeds		19.1
Operative Documents		20.1.3
Rent		5.3.1
Reserves		5.4.1
Scheduled Delivery Date		3.2
Security Deposit		5.1.1
Taxes		16.1
Termination Date		4.3
Total Loss		19.1
Total Loss Date		19.1
Total Loss Proceeds		19.1

8 ARTICLE 2 DEFINITIONS

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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ARTICLE 3          PLACE AND DATE OF DELIVERY

3.1 Place of Delivery. LESSOR will deliver the Aircraft to LESSEE at Manufacturer’s facility at Hamburg, Germany or such other place as may be agreed in writing between the parties (the “Delivery Location”).

3.2 Scheduled Delivery Date. As of the date of this Lease, Delivery of the Aircraft from Manufacturer to LESSOR is scheduled to occur in the month of June 2002. LESSOR will notify LESSEE from time to time and in a timely manner (always to give at least 30 days’ prior notice) of the target date on which LESSOR expects Delivery to take place (the “Scheduled Delivery Date”).

3.3 Delivery subject to Manufacturer Delivery. LESSOR and LESSEE expressly acknowledge that Delivery of the Aircraft to LESSEE is subject to and conditioned upon delivery of the Aircraft by Manufacturer to LESSOR.

3.4 No LESSOR Liability. LESSOR will not be liable for any loss or expense, or any loss of profit, arising from any delay or failure in Delivery to LESSEE unless such delay or failure arises as a direct consequence of the willful misconduct of LESSOR, and in no event will LESSOR be liable for any delay or failure which is caused by any breach or delay on the part of Manufacturer or any BFE supplier.

3.5 Total Loss of Aircraft prior to Delivery. If a Total Loss of the Aircraft occurs prior to Delivery, neither party will have any further liability to the other except that LESSOR will return to LESSEE the Security Deposit in accordance with Article 5.1.3 and any prepaid Rent.

3.6 Cancellation for Anticipatory Delay. Promptly after LESSOR becomes aware that in Manufacturer’s opinion a delay will cause Delivery to be delayed beyond June 30, 2003, LESSOR will notify LESSEE. By written notice given within ten (10) Business Days after LESSEE’s receipt of such LESSOR notice, either party may by written notice to the other party terminate this Lease and this Lease will terminate on the date of receipt of such notice. In the event of such termination, neither party will have any further liability to the other party except that LESSOR will return to LESSEE the Security Deposit in accordance with Article 5.1.3 and any prepaid Rent. If neither party gives notice of termination within such ten (10) Business Days, both parties lose all right to terminate under this Article 3.6 unless otherwise agreed in writing by the parties.

3.7 Cancellation for Delay. If a delay, not caused by LESSEE’s or LESSOR’s breach of this Lease, causes Delivery to be delayed beyond June 30, 2003, either party may terminate this Lease by giving the other party written notice within ten (10) Business Days after such

9 ARTICLE 3 PLACE AND DATE OF DELIVERY

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date and this Lease will terminate on the date of receipt of such notice. In the event of such termination, neither party will have any further liability to the other party except that LESSOR will return to LESSEE the Security Deposit in accordance with Article 5.1.3 and any prepaid Rent. If neither party gives notice of termination within such ten (10) Business Days, both parties lose all right to terminate under this Article 3.7, unless otherwise agreed in writing by the parties.

10 ARTICLE 3 PLACE AND DATE OF DELIVERY

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ARTICLE 4         LEASE TERM

4.1 Lease Term. The term of leasing of the Aircraft will commence on the Delivery Date and continue for a term of ten (10) years (“Lease Term”).

4.2 “Expiration Date”. “Expiration Date” means the date on which LESSEE is required to redeliver the Aircraft to LESSOR in the condition required by this Lease on the last day of the Lease Term.

4.3 “Termination Date”. This Lease may in fact terminate on any of the dates set forth below:

(a) the Expiration Date, provided LESSEE returns the Aircraft to LESSOR on the Expiration Date in the condition required by Article 23; or

(b) a date earlier than the Expiration Date, if:

(i) there is a Total Loss of the Aircraft prior to Delivery pursuant to Article 3.5;

(ii) cancellation of this Lease occurs pursuant to Article 3.6;

(iii) there is a Total Loss of the Aircraft and payment is made to LESSOR in accordance with Article 19.3; or

(iv) an Event of Default occurs and LESSOR repossesses the Aircraft or otherwise terminates this Lease pursuant to Article 25.3.

(c) a date later than the Expiration Date, if:

(i) an Event of Default occurs hereunder by LESSEE returning the Aircraft in the condition required by this Lease after the Expiration Date; or

(ii) an Event of Default occurs and LESSOR repossesses the Aircraft or otherwise terminates this Lease pursuant to Article 25.3.

The “Termination Date” is the date on which this Lease terminates because one of the above has occurred.

11 ARTICLE 4 LEASE TERM

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ARTICLE 5         SECURITY DEPOSIT, RENT, RESERVES AND OTHER PAYMENTS

5.1 Security Deposit.

5.1.1 LESSEE will pay LESSOR a security deposit of *  U.S. Dollars (US$ * ) for its lease of the Aircraft (the “Security Deposit”). The Security Deposit is payable as follows (in US$):

Received	*
Within five (5) Business Days following execution of the Lease	*
Three (3) Business Days prior to Scheduled Delivery Date	*

5.1.2 The Security Deposit may be commingled with LESSOR’s general funds and any interest earned on such Security Deposit will be for LESSOR’s account. If the Security Deposit is reduced below the required amount by application to meet LESSEE’s unperformed obligations under this Lease, LESSEE will replenish the Security Deposit within ten (10) days after LESSOR’s demand therefor. The Security Deposit will serve as security for the performance by LESSEE of its obligations under this Lease and any other agreements between LESSEE and LESSOR relating to aircraft, engines, aircraft equipment or the extension of credit and may be applied by LESSOR upon the occurrence of a Default or Event of Default hereunder or of a default by LESSEE under any such other agreements.

5.1.3 Upon termination of this Lease in accordance with Article 4.3 other than if an Event of Default has occurred and is continuing, LESSOR will return to LESSEE the amount of the Security Deposit then held by LESSOR (so long as no default by LESSEE exists under any other agreement between LESSEE and LESSOR relating to aircraft, engines or aircraft equipment or the extension of credit by LESSOR to LESSEE), without interest, less an amount determined to be a reasonable estimate of the costs, if any, which LESSOR will incur to remedy any unperformed obligations of LESSEE under this Lease, including the correction of any discrepancies from the required condition of the Aircraft on return of the Aircraft.

12 ARTICLE 5 SECURITY DEPOSIT, RENT, RESERVES AND OTHER PAYMENTS

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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5.2 LESSOR Costs. LESSEE will reimburse LESSOR for LESSOR’s out-of-pocket costs in connection with any legal opinion obtained by LESSOR with respect to this Lease and registration and repossession of the Aircraft in the State of Registration.

5.3 Rent.

5.3.1 LESSEE will pay LESSOR the following amounts monthly in advance as rent for the Aircraft (“Rent”):

MTOW of Aircraft	Amount of monthly Rent
64 tonnes		US$ *
70 tonnes		US$ *

5.3.2 The first payment of Rent during the Lease Term will be paid no later than three (3) Business Days prior to Delivery. Each subsequent payment of Rent will be due monthly thereafter no later than the same day of the month as the Delivery Date of the Aircraft except that, if such day is not a Business Day, the Rent will be due on the immediately preceding Business Day. If Delivery occurred on the 29th, 30th or 31st of the month and in any given month during the Lease Term there is no such corresponding date, Rent will be payable on the last Business Day of such month.

5.4 Reserves.

5.4.1 LESSEE will pay to LESSOR supplemental Rent, based on LESSEE’s use of the Aircraft during the Lease Term, in the form of the following reserves in the following amounts per flight hour (individually, “Airframe Reserves” and “Engine Performance Restoration Reserves”, “Engine LLP Reserves”, and collectively “Reserves”):

A total of US$ *  per flight hour, as follows:

Airframe Reserves:	US$ *  per Airframe flight hour
Engine Performance Restoration Reserves:	US$ *  per Engine flight hour for each Engine (payable when the Engine is utilized on the Aircraft or another aircraft)
Engine LLP Reserves:	US$ *  per Engine flight hour for each Engine (payable when the Engine is utilized on the Aircraft or another aircraft)

13 ARTICLE 5 SECURITY DEPOSIT, RENT, RESERVES AND OTHER PAYMENTS

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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5.4.2 The amount of the Engine Reserves set forth in Article 5.4.1 is payable when the Engine is utilized on the Airframe or another airframe and may be increased by LESSOR in the event of an increase in the thrust rating of an Engine in accordance with Article 12.7.

5.4.3 Such Reserves will be paid on or before the 10th day of the calendar month next following the month in which the Delivery Date occurs and on or before the 10th day of each succeeding calendar month for flying performed during the calendar month prior to payment. All Reserves for flying performed during the month in which the Termination Date occurs will be paid on the Termination Date, unless otherwise agreed by the parties.

5.4.4 No interest will accrue or be paid at any time to LESSEE on such Reserves and, subject to LESSOR’s obligations under Article 13, LESSOR may commingle the Reserves with LESSOR’s general funds.

5.5 LESSOR’s Bank Account. The Security Deposit, Rent, Reserves and any other payment due under this Lease will be paid by wire transfer of immediately available U.S. Dollar funds to LESSOR’s bank account at:

* 

Account No. * 

Chase Manhattan Bank

55 Water Street

New York, NY 10041

ABA# 021000021

or to such other bank account as LESSOR may from time to time designate by not fewer than ten (10) Business Days’ prior written notice (“LESSOR’s Bank”). When it is stated in this Lease that an installment of the Security Deposit, the monthly Rent, Reserves or any other payment is due or must be paid or made by LESSEE by a specific date, then such payment actually must be received by LESSOR’s Bank on or before such specific date, even if, in order for such payment to be received by LESSOR’s Bank by such specific date, LESSEE must initiate the wire transfer prior to such specific date, provided that LESSEE will not be responsible for any failure or delay on the part of LESSOR’s Bank with respect to such funds, including the failure or delay on the part of LESSOR’s Bank to credit LESSOR’s account with amounts paid by LESSEE.

14 ARTICLE 5 SECURITY DEPOSIT, RENT, RESERVES AND OTHER PAYMENTS

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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5.6 Default Interest. If LESSOR’s Bank does not receive the Rent or any other amount on or before the specific date when due, LESSOR will suffer loss and damage the exact nature and amount of which are difficult or impossible to ascertain. LESSEE will pay LESSOR as supplemental Rent (by way of agreed compensation and not as a penalty) interest on any due and unpaid amounts payable by LESSEE under this Lease. Interest will be calculated at a per annum rate (based on a 360 day year) which is equal to * percent * %) plus the Prime Rate in effect on the date on which the amount was originally due for the period from the date the amount originally was due through the date the amount actually is received at LESSOR’s Bank or, in the case of LESSOR’s performance of LESSEE’s obligations hereunder, from the date of payment by LESSOR through the date of LESSEE’s repayment to LESSOR (“Default Interest”). Default Interest will accrue on a day-to-day basis and be compounded monthly.

5.7 No Deductions or Withholdings. All payments by LESSEE under this Lease, including the Security Deposit, Rent, Reserves, Default Interest, fees, indemnities or any other item, will be made in full without any deduction or withholding whether in respect of set-off, counterclaim, duties, or Taxes (as defined in Article 16) imposed in the State of Registration or any jurisdiction from which such payments are made unless LESSEE is prohibited by Law from doing so, in which event LESSEE will gross up the payment amount such that the net payment received by LESSOR after any deduction or withholding equals the amounts called for under this Lease. All payments by LESSOR under this Lease, including the return of the Security Deposit, or any other item, will be made in full without any deduction or withholding whether in respect of set-off, counterclaim, duties, or Taxes (as defined in Article 16) imposed in the U.S. or any jurisdiction from which such payments are made unless LESSOR is prohibited by Law from doing so, in which event LESSOR will gross up the payment amount such that the net payment received by LESSEE after any deduction or withholding equals the amounts called for under this Lease.

5.8 Value Added Taxes. The Rent and other amounts payable by LESSEE under this Lease are exclusive of any value added tax, turnover tax or similar tax or duty.

5.9 Wire Transfer Disbursement Report. At the time of each Rent or other payment, LESSEE will complete and fax to LESSOR a wire transfer disbursement report stating the amount of the payment being made by LESSEE and the allocation of such payment to the Security Deposit, Rent, Reserves, Default Interest and other charges. Notwithstanding the allocation set forth in LESSEE’s report, in the event LESSEE is in default under this Lease, LESSOR will have complete discretion to allocate LESSEE’s payments as LESSOR determines.

5.10 Net Lease.

5.10.1 This Lease is a net lease and LESSEE’s obligation to pay Rent and make other payments in accordance with this Lease will be absolute and unconditional under any and all circumstances and regardless of other events, including the following:

(a) any right of set-off, counterclaim, recoupment, defense or other right (including any right of reimbursement) which LESSEE may have against LESSOR, Manufacturer, the Engine manufacturer or any other person for any reason, including any claim LESSEE may have for the foregoing;

15 ARTICLE 5 SECURITY DEPOSIT, RENT, RESERVES AND OTHERS PAYMENTS

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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(b) unavailability or interruption in use of the Aircraft for any reason, other than LESSOR’s breach of the covenant of quiet enjoyment described in Article 21.2, including a requisition thereof or any prohibition or interference with or other restriction against LESSEE’s use, operation or possession of the Aircraft (whether by Law or otherwise), any defect in title, airworthiness, merchantability, fitness for any purpose, condition, design, specification or operation of any kind or nature of the Aircraft, the ineligibility of the Aircraft for any particular use or trade or for registration under the Laws of any jurisdiction or Total Loss of the Aircraft;

(c) insolvency, bankruptcy, reorganization, arrangement, readjustment of debt, dissolution, liquidation, receivership, administration or similar proceedings by or against LESSOR, LESSEE, Manufacturer, the Engine manufacturer or any other Person;

(d) invalidity or unenforceability or lack of due authorization of or other defect in this Lease;

(e) failure or delay on the part of any party to perform its obligations under this Lease; or

(f) any other circumstance which but for this provision would or might have the effect of terminating or in any other way affecting any obligation of LESSEE hereunder.

5.10.2 Nothing in Article 5.10 will be construed to limit LESSEE’s rights and remedies in the event of LESSOR’s breach of its warranty of quiet enjoyment set forth in Article 21.2 or to limit LESSEE’s rights and remedies to pursue in a court of law any claim it may have against LESSOR or any other Person.

5.11 Currency Indemnity. If under any applicable Law, whether as a result of a judgment against LESSEE or the liquidation of LESSEE or for any other reason, any payment hereunder is required to be made or recovered in a currency other than Dollars then, to the extent that the payment (when converted into Dollars at the “rate of exchange” on the date of payment or, in the case of a liquidation, the latest date for the determination of liabilities permitted by the applicable Law) falls short of the amount unpaid under this Lease, LESSEE or LESSOR, as applicable, will as a separate and independent obligation, fully indemnify LESSOR or LESSEE, as

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applicable, against the amount of the shortfall. If the amount received by LESSOR or LESSEE, as applicable, upon converting the payment into Dollars exceeds the amount payable under this Lease, LESSOR or LESSEE, as applicable, will remit such excess to the other party. For the purposes of this paragraph “rate of exchange” means the rate at which LESSOR or LESSEE is able on the relevant date to purchase Dollars in New York or London (at LESSOR’S option) with such other currency.

5.12 LESSOR Performance of LESSEE Obligation. If LESSEE fails to make any payment under this Lease to a third party in connection with the Aircraft or fails to perform any other obligation required under this Lease, LESSOR may, (but is not required to) at its election and without waiver of its rights perform such obligation and/or pay such amount. Within five (5) Business Days after written notice to LESSEE of the amount paid by LESSOR on behalf of LESSEE, LESSEE will repay such amount to LESSOR together with Default Interest. Such payment to LESSOR will constitute additional Rent payable by LESSEE to LESSOR hereunder. Any payment, performance or compliance by LESSOR of a LESSEE obligation hereunder will not affect the occurrence or continuance of a Default or Event of Default as the case may be.

5.13 Consideration for Rent and other Amounts. The amount of the Rent and other payments contained herein are in consideration of LESSEE’s waiver of warranties and indemnities set forth in Articles 8 and 17, respectively, and the other provisions of this Lease.

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ARTICLE 6          INVOLVEMENT WITH AIRCRAFT MANUFACTURER

6.1 LESSEE Selection of Aircraft. LESSEE ACKNOWLEDGES THAT THE DESCRIPTION OF THE AIRCRAFT SET FORTH IN THIS LEASE IS BASED UPON INFORMATION SUPPLIED BY MANUFACTURER. LESSEE COVENANTS TO LESSOR THAT LESSEE HAS USED ITS OWN JUDGMENT IN SELECTING THE AIRCRAFT AND HAS DONE SO BASED ON ITS SIZE, DESIGN AND TYPE. LESSEE ACKNOWLEDGES THAT LESSOR IS NOT A MANUFACTURER, REPAIRER OR SERVICING AGENT OF THE AIRCRAFT.

6.2 Participation Agreement. LESSEE has the right to inspect the Aircraft during the manufacture process and to attend and observe the acceptance tests of the Aircraft pursuant to the terms of a Participation Agreement to be entered into between LESSEE and LESSOR in the form set forth in Exhibit B.

6.3 Procurement of BFE. LESSEE’s and LESSOR’s technical representatives will meet and determine which of LESSEE or LESSOR will provide specific items of BFE. Such BFE will then be provided to Manufacturer by LESSEE or LESSOR, as applicable, within the time frames required by Manufacturer.

6.4 Assignment of Training. LESSOR hereby assigns to LESSEE all rights to training to which LESSOR is entitled as a result of LESSOR’s purchase of the Aircraft and lease of the Aircraft to LESSEE. If LESSEE fails to take Delivery of the Aircraft when tendered in accordance with Article 6.7, LESSEE will immediately pay to LESSOR an amount equal to the Dollar value of such training based on what the training would have cost LESSEE had LESSEE purchased such training directly from Manufacturer.

6.5 LESSEE Inspection of Aircraft. During the course of final assembly of the Aircraft, and at Delivery, LESSEE will have its own representative present to inspect the Aircraft and to ensure its conformity with LESSEE’s needs and the terms of this Lease. LESSEE will have ground inspection and acceptance flight rights with respect to the Aircraft. LESSEE acknowledges that, as between LESSEE and LESSOR, in accepting the Aircraft LESSEE is relying on its own inspection and knowledge of the Aircraft in determining whether the Aircraft meets the requirements of this Lease.

6.6 Aircraft at Delivery. At Delivery, the Aircraft will be as set forth in Exhibit A, as such description may be modified by any change requests agreed to among LESSEE, LESSOR and Manufacturer (which will be reflected in amendment(s) to this Lease). In the event of any discrepancies, LESSEE and LESSOR will cooperate in good faith with one another and with Manufacturer and Engine manufacturer, as applicable, in order to arrive at a mutually acceptable resolution of any such discrepancies.

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6.7 Delivery of the Aircraft to LESSEE. Subject to LESSEE having performed all of the conditions precedent to Delivery set forth herein, immediately following delivery of the Aircraft from Manufacturer to LESSOR, LESSOR will deliver the Aircraft to LESSEE at the Delivery Location. Provided that the Aircraft is in the condition required by Article 6.6, upon the tender of the Aircraft by LESSOR to LESSEE, LESSEE will accept the Aircraft and the date of tender by LESSOR to LESSEE will be deemed to be the Delivery Date for all purposes under this Lease, including but not limited to the commencement of LESSEE’s obligation to pay Rent hereunder.

6.8 LESSEE Acceptance of Aircraft. If LESSEE fails to (a) comply with its obligations set forth in Article 6.2, (b) comply with the conditions contained in Articles 7.1 and 7.2 so as to allow Delivery to take place immediately following delivery of the Aircraft by Manufacturer to LESSOR or (c) take delivery of the Aircraft when properly tendered for delivery by LESSOR in the condition required hereunder, LESSEE will indemnify LESSOR for all costs and expenses incurred by LESSOR as a result thereof including (but without limitation) any payments other than the purchase price which LESSOR becomes obliged to make to Manufacturer.

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ARTICLE 7          PRE-DELIVERY, DELIVERY AND POST-DELIVERY DOCUMENTARY AND OTHER REQUIREMENTS

7.1 Pre-Delivery Requirements. LESSEE will do each of the following prior to the Scheduled Delivery Date of the Aircraft within the time frames set forth below:

7.1.1 Within one (1) month after execution of this Lease, LESSEE will deliver to LESSOR each of the following:

(a) copies of resolutions of the Board of Directors of LESSEE or other written evidence of appropriate corporate action, duly certifying and authorizing the lease of the Aircraft hereunder and the execution, delivery and performance of this Lease, together with an incumbency certificate as to the person or persons authorized to execute and deliver documents on behalf of LESSEE hereunder; and

(b) if available, a letter from the Aviation Authority in the form and substance of Exhibit E.

7.1.2 At least five (5) Business Days prior to the Scheduled Delivery Date, LESSEE will have delivered to LESSOR a Certificate of Insurance and Brokers’ Letter of Undertaking in the form and substance of Exhibits C and D, respectively, from LESSEE’s insurance brokers evidencing insurance of the Aircraft in accordance with this Lease from the Delivery Date.

7.1.3 At least three (3) Business Days prior to the Scheduled Delivery Date, LESSEE will do each of the following:

(a) pay to LESSOR the first monthly installment of Rent in accordance with Article 5.3.2;

(b) LESSEE’s counsel will deliver an opinion in form and substance of Exhibit G or as otherwise reasonably satisfactory to LESSOR;

(c) provide LESSOR with documents evidencing that LESSEE has obtained any necessary licenses for the importation and ferrying of the Aircraft into *  and that all applicable customs duties and sales taxes in respect of the Aircraft have been discharged by LESSEE (or arrangements satisfactory to LESSOR have been made for obtaining or paying for the same);

20 ARTICLE 7 PRE-DELIVERY, DELIVERY AND POST-DELIVERY DOCUMENTARY AND OTHER REQUIREMENTS

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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(d) provide LESSOR with documents reasonably requested by LESSOR evidencing the issuance of each approval, license and consent which may be required in connection with the remittance to LESSOR of any amount payable under this Lease or the performance by LESSEE of any of its obligations hereunder (including without limitation any exchange control approval);

(e) provide LESSOR with a copy of such Aviation Documents as may be available prior to the Scheduled Delivery Date;

(f) provide LESSOR with a power of attorney empowering LESSEE’s representative, who may be an officer or employee of LESSEE, to accept the Aircraft on behalf of LESSEE;

(g) provide LESSOR with a power of attorney in the form of Exhibit H; and

(h) provide LESSOR with such other documents as LESSOR may reasonably request.

7.2 Delivery Requirements. On the Delivery Date of the Aircraft, each of the following will occur.

7.2.1 LESSEE will execute and deliver to LESSOR an Estoppel and Acceptance Certificate in the form of Exhibit F covering the Aircraft and effective as of the Delivery Date.

7.2.2 If not previously done, LESSEE and LESSOR will sign an amendment or supplement to Exhibit A evidencing all agreed-to changes to the specification of the Aircraft.

7.2.3 LESSEE will deliver a certificate signed by an officer of LESSEE stating all of the following:

(a) the representations and warranties contained in Article 20 are true and accurate on and as of the Delivery Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date);

(b) no Default has occurred and is continuing or will result from LESSEE’s lease of the Aircraft hereunder, and

(c) such officer has examined the Creditor Agreements between LESSEE and the other Creditors and none of such Creditor Agreements contains terms which provide

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or contemplate that such Creditors will obtain any right, title or interest in an Engine which is installed on another aircraft (or, if this is not the case, such officer will identify in the certificate the parties, the aircraft and the Creditor Agreements for which this statement is untrue).

7.2.4 If any Creditor Agreement provides or contemplates that such Creditor will obtain any right, title or interest in an Engine which is installed on such Creditor’s aircraft, LESSEE will deliver to LESSOR an engines cooperation agreement in form and substance acceptable to LESSOR which is executed by LESSEE and LESSEE’s Creditors (as defined therein).

7.2.5 LESSOR will deliver to LESSEE an assignment of Manufacturer and Engine manufacturer rights in the form and substance of Exhibits I and J, respectively, and concurrently therewith LESSOR, to the extent it has not previously done so, will be deemed to have assigned all applicable product support and training with the exception of Manufacturer field service representative, which will not be provided.

7.2.6 LESSEE will deliver to LESSOR a copy of such Aviation Documents as have not been previously delivered which are available.

7.3 Post-Delivery Requirements.

7.3.1 Within seven (7) days after Delivery, if not previously provided, LESSEE will do each of the following:

(a) LESSEE will procure registration of the Aircraft in the register of aircraft of the State of Registration showing LESSOR as the owner and will provide evidence of the same to LESSOR;

(b) provide LESSOR with copies of all Aviation Documents not previously delivered; and

(c) if the Aircraft could not be registered at Delivery, provide LESSOR with a follow-up opinion of counsel advising that the Aircraft has been registered in the State of Registration and that all necessary filings have been made.

7.3.2 Within one (1) month after Delivery, LESSEE will provide LESSOR with a Technical Evaluation Report for the Aircraft in the form and substance of Exhibit M, as revised.

7.4 LESSOR Delivery Requirements. LESSEE’s obligation to lease the Aircraft from LESSOR hereunder will be conditioned upon the representations and warranties of LESSOR

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set forth in Article 21 being correct at the time given and as if repeated on the Delivery Date. Further, LESSEE’s obligation to lease the Aircraft from LESSOR will be conditioned upon LESSOR delivering to LESSEE a certified copy of the Export Certificate of Airworthiness in respect of the Aircraft issued by the DGAC.

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ARTICLE 8         DISCLAIMERS

LESSOR HAS COMMITTED TO LESSEE THAT ON THE DELIVERY DATE THE AIRCRAFT WILL BE IN THE CONDITION REQUIRED BY ARTICLE 6. SUCH COMMITMENT OR COVENANT ON THE PART OF LESSOR EXPIRES AND THE DISCLAIMERS SET FORTH IN THIS ARTICLE 8 APPLY UPON LESSEE’S ACCEPTANCE OF THE AIRCRAFT AND EXECUTION OF THE ESTOPPEL AND ACCEPTANCE CERTIFICATE. AFTER SUCH TIME, THEN AS BETWEEN LESSOR AND LESSEE:

8.1 “As Is, Where Is”. LESSEE AGREES THAT IT IS LEASING THE AIRCRAFT “AS IS, WHERE IS”. LESSEE UNCONDITIONALLY ACKNOWLEDGES AND AGREES THAT NEITHER LESSOR NOR ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES OR REPRESENTATIVES HAVE MADE OR WILL BE DEEMED TO HAVE MADE ANY TERM, CONDITION, REPRESENTATION, WARRANTY OR COVENANT EXPRESS OR IMPLIED (WHETHER STATUTORY OR OTHERWISE) AS TO (a) THE CAPACITY, AGE, AIRWORTHINESS, VALUE, QUALITY, DURABILITY, CONFORMITY TO THE PROVISIONS OF THIS LEASE, DESCRIPTION, CONDITION (WHETHER OF THE AIRCRAFT, ANY ENGINE, ANY PART THEREOF OR THE AIRCRAFT DOCUMENTATION), DESIGN, WORKMANSHIP, MATERIALS, MANUFACTURE, CONSTRUCTION, OPERATION, DESCRIPTION, STATE, MERCHANTABILITY, PERFORMANCE, FITNESS FOR ANY PARTICULAR USE OR PURPOSE (INCLUDING THE ABILITY TO OPERATE OR REGISTER THE AIRCRAFT OR USE THE AIRCRAFT DOCUMENTATION IN ANY OR ALL JURISDICTIONS) OR SUITABILITY OF THE AIRCRAFT OR ANY PART THEREOF, AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, KNOWN OR UNKNOWN, APPARENT OR CONCEALED, EXTERIOR OR INTERIOR, (b) THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK, COPYRIGHT OR OTHER INTELLECTUAL PROPERTY RIGHTS, (c) ANY IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE, COURSE OF DEALING OR USAGE OF TRADE OR (d) EXCEPT AS STATED IN ARTICLES 21.1.5 AND 21.2, ANY OTHER REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT OR ANY PART THEREOF, ALL OF WHICH ARE HEREBY EXPRESSLY EXCLUDED AND EXTINGUISHED.

8.2 Waiver of Warranty of Description. IN CONSIDERATION OF (a) LESSEE’S RIGHTS HEREUNDER TO INSPECT THE AIRCRAFT AND (b) LESSOR’S ASSIGNMENT TO LESSEE OF ANY EXISTING AND ASSIGNABLE WARRANTIES OF MANUFACTURER AND ENGINE MANUFACTURER, LESSEE HEREBY AGREES THAT ITS ACCEPTANCE OF THE AIRCRAFT AT DELIVERY AND ITS EXECUTION AND

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DELIVERY OF THE ESTOPPEL AND ACCEPTANCE CERTIFICATE CONSTITUTE LESSEE’S WAIVER OF THE WARRANTY OF DESCRIPTION, ANY CLAIMS LESSEE MAY HAVE AGAINST LESSOR BASED UPON THE FAILURE OF THE AIRCRAFT TO CONFORM WITH SUCH DESCRIPTION AND ANY AND ALL RIGHTS IT MAY HAVE TO THE REMEDIES SET FORTH IN SECTIONS 10508 THROUGH 10522 OF THE CALIFORNIA COMMERCIAL CODE. EVEN IF AT ANY TIME THE FAILURE OF THE AIRCRAFT TO CONFORM TO SUCH DESCRIPTION SUBSTANTIALLY IMPAIRS THE VALUE AND UTILITY OF THE AIRCRAFT AND EITHER (i) LESSEE ACCEPTED THE AIRCRAFT BASED ON A REASONABLE ASSUMPTION THAT THE NONCONFORMITY WOULD BE CURED AND IT WAS NOT SEASONABLY CURED OR (ii) LESSEE ACCEPTED THE AIRCRAFT WITHOUT DISCOVERING THE NONCONFORMITY BUT LESSEE’S ACCEPTANCE OF THE AIRCRAFT WAS REASONABLY INDUCED EITHER BY LESSOR’S ASSURANCES OR BY THE DIFFICULTY OF DISCOVERING ANY DEFECT PRIOR TO ACCEPTANCE, LESSEE AGREES NOT TO LOOK TO LESSOR FOR DAMAGES OR RELIEF ARISING OUT OF THE FAILURE OF THE AIRCRAFT TO CONFORM TO SUCH DESCRIPTION.

8.3 LESSEE Waiver. LESSEE hereby waives as between itself and LESSOR and agrees not to seek to establish or enforce any rights and remedies, express or implied (whether statutory or otherwise) against LESSOR or the Aircraft relating to any of the matters mentioned in Articles 8.1 or 8.2 and the leasing thereof by LESSOR to LESSEE.

8.4 Conclusive Proof. DELIVERY BY LESSEE TO LESSOR OF THE ESTOPPEL AND ACCEPTANCE CERTIFICATE WILL BE CONCLUSIVE PROOF AS BETWEEN LESSOR AND LESSEE THAT LESSEE’S TECHNICAL EXPERTS HAVE EXAMINED AND INVESTIGATED THE AIRCRAFT AND ENGINES AND (a) EACH IS AIRWORTHY AND IN GOOD WORKING ORDER AND REPAIR AND (b) THE AIRCRAFT AND ENGINES AND THE AIRCRAFT DOCUMENTATION ARE WITHOUT DEFECT (WHETHER OR NOT DISCOVERABLE AT DELIVERY) AND IN EVERY WAY SATISFACTORY TO LESSEE.

8.5 No LESSOR Liability for Losses. LESSEE agrees that LESSOR will not be liable to LESSEE, any sublessee or any Person, whether in contract or tort and however arising, for any cost, loss or damage (consequential or otherwise) arising out of the condition of the Aircraft, whether or not due in whole or in part to an act or omission or the active or passive negligence of LESSOR.

8.6 No Liability to Repair or Replace. LESSOR will not be liable for any expense in repairing or replacing any item of the Aircraft or be liable to supply another aircraft or any item in lieu of the Aircraft or any Part thereof if the same is lost, confiscated, damaged, destroyed or otherwise rendered unfit for use.

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8.7 No Waiver. Nothing in this Article 8 or elsewhere in this Lease will be deemed to be a waiver by LESSEE of any rights it may have against Manufacturer, the Engine manufacturer or any other Person.

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ARTICLE 9        MANUFACTURERS’ AND VENDORS’ WARRANTIES

9.1 Warranties. As set forth in Article 7.2.5, at Delivery LESSOR will assign to LESSEE for the duration of the Lease Term the benefit of all warranties and indemnities given to LESSOR by Manufacturer and the Engine manufacturer. Effective on the Delivery Date, all other vendor warranties with respect to the Aircraft are hereby assigned by LESSOR to LESSEE.

9.2 Reassignment. On the Termination Date, the benefit of any warranty assigned by LESSOR to LESSEE pursuant to Article 7.2.5 will be reassigned automatically to LESSOR or its designee. LESSEE’s rights under such warranties (including LESSEE’s claims and rights to payment thereunder) will revert to LESSOR during any period in which an Event of Default is continuing. LESSEE at its own cost and expense will do all such things and execute such documents as may be required for this purpose.

9.3 Warranty Claims. LESSEE will diligently and promptly pursue any valid claims it may have against Manufacturer and others under such warranties with respect to the Aircraft and will provide notice of the same to LESSOR.

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ARTICLE 10        OPERATION OF AIRCRAFT

10.1 Costs of Operation. LESSEE will pay all costs incurred in the operation of the Aircraft during the Lease Term, for profit or otherwise, including the costs of flight crews, cabin personnel, fuel, oil, lubricants, maintenance, insurance, storage, landing and navigation fees, airport charges, passenger service and any and all other expenses of any kind or nature, directly or indirectly, in connection with or related to the use, movement and operation of the Aircraft. The obligations, covenants and liabilities of LESSEE under this paragraph arising prior to return of the Aircraft to LESSOR will continue in full force and effect, notwithstanding the termination of this Lease or expiration of the Lease Term.

10.2 Compliance with Laws. LESSEE agrees throughout the Lease Term to maintain operational control of the Aircraft and use the Aircraft in accordance with applicable Laws of the State of Registration and of any country, state, territory or municipality into or over which LESSEE may operate and in accordance with the applicable regulations of IATA. LESSEE will not employ, suffer or cause the Aircraft to be used in any business which is forbidden by Law or in any manner which may render it liable to condemnation, destruction, seizure, or confiscation by any authority. LESSEE will not permit the Aircraft to fly to any airport or country if so doing would cause LESSOR to be in violation of any U.S. Law.

10.3 Training. LESSEE will not use the Aircraft for testing or for training of flight crew members other than LESSEE crew members and will not use the Aircraft for training any more than it utilizes for training the other aircraft in its fleet.

10.4 No Violation of Insurance Policies. LESSEE will not use or permit the Aircraft to be used in any manner or for any purpose which is not covered by the insurance policies LESSEE is required to carry and maintain as set forth in this Lease. LESSEE will not carry any goods of any description excepted or exempted from such policies or do any other act or permit to be done anything which could reasonably be expected to invalidate or limit any such insurance policy.

10.5 Flight Charges.

10.5.1 LESSEE will pay promptly when due all enroute navigation charges, navigation service charges and all other charges payable by LESSEE, and incurred during the Lease Term, for the use of or for services provided at any airport, whether in respect of the Aircraft or any other aircraft of LESSEE, and will indemnify and hold LESSOR harmless in respect of the same. This indemnity will continue in full force and effect notwithstanding the termination or expiration of the Lease Term for any reason or the return of the Aircraft.

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10.5.2 If requested by LESSOR, LESSEE will provide LESSOR with a list of the airports to which LESSEE regularly operates the Aircraft or its other aircraft. LESSEE hereby authorizes Eurocontrol or another aviation authority or airport or creditor claiming rights on the Aircraft to confirm the status of LESSEE’s payments to such creditor for the Aircraft and its other aircraft, as and when requested by LESSOR.

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ARTICLE 11        SUBLEASES

11.1 No Sublease without LESSOR Consent. LESSEE WILL NOT SUBLEASE OR PART WITH POSSESSION OF THE AIRCRAFT (EXCEPT FOR MAINTENANCE AND REPAIR) AT ANY TIME WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR (NOT TO BE UNREASONABLY WITHHELD OR DELAYED) AND IN ACCORDANCE WITH SUCH REQUIREMENTS AS MAY FROM TIME TO TIME BE AGREED IN WRITING BETWEEN LESSOR AND LESSEE. THE WET LEASING OF THE AIRCRAFT DURING THE LEASE TERM (IN WHICH LESSEE AND ITS CREWS RETAIN OPERATIONAL CONTROL OF THE AIRCRAFT) WILL NOT BE CONSIDERED A SUBLEASE OF THE AIRCRAFT.

11.1.1 It shall not be unreasonable for LESSOR to withhold its consent to a sublease or assignment unless:

(a) LESSOR and LESSOR’s Lender (if any) are satisfied (with the support of an independent local legal opinion) that their respective interests as owner of the Aircraft and mortgagee (if any) will be fully recognized and protected in the jurisdiction in which the Aircraft is proposed to be based;

(b) LESSOR is satisfied (in its absolute discretion) and LESSEE has certified to LESSOR’s Lender that the terms of the proposed sublease neither conflict nor are inconsistent with the terms of this Lease; and

(c) the sublease is subject and subordinate to this Lease and prohibits further derivative subleasing.

11.1.2 The wet leasing of the Aircraft during the Lease Term (in which LESSEE and its crews retain operational control of the Aircraft) will not be considered a sublease of the Aircraft and will be permitted without LESSOR’s consent, provided that (a) the Aircraft remains registered in the State of Registration, (b) the Aircraft will neither be based nor operated in a Prohibited Country, (c) LESSEE provides LESSOR with either a certified copy of the applicable provisions from the wet lease agreement or an officer’s certificate indicating whether LESSEE or the wet lessee will be responsible for maintaining the primary passenger, baggage and cargo liability insurance relating to operation under the wet lease and (d) LESSEE complies with Article 18.4.

11.2 Subleasing Proposal Fee. LESSEE will indemnify LESSOR on demand for all out-of-pocket expenses (including legal fees) incurred in connection with LESSOR’s assessment of the subleasing proposal or its implementation.

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11.3 Any Approved Sublease. Any sublease approved by LESSOR will be for a term no greater than the remaining Lease Term and contain provisions consistent with this Lease protecting LESSOR’s title to the Aircraft, providing appropriate LESSOR indemnities, regarding the maintenance and repair standards for the Aircraft, concerning the insurances which will be carried by the sublessee and the circumstances which constitute a Total Loss of the Aircraft. Any such sublease will be subject and subordinate to this Lease. In its sole discretion, LESSOR may require an opinion of counsel in connection with such sublease, including LESSOR’s rights to repossess the Aircraft in the event of an Event of Default hereunder or under the sublease. LESSEE will not amend the terms of any approved sublease without the prior written consent of LESSOR, which will not be unreasonably withheld.

11.4 Assignment of Sublease. At the request of LESSOR, any approved sublease will be assigned to LESSOR as security. LESSEE will deliver the original counterpart of the sublease to LESSOR and make any filings necessary to protect LESSOR’s security interest.

11.5 Continued Responsibility of LESSEE. LESSEE will continue to be responsible for performance of its obligations under this Lease during any period of sublease or wet lease.

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ARTICLE 12        MAINTENANCE OF AIRCRAFT

12.1 General Obligation. During the Lease Term and until the Aircraft is returned to LESSOR in the condition required by this Lease, LESSEE alone has the obligation, at its expense, to maintain and repair the Aircraft, Engines and all of the Parts (a) in accordance with the Maintenance Program, (b) in accordance with the rules and regulations of the Aviation Authority, (c) in accordance with Manufacturer’s type design, (d) in accordance with any other regulations or requirements necessary in order to maintain a valid Certificate of Airworthiness for the Aircraft and meet the requirements at all times during the Lease Term and upon return of the Aircraft to LESSOR for issuance of a standard Certificate of Airworthiness for transport category aircraft issued by the FAA in accordance with FAR Part 21 (except during those periods when the Aircraft is undergoing maintenance or repairs as required or permitted by this Lease and to the extent in conflict with the requirements of the Aviation Authority or the applicable aviation authority of the Manufacturer) and (e) in the same manner and with the same care as used by LESSEE with respect to similar aircraft and engines operated by LESSEE and without in any way discriminating against the Aircraft.

12.2 Specific Obligations. Without limiting Article 12.1, LESSEE agrees that such maintenance and repairs will include but will not be limited to each of the following specific items:

(a) performance in accordance with the Maintenance Program of all routine and non-routine maintenance work;

(b) incorporation in the Aircraft of all Airworthiness Directives, all alert service bulletins of Manufacturer, Engine manufacturer and other vendors or manufacturers of Parts incorporated on the Aircraft and any service bulletins which must be performed in order to maintain the warranties on the Aircraft, Engines and Parts;

(c) incorporation in the Aircraft of all other service bulletins of Manufacturer, the Engine manufacturer and other vendors which LESSEE schedules to adopt within the Lease Term for the rest of its A319 aircraft fleet. It is the intent of the parties that the Aircraft will not be discriminated from the rest of LESSEE’s fleet in service bulletin compliance (including method of compliance) or other maintenance matters. LESSEE will not discriminate against the Engines with respect to Overhaul build standards and life limited part replacements;

(d) incorporation in the Maintenance Program for the Aircraft of a corrosion prevention and control program as recommended by Manufacturer, the Aviation Authority and the FAA and the correction of any discrepancies in accordance with the recommendations of Manufacturer and the Structural Repair Manual. In addition, all inspected areas will be properly treated with corrosion inhibitor as recommended by Manufacturer;

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(e) incorporation into the Maintenance Program of an anti-fungus/biological growth and contamination prevention, control and treatment program of all fuel tanks in accordance with Manufacturer’s approved procedures;

(f) providing LESSOR with written summaries of all sampling programs involving or affecting the Aircraft;

(g) maintaining in English and keeping in an up-to-date status the records and historical documents set forth in Attachment 1 of Exhibit K;

(h) maintaining historical records, in English, for condition-monitored, hard time and life limited Parts (including tags from the manufacturer of such Part or a repair facility which evidence that such Part is new or overhauled and establish authenticity, total time in service and time since overhaul for such Part), the hours and cycles the Aircraft and Engines operate and all maintenance and repairs performed on the Aircraft;

(i) properly documenting all repairs, Modifications and alterations and the addition, removal or replacement of equipment, systems or components in accordance with the rules and regulations of the Aviation Authority and reflecting such items in the Aircraft Documentation. In addition, all repairs to the Aircraft will be accomplished in accordance with Manufacturer’s Structural Repair Manual (or FAA-approved data supported by FAA Form 8110-3 or equivalent). All Modifications and alterations will also be accomplished in accordance with FAA-approved data supported by FAA Form 8110-3 or equivalent; and

(j) ensuring that Overhauls are accomplished utilizing maintenance and quality control procedures approved by the Aviation Authority and that the repair agency provides a complete record of all work performed during the course of such Overhaul and certifies that such Overhaul was accomplished, that the equipment is airworthy and released for return to service and that the Overhaul was in conformity with the original type design.

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12.3 Replacement of Parts.

12.3.1 LESSEE, at its own cost and expense, will promptly replace all Parts which may from time to time become worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or rendered unfit or beyond economical repair (BER) for use for any reason. In the ordinary course of maintenance, service, repair, Overhaul or testing, LESSEE may remove any Part provided that LESSEE replaces such Part as promptly as practicable. All replacement Parts will (a) be free and clear of all Security Interests (except Permitted Liens) of any kind or description, (b) be in airworthy condition and of at least equivalent model, service bulletin and modification status and have a value and utility at least equal to the Parts replaced, assuming such replaced Parts were in the condition and repair required to be maintained by the terms hereof and (c) have a current “serviceable tag” of the manufacturer or maintenance facility providing such items to LESSEE, indicating that such Parts are new, serviceable or Overhauled. With respect to replacement modules in an Engine, the replacement module will not have been previously operated at a higher thrust rating than the replaced module. So long as a substitution meets the requirements of the Maintenance Program and Aviation Authority, LESSEE may substitute for any Part a part that does not meet the requirements of the foregoing sentence if a complying Part cannot be procured or installed within the available groundtime of the Aircraft and as soon as practicable the noncomplying part is removed and replaced by a complying Part.

12.3.2 All Parts removed from the Airframe or any Engine will remain the property of LESSOR and subject to this Lease no matter where located, until such time as such Parts have been replaced by Parts (which have been incorporated or installed in or attached to the Airframe or such Engine) which meet the requirements for replacement Parts specified above and title to such replacement Parts has passed to LESSOR under the Laws of the State of Registration and lex situs. To the extent permitted by the Laws of the State of Registration and the lex situs it is the intent of LESSOR and LESSEE that without further act and immediately upon any replacement Part becoming incorporated, installed or attached to the Airframe or an Engine as above provided, (a) title to the removed Part will thereupon vest in LESSEE, free and clear of all rights of LESSOR or LESSOR’s Liens, (b) title to the replacement Part will thereupon vest in LESSOR free and clear of all rights of LESSEE and (c) such replacement Part will become subject to this Lease and be deemed to be a Part hereunder to the same extent as the Parts originally incorporated or installed in or attached to the Airframe or such Engine.

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12.4 Removal of Engines.

12.4.1 If an Engine is removed for testing, service, repair, maintenance, Overhaul work, alterations or modifications, title to such Engine will at all times remain vested in LESSOR.

12.4.2 LESSEE will be entitled to remove any of the Engines from the Aircraft and install another engine or engines on the Aircraft, provided that LESSEE complies with each of the following obligations:

(a) the insurance requirements set forth in Article 18 and Exhibit C are in place;

(b) LESSEE ensures that the identification plates referred to in Article 15 are not removed from any Engine upon such Engine being detached from the Aircraft; and

(c) title to the Engine remains with LESSOR free from all Security Interests (except Permitted Liens) regardless of the location of the Engine or its attachment to or detachment from the Aircraft.

12.5 Pooling of Engines and Parts. With LESSOR’s prior written consent, not to be unreasonably withheld, LESSEE may subject the Engines and Parts to normal interchange or pooling agreements with responsible international scheduled commercial air carriers customary in the airline industry and entered into by LESSEE in the ordinary course of its business with respect to its entire A319 fleet so long as (a) in the case of pooling of an Engine, such Engine is returned to LESSEE within two (2) months, (b) no transfer of title to the Engine occurs, (c) all other terms of this Lease continue to be observed with respect to the Engines or Parts, including but not limited to Articles 8, 10, 12, 14, 15, 16, 17, 18 and 19 and (d) LESSEE continues to be fully responsible to LESSOR for the performance of all of its obligations hereunder.

12.6 Installation of Engines on other aircraft. Any Engine removed from the Aircraft may be installed on another aircraft in LESSEE’s fleet which utilizes engines of the same type as the Engine only if one of the situations described in this Article 12.6 exists:

12.6.1 LESSEE or LESSOR has title to such other aircraft free and clear of all Security Interests (except Permitted Liens).

12.6.2 LESSEE, LESSOR and all of the Creditors of LESSEE of such aircraft enter into an engines cooperation agreement in form and substance acceptable to LESSOR in which each party agrees to recognize one another’s rights in the engines. LESSEE will reimburse LESSOR and its Lender for their reasonable attorneys’ fees and costs in negotiating and finalizing engine cooperation agreement arrangements with LESSEE and its Creditors.

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12.6.3 Such other aircraft is subject to a Creditor Agreement (but no other Security Interests except Permitted Liens) which by its terms expressly or effectively states that such Creditor and its successors and assigns will not acquire any right, title or interest in any Engine by reason of such Engine being installed on such aircraft. To evidence the foregoing, at or before Delivery, LESSEE will provide LESSOR with an opinion of counsel and officer’s certificate as to this matter (and such an opinion of counsel and officer’s certificate will be provided during the Lease Term with respect to other Creditor Agreements regarding aircraft entering LESSEE’s operating fleet subsequent to Delivery). LESSEE hereby agrees that if LESSOR’s title to an Engine is in fact impaired under any such Creditor Agreement, such impairment will be a Total Loss of such Engine and the provisions of Article 19.5 will apply. To the extent another Creditor Agreement contains such provisions, then LESSOR hereby agrees for the benefit of the Creditor of such Creditor Agreement that neither LESSOR nor its successors or assigns will acquire or claim any right, title or interest in any engine in which LESSEE or another Creditor has an interest as a result of such engine being installed on the Airframe.

12.7 Engine Thrust Rating. If an Engine is utilized by LESSEE on the Aircraft or on any other airframe (or if the Engine is utilized by any sublessee or user under a pooling arrangement in accordance with this Lease) at a thrust rating greater than the thrust rating set forth in Exhibit A, LESSEE will promptly notify LESSOR and the Engine Reserve amounts set forth in Article 5.4.1 will be increased in an amount proportional to the accelerated rate of deterioration of the Engine resulting from the increased thrust rating.

12.8 Modifications.

12.8.1 No modification, alteration, addition or removal to the Aircraft (“Modification”) expected to cost over * U.S. Dollars (US$ * ) or deviation from the Aircraft’s original type design or configuration will be made without the prior written consent of LESSOR, which consent will not be unreasonably withheld. “Modifications” do not include Airworthiness Directives or Manufacturer’s recommended service bulletins, for which LESSOR’s consent is not required.

12.8.2 LESSOR may review LESSEE’s proposed designs, plans, engineering drawings and diagrams, and flight and maintenance manual revisions for any proposed Modification. If requested by LESSOR, LESSEE will furnish LESSOR (at LESSEE’s expense) with such documents in final form and any other documents required by Law, as a result of such Modification. All Modifications incorporated on the Aircraft will be properly documented in the Aircraft Documentation and be fully approved by the Aviation Authority.

36 ARTICLE 12 MAINTENANCE OF AIRCRAFT

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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12.8.3 Notwithstanding any other provision of this Lease, no Modification will be made which has the effect of decreasing the utility or value of the Aircraft or invalidating any warranty applicable to the Aircraft.

12.8.4 No Modification will be made by LESSEE if an Event of Default exists and is continuing hereunder.

12.8.5 Unless otherwise agreed by LESSOR in writing, all permanent or structural Modifications will forthwith become a part of the Aircraft and LESSEE relinquishes to LESSOR all rights and title thereto. However, all temporary and non-structural Modifications will remain the property of LESSEE and, at LESSOR’s request and LESSEE’s cost, will be removed from the Aircraft prior to return of the Aircraft, with LESSEE restoring the Aircraft to the condition it was in prior to the Modification in a manner cosmetically acceptable to LESSOR. Notwithstanding the foregoing, no such removal will be permitted without LESSOR’s permission after the occurrence of an Event of Default hereunder and immediately upon the occurrence of an Event of Default hereunder, without the requirement of any further act or notice, all right, title and interest in such Modifications will immediately vest in LESSOR, provided that if such Event of Default is remedied or waived, all rights title and interest in such Modification will without requirement for any further act or notice immediately revest in LESSEE (unless LESSOR has exercised any or all of its rights pursuant to the Lease on account of such Event of Default).

12.8.6 LESSOR will bear no liability for the cost of Modifications of the Aircraft whether in the event of grounding or suspensions of certification, or for any other cause.

12.9 Performance of Work by Third Parties. Whenever maintenance and repair work on the Aircraft or Engines will be regularly performed by a Person other than LESSEE, such Person will be an FAA-authorized repair station.

12.10 Reporting Requirements.

12.10.1 Commencing with a report furnished ten (10) days after the end of the calendar month in which Delivery occurs, LESSEE will furnish to LESSOR a Monthly Report in English in the form attached hereto as Exhibit L. Each Monthly Report will be furnished within ten (10) days after the end of each calendar month, except that the Monthly Report pertaining to the last month (or any portion thereof) of the Lease Term will be furnished to LESSOR on the Termination Date.

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12.10.2 Within thirty (30) days after completion of each “C” check on the Aircraft, LESSEE will provide LESSOR with a Technical Evaluation Report for the Aircraft in the form and substance of Exhibit M, as revised.

12.11 Information Regarding Maintenance Program. LESSEE will provide LESSOR with a copy of or information regarding the Maintenance Program for the Aircraft, as requested by LESSOR.

12.12 LESSOR Rights to Inspect Aircraft. On reasonable notice, LESSOR and/or its authorized agents or representatives will have the right to inspect the Aircraft and Aircraft Documentation. LESSOR agrees that such requests will be coordinated with LESSEE so as to cause the minimum practical disturbance to LESSEE’s operation or its personnel. LESSEE agrees to cooperate with LESSOR in making the Aircraft and Aircraft Documentation available to such authorized technical teams. LESSOR will have no duty to make any such inspection and will not incur any liability or obligation by reason of (and LESSEE’s indemnity obligations pursuant to Article 17 will apply notwithstanding) not making any such inspection or by reason of any reports it receives or any reviews it may make of the Aircraft records.

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ARTICLE 13        USE OF RESERVES

13.1 Airframe Reserves. LESSOR will reimburse LESSEE from the Airframe Reserves for the actual cost of the structural inspection portion of completed scheduled 5 year, 10 year or 24,000 flight cycle complete zonal and structural checks as described in the MPD and the rectification of any structural deficiencies resulting from such inspections, with work performed for all other causes excluded, including those causes set forth in Article 13.5. Subject to Article 16.1 and excluding handling, packaging and shipping charges, reimbursement will be made up to the amount in the Airframe Reserve.

13.2 Engine Performance Restoration Reserves.

13.2.1 Subject to the limitations set forth in Article 13.2.2, LESSOR will reimburse LESSEE from the Engine Performance Restoration Reserves for the actual cost associated with performance restoration or the replacement of life limited parts or permanent repair of on-condition parts in the basic Engine during completed Engine shop visits (i.e. heavy maintenance visits) requiring off-wing teardown and/or disassembly, with work performed for all other causes excluded, including those causes set forth in Article 13.5. Subject to Articles 13.2.2 and 16.1 and excluding handling, packaging and shipping charges, reimbursement for an Engine will be made up to the amount in the Engine Performance Restoration Reserves applicable to such Engine.

13.2.2 Reimbursement from the Engine Performance Restoration Reserves will be limited as to each module of such Engine in accordance with the following percentages of the remaining total amount in the Engine Performance Restoration Reserves for such Engine:

* %    Fan & Accessory Gearbox

* %    High Pressure Compressor

* %    High Pressure Turbine

* %    Low Pressure Turbine

13.3 Engine LLP Reserves. LESSOR will reimburse LESSEE from the Engine LLP Reserves for an Engine for the actual out-of-pocket materials cost without overhead, mark-up or profit factor associated with the replacement of life-limited Parts in such Engine during completed Engine shop visits (i.e. heavy maintenance visits) requiring off-wing teardown and/or disassembly, with work performed for all other causes excluded, including those causes set forth in Article 13.5. Subject to Article 16.1 and excluding exchange fees and handling, packaging and shipping charges, reimbursement for replacement of life-limited Parts in an Engine will be made up to the amount in the Engine LLP Reserves applicable to such Engine at the time of removal of such Engine.

39 ARTICLE 13 USE OF RESERVES

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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13.4 Reimbursement. LESSEE will be entitled to reimbursement from the Reserves after the work is completed and the Airframe or Engine has left the repair agency, by submitting invoices and proper documentation within six (6) months after completion of the work. For the Airframe, proper documentation includes a list of all routine and non-routine work cards with corresponding references to the MPD and an itemized labor and materials report. For the Engine, proper documentation includes a description of the reason for removal, a shop teardown report, a shop findings report, a full description of the workscope and complete disk records for the Engine both prior to and after the shop visit. Both the invoice supplied by the Engine repair facility and that submitted by LESSEE to LESSOR with respect to an Engine will state whether or not credits were provided due to life remaining on any removed Engine Parts and the amount of any such credits will be itemized.

13.5 Reimbursement Adjustment. By way of example, among the exclusions from reimbursement are those items resulting from repairs covered by LESSEE’s or a third party’s insurance, (deductibles being for the account of LESSEE) or warranties or required as a result of an Airworthiness Directive, manufacturer’s service bulletin, faulty maintenance or installation, improper operations, misuse, neglect, accident, incident, ingestion, or other accidental cause. Reimbursement from the Reserves will not be available for the APU, quick engine change (QEC) Parts, thrust reversers, Landing Gear or any of their associated components. All invoices subject to reimbursement from LESSOR will be reduced (by adjustment between LESSEE and LESSOR retroactively if necessary) by the actual amounts received by LESSEE on account of such work from responsible third parties or other sources, such as insurance proceeds, manufacturer’s warranties, guarantees, concessions and credits (including, with respect to Engines, credits due to life remaining on any removed Engine Parts).

13.6 Costs in Excess of Reserves. LESSEE will be responsible for payment of all costs in excess of the amounts reimbursed hereunder. If on any occasion the balance in the Airframe or an Engine Reserve is insufficient to satisfy a claim for reimbursement in respect of the Airframe or such Engine, the shortfall may not be carried forward or made the subject of any further claim for reimbursement.

13.7 Reimbursement after Termination Date. LESSEE may not submit any invoice for reimbursement from the Reserves after the Termination Date unless on or prior to such date LESSEE has notified LESSOR in writing that such outstanding invoice will be submitted after the Termination Date and the anticipated amount of such invoice. So long as LESSEE has provided such notice to LESSOR, LESSEE may then submit such outstanding invoice at any time within six (6) months after the Termination Date. Subject to the foregoing, any balance remaining in the Airframe and Engine Reserves on the Termination Date, including termination on account of a Total Loss of the Aircraft, will be retained by LESSOR.

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ARTICLE 14        TITLE AND REGISTRATION

14.1 Title to the Aircraft During Lease Term. Title to the Aircraft will be and remain vested in LESSOR. LESSOR and LESSEE intend this Lease to be a “true lease”. LESSEE will have no right, title or interest in the Aircraft except as provided in this Lease.

14.2 Registration of Aircraft. LESSEE at its sole cost and expense will (a) register and maintain registration of the Aircraft in the name of LESSOR at the register of aircraft in the State of Registration and (b) from time to time take all other steps then required by Law (including the Geneva Convention if applicable) or by practice, custom or understanding or as LESSOR may reasonably request to protect and perfect LESSOR’s interest in the Aircraft and this Lease in the State of Registration or in any other jurisdictions in or over which LESSEE may operate the Aircraft.

14.3 Filing of this Lease. To the extent permitted by Law and in accordance with the requirements of the Law from time to time, LESSEE at its sole cost and expense will cause this Lease to be kept, filed, recorded and refiled or rerecorded in the State of Registration and in any other offices necessary to protect LESSOR’s rights hereunder.

14.4 Evidence of Registration and Filings. As LESSOR may reasonably request from time to time, LESSEE will furnish to LESSOR an opinion of counsel or other evidence reasonably satisfactory to LESSOR of the registrations and filings required hereunder.

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ARTICLE 15        IDENTIFICATION PLATES

LESSOR will affix and LESSEE will at all times maintain on the Airframe, each Engine and the APU the identification plates containing the following legends or any other legend requested by LESSOR in writing:

15.1 Airframe Identification Plates.

Location:	One to be affixed to the Aircraft structure above the forward entry door adjacent to and not less prominent than that of Manufacturer’s data plate and another in a prominent place on the flight deck.
Size:	No smaller than 4” x 6”.
Legend:	“THIS AIRCRAFT IS OWNED BY * *  MANUFACTURER’S SERIAL NO: (TBD) OWNER’S ADDRESS: *  *  *  United States of America Telex:    * Fax:    *

15.2 Engine Identification Plates.

Location:	The legend on the plate must be no less prominent than the Engine data plate and must be visible.
Size:	No smaller than 2” x 6”.
Legend:	“THIS ENGINE IS OWNED BY * *  USA.”

42 ARTICLE 15 IDENTIFICATION PLATES

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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ARTICLE 16        TAXES

16.1 General Obligation of LESSEE. Except as set forth in Article 16.2, LESSEE agrees to pay promptly when due, and to indemnify and hold harmless LESSOR on a full indemnity basis from, all license and registration fees and all taxes, fees, levies, imposts, duties, charges, deductions or withholdings of any nature (including without limitation any value added, franchise, transfer, sales, gross receipts, use, business, excise, turnover, personal property, stamp or other tax) together with any assessments, penalties, fines, additions to tax or interest thereon, however or wherever imposed (whether imposed upon LESSEE, LESSOR, on all or part of the Aircraft, the Engines or otherwise), by any Government Entity or taxing authority in the U.S., Macau or any foreign country or by any international taxing authority (including the City or County of * ),.upon or with respect to, based upon or measured by any of the following (collectively, “Taxes”):

(a) the Aircraft, the Engines or any Parts;

(b) the use, operation or maintenance of the Aircraft or carriage of passengers or freight during the Lease Term;

(c) this Lease, the payments due hereunder and the terms and conditions hereof; and

(d) the delivery, import or export, return, sale, payment of Total Loss Proceeds or other disposition of the Aircraft.

16.2 Exceptions to Indemnity. The indemnity provided for in Article 16.1 does not extend to any of the following Taxes:

(a) Taxes imposed by the U.S. or the State of * on the net income, gross receipts, capital or net worth of LESSOR;

(b) Taxes imposed by any other country or jurisdiction (including a jurisdiction to which LESSOR may move its principal place of business) on the net income, gross receipts, capital or net worth of LESSOR but only to the extent such Taxes were not in any way connected with, due to or arising out of this Lease or LESSEE’S use and operation of the Aircraft or to the extent such Taxes would have been imposed notwithstanding this Lease, the payments due hereunder or LESSEE’s use and operation of the Aircraft.

43 ARTICLE 16 TAXES

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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(c) Taxes attributable to the period prior to Delivery or after return of the Aircraft to LESSOR in accordance with this Lease;

(d) Taxes attributable to LESSOR’s gross negligence, willful misconduct or breach of this Lease; or

(e) Taxes imposed as a result of LESSOR’s voluntary transfer or other disposition (including financing) of the Aircraft or this Lease except a transfer or sale resulting from an Event of Default hereunder or the loss of the Aircraft or any part thereof (if and to the extent such Taxes exceed the Taxes which would have been imposed and in respect of which LESSEE would have been liable to indemnify LESSOR under this Lease had LESSOR not so transferred its interest).

16.3 After-Tax Basis. The amount which LESSEE is required to pay with respect to any Taxes indemnified against under Article 16.1 is an amount sufficient to restore LESSOR on an after-tax basis to the same position LESSOR would have been in had such Taxes not been incurred.

16.4 Timing of Payment. Any amount payable to LESSOR pursuant to this Article 16 will be paid within ten (10) days after receipt of a written demand therefor from LESSOR accompanied by a written statement describing in reasonable detail the basis for such indemnity and the computation of the amount so payable provided, however, that such amount need not be paid by LESSEE prior to the earlier of (a) the date any Tax is payable to the appropriate Government Entity or taxing authority or (b) in the case of amounts which are being contested by LESSEE in good faith or by LESSOR pursuant to Article 16.5, the date such contest is finally resolved.

16.5 Contests. If claim is made against LESSOR for Taxes with respect to which LESSEE is liable for a payment or indemnity under this Lease, LESSOR will promptly give LESSEE notice in writing of such claim provided, however, that LESSOR’s failure to give notice will not relieve LESSEE of its obligations hereunder unless such failure materially impairs or precludes LESSEE’s ability to contest the claim. So long as (a) a contest of such Taxes does not involve any danger of the sale, forfeiture or loss of the Aircraft or any interest therein, (b) if LESSOR so requests, LESSEE has provided LESSOR with an opinion of independent tax counsel that a reasonable basis exists for contesting such claim and (c) adequate reserves have been made for such Taxes or, if required, an adequate bond has been posted, then LESSOR at LESSEE’s written request will in good faith, with due diligence and at LESSEE’s expense, contest (or permit LESSEE to contest in the name of LESSEE or LESSOR) the validity, applicability or amount of such Taxes. Provided that there is no danger of sale, forfeiture or loss of the Aircraft or any interest therein, LESSOR will not settle or compromise any claim for which it is seeking indemnification and

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which LESSEE has elected to contest (and LESSEE has provided LESSOR with written notice of its election to contest) without the prior written consent of LESSEE, which consent will not be unreasonably withheld.

16.6 Refunds. Upon receipt by LESSOR of a refund of all or any part of any Taxes (including any deductions or withholdings referred to in Article 5.7) which LESSEE has paid, LESSOR will pay to LESSEE the net amount of such Taxes refunded.

16.7 Cooperation in Filing Tax Returns. LESSEE and LESSOR will cooperate with one another in providing information which may be reasonably required to fulfill each party’s tax filing requirements and any audit information request arising from such filing.

16.8 Survival of Obligations. The representations, warranties, indemnities and agreements of LESSEE provided for in this Article 16 will survive the Termination Date.

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ARTICLE 17         INDEMNITIES

17.1 General Indemnity. Except as set forth in Article 17.2, LESSEE agrees to indemnify and hold harmless LESSOR and its officers, directors, employees, agents and shareholders (individually an “Indemnitee” and collectively “Indemnitees”) from any and all liabilities, obligations, losses, damages, penalties, claims, actions, suits, costs, disbursements and expenses (including legal fees, costs and related expenses) of every kind and nature, whether or not any of the transactions contemplated by this Lease are consummated (collectively “Expenses”), which are imposed on, incurred by or asserted against any Indemnitee and which are in any way relating to, based on or arising out of any of the following:

(a) this Lease or any transactions contemplated hereby;

(b) the operation, possession, use, non-use, control, leasing, subleasing, maintenance, storage, Overhaul, testing, inspections or acceptance flights at return of the Aircraft, any Engine or any Part during the Lease Term by LESSEE, any sublessee or any other Person, whether or not the same is in compliance with the terms of this Lease, including without limitation claims for death, personal injury, property damage, other loss or harm to any Person and claims relating to any Laws, including without limitation environmental control, noise and pollution laws, rules or regulations;

(c) the manufacture, design, acceptance, rejection, delivery, return, sale after an Event of Default, import, export, condition, repair, modification, servicing, rebuilding, enforcement of warranties whether in LESSOR’s or LESSEE’s name, customer and product support provided by Manufacturer and other vendors, airworthiness, registration, reregistration, performance, sublease, merchantability, fitness for use, substitution or replacement of the Aircraft, Engine or any Part under this Lease or other transfer of use or possession of the Aircraft, Engine or any Part, including under a pooling or interchange arrangement, including without limitation latent and other defects, whether or not discoverable and patent, trademark or copyright infringement;

(d) any non-compliance by LESSEE with any term of this Lease or the falsity or inaccuracy of any representation or warranty of LESSEE set forth herein;

(e) the prevention or attempt to prevent the arrest, confiscation, seizure, taking in execution, impounding, forfeiture or detention of the Aircraft, or in securing the release of the Aircraft; or

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(f) as a consequence of any Default in payment by LESSEE of any sum to be paid by LESSEE when due under this Lease or any other Default by LESSEE in the due and punctual performance of its obligations under this Lease.

The foregoing indemnity by LESSEE is intended to include and cover any Expense to which an Indemnitee may be subject (in contract, tort, strict liability or under any other theory) regardless of the negligence, active or passive or any other type, of such Indemnitee, so long as such Expense does not fall within any of the exceptions listed in Article 17.2.

17.2 Exceptions to General Indemnities. The indemnity provided for in Article 17.1 will not extend to Expenses of any Indemnitee to the extent resulting from or arising out of any of the following:

(a) Expenses which LESSEE and LESSOR mutually agree or, absent mutual agreement, are judicially determined to have resulted from the willful misconduct of such Indemnitee;

(b) Expenses which LESSEE and LESSOR mutually agree or, absent mutual agreement, are judicially determined to be attributable to acts or events which occur after the Termination Date and return of the Aircraft to LESSOR in the condition required hereunder, but in any such case only to the extent not attributable to acts or omissions of LESSEE;

(c) Expenses representing Taxes, it being acknowledged that the terms of Article 16 apply exclusively to LESSEE’s indemnity obligations with respect to Taxes;

(d) Expenses due to the breach by LESSOR of its covenant of quiet enjoyment pursuant to Article 21.2 (except to the extent covered by LESSEE’s insurances);

(e) administrative Expenses which are in the ordinary and usual operating and overhead expense of the relevant Indemnitee;

(f) Expenses, other than those Taxes referred to in Article 16.2, which arise as a result of a LESSOR’s Lien or any financing in connection with the Aircraft; or

(g) Expenses which are provided for in another indemnity provision in this Lease.

17.3 After-Tax Basis. The amount which LESSEE will be required to pay with respect to any Expense indemnified against under Article 17.1 will be an amount sufficient to restore the Indemnitee, on an after-tax basis, to the same position such Indemnitee would have been in had such Expense not been incurred.

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17.4 Timing of Payment. It is the intent of the parties that each Indemnitee will have the right to indemnification for Expenses hereunder as soon as a claim is made and as soon as an Expense is incurred, whether or not such claim is meritorious and whether or not liability is established (but subject to Article 17.8). LESSEE will pay an Indemnitee for Expenses pursuant to this Article 17 within ten (10) days after receipt of a written demand therefor from such Indemnitee accompanied by a written statement describing in reasonable detail the basis for such indemnity.

17.5 Subrogation. Upon the payment in full of any indemnity pursuant to this Article 17 by LESSEE, LESSEE will be subrogated to any right of the Indemnitee in respect of the matter against which such indemnity has been made. LESSOR will, or LESSOR will use its reasonable efforts, to procure that such Indemnitee will provide such assistance as may be reasonably requested by LESSEE to pursue any rights which LESSEE has as a result of such subrogation.

17.6 Notice. Each Indemnitee and LESSEE will give prompt written notice one to the other of any liability of which such party has knowledge for which LESSEE is, or may be, liable under Article 17.1 provided, however, that failure to give such notice will not terminate any of the rights of Indemnitees under this Article 17 except to the extent that LESSEE has been materially prejudiced by the failure to provide such notice.

17.7 Refunds. If any Indemnitee obtains a recovery of all or any part of any amount which LESSEE has paid to such Indemnitee, such Indemnitee will pay to LESSEE the net amount recovered by such Indemnitee.

17.8 Defense of Claims. Unless a Default has occurred and is continuing, LESSEE and its insurers will have the right (in each such case at LESSEE’s sole expense) to investigate or, provided that LESSEE or its insurers have not reserved the right to dispute liability with respect to any insurance policies pursuant to which coverage is sought, defend or compromise any claim covered by insurance for which indemnification is sought pursuant to Article 17.1 and each Indemnitee will cooperate with LESSEE or its insurers with respect thereto. If LESSEE or its insurers are retaining attorneys to handle such claim, such counsel must be reasonably satisfactory to the Indemnitees. If not, the Indemnitees will have the right to retain counsel of their choice at LESSEE’s expense. Unless there is a danger of impairment to the Aircraft’s title, no Indemnitee will settle or compromise any claim for which it is seeking indemnification and for which LESSEE has given written notice to LESSOR of its election to contest, without the prior written consent of LESSEE, which consent will not be unreasonably withheld.

17.9 Survival of Obligation. Notwithstanding anything in this Lease to the contrary, the provisions of this Article 17 will survive the Termination Date and continue in full force and effect notwithstanding any breach by LESSOR or LESSEE of the terms of this Lease, the termination of the lease of the Aircraft to LESSEE under this Lease or the repudiation by LESSOR or LESSEE of this Lease.

48 ARTICLE 17 INDEMNITIES

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ARTICLE 18        INSURANCE

18.1 Categories of Insurance. Throughout the Lease Term and until the Termination Date LESSEE will, at its own expense, effect and maintain in full force and effect the types of insurance and amounts of insurance (including deductibles) described in Exhibit C through such brokers and with such insurers, as may be approved by LESSOR, such approval not to be unreasonably withheld, in London or New York or such other insurance markets as mutually agreed upon by the parties.

18.2 Write-back of any Date Recognition Exclusion. In the event any of LESSEE’s insurances (either the primary insurance or the reinsurance) contain any date recognition exclusion clause or similar clause excluding from such insurance coverage damage to any property (including the Aircraft) or death or injury to any person on account of accidents, incidents or occurrences caused by date recognition or other Year 2000-related problems, LESSEE at its cost will obtain for the benefit of itself and LESSOR the broadest write-back available in the London insurance market with respect to such exclusion.

18.3 Insurance for Indemnities. The insurance referred to in Article 18.1 will in each case include and insure (to the extent of the risks covered by the policies) the indemnity provisions of Article 17 and LESSEE will maintain such insurance of the indemnities for a minimum of two (2) years following the Termination Date.

18.4 Insurance for Wet Lease Operations. In the event LESSOR is performing wet lease operations with the Aircraft pursuant to Article 11.1.2 and the wet lessee is carrying the primary passenger, baggage cargo liability insurance with respect to the flights, then such insurance must contain the endorsements set forth in LESSEE’s own insurance certificate as required under the Lease. Moreover, LESSEE will at all times carry contingent passenger, baggage and cargo liability insurances for such flights. Prior to commencement of wet lease operations for a particular wet lessee, LESSOR will receive certificates of insurance from the insurance brokers for LESSEE and, if applicable, the wet lessee evidencing such coverages.

18.5 Renewal. Not less than five (5) Business Days before the expiration or termination date of any insurance required hereunder, LESSEE will provide LESSOR with fax confirmation from LESSEE’s insurance brokers that renewed certificates of insurance evidencing the renewal or replacement of such insurance and complying with Exhibit C will be issued on the termination date of the prior certificate. Within seven (7) days after such renewal, LESSEE will furnish its brokers’ certificates of insurance to LESSOR.

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18.6 Assignment of Rights by LESSOR. If LESSOR assigns all or any of its rights under this Lease as permitted by this Lease or otherwise disposes of any interest in the Aircraft to any other Person, LESSEE will, upon request, procure that such Person hereunder be added as loss payee and/or additional assured in the policies effected hereunder and enjoy the same rights and insurance enjoyed by LESSOR under such policies. LESSOR will nevertheless continue to be covered by such policies.

18.7 Deductibles. If there is a material adverse change in the financial condition of LESSEE which LESSOR reasonably believes will not enable LESSEE to pay the deductible upon the occurrence of a partial loss of the Aircraft or an Engine, then LESSOR may require LESSEE at LESSEE’s expense to lower its deductibles on the insurance maintained hereunder to a level which is available on commercially reasonable terms in the insurance market.

18.8 Other Insurance. LESSOR may from time to time by notice to LESSEE require LESSEE at LESSEE’s expense to effect such other insurance or such variations to the terms of the existing insurance as may then be customary in the airline industry for aircraft of the same type as the Aircraft and at the time commonly available in the insurance market.

18.9 Information. LESSEE will provide LESSOR with any information reasonably requested by LESSOR from time to time concerning the insurance maintained with respect to the Aircraft or in connection with any claim being made or proposed to be made thereunder.

18.10 Currency. All proceeds of insurance pursuant to this Lease will be payable in Dollars except as may be otherwise agreed by LESSOR.

18.11 Grounding of Aircraft. If at any time any of the insurance required pursuant to this Lease will cease to be in full force and effect, LESSEE will forthwith ground the Aircraft and keep the Aircraft grounded until such time as such insurance is in full force and effect again.

18.12 Failure to Insure. If at any time LESSEE fails to maintain insurance in compliance with this Article 18, LESSOR will be entitled but not bound to do any of the following (without prejudice to any other rights which it may have under this Lease by reason of such failure):

(a) to pay any premiums due or to effect or maintain insurance satisfactory to LESSOR or otherwise remedy such failure in such manner as LESSOR considers appropriate (and LESSEE will upon demand reimburse LESSOR in full for any amount so expended in that connection); or

(b) at any time while such failure is continuing, to require the Aircraft to remain at any airport or (as the case may be), proceed to and remain at any airport designated by LESSOR, until such failure is remedied to LESSOR’s satisfaction.

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18.13 Reinsurance. Any reinsurance will be maintained with reinsurers and brokers approved by LESSOR (which approval shall not be unreasonably withheld or delayed). Such reinsurance will contain each of the following terms and will in all other respects (including amount) be satisfactory to LESSOR:

(a) the same terms as the original insurance;

(b) a cut-through and assignment clause satisfactory to LESSOR; and

(c) payment will be made notwithstanding (i) any bankruptcy, insolvency, liquidation or dissolution of any of the original insurers and/or (ii) that the original insurers have made no payment under the original insurance policies.

18.14 Limit on Hull in favor of LESSEE. LESSEE may carry hull all risks or hull war and allied perils on the Aircraft in excess of the Agreed Value (which is payable to LESSOR) only to the extent such excess insurance which would be payable to LESSEE in the event of a Total Loss does not exceed * percent (* %) of the Agreed Value and only to the extent that such additional insurance will not prejudice the insurances required herein or the recovery by LESSOR thereunder. LESSEE agrees that it will not create or permit to exist any liens or encumbrances over the insurances, or its interest therein, except as constituted by this Lease.

51 ARTICLE 18 INSURANCE

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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ARTICLE 19        LOSS, DAMAGE AND REQUISITION

Throughout the Lease Term and until the Termination Date, LESSEE will bear all risk of loss, theft, damage and destruction to the Aircraft.

19.1 Definitions. In this Article 19:

“Agreed Value” means * percent (* %) of Manufacturer’s list price for the Aircraft and any additional LESSEE specified changes and LESSOR purchased equipment (BFE) on the Delivery Date, based upon the invoice provided by Manufacturer. Such Agreed Value shall decline by * % on each anniversary of the Delivery Date.

“Net Total Loss Proceeds” means the Total Loss Proceeds actually received by LESSOR following a Total Loss, less any legal and other out-of-pocket expenses, taxes or duties incurred by LESSOR in connection with the collection of such proceeds.

“Total Loss” means any of the following in relation to the Aircraft, Airframe or any Engine and “Total Loss Date” means the date set forth in parenthesis after each Total Loss:

(a) destruction, damage beyond repair or being rendered permanently unfit for normal use for any reason (the date such event occurs or, if not known, the date on which the Aircraft, Airframe or Engine was last heard of);

(b) actual, constructive, compromised, arranged or agreed total loss (the earlier of the date on which the loss is agreed or compromised by the insurers or thirty (30) days after the date of notice to LESSEE’s brokers or insurers claiming such total loss);

(c) requisition of title, confiscation, forfeiture or any compulsory acquisition or other similar event (the date on which the same takes effect);

(d) sequestration, detention, seizure or any similar event for more than sixty (60) consecutive days (the earlier of the date on which insurers make payment on the basis of a total loss or the date of expiration of such period);

(e) requisition for use for more than one hundred and eighty (180) consecutive days (the earlier of the date on which the insurers make payment on the basis of a total loss or the date of expiration of such period);

52 ARTICLE 19 LOSS, DAMAGE AND REQUISITION

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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(f) in the case of an Engine, the event described in Article 12.6.3 (the date on which the same takes effect);

(g) any sale of the Aircraft in connection with a LESSEE bankruptcy, whether by an administrator, trustee or court (the date on which the intent to sell the Aircraft becomes known);

(h) any sale of the Aircraft in connection with Eurocontrol charges (the date on which the sale occurs); or

(i) any other occurrence not permitted under this Lease which deprives LESSEE of use or possession for a period of sixty (60) consecutive days or longer (the 60th day of such period).

“Total Loss Proceeds” means the proceeds of any insurance or any compensation or similar payment arising in respect of a Total Loss.

19.2 Notice of Total Loss. LESSEE will notify LESSOR in writing within two (2) Business Days after a Total Loss Date of the Aircraft, Airframe or any Engine.

19.3 Total Loss of Aircraft or Airframe. If the Total Loss of the Aircraft or Airframe occurs during the Lease Term, the following will occur.

19.3.1 After the Total Loss Date and until receipt by LESSOR of the Agreed Value as set forth in Exhibit C and all other amounts then due under this Lease, LESSEE will continue to pay Rent and the parties will perform all of their other obligations (to the extent possible, in the context of the Total Loss) under this Lease.

19.3.2 On the date which is the earlier of the following dates:

(a) the date on which the Total Loss Proceeds of the Aircraft or the Airframe are paid by LESSEE’s insurance underwriters or brokers and

(b) the date which falls sixty (60) days after the Total Loss Date,

LESSEE will pay to LESSOR an amount equal to the sum of:

(a) the Agreed Value; and

(b) all other amounts then accrued under this Lease, less an amount equal to the Net Total Loss Proceeds received by LESSOR by such date.

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19.3.3 LESSOR will apply the Net Total Loss Proceeds and any amounts received from LESSEE pursuant to Article 19.3.2 as follows:

(a) first, in discharge of any unpaid Rent and any other amounts accrued and unpaid up to the date of LESSOR’s receipt of the Agreed Value;

(b) second, in discharge of the Agreed Value together with interest thereon calculated at the Default Rate for any period from the due date set forth in Article 19.3.2 up to the date of discharge; and

(c) third, payment of the balance, if any, to LESSEE.

19.3.4 Upon receipt by LESSOR of all monies payable by LESSEE in Article 19.3, provided no Default has occurred and is continuing, this Lease will terminate except for LESSEE’s obligations under Articles 10.5, 16 and 17, and LESSOR’s obligations under Articles 5.1.3, 16.6 and 17.7, which survive the Termination Date.

FOR AVOIDANCE OF DOUBT, (a) THE AGREED VALUE OF THE AIRCRAFT WILL BE PAYABLE TO LESSOR PURSUANT TO THIS ARTICLE 19.3 WHEN A TOTAL LOSS OF THE AIRFRAME OCCURS EVEN IF THERE HAS NOT BEEN A TOTAL LOSS OF AN ENGINE OR ENGINES and (b) LESSOR ACKNOWLEDGES AND AGREES THAT PAYMENT OF THE AGREED VALUE WILL CONSTITUTE FULL COMPENSATION FOR LESSOR FOR THE TOTAL LOSS OF THE AIRFRAME OR THE AIRCRAFT (AS THE CASE MAY BE) AND THAT, NOTWITHSTANDING ANY OTHER PROVISION OF THIS LEASE OR ANY OPERATIVE DOCUMENT, NO FURTHER COMPENSATION WILL BE PAYABLE IN RESPECT OF SUCH LOSS.

19.4 Surviving Engine(s). If a Total Loss of the Airframe occurs and there has not been a Total Loss of an Engine or Engines, then, provided no Default has occurred and is continuing, at the request of LESSEE (subject to agreement of relevant insurers) and on receipt of all monies due under Article 19.3 and payment by LESSEE of all airport, navigation and other charges on the Aircraft, LESSOR will transfer all its right, title and interest in the surviving Engine(s) to LESSEE, but without any responsibility, condition or warranty on the part of LESSOR other than as to freedom from any LESSOR’s Lien.

54 ARTICLE 19 LOSS, DAMAGE AND REQUISITION

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19.5 Total Loss of Engine and not Airframe.

19.5.1 Upon a Total Loss of any Engine not installed on the Airframe or a Total Loss of an Engine installed on the Airframe not involving a Total Loss of the Airframe, LESSEE will give LESSOR prompt written notice thereof. LESSEE will replace such Engine as soon as reasonably possible by duly conveying to LESSOR title to another engine (a) free and clear of all Security Interests (except Permitted Liens) of any kind or description, (b) in airworthy condition and of the same or improved model, service bulletin and modification status and having a value and utility at least equal to the Engine which sustained the Total Loss, (c) not older (by reference to serial number of manufacture date) than the older of the two Engines delivered by LESSOR to LESSEE with the Aircraft on the Delivery Date, (d) in the same or better operating condition as the Engine which sustained a Total Loss, including time in service, hours and cycles since new and hours and cycles available to the next inspection, Overhaul or scheduled or anticipated removal and (e) which has not been operated and does not have any modules that have been operated at a higher thrust rating than the Engine which sustained the Total Loss. Such replacement engine will be an Engine as defined herein and the Engine which sustained such Total Loss will cease to be an Engine.

19.5.2 LESSEE agrees at its own expense to take such action as LESSOR may reasonably request in order that any such replacement Engine becomes the property of LESSOR and is leased hereunder on the same terms as the destroyed Engine. LESSEE’s obligation to pay Rent will continue in full force and effect, but an amount equal to the Net Total Loss Proceeds received by LESSOR with respect to such destroyed Engine will, subject to LESSOR’s right to deduct therefrom any amounts then due and payable by LESSEE under this Lease, be paid to LESSEE.

19.5.3 Notwithstanding Articles 19.5.1 and 19.5.2, if at the time of a Total Loss of an Engine not installed on the Aircraft or a Total Loss of an Engine installed on the Airframe not involving a Total Loss of the Airframe, LESSOR and LESSEE are parties to a spare engine lease pursuant to which LESSOR is leasing a spare engine to LESSEE of the same model and type as the Engine which has suffered such Total Loss, LESSOR will receive from LESSEE the specific agreed value of the Engine set forth in Exhibit C or the replacement cost of the Engine (as applicable under LESSEE’s aircraft spares insurance) instead of accepting a replacement engine. One (1) of such LESSOR spare engines will then be substituted under this Lease for the Engine which suffered such Total Loss and the applicable spare engine lease will terminate.

55 ARTICLE 19 LOSS, DAMAGE AND REQUISITION

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19.6 Other Loss or Damage.

19.6.1 If the Aircraft or any part thereof suffers loss or damage not constituting a Total Loss of the Aircraft or the Airframe or any Engine, all the obligations of LESSEE under this Lease (including payment of Rent) will continue in full force.

19.6.2 In the event of any loss or damage to the Aircraft or Airframe which does not constitute a Total Loss of the Aircraft or the Airframe, or any loss or damage to an Engine which does not constitute a Total Loss of such Engine, LESSEE will at its sole cost and expense fully repair the Aircraft or Engine in order that the Aircraft or Engine is placed in an airworthy condition and substantially the same condition as it was prior to such loss or damage. All repairs will be performed in a manner which preserves and maintains all warranties and service life policies to the same extent as they existed prior to such loss or damage. LESSEE will notify LESSOR forthwith of any loss, theft or damage to the Aircraft for which the cost of repairs is estimated to exceed * U.S. Dollars (US$ *  ), together with LESSEE’s proposal for carrying out the repair. In the event that LESSOR does not agree with LESSEE’S proposals for repair, LESSOR will so notify LESSEE within two (2) Business Days after its receipt of such proposal. LESSEE and LESSOR will then consult with Manufacturer and LESSEE and LESSOR agree to accept as conclusive, and be bound by, Manufacturer’s directions or recommendations as to the manner in which to carry out such repairs. If Manufacturer declines to give directions or recommendations, LESSEE will carry out the repairs in accordance with the directions of LESSOR.

19.6.3 To the extent insurance proceeds received by LESSEE directly from its insurers do not cover the cost of such repair work on the Aircraft or Engine and LESSOR has received additional insurance proceeds from LESSEE’s insurers with respect to such repair work, LESSOR will (subject to LESSOR’s right to deduct therefrom any amounts then due and payable by LESSEE under this Lease and submission by LESSEE of reasonable documentation in support of such excess repair costs) pay to LESSEE insurance proceeds received by LESSOR as and when such repair work is performed on the Aircraft.

19.7 Copy of Insurance Policy. Promptly after the occurrence of a partial loss or Total Loss of the Aircraft or an Engine, at the request of LESSOR, LESSEE will provide LESSOR with a copy of LESSEE’s insurance policy.

19.8 Government Requisition. If the Aircraft, Airframe or any Engine is requisitioned for use by any Government Entity and such requisition does not constitute a Total Loss, LESSEE will promptly notify LESSOR of such requisition. All of LESSEE’s obligations hereunder will continue as if such requisition had not occurred. So long as no Default or Event of Default has occurred and is continuing, all payments received by LESSOR or LESSEE from such Government

56 ARTICLE 19 LOSS, DAMAGE AND REQUISITION

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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Entity will be paid over to or retained by LESSEE. If a Default has occurred and is continuing, all payments received by LESSEE or LESSOR from such Government Entity may be used by LESSOR to satisfy any obligations owing by LESSEE.

19.9 LESSOR Retention of Reserves. For avoidance of doubt, the parties agree that notwithstanding the Total Loss of the Airframe and/or Engines LESSOR will retain all Airframe and Engine Reserves paid by LESSEE and not payable to LESSEE pursuant to Article 13.4.

57 ARTICLE 19 LOSS, DAMAGE AND REQUISITION

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ARTICLE 20         REPRESENTATIONS, WARRANTIES AND COVENANTS OF LESSEE

20.1 Representations and Warranties. LESSEE represents and warrants the following to LESSOR as of the date of execution of this Lease and as of the Delivery Date:

20.1.1 Corporate Status. LESSEE is a corporation duly incorporated, validly existing and in good standing under the Laws of * . It has the corporate power and authority to carry on its business as presently conducted and to perform its obligations hereunder;

20.1.2 Governmental Approvals. No authorization, approval, consent, license or order of, or registration with, or the giving of notice to the Aviation Authority or any other Government Entity is required for the valid authorization, execution, delivery and performance by LESSEE of this Lease, except as will have been duly effected as of the Delivery Date.

20.1.3 Binding. LESSEE’s Board of Directors has authorized LESSEE to enter into this Lease, any Side Letters hereto and any other documentation in connection with the leasing of the Aircraft from LESSOR (collectively, the “Operative Documents”) and perform its obligations under the Operative Documents. This Lease and the other Operative Documents have been duly executed and delivered by LESSEE and represent the valid, binding and enforceable obligations of LESSEE except as enforceability may be limited by bankruptcy, insolvency, reorganization or other Laws of general application affecting the enforcement of creditors’ rights. When executed by LESSEE at Delivery, the same will apply to the Estoppel and Acceptance Certificate.

20.1.4 No Breach. The execution and delivery of the Operative Documents, the consummation by LESSEE of the transactions contemplated herein and compliance by LESSEE with the terms and provisions hereof do not and will not contravene any Law applicable to LESSEE, or result in any breach of or constitute any default under or result in the creation of any Security Interest upon any property of LESSEE, pursuant to any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, bank loan or credit agreement, corporate charter, by-law or other agreement or instrument to which LESSEE is a party or by which LESSEE or its properties or assets may be bound or affected. When executed by LESSEE at Delivery, the same will apply to the Estoppel and Acceptance Certificate.

58 ARTICLE 20 REPRESENTATIONS, WARRANTIES AND COVENANTS OF LESSEE

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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20.1.5 Filings. Except for any filing or recording that may be required under the Civil Aviation Authority of * , no filing or recording of any instrument or document (including the filing of any financial statement) is necessary under the Laws of the State of Registration in order for this Lease to constitute a valid and perfected lease of record relating to the Aircraft.

20.1.6 Licenses. LESSEE holds all licenses, certificates and permits from applicable Government Entities in * for the conduct of its business as a certificated air carrier and performance of its obligations under this Lease.

20.1.7 No Suits. There are no suits, arbitrations or other proceedings pending or threatened against LESSEE before any court or administrative agency against or affecting LESSEE which, if adversely determined, would have a material adverse effect on the business, assets or condition (financial or otherwise) of LESSEE or its ability to perform under this Lease, except as described in the filings provided to LESSOR pursuant to Article 22.

20.1.8 No Withholding. Under the Laws of * LESSEE will not be required to deduct any withholding or other Tax from any payment it may make under this Lease.

20.1.9 No Restrictions on Payments. Under the Laws of * , there are no present restrictions on LESSEE making the payments required by this Lease.

20.1.10 General Obligations. The obligations of LESSEE under this Lease are direct, general and unconditional obligations of LESSEE and rank or will rank at least pari passu with all other present and future unsecured and unsubordinated obligations (including contingent obligations) of LESSEE, with the exception of such obligations as are mandatorily preferred by law and not by reason of any encumbrance.

20.1.11 No Sovereign Immunity. LESSEE, under the Laws of * or of any other jurisdiction affecting LESSEE, is subject to private commercial law and suit. Neither LESSEE nor its properties or assets is entitled to sovereign immunity under any such Laws. LESSEE’s performance of its obligations hereunder constitute commercial acts done for commercial purposes.

20.1.12 Tax Returns. All necessary returns have been delivered by LESSEE to all relevant taxation authorities in the jurisdiction of its incorporation before the applicable due dates and LESSEE is not in default in the payment of any taxes due and payable.

59 ARTICLE 20 REPRESENTATIONS, WARRANTIES AND COVENANTS OF LESSEE

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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20.1.13 No Material Adverse Effect. LESSEE is not in default under any agreement to which it is a party or by which it may be bound which would have a material adverse effect on its business, assets or condition.

20.1.14 No Default under this Lease. At the time of execution of this Lease, no Default has occurred and is continuing and the financial statements provided to LESSOR pursuant to Article 22 fairly present the financial condition of LESSEE.

20.2 Covenants. LESSEE covenants to LESSOR that it will comply with the following throughout the entire Lease Term:

20.2.1 Licensing. LESSEE will hold all licenses, certificates and permits from applicable Government Entities in * for the conduct of its business as a certificated air carrier and performance of its obligations under this Lease. LESSEE will advise LESSOR promptly in the event any such licenses, certificates or permits are cancelled, terminated, revoked or not renewed.

20.2.2 Payments. If at any time any such restrictions may be applicable, LESSEE will obtain all certificates, licenses, permits, exemptions and other authorizations which are from time to time required for the making of the payments required by this Lease on the dates and in the amounts and currency which are stipulated herein, and will maintain the same in full force and effect for so long as the same will be required.

20.2.3 Sovereign Immunity. LESSEE, under the Laws of * or of any other jurisdiction affecting LESSEE, will continue to be subject to private commercial law and suit. Neither LESSEE nor its properties or assets will be entitled to sovereign immunity under any such Laws. LESSEE’s performance of its obligations hereunder will constitute commercial acts done for commercial purposes. LESSEE will advise LESSOR promptly of any change in the foregoing.

20.2.4 Information about Suits. LESSEE will promptly give to LESSOR a notice in writing of any suit, arbitration or proceeding before any court, administrative agency or Government Entity which, if adversely determined, would materially adversely affect LESSEE’s financial condition, affairs, operations or its ability to perform under this Lease.

20.2.5 Restrictions on Mergers. Without the prior written consent of LESSOR which will not be unreasonably withheld, LESSEE will not sell or convey substantially all of its property and assets or merge or consolidate with or into any other corporation unless (a) upon such consolidation, merger or conveyance, the obligations of LESSEE are fully assumed by the resulting entity, and (b) the resulting entity has a net worth equal to or greater than that of LESSEE at the time this Lease is executed.

60 ARTICLE 20 REPRESENTATIONS, WARRANTIES AND COVENANTS OF LESSEE

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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20.2.6 Restriction on Relinquishment of Possession. LESSEE will not, without the prior consent of LESSOR, deliver, transfer or relinquish possession of the Aircraft except in accordance with Articles 11 and 12.

20.2.7 No Security Interests. LESSEE will not create or agree to or permit to arise any Security Interest (other than Permitted Liens) on or with respect to the Aircraft, title thereto or any interest therein. LESSEE will forthwith, at its own expense, take all action as may be necessary to discharge or remove any such Security Interest if it exists at any time. LESSEE will within twenty-four (24) hours after becoming aware of the existence of any such Security Interest give written notice thereof to LESSOR.

20.2.8 Representations to Other Parties. LESSEE will not represent or hold out LESSOR as carrying goods or passengers on the Aircraft or as being in any way connected or associated with any operation of the Aircraft.

61 ARTICLE 20 REPRESENTATIONS, WARRANTIES AND COVENANTS OF LESSEE

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ARTICLE 21        REPRESENTATIONS, WARRANTIES AND COVENANTS OF LESSOR

21.1 Representations and Warranties. LESSOR represents and warrants the following to LESSEE as of the date of execution of the Lease and as of the Delivery Date and ALL OTHER WARRANTIES, EXPRESS OR IMPLIED HAVE BEEN WAIVED IN ACCORDANCE WITH ARTICLE 8:

21.1.1 Corporate Status. LESSOR is a corporation duly incorporated, validly existing and in good standing under the Laws of the State of * . It has the corporate power and authority to carry on its business as presently conducted and to perform its obligations hereunder.

21.1.2 Governmental Approvals. No authorization, approval, consent, license or order of, or registration with, or the giving of notice to the Aviation Authority or any Government Entity is required for the valid authorization, execution, delivery and performance by LESSOR of this Lease.

21.1.3 Binding. This Lease and the other Operative Documents have been duly authorized, executed and delivered by LESSOR and represent the valid, enforceable and binding obligations of LESSOR except as enforceability may be limited by bankruptcy, insolvency, reorganization or other Laws of general application affecting the enforcement of creditors’ rights.

21.1.4 No Breach. The execution and delivery of the Operative Documents, the consummation by LESSOR of the transactions contemplated herein and compliance by LESSOR with the terms and provisions hereof do not and will not contravene any Law applicable to LESSOR, or result in any breach of or constitute any default under any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, bank loan or credit agreement, corporate charter, by-law or other agreement or instrument to which LESSOR is a party or by which LESSOR or its properties or assets may be bound or affected.

21.1.5 Title to Aircraft. On the Delivery Date LESSOR will have good and valid title to the Aircraft.

21.1.6 Value Added Tax in the U.S. There is no value added tax payable in the U.S. as at the date of execution of this Lease.

62 ARTICLE 21 REPRESENTATIONS, WARRANTIES AND COVENANTS OF LESSOR

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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21.2 Covenant of Quiet Enjoyment. So long as no Default or Event of Default has occurred and is continuing hereunder, LESSOR covenants that neither LESSOR nor any person lawfully claiming through LESSOR will interfere with LESSEE’s quiet, peaceful use and enjoyment of the Aircraft.

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ARTICLE 22        FINANCIAL AND RELATED INFORMATION

LESSEE agrees to furnish each of the following to LESSOR:

(a) within forty-five (45) days after the end of each fiscal quarter of LESSEE, three (3) copies of the unaudited consolidated financial statements (including a balance sheet and profit and loss statement) prepared for such quarter in accordance with generally accepted accounting principles in * ;

(b) within ninety (90) days after the end of each fiscal year of LESSEE, three (3) copies of the audited consolidated financial statements (including a balance sheet and profit and loss statement) prepared as of the close of such fiscal year in accordance with generally accepted accounting principles in * LESSEE’s chief financial officer will also provide a certificate stating that no Default exists under this Lease;

(c) promptly after distribution, three (3) copies of all reports and financial statements which LESSEE sends or makes available to its stockholders or creditors;

(d) annually on the anniversary of the Delivery Date, a Technical Evaluation Report in the form and substance of Exhibit M, as revised; and

(e) from time to time, such other reasonable information as LESSOR or LESSOR’s Lender may reasonably request concerning the location, condition, use and operation of the Aircraft or the financial condition of LESSEE.

64 ARTICLE 22 FINANCIAL AND RELATED INFORMATION

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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ARTICLE 23        RETURN OF AIRCRAFT

23.1 Date of Return. LESSEE is obligated to return the Aircraft, Engines, Parts and Aircraft Documentation to LESSOR on the Expiration Date, unless a Total Loss of the Aircraft occurred prior to the Expiration Date and this Lease was terminated early in accordance with Article 19.3. If LESSEE is in Default hereunder by failing to return the Aircraft on the Expiration Date or if an Event of Default occurs prior to the Expiration Date and LESSOR repossesses the Aircraft, the return requirements set forth in this Article 23 nonetheless must be met on the date the Aircraft is actually returned to LESSOR or repossessed by LESSOR.

23.2 Technical Reporting. Six (6) months prior to the Expiration Date (and in an updated form at return of the Aircraft), LESSEE will provide LESSOR with a Technical Evaluation Report in the form and substance of Exhibit M, as revised, and, in addition upon LESSOR’s request, will make copies available of (a) drawings of the interior configuration of the Aircraft both as it presently exists and as it will exist at return, (b) an Airworthiness Directive status list, (c) a service bulletin incorporation list, (d) rotable tracked, hard-time and life limited component listings, (e) a list of LESSEE-initiated modifications and alterations, (f) interior material burn certificates, (g) the Aircraft Maintenance Program, (h) the complete workscope for the checks, inspections and other work to be performed prior to return, (i) current Engine disk sheets and (j) any other data which is reasonably requested by LESSOR.

23.3 Return Location. LESSEE at its expense will return the Aircraft, Parts and Aircraft Documentation to LESSOR at the facility where the return check will be performed. At LESSOR’s request and expense, LESSEE will ferry the Aircraft to another destination designated by LESSOR.

23.4 Full Aircraft Documentation Review. For the period commencing at least ten (10) Business Days prior to the proposed redelivery date and continuing until the date on which the Aircraft is returned to LESSOR in the condition required by this Lease, LESSEE will provide for the review of LESSOR and/or its representative the Aircraft Documentation in one central room at the Aircraft return location.

23.5 Aircraft Inspection.

23.5.1 During the maintenance checks performed immediately prior to the proposed redelivery and at the actual return of the Aircraft, LESSOR and/or its representatives will have an opportunity to conduct a full systems functional and operational inspection of the Aircraft (and other types of reasonable inspections based upon the Aircraft type, age, use and other known factors with respect to the Aircraft) and a full inspection of the Aircraft Documentation (including records and manuals), all to

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LESSOR’s reasonable satisfaction. Any deficiencies from the Aircraft return condition requirements set forth in this Article 23 will be corrected by LESSEE at its cost prior to the acceptance flight described in Article 23.5.2 and LESSOR agrees to act reasonably and in good faith when determining whether LESSEE has met the return conditions set forth in this Article 23.

23.5.2 Immediately prior to the proposed redelivery of the Aircraft, LESSEE will carry out for LESSOR and/or LESSOR’s representatives an Aircraft acceptance flight in accordance with Manufacturer’s standard flight operation check flight procedures or, if agreed to in writing by LESSOR, in accordance with an airline acceptance flight procedure, either of which will be for the duration necessary to perform such check flight procedures but in any event not more than two (2) hours. Flight costs and fuel will be furnished by and at the expense of LESSEE. Any deficiencies from the Aircraft return condition requirements set forth in this Article 23 will be corrected by LESSEE at its cost prior to return of the Aircraft.

23.5.3 To the extent that the ground inspection and acceptance flight extend beyond the Expiration Date, the Lease Term will be deemed to have been automatically extended and the obligations of LESSEE hereunder (including Article 23.11.3) will continue on a day-to-day basis until the Aircraft is accepted by LESSOR executing the Return Acceptance Receipt.

23.6 Certificate of Airworthiness Matters.

23.6.1 The Aircraft will possess a current Certificate of Airworthiness issued by the Aviation Authority (although this Certificate of Airworthiness may later be substituted by the Export Certificate of Airworthiness or equivalent if requested by LESSOR pursuant to Article 23.10). In addition, even if LESSEE must perform engineering, maintenance and repair work on the Aircraft beyond the requirements of Article 12, the Aircraft at return must be in the condition required in order to meet the requirements for issuance of a U.S. Standard Certificate of Airworthiness for transport category aircraft issued by the FAA in accordance with FAR Part 21 and, in addition, to meet the operating requirements of FAR Part 121.

23.6.2 At LESSOR’s request, LESSEE at its cost will demonstrate that the Aircraft meets the requirements for issuance of the U.S. Standard Certificate of Airworthiness for transport category aircraft specified in Article 23.6.1 by delivering to LESSOR a letter or document acceptable to LESSOR signed by an FAA Designated Airworthiness Representative (DAR) stating that the DAR has inspected the Aircraft and Aircraft Documentation (including records and manuals) and has found that the Aircraft meets the requirements for issuance of a U.S. Standard Certificate of Airworthiness for transport category aircraft in accordance with FAR Part 21.

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23.6.3 If the Aircraft is to be registered in a country other than in the U.S. after return from LESSEE, LESSOR may in its sole discretion waive the requirements of Article 23.6.2 and instead require that LESSEE at its expense (to the extent such expense is no greater than that which LESSEE would have incurred pursuant to Articles 23.6.1 and 23.6.2, with any additional expenses being for LESSOR’s account) put the Aircraft in a condition to meet the requirements for issuance of a Certificate of Airworthiness of the Aviation Authority of the next country of register, provided that such requirements will not cause LESSEE to be responsible for any greater expense or cause any delay in redelivery or the time for redelivery procedures than would be the case if the requirements of Articles 23.6.1 and 23.6.2 had not been waived. LESSOR will provide LESSEE with the information necessary to put the Aircraft in a condition to meet the requirements of a Certificate of Airworthiness of the aviation authority of such other country.

23.7 General Condition of Aircraft at Return.

23.7.1 The Aircraft, Engines and Parts will have been maintained and repaired in accordance with the Maintenance Program, the rules and regulations of the Aviation Authority and this Lease.

23.7.2 Aircraft Documentation (including records and manuals) will have been maintained in an up-to-date status, in accordance with the rules and regulations of the Aviation Authority and the FAA and this Lease and in a form necessary in order to meet the requirements of Article 23.6.2. The records and historical documents set forth in Attachment 1 of Exhibit K will be in English.

23.7.3 The Aircraft will be in the same working order and condition as at Delivery (subject to the other provisions of this Article 23, reasonable wear and tear from normal flight operations excepted), with all pilot discrepancies and deferred maintenance items cleared on a terminating action basis.

23.7.4 The Aircraft will be airworthy (conform to type design and be in a condition for safe operation), with all Aircraft equipment, components and systems operating in accordance with their intended use and within limits approved by Manufacturer, Aviation Authority and FAA.

23.7.5 The Aircraft interior (including cabin and windows) and exterior will be clean and cosmetically acceptable to LESSOR, with all compartments free of foreign objects, dirt, grease, fluids, stains, grime, cracks, tears and rips and ready to be placed into immediate commercial airline operations.

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23.7.6 No special or unique Manufacturer, Engine manufacturer or Aviation Authority inspection or check requirements which are specific to the Aircraft or Engines (as opposed to all aircraft or engines of their types) will exist with respect to the Airframe, Engines and Aircraft equipment, components and systems.

23.7.7 All repairs, modifications and alterations to the Aircraft will have been accomplished in accordance with Manufacturer’s Structural Repair Manual (or DGAC-approved data supported by a repair approval sheet (RAS)).

23.7.8 The Aircraft will be returned with the Engines installed and with the same equipment as at Delivery, subject only to those replacements, additions and Modifications permitted under this Lease.

23.7.9 All Airworthiness Directives which are issued prior to the date of return of the Aircraft and require compliance (either by means of repetitive inspections, modifications or terminating action) prior to return of the Aircraft to LESSOR will have been complied with on the Aircraft on a terminating action basis at LESSEE’s cost. Airworthiness Directives which do not have a terminating action will be accomplished at the highest level of inspection or modification possible. If, after using best efforts, LESSEE is unable to acquire the material, parts or components necessary to accomplish such Airworthiness Directive, LESSEE will pay to LESSOR upon return of the Aircraft the estimated cost of terminating such Airworthiness Directive. If the estimated cost cannot be mutually agreed upon by LESSEE and LESSOR, LESSEE and LESSOR will each obtain an estimate from a reputable FAA approved maintenance facility and the estimated cost will be the average of the two estimates.

23.7.10 The Aircraft will be in compliance with Manufacturer’s Corrosion Prevention and Control Program (CPCP) specified for the model type by Manufacturer.

23.7.11 If any waivers, alternate means of compliance, dispensations, extensions or carry-overs with respect to Airworthiness Directives or operating or maintenance requirements are granted by the Aviation Authority or permitted by the Maintenance Program, LESSEE at its sole cost and expense will nonetheless perform such Airworthiness Directives and other operating or maintenance requirements on a terminating action basis as if such waivers, alternate means of compliance, dispensations or extensions did not exist.

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23.7.12 The Aircraft will be free from any Security Interest except LESSOR’s Liens and no circumstance will have so arisen whereby the Aircraft is or could become subject to any Security Interest or right of detention or sale in favor of the Aviation Authority, any airport authority, or any other authority.

23.7.13 All no-charge vendor and Manufacturer’s service bulletin kits received by LESSEE for the Aircraft but not installed thereon will be on board the Aircraft as cargo. At LESSOR’s request, any other service bulletin kit which LESSEE paid for will also be delivered to LESSOR on board the Aircraft, but LESSOR will reimburse LESSEE for its actual out-of-pocket costs for such kit.

23.7.14 The Aircraft will be free of any system-related leaks and any damage resulting therefrom. All repairs will have been performed on a permanent basis in accordance with the applicable manufacturer’s instructions.

23.7.15 The Aircraft fluid reservoirs (including oil, oxygen, hydraulic and water) will be serviced to full and the waste tank serviced in accordance with Manufacturer’s instructions. At technical acceptance of return, each fuel tank will be at least as full as at Delivery.

23.7.16 All fuel tanks will have recently undergone an anti-fungus/biological growth contamination laboratory evaluation, with appropriate correction taken in the event excessive levels of contamination are identified.

23.7.17 At LESSOR’s request, LESSEE will provide LESSOR with a written summary of all sampling programs involving or affecting the Aircraft.

23.8 Checks Prior to Return. Immediately prior to return of the Aircraft to LESSOR, LESSEE at its expense will do each of the following:

23.8.1 Have performed, by an FAA-approved repair station, a full and complete zonal, systems and structural check (“C” or its equivalent), the corresponding lower checks (“A” and “B” or equivalent) and any other maintenance and inspections tasks, all in accordance with the MPD, sufficient to clear the Aircraft for operation until the next-scheduled full and complete zonal, systems and structural check under the MPD (which in any event will not be less than one year). LESSEE will also weigh the Aircraft. Any discrepancies revealed during such inspection will be corrected in accordance with Manufacturer’s maintenance and repair manuals or DGAC-approved data. LESSEE agrees to perform during such check any other work reasonably required by LESSOR (and not otherwise required under this Lease) and LESSOR will reimburse LESSEE for such work at LESSEE’s preferred customer rates.

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23.8.2 Perform an internal and external corrosion inspection and correct any discrepancies in accordance with the recommendations of Manufacturer and the Structural Repair Manual. In addition, all inspected areas will be properly treated with corrosion inhibitor as recommended by Manufacturer.

23.8.3 If LESSEE performed any structural inspections/tasks on a sampling basis but did not perform such inspections/tasks on the Aircraft, such work also will be accomplished on the Aircraft.

23.8.4 Remove LESSEE’s exterior markings, including all exterior paint, by stripping (or, at LESSOR’s option, pneumatically scuff/sanding) the paint from the Airframe and clean, reseal, refinish, prepare (including application of alodine or another corrosion inhibitor) and prime the surfaces to be painted, all in accordance with Manufacturer’s and paint manufacturer’s recommendations. LESSEE will then repaint the Airframe in the colors and logo specified by LESSOR. Such painting will be accomplished in such a manner as to result in a uniformly smooth and cosmetically acceptable aerodynamic surface. All external placards, signs and markings will be properly attached, free from damage, clean and legible.

23.8.5 Clean the exterior and interior of the Aircraft.

23.8.6 If reasonably required by LESSOR, repaint the interior of the Aircraft, including flight deck, and replace placards.

23.8.7 In accordance with Manufacturer’s Structural Repair Manual, permanently repair damage to the Aircraft that exceeds Manufacturer’s limits and replace any non-flush structural patch repairs installed on the Airframe with flush-type repairs.

23.8.8 Perform a full and complete hot and cold section videotape borescope on each Engine and its modules in accordance with the Engine manufacturer’s maintenance manual, with LESSOR or its representatives entitled to be present. LESSEE will provide evidence to LESSOR’s satisfaction that such inspection does not reveal any condition which would cause the Engine or any module to be unserviceable, beyond serviceable limits or serviceable with limitations under the Engine manufacturer’s maintenance manual. LESSEE will correct any discrepancies in accordance with the guidelines set out by the Engine manufacturer which may be discovered during such inspection.

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23.8.9 If the Engine historical and technical records and/or condition trend monitoring data of any Engine (including the APU) indicate an acceleration in the rate of deterioration in the performance of an Engine outside the Engine manufacturer’s standards, LESSEE will correct, to LESSOR’s satisfaction, such conditions which are determined to be causing such accelerated rate of deterioration.

23.8.10 In accordance with the applicable maintenance manual, accomplish a maximum power assurance run and condition, acceleration and bleed valve scheduling checks on the Engines. LESSEE will record and evaluate the Engine performance, with LESSOR and/or its representative entitled to be present. The performance and all operating parameters of each Engine will be within the limits specified in Manufacturer’s maintenance manual.

23.8.11 In the event the Engine historical and technical records, borescope inspection, trend monitoring and other checks specified in Article 23.8.10 result in a dispute regarding the conformity of an Engine with the requirements of this Article 23, LESSEE and LESSOR will consult with Engine manufacturer and follow Engine manufacturer’s recommendations (including the accomplishment of an Engine test cell operational check) with regard to determining if such Engine complies with the requirements of this Article 23 and the manner in which any discrepancies from the requirements of this Article 23 will be rectified.

23.9 Part Lives. At return, the condition of the Aircraft will be as follows:

23.9.1 The Aircraft will have at least * percent (* %) of the full allotment of hours, cycles and calendar time (whichever is the more limiting factor) between the 10 year/24,000 flight cycles complete zonal and structural checks (or any replacement or successor to such checks) remaining as approved by the MPD. All non-routine tasks generated as a result of the performance of these work cards must also be performed.

23.9.2 The Aircraft will have * (* ) hours consumed since the last full and complete zonal, systems and structural check (“C” check or equivalent) (excluding hours consumed on the acceptance flight).

23.9.3 Each Engine will meet all of the following:

(a) Each Engine will have operated no more than * hours and * cycles since the last full performance restoration shop visit in which the modules were fully refurbished and will have at least * percent of the hours and cycles remaining until its next anticipated removal (based upon the Engine manufacturer’s estimated mean time between removals for engines of the same type as the Engines);

71 ARTICLE 23 RETURN OF AIRCRAFT

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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(b) Each Engine will also have a remaining EGT margin sufficient to permit the operation of such Engine for the hours and cycles set forth in the preceding subparagraph, based upon the historical experience of LESSEE;

(c) No life-limited part of an Engine will have more hours or cycles consumed than such Engine’s data plate; and

(d) Each part of an Engine which has a hard time limit will have at least *% of such Part’s full allotment of hours and cycles remaining to operate until its next scheduled overhaul. Each part of an Engine which has a life limit will have at least *% of such Part’s full allotment of hours and cycles remaining to operate until its removal. However, if *% of such hard time or life-limited part’s full allotment of hours and cycles remaining is less than * hours and * cycles, then such hard time or life-limited part will be returned with at least * hours and * cycles remaining.

23.9.4 The APU will have * *() APU hours consumed since the last hot section refurbishment (excluding hours consumed on the acceptance flight).

23.9.5 The Landing Gear will have at least * percent (*)%) of the full allotment of hours/cycles/calendar time remaining until the next Overhaul or scheduled removal.

23.9.6 Each Part of the Aircraft which has a hard time (hour/cycle) limit to Overhaul pursuant to the MPD will have at least *% of such part’s full allotment of hours and cycles remaining to operate until its next scheduled overhaul pursuant to the MPD. However, if *% of such hard time Part’s full allotment of hours and cycles remaining is less than * hours and * cycles, then such hard time Part will be returned with at least * hours and * cycles remaining to operate until its next scheduled overhaul pursuant to the MPD.

23.9.7 Each life-limited Part of the Aircraft will have at least *% of such Part’s full allotment of hours and cycles remaining to operate until removal pursuant to the MPD. However, if *% of such life-limited Part’s full allotment of hours and cycles remaining is less than * hours and * cycles, then such life-limited Part will be returned with at least * hours and * cycles remaining to operate pursuant to the MPD.

23.9.8 Each Part which has a calendar limit will have sufficient calendar time remaining to operate until the next “C” check pursuant to the MPD after return of the Aircraft to LESSOR (which in any event will be not less than * year).

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*  The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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23.9.9 No Engine or installed component or Part of the Aircraft will have a total time since new greater than * percent *%) of that of the Airframe and, with respect to all installed components as a group, the components will have an average total time since new no greater than that of the Airframe.

23.9.10 The Aircraft Landing Gear tires and brakes will be * or have * (* hours/cycles out of Overhaul (except for the acceptance flight).

23.10 Export and Deregistration of Aircraft. At LESSOR’s request, LESSEE at its cost will (a) provide an Export Certificate of Airworthiness or its equivalent from the State of Registration so that the Aircraft can be exported to the country designated by LESSOR, (b) assist with deregistration of the Aircraft from the register of aircraft in the State of Registration, (c) assist with arranging for prompt confirmation of such deregistration to be sent by the registry in the State of Registration to the next country of registration and (d) perform any other acts reasonably required by LESSOR in connection with the foregoing. If any Aircraft work which LESSEE is not otherwise required to perform hereunder, including engineering, is required in order to obtain such Export Certificate of Airworthiness, LESSEE will perform such work and LESSOR will reimburse LESSEE for such work at LESSEE’s preferred customer rates.

23.11 LESSEE’s Continuing Obligations. In the event that LESSEE does not return the Aircraft to LESSOR on the Expiration Date and in the condition required by this Article 23 for any reason (whether or not the reason is within LESSEE’s control other than any delay due to additional work requested by LESSOR referred to in Articles 23.8.1 and 23.10 or for reasons within LESSOR’s control described in Article 23.6.3):

23.11.1 the obligations of LESSEE under this Lease will continue in full force and effect on a day-to-day basis until such return except that if LESSEE does not return the Aircraft to LESSOR on the Expiration Date solely and directly because of additional work requests made at the request of LESSOR which LESSEE is not otherwise required to perform hereunder, LESSEE shall have no obligation to pay Rent. This will not be considered a waiver of LESSEE’s Event of Default or any right of LESSOR hereunder.

23.11.2 Until such return, the Agreed Value will be an amount equal to the Agreed Value on the day the Aircraft should have been returned to LESSOR pursuant to this Lease.

23.11.3 LESSEE will fully indemnify LESSOR on demand for all losses (including consequential damages), liabilities, actions, proceedings, costs and expenses thereby suffered or incurred by LESSOR and, in addition, until such time as the Aircraft is redelivered to LESSOR and put into the condition required by this Article 23, instead of paying the Rent specified in Article 5.3, LESSEE will pay twice the amount of Rent

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*  The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, INC. with the Securities Exchange Commission and filed separately with the Commission.

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for each day from the scheduled Expiration Date until the Termination Date (the monthly Rent payable under Article 5.3.1 will be prorated based on the actual number of days in the applicable month). Payment will be made upon presentation of LESSOR’s invoice.

23.11.4 LESSOR may elect, in its sole and absolute discretion, to accept the return of the Aircraft prior to the Aircraft being put in the condition required by this Article 23 and thereafter have any such non-conformance corrected at such time as LESSOR may deem appropriate (but within ninety (90) days following the return of the Aircraft) and at commercial rates then-charged by the Person selected by LESSOR to perform such correction. Any direct expenses incurred by LESSOR for such correction will become additional Rent payable by LESSEE within fifteen (15) days following the submission of a written statement by LESSOR to LESSEE, identifying the items corrected and setting forth the expense of such corrections. LESSEE’s obligation to pay such supplemental Rent will survive the Termination Date.

23.12 Airport and Navigation Charges. LESSEE will ensure that at return of the Aircraft any and all airport, navigation and other charges which give rise or may if unpaid give rise to any lien, right of detention, right of sale or other Security Interest in relation to the Aircraft, Engine or any Part, whether incurred in respect of the Aircraft or any other aircraft operated by LESSEE, have been paid and discharged in full (whether or not due) and will at LESSOR’s request produce evidence thereof satisfactory to LESSOR.

23.13 Return Acceptance Certificate. Upon return of the Aircraft in accordance with the terms of this Lease, LESSEE will prepare and execute two (2) Return Acceptance Certificates in the form and substance of Exhibit K and LESSOR will countersign and return one such Return Acceptance Certificate to LESSEE.

23.14 Indemnities and Insurance. The indemnities and insurance requirements set forth in Articles 17 and 18, respectively, will apply to Indemnitees and LESSOR’s representatives during return of the Aircraft, including the ground inspection and acceptance flight. With respect to the acceptance flight, LESSOR’s representatives will receive the same protections as LESSOR on LESSEE’s Aviation and Airline General Third Party Liability Insurance.

23.15 Storage. At LESSOR’s request, LESSEE will continue to lease the Aircraft under this Lease for a period not to exceed thirty (30) days. During this period, LESSEE will have no obligations under this Lease except to park and store the Aircraft in accordance with Manufacturer’s recommended short term storage program at one of LESSEE’s principal maintenance facilities in * and, at LESSOR’s cost, to maintain all insurance on the Aircraft. LESSEE will not utilize the Aircraft for any reason during this period. LESSOR agrees to pay the airport parking charges in connection with this Article 23.15.

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*  The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, INC. with the Securities Exchange Commission and filed separately with the Commission.

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ARTICLE 24         ASSIGNMENT

24.1 No Assignment by LESSEE. NO ASSIGNMENT, NOVATION, TRANSFER, MORTGAGE OR OTHER CHARGE MAY BE MADE BY LESSEE OF ANY OF ITS RIGHTS WITH RESPECT TO THE AIRCRAFT, ENGINE OR PART OR THIS LEASE.

24.2 Sale or Assignment by LESSOR. Subject to LESSEE’s rights pursuant to this Lease, LESSOR may at any time and without LESSEE’s consent sell, assign or transfer its rights and interest hereunder or with respect to the Aircraft to a third party (“LESSOR’s Assignee”). For a period of *  (*) years after such sale or assignment and at LESSEE’s cost, LESSEE will continue to name LESSOR as an additional insured under the Aviation and Airline General Third Party Liability Insurance specified in Exhibit C.

24.3 LESSOR’s Lender. Subject to LESSEE’s rights pursuant to this Lease, LESSOR may at any time and without LESSEE’s consent grant security interests over the Aircraft and assign the benefit of this Lease to a lender (“LESSOR’s Lender”) as security for LESSOR’s obligations to LESSOR’s Lender. In connection with such financing, LESSOR may transfer the Aircraft to another entity owned or controlled by LESSOR, in which case LESSOR will guaranty the performance of such entity. LESSEE consents to any such transfer and agrees to cooperate with LESSOR or and Lender and to provide such certificates, agreements, and information as LESSOR or Lender may reasonably request. Further, if LESSOR’s Lender requires, as a condition to providing financing, any nonsubstantive modification of the Lease, LESSEE agrees to enter into an agreement so modifying this Lease.

24.4 LESSEE Cooperation. On request by LESSOR, LESSOR’s Assignee or LESSOR’s Lender, LESSEE will execute all such documents (such as a lease assignment agreement) as LESSOR, LESSOR’s Assignee or LESSOR’s Lender may reasonably require to confirm LESSEE’s obligations under this Lease and obtain LESSEE’s acknowledgment that LESSOR is not in breach of the Lease. LESSEE will provide all other reasonable assistance and cooperation to LESSOR, LESSOR’s Assignee and LESSOR’s Lender in connection with any such sale or assignment or the perfection and maintenance of any such security interest, including, at LESSOR’s cost, making all necessary filings and registrations in the State of Registration and providing all opinions of counsel with respect to matters reasonably requested by LESSOR, LESSOR’s Lender or LESSOR’s Assignee. LESSOR will reimburse LESSEE for its reasonable out-of-pocket costs in reviewing documents required by LESSOR or LESSOR’s Lender.

24.5 Protections.

24.5.1 At LESSEE’s request, LESSOR will obtain for the benefit of LESSEE an acknowledgment from any LESSOR’s Assignee or LESSOR’s Lender that, so long as no Default or Event of Default has occurred and is continuing hereunder, such Person will not interfere with LESSEE’s quiet, peaceful use and enjoyment of the Aircraft.

	75	ARTICLE 24 ASSIGNMENT
*  The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, INC. with the Securities Exchange Commission and filed separately with the Commission.

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24.5.2 Wherever the term “LESSOR” is used in this Lease in relation to any of the provisions relating to disclaimer, title and registration, taxes, indemnity and insurance contained in Articles 8, 14, 16, 17 and 18, respectively, or with respect to Article 20.2.8, the term “LESSOR” will be deemed to include LESSOR’s Assignee and LESSOR’s Lender, if applicable.

24.5.3 LESSEE will not be obligated to pay any greater amount following an assignment, sale or granting of a security interest than it would have had to pay but for such assignment or sale, and LESSOR will indemnify LESSEE on demand for any loss suffered or cost incurred as a result of such assignment or sale or granting of such security interests (provided that the foregoing shall not apply to any additional risk or cost associated with the insurances to be carried by LESSEE hereunder and its indemnity obligations pursuant to Article 17).

76 ARTICLE 24 ASSIGNMENT

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ARTICLE 25        DEFAULT OF LESSEE

25.1 LESSEE Notice to LESSOR. LESSEE will promptly notify LESSOR if LESSEE becomes aware of the occurrence of any Default.

25.2 Events of Default. The occurrence of any of the following will constitute an Event of Default and material breach of this Lease by LESSEE:

(a) LESSEE fails to take delivery of the Aircraft when obligated to do so under the terms of this Lease;

(b) LESSEE fails to make a Rent or other payment due hereunder in the manner and by the date provided herein and fails to make such payment within five (5) Business Days after such payment is due;

(c) LESSEE fails to obtain or maintain the insurance required by Article 18;

(d) LESSEE fails to return the Aircraft to LESSOR on the Expiration Date in accordance with Article 23;

(e) LESSEE fails to observe or perform any of its other obligations hereunder and fails to cure the same within fifteen (15) days after written notice thereof to LESSEE. If such failure cannot by its nature be cured within fifteen (15) days, LESSEE will have the reasonable number of days necessary to cure such failure (not to exceed a period of sixty (60) days) so long as it uses diligent and best efforts to do so;

(f) any representation or warranty of LESSEE herein proves to be untrue in any material respect;

(g) the registration of the Aircraft is cancelled other than as a result of an act or omission of LESSOR;

(h) LESSEE abandons the Aircraft or Engines;

(i) LESSEE or an approved sublessee no longer has unencumbered control (other than Permitted Liens) or possession of the Aircraft or Engines, except as otherwise permitted by this Lease;

(j) LESSEE threatens to or temporarily or permanently discontinues business or sells or otherwise disposes of all or substantially all of its assets;

77 ARTICLE 25 DEFAULT OF LESSEE

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(k) a material adverse change occurs in the financial condition of LESSEE;

(l) LESSEE no longer possesses the licenses, certificates and permits required for the conduct of its business as a certificated air carrier in *;

(m) LESSEE (i) suspends payment on its debts or other obligations, (ii) is unable to or admits its inability to pay its debts or other obligations as they fall due, (iii) is adjudicated or becomes bankrupt or insolvent or (iv) proposes or enters into any composition or other arrangement for the benefit of its creditors generally;

(n) any proceedings, resolutions, filings or other steps are instituted or threatened with respect to LESSEE relating to the bankruptcy, liquidation, reorganization or protection from creditors of LESSEE or a substantial part of LESSEE’s property. If instituted by LESSEE, the same will be an immediate Event of Default. If instituted by another Person, the same will be an Event of Default if not dismissed, remedied or relinquished within sixty (60) days;

(o) any order, judgment or decree is entered by any court of competent jurisdiction appointing a receiver, trustee or liquidator of LESSEE or a substantial part of its property, or if a substantial part of LESSEE’s property is to be sequestered. If instituted by or done with the consent of LESSEE, the same will be an immediate Event of Default. If instituted by another Person, the same will be an Event of Default if not dismissed, remedied or relinquished within sixty (60) days;

(p) any indebtedness for borrowed moneys or a guarantee or similar obligation owed by LESSEE with an unpaid balance of at least * U.S. Dollars (US*) becomes due or is capable of being declared due before its stated maturity or LESSEE is in default under any other purchase agreement, lease, conditional sale agreement or other agreement pursuant to which LESSEE has possession of any aircraft and such default materially and adversely affects LESSEE’s ability to perform its obligations under this Lease. Provided, however, that any default declared on account of LESSEE not returning a leased aircraft (other than an aircraft leased to LESSEE by LESSOR) to a lessor on the relevant expiration date of such other lease shall not be an Event of Default hereunder;

(q) LESSEE is in default under any other lease or agreement between LESSEE and LESSOR and the same is not cured within its specified cure period; or

(r) any approved sublessee acts so as to prevent present or future performance by LESSEE of its obligations under this Lease and LESSEE has not procured such action as is necessary to enable performance within fifteen (15) days after such action.

	78	ARTICLE 25 DEFAULT OF LESSEE
*  The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, INC. with the Securities Exchange Commission and filed separately with the Commission.

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25.3 LESSOR’s General Rights. Upon the occurrence of any Event of Default, all rights of LESSEE hereunder will immediately cease and terminate (but LESSEE’s obligations hereunder will continue, including the obligations to protect and insure the Aircraft as required under this Lease). LESSOR may do all or any of the following at its option (in addition to such other rights and remedies which LESSOR may have by statute or otherwise but subject to any requirements of applicable Law):

(a) terminate this Lease by giving written notice to LESSEE;

(b) require that LESSEE immediately move the Aircraft to an airport or other location designated by LESSOR;

(c) for LESSEE’s account, do anything that may reasonably be required to cure any default and recover from LESSEE all reasonable costs, including legal fees and expenses incurred in doing so and Default Interest;

(d) proceed as appropriate to enforce performance of this Lease and to recover any damages for the breach hereof, including the amounts specified in Article 25.5;

(e) terminate this Lease by taking possession of the Aircraft or by serving notice requiring LESSEE to return the Aircraft to LESSOR at the location specified by LESSOR. If LESSOR takes possession of the Aircraft, it may enter upon LESSEE’s premises where the Aircraft is located without liability. Upon repossession of the Aircraft, LESSOR will then be entitled to sell, lease or otherwise deal with the Aircraft as if this Lease had never been made. LESSOR will be entitled to the full benefit of its bargain with LESSEE; or

(f) apply all or any portion of the Security Deposit and any other security deposits held by LESSOR pursuant to any other agreements between LESSOR and LESSEE to any amounts due.

25.4 Deregistration and Export of Aircraft. If an Event of Default has occurred and is continuing, LESSOR may take all steps necessary to deregister the Aircraft in and export the Aircraft from the State of Registration.

25.5 LESSEE Liability for Damages. If an Event of Default occurs, in addition to all other remedies available at law or in equity, LESSOR has the right to recover from LESSEE and LESSEE will pay LESSOR within two (2) Business Days after LESSOR’s written demand, all of the following:

79 ARTICLE 25 DEFAULT OF LESSEE

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(a) all amounts which are then due and unpaid hereunder and which become due prior to the earlier of LESSOR’s recovery of possession of the Aircraft or LESSEE making an effective tender thereof;

(b) subject to LESSOR’s duty to mitigate losses, any losses suffered by LESSOR because of LESSOR’s inability to place the Aircraft on lease with another lessee or to otherwise utilize the Aircraft on financial terms as favorable to LESSOR as the terms hereof or, if LESSOR elects to dispose of the Aircraft, the funds arising from a sale or other disposition of the Aircraft are not as profitable to LESSOR as leasing the Aircraft in accordance with the terms hereof would have been (and LESSOR will be entitled to accelerate any and all Rent which would have been due from the date of LESSOR’s recovery or repossession of the Aircraft through the Expiration Date);

(c) all costs associated with LESSOR’s exercise of its remedies hereunder, including but not limited to repossession costs, legal fees, Aircraft storage costs, Aircraft re-lease or sale costs and LESSOR’s internal costs and expenses (including the cost of personnel time calculated based upon the compensation paid to the individuals involved on an annual basis and a general LESSOR overhead allocation);

(d) subject to LESSOR’s duty to mitigate losses, any interest, fees or other sums paid or payable on account of funds borrowed in order to carry any unpaid amount;

(e) subject to LESSOR’s duty to mitigate losses, any loss, premium, penalty or expense which may be incurred in repaying funds raised to finance the Aircraft or in unwinding any financial instrument relating in whole or in part to LESSOR’s financing of the Aircraft;

(f) subject to LESSOR’s duty to mitigate losses, any loss, cost, expense or liability sustained by LESSOR due to LESSEE’s failure to redeliver the Aircraft in the condition required by this Lease; and

(g) subject to LESSOR’s duty to mitigate losses, any other loss, damage, expense, cost or liability which LESSOR suffers or incurs as a result of the Event of Default and/or termination of this Lease, including an amount sufficient to fully compensate LESSOR for any loss of or damage to LESSOR’s residual interest in the Aircraft caused by LESSEE’s default.

25.6 Waiver of Default. By written notice to LESSEE, LESSOR may at its election waive any Default or Event of Default and its consequences and rescind and annul any prior notice of termination of this Lease. The respective rights of the parties will then be as they would have been had no Default or Event of Default occurred and no such notice been given.

80 ARTICLE 25 DEFAULT OF LESSEE

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25.7 Present Value of Payments. In calculating LESSOR’s damages hereunder, upon an Event of Default all Rent and other amounts which would have been due hereunder during the Lease Term if an Event of Default had not occurred will be calculated on a present value basis using a discounting rate of * percent (*%) per annum discounted to the earlier of the date on which LESSOR obtains possession of the Aircraft or LESSEE makes an effective tender thereof.

25.8 Use of “Termination Date”. For avoidance of doubt, it is agreed that if this Lease terminates and the Aircraft is repossessed by LESSOR due to an Event of Default, then, notwithstanding the use of the term “Termination Date” in this Lease, the period of the Lease Term and the “Expiration Date” will be utilized in calculating the damages to which LESSOR is entitled pursuant to Article 25.5. For example, it is agreed and understood that LESSOR is entitled to receive from LESSEE the Rent and the benefit of LESSEE’s insurance and maintenance of the Aircraft until expiration of the Lease Term.

	81	ARTICLE 25 DEFAULT OF LESSEE
*  The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, INC. with the Securities Exchange Commission and filed separately with the Commission.

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ARTICLE 26         NOTICES

26.1 Manner of Sending Notices. Any notice, request or information required or permissible under this Lease will be in writing and in English. Notices will be delivered in person or sent by telex, fax, letter (mailed airmail, certified and return receipt requested), or by expedited delivery addressed to the parties as set forth in Article 26.2. In the case of a telex or fax, notice will be deemed received upon actual receipt (in the case of a fax notice, the date of actual receipt will be deemed to be the date set forth on the confirmation of receipt produced by the sender’s fax machine immediately after the fax is sent). In the case of a mailed letter, notice will be deemed received on the tenth (10th) day after mailing. In the case of a notice sent by expedited delivery, notice will be deemed received on the date of delivery set forth in the records of the Person which accomplished the delivery. If any notice is sent by more than one of the above listed methods, notice will be deemed received on the earliest possible date in accordance with the above provisions.

26.2 Notice Information. Notices will be sent:

If to LESSOR:	*
	*
	*
	United States of   America
	Attention:                 Legal Department
	Fax:                         *
	Telephone:              *
If to LESSEE:	*L
	*
	*
	*
	*
	Attention:              *
	Fax:                       *
	Telephone:            *

or to such other places and numbers as either party directs in writing to the other party.

	82	ARTICLE 26 NOTICES
*  The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, INC. with the Securities Exchange Commission and filed separately with the Commission.

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ARTICLE 27         GOVERNING LAW AND JURISDICTION

27.1 California Law. This Lease is being delivered in the State of California and will in all respects be governed by and construed in accordance with the Laws of the State of California (notwithstanding the conflict Laws of the State of California).

27.2 Non-Exclusive Jurisdiction in California. As permitted by Section 410.40 of the California Code of Civil Procedure, the parties hereby irrevocably submit to the non-exclusive jurisdiction of the Federal District Court for the Central District of California and the State of California Superior or Municipal Court in Los Angeles, California. Nothing herein will prevent either party from bringing suit in any other appropriate jurisdiction.

27.3 Service of Process. The parties hereby consent to the service of process (a) out of any of the courts referred to above, (b) in accordance with Section 415.40 of the California Code of Civil Procedure by mailing copies of the summons and complaint to the person to be served by air mail, certified or registered mail to the address set forth in Article 26.2, postage prepaid, return receipt requested or (c) in accordance with the Hague Convention, if applicable.

27.4 Prevailing Party in Dispute. If any legal action or other proceeding is brought in connection with or arises out of any provisions in this Lease, the prevailing party will be entitled to recover reasonable attorneys’ fees and other costs incurred in such action or proceedings. The prevailing party will also, to the extent permissible by Law, be entitled to receive pre- and post-judgment Default Interest.

27.5 Waiver. LESSEE AND LESSOR HEREBY WAIVE THE RIGHT TO A TRIAL BY JURY. LESSEE AND LESSOR HEREBY IRREVOCABLY WAIVE ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATED TO THIS LEASE BROUGHT IN ANY OF THE COURTS REFERRED TO IN ARTICLE 27.2, AND HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

83 ARTICLE 27 GOVERNING LAW AND JURISDICTION

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ARTICLE 28          MISCELLANEOUS

28.1 Transportation of Personnel. LESSEE will provide transportation to LESSOR’s personnel on a gratis basis on aircraft operated by LESSEE five (5) times per calendar year (per aircraft leased from LESSOR).

28.2 Press Releases. The parties will give copies to one another, in advance if possible, of all news, articles and other releases provided to the public media regarding this Lease or the Aircraft.

28.3 Power of Attorney. LESSEE hereby irrevocably appoints LESSOR as its attorney for the purpose of putting into effect the intent of this Lease following an Event of Default, including without limitation, the return, repossession, deregistration and exportation of the Aircraft. To evidence this appointment, LESSEE has executed the Power of Attorney in the form of Exhibit H. LESSEE will take all steps required under the Laws of the State of Registration to provide such power of attorney to LESSOR.

28.4 LESSOR Performance for LESSEE. The exercise by LESSOR of its remedy of performing a LESSEE obligation hereunder is not a waiver of and will not relieve LESSEE from the performance of such obligation at any subsequent time or from the performance of any of its other obligations hereunder.

28.5 LESSOR’s Payment Obligations. Any obligation of LESSOR under this Lease to pay or release any amount to LESSEE is conditioned upon (a) all amounts then due and payable by LESSEE to LESSOR under this Lease or under any other agreement between LESSOR and LESSEE having been paid in full and (b) no Default having occurred and continuing hereunder at the time such payment or release of payment is payable to LESSEE.

28.6 Application of Payments. Any amounts paid or recovered in respect of LESSEE liabilities hereunder may be applied to Rent, Default Interest, fees or any other amount due hereunder in such proportions, order and manner as LESSOR determines.

28.7 Usury Laws. The parties intend to contract in strict compliance with the usury Laws of the State of California and, to the extent applicable, the United States. Notwithstanding anything to the contrary in the Operative Documents, LESSEE will not be obligated to pay Default Interest or other interest in excess of the maximum non-usurious interest rate, as in effect from time to time, which may by applicable Law be charged, contracted for, reserved, received or collected by LESSOR in connection with the Operative Documents. During any period of time in which the then-applicable highest lawful rate is lower than the Default Interest rate, Default Interest will accrue and be payable at such highest lawful rate; however, if at later times such highest lawful rate is

84 ARTICLE 28 MISCELLANEOUS

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greater than the Default Interest rate, then LESSEE will pay Default Interest at the highest lawful rate until the Default Interest which is paid by LESSEE equals the amount of interest that would have been payable in accordance with the interest rate set forth in Article 5.6.

28.8 Delegation by LESSOR. LESSOR may delegate to any Person(s) all or any of the rights, powers or discretion vested in it by this Lease and any such delegation may be made upon such terms and conditions as LESSOR in its absolute discretion thinks fit.

28.9 Confidentiality. The Operative Documents and all non-public information obtained by either party about the other are confidential and are between LESSOR and LESSEE only and will not be disclosed by a party to third parties (other than to such party’s auditors or legal advisors or as required in connection with any filings of this Lease in accordance with Article 14) without the prior written consent of the other party. If disclosure is required as a result of applicable Law, LESSEE and LESSOR will cooperate with one another to obtain confidential treatment as to the commercial terms and other material provisions of this Lease.

28.10 Rights of Parties. The rights of the parties hereunder are cumulative, not exclusive, may be exercised as often as each party considers appropriate and are in addition to its rights under general Law. The rights of one party against the other party are not capable of being waived or amended except by an express waiver or amendment in writing. Any failure to exercise or any delay in exercising any of such rights will not operate as a waiver or amendment of that or any other such right any defective or partial exercise of any such rights will not preclude any other or further exercise of that or any other such right and no act or course of conduct or negotiation on a party’s part or on its behalf will in any way preclude such party from exercising any such right or constitute a suspension or any amendment of any such right.

28.11 Further Assurances. Each party agrees from time to time to do and perform such other and further acts and execute and deliver any and all such other instruments as may be required by Law, reasonably requested by the auditors of the other party or requested by the other party to establish, maintain or protect the rights and remedies of the requesting party or to carry out and effect the intent and purpose of this Lease.

28.12 Use of Word “including”. The term “including” is used herein without limitation and by way of example only.

28.13 Headings. All article and paragraph headings and captions are purely for convenience and will not affect the interpretation of this Lease. Any reference to a specific article, paragraph or section will be interpreted as a reference to such article, paragraph or section of this Lease.

85 ARTICLE 28 MISCELLANEOUS

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28.14 Invalidity of any Provision. If any of the provisions of this Lease become invalid, illegal or unenforceable in any respect under any Law, the validity, legality and enforceability of the remaining provisions will not in any way be affected or impaired.

28.15 Negotiation. The terms of this Lease are agreed by LESSOR from its principal place of business in *

28.16 Time is of the Essence. Time is of the essence in the performance of all obligations of the parties under this Lease and, consequently, all time limitations set forth in the provisions of this Lease will be strictly observed.

28.17 Amendments in Writing. The provisions of this Lease may only be amended or modified by a writing executed by LESSOR and LESSEE.

28.18 Counterparts. This Lease may be executed in any number of identical counterparts, each of which will be deemed to be an original, and all of which together will be deemed to be one and the same instrument when each party has signed and delivered one such counterpart to the other party.

28.19 Delivery of Documents by Fax. Delivery of an executed counterpart of this Lease or of any other documents in connection with this Lease by fax will be deemed as effective as delivery of an originally executed counterpart. Any party delivering an executed counterpart of this Lease or other document by fax will also deliver an originally executed counterpart, but the failure of any party to deliver an originally executed counterpart of this Lease or such other document will not affect the validity or effectiveness of this Lease or such other document.

28.20 Entire Agreement. The Operative Documents constitute the entire agreement between the parties in relation to the leasing of the Aircraft by LESSOR to LESSEE and supersede all previous proposals, agreements and other written and oral communications in relation hereto. The parties acknowledge that there have been no representations, warranties, promises, guarantees or agreements, express or implied, except as set forth herein.

28.21 Witness. * has executed and delivered this Lease to LESSOR only for the purpose of recording his status as a witness thereto.

	86	ARTICLE 28 MISCELLANEOUS
*  The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, INC. with the Securities Exchange Commission and filed separately with the Commission.

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IN WITNESS WHEREOF, LESSEE and LESSOR have caused this Lease to be executed by their respective officers as of October 26, 2001.

*		*
	By:		By:
	Its:		Its:
			By:
			Its:

*
	By:

SIGNATURE PAGE

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, INC. with the Securities Exchange Commission and filed separately with the Commission.

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EXHIBIT A          AIRCRAFT DESCRIPTION

Aircraft Manufacturer and Model:	Airbus A319-100
Engine Manufacturer and Model:		IAE V2524-A5
Engine Serial Numbers:		To be identified in the Acceptance Certificate
Audio and Video Equipment:		Furnished
Configuration:		8C/118Y
Specification:

*

88 EXHIBIT A AIRCRAFT DESCRIPTION

*  The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, INC. with the Securities Exchange Commission and filed separately with the Commission.

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EXHIBIT B        PARTICIPATION AGREEMENT

89 EXHIBIT ? PARTICIPATION AGREEMENT

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EXHIBIT C        CERTIFICATE OF INSURANCE

[Refer to Aircraft Lease Agreement dated as of October 26, 2001 between LESSEE and LESSOR (the “Lease”). If applicable, insurance certificates from both the insurers and reinsurers will be provided. If there is a LESSOR’s Lender, include references to it where appropriate after references to LESSOR.]

To:        * (“LESSOR”)

               *

              *

      United States

Re:      *
A319-100       Manufacturer’s Serial No.:       Registration Mark:	TBD      (the ‘‘Aircraft”)

 The following security has subscribed to the insurance and/or reinsurance policies:

 [LIST COMPANIES & PERCENTAGES]

 THIS IS TO CERTIFY THAT, as Insurance Brokers, we have effected Fleet Insurance in respect of aircraft owned or operated by LESSEE (including the Aircraft) as specified below.

AIRCRAFT HULL ALL RISKS

COVERING:

All risks of physical loss or damage to the Aircraft from any cause (subject only to the exclusions as specified below), for an Agreed Value of Aircraft in the amount of [list amount calculated in accordance with Article 19.1]

DEDUCTIBLES:

US$ [AMOUNT] each and every loss. Not applicable to Total Loss/Constructive Total Loss or Arranged Total Loss

90 EXHIBIT C CERTIFICATE OF INSURANCE

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, INC. with the Securities Exchange Commission and filed separately with the Commission.

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GEOGRAPHICAL COVERAGE:

Worldwide

AVIATION AND AIRLINE GENERAL THIRD PARTY LIABILITY

COVERING:

Aircraft Third Party, Passenger, Baggage, Cargo and Mail Liability and Airline General Third Party Liability (including Premises, Hangarkeepers and Products Liability) for combined single limit of not less than US$* (or such higher amount as LESSEE may carry on any other aircraft in its fleet) any one accident/occurrence (but in the aggregate in relation to Products Liability), extended to cover LESSEE’s liability under the Lease to the extent of the risks covered by the policy including war and allied perils under Extended Coverage Endorsement as per AVN 52 subject only to exclusions as specified below and AVN 52D

GEOGRAPHICAL LIMITS:

Worldwide

HULL WAR AND ALLIED PERILS

COVERING:

Hull War Risks as per LSW555.B, but including (a) confiscation or requisition (including by State of Registration and state where airline is domiciled), (b) hijacking or other unlawful seizure or wrongful exercise of control of the Aircraft or crew in flight (including any attempt at such seizure or control) and including “All Risks” Continuation Clause and Extortion Risks (including expenses) and covering claims excluded from Hull All Risks Policy while Aircraft outside Assured’s control by reason of perils insured under this policy, for an Agreed Value of Aircraft in the amount of [list amount calculated in accordance with Article 19.1]

DEDUCTIBLE:

No deductible

91 EXHIBIT C CERTIFICATE OF INSURANCE

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, INC. with the Securities Exchange Commission and filed separately with the Commission.

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GEOGRAPHICAL LIMITS:

Worldwide

AIRCRAFT SPARES ALL RISKS INSURANCE

COVERING:

All risks of physical loss or damage to Aircraft Parts or spares or Engines at all times when removed from the Aircraft from whatever cause, subject only to the exclusions specified below, including the risks set down in AVN 48B other than paragraphs (a) and (b) thereof (but including paragraph (a) in respect of transit risks) for limits of not less than:

US$ * any one location

US$ * any one sending

and covering:

With respect to an Engine, an agreed value of    or, with LESSOR’s written concurrence, replacement cost

With respect to Parts, replacement cost

DEDUCTIBLE:

US$ * each and every loss

GEOGRAPHICAL COVERAGE:

Worldwide

INSURANCE REQUIRED BY MANUFACTURER

LESSEE will carry the insurance required by Manufacturer in connection with LESSOR’s assignment of Manufacturer’s warranties and product support to LESSEE

92 EXHIBIT C CERTIFICATE OF INSURANCE

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the securities Exchange Commission and filed separately with the Commission.

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CONTRACTUAL INDEMNITY

LESSEE has insurance coverage for the indemnities agreed to by LESSEE pursuant to Article 17 of the Lease

PERIOD OF COVERAGE (ALL POLICIES)

From Delivery Date of Aircraft to [EXPIRATION DATE]

It is further certified that LESSOR has an interest in respect of the Aircraft under the Lease. Accordingly, with respect to losses occurring during the period from the Effective Date until the expiry of the Insurance or until the expiry or agreed termination of the Lease or until the obligations under the Lease are terminated by any action of the Insured or LESSOR and in consideration of the Additional Premium it is confirmed that the Insurance afforded by the Policy is in full force and effect and it is further agreed that the following provisions are specifically endorsed to the Policy.

2.    UNDER THE HULL (ALL RISKS AND HULL WAR AND ALLIED RISKS) AND AIRCRAFT SPARES INSURANCES

(a) [* ONLY-NO OTHER CONTRACT PARTIES] In respect of any claim on the Aircraft that becomes payable on the basis of a Total Loss, settlement will be made to, or to the order of LESSOR as sole loss payee, up to the Agreed Value. With respect to repairable damage to an Aircraft or Engine, LESSOR will receive all insurance proceeds in excess of US$ * provided that upon receipt by the insurance broker of written notice of a material default on the part of LESSEE, all insurance proceeds which otherwise would be payable to LESSEE will be made directly to LESSOR. In respect of any other claim, settlement (net of any relevant policy deductible) will be made with such party(ies) as may be necessary to repair the Aircraft unless otherwise agreed after consultation between the Insurers and the insured and, where necessary under the terms of the Lease, LESSOR. Such payments will only be made provided they are in compliance with all applicable laws and regulations.

(b) Insurers agree on a 50/50 settlement in terms of AVS 103.

(c) Insurers have no right to replace the Aircraft on a Total Loss (arranged, constructive or otherwise).

(d) Insurers recognize that LESSEE and LESSOR have agreed that a Total Loss of the Airframe will constitute a Total Loss of the Aircraft.

(e) In the event of Total Loss of the Aircraft, Insurers agree to pay LESSOR all amounts up to the Agreed Value based solely upon LESSOR’s (not LESSEE’s) execution

93 EXHIBIT C CERTIFICATE OF INSURANCE

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the securities Exchange Commission and filed separately with the Commission.

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of the appropriate form of release/discharge document. LESSOR may sign any required release in lieu of the Insured in the event of a Total Loss, Constructive Total Loss or Arranged Total Loss.

(f) “Cut-through clause”: Insurers confirm that in the event of any claim arising under the hull insurances, the Reinsurers will in lieu of payment of the Insurers, its successors in interest and assigns, pay to the person named as sole loss payee under the original insurances that portion of any loss due for which the Reinsurers would otherwise be liable to pay the Insurers (subject to proof of loss), it being understood and agreed that any such payment by any Reinsurers will fully discharge and release such Reinsurer from any and all further liability in connection therewith and provide for payment to be made notwithstanding (i) any bankruptcy, insolvency, liquidation or dissolution of the Insurers and (ii) that the Insurers have made no payment under the original insurance policies.

(g) Insurers confirm that under the insurance policies, if the Insured installs an engine owned by a third party on the Aircraft, either (i) the hull insurance will automatically increase to such higher amount as is necessary in order to satisfy both LESSOR’s requirement to receive the Agreed Value in the event of a Total Loss, Constructive Total Loss or Arranged Total Loss and the amount required by the third party engine owner, or (ii) separate additional insurance on such engine will attach in order to satisfy separately the requirements of the Insured to such third party engine owner.

3. UNDER THE LEGAL LIABILITY INSURANCE

(a) Subject to the provisions of this Endorsement, the Insurance will operate in all respects as if a separate Policy had been issued covering each party insured hereunder, but this provision will not operate to include any claim arising howsoever in respect of loss or damage to the Aircraft insured under the Hull or Spares Insurance of the Insured. Notwithstanding the foregoing the total liability of Insurers in respect of any and all Insureds will not exceed the limits of liability stated in the Policy.

(b) The Insurance provided hereunder will be primary and without right of contribution from any other insurance which may be available to LESSOR.

4. UNDER ALL INSURANCES

(a) LESSOR, its successors and assigns, and (with respect to Aviation and Airline General Third Party Liability only) its directors, officers and employees for their respective rights and interests, are included as Additional Insured.

94 EXHIBIT C CERTIFICATE OF INSURANCE

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(b) The cover afforded to LESSOR by the Policy in accordance with this Endorsement will not be invalidated by any act or omission (including misrepresentation and non-disclosure) of any other person or party which results in a breach of any term, condition or warranty of the Policy.

(c) LESSOR will have no responsibility for premium and insurers will waive any right of set-off or counterclaim against LESSOR except in respect of outstanding premium in respect of the Aircraft, provided that Insurer may only set-off for premiums against the proceeds of the hull insurance for outstanding premiums in connection with hull all risks and hull war and allied perils insurance.

(d) Upon payment of any loss or claim to or on behalf of LESSOR, Insurers will to the extent and in respect of such payment be thereupon subrogated to all legal and equitable rights of LESSOR indemnified hereby (but not against LESSOR). Insurers will not exercise such rights without the consent of those indemnified, such consent not to be unreasonably withheld. At the expense of Insurers LESSOR will do all things reasonably necessary to assist the Insurers to exercise said rights.

(e) Except in respect of any provision for Cancellation or Automatic Termination specified in the Policy or any endorsement thereof, cover provided by this Endorsement may only be cancelled or materially altered in a manner adverse to LESSOR by the giving of not less than thirty (30) days notice in writing to LESSOR. Notice will be deemed to commence from the date such notice is given by the Insurers. Such notice will NOT, however, be given at normal expiry date of the Policy or any endorsement.

5. EXCEPT AS SPECIFICALLY VARIED OR PROVIDED BY THE TERMS OF THIS CERTIFICATE

(a) IS COVERED BY THE POLICY SUBJECT TO ALL TERMS, CONDITIONS, LIMITATIONS, WARRANTIES, EXCLUSIONS AND CANCELLATION PROVISIONS THEREOF.

(b) THE POLICY WILL NOT BE VARIED BY ANY PROVISIONS CONTAINED IN THE LEASE WHICH PURPORT TO SERVE AS AN ENDORSEMENT OR AMENDMENT TO THE POLICY.

SUBJECT (save as specifically stated in this Certificate) to policy terms, conditions, limitations and exclusions.

Yours faithfully,

[BROKERS]

95 EXHIBIT C CERTIFICATE OF INSURANCE

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        EXHIBIT D                         BROKERS’ LETTER OF UNDERTAKING

To:	*
	*
	*
	United States

Date:                                                                                                      Our Ref:

Dear Sirs:

Re:	*
	A319-100
	Manufacturer’s Serial Number:         TBD
	Registration Mark:

We confirm that insurance has been effected for the account of [LESSEE] (the “Operator”) covering all aircraft owned or operated by them, including the above-referenced aircraft (the “Aircraft”). [Also confirm, if applicable, the amount of any hull all risks or hull war and allied perils on the Aircraft which LESSEE is carrying in excess of the Agreed Value (which excess insurance would be payable to LESSEE). Such excess insurance may not exceed Ten percent (10%) of the Agreed Value.]

Pursuant to instructions received from the Operator and in consideration of your approving the arrangement of the Operator’s “Fleet Policy” (under which the above-referenced Aircraft is insured) through the intermediary of ourselves as Brokers in connection with the insurance (the “Insurance”) mentioned in our Certificate of Insurance (Reference No. [    ] dated [    ] and attached hereto), we undertake as follows:

1. In relation to the Hull and War Risks Insurance to hold to your order the insurance Slips or Contracts and any Policies which may be issued or any policies substituted (with your consent) therefor (but only insofar as the same relate to the Aircraft only) and the benefit of the Hull and War Risks Insurance thereunder, but subject to our requirements to operate the Fleet Policy insofar as it relates to any other aircraft insured thereunder.

2. To advise you of any of the following:

(a) If any insurer cancels or gives notice of cancellation of any of the Insurance at least thirty (30) days (or such lesser period as may be available in the case of War and Allied Perils) before such cancellation is to take effect in respect of the Aircraft.

96 EXHIBIT D BROKERS’ LETTER OF UNDERTAKING

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the securities Exchange Commission and filed separately with the Commission.

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(b) Of any act or omission or of any event (including non-payment of premium) of which we have knowledge or are notified and which might invalidate or render unenforceable in whole or in part any of the Insurance, insofar as the same relate to the Aircraft.

(c) If we do not receive instructions to renew all or any of the Insurance at least thirty (30) days prior to their expiration.

(d) If any of the Insurance are not renewed on the same terms (save as to premium and period of cover and as you might otherwise have notified us to be acceptable to you) seven (7) days prior to expiry thereof.

The above undertakings are given subject to our continuing appointment for the time being as Insurance Brokers to the Operator.

We also undertake to advise you if we cease to be Insurance Brokers to the Operator.

Yours faithfully,

97 EXHIBIT D BROKERS’ LETTER OF UNDERTAKING

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EXHIBIT E                         AVIATION AUTHORITY UNDERTAKING LETTER

The Aviation Authority undertakes that:

1. No cancellation, alteration or change in the registration of the Aircraft or recordation of liens will be made until receipt of written consent to such specified change from LESSOR.

2. On written request of LESSOR (which will include telex) the Aviation Authority will promptly de-register the Aircraft and provide such confirmation as is requested by LESSOR together with any other confirmation or information LESSOR may require to enable the Aircraft to be re-registered in any other country or state.

3. On written request of LESSOR (which will include telex) the Aviation Authority will release, remove or cancel all liens it may have over the Aircraft, and will acknowledge in doing so that all liability for such liens as discharged are for the sole account of LESSEE.

4. The Aviation Authority will not allow the registration, use or operation of the Aircraft for any purpose other than the category of fare paying passenger transportation.

5. The Aviation Authority will consent to the export of the Aircraft on the termination of the Lease Term or at LESSOR’s written request.

98 EXHIBIT E AVIATION AUTHORITY UNDERTAKING LETTER

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        EXHIBIT F                        ESTOPPEL AND ACCEPTANCE CERTIFICATE

* (“LESSEE”), a corporation organized under the laws of * does hereby represent, acknowledge, warrant and agree as follows:

1. LESSEE and * as LESSOR, have entered into an Aircraft Lease Agreement dated as of October 26, 2001 (hereinafter referred to as the “Lease”). Words used herein with capital letters and not otherwise defined will have the meanings set forth in the Lease.

2. LESSEE has this         day of             ,          (Time:             ) at                      received from LESSOR possession of:

(a) One (1) A319-100 Aircraft bearing Manufacturer’s serial number (TBD) and Registration Mark         , together with two (2) IAE V2524-A5 Engines bearing manufacturer’s serial numbers          and          (each of which has 750 or more rated take-off horse power) and an APU bearing manufacturer’s serial number         , all in airworthy condition.

(b) All Aircraft Documentation, including the usual and customary manuals, logbooks, flight records and historical information regarding the Aircraft, Engines and Parts.

3. All of the foregoing has been delivered and accepted on the date set forth above to LESSEE’s full satisfaction and pursuant to the terms and provisions of the Lease.

4. The Agreed Value of the Aircraft is US$             .

5. The amount of fuel on board at Delivery is              (circle one) pounds/kilos (             gallons).

6. Pursuant to the terms of the Lease, the first Rent payment was due and payable three (3) Business Days prior to the date set forth above and all subsequent monthly payments are due and payable as provided in Article 5.3.2 of the Lease.

7. The Aircraft, Engines, Parts and Aircraft Documentation as described in the Lease have been fully examined by LESSEE and have been received in a condition fully satisfactory to LESSEE and in full conformity with the Lease in every respect.

8. The Lease is in full force and effect, LESSOR has fully, duly and timely performed all of its obligations of every kind or nature thereunder and LESSEE has no claims, offsets, deductions, set-off or defenses of any kind or nature in connection with the Lease.

99 EXHIBIT F ESTOPPEL AND ACCEPTANCE CERTIFICATE

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the securities Exchange Commission and filed separately with the Commission.

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9. LESSOR’s Lender may rely upon all of the foregoing in granting substantial financial accommodations to LESSOR and LESSEE understands and agrees that any funds being advanced by LESSOR’s Lender will be made in reliance upon the foregoing.

10. Prior to the Delivery Date, LESSEE has obtained all required permits, authorizations, licenses and fees of the State of Registration or any Government Entity thereof necessary in order for LESSEE to operate the Aircraft as permitted by the terms of the Lease.

Dated on the date set forth above

*
*
	By:
	Title:

Attachments: 1. List of Aircraft Documentation

2. List of Loose Equipment

100 EXHIBIT F ESTOPPEL AND ACCEPTANCE CERTIFICATE

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the securities Exchange Commission and filed separately with the Commission.

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EXHIBIT G                                                                          OPINION OF COUNSEL

TO BE GIVEN BY INDEPENDENT OUTSIDE COUNSEL OF LESSEE OR OTHER LAWYERS ACCEPTABLE TO LESSOR

To:	*
	*
	*
	United States

Gentlemen:

This opinion is furnished to you pursuant to Article 7 of the Aircraft Lease Agreement dated as of October 26, 2001 (the “Lease”) between * (“LESSEE”) and *  (“LESSOR”). Defined terms in this opinion are used herein as defined in the Lease.

I have acted as counsel for LESSEE in connection with the preparation, execution and delivery of the Lease.

In that connection I have examined:

	(a)    The Lease and Estoppel and Acceptance Certificate;
	(b)    The charter of LESSEE and all amendments thereto (the “Charter”); and
	(c)    Such other documents, agreements and instruments, and such treaties, laws, rules, regulations, decrees and the like, as I have deemed necessary as a basis for the opinions hereinafter expressed.
[	(d)    All of the agreements and any amendments thereto between LESSEE and all other lessors and lenders of LESSEE covering other aircraft operated by LESSEE on which the Engines can be installed.]

Based upon the foregoing and having regard for legal considerations which I deem relevant, I am of the opinion that:

2.    LESSEE is a corporation duly incorporated, validly existing and in good standing under the Laws of * It has the corporate power and authority to carry on its business as presently conducted and to perform its obligations under the Lease.

101 EXHIBIT G OPINION OF COUNSEL

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the securities Exchange Commission and filed separately with the Commission.

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3.    No authorization, approval, consent, license or order of, or registration with, or the giving of notice to the Aviation Authority or any other regulatory body or authority is required for the valid authorization, execution, delivery and performance by LESSEE of the Lease.

4.    The Lease and the Estoppel and Acceptance Certificate have each been duly authorized, executed and delivered by LESSEE. Each such instrument is a valid, enforceable and binding obligation of LESSEE except as enforceability may be limited by bankruptcy, insolvency, reorganization or other Laws of general application affecting the enforcement of creditors’ rights.

5.    The execution and delivery of the Lease and the Estoppel and Acceptance Certificate, the consummation by LESSEE of the transactions contemplated therein and compliance by LESSEE with the terms and provisions thereof do not and will not contravene any Law applicable to LESSEE, or result in any breach of or constitute any default under or result in the creation of any lien, charge or encumbrance upon any property of LESSEE, under any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, bank loan or credit agreement, corporate charter, by-law or other agreement or instrument to which LESSEE is a party or by which LESSEE or its properties or assets may be bound or affected.

6.    [Describe the process in * with respect to registration of the Aircraft in the name of LESSOR and any other steps required or recommended in * in order to protect the interests of LESSOR in the Aircraft]. Such registration of the Aircraft is not inconsistent with, and would not result in the loss of, LESSOR’s title to and ownership of the Aircraft. Except for the foregoing, no other filing or recording of any instrument or document or any other acts are necessary or advisable under the laws of * to protect LESSOR’s title to and ownership of the Aircraft. [In the opinion given at Delivery, also confirm that the Aircraft is registered in the name of LESSOR.]

7.    Except for any filing or recording that may be required with the [NAME OF AIRCRAFT REGISTER] and except for [DESCRIBE SUCH OTHER FILINGS OR RECORDINGS], no filing or recording of any instrument or document (including the filing of any financial statement) is necessary under the laws of * in order for the Lease to constitute a valid and perfected lease of record relating to the Aircraft, it being understood that such counsel expresses no opinion as to the nature of LESSOR’s title to the Aircraft on the Delivery Date. [In opinion given at Delivery, also confirm that the filings and other steps described have been accomplished.]

8.    LESSEE holds all licenses, certificates and permits from applicable governmental authorities in * necessary for the conduct of its business as a certificated air carrier and performance of its obligations under the Lease.

102 EXHIBIT G OPINION OF COUNSEL

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the securities Exchange Commission and filed separately with the Commission.

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9.    To my knowledge, there are no suits or proceedings pending or threatened against LESSEE before any Government Entity against or affecting LESSEE which, if adversely determined, would have a material adverse effect on the financial condition or business of LESSEE or its ability to perform under the Lease, except as described in the filings provided to LESSOR pursuant to Article 22.

10.    Under the laws of * , LESSEE will not be required to make or deduct any withholding or other Tax from any payment it may make under the Lease.

11.    The obligations of LESSEE under the Lease are direct, general and unconditional obligations of LESSEE and rank or will rank at least pari passu with all other present and future unsecured and unsubordinated obligations (including contingent obligations) of LESSEE, with the exception of such obligations as are mandatorily preferred by law and not by reason of any encumbrance.

12.    LESSEE, under the laws of * or of any other jurisdiction affecting LESSEE, is subject to private commercial law and suit. Neither LESSEE nor its properties or assets have the right of immunity from suit or execution on the grounds of sovereignty in such jurisdictions and the performance by LESSEE of its obligations under the Lease constitute commercial acts done for commercial purposes.

13.    On termination of the Lease, LESSOR would be entitled to repossess the Aircraft and export it from * .

14.    There is no applicable usury or interest limitation Law in * which may restrict the recovery of payments in accordance with the Lease.

15.     LESSOR will not violate any Law or become liable to any tax in * by reason of entering into or performing its obligations under the Lease and it is not necessary to establish a place of business in * in order to enforce any provisions of the Lease.

16.    The choice of California Law to govern the Lease will be upheld in any action in the courts of * . Any judgment given by United States or California courts would be recognized and accepted by the courts in * .

[          17.    None of the agreements and any amendments thereto between LESSEE and all other lessors and lenders to LESSEE covering other aircraft operated by LESSEE on which the Engines can be installed contain terms which provide or contemplate that such other lessors or lenders will obtain any right, title or interest in an Engine which is installed on such other aircraft.]

Very truly yours,

103 EXHIBIT G OPINION OF COUNSEL

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the securities Exchange Commission and filed separately with the Commission.

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EXHIBIT H                                                      FORM OF POWER OF ATTORNEY

* (“ * ”) hereby irrevocably appoints *  (“ * ”) of * , U.S.A. as AM’s true and lawful attorney so that * may take any of the following actions in the name of and for * with respect to the A319-100 aircraft bearing manufacturer’s serial number (TBD) (the “Aircraft”) leased by * to * pursuant to an Aircraft Lease Agreement dated as of October 26, 2001 (the “Lease”):

1.        Pursuant to the Lease, * has procured and is maintaining insurances for the Aircraft. * has been named sole loss payee on the all risk hull and war risk insurances for the Aircraft. In the event of a total loss or constructive total loss of the Aircraft, * is entitled to receive insurance proceeds in an amount equal to the Agreed Value. * may take all action and sign all documents otherwise required to be performed by * , including execution on behalf of * of an appropriate form of discharge/release document, in order for * to collect such insurance proceeds.

2.        In the exercise of the rights of * under the Lease to recover the Aircraft from * and * after termination of the Lease due to an Event of Default under the Lease or for termination of the Lease due to any other reason, * may take all action otherwise required to be performed by * before the authorities and courts * in order to cause the Aircraft to be repossessed by I * deregistered from the [NAME OF REGISTRY] and exported from * .

3.        In the exercise of the rights mentioned in paragraphs 1 and 2, * may make any declarations or statements and sign any public or private documents which may be considered necessary or appropriate.

4.         * may delegate the powers conferred hereby, in whole or in part, to any individual(s), including but not limited to employees of * or legal counsel in * .

    * is empowered to determine in its sole discretion when to exercise the powers conferred upon* pursuant to this Power of Attorney. Any person, agency or company relying upon this Power of Attorney need not and will not make any determination or require any court judgment as to whether an Event of Default has occurred under the Lease or whether the Lease has been terminated. * hereby waives any claims against (a) any person acting on the instructions given by * or its designee pursuant to this Power of Attorney and (b) any person designated by * or an officer of * to give instructions pursuant to this Power of Attorney. * also agrees to indemnify and hold harmless any person, agency or company which may act in reliance upon this Power of Attorney and pursuant to instructions given by * or its designee.

104 EXHIBIT H FORM OF POWER OF ATTORNEY

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the securities Exchange Commission and filed separately with the Commission.

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This Power of Attorney is irrevocable until the Aircraft has been returned to the possession of * , deregistered and exported from * .

* has made and delivered this Power of Attorney on                  in Hamburg, Germany.

* *
	By:
	Title:

105 EXHIBIT H FORM OF POWER OF ATTORNEY

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the securities Exchange Commission and filed separately with the Commission.

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EXHIBIT I ASSIGNMENT OF RIGHTS (AIRFRAME)

[INSERT PROPER FORM BASED ON MANUFACTURER]

106 EXHIBIT I ASSIGNMENT OF RIGHTS (AIRFRAME)

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EXHIBIT J ASSIGNMENT OF RIGHTS (ENGINES)

[INSERT PROPER FORM BASED ON MANUFACTURER]

107 EXHIBIT J ASSIGNMENT OF RIGHTS (ENGINE)

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                    EXHIBIT K                              RETURN ACCEPTANCE RECEIPT

Date:                                   ,              

1.     * , as LESSEE, and * , as LESSOR, have entered into an Aircraft Lease Agreement dated as of October 26, 2001 (the “Lease”). Words used herein with capital letters and not otherwise defined will have the meanings set forth in the Lease.

2.     LESSOR has this              day of                     ,               (Time:                             ) at                      received from LESSEE possession of:

(a)     One (1) A319-100 Aircraft bearing Manufacturer’s serial number (TBD), together with two (2) IAE V2524-A5 Engines bearing manufacturer’s serial numbers              and             , all Parts attached thereto and thereon in an airworthy condition and

(b)     All Aircraft Documentation, including the usual and customary manuals, logbooks, flight records and historical information regarding the Aircraft, Engines and Parts, as listed in the Document Receipt attached hereto.

3.     The Airframe, Engines and Parts had the following hours/cycles at return:

(a)     Airframe:

Total hours:                                                   Total Landings:                             

                 hours/                  cycles since last “C” check

                 hours/                  cycles since last “A” check

(b)     Engines:

Position Serial No. Total Hours Total Cycles Hrs/Cycles since last shop visit

Time Remaining to Next

Life Limited Part Removal

Hours                         Cycles

MSN

108 EXHIBIT K RETURN ACCEPTANCE RECEIPT

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the securities Exchange Commission and filed separately with the Commission.

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                  MSN

(c)     APU:   MSN                    

Total hours:                     

                          hours/                     cycles remaining until next HSI inspection

                          hours/                     cycles remaining on turbine and compressor life limited parts

(d)     Landing Gears:

Position	Serial No.	Total Hrs/Cycles	Hrs/Cycles since last Overhaul	Hrs/Cycles to next Sched. Removal
Nose
Right Main
Left Main

(e)    Status of components or Parts with time/cycle and calendar limits (see attached sheet)

(f)    Fuel on board at return:                      (circle one) pounds/kilos (                     gallons)

4.    Other technical information regarding the Aircraft and its components are correctly set forth on the Technical Evaluation Report (in the form of Exhibit M) attached hereto.

5.    The above specified aircraft, engines and documentation are hereby accepted by LESSOR subject to (a) the provisions of the Lease and (b) correction by LESSEE (or procurement by LESSEE at LESSEE’s cost) as soon as reasonably possible of the discrepancies specified in Attachment 2 hereto.

6.    Subject to the following paragraph, the leasing of the Aircraft by LESSOR to LESSEE pursuant to the Lease is hereby terminated without prejudice to LESSEE’s continuing obligations under the Lease including, without limitation, paragraph 5(b) above and Articles 10.5, 16 and 17.

109 EXHIBIT K RETURN ACCEPTANCE RECEIPT

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7.    LESSEE represents and warrants that during the term of the Lease all maintenance and repairs to the Airframe and Engines were performed in accordance with the requirements contained in the Lease. LESSEE further confirms that all of its obligations under the Lease whether accruing prior to the date hereof or which survive the termination of the Lease by their terms and accrue after the date hereof, will remain in full force and effect until all such obligations have been satisfactorily completed.

8.    This Return Acceptance Supplement is executed and delivered by the parties in [place].

IN WITNESS WHEREOF, the parties hereto have caused this Return Acceptance Receipt to be executed in their respective corporate names by their duly authorized representatives as of the day and year first above written.

*	*
*	*
BY:	By:
Its:	Its:

Attachments: 1.        Aircraft Documentation

 2.        List of Discrepancies

 3.        Technical Evaluation Report (in the form of Exhibit M)

110 EXHIBIT K RETURN ACCEPTANCE RECEIPT

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the securities Exchange Commission and filed separately with the Commission.

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ATTACHMENT 1

TO RETURN ACCEPTANCE SUPPLEMENT

AIRCRAFT DOCUMENTATION

[The (a) manuals and (b) Aircraft records and historical documents set forth below are to be returned with the Aircraft in a current, up-to-date and correct status]

MANUALS

1. FAA approved Airplane Flight Manual

2. Manufacturer’s Operations Manual - Volume No.         

3. Quick Reference Handbook

4. Maintenance Manuals

5. Wiring Diagram Manuals

6. Structural Repair Manual

7. Illustrated Parts Catalog

8. Vendor Illustrated Parts Catalog

9. Overhaul Manuals

10. Vendor Overhaul Manuals

11. Drawings (Major Assembly and Installation)

12. Weight and Balance Control and Loading Manual

13. Weight and Balance Manual Supplement

14. Actual Weight and Balance Compliance

111 EXHIBIT K RETURN ACCEPTANCE RECEIPT

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AIRCRAFT RECORDS AND HISTORICAL DOCUMENTS

1. Aircraft log book (current and file copies)

2. Aircraft Readiness Log (revised to time of return)

3. Maintenance Time Control Report (components, maintenance visit, special items next due Airframe hours and cycles)

4. Aircraft previous maintenance visit record including the last inspection performed

5. Airworthiness Directive Compliance Summary

6. Rigging Document

7. Serviceable Tags for all rotable components installed (Airframe & Engines)

8. ADs requiring continuous surveillance

9. Service bulletin terminated accomplishment status

10. Service bulletin requiring continuous surveillance summary and maintenance control action

11. Airframe and component history records

12. FAA Form 337 (or equivalent) for Airframe, repair/overhaul certification of last major visit

13. FAA Form 337 (or equivalent) for each Engine, repair/overhaul certification of last shop visit

14. Engine Readiness Log for each Engine (components installed)

15. Summary of Service Bulletins accomplished for each Engine

16. Summary of ADs accomplished for each Engine

17. SB and AD status requiring continuous surveillance with maintenance, control action for each Engine

18. Engine time summary sheet including life limited items (for each Engine)

19. Engine log books for each Engine (current and file copies)

112 EXHIBIT K RETURN ACCEPTANCE RECEIPT

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ATTACHMENT 1

TO RETURN ACCEPTANCE SUPPLEMENT

AIRCRAFT DOCUMENTATION

[The (a) manuals and (b) Aircraft records and historical documents set forth below are to be returned with the Aircraft in a current, up-to-date and correct status]

MANUALS

1. FAA approved Airplane Flight Manual

2. Manufacturer’s Operations Manual - Volume No.         

3. Quick Reference Handbook

4. Maintenance Manuals

5. Wiring Diagram Manuals

6. Structural Repair Manual

7. Illustrated Parts Catalog

8. Vendor Illustrated Parts Catalog

9. Overhaul Manuals

10. Vendor Overhaul Manuals

11. Drawings (Major Assembly and Installation)

12. Weight and Balance Control and Loading Manual

13. Weight and Balance Manual Supplement

14. Actual Weight and Balance Compliance

113 EXHIBIT K RETURN ACCEPTANCE RECEIPT

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EXHIBIT L	MONTHLY REPORT
	(SEE FOLLOWING SHEET)

114 EXHIBIT L MONTHLY REPORT

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MONTHLY AIRCRAFT UTILIZATION AND STATUS REPORT

Page 1 of 2

Report Due Date:                                                                                           

To:  * *	Fax:*
* , United States
Attn: Finance Department

From: *                                                                       

Contact:                                                                          

AIRCRAFT TYPE:	REGISTRATION:
ENGINE TYPE:
SERIAL NUMBER:	MONTH OF	,

NOTE:    PLEASE RECORD TIME IN HOURS AND MINUTES NOT DECIMALS.

Aircraft Total Time Since New As Of Last Month:	Hours:	Min:
Aircraft Total Time Since New:	Hours:	Min:
Aircraft Total Cycles Since New:	Cycles:
Airframe Hours Flown During Month:	Hours:	Min:
Airframe Cycles/Landings During Month:	Cycles:
Time Remaining to “D” or Heavy Maintenance Check:

	HOURS FLOWN DURING MONTH			X		US$ PER FLIGHT HOUR	=		OVERHAUL RESERVES
TOTAL AIRFRAME:		Hrs:			X			=
Original Engine Serial Number:		Hrs:	Min:		X			=
Original Engine Serial Number:		Hrs:	Min:		X			=
TOTAL AMOUNT OF OVERHAUL RESERVES (US$) PAID THIS MONTH FOR AIRFRAME AND ENGINES:

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the securities Exchange Commission and filed separately with the Commission.

ACL01.78-C.wpd

1 new A319-100 (June 2002)

Monthly Aircraft Utilization and Status Report
From: *	Page 2 of 2

ENGINE SERIAL NUMBER:		ENGINE SERIAL NUMBER:
ORIGINAL POSITION:		ORIGINAL POSITION:
ACTUAL LOCATION:		ACTUAL LOCATION:
CURRENT THRUST RATING:		CURRENT THRUST RATING:
	HOURS:/MIN:		HOURS:/MIN:
Total Time Since New As Of Last Month:		Total Time Since New As Of Last Month:
Total Time Since New:		Total Time Since New:
Total Cycles Since New:		Total Cycles Since New:	.
Hours Flown During Month:		Hours Flown During Month:
Cycles During Month:		Cycles During Month:

IMPORTANT: IF * OWNED ENGINE IS REMOVED OR INSTALLED ON ANOTHER AIRCRAFT IT MUST BE REPORTED MONTHLY ON THIS FORM.

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the securities Exchange Commission and filed separately with the Commission.

ACL01.78-C.wpd

1 new A319-100 (June 2002)

EXHIBIT M	TECHNICAL EVALUATION REPORT
	(SEE FOLLOWING SHEETS)

117 EXHIBIT M TECHNICAL EVALUATION REPORT

EX-10.12

Exhibit 10.12

Dated as of 4 September 2018

*

* as trustee under the Trust Agreement

as Existing Lessor

*

as Lessee

and

Contrail Aviation Leasing, LLC

as New Lessor

NOVATION AND AMENDMENT AGREEMENT

relating to an

Aircraft Lease Agreement dated 26 October 2001 in respect of

One (1) Airbus A319-l00 aircraft with manufacturer’s serial no. *

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

CONTENTS

Article		Page
1.	Definitions and Interpretation		1
2.	Novation		3
3.	Lease Amendments		4
4.	Relevant Interests		7
5.	Conditions Precedent		8
6.	Conditions Subsequent and Undertakings		9
7.	Further Assurances		10
8.	Representations and Warranties		11
9.	Effective Time		13
10.	No Greater Obligation		14
11.	Miscellaneous		14
12.	Filings, Registrations, Documentary Taxes and Costs and Expenses		16
13.	Confidentiality		16
14.	Assignment		17
15.	Governing Law		17

Schedule 1	Form of Effective Time Supplement
Schedule 2	Lease Documents
Schedule 3	Form of Replacement Power of Attorney

Novation and Amendment Agreement * MSN * CONTENTS

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

THIS NOVATION AND AMENDMENT AGREEMENT (this “Agreement”) is made as of 4 September 2018

BETWEEN:

(1) *, a private limited company organised under the laws of * whose address is at *as trustee under the Trust Agreement (the “Existing Lessor”);

(2) *, a * company whose principal place of business is at * (the “Lessee”); and

(3) CONTRAIL AVIATION LEASING, LLC, a limited liability company organised and existing under the laws of the State of Wisconsin, United States of America whose principal place of business is at 435 Investment Court, Verona, Wisconsin 53593, United States of America (the “New Lessor”).

WHEREAS:

(A) By an Aircraft Lease Agreement dated as of 26 October 2001 between the Original Lessor and the Lessee (as supplemented, assigned, assumed and amended from time to time prior to the Effective Time pursuant to the Lease Documents, the “Lease”), the Existing Lessor agreed to lease and the Lessee agreed to take on lease one (1) Airbus A319-100 aircraft bearing manufacturer’s serial number * (as more particularly described in the Lease, the “Aircraft”) on the terms and subject to the conditions contained in the Lease.

(B) Pursuant to an aircraft sale agreement dated 3 August 2018 between the Existing Lessor as seller 1, * as trustee for Aircraft 32A- * as seller 2 and Contrail Aviation Support, LLC (“Contrail”) as buyer (the “Sale Agreement”), Contrail has agreed to cause the New Lessor, the wholly-owned subsidiary of Contrail, to purchase the Aircraft on the terms and subject to the conditions set out therein.

(C) The parties hereto have agreed that the New Lessor will assume the rights, liabilities and obligations of the Existing Lessor under the Lease and that the Existing Lessor should be released from its liabilities and obligations under the Lease on the terms and conditions set out herein.

NOW, THEREFORE, in consideration of the provisions and mutual covenants herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged,

IT IS AGREED as follows:

1. DEFINITIONS AND INTERPRETATION

In this Agreement the following expressions shall have the following meanings:

“Aircraft” has the meaning ascribed to it in the recitals hereto.

“Bill of Sale” means the bill of sale for the Aircraft dated the Effective Time and delivered by the Existing Lessor to the New Lessor for registration purposes.

Novation and Amendment Agreement * MSN * Page 1

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

“Effective Time” has the meaning ascribed to it in Article 9 (Effective Time).

“Effective Time Supplement” means the Effective Time Supplement in the form of Schedule 1 (Form of Effective Time Supplement) to be executed by the Existing Lessor, the New Lessor and the Lessee.

“Existing DPoA” means the power of attorney dated 29 May 2012 granted by the Lessee in favour of the Existing Lessor and * relating to the Aircraft.

“Global Side Letter #2” means Global Side Letter #2 to Aircraft Lease Agreements dated 4 November 2011 by and between * and *

“Lease” has the meaning ascribed to it in the recitals hereto.

“Lease Documents” means the documents (or, as applicable, the specific paragraph(s) of the documents) listed in Schedule 2 (Lease Documents).

“Novated Lease” means the Lease as novated and amended pursuant to this Agreement.

“Novated Lease Documents” means the Lease Documents as novated and amended pursuant to this Agreement.

“Novation Documents” means this Agreement, the Effective Time Supplement and the Replacement Power of Attorney.

“Original Lessor” means *

“Relevant Interest” has the meaning ascribed to it in Article 4.1 (Relevant Interests).

“Replacement Power of Attorney” means a replacement power of attorney, duly notarised and executed in * (with an English translation), to be granted by the Lessee in favour of the New Lessor substantially in the form of Schedule 3.

“Trust Agreement” means that certain Declaration of Trust (Aircraft 32A-* Trust) dated as of October 28, 2011 between the Existing Lessor as trustee and * as beneficial owner.

1.1 Defined Terms in Lease

Capitalised terms used, but not defined, in this Agreement shall have the respective meanings assigned to them in the Lease.

1.2 Interpretation

In this Agreement, unless the context otherwise requires:

1.2.1 a reference to an Article or a Schedule is a reference to an Article of or Schedule to this Agreement;

1.2.2 a reference to a person includes its successors and permitted assigns;

1.2.3 words importing the plural shall include the singular, and vice versa;

1.2.4 headings are to be ignored in construing this Agreement;

Novation and Amendment Agreement (* MSN * Page 2

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

1.2.5 references to any statutory or other legislative provision shall be construed as including any statutory or legislative modification or re-enactment thereof, or any provision enacted in substitution therefor; and

1.2.6 references to an “agreement” also include a concession, contract, franchise, licence, treaty or undertaking.

2. NOVATION

2.1 Releases and Assumptions

As of and with effect from the Effective Time, and subject to the provisions of Article 2.3 (Pre-Effective Time Rights and Remedies; Indemnities):

2.1.1 the Existing Lessor releases and discharges the Lessee from all of its obligations, duties, undertakings and liabilities to the Existing Lessor under the Lease Documents, and the Existing Lessor agrees that it has no further rights, benefits and interests against the Lessee under the Lease Documents;

2.1.2 the Lessee releases and discharges the Existing Lessor from all its obligations, duties, undertakings and liabilities to the Lessee under the Lease Documents, and the Lessee agrees that it has no further rights, benefits and interests against the Existing Lessor under the Lease Documents;

2.1.3 the New Lessor agrees to assume the rights, benefits, interests and obligations, duties and liabilities of “Lessor” under the Novated Lease Documents arising from and after the Effective Time and to perform the obligations of “Lessor” under the Novated Lease Documents arising from and after the Effective Time;

2.1.4 the Lessee consents to and accepts the assumption by the New Lessor of the rights, benefits, interests, obligations, duties and liabilities of “Lessor” under the Novated Lease Documents and the New Lessor’s agreement to perform the obligations of “Lessor” under the Novated Lease Documents (for the avoidance of doubt, other than the obligations, duties and liabilities required to be performed prior to the Effective Time);

2.1.5 the Lessee agrees that it will not assert against the New Lessor any claim (save for Relevant Claims as defined under Article 2.3) or defence which it may have or have had against the Existing Lessor under the Lease Documents prior to the Effective Time; and

2.1.6 the Lessee acknowledges that its obligations, duties, undertakings and liabilities to “Lessor” under the Novated Lease Documents arising from and after the Effective Time are owed to, and are to be performed for the benefit of, the New Lessor, and agrees with the New Lessor to perform such obligations under the Novated Lease Documents in favour of the New Lessor.

Each of the foregoing events and agreements is conditional upon the happening of the others and shall occur simultaneously at the Effective Time.

2.2 Effect

The parties accordingly agree that, as and with effect from and after the Effective Time (subject to the satisfaction (or the waiver in accordance with Article 5.4 (Waiver or Deferral of Conditions Precedent)) of the conditions precedent set out in Article 5 (Conditions

Novation and Amendment Agreement (* MSN * Page 3

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

Precedent)) the Lease Documents are novated and constitute agreements between the New Lessor as lessor and owner and the Lessee as lessee on the terms and conditions of the Novated Lease Documents.

2.3 Pre-Effective Time Rights and Remedies; lndemnities

The Lessee and the Existing Lessor agree that they shall have the same rights and remedies against each other as each would have had under the Lease Documents in respect of any losses, liabilities or claims suffered or incurred or brought against or payments due to each other in respect of or attributable to the period prior to the Effective Time as if the Existing Lessor had remained the Lessor under the Lease Documents, and the New Lessor shall not be responsible to either the Lessee or the Existing Lessor in respect of any such losses, liabilities or claims, nor shall the Lessee exercise any set off or counterclaim in respect of any such losses, liabilities or claims against the New Lessor, save that the New Lessor shall be responsible for the application and payment of Reserves in accordance with the Lease (as novated and amended pursuant to this Agreement and as further amended from time to time) (“Relevant Claims”), whether or not those Relevant Claims are attributable to periods arising prior to or on and after the Effective Time.

The Lessee and the Existing Lessor agree the indemnities set out in articles 16 and 17 of the Lease shall survive the termination of the Lease and after the Effective Time.

2.4 Delivery of Aircraft

The Lessee acknowledges that the Aircraft was delivered by the Original Lessor to the Lessee on 19 August 2002 in accordance with the terms of the Lease, that the Lessee is in possession of the Aircraft and that the New Lessor may rely on the Estoppel and Acceptance Certificate dated 19 August 2002 (“Estoppel and Acceptance Certificate”) issued by the Lessee to the Original Lessor as though it had been issued to the New Lessor by the Lessee; and it is acknowledged by all parties hereto that no further physical delivery of the Aircraft by the New Lessor is required or contemplated as a result of this Agreement.

3. LEASE AMENDMENTS

3.1 Amendments

As of, and with effect from and after, the Effective Time the Lease Documents as novated hereby shall be (and is hereby) amended as follows and as so amended shall constitute the Novated Lease Documents:

3.1.1 the expressions “this Lease” and “the Lease” shall be construed, wherever they appear in the Lease as so novated and amended and wherever the context so permits, as if they referred to the Novated Lease (and as supplemented by the Novated Lease Documents);

3.l.2 the expression “LESSOR” shall be construed, wherever it appears in the Lease Documents and where appropriate, as if it referred to the New Lessor, save and except in the definition of Delivery, in any references to any act taken by, or any delivery of a document or notice by or to, the Existing Lessor under the Lease prior to the Effective Time, and in any condition precedent in favour of, or representation and warranty made by, the Existing Lessor under the Lease prior to the Effective Time;

3.l.3 in the title page to the Lease the words * as Trustee” shall be deleted in their entirety and shall be replaced by the words “CONTRAIL AVIATION LEASING, LLC”;

Novation and Amendment Agreement (* MSN * Page 4

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

3.1.4 on page 1 of the Lease the words *, a private limited company duly incorporated under the laws of * (registered number *), whose address is * Trustee under the Trust Agreement (“LESSOR”)” shall be deleted and replaced with the words “CONTRAIL AVIATION LEASING, LLC, a limited liability company organized under the laws of the State of Wisconsin, United States of America whose principal place of business is at 435 Investment Court, Verona, Wisconsin 53593, United States of America (“LESSOR”)”;

3.1.5 in article 2.1 of the Lease the definitions of “Beneficial Owner”, “*”, “Servicer” and “Trust Agreement” and all references thereto in the Lease, shall be deleted;

3.1.6 in article 2.1 of the Lease the definition of “LESSOR Party” shall be deleted and all references thereto in the Lease shall be deemed to be a reference to the Lessor;

3.1.7 the definition of “LESSOR’s Lender” in article 2.1 of the Lease shall be deleted in its entirety and replaced with the following:

““LESSOR’s Lender” means one or more banks or financial institutions or other Persons as notified in writing to LESSEE from time to time that provide financing directly or indirectly to LESSOR or any Affiliate of LESSOR in relation to LESSOR’s acquisition, continuing ownership or leasing of the Aircraft and will include any collateral agent or security trustee and any Person acting as agent or security trustee for one or more LESSOR’S Lenders.”;

3.1.8 the definition of “LESSOR’s Lien” in article 2.1 of the Lease shall be amended by replacing the words “LESSOR and/or Beneficial Owner” with the word “LESSOR”;

3.1.9 article 5.1.2 of the Lease is amended by replacing:

(a) the words “LESSOR’S or * with the word “LESSOR’s”; and

(b) the words “LESSOR, * or any subsidiary of * (including trusts in which * or any subsidiary of * is the beneficiary of such trust)” with the word “LESSOR”;

3.1.10 article 5.1.3 of the Lease is amended by replacing the words “LESSOR, * or any subsidiary of * (including trusts in which * or any subsidiary of * is the beneficiary of such trust)” with the word “LESSOR”;

3.1.11 in articles 1.10 and 5.5 of the Lease the LESSOR’s Bank Account details shall be deleted and replaced with the words “Such bank account notified in writing to the Lessee with ten (10) Business Days’ prior written notice”;

3.1.12 article 15.1 of the Lease shall be amended by deleting and replacing the description of the legend on the Airframe identification plates with the fol1owing:

Novation and Amendment Agreement * MSN * Page 5

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

“THIS AIRCRAFT IS OWNED BY CONTRAIL AVIATION LEASING, LLC

MANUFACTURER’S SERIAL NO: *

OWNER’S ADDRESS: 435 INVESTMENT COURT, VERONA, WISCONSIN 53593, UNITED STATES OF AMERICA”;

3.1.13 article 15.2 of the Lease shall be amended by deleting and replacing the description of the legend on the Engine identification plates with the following:

“THIS ENGINE IS OWNED BY CONTRAIL AVIATION LEASING, LLC

MANUFACTURER’S SERIAL NO: *

OWNER’S ADDRESS: 435 INVESTMENT COURT, VERONA, WISCONSIN 53593, UNITED STATES OF AMERICA”;

3.1.14 article 16.1 of the Lease is amended by replacing the words “LESSOR, * and Beneficial Owner (individually a “Tax Indemnitee” and collectively “Tax lndemnitees”)” with the word “LESSOR”;

3.1.15 article 16 of the Lease shall be amended throughout to delete each reference to (i) “any Tax Indemnitee”, “the relevant Tax Indemnitee”, “a Tax Indemnitee” and “such Tax Indemnitee” and replace each such reference with the word “LESSOR”; (ii) “in * and replace such reference with the words * and in the U.S.”; and (iii)* and replace such reference with the words “* and Verona, Wisconsin, United States of America”;

3.1.16 article 17.1 of the Lease is amended by replacing the words “each LESSOR Party, Servicer and any LESSOR’s Lender” in the first sentence thereof with the words “LESSOR and any LESSOR’s Lender”;

3.1.17 article 25.2(q) of the Lease is amended by replacing the text “lease or agreement between LESSEE and LESSOR, * or any subsidiary of * (including trusts in which * or any subsidiary of * is the beneficiary of such trust)” with the text “lease or agreement between LESSEE and LESSOR or any subsidiary of LESSOR (including trusts in which LESSOR or any subsidiary of LESSOR is the beneficiary of such trust)”;

3.1.18 article 25.3(f) of the Lease is amended by replacing words “LESSOR, * or any subsidiary of * (including trusts in which * or any subsidiary of * is the beneficiary of such trust)” with the word “LESSOR”;

3.1.19 in article 26.1 of the Lease references to “telex” shall be deleted and replaced with references to “e-mail”;

3.1.20 in article 26.2 of the Lease the notice details for the LESSOR (including as to the notice being copied to other persons) shall be deleted and replaced with the following:

“Contrail Aviation Leasing, LLC

435 Investment Court

Verona, Wisconsin 53593

United States of America

Novation and Amendment Agreement (* MSN * Page 6

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

Attention :         President

Facsimile :         +1 608 848-8101

Telephone :        +1 608 848-8100

E-mail :               joe@contrail.com

3.1.21 article 28.5 of the Lease is amended by replacing the text “this Lease or under any other agreement between LESSEE and LESSOR, * or any subsidiary of * (including trusts in which * or any subsidiary of * is the beneficiary of such trust)” with the text “this Lease or under any other agreement between LESSEE and LESSOR or any subsidiary of LESSOR (including trusts in which LESSOR or any subsidiary of LESSOR is the beneficiary of such trust)”;

3.1.22 the first sentence in article 28.7 shall be amended to include *

3.1.23 article 28.9 of the Lease shall be amended to permit disclosure of the Operative Documents and all non-public information obtained by either party to any Lessor’s Lender; and

3.1.24 Exhibit H of the Lease shall be replaced with the Replacement Power of Attorney and the original power of attorney granted in favour of the Existing Lessor will be cancelled.

3.2 With effect from the Effective Time: (a) all references to the Lease Documents contained in any documents delivered under or pursuant to the Lease Documents or any other Operative Document shall be construed as references to the Novated Lease Documents (as they may be further amended from time to time); and (b) this Agreement shall be an Operative Document (as defined in the Novated Lease).

4. RELEVANT INTERESTS

4.1 Relevant Interests

As a result of the events referred to in the Recitals and Articles 2 (Novation) and 3 (Lease Amendments), as of the Effective Time, the following interests (each a “Relevant Interest”) will exist in relation to the Aircraft:

4.1.1 the New Lessor will be the legal and beneficial owner of the Aircraft; and

4.1.2 the New Lessor will lease the Aircraft to the Lessee pursuant to the Novated Lease.

4.2 Existing Lessor Insurances

The Lessee shall maintain or procure that liability insurance is maintained in respect of the Aircraft with each Indemnitee (as defined in article 17 of the Lease prior to its amendment hereunder) as additional assureds, from the Effective Time until the second anniversary of the Effective Time. The cover shall be on terms and for amounts required by the Lease prior to the Effective Time. The Lessee shall deliver a copy of a certificate of such insurances in relation to the Aircraft to the Existing Lessor prior to the Effective Time and at each annual renewal, a copy of such liability insurances until the expiration of such two-year period as required under this Article 4.2 (Existing Lessor Insurances).

Novation and Amendment Agreement * MSN * Page 7

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

5. CONDITIONS PRECEDENT

5.1 New Lessor’s Conditions Precedent

The obligation of the New Lessor to execute and deliver the Effective Time Supplement shall be subject to receipt by the New Lessor of the following in form and substance reasonably satisfactory to the New Lessor:

5.1.1 an executed copy of the Novation Documents (other than the Effective Time Supplement) duly executed by the parties hereto and thereto (other than the New Lessor);

5.1.2 evidence reasonably satisfactory to the New Lessor that the Lessee has all necessary corporate or other authorisation to enter into and perform its obligations under this Agreement and the other Novation Documents to which it is a party:

5.1.3 evidence reasonably satisfactory to the New Lessor that the Existing Lessor has all necessary corporate or other authorisation to enter into and perform its obligations under this Agreement and the other Novation Documents to which it is a party;

5.1.4 copies of certificates of insurance and reinsurance and brokers’ letters of undertaking relating to the insurances and reinsurances in compliance with the insurance and reinsurance requirements of Article 4.2 (Existing Lessor Insurances) and the Novated Lease;

5.1.5 each of the confirmations, representations and warranties of the Existing Lessor and the Lessee in this Agreement and the other Novation Documents to which they are a party shall be true and accurate at the Effective Time, in each case as to the facts and circumstances then existing and as if made at the Effective Time (and, for the avoidance of doubt, no party hereto shall be required to provide any certificates in connection therefor); and

5.1.6 each of the conditions precedent set out in clause 5 .1 of the Sale Agreement shall have been satisfied or waived or postponed in accordance with the terms of the Sale Agreement.

5.2 Lessee’s Conditions Precedent

The obligation of the Lessee to execute and deliver the Effective Time Supplement will be subject to the receipt by the Lessee of the following in form and substance reasonably satisfactory to the Lessee:

5.2.1 an executed copy of the Novation Documents (other than the Effective Time Supplement) duly executed by the parties hereto and thereto (other than the Lessee);

5.2.2 evidence reasonably satisfactory to the Lessee that the New Lessor has all necessary corporate or other authorisation to enter into and perform its obligations under this Agreement and the other Novation Documents to which it is a party;

5.2.3 evidence reasonably satisfactory to the Lessee that the Existing Lessor has all necessary corporate or other authorisation to enter into and perform its obligations under this Agreement and the other Novation Documents to which it is a party; and

5.2.4 each of the representations and warranties of the Existing Lessor and the New Lessor in this Agreement and the other Novation Documents to which they are a party shall be true and accurate at the Effective Time, in each case as to the facts and circumstances then existing and as if made at the Effective Time.

Novation and Amendment Agreement * MSN * Page 8

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

5.3 Existing Lessor’s Conditions Precedent

The obligation of the Existing Lessor to execute and deliver the Effective Time Supplement will be subject to the receipt by the Existing Lessor of the following in form and substance reasonably satisfactory to the Existing Lessor:

5.3.1 an executed copy of this Agreement and the other Novation Documents (other than the Effective Time Supplement) duly executed by the parties hereto (other than the Existing Lessor);

5.3.2 evidence reasonably satisfactory to the Existing Lessor that the Lessee has all necessary corporate or other authorisation to enter into and perform its obligations under this Agreement and the other Novation Documents to which it is a party;

5.3.3 evidence reasonably satisfactory to the Existing Lessor that the New Lessor has all necessary corporate or other authorisation to enter into and perform its obligations under this Agreement and the other Novation Documents to which it is a party;

5.3.4 copies of certificates of insurance and broker’s letter of undertaking relating to the insurances in compliance with Article 4.2 (Existing Lessor Insurances);

5.3.5 the Lessee will have delivered to the Existing Lessor its signature to the termination agreement relating to the guarantee dated May 30, 2012 granted by * in favour of the Lessee;

5.3.6 each of the representations and warranties of the New Lessor and the Lessee in this Agreement and the other Novation Documents to which they are a party shall be true and accurate at the Effective Time, in each case as to the facts and circumstances then existing and as if made at the Effective Time; and

5.3.7 each of the conditions precedent set out in clause 5.2 of the Sale Agreement shall have been satisfied or waived or postponed in accordance with the terms of the Sale Agreement.

5.4 Waiver or Deferral of Conditions Precedent

Each of the New Lessor, the Lessee and the Existing Lessor may waive or defer any of such conditions precedent to their own obligations as contemplated in Article 5.1 (New Lessor’s Conditions Precedent), Article 5.2 (Lessee’s Conditions Precedent) or Article 5.3 (Existing Lessor’s Conditions Precedent) respectively, upon such further terms and subject to such further conditions as the Existing Lessor, the New Lessor and the Lessee, as the case may be, think fit.

6. CONDITIONS SUBSEQUENT AND UNDERTAKINGS

6.1 Fireproof Plates

After the Effective Time, the Lessee will (a) prepare new identification plates for the Aircraft as set forth in article 15 of the Novated Lease, (b) as soon as practicable after the Effective Time and in any event no later than 60 days after the Effective Time, remove the existing identification plates and install the replacement identification plates on the Aircraft and (c) notify the New Lessor of such replacement. The New Lessor agrees to pay or reimburse all of the Lessee’s reasonable out-of-pocket costs and expenses incurred by the Lessee in connection with this Article 6.1 (Fireproof Plates).

Novation and Amendment Agreement * MSN * Page 9

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

6.2 Aircraft Location

The parties will cooperate with one another in order to close the sale of the Aircraft and each Engine at a convenient time when the Aircraft and/or the relevant Engine is in a jurisdiction acceptable to the Existing Lessor and the New Lessor, or over international waters. The Existing Lessor and the New Lessor will notify the Lessee of the dates that are scheduled to be the date of the Effective Time reasonably in advance of Effective Time and the Lessee will provide the Existing Lessor and the New Lessor with the scheduled route of the Aircraft (or any other aircraft on which the relevant Engine is installed) on those dates to the extent such schedule is available at the time of such notification, otherwise as soon as such schedule becomes available.

6.3 Aircraft Documents

The Lessee undertakes to provide to the New Lessor, as soon as practicable but in any event within 30 days following the Effective Time, a copy of the Aircraft Station Licence for the Aircraft and a copy of the Certificate of Registration issued by the *, each with the name of the New Lessor noted thereon as owner of the Aircraft.

6.4 Aviation Authority Filings

6.4.1 Promptly following the Effective Time, the Lessee, the Existing Lessor and the New Lessor will each make available an original counterpart of this Agreement and the Effective Time Supplement (in the case of the Existing Lessor, each notarised and apostilled) for the purpose of filing the same with the *

6.4.2 The New Lessor agrees that the Lessee shall have no obligation to provide (and has not provided) any advice to the New Lessor in connection with the sale and/or purchase of the Aircraft pursuant to the Sale Agreement or in connection with the transactions contemplated under this Agreement (collectively, the “Transaction”) or the registration of the Transaction with the * or the * (the “Registration”).

6.4.3 The New Lessor agrees that the New Lessor is solely responsible for any costs, taxes and fines imposed on the Lessee in connection with the Registration and agrees to indemnify the Lessee should any cost, tax or fine be imposed on the Lessee in relation thereto unless such costs, taxes and fines are imposed as a result of the Lessee undertaking the Registration without the prior written consent of the New Lessor.

7. FURTHER ASSURANCES

At the New Lessor’s cost and to the extent required under the Novated Lease, the Lessee shall perform and do all such other and further acts and things and execute and deliver any and all such other instruments (including any notification to the * of changes in the ownership structure of the Aircraft) as the New Lessor may reasonably require to reflect the change in the identity of the owner and lessor of the Aircraft recited in this Agreement (including, but not limited to, the documents and other evidence specified in Articles 6.3 (Aircraft Documents) and 6.4 (Aviation Authority Filings)) and to perfect or protect the interests of the New Lessor and any other person having a Relevant Interest, and for the purpose of carrying out the intent of and giving the New Lessor the full benefit of the novation effected by this Agreement.

Novation and Amendment Agreement (* MSN *) Page 10

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

Each of the New Lessor and the Existing Lessor shall, at its own cost, perform and do all such other and further acts and things and execute and deliver any and all such other instruments as may be reasonably required to carry out the intent of this Agreement.

8. REPRESENTATIONS AND WARRANTIES

8.1 Lessee’s Representations and Warranties

The Lessee represents and warrants to the New Lessor and the Existing Lessor that, as of the date of this Agreement and as of the Effective Time (in each case by reference to the facts and circumstances then existing):

8.1.1 it is duly incorporated and validly existing and in good standing under the laws of * and has the power and authority to (a) carry on its business as presently conducted and (b) enter into and perform its obligations under the Novated Lease Documents and the Novation Documents to which it is a party;

8.1.2 it is subject to civil commercial law with respect to its obligations under the Novated Lease Documents and the Novation Documents to which it is a party and neither it nor any of its assets is entitled to any right of immunity and the entry into and performance of the Novated Lease Documents and the Novation Documents to which it is a party by it constitute private and commercial acts;

8.1.3 this Agreement and the other Novation Documents to which it is a party have been duly authorised by all necessary corporate action on its part, have been duly executed and delivered by it and constitute its valid, legal and binding obligations enforceable against it in accordance with their terms except insofar as enforceability may be limited by (i) applicable bankruptcy and similar laws affecting creditors’ rights generally or (ii) general principles of equity;

8.1.4 no authorisation, approval, consent, licence or order of, or registration with, or the giving of notice to any Government Entity is required for the valid authorisation, execution, delivery and performance by it of the Novated Lease Documents and the Novation Documents to which it is a party, except as will have been duly effected as of the Effective Time;

8.1.5 the entry into and performance by it of, and the transactions contemplated by, this Agreement and the other Novation Documents to which it is a party do not and will not: (i) conflict with any laws binding on it; or (ii) conflict with its constitutional documents; or (iii) conflict with or result in any default under any document which is binding upon it or any of its assets;

8.1.6 save as disclosed by the Lessee in writing (after the date hereof in relation to any such matters arising after the date hereof) to the Existing Lessor and the New Lessor, no loss, damage or destruction exceeding US$1,000,000.00 has occurred in respect of the Aircraft or any Engine since Delivery;

8.1.7 the Lease has not been terminated and, save as disclosed by the Lessee in writing (after the date hereof in relation to any such matters arising after the date hereof) to the Existing Lessor and the New Lessor, no Event of Default has occurred and is continuing;

8.1.8 no Total Loss has occurred with respect to the Aircraft; and

Novation and Amendment Agreement * MSN *) Page 11

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

8.1.9 save as disclosed in writing to the Existing Lessor and the New Lessor, the Aircraft has not been requisitioned, is not subject to a sublease or wetlease nor has any agreement in relation to subleasing or wetleasing of the Aircraft been entered into between the Existing Lessor and the Lessee.

8.2 New Lessor’s Representations and Warranties

The New Lessor represents and warrants to the Lessee and the Existing Lessor that, as of the date of this Agreement and as of the Effective Time:

8.2.1 it is a company duly formed and validly existing under the laws of its jurisdiction of incorporation and has the power and authority to (a) carry on its business as presently conducted and (b) enter into and to perform its obligations under the Novated Lease and the Novation Documents to which it is a party;

8.2.2 it is subject to civil commercial law with respect to its obligations under the Novated Lease Documents and the Novation Documents to which it is a party and neither it nor any of its assets is entitled to any right of immunity and the entry into and performance of the Novated Lease Documents and the Novation Documents to which it is a party by it constitute private and commercial acts;

8.2.3 it has corporate power and authority to enter into and perform this Agreement and the other Novation Documents to which it is party and this Agreement and the other Novation Documents to which it is a party have been duly authorised by all necessary corporate action on its part and constitute its valid, legal and binding obligations enforceable against it in accordance with their terms except insofar as enforceability may be limited by (i) applicable bankruptcy and similar laws affecting creditors’ rights generally or (ii) general principles of equity;

8.2.4 no authorisation, approval, consent, licence or order of, or registration with, or the giving of notice to any Government Entity is required for the valid authorisation, execution, delivery and performance by it of the Novated Lease Documents and the Novation Documents to which it is a party, except as will have been duly effected as of the Effective Time;

8.2.5 the entry into and performance by it of, and the transactions contemplated by, this Agreement and the other Novation Documents to which it is a party do not and will not: (i) conflict with any laws binding on it; or (ii) conflict with its constitutional documents; or (iii) conflict with or result in any default under any document which is binding upon it or any of its assets; and

8.2.6 it is the wholly-owned subsidiary of Contrail Aviation Support, LLC.

8.3 Existing Lessor’s Representations and Warranties

The Existing Lessor hereby represents and warrants to the Lessee and the New Lessor that, as of the date of this Agreement and as of the Effective Time:

8.3.1 it is a company duly incorporated and validly existing under the laws of its jurisdiction of incorporation and has the corporate power and authority to (a) carry on its business as presently conducted and (b) enter into and to perform its obligations under the Novation Documents to which it is a party;

8.3.2 it is subject to civil commercial law with respect to its obligations under the Novated Lease Documents and the Novation Documents to which it is a party and neither it

Novation and Amendment Agreement * MSN * Page 12

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

nor any of its assets is entitled to any right of immunity and the entry into and performance of the Novated Lease Documents and the Novation Documents to which it is a party by it constitute private and commercial acts;

8.3.3 it has corporate power and authority to enter into and perform this Agreement and the other Novation Documents to which it is party and this Agreement and the other Novation Documents to which it is a party have been duly authorised by all necessary corporate action on its part and constitute its valid, legal and binding obligations enforceable against it in accordance with their terms except insofar as enforceability may be limited by (i) applicable bankruptcy and similar laws affecting creditors’ rights generally or (ii) general principles of equity;

8.3.4 no authorisation, approval, consent, licence or order of, or registration with, or the giving of notice to any Government Entity is required for the valid authorisation, execution, delivery and performance by it of the Novation Documents to which it is a party, except as will have been duly effected as of the Effective Time; and

8.3.5 the entry into and performance by it of, and the transactions contemplated by, this Agreement and the other Novation Documents to which it is a party do not and will not: (i) conflict with any laws binding on it; or (ii) conflict with its constitutional documents; or (iii) conflict with or result in any default under any document which is binding upon it or any of its assets.

9. EFFECTIVE TIME

9.1 Subject to the satisfaction or waiver or deferral, in accordance with Article 5.4 (Waiver or Deferral of Conditions Precedent), of the conditions precedent set out in Articles 5.1 (New Lessor’s Conditions Precedent), 5.2 (Lessee’s Conditions Precedent) and 5.3 (Existing Lessor’s Conditions Precedent), the novation of the Lease Documents contemplated by Article 2 (Novation) and the amendments to the Lease Documents so novated shall become effective at a time (the “Effective Time”), as evidenced by the Effective Time Supplement duly executed by each of the parties thereto and substantially in the form of Schedule 1 (Form of Effective Time Supplement) hereto. At any time before the Effective Time, the Existing Lessor and the New Lessor may serve notice on the Lessee that this Agreement is to be cancelled and not have any effect and upon service of such notice this Agreement shall terminate and be of no effect; provided that Articles 12.3 (Costs and Expenses), 13 (Confidentiality) and 15 (Governing Law) hereof shall survive any such termination.

9.2 Confirmations and Agreements

Each of the Lessee and the Existing Lessor confirms and agrees that:

9.2.1 the amount of monthly Rent payable by the Lessee as at the date of this Agreement is US$* per month and is payable on the twenty-fifth (25th) day of each month. No rebate arrangements in respect of the Rent are in place and as at the date of this Agreement the Lessee has not pre-paid any Rent;

9.2.2 the Lease Documents (as novated and amended hereby) (i) constitute the entire agreement between the New Lessor and the Lessee with respect to the Aircraft that will be in effect following the Effective Time and (ii) are in full force and effect;

9.2.3 the Agreed Value as at the date of this Agreement is US$*;

9.2.4 the Reserves rates in effect as at the date of this Agreement under the Lease are as specified in Article 9.2.5 below and the balance of the Reserves shall be set out in the Effective Time Supplement at the Effective Time or any other date as agreed by the New Lessor, the Existing Lessor and the Lessee;

Novation and Amendment Agreement * MSN * Page 13

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

9.2.5 the current Reserve rates under the Lease are:

(a) Airframe Reserves rate for Airframe 6Y Check $*/ month;

(b) Airframe Reserves rate for Airframe 12Y Check $* month;

(c) Engine Performance Restoration Reserves (ESN * rate $* engine flight hour;

(d) Engine LLP Reserves (ESN * rate $ */ engine flight cycle;

(e) Engine Performance Restoration Reserves (ESN *) rate $*/ engine flight hour;

(f) Engine LLP Reserves (ESN * rate $* engine flight cycle;

(g) Landing Gear Group Reserves rate $* month; and

(h) APU Reserves rate $* APU Hour;

9.2.6 the amount of the Security Deposit held by the Existing Lessor as cash is US$*

9.2.7 the scheduled Expiration Date is August 18, 2019; and

9.2.8 the Early Return Option (as defined in Global Side Letter #2) was not exercised with respect to the Aircraft.

10. NO GREATER OBLIGATION

10.1.1 The Lessee will not be obligated to pay any greater amount following the novation of the Lease pursuant to this Agreement and the sale of the Aircraft to the New Lessor pursuant to the Sale Agreement than it would have had to pay but for such novation and sale and the New Lessor will indemnify the Lessee on demand for any loss suffered or cost incurred from the Effective Time as a result of such assignment or sale (provided that the foregoing shall not apply (a) to any additional risk or cost associated with the insurances to be carried by the Lessee under the Novated Lease or (b) to the Lessee’s indemnity obligations under the Novated Lease).

10.1.2 For the avoidance of doubt, the costs incurred by the Lessee described in Article 12.3.2(a) and 12.3.2(b) will be paid for by the New Lessor in accordance with such Articles.

11. MISCELLANEOUS

11.1 Continuing Effect

Save as provided for herein, the Novated Lease Documents and all provisions thereof shall continue in full force and effect as the legal, valid and binding rights and obligations of each of the New Lessor and the Lessee enforceable in accordance with their respective terms. All representations, warranties and agreements contained in this Agreement shall survive the execution of this Agreement.

Novation and Amendment Agreement (* MSN *) Page 14

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

11.2 Variation

The provisions of this Agreement shall not be varied otherwise than by an instrument in writing executed by or on behalf of all the parties; provided that the New Lessor and the Lessee shall be entitled to amend, modify or vary the terms of the Novated Lease Documents after the Effective Time without reference to the Existing Lessor.

11.3 Notices

Every notice, request, direction or other communication under this Agreement shall be made in accordance with article 26 of the Lease and shall be sent:

11.3.1 to the New Lessor to:

Contrail Aviation Leasing, LLC

435 Investment Court

Verona, Wisconsin 53593

United States of America

Attention :         President

Facsimile :         + 1 608 848-8101

Telephone :        + 1 608 848--8100

E-mail :              joe@contrail.com

11.3.2 to the Existing Lessor and the Lessee to such address and fax number as specified for that party in the Lease immediately prior to the Effective Time, and in respect of e-mail, to the following e-mail addresses:

Existing Lessor:	*
Lessee:	*

11.4 Counterparts

This Agreement may be executed in any number of counterparts and by any party hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which, when taken together, shall constitute one and the same agreement.

11.5 Lease Provisions

The provisions of article 28.14 of the Lease shall apply to this Agreement as if set out in full herein and as if references therein to this Agreement were to this Agreement.

11.6 Entire Agreement

This Agreement, the other Novation Documents and the Novated Lease Documents together constitute the sole and entire agreement between the parties hereto in relation to the novation of the Lease.

Novation and Amendment Agreement * SN * Page 15

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

12. FILINGS, REGISTRATIONS, DOCUMENTARY TAXES AND COSTS AND EXPENSES

12.1 Filings and Registrations

To the extent required under the Novated Lease, the Existing Lessor, the New Lessor and the Lessee shall co-operate, at the cost of the New Lessor, to make all necessary filings and registrations in connection with the Novation Documents required under the laws of *

12.2 Documentary Taxes

If stamp duty in respect of this Agreement is actually imposed on the Lessee in * (which stamp duty would not have otherwise been imposed but for the novation under this Agreement) and is in addition to stamp duty already imposed on the Lease (which is payable by the Lessee), such stamp duty shall be for the account of the New Lessor unless such stamp duty is levied as a result of the Lessee registering or filing any of the Novated Lease Documents or any of the Novation Documents with the * without the prior written consent of the New Lessor.

12.3 Costs and Expenses

12.3.1 Except as expressly provided otherwise in this Agreement, the Existing Lessor and the New Lessor shall bear their own costs, fees and expenses (including legal fees) in connection with the negotiation, preparation and completion of this Agreement and performance of the transactions contemplated hereby.

12.3.2 In respect of costs incurred by the Lessee in connection with the transactions contemplated by this Agreement:

(a) The New Lessor shall be responsible for all registration or filing costs incurred by the Lessee including, if applicable, all costs, fees and expenses associated with the deregistration of the Aircraft in the name of the Existing Lessor and the re-registration of the Aircraft in the name of the New Lessor and any new financing with respect to the Aircraft to be put in place by the New Lessor; and

(b) The New Lessor shall be responsible for all other costs, fees and expenses incurred by the Lessee relating to the negotiation, documentation and closing of the transactions contemplated by this Agreement.

13. CONFIDENTIALITY

This Agreement and all non-public information obtained by any party about the another party are confidential and are between the parties to this Agreement only and will not be disclosed by a party to third parties (other than to such party’s auditors or legal advisors; as required in connection with any filings of this Agreement or the Novated Lease Documents, in connection with a financing of the Aircraft, as required for enforcement by any party of its rights and remedies with respect to this Agreement or the Novated Lease Documents or as required by applicable law or for the purposes of any applicable filings and registrations) without the prior written consent of the other parties. lf any disclosure will result in this Agreement or the Novated Lease Documents becoming publicly available, the parties will cooperate with one another to obtain confidential treatment as to the commercial terms and other material provisions of this Agreement or the Novated Lease Documents (as applicable).

Novation and Amendment Agreement * MSN * Page 16

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

14. ASSIGNMENT

No party may assign any of its respective rights or obligations hereunder or the benefit of this Agreement, save that the New Lessor may assign any of its rights or the benefit of this Agreement in accordance with article 24 of the Novated Lease.

15. GOVERNING LAW AND JURISDICTION

The provisions of article 27 of the Lease with respect to governing law, jurisdiction and legal proceedings are incorporated in this Agreement as if such provisions were set forth herein, mutatis mutandis.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorised representatives as of the day and year first herein written.

Novation and Amendment Agreement * MSN * Page 17

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

SCHEDULE 1

FORM OF EFFECTIVE TIME SUPPLEMENT

(1) * (“Lessee”)

(2) * as trustee under the Trust Agreement (“Existing Lessor”)

(3) Contrail Aviation Leasing, LLC (“New Lessor”)

Existing Lessor, New Lessor and Lessee hereby agree as follows:

1. This Effective Time Supplement (this “Supplement”) is entered into for purposes of the Novation and Amendment Agreement dated                      2018 between the parties to this Supplement (the “Agreement”) relating to the one Airbus A319-100 aircraft bearing manufacturer’s serial number * together with two (2) IAE V2524-A5 engines with manufacturer’s serial numbers * and * (the “Aircraft”).

2. Terms used in this Supplement shall have the meanings given to them in the Agreement and the Novated Lease.

3. Lessee, Existing Lessor and New Lessor confirm that the conditions precedent for its benefit contained in the Agreement have been satisfied, deferred or waived and that the novation and amendment contemplated in the Agreement has occurred and the Effective Time was          [a.m.][p.m.] local time on this              day of [●] 2018 while the aircraft with manufacturer’s serial number 1790 was located at                 ·

4. Lessee, Existing Lessor and New Lessor confirm that the representations and warranties made by it in the Agreement are true and correct at the Effective Time.

5. New Lessor and Existing Lessor hereby notify Lessee that at the Effective Time ownership in the Aircraft has been transferred to New Lessor.

6. The amount of the Security Deposit held by Existing Lessor and transferred to New Lessor at the Effective Time is $                    .

7. The balance of the Reserves held by Existing Lessor less any amounts reimbursed by Existing Lessor to Lessee under the Lease or otherwise accounted for under the Lease are as at the date hereof as follows and such amounts have been transferred by Existing Lessor to New Lessor at the Effective Time:

(a) in respect of the Airframe 6Y Check Reserves: US$[●];

(b) in respect of the Airframe 12Y Check Reserves: US$[●];

(c) in respect of the Engine LLP Reserves (ESN V11286): US$[●];

(d) in respect of the Engine LLP Reserves (ESN V11287): US$[●];

(e) in respect of Engine Performance Restoration Reserves (ESN V11286): US$[●];

(f) in respect of Engine Performance Restoration Reserves (ESN V11287): US$[●];

Novation and Amendment Agreement * MSN * SCHEDULE 1 - Page 1

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

(g) in respect of the Landing Gear Reserves: US$[●]; and

(h) in respect of the APU Reserves: US$[●].

8. This Effective Time Supplement and all non-contractual obligations arising from or in connection with it are governed by and shall be construed in accordance with the Laws of New York.

[Signature Page follows]

Novation and Amendment Agreement * MSN * SCHEDULE 1 - Page 2

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

SIGNATURES

Existing Lessor

*

By:

Name:

Title:

New Lessor

Contrail Aviation Leasing, LLC

By:

Name:

Title:

Lessee

*

By:

Name:

Title:

Novation and Amendment Agreement (* MSN * SCHEDULE 1 - Page 3

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

SCHEDULE 2

LEASE DOCUMENTS

1. Aircraft Lease Agreement dated as of October 26, 2001, between * and * * *(also known as *

2. Estoppel and Acceptance Certificate dated August 19, 2002 executed by * * (also known as *

3. Side Letter dated as of October 26, 2001 between * and * * (also known as * *

4. Amendment No. 1 dated as of August 19, 2002, between * and * (also known as * *

5. Global Side Letter No. 1 dated as of January 30, 2004, between * * * * (also known as * *) only insofar as it relates to the Aircraft.

6. Assignment, Assumption and Amendment Agreement dated as of November 4, 2011, between * * and *

7. Global Side Letter No. 2 dated as of November 4, 2011, between * * and *only insofar as it relates to the Aircraft.

8. Global Amendment No. 1 dated as of June 29, 2016, between * * and *only insofar as it relates to the Aircraft.

Novation and Amendment Agreement (* MSN *) SCHEDULE 2 - Page 1

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

SCHEDULE 3

FORM OF REPLACEMENT POWER OF ATTORNEY

*(“*”) hereby irrevocably appoints CONTRAIL AVIATION LEASING, LLC (“CONTRAIL AVIATION LEASING, LLC”), organized and existing under the laws of the State of Wisconsin, United States of America whose principal place of business office is at 435 Investment Court, Verona, Wisconsin 53593, United States of America as * true and lawful attorney so that CONTRAIL AVIATION LEASING, LLC may take any of the following actions in the name of and for * with respect to the A319-100 aircraft bearing manufacturer’s serial number *, (the “Aircraft”) leased by CONTRAIL AVIATION LEASING, LLC to * pursuant to an Aircraft Lease Agreement dated as of October 26, 2001, as assigned and amended from time to time and as novated and amended pursuant to the Novation and Amendment Agreement dated as of [●] (the “Lease”):

1. Pursuant to the Lease, * has procured and is maintaining insurances for the Aircraft. CONTRAIL AVIATION LEASING, LLC has been named sole loss payee on the all risk hull and war risk insurances for the Aircraft. In the event of a total loss or constructive total loss of the Aircraft, CONTRAIL AVIATION LEASING, LLC is entitled to receive insurance proceeds in an amount equal to the Agreed Value (as defined in the Lease). CONTRAIL AVIATION LEASING, LLC may take all action and sign all documents otherwise required to be performed by *, including execution on behalf of * of an appropriate form of discharge/release document, in order for CONTRAIL AVIATION LEASING, LLC to collect such insurance proceeds.

2. In the exercise of the rights of CONTRAIL AVIATION LEASING, LLC under the Lease to recover the Aircraft from * and * after termination of the Lease due to an Event of Default (as defined in the Lease) under the Lease or for termination of the Lease due to any other reason, CONTRAIL AVIATION LEASING, LLC may take all action otherwise required to be performed by * before the authorities and courts in * in order to cause the Aircraft to be repossessed by CONTRAIL AVIATION LEASING, LLC, deregistered from the * and/or the * *or any successor thereof, and any other person or Government Entity (as defined in the Lease) which from time to time has control over civil aviation or the registration, airworthiness or operation of aircraft in * (the “Aeronautics Authorities”), operated and exported from *

3. In the exercise of the rights mentioned in paragraphs 1 to 2, CONTRAIL AVIATION LEASING, LLC may make any declarations or statements and sign any public or private documents which may be considered necessary or appropriate.

4. CONTRAIL AVIATION LEASING, LLC may delegate the powers conferred hereby, in whole or in part, to any individual(s), including but not limited to employees of CONTRAIL AVIATION LEASING, LLC or legal counsel in *

CONTRAIL AVIATION LEASING, LLC is empowered to determine in its sole discretion when to exercise the powers conferred upon CONTRAIL AVIATION LEASING, LLC pursuant to this Power of Attorney. Any person, agency or company relying upon this Power of Attorney need not and will not make any determination or require any court judgment as to whether an Event of Default (as defined in the Lease) is outstanding under the Lease or whether the Lease has been terminated.

* hereby waives any claims against (a) any person acting on the instructions given by CONTRAIL AVIATION LEASING, LLC or its designee pursuant to this Power of Attorney and (b) any person designated by CONTRAIL AVIATION LEASING, LLC or an officer of CONTRAIL AVIATION LEASING, LLC to give instructions pursuant to this Power of Attorney. * also

Novation and Amendment Agreement *MSN* SCHEDULE 5 - Page 1

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

agrees to indemnify and hold harmless any person, agency or company which may act in reliance upon this Power of Attorney and pursuant to instructions given by CONTRAIL AVIATION LEASING, LLC or its designee.

*expressly declares that CONTRAIL AVIATION LEASING, LLC may use this power of attorney to do business with “itself”.

This Power of Attorney is irrevocable as it is granted for the benefit of CONTRAIL AVIATION LEASING, LLC in accordance with Articles * of the * Civil Code, and may only be revoked with the approval of CONTRAIL AVIATION LEASING, LLC or when the Aircraft has been returned possession of CONTRAIL AVIATION LEASING, LLC, deregistered and exported from *

* has made and delivered this Power of Attorney on                      in [●].

*

By:

Title:

Novation and Amendment Agreement * MSN * SCHEDULE 5 - Page 2

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

SIGNATURES

EXISTING LESSOR

*

By:

Name:

Title:

NEW LESSOR
Contrail Aviation Leasing, LLC
By:	/s/ Joseph G. Kuhn
Name:	Joseph G. Kuhn
Title:	CEO

LESSEE

*

	*
By:	*
Name:	*
Title:	*

Novation and Amendment Agreement * MSN * SIGNATURES                        

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

SIGNATURES

EXISTING LESSOR

*

By: *

Name: *

Title: *

NEW LESSOR

Contrail Aviation Leasing, LLC

By:

Name:

Title:

LESSEE

*

By:

Name:

Title:

Novation and Amendment Agreement * MSN * SIGNATURES                        

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

ACL01.79-a.wpd

1 new A319-100 (August 2002)

AIRCRAFT LEASE AGREEMENT

Dated as of October 26, 2001

BETWEEN

*

as LESSEE

and

*

as LESSOR

Aircraft Make and Model:	New Airbus A319-100
Aircraft Manufacturer’s Serial Number:	Per Estoppel and Acceptance Certificate
Aircraft Registration Mark:	Per Estoppel and Acceptance Certificate
Make and Model of Engines:	IAE V2524-A5
Serial Numbers of Engines:	Per Estoppel and Acceptance Certificate

NEW AIRCRAFT NO. 2

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

ACL01.79-a.wpd

1 new A319-100 (August 2002)

TABLE OF CONTENTS

ARTICLE 1	SUMMARY OF TRANSACTION	2
1.1	Description of Aircraft	2
1.2	Scheduled Delivery Date and Location	2
1.3	Lease Term	2
1.4	Security Deposit	2
1.5	Rent During Lease Term	2
1.6	Reserves	2
1.7	Country of Aircraft Registration	3
1.8	Maintenance Program	3
1.9	Agreed Value of Aircraft	3
1.10	LESSOR’s Bank Account	3
ARTICLE 2	DEFINITIONS	4
2.1	General Definitions	4
2.2	Specific Definitions	8
ARTICLE 3	PLACE AND DATE OF DELIVERY	9
3.1	Place of Delivery	9
3.2	Scheduled Delivery Date	9
3.3	Delivery subject to Manufacturer Delivery	9
3.4	No LESSOR Liability	9
3.5	Total Loss of Aircraft prior to Delivery	9
3.6	Cancellation for Anticipatory Delay	9
3.7	Cancellation for Delay	9
ARTICLE 4	LEASE TERM	11
4.1	Lease Term	11
4.2	“Expiration Date”	11
4.3	“Termination Date”	11
ARTICLE 5	SECURITY DEPOSIT, RENT, RESERVES AND OTHER PAYMENTS	12
5.1	Security Deposit	12
5.2	LESSOR Costs	13
5.3	Rent	13
5.4	Reserves	13
5.5	LESSOR’s Bank Account	14

i TABLE OF CONTENTS

ACL01.79-a.wpd

1 new A319-100 (August 2002)

5.6	Default Interest	14
5.7	No Deductions or Withholdings	15
5.8	Value Added Taxes	15
5.9	Wire Transfer Disbursement Report	15
5.10	Net Lease	15
5.11	Currency Indemnity	16
5.12	LESSOR Performance of LESSEE Obligation	17
5.13	Consideration for Rent and other Amounts	17
ARTICLE 6	INVOLVEMENT WITH AIRCRAFT MANUFACTURER	18
6.1	LESSEE Selection of Aircraft	18
6.2	Participation Agreement	18
6.3	Procurement of BFE	18
6.4	Assignment of Training	18
6.5	LESSEE Inspection of Aircraft	18
6.6	Aircraft at Delivery	18
6.7	Delivery of the Aircraft to LESSEE	19
6.8	LESSEE Acceptance of Aircraft	19
ARTICLE 7	PRE-DELIVERY, DELIVERY AND POST-DELIVERY DOCUMENTARY AND OTHER REQUIREMENTS	20
7.1	Pre-Delivery Requirements	20
7.2	Delivery Requirements	21
7.3	Post-Delivery Requirements	22
7.4	LESSOR Delivery Requirements	22
ARTICLE 8	DISCLAIMERS	23
8.1	“As Is, Where Is”	23
8.2	Waiver of Warranty of Description	23
8.3	LESSEE Waiver	24
8.4	Conclusive Proof	24
8.5	No LESSOR Liability for Losses	24
8.6	No Liability to Repair or Replace	24
8.7	No Waiver	24
ARTICLE 9	MANUFACTURERS’ AND VENDORS’ WARRANTIES	25
9.1	Warranties	25
9.2	Reassignment	25
9.3	Warranty Claims	25
ARTICLE 10	OPERATION OF AIRCRAFT	26

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10.1	Costs of Operation	26
10.2	Compliance with Laws	26
10.3	Training	26
10.4	No Violation of Insurance Policies	26
10.5	Flight Charges	26
ARTICLE 11	SUBLEASES	28
11.1	No Sublease without LESSOR Consent	28
11.2	Subleasing Proposal Fee	28
11.3	Any Approved Sublease	29
11.4	Assignment of Sublease	29
11.5	Continued Responsibility of LESSEE	29
ARTICLE 12	MAINTENANCE OF AIRCRAFT	30
12.1	General Obligation	30
12.2	Specific Obligations	30
12.3	Replacement of Parts	32
12.4	Removal of Engines	32
12.5	Pooling of Engines and Parts	33
12.6	Installation of Engines on other aircraft	33
12.7	Engine Thrust Rating	34
12.8	Modifications	34
12.9	Performance of Work by Third Parties	35
12.10	Reporting Requirements	35
12.11	Information Regarding Maintenance Program	36
12.12	LESSOR Rights to Inspect Aircraft	36
ARTICLE 13	USE OF RESERVES	37
13.1	Airframe Reserves	37
13.2	Engine Performance Restoration Reserves	37
13.3	Engine LLP Reserves	37
13.4	Reimbursement	38
13.5	Reimbursement Adjustment	38
13.6	Costs in Excess of Reserves	38
13.7	Reimbursement after Termination Date	38
ARTICLE 14	TITLE AND REGISTRATION	39
14.1	Title to the Aircraft During Lease Term	39
14.2	Registration of Aircraft	39
14.3	Filing of this Lease	39
14.4	Evidence of Registration and Filings	39

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ARTICLE 15	IDENTIFICATION PLATES	40
15.1	Airframe Identification Plates	40
15.2	Engine Identification Plates	40
ARTICLE 16	TAXES	40
16.1	General Obligation of LESSEE	41
16.2	Exceptions to Indemnity	41
16.3	After-Tax Basis	42
16.4	Timing of Payment	42
16.5	Contests	42
16.6	Refunds	42
16.7	Cooperation in Filing Tax Returns	43
16.8	Survival of Obligations	43
ARTICLE 17	INDEMNITIES	44
17.1	General Indemnity	44
17.2	Exceptions to General Indemnities	45
17.3	After-Tax Basis	45
17.4	Timing of Payment	46
17.5	Subrogation	46
17.6	Notice	46
17.7	Refunds	46
17.8	Defense of Claims	46
17.9	Survival of Obligation	46
ARTICLE 18	INSURANCE	48
18.1	Categories of Insurance	48
18.2	Write-back of any Date Recognition Exclusion	48
18.3	Insurance for Indemnities	48
18.4	Insurance for Wet Lease Operations	48
18.5	Renewal	48
18.6	Assignment of Rights by LESSOR	48
18.7	Deductibles	49
18.8	Other Insurance	49
18.9	Information	49
18.10	Currency	49
18.11	Grounding of Aircraft	49
18.12	Failure to Insure	49
18.13	Reinsurance	49
18.14	Limit on Hull in favor of LESSEE	50

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ARTICLE 19	LOSS, DAMAGE AND REQUISITION	51
19.1	Definitions	51
19.2	Notice of Total Loss	52
19.3	Total Loss of Aircraft or Airframe	52
19.4	Surviving Engine(s)	53
19.5	Total Loss of Engine and not Airframe	54
19.6	Other Loss or Damage	55
19.7	Copy of Insurance Policy	55
19.8	Government Requisition	55
19.9	LESSOR Retention of Reserves	56
ARTICLE 20	REPRESENTATIONS, WARRANTIES AND COVENANTS OF LESSEE	57
20.1	Representations and Warranties	57
20.2	Covenants	59
ARTICLE 21	REPRESENTATIONS, WARRANTIES AND COVENANTS OF LESSOR	61
21.1	Representations and Warranties	61
21.2	Covenant of Quiet Enjoyment	61
ARTICLE 22	FINANCIAL AND RELATED INFORMATION	62
ARTICLE 23	RETURN OF AIRCRAFT	63
23.1	Date of Return	63
23.2	Technical Reporting	63
23.3	Return Location	63
23.4	Full Aircraft Documentation Review	63
23.5	Aircraft Inspection	63
23.6	Certificate of Airworthiness Matters	64
23.7	General Condition of Aircraft at Return	65
23.8	Checks Prior to Return	67
23.9	Part Lives	69
23.10	Export and Deregistration of Aircraft	70
23.11	LESSEE’s Continuing Obligations	71
23.12	Airport and Navigation Charges	72
23.13	Return Acceptance Certificate	72
23.14	Indemnities and Insurance	72
23.15	Storage	72

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ARTICLE 24	ASSIGNMENT	73
24.1	No Assignment by LESSEE	73
24.2	Sale or Assignment by LESSOR	73
24.3	LESSOR’s Lender	73
24.4	LESSEE Cooperation	73
24.5	Protections	73
ARTICLE 25	DEFAULT OF LESSEE	75
25.1	LESSEE Notice to LESSOR	75
25.2	Events of Default	75
25.3	LESSOR’s General Rights	77
25.4	Deregistration and Export of Aircraft	77
25.5	LESSEE Liability for Damages	77
25.6	Waiver of Default	78
25.7	Present Value of Payments	78
25.8	Use of “Termination Date”	79
ARTICLE 26	NOTICES	80
26.1	Manner of Sending Notices	80
26.2	Notice Information	80
ARTICLE 27	GOVERNING LAW AND JURISDICTION	81
27.1	California Law	81
27.2	Non-Exclusive Jurisdiction in California	81
27.3	Service of Process	81
27.4	Prevailing Party in Dispute	81
27.5	Waiver	81
ARTICLE 28	MISCELLANEOUS	82
28.1	Transportation of Personnel	82
28.2	Press Releases	82
28.3	Power of Attorney	82
28.4	LESSOR Performance for LESSEE	82
28.5	LESSOR’s Payment Obligations	82
28.6	Application of Payments	82
28.7	Usury Laws	82
28.8	Delegation by LESSOR	83
28.9	Confidentiality	83
28.10	Rights of Parties	83
28.11	Further Assurances	83
28.12	Use of Word “including”	83

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28.13	Headings	83
28.14	Invalidity of any Provision	83
28.15	Negotiation	84
28.16	Time is of the Essence	84
28.17	Amendments in Writing	84
28.18	Counterparts	84
28.19	Delivery of Documents by Fax	84
28.20	Entire Agreement	84
28.21	Witness	84
EXHIBIT A	AIRCRAFT DESCRIPTION	86
EXHIBIT B	PARTICIPATION AGREEMENT	87
EXHIBIT C	CERTIFICATE OF INSURANCE	88
EXHIBIT D	BROKERS’ LETTER OF UNDERTAKING	94
EXHIBIT E	AVIATION AUTHORITY UNDERTAKING LETTER	96
EXHIBIT F	ESTOPPEL AND ACCEPTANCE CERTIFICATE	97
EXHIBIT G	OPINION OF COUNSEL	99
EXHIBIT H	FORM OF POWER OF ATTORNEY	102
EXHIBIT I	ASSIGNMENT OF RIGHTS (AIRFRAME)	104
EXHIBIT J	ASSIGNMENT OF RIGHTS (ENGINES)	105
EXHIBIT K	RETURN ACCEPTANCE RECEIPT	106
EXHIBIT L	MONTHLY REPORT	112
EXHIBIT M	TECHNICAL EVALUATION REPORT	115

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AIRCRAFT LEASE AGREEMENT

THIS AIRCRAFT LEASE AGREEMENT is made and entered into as of October 26, 2001.

BETWEEN:

* , a * corporation whose address and principal place of business is at * (“LESSEE”) and

* , a * corporation whose address and principal place of business is at * , United States of America (“LESSOR”).

The subject matter of this Lease is one (1) new Airbus A319-100 aircraft. In consideration of and subject to the mutual covenants, terms and conditions contained in this Lease, LESSOR hereby agrees to lease to LESSEE and LESSEE hereby agrees to lease from LESSOR the Aircraft for the Lease Term and the parties further agree as follows:

1 RECITALS

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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ARTICLE 1         SUMMARY OF TRANSACTION

The following is a summary of the lease transaction between LESSEE and LESSOR. It is set forth for the convenience of the parties only and will not be deemed in any way to amend, detract from or simplify the other provisions of this Lease.

1.1 Description of Aircraft

One new Airbus A319-100

1.2 Scheduled Delivery Date and Location

In the month of August 2002, at Hamburg, Germany

1.3 Lease Term

10 years

1.4 Security Deposit

US$ * , payable as follows (in U.S. Dollars):

Received	*
Within 5 business days following execution of the Lease	*
3 business days prior to scheduled delivery date	*

1.5 Rent During Lease Term

Payable monthly in advance and equal to * U.S. Dollars (US$ * ) for a MTOW of 70 tonnes, or *  U.S. Dollars (US$ * ) for a MTOW of 64 tonnes.

2 ARTICLE 1 SUMMARY OF TRANSACTION

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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1.6 Reserves

A total of US$ * per flight hour, as follows:

Airframe Reserves:	US$ * per airframe flight hour
Engine Performance	US$ * per engine flight hour for each engine
Restoration Reserves:
Engine LLP Reserves:	US$ * per engine flight hour for each engine

1.7 Country of Aircraft Registration

*

1.8 Maintenance Program

LESSEE’s Maintenance Program

1.9 Agreed Value of Aircraft

* % of Airbus’s list price for the Aircraft and any additional LESSEE specified changes and LESSOR purchased equipment (BFE) on the date LESSEE takes delivery of the Aircraft, based upon the invoice provided by Airbus. Such agreed value shall decline by * % on each anniversary of the date LESSEE takes delivery of the Aircraft.

1.10 LESSOR’s Bank Account

*

Account No. *

Chase Manhattan Bank

55 Water Street

New York, NY 10041

ABA# 021000021

3 ARTICLE 1 SUMMARY OF TRANSACTION

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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ARTICLE 2         DEFINITIONS

Except where the context otherwise requires, the following words have the following meanings for all purposes of this Lease. The definitions are equally applicable to the singular and plural forms of the words. Any agreement defined below includes each amendment, modification, supplement and waiver thereto in effect from time to time.

2.1 General Definitions.

“Aircraft” means the Airframe, the two (2) Engines, the Parts and the Aircraft Documentation, collectively. As the context requires, “Aircraft” may also mean the Airframe, any Engine, any Part, the Aircraft Documentation or any part thereof individually. For example, in the context of return to LESSOR the term “Aircraft” means the Airframe, Engines, Parts and Aircraft Documentation collectively, yet in the context of LESSEE not creating any Security Interests other than Permitted Liens on the Aircraft, the term “Aircraft” means any of the Airframe, any Engine, any Part or the Aircraft Documentation individually.

“Aircraft Documentation” means all (a) log books, Aircraft records, manuals and other documents provided to LESSEE in connection with the Aircraft, (b) documents listed in Exhibits K and (c) any other documents required to be maintained during the Lease Term by the Aviation Authority, LESSEE’s Maintenance Program and this Lease.

“Airframe” means the airframe described in Exhibit A together with all Parts relating thereto (except Engines or engines).

“Airworthiness Directives” or “ADs” means all airworthiness directives (or equivalent) and other instructions of the FAA and the Aviation Authority applicable to the Aircraft.

“APU” means (a) the auxiliary power unit of the Aircraft.

“Aviation Authority” means the Civil Aviation Authority of * or any Government Entity which under the Laws of * from time to time has control over civil aviation or the registration, airworthiness or operation of aircraft in * . If the Aircraft is registered in a country other than * , “Aviation Authority” means the agency which regulates civil aviation in such other country.

“Aviation Documents” means any or all of the following which at any time may be obtainable from the Aviation Authority: (a) if required, a temporary certificate of airworthiness from the Aviation Authority allowing the Aircraft to be flown after Delivery to the State of Registration, (b) an application for registration of the Aircraft with the appropriate authority in the State of

4 ARTICLE 2 DEFINITIONS

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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Registration, (c) the certificate of registration for the Aircraft issued by the State of Registration, (d) a full certificate of airworthiness for the Aircraft specifying transport category (passenger), (e) an air transport license, (f) an air operator’s certificate, (g) such recordation of LESSOR’s title to the Aircraft and interest in this Lease as may be available in the State of Registration and (h) all such other authorizations, approvals, consents and certificates in the State of Registration as may be required to enable LESSEE lawfully to operate the Aircraft.

“BFE” means any equipment which is to be provided by the purchaser of the Aircraft (whether actually provided by LESSOR as buyer-furnished equipment or Manufacturer as seller-purchased equipment).

“Business Day” means a day other than a Saturday or Sunday on which the banks in * and the city where LESSOR’s Bank are located are open for the transaction of business of the type required by this Lease.

“Creditor” means any lessor, owner, bank, lender, mortgagee or other Person which is the owner of or has any interest in an aircraft engine or aircraft operated by LESSEE.

“Creditor Agreement” means the applicable agreement between a Creditor and LESSEE or between Creditors pursuant to which such Creditor owns, leases or has an interest in either an aircraft operated by LESSEE on which an Engine may be installed or in an aircraft engine which may be installed on the Airframe.

“Default” means any event which, upon the giving of notice, the lapse of time and/or a relevant determination, would constitute an Event of Default.

“Delivery” means the delivery of the Aircraft from LESSOR to LESSEE pursuant to Articles 3 and 6.

“Delivery Date” means the date on which Delivery takes place.

*

“Dollars” and “$”means the lawful currency of the U.S.

“Engine” means (a) each of the engines listed on the Estoppel and Acceptance Certificate; (b) any replacement engine acquired by LESSOR and leased to LESSEE pursuant to Article 19.5 following a Total Loss of an Engine; and (c) all Parts installed in or on any of such engines at Delivery (or substituted, renewed or replacement Parts in accordance with this Lease) so long as title thereto is or remains vested in LESSOR in accordance with the terms of Article 12.3.

5 ARTICLE 2 DEFINITIONS

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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“Event of Default” means any of the events referred to in Article 25.2.

“FAA” means the Federal Aviation Administration of the Department of Transportation or any successor thereto under the Laws of the U.S.

“FARs” means the U.S. Federal Aviation Regulations embodied in Title 14 of the U.S. Code of Federal Regulations, as amended from time to time, or any successor regulations thereto.

“Geneva Convention” means the Convention on the International Recognition of Rights in Aircraft signed in Geneva, Switzerland on June 19, 1948.

“Government Entity” means any (a) national, state or local government, (b) board, commission, department, division, instrumentality, court, agency or political subdivision thereof and (c) association, organization or institution of which any of the entities listed in (a) or (b) is a member or to whose jurisdiction any such entity is subject.

“Landing Gear” means the installed main and nose landing gear, components and their associated actuators, side braces and parts.

“Law” means any (a) statute, decree, constitution, regulation, order or any directive of any Government Entity, (b) treaty, pact, compact or other agreement to which any Government Entity is a signatory or party and (c) judicial or administrative interpretation or application of any of the foregoing.

“Lease” means this Aircraft Lease Agreement, together with all Exhibits hereto.

“LESSOR’S Lien” means any Security Interest created by or through LESSOR.

“Maintenance Program” means LESSEE’s maintenance program as approved by the Aviation Authority or such other maintenance program as LESSOR may, in its discretion, accept in writing.

“Manufacturer” means Airbus Industrie, a “Groupement d’Interet Economique” established under Ordonnance No. 67-821 dated September 23, 1967 of the republic of France.

“MPD” means the Maintenance Planning Document published by the Manufacturer and applicable to the Aircraft.

“Overhaul” means the full reconditioning of the Aircraft, an Engine, APU, Landing Gear, module or Part, as the case may be, in which such equipment has been fully disassembled; cleaned; thoroughly inspected; and returned to the highest standard specified by the applicable manufacturer’s manual.

6 ARTICLE 2 DEFINITIONS

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“Part” means any part, component, appliance, system module, engine module, the APU, accessory, material, instrument, communications equipment, furnishing, LESSEE-furnished or LESSOR-purchased equipment or other item of equipment (other than complete Engines or engines or the APU) for the time being installed in or attached to the Airframe, any Engine or which, having been removed from the Airframe, any Engine, remains the property of LESSOR.

“Permitted Lien” means (a) LESSOR’s Liens; (b) Security Interests arising in the ordinary course of LESSEE’s business for Taxes either not yet assessed or, if assessed, not yet due or being contested in good faith in accordance with Article 16.5 or (c) materialmen’s, mechanics’, workmen’s, repairmen’s, employees’ liens or similar Security Interests arising by operation of Law after the Delivery Date in the ordinary course of LESSEE’s business for amounts which are either not yet due or are being contested in good faith by appropriate proceedings (and for which adequate reserves have been made or, when required in order to pursue such proceedings, an adequate bond has been provided) so long as such proceedings do not involve any danger of sale, forfeiture or loss of the Aircraft.

“Person” means any individual, firm, partnership, joint venture, trust, corporation, Government Entity, committee, department, authority or any body, incorporated or unincorporated, whether having distinct legal personality or not.

“Prime Rate” means the rate of interest from time to time announced by Chase Manhattan Bank in New York as its prime commercial lending rate.

“Prohibited Country” means any country to which the export and/or use of an A319 aircraft with IAE engines attached thereto is not permitted under (a) any United Nations sanctions, (b) the U.K. Export of Goods Control Order 1992, (c) the United States Export Administration Act 1979 (as amended) or any successor legislation and/or the Export Administration Regulations promulgated thereunder, (d) where applicable, the various regulations administered from time to time by the Office of Foreign Assets Control of the U.S. Treasury Department, (e) any similar or corresponding legislation then in effect in the U.S., the United Kingdom, France, Spain or Germany or (f) any subsequent United Nations Sanctions Orders the effect of which prohibits or restricts the export and/or use of A319 aircraft with IAE engines attached thereto to such country.

“Security Interest” means any encumbrance or security interest, however and wherever created or arising including (without prejudice to the generality of the foregoing) any right of ownership, security, mortgage, pledge, charge, encumbrance, lease, lien, statutory or other right in rem, hypothecation, title retention, attachment, levy, claim or right of possession or detention.

7 ARTICLE 2 DEFINITIONS

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“State of Registration” means * or such other country or state of registration of the Aircraft as LESSOR may, in its absolute discretion, approve in writing.

“U.S.” means the United States of America.

2.2 Specific Definitions. The following terms are defined in the Articles referenced below:

Terms	Article
Agreed Value		19.1
Airframe Reserves		5.4.1
Default Interest		5.6
Delivery Location		3.1
Engine LLP Reserves		5.4.1
Engine Performance		5.4.1
Restoration Reserves
Expenses		17.1
Expiration Date		4.2
Indemnitees		17.1
Lease Term		4.1
LESSOR’s Assignee		24.2
LESSOR’s Bank		5.5
LESSOR’s Lender		24.3
Modification		12.8.1
Net Total Loss Proceeds		19.1
Operative Documents		20.1.3
Rent		5.3.1
Reserves		5.4.1
Scheduled Delivery Date		3.2
Security Deposit		5.1.1
Taxes		16.1
Termination Date		4.3
Total Loss		19.1
Total Loss Date		19.1
Total Loss Proceeds		19.1

8 ARTICLE 2 DEFINITIONS

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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ARTICLE 3         PLACE AND DATE OF DELIVERY

3.1 Place of Delivery. LESSOR will deliver the Aircraft to LESSEE at Manufacturer’s facility at Hamburg, Germany or such other place as may be agreed in writing between the parties (the “Delivery Location”).

3.2 Scheduled Delivery Date. As of the date of this Lease, Delivery of the Aircraft from Manufacturer to LESSOR is scheduled to occur in the month of August 2002. LESSOR will notify LESSEE from time to time and in a timely manner (always to give at least 30 days’ prior notice) of the target date on which LESSOR expects Delivery to take place (the “Scheduled Delivery Date”).

3.3 Delivery subject to Manufacturer Delivery. LESSOR and LESSEE expressly acknowledge that Delivery of the Aircraft to LESSEE is subject to and conditioned upon delivery of the Aircraft by Manufacturer to LESSOR.

3.4 No LESSOR Liability. LESSOR will not be liable for any loss or expense, or any loss of profit, arising from any delay or failure in Delivery to LESSEE unless such delay or failure arises as a direct consequence of the willful misconduct of LESSOR, and in no event will LESSOR be liable for any delay or failure which is caused by any breach or delay on the part of Manufacturer or any BFE supplier.

3.5 Total Loss of Aircraft prior to Delivery. If a Total Loss of the Aircraft occurs prior to Delivery, neither party will have any further liability to the other except that LESSOR will return to LESSEE the Security Deposit in accordance with Article 5.1.3 and any prepaid Rent.

3.6 Cancellation for Anticipatory Delay. Promptly after LESSOR becomes aware that in Manufacturer’s opinion a delay will cause Delivery to be delayed beyond August 31, 2003, LESSOR will notify LESSEE. By written notice given within ten (10) Business Days after LESSEE’s receipt of such LESSOR notice, either party may by written notice to the other party terminate this Lease and this Lease will terminate on the date of receipt of such notice. In the event of such termination, neither party will have any further liability to the other party except that LESSOR will return to LESSEE the Security Deposit in accordance with Article 5.1.3 and any prepaid Rent. If neither party gives notice of termination within such ten (10) Business Days, both parties lose all right to terminate under this Article 3.6 unless otherwise agreed in writing by the parties.

3.7 Cancellation for Delay. If a delay, not caused by LESSEE’s or LESSOR’s breach of this Lease, causes Delivery to be delayed beyond August 31, 2003, either party may terminate this Lease by giving the other party written notice within ten (10) Business Days after such

9 ARTICLE 3 PLACE AND DATE OF DELIVERY

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date and this Lease will terminate on the date of receipt of such notice. In the event of such termination, neither party will have any further liability to the other party except that LESSOR will return to LESSEE the Security Deposit in accordance with Article 5.1.3 and any prepaid Rent. If neither party gives notice of termination within such ten (10) Business Days, both parties lose all right to terminate under this Article 3.7, unless otherwise agreed in writing by the parties.

10 ARTICLE 3 PLACE AND DATE OF DELIVERY

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ARTICLE 4         LEASE TERM

4.1 Lease Term. The term of leasing of the Aircraft will commence on the Delivery Date and continue for a term of ten (10) years (“Lease Term”).

4.2 “Expiration Date”. “Expiration Date” means the date on which LESSEE is required to redeliver the Aircraft to LESSOR in the condition required by this Lease on the last day of the Lease Term.

4.3 “Termination Date”. This Lease may in fact terminate on any of the dates set forth below:

(a) the Expiration Date, provided LESSEE returns the Aircraft to LESSOR on the Expiration Date in the condition required by Article 23; or

(b) a date earlier than the Expiration Date, if:

(i) there is a Total Loss of the Aircraft prior to Delivery pursuant to Article 3.5;

(ii) cancellation of this Lease occurs pursuant to Article 3.6;

(iii) there is a Total Loss of the Aircraft and payment is made to LESSOR in accordance with Article 19.3; or

(iv) an Event of Default occurs and LESSOR repossesses the Aircraft or otherwise terminates this Lease pursuant to Article 25.3.

(c) a date later than the Expiration Date, if:

(i) an Event of Default occurs hereunder by LESSEE returning the Aircraft in the condition required by this Lease after the Expiration Date; or

(ii) an Event of Default occurs and LESSOR repossesses the Aircraft or otherwise terminates this Lease pursuant to Article 25.3.

The “Termination Date” is the date on which this Lease terminates because one of the above has occurred.

11 ARTICLE ? LEASE TERM

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ARTICLE 5         SECURITY DEPOSIT, RENT, RESERVES AND OTHER PAYMENTS

5.1 Security Deposit.

5.1.1 LESSEE will pay LESSOR a security deposit of *  U.S. Dollars (US$ * for its lease of the Aircraft (the “Security Deposit”). The Security Deposit is payable as follows (in US$):

Received	*
Within five (5) Business Days following execution of the Lease	*
Three (3) Business Days prior to Scheduled Delivery Date	*

5.1.2 The Security Deposit may be commingled with LESSOR’s general funds and any interest earned on such Security Deposit will be for LESSOR’s account. If the Security Deposit is reduced below the required amount by application to meet LESSEE’s unperformed obligations under this Lease, LESSEE will replenish the Security Deposit within ten (10) days after LESSOR’S demand therefor. The Security Deposit will serve as security for the performance by LESSEE of its obligations under this Lease and any other agreements between LESSEE and LESSOR relating to aircraft, engines, aircraft equipment or the extension of credit and may be applied by LESSOR upon the occurrence of a Default or Event of Default hereunder or of a default by LESSEE under any such other agreements.

5.1.3 Upon termination of this Lease in accordance with Article 4.3 other than if an Event of Default has occurred and is continuing, LESSOR will return to LESSEE the amount of the Security Deposit then held by LESSOR (so long as no default by LESSEE exists under any other agreement between LESSEE and LESSOR relating to aircraft, engines or aircraft equipment or the extension of credit by LESSOR to LESSEE), without interest, less an amount determined to be a reasonable estimate of the costs, if any, which LESSOR will incur to remedy any unperformed obligations of LESSEE under this Lease, including the correction of any discrepancies from the required condition of the Aircraft on return of the Aircraft.

12 ARTICLE 5 SECURITY DEPOSIT, RENT, RESERVES AND OTHER PAYMENTS

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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5.2 LESSOR Costs. LESSEE will reimburse LESSOR for LESSOR’s out-of-pocket costs in connection with any legal opinion obtained by LESSOR with respect to this Lease and registration and repossession of the Aircraft in the State of Registration.

5.3 Rent.

5.3.1 LESSEE will pay LESSOR the following amounts monthly in advance as rent for the Aircraft (“Rent”):

MTOW of Aircraft	Amount of monthly Rent
64 tonnes	US$ *
70 tonnes	US$ *

5.3.2 The first payment of Rent during the Lease Term will be paid no later than three (3) Business Days prior to Delivery. Each subsequent payment of Rent will be due monthly thereafter no later than the same day of the month as the Delivery Date of the Aircraft except that, if such day is not a Business Day, the Rent will be due on the immediately preceding Business Day. If Delivery occurred on the 29th, 30th or 31st of the month and in any given month during the Lease Term there is no such corresponding date, Rent will be payable on the last Business Day of such month.

5.4 Reserves.

5.4.1 LESSEE will pay to LESSOR supplemental Rent, based on LESSEE’S use of the Aircraft during the Lease Term, in the form of the following reserves in the following amounts per flight hour (individually, “Airframe Reserves” and “Engine Performance Restoration Reserves”, “Engine LLP Reserves”, and collectively “Reserves”):

A total of US$ * per flight hour, as follows:

Airframe Reserves:	US$ * per Airframe flight hour
Engine Performance Restoration Reserves:	US$ * per Engine flight hour for each Engine (payable when the Engine is utilized on the Aircraft or another aircraft)

13 ARTICLE 5 SECURITY DEPOSIT, RENT, RESERVES AND OTHER PAYMENTS

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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Engine LLP Reserves: US$ *  per Engine flight hour for each Engine (payable when the Engine is utilized
on the Aircraft or another aircraft)

5.4.2 The amount of the Engine Reserves set forth in Article 5.4.1 is payable when the Engine is utilized on the Airframe or another airframe and may be increased by LESSOR in the event of an increase in the thrust rating of an Engine in accordance with Article 12.7.

5.4.3 Such Reserves will be paid on or before the 10th day of the calendar month next following the month in which the Delivery Date occurs and on or before the 10th day of each succeeding calendar month for flying performed during the calendar month prior to payment. All Reserves for flying performed during the month in which the Termination Date occurs will be paid on the Termination Date, unless otherwise agreed by the parties.

5.4.4 No interest will accrue or be paid at any time to LESSEE on such Reserves and, subject to LESSOR’s obligations under Article 13, LESSOR may commingle the Reserves with LESSOR’s general funds.

5.5 LESSOR’s Bank Account. The Security Deposit, Rent, Reserves and any other payment due under this Lease will be paid by wire transfer of immediately available U.S. Dollar funds to LESSOR’s bank account at:

* 

Account No. * 

Chase Manhattan Bank 55

Water Street New York,

NY 10041 ABA#

021000021

or to such other bank account as LESSOR may from time to time designate by not fewer than ten (10) Business Days’ prior written notice (“LESSOR’s Bank”). When it is stated in this Lease that an installment of the Security Deposit, the monthly Rent, Reserves or any other payment is due or must be paid or made by LESSEE by a specific date, then such payment actually must be received by LESSOR’s Bank on or before such specific date, even if, in order for such payment to be received by LESSOR’s Bank by such specific date, LESSEE must initiate the wire transfer prior to such specific date, provided that LESSEE will not be responsible for any failure or delay on the part of LESSOR’s Bank with respect to such funds, including the failure or delay on the part of LESSOR’s Bank to credit LESSOR’s account with amounts paid by LESSEE.

14 ARTICLE 5 SECURITY DEPOSIT, RENT, RESERVES AND OTHER PAYMENTS

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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5.6 Default Interest. If LESSOR’s Bank does not receive the Rent or any other amount on or before the specific date when due, LESSOR will suffer loss and damage the exact nature and amount of which are difficult or impossible to ascertain. LESSEE will pay LESSOR as supplemental Rent (by way of agreed compensation and not as a penalty) interest on any due and unpaid amounts payable by LESSEE under this Lease. Interest will be calculated at a per annum rate (based on a 360 day year) which is equal to * percent (* %) plus the Prime Rate in effect on the date on which the amount was originally due for the period from the date the amount originally was due through the date the amount actually is received at LESSOR’s Bank or, in the case of LESSOR’s performance of LESSEE’s obligations hereunder, from the date of payment by LESSOR through the date of LESSEE’s repayment to LESSOR (“Default Interest”). Default Interest will accrue on a day-to-day basis and be compounded monthly.

5.7 No Deductions or Withholdings. All payments by LESSEE under this Lease, including the Security Deposit, Rent, Reserves, Default Interest, fees, indemnities or any other item, will be made in full without any deduction or withholding whether in respect of set-off, counterclaim, duties, or Taxes (as defined in Article 16) imposed in the State of Registration or any jurisdiction from which such payments are made unless LESSEE is prohibited by Law from doing so, in which event LESSEE will gross up the payment amount such that the net payment received by LESSOR after any deduction or withholding equals the amounts called for under this Lease. All payments by LESSOR under this Lease, including the return of the Security Deposit, or any other item, will be made in full without any deduction or withholding whether in respect of set-off, counterclaim, duties, or Taxes (as defined in Article 16) imposed in the U.S. or any jurisdiction from which such payments are made unless LESSOR is prohibited by Law from doing so, in which event LESSOR will gross up the payment amount such that the net payment received by LESSEE after any deduction or withholding equals the amounts called for under this Lease.

5.8 Value Added Taxes. The Rent and other amounts payable by LESSEE under this Lease are exclusive of any value added tax, turnover tax or similar tax or duty.

5.9 Wire Transfer Disbursement Report. At the time of each Rent or other payment, LESSEE will complete and fax to LESSOR a wire transfer disbursement report stating the amount of the payment being made by LESSEE and the allocation of such payment to the Security Deposit, Rent, Reserves, Default Interest and other charges. Notwithstanding the allocation set forth in LESSEE’s report, in the event LESSEE is in default under this Lease, LESSOR will have complete discretion to allocate LESSEE’s payments as LESSOR determines.

5.10 Net Lease.

5.10.1 This Lease is a net lease and LESSEE’s obligation to pay Rent and make other payments in accordance with this Lease will be absolute and unconditional under any and all circumstances and regardless of other events, including the following:

(a) any right of set-off, counterclaim, recoupment, defense or other right (including any right of reimbursement) which LESSEE may have against LESSOR, Manufacturer, the Engine manufacturer or any other person for any reason, including any claim LESSEE may have for the foregoing;

15 ARTICLE 5 SECURITY DEPOSIT, RENT, RESERVES AND OTHER PAYMENTS

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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(b) unavailability or interruption in use of the Aircraft for any reason, other than LESSOR’s breach of the covenant of quiet enjoyment described in Article 21.2, including a requisition thereof or any prohibition or interference with or other restriction against LESSEE’s use, operation or possession of the Aircraft (whether by Law or otherwise), any defect in title, airworthiness, merchantability, fitness for any purpose, condition, design, specification or operation of any kind or nature of the Aircraft, the ineligibility of the Aircraft for any particular use or trade or for registration under the Laws of any jurisdiction or Total Loss of the Aircraft;

(c) insolvency, bankruptcy, reorganization, arrangement, readjustment of debt, dissolution, liquidation, receivership, administration or similar proceedings by or against LESSOR, LESSEE, Manufacturer, the Engine manufacturer or any other Person;

(d) invalidity or unenforceability or lack of due authorization of or other defect in this Lease;

(e) failure or delay on the part of any party to perform its obligations under this Lease; or

(f) any other circumstance which but for this provision would or might have the effect of terminating or in any other way affecting any obligation of LESSEE hereunder.

5.10.2 Nothing in Article 5.10 will be construed to limit LESSEE’s rights and remedies in the event of LESSOR’s breach of its warranty of quiet enjoyment set forth in Article 21.2 or to limit LESSEE’s rights and remedies to pursue in a court of law any claim it may have against LESSOR or any other Person.

5.11 Currency Indemnity. If under any applicable Law, whether as a result of a judgment against LESSEE or the liquidation of LESSEE or for any other reason, any payment hereunder is required to be made or recovered in a currency other than Dollars then, to the extent that the payment (when converted into Dollars at the “rate of exchange” on the date of payment or, in the case of a liquidation, the latest date for the determination of liabilities permitted by the applicable Law) falls short of the amount unpaid under this Lease, LESSEE or LESSOR, as applicable, will as a separate and independent obligation, fully indemnify LESSOR or LESSEE, as

16 ARTICLE 5 SECURITY DEPOSIT, RENT, RESERVES AND OTHER PAYMENTS

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applicable, against the amount of the shortfall. If the amount received by LESSOR or LESSEE, as applicable, upon converting the payment into Dollars exceeds the amount payable under this Lease, LESSOR or LESSEE, as applicable, will remit such excess to the other party. For the purposes of this paragraph “rate of exchange” means the rate at which LESSOR or LESSEE is able on the relevant date to purchase Dollars in New York or London (at LESSOR’s option) with such other currency.

5.12 LESSOR Performance of LESSEE Obligation. If LESSEE fails to make any payment under this Lease to a third party in connection with the Aircraft or fails to perform any other obligation required under this Lease, LESSOR may, (but is not required to) at its election and without waiver of its rights perform such obligation and/or pay such amount. Within five (5) Business Days after written notice to LESSEE of the amount paid by LESSOR on behalf of LESSEE, LESSEE will repay such amount to LESSOR together with Default Interest. Such payment to LESSOR will constitute additional Rent payable by LESSEE to LESSOR hereunder. Any payment, performance or compliance by LESSOR of a LESSEE obligation hereunder will not affect the occurrence or continuance of a Default or Event of Default, as the case may be.

5.13 Consideration for Rent and other Amounts. The amount of the Rent and other payments contained herein are in consideration of LESSEE’s waiver of warranties and indemnities set forth in Articles 8 and 17, respectively, and the other provisions of this Lease.

17 ARTICLE 5 SECURITY DEPOSIT, RENT, RESERVES AND OTHER PAYMENTS

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ARTICLE 6         INVOLVEMENT WITH AIRCRAFT MANUFACTURER

6.1 LESSEE Selection of Aircraft. LESSEE ACKNOWLEDGES THAT THE DESCRIPTION OF THE AIRCRAFT SET FORTH IN THIS LEASE IS BASED UPON INFORMATION SUPPLIED BY MANUFACTURER. LESSEE COVENANTS TO LESSOR THAT LESSEE HAS USED ITS OWN JUDGMENT IN SELECTING THE AIRCRAFT AND HAS DONE SO BASED ON ITS SIZE, DESIGN AND TYPE. LESSEE ACKNOWLEDGES THAT LESSOR IS NOT A MANUFACTURER, REPAIRER OR SERVICING AGENT OF THE AIRCRAFT.

6.2 Participation Agreement. LESSEE has the right to inspect the Aircraft during the manufacture process and to attend and observe the acceptance tests of the Aircraft pursuant to the terms of a Participation Agreement to be entered into between LESSEE and LESSOR in the form set forth in Exhibit B.

6.3 Procurement of BFE. LESSEE’S and LESSOR’s technical representatives will meet and determine which of LESSEE or LESSOR will provide specific items of BFE. Such BFE will then be provided to Manufacturer by LESSEE or LESSOR, as applicable, within the time frames required by Manufacturer.

6.4 Assignment of Training. LESSOR hereby assigns to LESSEE all rights to training to which LESSOR is entitled as a result of LESSOR’S purchase of the Aircraft and lease of the Aircraft to LESSEE. If LESSEE fails to take Delivery of the Aircraft when tendered in accordance with Article 6.7, LESSEE will immediately pay to LESSOR an amount equal to the Dollar value of such training based on what the training would have cost LESSEE had LESSEE purchased such training directly from Manufacturer.

6.5 LESSEE Inspection of Aircraft. During the course of final assembly of the Aircraft, and at Delivery, LESSEE will have its own representative present to inspect the Aircraft and to ensure its conformity with LESSEE’S needs and the terms of this Lease. LESSEE will have ground inspection and acceptance flight rights with respect to the Aircraft. LESSEE acknowledges that, as between LESSEE and LESSOR, in accepting the Aircraft LESSEE is relying on its own inspection and knowledge of the Aircraft in determining whether the Aircraft meets the requirements of this Lease.

6.6 Aircraft at Delivery. At Delivery, the Aircraft will be as set forth in Exhibit A, as such description may be modified by any change requests agreed to among LESSEE, LESSOR and Manufacturer (which will be reflected in amendment(s) to this Lease). In the event of any discrepancies, LESSEE and LESSOR will cooperate in good faith with one another and with Manufacturer and Engine manufacturer, as applicable, in order to arrive at a mutually acceptable resolution of any such discrepancies.

18 ARTICLE 6 INVOLVEMENT WITH AIRCRAFT MANUFACTURER

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6.7 Delivery of the Aircraft to LESSEE. Subject to LESSEE having performed all of the conditions precedent to Delivery set forth herein, immediately following delivery of the Aircraft from Manufacturer to LESSOR, LESSOR will deliver the Aircraft to LESSEE at the Delivery Location. Provided that the Aircraft is in the condition required by Article 6.6, upon the tender of the Aircraft by LESSOR to LESSEE, LESSEE will accept the Aircraft and the date of tender by LESSOR to LESSEE will be deemed to be the Delivery Date for all purposes under this Lease, including but not limited to the commencement of LESSEE’S obligation to pay Rent hereunder.

6.8 LESSEE Acceptance of Aircraft. If LESSEE fails to (a) comply with its obligations set forth in Article 6.2, (b) comply with the conditions contained in Articles 7.1 and 7.2 so as to allow Delivery to take place immediately following delivery of the Aircraft by Manufacturer to LESSOR or (c) take delivery of the Aircraft when properly tendered for delivery by LESSOR in the condition required hereunder, LESSEE will indemnify LESSOR for all costs and expenses incurred by LESSOR as a result thereof including (but without limitation) any payments other than the purchase price which LESSOR becomes obliged to make to Manufacturer.

19 ARTICLE 6 INVOLVEMENT WITH AIRCRAFT MANUFACTURER

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ARTICLE 7         PRE-DELIVERY, DELIVERY AND POST-DELIVERY DOCUMENTARY AND OTHER REQUIREMENTS

7.1 Pre-Delivery Requirements. LESSEE will do each of the following prior to the Scheduled Delivery Date of the Aircraft within the time frames set forth below:

7.1.1 Within one (1) month after execution of this Lease, LESSEE will deliver to LESSOR each of the following:

(a) copies of resolutions of the Board of Directors of LESSEE or other written evidence of appropriate corporate action, duly certifying and authorizing the lease of the Aircraft hereunder and the execution, delivery and performance of this Lease, together with an incumbency certificate as to the person or persons authorized to execute and deliver documents on behalf of LESSEE hereunder; and

(b) if available, a letter from the Aviation Authority in the form and substance of Exhibit E.

7.1.2 At least five (5) Business Days prior to the Scheduled Delivery Date, LESSEE will have delivered to LESSOR a Certificate of Insurance and Brokers’ Letter of Undertaking in the form and substance of Exhibits C and D, respectively, from LESSEE’s insurance brokers evidencing insurance of the Aircraft in accordance with this Lease from the Delivery Date.

7.1.3 At least three (3) Business Days prior to the Scheduled Delivery Date, LESSEE will do each of the following:

(a) pay to LESSOR the first monthly installment of Rent in accordance with Article 5.3.2;

(b) LESSEE’s counsel will deliver an opinion in form and substance of Exhibit G or as otherwise reasonably satisfactory to LESSOR;

(c) provide LESSOR with documents evidencing that LESSEE has obtained any necessary licenses for the importation and ferrying of the Aircraft into * and that all applicable customs duties and sales taxes in respect of the Aircraft have been discharged by LESSEE (or arrangements satisfactory to LESSOR have been made for obtaining or paying for the same);

20 ARTICLE 7 PRE-DELIVERY, DELIVERY AND POST-DELIVERY DOCUMENTARY AND OTHER REQUIREMENTS

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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(d) provide LESSOR with documents reasonably requested by LESSOR evidencing the issuance of each approval, license and consent which may be required in connection with the remittance to LESSOR of any amount payable under this Lease or the performance by LESSEE of any of its obligations hereunder (including without limitation any exchange control approval);

(e) provide LESSOR with a copy of such Aviation Documents as may be available prior to the Scheduled Delivery Date;

(f) provide LESSOR with a power of attorney empowering LESSEE’s representative, who may be an officer or employee of LESSEE, to accept the Aircraft on behalf of LESSEE;

(g) provide LESSOR with a power of attorney in the form of Exhibit H; and

(h) provide LESSOR with such other documents as LESSOR may reasonably request.

7.2 Delivery Requirements. On the Delivery Date of the Aircraft, each of the following will occur

7.2.1 LESSEE will execute and deliver to LESSOR an Estoppel and Acceptance Certificate in the form of Exhibit F covering the Aircraft and effective as of the Delivery Date.

7.2.2 If not previously done, LESSEE and LESSOR will sign an amendment or supplement to Exhibit A evidencing all agreed-to changes to the specification of the Aircraft.

7.2.3 LESSEE will deliver a certificate signed by an officer of LESSEE stating all of the following:

(a) the representations and warranties contained in Article 20 are true and accurate on and as of the Delivery Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date);

(b) no Default has occurred and is continuing or will result from LESSEE’s lease of the Aircraft hereunder, and

(c) such officer has examined the Creditor Agreements between LESSEE and the other Creditors and none of such Creditor Agreements contains terms which provide

21 ARTICLE 7 PRE-DELIVERY, DELIVERY AND POST-DELIVERY DOCUMENTARY AND OTHER REQUIREMENTS

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or contemplate that such Creditors will obtain any right, title or interest in an Engine which is installed on another aircraft (or, if this is not the case, such officer will identify in the certificate the parties, the aircraft and the Creditor Agreements for which this statement is untrue).

7.2.4 If any Creditor Agreement provides or contemplates that such Creditor will obtain any right, title or interest in an Engine which is installed on such Creditor’s aircraft, LESSEE will deliver to LESSOR an engines cooperation agreement in form and substance acceptable to LESSOR which is executed by LESSEE and LESSEE’S Creditors (as defined therein).

7.2.5 LESSOR will deliver to LESSEE an assignment of Manufacturer and Engine manufacturer rights in the form and substance of Exhibits I and J, respectively, and concurrently therewith LESSOR, to the extent it has not previously done so, will be deemed to have assigned all applicable product support and training with the exception of Manufacturer field service representative, which will not be provided.

7.2.6 LESSEE will deliver to LESSOR a copy of such Aviation Documents as have not been previously delivered which are available.

7.3 Post-Delivery Requirements.

7.3.1 Within seven (7) days after Delivery, if not previously provided, LESSEE will do each of the following:

(a) LESSEE will procure registration of the Aircraft in the register of aircraft of the State of Registration showing LESSOR as the owner and will provide evidence of the same to LESSOR;

(b) provide LESSOR with copies of all Aviation Documents not previously delivered; and

(c) if the Aircraft could not be registered at Delivery, provide LESSOR with a follow-up opinion of counsel advising that the Aircraft has been registered in the State of Registration and that all necessary filings have been made.

7.3.2 Within one (1) month after Delivery, LESSEE will provide LESSOR with a Technical Evaluation Report for the Aircraft in the form and substance of Exhibit M, as revised.

22 ARTICLE 7 PRE-DELIVERY, DELIVERY AND POST-DELIVERY DOCUMENTARY AND OTHER REQUIREMENTS

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7.4 LESSOR Delivery Requirements. LESSEE’S obligation to lease the Aircraft from LESSOR hereunder will be conditioned upon the representations and warranties of LESSOR set forth in Article 21 being correct at the time given and as if repeated on the Delivery Date. Further, LESSEE’S obligation to lease the Aircraft from LESSOR will be conditioned upon LESSOR delivering to LESSEE a certified copy of the Export Certificate of Airworthiness in respect of the Aircraft issued by the DGAC.

23 ARTICLE 7 PRE-DELIVERY, DELIVERY AND POST-DELIVERY DOCUMENTARY AND OTHER REQUIREMENTS

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ARTICLE 8         DISCLAIMERS

LESSOR HAS COMMITTED TO LESSEE THAT ON THE DELIVERY DATE THE AIRCRAFT WILL BE IN THE CONDITION REQUIRED BY ARTICLE 6. SUCH COMMITMENT OR COVENANT ON THE PART OF LESSOR EXPIRES AND THE DISCLAIMERS SET FORTH IN THIS ARTICLE 8 APPLY UPON LESSEE’S ACCEPTANCE OF THE AIRCRAFT AND EXECUTION OF THE ESTOPPEL AND ACCEPTANCE CERTIFICATE. AFTER SUCH TIME, THEN AS BETWEEN LESSOR AND LESSEE:

8.1 “As Is, Where Is”. LESSEE AGREES THAT IT IS LEASING THE AIRCRAFT “AS IS, WHERE IS”. LESSEE UNCONDITIONALLY ACKNOWLEDGES AND AGREES THAT NEITHER LESSOR NOR ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES OR REPRESENTATIVES HAVE MADE OR WILL BE DEEMED TO HAVE MADE ANY TERM, CONDITION, REPRESENTATION, WARRANTY OR COVENANT EXPRESS OR IMPLIED (WHETHER STATUTORY OR OTHERWISE) AS TO (a) THE CAPACITY, AGE, AIRWORTHINESS, VALUE, QUALITY, DURABILITY, CONFORMITY TO THE PROVISIONS OF THIS LEASE, DESCRIPTION, CONDITION (WHETHER OF THE AIRCRAFT, ANY ENGINE, ANY PART THEREOF OR THE AIRCRAFT DOCUMENTATION), DESIGN, WORKMANSHIP, MATERIALS, MANUFACTURE, CONSTRUCTION, OPERATION, DESCRIPTION, STATE, MERCHANTABILITY, PERFORMANCE, FITNESS FOR ANY PARTICULAR USE OR PURPOSE (INCLUDING THE ABILITY TO OPERATE OR REGISTER THE AIRCRAFT OR USE THE AIRCRAFT DOCUMENTATION IN ANY OR ALL JURISDICTIONS) OR SUITABILITY OF THE AIRCRAFT OR ANY PART THEREOF, AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, KNOWN OR UNKNOWN, APPARENT OR CONCEALED, EXTERIOR OR INTERIOR, (b) THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK, COPYRIGHT OR OTHER INTELLECTUAL PROPERTY RIGHTS, (c) ANY IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE, COURSE OF DEALING OR USAGE OF TRADE OR (d) EXCEPT AS STATED IN ARTICLES 21.1.5 AND 21.2, ANY OTHER REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT OR ANY PART THEREOF, ALL OF WHICH ARE HEREBY EXPRESSLY EXCLUDED AND EXTINGUISHED.

8.2 Waiver of Warranty of Description. IN CONSIDERATION OF (a) LESSEE’S RIGHTS HEREUNDER TO INSPECT THE AIRCRAFT AND (b) LESSOR’S ASSIGNMENT TO LESSEE OF ANY EXISTING AND ASSIGNABLE WARRANTIES OF MANUFACTURER AND ENGINE MANUFACTURER, LESSEE HEREBY AGREES THAT ITS ACCEPTANCE OF THE AIRCRAFT AT DELIVERY AND ITS EXECUTION AND

24 ARTICLE 8 DISCLAIMERS

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DELIVERY OF THE ESTOPPEL AND ACCEPTANCE CERTIFICATE CONSTITUTE LESSEE’S WAIVER OF THE WARRANTY OF DESCRIPTION, ANY CLAIMS LESSEE MAY HAVE AGAINST LESSOR BASED UPON THE FAILURE OF THE AIRCRAFT TO CONFORM WITH SUCH DESCRIPTION AND ANY AND ALL RIGHTS IT MAY HAVE TO THE REMEDIES SET FORTH IN SECTIONS 10508 THROUGH 10522 OF THE CALIFORNIA COMMERCIAL CODE. EVEN IF AT ANY TIME THE FAILURE OF THE AIRCRAFT TO CONFORM TO SUCH DESCRIPTION SUBSTANTIALLY IMPAIRS THE VALUE AND UTILITY OF THE AIRCRAFT AND EITHER (i) LESSEE ACCEPTED THE AIRCRAFT BASED ON A REASONABLE ASSUMPTION THAT THE NONCONFORMITY WOULD BE CURED AND IT WAS NOT SEASONABLY CURED OR (ii) LESSEE ACCEPTED THE AIRCRAFT WITHOUT DISCOVERING THE NONCONFORMITY BUT LESSEE’S ACCEPTANCE OF THE AIRCRAFT WAS REASONABLY INDUCED EITHER BY LESSOR’S ASSURANCES OR BY THE DIFFICULTY OF DISCOVERING ANY DEFECT PRIOR TO ACCEPTANCE, LESSEE AGREES NOT TO LOOK TO LESSOR FOR DAMAGES OR RELIEF ARISING OUT OF THE FAILURE OF THE AIRCRAFT TO CONFORM TO SUCH DESCRIPTION.

8.3 LESSEE Waiver. LESSEE hereby waives as between itself and LESSOR and agrees not to seek to establish or enforce any rights and remedies, express or implied (whether statutory or otherwise) against LESSOR or the Aircraft relating to any of the matters mentioned in Articles 8.1 or 8.2 and the leasing thereof by LESSOR to LESSEE.

8.4 Conclusive Proof. DELIVERY BY LESSEE TO LESSOR OF THE ESTOPPEL AND ACCEPTANCE CERTIFICATE WILL BE CONCLUSIVE PROOF AS BETWEEN LESSOR AND LESSEE THAT LESSEE’S TECHNICAL EXPERTS HAVE EXAMINED AND INVESTIGATED THE AIRCRAFT AND ENGINES AND (a) EACH IS AIRWORTHY AND IN GOOD WORKING ORDER AND REPAIR AND (b) THE AIRCRAFT AND ENGINES AND THE AIRCRAFT DOCUMENTATION ARE WITHOUT DEFECT (WHETHER OR NOT DISCOVERABLE AT DELIVERY) AND IN EVERY WAY SATISFACTORY TO LESSEE.

8.5 No LESSOR Liability for Losses. LESSEE agrees that LESSOR will not be liable to LESSEE, any sublessee or any Person, whether in contract or tort and however arising, for any cost, loss or damage (consequential or otherwise) arising out of the condition of the Aircraft, whether or not due in whole or in part to an act or omission or the active or passive negligence of LESSOR.

8.6 No Liability to Repair or Replace. LESSOR will not be liable for any expense in repairing or replacing any item of the Aircraft or be liable to supply another aircraft or any item in lieu of the Aircraft or any Part thereof if the same is lost, confiscated, damaged, destroyed or otherwise rendered unfit for use.

25 ARTICLE 8 DISCLAIMERS

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8.7 No Waiver. Nothing in this Article 8 or elsewhere in this Lease will be deemed to be a waiver by LESSEE of any rights it may have against Manufacturer, the Engine manufacturer or any other Person.

26 ARTICLE 8 DISCLAIMERS

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ARTICLE 9          MANUFACTURERS’ AND VENDORS’ WARRANTIES

9.1 Warranties. As set forth in Article 7.2.5, at Delivery LESSOR will assign to LESSEE for the duration of the Lease Term the benefit of all warranties and indemnities given to LESSOR by Manufacturer and the Engine manufacturer. Effective on the Delivery Date, all other vendor warranties with respect to the Aircraft are hereby assigned by LESSOR to LESSEE.

9.2 Reassignment. On the Termination Date, the benefit of any warranty assigned by LESSOR to LESSEE pursuant to Article 7.2.5 will be reassigned automatically to LESSOR or its designee. LESSEE’s rights under such warranties (including LESSEE’s claims and rights to payment thereunder) will revert to LESSOR during any period in which an Event of Default is continuing. LESSEE at its own cost and expense will do all such things and execute such documents as may be required for this purpose.

9.3 Warranty Claims. LESSEE will diligently and promptly pursue any valid claims it may have against Manufacturer and others under such warranties with respect to the Aircraft and will provide notice of the same to LESSOR.

27 ARTICLE 9 MANUFACTURERS’ AND VENDORS’ WARRANTIES

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ARTICLE 10          OPERATION OF AIRCRAFT

10.1 Costs of Operation. LESSEE will pay all costs incurred in the operation of the Aircraft during the Lease Term, for profit or otherwise, including the costs of flight crews, cabin personnel, fuel, oil, lubricants, maintenance, insurance, storage, landing and navigation fees, airport charges, passenger service and any and all other expenses of any kind or nature, directly or indirectly, in connection with or related to the use, movement and operation of the Aircraft. The obligations, covenants and liabilities of LESSEE under this paragraph arising prior to return of the Aircraft to LESSOR will continue in full force and effect, notwithstanding the termination of this Lease or expiration of the Lease Term.

10.2 Compliance with Laws. LESSEE agrees throughout the Lease Term to maintain operational control of the Aircraft and use the Aircraft in accordance with applicable Laws of the State of Registration and of any country, state, territory or municipality into or over which LESSEE may operate and in accordance with the applicable regulations of IATA. LESSEE will not employ, suffer or cause the Aircraft to be used in any business which is forbidden by Law or in any manner which may render it liable to condemnation, destruction, seizure, or confiscation by any authority. LESSEE will not permit the Aircraft to fly to any airport or country if so doing would cause LESSOR to be in violation of any U.S. Law.

10.3 Training. LESSEE will not use the Aircraft for testing or for training of flight crew members other than LESSEE crew members and will not use the Aircraft for training any more than it utilizes for training the other aircraft in its fleet.

10.4 No Violation of Insurance Policies. LESSEE will not use or permit the Aircraft to be used in any manner or for any purpose which is not covered by the insurance policies LESSEE is required to carry and maintain as set forth in this Lease. LESSEE will not carry any goods of any description excepted or exempted from such policies or do any other act or permit to be done anything which could reasonably be expected to invalidate or limit any such insurance policy.

10.5 Flight Charges.

10.5.1 LESSEE will pay promptly when due all enroute navigation charges, navigation service charges and all other charges payable by LESSEE, and incurred during the Lease Term, for the use of or for services provided at any airport, whether in respect of the Aircraft or any other aircraft of LESSEE, and will indemnify and hold LESSOR harmless in respect of the same. This indemnity will continue in full force and effect notwithstanding the termination or expiration of the Lease Term for any reason or the return of the Aircraft.

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10.5.2 If requested by LESSOR, LESSEE will provide LESSOR with a list of the airports to which LESSEE regularly operates the Aircraft or its other aircraft. LESSEE hereby authorizes Eurocontrol or another aviation authority or airport or creditor claiming rights on the Aircraft to confirm the status of LESSEE’s payments to such creditor for the Aircraft and its other aircraft, as and when requested by LESSOR.

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ARTICLE 11          SUBLEASES

11.1 No Sublease without LESSOR Consent. LESSEE WILL NOT SUBLEASE OR PART WITH POSSESSION OF THE AIRCRAFT (EXCEPT FOR MAINTENANCE AND REPAIR) AT ANY TIME WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR (NOT TO BE UNREASONABLY WITHHELD OR DELAYED) AND IN ACCORDANCE WITH SUCH REQUIREMENTS AS MAY FROM TIME TO TIME BE AGREED IN WRITING BETWEEN LESSOR AND LESSEE. THE WET LEASING OF THE AIRCRAFT DURING THE LEASE TERM (IN WHICH LESSEE AND ITS CREWS RETAIN OPERATIONAL CONTROL OF THE AIRCRAFT) WILL NOT BE CONSIDERED A SUBLEASE OF THE AIRCRAFT.

11.1.1	It shall not be unreasonable for LESSOR to withhold its consent to a sublease or assignment unless:
	(a) LESSOR and LESSOR’s Lender (if any) are satisfied (with the support of an independent local legal opinion) that their respective interests as owner of the Aircraft and mortgagee (if any) will be fully recognized and protected in the jurisdiction in which the Aircraft is proposed to be based;
	(b) LESSOR is satisfied (in its absolute discretion) and LESSEE has certified to LESSOR’s Lender that the terms of the proposed sublease neither conflict nor are inconsistent with the terms of this Lease; and
	(c) the sublease is subject and subordinate to this Lease and prohibits further derivative subleasing.
11.1.2	The wet leasing of the Aircraft during the Lease Term (in which LESSEE and its crews retain operational control of the Aircraft) will not be considered a sublease of the Aircraft and will be permitted without LESSOR’s consent, provided that (a) the Aircraft remains registered in the State of Registration, (b) the Aircraft will neither be based nor operated in a Prohibited Country, (c) LESSEE provides LESSOR with either a certified copy of the applicable provisions from the wet lease agreement or an officer’s certificate indicating whether LESSEE or the wet lessee will be responsible for maintaining the primary passenger, baggage and cargo liability insurance relating to operation under the wet lease and (d) LESSEE complies with Article 18.4.

11.2 Subleasing Proposal Fee. LESSEE will indemnify LESSOR on demand for all out-of-pocket expenses (including legal fees) incurred in connection with LESSOR’s assessment of the subleasing proposal or its implementation.

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11.3 Any Approved Sublease. Any sublease approved by LESSOR will be for a term no greater than the remaining Lease Term and contain provisions consistent with this Lease protecting LESSOR’s title to the Aircraft, providing appropriate LESSOR indemnities, regarding the maintenance and repair standards for the Aircraft, concerning the insurances which will be carried by the sublessee and the circumstances which constitute a Total Loss of the Aircraft. Any such sublease will be subject and subordinate to this Lease. In its sole discretion, LESSOR may require an opinion of counsel in connection with such sublease, including LESSOR’s rights to repossess the Aircraft in the event of an Event of Default hereunder or under the sublease. LESSEE will not amend the terms of any approved sublease without the prior written consent of LESSOR, which will not be unreasonably withheld.

11.4 Assignment of Sublease. At the request of LESSOR, any approved sublease will be assigned to LESSOR as security. LESSEE will deliver the original counterpart of the sublease to LESSOR and make any filings necessary to protect LESSOR’s security interest.

11.5 Continued Responsibility of LESSEE. LESSEE will continue to be responsible for performance of its obligations under this Lease during any period of sublease or wet lease.

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ARTICLE 12          MAINTENANCE OF AIRCRAFT

12.1 General Obligation. During the Lease Term and until the Aircraft is returned to LESSOR in the condition required by this Lease, LESSEE alone has the obligation, at its expense, to maintain and repair the Aircraft, Engines and all of the Parts (a) in accordance with the Maintenance Program, (b) in accordance with the rules and regulations of the Aviation Authority, (c) in accordance with Manufacturer’s type design, (d) in accordance with any other regulations or requirements necessary in order to maintain a valid Certificate of Airworthiness for the Aircraft and meet the requirements at all times during the Lease Term and upon return of the Aircraft to LESSOR for issuance of a standard Certificate of Airworthiness for transport category aircraft issued by the FAA in accordance with FAR Part 21 (except during those periods when the Aircraft is undergoing maintenance or repairs as required or permitted by this Lease and to the extent in conflict with the requirements of the Aviation Authority or the applicable aviation authority of the Manufacturer) and (e) in the same manner and with the same care as used by LESSEE with respect to similar aircraft and engines operated by LESSEE and without in any way discriminating against the Aircraft.

12.2 Specific Obligations. Without limiting Article 12.1, LESSEE agrees that such maintenance and repairs will include but will not be limited to each of the following specific items:

(a) performance in accordance with the Maintenance Program of all routine and non-routine maintenance work;

(b) incorporation in the Aircraft of all Airworthiness Directives, all alert service bulletins of Manufacturer, Engine manufacturer and other vendors or manufacturers of Parts incorporated on the Aircraft and any service bulletins which must be performed in order to maintain the warranties on the Aircraft, Engines and Parts;

(c) incorporation in the Aircraft of all other service bulletins of Manufacturer, the Engine manufacturer and other vendors which LESSEE schedules to adopt within the Lease Term for the rest of its A319 aircraft fleet. It is the intent of the parties that the Aircraft will not be discriminated from the rest of LESSEE’s fleet in service bulletin compliance (including method of compliance) or other maintenance matters. LESSEE will not discriminate against the Engines with respect to Overhaul build standards and life limited part replacements;

(d) incorporation in the Maintenance Program for the Aircraft of a corrosion prevention and control program as recommended by Manufacturer, the Aviation Authority and the FAA and the correction of any discrepancies in accordance with the recommendations of Manufacturer and the Structural Repair Manual. In addition,

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all inspected areas will be properly treated with corrosion inhibitor as recommended by Manufacturer;

(e) incorporation into the Maintenance Program of an anti-fungus/biological growth and contamination prevention, control and treatment program of all fuel tanks in accordance with Manufacturer’s approved procedures;

(f) providing LESSOR with written summaries of all sampling programs involving or affecting the Aircraft;

(g) maintaining in English and keeping in an up-to-date status the records and historical documents set forth in Attachment 1 of Exhibit K;

(h) maintaining historical records, in English, for condition-monitored, hard time and life limited Parts (including tags from the manufacturer of such Part or a repair facility which evidence that such Part is new or overhauled and establish authenticity, total time in service and time since overhaul for such Part), the hours and cycles the Aircraft and Engines operate and all maintenance and repairs performed on the Aircraft;

(i) properly documenting all repairs, Modifications and alterations and the addition, removal or replacement of equipment, systems or components in accordance with the rules and regulations of the Aviation Authority and reflecting such items in the Aircraft Documentation. In addition, all repairs to the Aircraft will be accomplished in accordance with Manufacturer’s Structural Repair Manual (or FAA-approved data supported by FAA Form 8110-3 or equivalent). All Modifications and alterations will also be accomplished in accordance with FAA-approved data supported by FAA Form 8110-3 or equivalent; and

(j) ensuring that Overhauls are accomplished utilizing maintenance and quality control procedures approved by the Aviation Authority and that the repair agency provides a complete record of all work performed during the course of such Overhaul and certifies that such Overhaul was accomplished, that the equipment is airworthy and released for return to service and that the Overhaul was in conformity with the original type design.

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12.3 Replacement of Parts.

12.3.1 LESSEE, at its own cost and expense, will promptly replace all Parts which may from time to time become worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or rendered unfit or beyond economical repair (BER) for use for any reason. In the ordinary course of maintenance, service, repair, Overhaul or testing, LESSEE may remove any Part provided that LESSEE replaces such Part as promptly as practicable. All replacement Parts will (a) be free and clear of all Security Interests (except Permitted Liens) of any kind or description, (b) be in airworthy condition and of at least equivalent model, service bulletin and modification status and have a value and utility at least equal to the Parts replaced, assuming such replaced Parts were in the condition and repair required to be maintained by the terms hereof and (c) have a current “serviceable tag” of the manufacturer or maintenance facility providing such items to LESSEE, indicating that such Parts are new, serviceable or Overhauled. With respect to replacement modules in an Engine, the replacement module will not have been previously operated at a higher thrust rating than the replaced module. So long as a substitution meets the requirements of the Maintenance Program and Aviation Authority, LESSEE may substitute for any Part a part that does not meet the requirements of the foregoing sentence if a complying Part cannot be procured or installed within the available groundtime of the Aircraft and as soon as practicable the noncomplying part is removed and replaced by a complying Part.

12.3.2 All Parts removed from the Airframe or any Engine will remain the property of LESSOR and subject to this Lease no matter where located, until such time as such Parts have been replaced by Parts (which have been incorporated or installed in or attached to the Airframe or such Engine) which meet the requirements for replacement Parts specified above and title to such replacement Parts has passed to LESSOR under the Laws of the State of Registration and lex situs. To the extent permitted by the Laws of the State of Registration and the lex situs it is the intent of LESSOR and LESSEE that without further act and immediately upon any replacement Part becoming incorporated, installed or attached to the Airframe or an Engine as above provided, (a) title to the removed Part will thereupon vest in LESSEE, free and clear of all rights of LESSOR or LESSOR’S Liens, (b) title to the replacement Part will thereupon vest in LESSOR free and clear of all rights of LESSEE and (c) such replacement Part will become subject to this Lease and be deemed to be a Part hereunder to the same extent as the Parts originally incorporated or installed in or attached to the Airframe or such Engine.

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12.4 Removal of Engines.

12.4.1 If an Engine is removed for testing, service, repair, maintenance, Overhaul work, alterations or modifications, title to such Engine will at all times remain vested in LESSOR.

12.4.2 LESSEE will be entitled to remove any of the Engines from the Aircraft and install another engine or engines on the Aircraft, provided that LESSEE complies with each of the following obligations:

(a) the insurance requirements set forth in Article 18 and Exhibit C are in place;

(b) LESSEE ensures that the identification plates referred to in Article 15 are not removed from any Engine upon such Engine being detached from the Aircraft; and

(c) title to the Engine remains with LESSOR free from all Security Interests (except Permitted Liens) regardless of the location of the Engine or its attachment to or detachment from the Aircraft.

12.5 Pooling of Engines and Parts. With LESSOR’s prior written consent, not to be unreasonably withheld, LESSEE may subject the Engines and Parts to normal interchange or pooling agreements with responsible international scheduled commercial air carriers customary in the airline industry and entered into by LESSEE in the ordinary course of its business with respect to its entire A319 fleet so long as (a) in the case of pooling of an Engine, such Engine is returned to LESSEE within two (2) months, (b) no transfer of title to the Engine occurs, (c) all other terms of this Lease continue to be observed with respect to the Engines or Parts, including but not limited to Articles 8, 10, 12, 14, 15, 16, 17, 18 and 19 and (d) LESSEE continues to be fully responsible to LESSOR for the performance of all of its obligations hereunder.

12.6 Installation of Engines on other aircraft. Any Engine removed from the Aircraft may be installed on another aircraft in LESSEE’s fleet which utilizes engines of the same type as the Engine only if one of the situations described in this Article 12.6 exists:

12.6.1 LESSEE or LESSOR has title to such other aircraft free and clear of all Security Interests (except Permitted Liens).

12.6.2 LESSEE, LESSOR and all of the Creditors of LESSEE of such aircraft enter into an engines cooperation agreement in form and substance acceptable to LESSOR in which each party agrees to recognize one another’s rights in the engines. LESSEE will reimburse LESSOR and its Lender for their reasonable attorneys’ fees and costs in negotiating and finalizing engine cooperation agreement arrangements with LESSEE and its Creditors.

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12.6.3 Such other aircraft is subject to a Creditor Agreement (but no other Security Interests except Permitted Liens) which by its terms expressly or effectively states that such Creditor and its successors and assigns will not acquire any right, title or interest in any Engine by reason of such Engine being installed on such aircraft. To evidence the foregoing, at or before Delivery, LESSEE will provide LESSOR with an opinion of counsel and officer’s certificate as to this matter (and such an opinion of counsel and officer’s certificate will be provided during the Lease Term with respect to other Creditor Agreements regarding aircraft entering LESSEE’s operating fleet subsequent to Delivery). LESSEE hereby agrees that if LESSOR’s title to an Engine is in fact impaired under any such Creditor Agreement, such impairment will be a Total Loss of such Engine and the provisions of Article 19.5 will apply. To the extent another Creditor Agreement contains such provisions, then LESSOR hereby agrees for the benefit of the Creditor of such Creditor Agreement that neither LESSOR nor its successors or assigns will acquire or claim any right, title or interest in any engine in which LESSEE or another Creditor has an interest as a result of such engine being installed on the Airframe.

12.7 Engine Thrust Rating. If an Engine is utilized by LESSEE on the Aircraft or on any other airframe (or if the Engine is utilized by any sublessee or user under a pooling arrangement in accordance with this Lease) at a thrust rating greater than the thrust rating set forth in Exhibit A, LESSEE will promptly notify LESSOR and the Engine Reserve amounts set forth in Article 5.4.1 will be increased in an amount proportional to the accelerated rate of deterioration of the Engine resulting from the increased thrust rating.

12.8 Modifications.

12.8.1 No modification, alteration, addition or removal to the Aircraft (“Modification”) expected to cost over * U.S. Dollars (US$ * ) or deviation from the Aircraft’s original type design or configuration will be made without the prior written consent of LESSOR, which consent will not be unreasonably withheld. “Modifications” do not include Airworthiness Directives or Manufacturer’s recommended service bulletins, for which LESSOR’s consent is not required.

12.8.2 LESSOR may review LESSEE’s proposed designs, plans, engineering drawings and diagrams, and flight and maintenance manual revisions for any proposed Modification. If requested by LESSOR, LESSEE will furnish LESSOR (at LESSEE’s expense) with such documents in final form and any other documents required by Law, as a result of such Modification. All Modifications incorporated on the Aircraft will be properly documented in the Aircraft Documentation and be fully approved by the Aviation Authority.

36 ARTICLE 12 MAINTENANCE OF AIRCRAFT

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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12.8.3 Notwithstanding any other provision of this Lease, no Modification will be made which has the effect of decreasing the utility or value of the Aircraft or invalidating any warranty applicable to the Aircraft.

12.8.4 No Modification will be made by LESSEE if an Event of Default exists and is continuing hereunder.

12.8.5 Unless otherwise agreed by LESSOR in writing, all permanent or structural Modifications will forthwith become a part of the Aircraft and LESSEE relinquishes to LESSOR all rights and title thereto. However, all temporary and non-structural Modifications will remain the property of LESSEE and, at LESSOR’s request and LESSEE’s cost, will be removed from the Aircraft prior to return of the Aircraft, with LESSEE restoring the Aircraft to the condition it was in prior to the Modification in a manner cosmetically acceptable to LESSOR. Notwithstanding the foregoing, no such removal will be permitted without LESSOR’s permission after the occurrence of an Event of Default hereunder and immediately upon the occurrence of an Event of Default hereunder, without the requirement of any further act or notice, all right, title and interest in such Modifications will immediately vest in LESSOR, provided that if such Event of Default is remedied or waived, all rights title and interest in such Modification will without requirement for any further act or notice immediately revest in LESSEE (unless LESSOR has exercised any or all of its rights pursuant to the Lease on account of such Event of Default).

12.8.6 LESSOR will bear no liability for the cost of Modifications of the Aircraft whether in the event of grounding or suspensions of certification, or for any other cause.

12.9 Performance of Work by Third Parties. Whenever maintenance and repair work on the Aircraft or Engines will be regularly performed by a Person other than LESSEE, such Person will be an FAA-authorized repair station.

12.10 Reporting Requirements.

12.10.1 Commencing with a report furnished ten (10) days after the end of the calendar month in which Delivery occurs, LESSEE will furnish to LESSOR a Monthly Report in English in the form attached hereto as Exhibit L. Each Monthly Report will be furnished within ten (10) days after the end of each calendar month, except that the Monthly Report pertaining to the last month (or any portion thereof) of the Lease Term will be furnished to LESSOR on the Termination Date.

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12.10.2 Within thirty (30) days after completion of each “C” check on the Aircraft, LESSEE will provide LESSOR with a Technical Evaluation Report for the Aircraft in the form and substance of Exhibit M, as revised.

12.11 Information Regarding Maintenance Program. LESSEE will provide LESSOR with a copy of or information regarding the Maintenance Program for the Aircraft, as requested by LESSOR.

12.12 LESSOR Rights to Inspect Aircraft. On reasonable notice, LESSOR and/or its authorized agents or representatives will have the right to inspect the Aircraft and Aircraft Documentation. LESSOR agrees that such requests will be coordinated with LESSEE so as to cause the minimum practical disturbance to LESSEE’s operation or its personnel. LESSEE agrees to cooperate with LESSOR in making the Aircraft and Aircraft Documentation available to such authorized technical teams. LESSOR will have no duty to make any such inspection and will not incur any liability or obligation by reason of (and LESSEE’s indemnity obligations pursuant to Article 17 will apply notwithstanding) not making any such inspection or by reason of any reports it receives or any reviews it may make of the Aircraft records.

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ARTICLE 13         USE OF RESERVES

13.1 Airframe Reserves. LESSOR will reimburse LESSEE from the Airframe Reserves for the actual cost of the structural inspection portion of completed scheduled 5 year, 10 year or 24,000 flight cycle complete zonal and structural checks as described in the MPD and the rectification of any structural deficiencies resulting from such inspections, with work performed for all other causes excluded, including those causes set forth in Article 13.5. Subject to Article 16.1 and excluding handling, packaging and shipping charges, reimbursement will be made up to the amount in the Airframe Reserve.

13.2 Engine Performance Restoration Reserves.

13.2.1 Subject to the limitations set forth in Article 13.2.2, LESSOR will reimburse LESSEE from the Engine Performance Restoration Reserves for the actual cost associated with performance restoration or the replacement of life limited parts or permanent repair of on-condition parts in the basic Engine during completed Engine shop visits (i.e. heavy maintenance visits) requiring off-wing teardown and/or disassembly, with work performed for all other causes excluded, including those causes set forth in Article 13.5. Subject to Articles 13.2.2 and 16.1 and excluding handling, packaging and shipping charges, reimbursement for an Engine will be made up to the amount in the Engine Performance Restoration Reserves applicable to such Engine.

13.2.2 Reimbursement from the Engine Performance Restoration Reserves will be limited as to each module of such Engine in accordance with the following percentages of the remaining total amount in the Engine Performance Restoration Reserves for such Engine:

* % Fan & Accessory Gearbox

* % High Pressure Compressor

* % High Pressure Turbine

* % Low Pressure Turbine

13.3 Engine LLP Reserves. LESSOR will reimburse LESSEE from the Engine LLP Reserves for an Engine for the actual out-of-pocket materials cost without overhead, mark-up or profit factor associated with the replacement of life-limited Parts in such Engine during completed Engine shop visits (i.e. heavy maintenance visits) requiring off-wing teardown and/or disassembly, with work performed for all other causes excluded, including those causes set forth in Article 13.5. Subject to Article 16.1 and excluding exchange fees and handling, packaging and shipping charges, reimbursement for replacement of life-limited Parts in an Engine will be made up to the amount in the Engine LLP Reserves applicable to such Engine at the time of removal of such Engine.

39 ARTICLE 13 USE OF RESERVES

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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13.4 Reimbursement. LESSEE will be entitled to reimbursement from the Reserves after the work is completed and the Airframe or Engine has left the repair agency, by submitting invoices and proper documentation within six (6) months after completion of the work. For the Airframe, proper documentation includes a list of all routine and non-routine work cards with corresponding references to the MPD and an itemized labor and materials report. For the Engine, proper documentation includes a description of the reason for removal, a shop teardown report, a shop findings report, a full description of the workscope and complete disk records for the Engine both prior to and after the shop visit. Both the invoice supplied by the Engine repair facility and that submitted by LESSEE to LESSOR with respect to an Engine will state whether or not credits were provided due to life remaining on any removed Engine Parts and the amount of any such credits will be itemized.

13.5 Reimbursement Adjustment. By way of example, among the exclusions from reimbursement are those items resulting from repairs covered by LESSEE’s or a third party’s insurance, (deductibles being for the account of LESSEE) or warranties or required as a result of an Airworthiness Directive, manufacturer’s service bulletin, faulty maintenance or installation, improper operations, misuse, neglect, accident, incident, ingestion, or other accidental cause. Reimbursement from the Reserves will not be available for the APU, quick engine change (QEC) Parts, thrust reversers, Landing Gear or any of their associated components. All invoices subject to reimbursement from LESSOR will be reduced (by adjustment between LESSEE and LESSOR retroactively if necessary) by the actual amounts received by LESSEE on account of such work from responsible third parties or other sources, such as insurance proceeds, manufacturer’s warranties, guarantees, concessions and credits (including, with respect to Engines, credits due to life remaining on any removed Engine Parts).

13.6 Costs in Excess of Reserves. LESSEE will be responsible for payment of all costs in excess of the amounts reimbursed hereunder. If on any occasion the balance in the Airframe or an Engine Reserve is insufficient to satisfy a claim for reimbursement in respect of the Airframe or such Engine, the shortfall may not be carried forward or made the subject of any further claim for reimbursement.

13.7 Reimbursement after Termination Date. LESSEE may not submit any invoice for reimbursement from the Reserves after the Termination Date unless on or prior to such date LESSEE has notified LESSOR in writing that such outstanding invoice will be submitted after the Termination Date and the anticipated amount of such invoice. So long as LESSEE has provided such notice to LESSOR, LESSEE may then submit such outstanding invoice at any time within six (6) months after the Termination Date. Subject to the foregoing, any balance remaining in the Airframe and Engine Reserves on the Termination Date, including termination on account of a Total Loss of the Aircraft, will be retained by LESSOR.

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ARTICLE 14        TITLE AND REGISTRATION

14.1 Title to the Aircraft During Lease Term. Title to the Aircraft will be and remain vested in LESSOR. LESSOR and LESSEE intend this Lease to be a “true lease”. LESSEE will have no right, title or interest in the Aircraft except as provided in this Lease.

14.2 Registration of Aircraft. LESSEE at its sole cost and expense will (a) register and maintain registration of the Aircraft in the name of LESSOR at the register of aircraft in the State of Registration and (b) from time to time take all other steps then required by Law (including the Geneva Convention if applicable) or by practice, custom or understanding or as LESSOR may reasonably request to protect and perfect LESSOR’s interest in the Aircraft and this Lease in the State of Registration or in any other jurisdictions in or over which LESSEE may operate the Aircraft.

14.3 Filing of this Lease. To the extent permitted by Law and in accordance with the requirements of the Law from time to time, LESSEE at its sole cost and expense will cause this Lease to be kept, filed, recorded and refiled or rerecorded in the State of Registration and in any other offices necessary to protect LESSOR’s rights hereunder.

14.4 Evidence of Registration and Filings. As LESSOR may reasonably request from time to time, LESSEE will furnish to LESSOR an opinion of counsel or other evidence reasonably satisfactory to LESSOR of the registrations and filings required hereunder.

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ARTICLE 15        IDENTIFICATION PLATES

LESSOR will affix and LESSEE will at all times maintain on the Airframe, each Engine and the APU the identification plates containing the following legends or any other legend requested by LESSOR in writing:

15.1 Airframe Identification Plates.

Location:	One to be affixed to the Aircraft structure above the forward entry door adjacent to and not less prominent than that of Manufacturer’s data plate and another in a prominent place on the flight deck.
Size:	No smaller than 4” x 6”.
Legend:	“THIS AIRCRAFT IS OWNED BY * *
	MANUFACTURER’S SERIAL NO: (TBD) OWNER’S ADDRESS: * * *
	United States of America
	Telex: * Fax: *

15.2 Engine Identification Plates.

Location:	The legend on the plate must be no less prominent than the Engine data plate and must be visible.
Size:	No smaller than 2” x 6”.
Legend:	“THIS ENGINE IS OWNED BY * * USA.”

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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ARTICLE 16        TAXES

16.1 General Obligation of LESSEE. Except as set forth in Article 16.2, LESSEE agrees to pay promptly when due, and to indemnify and hold harmless LESSOR on a full indemnity basis from, all license and registration fees and all taxes, fees, levies, imposts, duties, charges, deductions or withholdings of any nature (including without limitation any value added, franchise, transfer, sales, gross receipts, use, business, excise, turnover, personal property, stamp or other tax) together with any assessments, penalties, fines, additions to tax or interest thereon, however or wherever imposed (whether imposed upon LESSEE, LESSOR, on all or part of the Aircraft, the Engines or otherwise), by any Government Entity or taxing authority in the U.S., Macau or any foreign country or by any international taxing authority (including the City or County of * ), upon or with respect to, based upon or measured by any of the following (collectively, “Taxes”):

(a) the Aircraft, the Engines or any Parts;

(b) the use, operation or maintenance of the Aircraft or carriage of passengers or freight during the Lease Term;

(c) this Lease, the payments due hereunder and the terms and conditions hereof; and

(d) the delivery, import or export, return, sale, payment of Total Loss Proceeds or other disposition of the Aircraft.

16.2 Exceptions to Indemnity. The indemnity provided for in Article 16.1 does not extend to any of the following Taxes:

(a) Taxes imposed by the U.S. or the State of * on the net income, gross receipts, capital or net worth of LESSOR;

(b) Taxes imposed by any other country or jurisdiction (including a jurisdiction to which LESSOR may move its principal place of business) on the net income, gross receipts, capital or net worth of LESSOR but only to the extent such Taxes were not in any way connected with, due to or arising out of this Lease or LESSEE’s use and operation of the Aircraft or to the extent such Taxes would have been imposed notwithstanding this Lease, the payments due hereunder or LESSEE’s use and operation of the Aircraft.

43 ARTICLE 16 TAXES

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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(c) Taxes attributable to the period prior to Delivery or after return of the Aircraft to LESSOR in accordance with this Lease;

(d) Taxes attributable to LESSOR’s gross negligence, willful misconduct or breach of this Lease; or

(e) Taxes imposed as a result of LESSOR’s voluntary transfer or other disposition (including financing) of the Aircraft or this Lease except a transfer or sale resulting from an Event of Default hereunder or the loss of the Aircraft or any part thereof (if and to the extent such Taxes exceed the Taxes which would have been imposed and in respect of which LESSEE would have been liable to indemnify LESSOR under this Lease had LESSOR not so transferred its interest).

16.3 After-Tax Basis. The amount which LESSEE is required to pay with respect to any Taxes indemnified against under Article 16.1 is an amount sufficient to restore LESSOR on an after-tax basis to the same position LESSOR would have been in had such Taxes not been incurred.

16.4 Timing of Payment. Any amount payable to LESSOR pursuant to this Article 16 will be paid within ten (10) days after receipt of a written demand therefor from LESSOR accompanied by a written statement describing in reasonable detail the basis for such indemnity and the computation of the amount so payable provided, however, that such amount need not be paid by LESSEE prior to the earlier of (a) the date any Tax is payable to the appropriate Government Entity or taxing authority or (b) in the case of amounts which are being contested by LESSEE in good faith or by LESSOR pursuant to Article 16.5, the date such contest is finally resolved.

16.5 Contests. If claim is made against LESSOR for Taxes with respect to which LESSEE is liable for a payment or indemnity under this Lease, LESSOR will promptly give LESSEE notice in writing of such claim provided, however, that LESSOR’s failure to give notice will not relieve LESSEE of its obligations hereunder unless such failure materially impairs or precludes LESSEE’s ability to contest the claim. So long as (a) a contest of such Taxes does not involve any danger of the sale, forfeiture or loss of the Aircraft or any interest therein, (b) if LESSOR so requests, LESSEE has provided LESSOR with an opinion of independent tax counsel that a reasonable basis exists for contesting such claim and (c) adequate reserves have been made for such Taxes or, if required, an adequate bond has been posted, then LESSOR at LESSEE’s written request will in good faith, with due diligence and at LESSEE’s expense, contest (or permit LESSEE to contest in the name of LESSEE or LESSOR) the validity, applicability or amount of such Taxes. Provided that there is no danger of sale, forfeiture or loss of the Aircraft or any interest therein, LESSOR will not settle or compromise any claim for which it is seeking indemnification and

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which LESSEE has elected to contest (and LESSEE has provided LESSOR with written notice of its election to contest) without the prior written consent of LESSEE, which consent will not be unreasonably withheld.

16.6 Refunds. Upon receipt by LESSOR of a refund of all or any part of any Taxes (including any deductions or withholdings referred to in Article 5.7) which LESSEE has paid, LESSOR will pay to LESSEE the net amount of such Taxes refunded.

16.7 Cooperation in Filing Tax Returns. LESSEE and LESSOR will cooperate with one another in providing information which may be reasonably required to fulfill each party’s tax filing requirements and any audit information request arising from such filing.

16.8 Survival of Obligations. The representations, warranties, indemnities and agreements of LESSEE provided for in this Article 16 will survive the Termination Date.

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ARTICLE 17        INDEMNITIES

17.1 General Indemnity. Except as set forth in Article 17.2, LESSEE agrees to indemnify and hold harmless LESSOR and its officers, directors, employees, agents and shareholders (individually an “Indemnitee” and collectively “Indemnitees”) from any and all liabilities, obligations, losses, damages, penalties, claims, actions, suits, costs, disbursements and expenses (including legal fees, costs and related expenses) of every kind and nature, whether or not any of the transactions contemplated by this Lease are consummated (collectively “Expenses”), which are imposed on, incurred by or asserted against any Indemnitee and which are in any way relating to, based on or arising out of any of the following:

(a) this Lease or any transactions contemplated hereby;

(b) the operation, possession, use, non-use, control, leasing, subleasing, maintenance, storage, Overhaul, testing, inspections or acceptance flights at return of the Aircraft, any Engine or any Part during the Lease Term by LESSEE, any sublessee or any other Person, whether or not the same is in compliance with the terms of this Lease, including without limitation claims for death, personal injury, property damage, other loss or harm to any Person and claims relating to any Laws, including without limitation environmental control, noise and pollution laws, rules or regulations;

(c) the manufacture, design, acceptance, rejection, delivery, return, sale after an Event of Default, import, export, condition, repair, modification, servicing, rebuilding, enforcement of warranties whether in LESSOR’s or LESSEE’s name, customer and product support provided by Manufacturer and other vendors, airworthiness, registration, reregistration, performance, sublease, merchantability, fitness for use, substitution or replacement of the Aircraft, Engine or any Part under this Lease or other transfer of use or possession of the Aircraft, Engine or any Part, including under a pooling or interchange arrangement, including without limitation latent and other defects, whether or not discoverable and patent, trademark or copyright infringement;

(d) any non-compliance by LESSEE with any term of this Lease or the falsity or inaccuracy of any representation or warranty of LESSEE set forth herein;

(e) the prevention or attempt to prevent the arrest, confiscation, seizure, taking in execution, impounding, forfeiture or detention of the Aircraft, or in securing the release of the Aircraft; or

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(f) as a consequence of any Default in payment by LESSEE of any sum to be paid by LESSEE when due under this Lease or any other Default by LESSEE in the due and punctual performance of its obligations under this Lease.

The foregoing indemnity by LESSEE is intended to include and cover any Expense to which an Indemnitee may be subject (in contract, tort, strict liability or under any other theory) regardless of the negligence, active or passive or any other type, of such Indemnitee, so long as such Expense does not fall within any of the exceptions listed in Article 17.2.

17.2 Exceptions to General Indemnities. The indemnity provided for in Article 17.1 will not extend to Expenses of any Indemnitee to the extent resulting from or arising out of any of the following:

(a) Expenses which LESSEE and LESSOR mutually agree or, absent mutual agreement, are judicially determined to have resulted from the willful misconduct of such Indemnitee;

(b) Expenses which LESSEE and LESSOR mutually agree or, absent mutual agreement, are judicially determined to be attributable to acts or events which occur after the Termination Date and return of the Aircraft to LESSOR in the condition required hereunder, but in any such case only to the extent not attributable to acts or omissions of LESSEE;

(c) Expenses representing Taxes, it being acknowledged that the terms of Article 16 apply exclusively to LESSEE’s indemnity obligations with respect to Taxes;

(d) Expenses due to the breach by LESSOR of its covenant of quiet enjoyment pursuant to Article 21.2 (except to the extent covered by LESSEE’s insurances);

(e) administrative Expenses which are in the ordinary and usual operating and overhead expense of the relevant Indemnitee;

(f) Expenses, other than those Taxes referred to in Article 16.2, which arise as a result of a LESSOR’s Lien or any financing in connection with the Aircraft; or

(g) Expenses which are provided for in another indemnity provision in this Lease.

17.3 After-Tax Basis. The amount which LESSEE will be required to pay with respect to any Expense indemnified against under Article 17.1 will be an amount sufficient to restore the Indemnitee, on an after-tax basis, to the same position such Indemnitee would have been in had such Expense not been incurred.

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17.4 Timing of Payment. It is the intent of the parties that each Indemnitee will have the right to indemnification for Expenses hereunder as soon as a claim is made and as soon as an Expense is incurred, whether or not such claim is meritorious and whether or not liability is established (but subject to Article 17.8). LESSEE will pay an Indemnitee for Expenses pursuant to this Article 17 within ten (10) days after receipt of a written demand therefor from such Indemnitee accompanied by a written statement describing in reasonable detail the basis for such indemnity.

17.5 Subrogation. Upon the payment in full of any indemnity pursuant to this Article 17 by LESSEE, LESSEE will be subrogated to any right of the Indemnitee in respect of the matter against which such indemnity has been made. LESSOR will, or LESSOR will use its reasonable efforts, to procure that such Indemnitee will provide such assistance as may be reasonably requested by LESSEE to pursue any rights which LESSEE has as a result of such subrogation.

17.6 Notice. Each Indemnitee and LESSEE will give prompt written notice one to the other of any liability of which such party has knowledge for which LESSEE is, or may be, liable under Article 17.1 provided, however, that failure to give such notice will not terminate any of the rights of Indemnitees under this Article 17 except to the extent that LESSEE has been materially prejudiced by the failure to provide such notice.

17.7 Refunds. If any Indemnitee obtains a recovery of all or any part of any amount which LESSEE has paid to such Indemnitee, such Indemnitee will pay to LESSEE the net amount recovered by such Indemnitee.

17.8 Defense of Claims. Unless a Default has occurred and is continuing, LESSEE and its insurers will have the right (in each such case at LESSEE’s sole expense) to investigate or, provided that LESSEE or its insurers have not reserved the right to dispute liability with respect to any insurance policies pursuant to which coverage is sought, defend or compromise any claim covered by insurance for which indemnification is sought pursuant to Article 17.1 and each Indemnitee will cooperate with LESSEE or its insurers with respect thereto. If LESSEE or its insurers are retaining attorneys to handle such claim, such counsel must be reasonably satisfactory to the Indemnitees. If not, the Indemnitees will have the right to retain counsel of their choice at LESSEE’s expense. Unless there is a danger of impairment to the Aircraft’s title, no Indemnitee will settle or compromise any claim for which it is seeking indemnification and for which LESSEE has given written notice to LESSOR of its election to contest, without the prior written consent of LESSEE, which consent will not be unreasonably withheld.

17.9 Survival of Obligation. Notwithstanding anything in this Lease to the contrary, the provisions of this Article 17 will survive the Termination Date and continue in full force and effect notwithstanding any breach by LESSOR or LESSEE of the terms of this Lease, the termination of the lease of the Aircraft to LESSEE under this Lease or the repudiation by LESSOR or LESSEE of this Lease.

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ARTICLE 18        INSURANCE

18.1 Categories of Insurance. Throughout the Lease Term and until the Termination Date LESSEE will, at its own expense, effect and maintain in full force and effect the types of insurance and amounts of insurance (including deductibles) described in Exhibit C through such brokers and with such insurers, as may be approved by LESSOR, such approval not to be unreasonably withheld, in London or New York or such other insurance markets as mutually agreed upon by the parties.

18.2 Write-back of any Date Recognition Exclusion. In the event any of LESSEE’s insurances (either the primary insurance or the reinsurance) contain any date recognition exclusion clause or similar clause excluding from such insurance coverage damage to any property (including the Aircraft) or death or injury to any person on account of accidents, incidents or occurrences caused by date recognition or other Year 2000-related problems, LESSEE at its cost will obtain for the benefit of itself and LESSOR the broadest write-back available in the London insurance market with respect to such exclusion.

18.3 Insurance for Indemnities. The insurance referred to in Article 18.1 will in each case include and insure (to the extent of the risks covered by the policies) the indemnity provisions of Article 17 and LESSEE will maintain such insurance of the indemnities for a minimum of two (2) years following the Termination Date.

18.4 Insurance for Wet Lease Operations. In the event LESSOR is performing wet lease operations with the Aircraft pursuant to Article 11.1.2 and the wet lessee is carrying the primary passenger, baggage cargo liability insurance with respect to the flights, then such insurance must contain the endorsements set forth in LESSEE’s own insurance certificate as required under the Lease. Moreover, LESSEE will at all times carry contingent passenger, baggage and cargo liability insurances for such flights. Prior to commencement of wet lease operations for a particular wet lessee, LESSOR will receive certificates of insurance from the insurance brokers for LESSEE and, if applicable, the wet lessee evidencing such coverages.

18.5 Renewal. Not less than five (5) Business Days before the expiration or termination date of any insurance required hereunder, LESSEE will provide LESSOR with fax confirmation from LESSEE’s insurance brokers that renewed certificates of insurance evidencing the renewal or replacement of such insurance and complying with Exhibit C will be issued on the termination date of the prior certificate. Within seven (7) days after such renewal, LESSEE will furnish its brokers’ certificates of insurance to LESSOR.

18.6 Assignment of Rights by LESSOR. If LESSOR assigns all or any of its rights under this Lease as permitted by this Lease or otherwise disposes of any interest in the Aircraft to

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any other Person, LESSEE will, upon request, procure that such Person hereunder be added as loss payee and/or additional assured in the policies effected hereunder and enjoy the same rights and insurance enjoyed by LESSOR under such policies. LESSOR will nevertheless continue to be covered by such policies.

18.7 Deductibles. If there is a material adverse change in the financial condition of LESSEE which LESSOR reasonably believes will not enable LESSEE to pay the deductible upon the occurrence of a partial loss of the Aircraft or an Engine, then LESSOR may require LESSEE at LESSEE’s expense to lower its deductibles on the insurance maintained hereunder to a level which is available on commercially reasonable terms in the insurance market.

18.8 Other Insurance. LESSOR may from time to time by notice to LESSEE require LESSEE at LESSEE’s expense to effect such other insurance or such variations to the terms of the existing insurance as may then be customary in the airline industry for aircraft of the same type as the Aircraft and at the time commonly available in the insurance market.

18.9 Information. LESSEE will provide LESSOR with any information reasonably requested by LESSOR from time to time concerning the insurance maintained with respect to the Aircraft or in connection with any claim being made or proposed to be made thereunder.

18.10 Currency. All proceeds of insurance pursuant to this Lease will be payable in Dollars except as may be otherwise agreed by LESSOR.

18.11 Grounding of Aircraft. If at any time any of the insurance required pursuant to this Lease will cease to be in full force and effect, LESSEE will forthwith ground the Aircraft and keep the Aircraft grounded until such time as such insurance is in full force and effect again.

18.12 Failure to Insure. If at any time LESSEE fails to maintain insurance in compliance with this Article 18, LESSOR will be entitled but not bound to do any of the following (without prejudice to any other rights which it may have under this Lease by reason of such failure):

(a) to pay any premiums due or to effect or maintain insurance satisfactory to LESSOR or otherwise remedy such failure in such manner as LESSOR considers appropriate (and LESSEE will upon demand reimburse LESSOR in full for any amount so expended in that connection); or

(b) at any time while such failure is continuing, to require the Aircraft to remain at any airport or (as the case may be), proceed to and remain at any airport designated by LESSOR, until such failure is remedied to LESSOR’s satisfaction.

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18.13 Reinsurance. Any reinsurance will be maintained with reinsurers and brokers approved by LESSOR (which approval shall not be unreasonably withheld or delayed). Such reinsurance will contain each of the following terms and will in all other respects (including amount) be satisfactory to LESSOR:

(a) the same terms as the original insurance;

(b) a cut-through and assignment clause satisfactory to LESSOR; and

(c) payment will be made notwithstanding (i) any bankruptcy, insolvency, liquidation or dissolution of any of the original insurers and/or (ii) that the original insurers have made no payment under the original insurance policies.

18.14 Limit on Hull in favor of LESSEE. LESSEE may carry hull all risks or hull war and allied perils on the Aircraft in excess of the Agreed Value (which is payable to LESSOR) only to the extent such excess insurance which would be payable to LESSEE in the event of a Total Loss does not exceed * percent (* %) of the Agreed Value and only to the extent that such additional insurance will not prejudice the insurances required herein or the recovery by LESSOR thereunder. LESSEE agrees that it will not create or permit to exist any liens or encumbrances over the insurances, or its interest therein, except as constituted by this Lease.

51 ARTICLE 18 INSURANCE

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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ARTICLE 19        LOSS, DAMAGE AND REQUISITION

Throughout the Lease Term and until the Termination Date, LESSEE will bear all risk of loss, theft, damage and destruction to the Aircraft.

19.1 Definitions. In this Article 19:

“Agreed Value” means * percent (* %) of Manufacturer’s list price for the Aircraft and any additional LESSEE specified changes and LESSOR purchased equipment (BFE) on the Delivery Date, based upon the invoice provided by Manufacturer. Such Agreed Value shall decline by * % on each anniversary of the Delivery Date.

“Net Total Loss Proceeds” means the Total Loss Proceeds actually received by LESSOR following a Total Loss, less any legal and other out-of-pocket expenses, taxes or duties incurred by LESSOR in connection with the collection of such proceeds.

“Total Loss” means any of the following in relation to the Aircraft, Airframe or any Engine and “Total Loss Date” means the date set forth in parenthesis after each Total Loss:

(a) destruction, damage beyond repair or being rendered permanently unfit for normal use for any reason (the date such event occurs or, if not known, the date on which the Aircraft, Airframe or Engine was last heard of);

(b) actual, constructive, compromised, arranged or agreed total loss (the earlier of the date on which the loss is agreed or compromised by the insurers or thirty (30) days after the date of notice to LESSEE’s brokers or insurers claiming such total loss);

(c) requisition of title, confiscation, forfeiture or any compulsory acquisition or other similar event (the date on which the same takes effect);

(d) sequestration, detention, seizure or any similar event for more than sixty (60) consecutive days (the earlier of the date on which insurers make payment on the basis of a total loss or the date of expiration of such period);

(e) requisition for use for more than one hundred and eighty (180) consecutive days (the earlier of the date on which the insurers make payment on the basis of a total loss or the date of expiration of such period);

52 ARTICLE 19 LOSS, DAMAGE AND REQUISITION

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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(f) in the case of an Engine, the event described in Article 12.6.3 (the date on which the same takes effect);

(g) any sale of the Aircraft in connection with a LESSEE bankruptcy, whether by an administrator, trustee or court (the date on which the intent to sell the Aircraft becomes known);

(h) any sale of the Aircraft in connection with Eurocontrol charges (the date on which the sale occurs); or

(i) any other occurrence not permitted under this Lease which deprives LESSEE of use or possession for a period of sixty (60) consecutive days or longer (the 60th day of such period).

“Total Loss Proceeds” means the proceeds of any insurance or any compensation or similar payment arising in respect of a Total Loss.

19.2 Notice of Total Loss. LESSEE will notify LESSOR in writing within two (2) Business Days after a Total Loss Date of the Aircraft, Airframe or any Engine.

19.3 Total Loss of Aircraft or Airframe. If the Total Loss of the Aircraft or Airframe occurs during the Lease Term, the following will occur.

19.3.1 After the Total Loss Date and until receipt by LESSOR of the Agreed Value as set forth in Exhibit C and all other amounts then due under this Lease, LESSEE will continue to pay Rent and the parties will perform all of their other obligations (to the extent possible, in the context of the Total Loss) under this Lease.

19.3.2 On the date which is the earlier of the following dates:

(a) the date on which the Total Loss Proceeds of the Aircraft or the Airframe are paid by LESSEE’s insurance underwriters or brokers and

(b) the date which falls sixty (60) days after the Total Loss Date,

LESSEE will pay to LESSOR an amount equal to the sum of:

(a) the Agreed Value; and

(b) all other amounts then accrued under this Lease, less an amount equal to the Net Total Loss Proceeds received by LESSOR by such date.

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19.3.3 LESSOR will apply the Net Total Loss Proceeds and any amounts received from LESSEE pursuant to Article 19.3.2 as follows:

(a) first, in discharge of any unpaid Rent and any other amounts accrued and unpaid up to the date of LESSOR’s receipt of the Agreed Value;

(b) second, in discharge of the Agreed Value together with interest thereon calculated at the Default Rate for any period from the due date set forth in Article 19.3.2 up to the date of discharge; and

(c) third, payment of the balance, if any, to LESSEE.

19.3.4 Upon receipt by LESSOR of all monies payable by LESSEE in Article 19.3, provided no Default has occurred and is continuing, this Lease will terminate except for LESSEE’s obligations under Articles 10.5, 16 and 17, and LESSOR’s obligations under Articles 5.1.3, 16.6 and 17.7, which survive the Termination Date.

FOR AVOIDANCE OF DOUBT, (a) THE AGREED VALUE OF THE AIRCRAFT WILL BE PAYABLE TO LESSOR PURSUANT TO THIS ARTICLE 19.3 WHEN A TOTAL LOSS OF THE AIRFRAME OCCURS EVEN IF THERE HAS NOT BEEN A TOTAL LOSS OF AN ENGINE OR ENGINES and (b) LESSOR ACKNOWLEDGES AND AGREES THAT PAYMENT OF THE AGREED VALUE WILL CONSTITUTE FULL COMPENSATION FOR LESSOR FOR THE TOTAL LOSS OF THE AIRFRAME OR THE AIRCRAFT (AS THE CASE MAY BE) AND THAT, NOTWITHSTANDING ANY OTHER PROVISION OF THIS LEASE OR ANY OPERATIVE DOCUMENT, NO FURTHER COMPENSATION WILL BE PAYABLE IN RESPECT OF SUCH LOSS.

19.4 Surviving Engine(s). If a Total Loss of the Airframe occurs and there has not been a Total Loss of an Engine or Engines, then, provided no Default has occurred and is continuing, at the request of LESSEE (subject to agreement of relevant insurers) and on receipt of all monies due under Article 19.3 and payment by LESSEE of all airport, navigation and other charges on the Aircraft, LESSOR will transfer all its right, title and interest in the surviving Engine(s) to LESSEE, but without any responsibility, condition or warranty on the part of LESSOR other than as to freedom from any LESSOR’s Lien.

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19.5 Total Loss of Engine and not Airframe.

19.5.1 Upon a Total Loss of any Engine not installed on the Airframe or a Total Loss of an Engine installed on the Airframe not involving a Total Loss of the Airframe, LESSEE will give LESSOR prompt written notice thereof. LESSEE will replace such Engine as soon as reasonably possible by duly conveying to LESSOR title to another engine (a) free and clear of all Security Interests (except Permitted Liens) of any kind or description, (b) in airworthy condition and of the same or improved model, service bulletin and modification status and having a value and utility at least equal to the Engine which sustained the Total Loss, (c) not older (by reference to serial number of manufacture date) than the older of the two Engines delivered by LESSOR to LESSEE with the Aircraft on the Delivery Date, (d) in the same or better operating condition as the Engine which sustained a Total Loss, including time in service, hours and cycles since new and hours and cycles available to the next inspection, Overhaul or scheduled or anticipated removal and (e) which has not been operated and does not have any modules that have been operated at a higher thrust rating than the Engine which sustained the Total Loss. Such replacement engine will be an Engine as denned herein and the Engine which sustained such Total Loss will cease to be an Engine.

19.5.2 LESSEE agrees at its own expense to take such action as LESSOR may reasonably request in order that any such replacement Engine becomes the property of LESSOR and is leased hereunder on the same terms as the destroyed Engine. LESSEE’s obligation to pay Rent will continue in full force and effect, but an amount equal to the Net Total Loss Proceeds received by LESSOR with respect to such destroyed Engine will, subject to LESSOR’s right to deduct therefrom any amounts then due and payable by LESSEE under this Lease, be paid to LESSEE.

19.5.3 Notwithstanding Articles 19.5.1 and 19.5.2, if at the time of a Total Loss of an Engine not installed on the Aircraft or a Total Loss of an Engine installed on the Airframe not involving a Total Loss of the Airframe, LESSOR and LESSEE are parties to a spare engine lease pursuant to which LESSOR is leasing a spare engine to LESSEE of the same model and type as the Engine which has suffered such Total Loss, LESSOR will receive from LESSEE the specific agreed value of the Engine set forth in Exhibit C or the replacement cost of the Engine (as applicable under LESSEE’s aircraft spares insurance) instead of accepting a replacement engine. One (1) of such LESSOR spare engines will then be substituted under this Lease for the Engine which suffered such Total Loss and the applicable spare engine lease will terminate.

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19.6 Other Loss or Damage.

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19.6.1 If the Aircraft or any part thereof suffers loss or damage not constituting a Total Loss of the Aircraft or the Airframe or any Engine, all the obligations of LESSEE under this Lease (including payment of Rent) will continue in full force.

19.6.2 In the event of any loss or damage to the Aircraft or Airframe which does not constitute a Total Loss of the Aircraft or the Airframe, or any loss or damage to an Engine which does not constitute a Total Loss of such Engine, LESSEE will at its sole cost and expense fully repair the Aircraft or Engine in order that the Aircraft or Engine is placed in an airworthy condition and substantially the same condition as it was prior to such loss or damage. All repairs will be performed in a manner which preserves and maintains all warranties and service life policies to the same extent as they existed prior to such loss or damage. LESSEE will notify LESSOR forthwith of any loss, theft or damage to the Aircraft for which the cost of repairs is estimated to exceed * U.S. Dollars (US$ * ), together with LESSEE’s proposal for carrying out the repair. In the event that LESSOR does not agree with LESSEE’s proposals for repair, LESSOR will so notify LESSEE within two (2) Business Days after its receipt of such proposal. LESSEE and LESSOR will then consult with Manufacturer and LESSEE and LESSOR agree to accept as conclusive, and be bound by, Manufacturer’s directions or recommendations as to the manner in which to carry out such repairs. If Manufacturer declines to give directions or recommendations, LESSEE will carry out the repairs in accordance with the directions of LESSOR.

19.6.3 To the extent insurance proceeds received by LESSEE directly from its insurers do not cover the cost of such repair work on the Aircraft or Engine and LESSOR has received additional insurance proceeds from LESSEE’s insurers with respect to such repair work, LESSOR will (subject to LESSOR’s right to deduct therefrom any amounts then due and payable by LESSEE under this Lease and submission by LESSEE of reasonable documentation in support of such excess repair costs) pay to LESSEE insurance proceeds received by LESSOR as and when such repair work is performed on the Aircraft.

19.7 Copy of Insurance Policy. Promptly after the occurrence of a partial loss or Total Loss of the Aircraft or an Engine, at the request of LESSOR, LESSEE will provide LESSOR with a copy of LESSEE’s insurance policy.

19.8 Government Requisition. If the Aircraft, Airframe or any Engine is requisitioned for use by any Government Entity and such requisition does not constitute a Total Loss, LESSEE will promptly notify LESSOR of such requisition. All of LESSEE’s obligations hereunder will continue as if such requisition had not occurred. So long as no Default or Event of Default has occurred and is continuing, all payments received by LESSOR or LESSEE from such Government

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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Entity will be paid over to or retained by LESSEE. If a Default has occurred and is continuing, all payments received by LESSEE or LESSOR from such Government Entity may be used by LESSOR to satisfy any obligations owing by LESSEE.

19.9 LESSOR Retention of Reserves. For avoidance of doubt, the parties agree that notwithstanding the Total Loss of the Airframe and/or Engines LESSOR will retain all Airframe and Engine Reserves paid by LESSEE and not payable to LESSEE pursuant to Article 13.4.

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ARTICLE 20          REPRESENTATIONS, WARRANTIES AND COVENANTS OF LESSEE

20.1 Representations and Warranties. LESSEE represents and warrants the following to LESSOR as of the date of execution of this Lease and as of the Delivery Date:

20.1.1 Corporate Status. LESSEE is a corporation duly incorporated, validly existing and in good standing under the Laws of * . It has the corporate power and authority to carry on its business as presently conducted and to perform its obligations hereunder.

20.1.2 Governmental Approvals. No authorization, approval, consent, license or order of, or registration with, or the giving of notice to the Aviation Authority or any other Government Entity is required for the valid authorization, execution, delivery and performance by LESSEE of this Lease, except as will have been duly effected as of the Delivery Date.

20.1.3 Binding. LESSEE’s Board of Directors has authorized LESSEE to enter into this Lease, any Side Letters hereto and any other documentation in connection with the leasing of the Aircraft from LESSOR (collectively, the “Operative Documents”) and perform its obligations under the Operative Documents. This Lease and the other Operative Documents have been duly executed and delivered by LESSEE and represent the valid, binding and enforceable obligations of LESSEE except as enforceability may be limited by bankruptcy, insolvency, reorganization or other Laws of general application affecting the enforcement of creditors’ rights. When executed by LESSEE at Delivery, the same will apply to the Estoppel and Acceptance Certificate.

20.1.4 No Breach. The execution and delivery of the Operative Documents, the consummation by LESSEE of the transactions contemplated herein and compliance by LESSEE with the terms and provisions hereof do not and will not contravene any Law applicable to LESSEE, or result in any breach of or constitute any default under or result in the creation of any Security Interest upon any property of LESSEE, pursuant to any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, bank loan or credit agreement, corporate charter, by-law or other agreement or instrument to which LESSEE is a party or by which LESSEE or its properties or assets may be bound or affected. When executed by LESSEE at Delivery, the same will apply to the Estoppel and Acceptance Certificate.

59 ARTICLE 20 REPRESENTATIONS, WARRANTIES AND COVENANTS OF LESSEE

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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20.1.5 Filings. Except for any filing or recording that may be required under the Civil Aviation Authority of * , no filing or recording of any instrument or document (including the filing of any financial statement) is necessary under the Laws of the State of Registration in order for this Lease to constitute a valid and perfected lease of record relating to the Aircraft.

20.1.6 Licenses. LESSEE holds all licenses, certificates and permits from applicable Government Entities in * for the conduct of its business as a certificated air carrier and performance of its obligations under this Lease.

20.1.7 No Suits. There are no suits, arbitrations or other proceedings pending or threatened against LESSEE before any court or administrative agency against or affecting LESSEE which, if adversely determined, would have a material adverse effect on the business, assets or condition (financial or otherwise) of LESSEE or its ability to perform under this Lease, except as described in the filings provided to LESSOR pursuant to Article 22.

20.1.8 No Withholding. Under the Laws of * , LESSEE will not be required to deduct any withholding or other Tax from any payment it may make under this Lease.

20.1.9 No Restrictions on Payments. Under the Laws of * , there are no present restrictions on LESSEE making the payments required by this Lease.

20.1.10 General Obligations. The obligations of LESSEE under this Lease are direct, general and unconditional obligations of LESSEE and rank or will rank at least pari passu with all other present and future unsecured and unsubordinated obligations (including contingent obligations) of LESSEE, with the exception of such obligations as are mandatorily preferred by law and not by reason of any encumbrance.

20.1.11 No Sovereign Immunity. LESSEE, under the Laws of * or of any other jurisdiction affecting LESSEE, is subject to private commercial law and suit. Neither LESSEE nor its properties or assets is entitled to sovereign immunity under any such Laws. LESSEE’s performance of its obligations hereunder constitute commercial acts done for commercial purposes.

20.1.12 Tax Returns. All necessary returns have been delivered by LESSEE to all relevant taxation authorities in the jurisdiction of its incorporation before the applicable due dates and LESSEE is not in default in the payment of any taxes due and payable.

60 ARTICLE 20 REPRESENTATIONS, WARRANTIES AND COVENANTS OF LESSEE

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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20.1.13 No Material Adverse Effect. LESSEE is not in default under any agreement to which it is a party or by which it may be bound which would have a material adverse effect on its business, assets or condition.

20.1.14 No Default under this Lease. At the time of execution of this Lease, no Default has occurred and is continuing and the financial statements provided to LESSOR pursuant to Article 22 fairly present the financial condition of LESSEE.

20.2 Covenants. LESSEE covenants to LESSOR that it will comply with the following throughout the entire Lease Term:

20.2.1 Licensing. LESSEE will hold all licenses, certificates and permits from applicable Government Entities in * for the conduct of its business as a certificated air carrier and performance of its obligations under this Lease. LESSEE will advise LESSOR promptly in the event any such licenses, certificates or permits are cancelled, terminated, revoked or not renewed.

20.2.2 Payments. If at any time any such restrictions may be applicable, LESSEE will obtain all certificates, licenses, permits, exemptions and other authorizations which are from time to time required for the making of the payments required by this Lease on the dates and in the amounts and currency which are stipulated herein, and will maintain the same in full force and effect for so long as the same will be required.

20.2.3 Sovereign Immunity. LESSEE, under the Laws of * or of any other jurisdiction affecting LESSEE, will continue to be subject to private commercial law and suit. Neither LESSEE nor its properties or assets will be entitled to sovereign immunity under any such Laws. LESSEE’s performance of its obligations hereunder will constitute commercial acts done for commercial purposes. LESSEE will advise LESSOR promptly of any change in the foregoing.

20.2.4 Information about Suits. LESSEE will promptly give to LESSOR a notice in writing of any suit, arbitration or proceeding before any court, administrative agency or Government Entity which, if adversely determined, would materially adversely affect LESSEE’s financial condition, affairs, operations or its ability to perform under this Lease.

20.2.5 Restrictions on Mergers. Without the prior written consent of LESSOR which will not be unreasonably withheld, LESSEE will not sell or convey substantially all of its property and assets or merge or consolidate with or into any other corporation unless (a) upon such consolidation, merger or conveyance, the obligations of LESSEE are fully assumed by the resulting entity, and (b) the resulting entity has a net worth equal to or greater than that of LESSEE at the time this Lease is executed.

61 ARTICLE 20 REPRESENTATIONS, WARRANTIES AND COVENANTS OF LESSEE

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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20.2.6 Restriction on Relinquishment of Possession. LESSEE will not, without the prior consent of LESSOR, deliver, transfer or relinquish possession of the Aircraft except in accordance with Articles 11 and 12.

20.2.7 No Security Interests. LESSEE will not create or agree to or permit to arise any Security Interest (other than Permitted Liens) on or with respect to the Aircraft, title thereto or any interest therein. LESSEE will forthwith, at its own expense, take all action as may be necessary to discharge or remove any such Security Interest if it exists at any time. LESSEE will within twenty-four (24) hours after becoming aware of the existence of any such Security Interest give written notice thereof to LESSOR.

20.2.8 Representations to Other Parties. LESSEE will not represent or hold out LESSOR as carrying goods or passengers on the Aircraft or as being in any way connected or associated with any operation of the Aircraft.

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ARTICLE 21          REPRESENTATIONS, WARRANTIES AND COVENANTS OF LESSOR

21.1 Representations and Warranties. LESSOR represents and warrants the following to LESSEE as of the date of execution of the Lease and as of the Delivery Date and ALL OTHER WARRANTIES, EXPRESS OR IMPLIED HAVE BEEN WAIVED IN ACCORDANCE WITH ARTICLE 8:

21.1.1 Corporate Status. LESSOR is a corporation duly incorporated, validly existing and in good standing under the Laws of the State of * . It has the corporate power and authority to carry on its business as presently conducted and to perform its obligations hereunder.

21.1.2 Governmental Approvals. No authorization, approval, consent, license or order of, or registration with, or the giving of notice to the Aviation Authority or any Government Entity is required for the valid authorization, execution, delivery and performance by LESSOR of this Lease.

21.1.3 Binding. This Lease and the other Operative Documents have been duly authorized, executed and delivered by LESSOR and represent the valid, enforceable and binding obligations of LESSOR except as enforceability may be limited by bankruptcy, insolvency, reorganization or other Laws of general application affecting the enforcement of creditors’ rights.

21.1.4 No Breach. The execution and delivery of the Operative Documents, the consummation by LESSOR of the transactions contemplated herein and compliance by LESSOR with the terms and provisions hereof do not and will not contravene any Law applicable to LESSOR, or result in any breach of or constitute any default under any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, bank loan or credit agreement, corporate charter, by-law or other agreement or instrument to which LESSOR is a party or by which LESSOR or its properties or assets may be bound or affected.

21.1.5 Title to Aircraft. On the Delivery Date LESSOR will have good and valid title to the Aircraft.

21.1.6 Value Added Tax in the U.S. There is no value added tax payable in the U.S. as at the date of execution of this Lease.

63 ARTICLE 21 REPRESENTATIONS, WARRANTIES AND COVENANTS OF LESSOR

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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21.2 Covenant of Quiet Enjoyment. So long as no Default or Event of Default has occurred and is continuing hereunder, LESSOR covenants that neither LESSOR nor any person lawfully claiming through LESSOR will interfere with LESSEE’s quiet, peaceful use and enjoyment of the Aircraft.

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ARTICLE 22          FINANCIAL AND RELATED INFORMATION

LESSEE agrees to furnish each of the following to LESSOR:

(a) within forty-five (45) days after the end of each fiscal quarter of LESSEE, three (3) copies of the unaudited consolidated financial statements (including a balance sheet and profit and loss statement) prepared for such quarter in accordance with generally accepted accounting principles in * ;

(b) within ninety (90) days after the end of each fiscal year of LESSEE, three (3) copies of the audited consolidated financial statements (including a balance sheet and profit and loss statement) prepared as of the close of such fiscal year in accordance with generally accepted accounting principles in * . LESSEE’s chief financial officer will also provide a certificate stating that no Default exists under this Lease;

(c) promptly after distribution, three (3) copies of all reports and financial statements which LESSEE sends or makes available to its stockholders or creditors;

(d) annually on the anniversary of the Delivery Date, a Technical Evaluation Report in the form and substance of Exhibit M, as revised; and

(e) from time to time, such other reasonable information as LESSOR or LESSOR’s Lender may reasonably request concerning the location, condition, use and operation of the Aircraft or the financial condition of LESSEE.

65 ARTICLE 22 FINANCIAL AND RELATED INFORMATION

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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ARTICLE 23          RETURN OF AIRCRAFT

23.1 Date of Return. LESSEE is obligated to return the Aircraft, Engines, Parts and Aircraft Documentation to LESSOR on the Expiration Date, unless a Total Loss of the Aircraft occurred prior to the Expiration Date and this Lease was terminated early in accordance with Article 19.3. If LESSEE is in Default hereunder by failing to return the Aircraft on the Expiration Date or if an Event of Default occurs prior to the Expiration Date and LESSOR repossesses the Aircraft, the return requirements set forth in this Article 23 nonetheless must be met on the date the Aircraft is actually returned to LESSOR or repossessed by LESSOR.

23.2 Technical Reporting. Six (6) months prior to the Expiration Date (and in an updated form at return of the Aircraft), LESSEE will provide LESSOR with a Technical Evaluation Report in the form and substance of Exhibit M, as revised, and, in addition upon LESSOR’s request, will make copies available of (a) drawings of the interior configuration of the Aircraft both as it presently exists and as it will exist at return, (b) an Airworthiness Directive status list, (c) a service bulletin incorporation list, (d) rotable tracked, hard-time and life limited component listings, (e) a list of LESSEE-initiated modifications and alterations, (f) interior material burn certificates, (g) the Aircraft Maintenance Program, (h) the complete workscope for the checks, inspections and other work to be performed prior to return, (i) current Engine disk sheets and (j) any other data which is reasonably requested by LESSOR.

23.3 Return Location. LESSEE at its expense will return the Aircraft, Parts and Aircraft Documentation to LESSOR at the facility where the return check will be performed. At LESSOR’s request and expense, LESSEE will ferry the Aircraft to another destination designated by LESSOR.

23.4 Full Aircraft Documentation Review. For the period commencing at least ten (10) Business Days prior to the proposed redelivery date and continuing until the date on which the Aircraft is returned to LESSOR in the condition required by this Lease, LESSEE will provide for the review of LESSOR and/or its representative the Aircraft Documentation in one central room at the Aircraft return location.

23.5 Aircraft Inspection.

23.5.1 During the maintenance checks performed immediately prior to the proposed redelivery and at the actual return of the Aircraft, LESSOR and/or its representatives will have an opportunity to conduct a full systems functional and operational inspection of the Aircraft (and other types of reasonable inspections based upon the Aircraft type, age, use and other known factors with respect to the Aircraft) and a full inspection of the Aircraft Documentation (including records and manuals), all to

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LESSOR’s reasonable satisfaction. Any deficiencies from the Aircraft return condition requirements set forth in this Article 23 will be corrected by LESSEE at its cost prior to the acceptance flight described in Article 23.5.2 and LESSOR agrees to act reasonably and in good faith when determining whether LESSEE has met the return conditions set forth in this Article 23.

23.5.2 Immediately prior to the proposed redelivery of the Aircraft, LESSEE will carry out for LESSOR and/or LESSOR’s representatives an Aircraft acceptance flight in accordance with Manufacturer’s standard flight operation check flight procedures or, if agreed to in writing by LESSOR, in accordance with an airline acceptance flight procedure, either of which will be for the duration necessary to perform such check flight procedures but in any event not more than two (2) hours. Flight costs and fuel will be furnished by and at the expense of LESSEE. Any deficiencies from the Aircraft return condition requirements set forth in this Article 23 will be corrected by LESSEE at its cost prior to return of the Aircraft.

23.5.3 To the extent that the ground inspection and acceptance flight extend beyond the Expiration Date, the Lease Term will be deemed to have been automatically extended and the obligations of LESSEE hereunder (including Article 23.11.3) will continue on a day-to-day basis until the Aircraft is accepted by LESSOR executing the Return Acceptance Receipt.

23.6 Certificate of Airworthiness Matters.

23.6.1 The Aircraft will possess a current Certificate of Airworthiness issued by the Aviation Authority (although this Certificate of Airworthiness may later be substituted by the Export Certificate of Airworthiness or equivalent if requested by LESSOR pursuant to Article 23.10). In addition, even if LESSEE must perform engineering, maintenance and repair work on the Aircraft beyond the requirements of Article 12, the Aircraft at return must be in the condition required in order to meet the requirements for issuance of a U.S. Standard Certificate of Airworthiness for transport category aircraft issued by the FAA in accordance with FAR Part 21 and, in addition, to meet the operating requirements of FAR Part 121.

23.6.2 At LESSOR’s request, LESSEE at its cost will demonstrate that the Aircraft meets the requirements for issuance of the U.S. Standard Certificate of Airworthiness for transport category aircraft specified in Article 23.6.1 by delivering to LESSOR a letter or document acceptable to LESSOR signed by an FAA Designated Airworthiness Representative (DAR) stating that the DAR has inspected the Aircraft and Aircraft Documentation (including records and manuals) and has found that the Aircraft meets the requirements for issuance of a U.S. Standard Certificate of Airworthiness for transport category aircraft in accordance with FAR Part 21.

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23.6.3 If the Aircraft is to be registered in a country other than in the U.S. after return from LESSEE, LESSOR may in its sole discretion waive the requirements of Article 23.6.2 and instead require that LESSEE at its expense (to the extent such expense is no greater than that which LESSEE would have incurred pursuant to Articles 23.6.1 and 23.6.2, with any additional expenses being for LESSOR’s account) put the Aircraft in a condition to meet the requirements for issuance of a Certificate of Airworthiness of the Aviation Authority of the next country of register, provided that such requirements will not cause LESSEE to be responsible for any greater expense or cause any delay in redelivery or the time for redelivery procedures than would be the case if the requirements of Articles 23.6.1 and 23.6.2 had not been waived. LESSOR will provide LESSEE with the information necessary to put the Aircraft in a condition to meet the requirements of a Certificate of Airworthiness of the aviation authority of such other country.

23.7 General Condition of Aircraft at Return.

23.7.1 The Aircraft, Engines and Parts will have been maintained and repaired in accordance with the Maintenance Program, the rules and regulations of the Aviation Authority and this Lease.

23.7.2 Aircraft Documentation (including records and manuals) will have been maintained in an up-to-date status, in accordance with the rules and regulations of the Aviation Authority and the FAA and this Lease and in a form necessary in order to meet the requirements of Article 23.6.2. The records and historical documents set forth in Attachment 1 of Exhibit K will be in English.

23.7.3 The Aircraft will be in the same working order and condition as at Delivery (subject to the other provisions of this Article 23, reasonable wear and tear from normal flight operations excepted), with all pilot discrepancies and deferred maintenance items cleared on a terminating action basis.

23.7.4 The Aircraft will be airworthy (conform to type design and be in a condition for safe operation), with all Aircraft equipment, components and systems operating in accordance with their intended use and within limits approved by Manufacturer, Aviation Authority and FAA.

23.7.5 The Aircraft interior (including cabin and windows) and exterior will be clean and cosmetically acceptable to LESSOR, with all compartments free of foreign objects, dirt, grease, fluids, stains, grime, cracks, tears and rips and ready to be placed into immediate commercial airline operations.

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23.7.6 No special or unique Manufacturer, Engine manufacturer or Aviation Authority inspection or check requirements which are specific to the Aircraft or Engines (as opposed to all aircraft or engines of their types) will exist with respect to the Airframe, Engines and Aircraft equipment, components and systems.

23.7.7 All repairs, modifications and alterations to the Aircraft will have been accomplished in accordance with Manufacturer’s Structural Repair Manual (or DGAC-approved data supported by a repair approval sheet (RAS)).

23.7.8 The Aircraft will be returned with the Engines installed and with the same equipment as at Delivery, subject only to those replacements, additions and Modifications permitted under this Lease.

23.7.9 All Airworthiness Directives which are issued prior to the date of return of the Aircraft and require compliance (either by means of repetitive inspections, modifications or terminating action) prior to return of the Aircraft to LESSOR will have been complied with on the Aircraft on a terminating action basis at LESSEE’s cost. Airworthiness Directives which do not have a terminating action will be accomplished at the highest level of inspection or modification possible. If, after using best efforts, LESSEE is unable to acquire the material, parts or components necessary to accomplish such Airworthiness Directive, LESSEE will pay to LESSOR upon return of the Aircraft the estimated cost of terminating such Airworthiness Directive. If the estimated cost cannot be mutually agreed upon by LESSEE and LESSOR, LESSEE and LESSOR will each obtain an estimate from a reputable FAA approved maintenance facility and the estimated cost will be the average of the two estimates.

23.7.10 The Aircraft will be in compliance with Manufacturer’s Corrosion Prevention and Control Program (CPCP) specified for the model type by Manufacturer.

23.7.11 If any waivers, alternate means of compliance, dispensations, extensions or carry-overs with respect to Airworthiness Directives or operating or maintenance requirements are granted by the Aviation Authority or permitted by the Maintenance Program, LESSEE at its sole cost and expense will nonetheless perform such Airworthiness Directives and other operating or maintenance requirements on a terminating action basis as if such waivers, alternate means of compliance, dispensations or extensions did not exist.

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23.7.12 The Aircraft will be free from any Security Interest except LESSOR’s Liens and no circumstance will have so arisen whereby the Aircraft is or could become subject to any Security Interest or right of detention or sale in favor of the Aviation Authority, any airport authority, or any other authority.

23.7.13 All no-charge vendor and Manufacturer’s service bulletin kits received by LESSEE for the Aircraft but not installed thereon will be on board the Aircraft as cargo. At LESSOR’s request, any other service bulletin kit which LESSEE paid for will also be delivered to LESSOR on board the Aircraft, but LESSOR will reimburse LESSEE for its actual out-of-pocket costs for such kit.

23.7.14 The Aircraft will be free of any system-related leaks and any damage resulting therefrom. All repairs will have been performed on a permanent basis in accordance with the applicable manufacturer’s instructions.

23.7.15 The Aircraft fluid reservoirs (including oil, oxygen, hydraulic and water) will be serviced to full and the waste tank serviced in accordance with Manufacturer’s instructions. At technical acceptance of return, each fuel tank will be at least as full as at Delivery.

23.7.16 All fuel tanks will have recently undergone an anti-fungus/biological growth contamination laboratory evaluation, with appropriate correction taken in the event excessive levels of contamination are identified.

23.7.17 At LESSOR’s request, LESSEE will provide LESSOR with a written summary of all sampling programs involving or affecting the Aircraft.

23.8 Checks Prior to Return. Immediately prior to return of the Aircraft to LESSOR, LESSEE at its expense will do each of the following:

23.8.1 Have performed, by an FAA-approved repair station, a full and complete zonal, systems and structural check (“C” or its equivalent), the corresponding lower checks (“A” and “B” or equivalent) and any other maintenance and inspections tasks, all in accordance with the MPD, sufficient to clear the Aircraft for operation until the next-scheduled full and complete zonal, systems and structural check under the MPD (which in any event will not be less than one year). LESSEE will also weigh the Aircraft. Any discrepancies revealed during such inspection will be corrected in accordance with Manufacturer’s maintenance and repair manuals or DGAC-approved data. LESSEE agrees to perform during such check any other work reasonably required by LESSOR (and not otherwise required under this Lease) and LESSOR will reimburse LESSEE for such work at LESSEE’s preferred customer rates.

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23.8.2 Perform an internal and external corrosion inspection and correct any discrepancies in accordance with the recommendations of Manufacturer and the Structural Repair Manual. In addition, all inspected areas will be properly treated with corrosion inhibitor as recommended by Manufacturer.

23.8.3 If LESSEE performed any structural inspections/tasks on a sampling basis but did not perform such inspections/tasks on the Aircraft, such work also will be accomplished on the Aircraft.

23.8.4 Remove LESSEE’s exterior markings, including all exterior paint, by stripping (or, at LESSOR’s option, pneumatically scuff/sanding) the paint from the Airframe and clean, reseal, refinish, prepare (including application of alodine or another corrosion inhibitor) and prime the surfaces to be painted, all in accordance with Manufacturer’s and paint manufacturer’s recommendations. LESSEE will then repaint the Airframe in the colors and logo specified by LESSOR. Such painting will be accomplished in such a manner as to result in a uniformly smooth and cosmetically acceptable aerodynamic surface. All external placards, signs and markings will be properly attached, free from damage, clean and legible.

23.8.5 Clean the exterior and interior of the Aircraft.

23.8.6 If reasonably required by LESSOR, repaint the interior of the Aircraft, including flight deck, and replace placards.

23.8.7 In accordance with Manufacturer’s Structural Repair Manual, permanently repair damage to the Aircraft that exceeds Manufacturer’s limits and replace any non-flush structural patch repairs installed on the Airframe with flush-type repairs.

23.8.8 Perform a full and complete hot and cold section videotape borescope on each Engine and its modules in accordance with the Engine manufacturer’s maintenance manual, with LESSOR or its representatives entitled to be present. LESSEE will provide evidence to LESSOR’s satisfaction that such inspection does not reveal any condition which would cause the Engine or any module to be unserviceable, beyond serviceable limits or serviceable with limitations under the Engine manufacturer’s maintenance manual. LESSEE will correct any discrepancies in accordance with the guidelines set out by the Engine manufacturer which may be discovered during such inspection.

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23.8.9 If the Engine historical and technical records and/or condition trend monitoring data of any Engine (including the APU) indicate an acceleration in the rate of deterioration in the performance of an Engine outside the Engine manufacturer’s standards, LESSEE will correct, to LESSOR’s satisfaction, such conditions which are determined to be causing such accelerated rate of deterioration.

23.8.10 In accordance with the applicable maintenance manual, accomplish a maximum power assurance run and condition, acceleration and bleed valve scheduling checks on the Engines. LESSEE will record and evaluate the Engine performance, with LESSOR and/or its representative entitled to be present. The performance and all operating parameters of each Engine will be within the limits specified in Manufacturer’s maintenance manual.

23.8.11 In the event the Engine historical and technical records, borescope inspection, trend monitoring and other checks specified in Article 23.8.10 result in a dispute regarding the conformity of an Engine with the requirements of this Article 23, LESSEE and LESSOR will consult with Engine manufacturer and follow Engine manufacturer’s recommendations (including the accomplishment of an Engine test cell operational check) with regard to determining if such Engine complies with the requirements of this Article 23 and the manner in which any discrepancies from the requirements of this Article 23 will be rectified.

23.9 Part Lives. At return, the condition of the Aircraft will be as follows:

23.9.1 The Aircraft will have at least * percent (* %) of the full allotment of hours, cycles and calendar time (whichever is the more limiting factor) between the 10 year/24,000 flight cycles complete zonal and structural checks (or any replacement or successor to such checks) remaining as approved by the MPD. All non-routine tasks generated as a result of the performance of these work cards must also be performed.

23.9.2 The Aircraft will have * (* ) hours consumed since the last full and complete zonal, systems and structural check (“C” check or equivalent) (excluding hours consumed on the acceptance flight).

23.9.3 Each Engine will meet all of the following:

(a) Each Engine will have operated no more than * hours and * cycles since the last full performance restoration shop visit in which the modules were fully refurbished and will have at least * percent of the hours and cycles remaining until its next anticipated removal (based upon the Engine manufacturer’s estimated mean time between removals for engines of the same type as the Engines);

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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(b) Each Engine will also have a remaining EGT margin sufficient to permit the operation of such Engine for the hours and cycles set forth in the preceding subparagraph, based upon the historical experience of LESSEE;

(c) No life-limited part of an Engine will have more hours or cycles consumed than such Engine’s data plate; and

(d) Each part of an Engine which has a hard time limit will have at least * % of such Part’s full allotment of hours and cycles remaining to operate until its next scheduled overhaul. Each part of an Engine which has a life limit will have at least * % of such Part’s full allotment of hours and cycles remaining to operate until its removal. However, if * % of such hard time or life-limited part’s full allotment of hours and cycles remaining is less than * hours and * cycles, then such hard time or life-limited part will be returned with at least *  hours and * cycles remaining.

23.9.4 The APU will have * (* ) APU hours consumed since the last hot section refurbishment (excluding hours consumed on the acceptance flight).

23.9.5 The Landing Gear will have at least * percent (* %) of the full allotment of hours/cycles/calendar time remaining until the next Overhaul or scheduled removal.

23.9.6 Each Part of the Aircraft which has a hard time (hour/cycle) limit to Overhaul pursuant to the MPD will have at least * % of such part’s full allotment of hours and cycles remaining to operate until its next scheduled overhaul pursuant to the MPD. However, if * % of such hard time Part’s full allotment of hours and cycles remaining is less than * hours and *  cycles, then such hard time Part will be returned with at least * hours and * cycles remaining to operate until its next scheduled overhaul pursuant to the MPD.

23.9.7 Each life-limited Part of the Aircraft will have at least * % of such Part’s full allotment of hours and cycles remaining to operate until removal pursuant to the MPD. However, if * % of such life-limited Part’s full allotment of hours and cycles remaining is less than * hours and * cycles, then such life-limited Part will be returned with at least * hours and * cycles remaining to operate pursuant to the MPD.

23.9.8 Each Part which has a calendar limit will have sufficient calendar time remaining to operate until the next “C” check pursuant to the MPD after return of the Aircraft to LESSOR (which in any event will be not less than * year).

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* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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23.9.9 No Engine or installed component or Part of the Aircraft will have a total time since new greater than * percent (* %) of that of the Airframe and, with respect to all installed components as a group, the components will have an average total time since new no greater than that of the Airframe.

23.9.10 The Aircraft Landing Gear tires and brakes will be * or have * (* hours/cycles out of Overhaul (except for the acceptance flight).

23.10 Export and Deregistration of Aircraft. At LESSOR’s request, LESSEE at its cost will (a) provide an Export Certificate of Airworthiness or its equivalent from the State of Registration so that the Aircraft can be exported to the country designated by LESSOR, (b) assist with deregistration of the Aircraft from the register of aircraft in the State of Registration, (c) assist with arranging for prompt confirmation of such deregistration to be sent by the registry in the State of Registration to the next country of registration and (d) perform any other acts reasonably required by LESSOR in connection with the foregoing. If any Aircraft work which LESSEE is not otherwise required to perform hereunder, including engineering, is required in order to obtain such Export Certificate of Airworthiness, LESSEE will perform such work and LESSOR will reimburse LESSEE for such work at LESSEE’s preferred customer rates.

23.11 LESSEE’s Continuing Obligations. In the event that LESSEE does not return the Aircraft to LESSOR on the Expiration Date and in the condition required by this Article 23 for any reason (whether or not the reason is within LESSEE’s control other than any delay due to additional work requested by LESSOR referred to in Articles 23.8.1 and 23.10 or for reasons within LESSOR’s control described in Article 23.6.3):

23.11.1 the obligations of LESSEE under this Lease will continue in full force and effect on a day-to-day basis until such return except that if LESSEE does not return the Aircraft to LESSOR on the Expiration Date solely and directly because of additional work requests made at the request of LESSOR which LESSEE is not otherwise required to perform hereunder, LESSEE shall have no obligation to pay Rent. This will not be considered a waiver of LESSEE’s Event of Default or any right of LESSOR hereunder.

23.11.2 Until such return, the Agreed Value will be an amount equal to the Agreed Value on the day the Aircraft should have been returned to LESSOR pursuant to this Lease.

23.11.3 LESSEE will fully indemnify LESSOR on demand for all losses (including consequential damages), liabilities, actions, proceedings, costs and expenses thereby suffered or incurred by LESSOR and, in addition, until such time as the Aircraft is redelivered to LESSOR and put into the condition required by this Article 23, instead of paying the Rent specified in Article 5.3, LESSEE will pay twice the amount of Rent

74 ARTICLE 23 RETURN OF AIRCRAFT

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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for each day from the scheduled Expiration Date until the Termination Date (the monthly Rent payable under Article 5.3.1 will be prorated based on the actual number of days in the applicable month). Payment will be made upon presentation of LESSOR’s invoice.

23.11.4 LESSOR may elect, in its sole and absolute discretion, to accept the return of the Aircraft prior to the Aircraft being put in the condition required by this Article 23 and thereafter have any such non-conformance corrected at such time as LESSOR may deem appropriate (but within ninety (90) days following the return of the Aircraft) and at commercial rates then-charged by the Person selected by LESSOR to perform such correction. Any direct expenses incurred by LESSOR for such correction will become additional Rent payable by LESSEE within fifteen (15) days following the submission of a written statement by LESSOR to LESSEE, identifying the items corrected and setting forth the expense of such corrections. LESSEE’s obligation to pay such supplemental Rent will survive the Termination Date.

23.12 Airport and Navigation Charges. LESSEE will ensure that at return of the Aircraft any and all airport, navigation and other charges which give rise or may if unpaid give rise to any lien, right of detention, right of sale or other Security Interest in relation to the Aircraft, Engine or any Part, whether incurred in respect of the Aircraft or any other aircraft operated by LESSEE, have been paid and discharged in full (whether or not due) and will at LESSOR’s request produce evidence thereof satisfactory to LESSOR.

23.13 Return Acceptance Certificate. Upon return of the Aircraft in accordance with the terms of this Lease, LESSEE will prepare and execute two (2) Return Acceptance Certificates in the form and substance of Exhibit K and LESSOR will countersign and return one such Return Acceptance Certificate to LESSEE.

23.14 Indemnities and Insurance. The indemnities and insurance requirements set forth in Articles 17 and 18, respectively, will apply to Indemnitees and LESSOR’s representatives during return of the Aircraft, including the ground inspection and acceptance flight. With respect to the acceptance flight, LESSOR’s representatives will receive the same protections as LESSOR on LESSEE’s Aviation and Airline General Third Party Liability Insurance.

23.15 Storage. At LESSOR’s request, LESSEE will continue to lease the Aircraft under this Lease for a period not to exceed thirty (30) days. During this period, LESSEE will have no obligations under this Lease except to park and store the Aircraft in accordance with Manufacturer’s recommended short term storage program at one of LESSEE’s principal maintenance facilities in * and, at LESSOR’s cost, to maintain all insurance on the Aircraft. LESSEE will not utilize the Aircraft for any reason during this period. LESSOR agrees to pay the airport parking charges in connection with this Article 23.15.

75 ARTICLE 23 RETURN OF AIRCRAFT

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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ARTICLE 24          ASSIGNMENT

24.1 No Assignment by LESSEE. NO ASSIGNMENT, NOVATION, TRANSFER, MORTGAGE OR OTHER CHARGE MAY BE MADE BY LESSEE OF ANY OF ITS RIGHTS WITH RESPECT TO THE AIRCRAFT, ENGINE OR PART OR THIS LEASE.

24.2 Sale or Assignment by LESSOR. Subject to LESSEE’s rights pursuant to this Lease, LESSOR may at any time and without LESSEE’s consent sell, assign or transfer its rights and interest hereunder or with respect to the Aircraft to a third party (“LESSOR’s Assignee”). For a period of *  (* ) years after such sale or assignment and at LESSEE’s cost, LESSEE will continue to name LESSOR as an additional insured under the Aviation and Airline General Third Party Liability Insurance specified in Exhibit C.

24.3 LESSOR’s Lender. Subject to LESSEE’s rights pursuant to this Lease, LESSOR may at any time and without LESSEE’s consent grant security interests over the Aircraft and assign the benefit of this Lease to a lender (“LESSOR’s Lender”) as security for LESSOR’s obligations to LESSOR’s Lender. In connection with such financing, LESSOR may transfer the Aircraft to another entity owned or controlled by LESSOR, in which case LESSOR will guaranty the performance of such entity. LESSEE consents to any such transfer and agrees to cooperate with LESSOR or and Lender and to provide such certificates, agreements, and information as LESSOR or Lender may reasonably request. Further, if LESSOR’s Lender requires, as a condition to providing financing, any nonsubstantive modification of the Lease, LESSEE agrees to enter into an agreement so modifying this Lease.

24.4 LESSEE Cooperation. On request by LESSOR, LESSOR’s Assignee or LESSOR’s Lender, LESSEE will execute all such documents (such as a lease assignment agreement) as LESSOR, LESSOR’s Assignee or LESSOR’s Lender may reasonably require to confirm LESSEE’s obligations under this Lease and obtain LESSEE’s acknowledgment that LESSOR is not in breach of the Lease. LESSEE will provide all other reasonable assistance and cooperation to LESSOR, LESSOR’s Assignee and LESSOR’s Lender in connection with any such sale or assignment or the perfection and maintenance of any such security interest, including, at LESSOR’s cost, making all necessary filings and registrations in the State of Registration and providing all opinions of counsel with respect to matters reasonably requested by LESSOR, LESSOR’s Lender or LESSOR’s Assignee. LESSOR will reimburse LESSEE for its reasonable out-of-pocket costs in reviewing documents required by LESSOR or LESSOR’s Lender.

24.5 Protections.

24.5.1 At LESSEE’s request, LESSOR will obtain for the benefit of LESSEE an acknowledgment from any LESSOR’s Assignee or LESSOR’s Lender that, so long

76 ARTICLE 24 ASSIGNMENT

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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as no Default or Event of Default has occurred and is continuing hereunder, such Person will not interfere with LESSEE’s quiet, peaceful use and enjoyment of the Aircraft.

24.5.2 Wherever the term “LESSOR” is used in this Lease in relation to any of the provisions relating to disclaimer, title and registration, taxes, indemnity and insurance contained in Articles 8, 14, 16, 17 and 18, respectively, or with respect to Article 20.2.8, the term “LESSOR” will be deemed to include LESSOR’s Assignee and LESSOR’s Lender, if applicable.

24.5.3 LESSEE will not be obligated to pay any greater amount following an assignment, sale or granting of a security interest than it would have had to pay but for such assignment or sale, and LESSOR will indemnify LESSEE on demand for any loss suffered or cost incurred as a result of such assignment or sale or granting of such security interests (provided that the foregoing shall not applyu to any additional risk or cost associated with the insurances to be carried by LESSEE hereunder and its indemnity obligations pursuant to Article 17).

77 ARTICLE 24 ASSIGNMENT

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ARTICLE 25 DEFAULT OF LESSEE

25.1 LESSEE Notice to LESSOR. LESSEE will promptly notify LESSOR if LESSEE becomes aware of the occurrence of any Default.

25.2 Events of Default. The occurrence of any of the following will constitute an Event of Default and material breach of this Lease by LESSEE:

(a) LESSEE fails to take delivery of the Aircraft when obligated to do so under the terms of this Lease;

(b) LESSEE fails to make a Rent or other payment due hereunder in the manner and by the date provided herein and fails to make such payment within five (5) Business Days after such payment is due;

(c) LESSEE fails to obtain or maintain the insurance required by Article 18;

(d) LESSEE fails to return the Aircraft to LESSOR on the Expiration Date in accordance with Article 23;

(e) LESSEE fails to observe or perform any of its other obligations hereunder and fails to cure the same within fifteen (15) days after written notice thereof to LESSEE. If such failure cannot by its nature be cured within fifteen (15) days, LESSEE will have the reasonable number of days necessary to cure such failure (not to exceed a period of sixty (60) days) so long as it uses diligent and best efforts to do so;

(f) any representation or warranty of LESSEE herein proves to be untrue in any material respect;

(g) the registration of the Aircraft is cancelled other than as a result of an act or omission of LESSOR;

(h) LESSEE abandons the Aircraft or Engines;

(i) LESSEE or an approved sublessee no longer has unencumbered control (other than Permitted Liens) or possession of the Aircraft or Engines, except as otherwise permitted by this Lease;

(j) LESSEE threatens to or temporarily or permanently discontinues business or sells or otherwise disposes of all or substantially all of its assets;

78 ARTICLE 25 DEFAULT OF LESSEE

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(k) a material adverse change occurs in the financial condition of LESSEE;

(l) LESSEE no longer possesses the licenses, certificates and permits required for the conduct of its business as a certificated air carrier in *;

(m) LESSEE (i) suspends payment on its debts or other obligations, (ii) is unable to or admits its inability to pay its debts or other obligations as they fall due, (iii) is adjudicated or becomes bankrupt or insolvent or (iv) proposes or enters into any composition or other arrangement for the benefit of its creditors generally;

(n) any proceedings, resolutions, filings or other steps are instituted or threatened with respect to LESSEE relating to the bankruptcy, liquidation, reorganization or protection from creditors of LESSEE or a substantial part of LESSEE’s property. If instituted by LESSEE, the same will be an immediate Event of Default. If instituted by another Person, the same will be an Event of Default if not dismissed, remedied or relinquished within sixty (60) days;

(o) any order, judgment or decree is entered by any court of competent jurisdiction appointing a receiver, trustee or liquidator of LESSEE or a substantial part of its property, or if a substantial part of LESSEE’s property is to be sequestered. If instituted by or done with the consent of LESSEE, the same will be an immediate Event of Default If instituted by another Person, the same will be an Event of Default if not dismissed, remedied or relinquished within sixty (60) days;

(p) any indebtedness for borrowed moneys or a guarantee or similar obligation owed by LESSEE with an unpaid balance of at least * U.S. Dollars (US* becomes due or is capable of being declared due before its stated maturity or LESSEE is in default under any other purchase agreement, lease, conditional sale agreement or other agreement pursuant to which LESSEE has possession of any aircraft and such default materially and adversely affects LESSEE’S ability to perform its obligations under this Lease. Provided, however, that any default declared on account of LESSEE not returning a leased aircraft (other than an aircraft leased to LESSEE by LESSOR) to a lessor on the relevant expiration date of such other lease shall not be an Event of Default hereunder;

(q) LESSEE is in default under any other lease or agreement between LESSEE and LESSOR and the same is not cured within its specified cure period; or

(r) any approved sublessee acts so as to prevent present or future performance by LESSEE of its obligations under this Lease and LESSEE has not procured such action as is necessary to enable performance within fifteen (15) days after such action.

79 ARTICLE 25 DEFAULT OF LESSEE

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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25.3 LESSOR’s General Rights. Upon the occurrence of any Event of Default, all rights of LESSEE hereunder will immediately cease and terminate (but LESSEE’s obligations hereunder will continue, including the obligations to protect and insure the Aircraft as required under this Lease). LESSOR may do all or any of the following at its option (in addition to such other rights and remedies which LESSOR may have by statute or otherwise but subject to any requirements of applicable Law):

(a) terminate this Lease by giving written notice to LESSEE;

(b) require that LESSEE immediately move the Aircraft to an airport or other location designated by LESSOR;

(c) for LESSEE’s account, do anything that may reasonably be required to cure any default and recover from LESSEE all reasonable costs, including legal fees and expenses incurred in doing so and Default Interest;

(d) proceed as appropriate to enforce performance of this Lease and to recover any damages for the breach hereof, including the amounts specified in Article 25.5;

(e) terminate this Lease by taking possession of the Aircraft or by serving notice requiring LESSEE to return the Aircraft to LESSOR at the location specified by LESSOR. If LESSOR takes possession of the Aircraft, it may enter upon LESSEE’s premises where the Aircraft is located without liability. Upon repossession of the Aircraft, LESSOR will then be entitled to sell, lease or otherwise deal with the Aircraft as if this Lease had never been made. LESSOR will be entitled to the full benefit of its bargain with LESSEE; or

(f) apply all or any portion of the Security Deposit and any other security deposits held by LESSOR pursuant to any other agreements between LESSOR and LESSEE to any amounts due.

25.4 Deregistration and Export of Aircraft. If an Event of Default has occurred and is continuing, LESSOR may take all steps necessary to deregister the Aircraft in and export the Aircraft from the State of Registration.

25.5 LESSEE Liability for Damages. If an Event of Default occurs, in addition to all other remedies available at law or in equity, LESSOR has the right to recover from LESSEE and LESSEE will pay LESSOR within two (2) Business Days after LESSOR’s written demand, all of the following:

80 ARTICLE 25 DEFAULT OF LESSEE

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(a) all amounts which are then due and unpaid hereunder and which become due prior to the earlier of LESSOR’s recovery of possession of the Aircraft or LESSEE making an effective tender thereof;

(b) subject to LESSOR’s duty to mitigate losses, any losses suffered by LESSOR because of LESSOR’s inability to place the Aircraft on lease with another lessee or to otherwise utilize the Aircraft on financial terms as favorable to LESSOR as the terms hereof or, if LESSOR elects to dispose of the Aircraft, the funds arising from a sale or other disposition of the Aircraft are not as profitable to LESSOR as leasing the Aircraft in accordance with the terms hereof would have been (and LESSOR will be entitled to accelerate any and all Rent which would have been due from the date of LESSOR’s recovery or repossession of the Aircraft through the Expiration Date);

(c) all costs associated with LESSOR’s exercise of its remedies hereunder, including but not limited to repossession costs, legal fees, Aircraft storage costs, Aircraft re-lease or sale costs and LESSOR’s internal costs and expenses (including the cost of personnel time calculated based upon the compensation paid to the individuals involved on an annual basis and a general LESSOR overhead allocation);

(d) subject to LESSOR’s duty to mitigate losses, any interest, fees or other sums paid or payable on account of funds borrowed in order to carry any unpaid amount;

(e) subject to LESSOR’s duty to mitigate losses, any loss, premium, penalty or expense which may be incurred in repaying funds raised to finance the Aircraft or in unwinding any financial instrument relating in whole or in part to LESSOR’s financing of the Aircraft;

(f) subject to LESSOR’s duty to mitigate losses, any loss, cost, expense or liability sustained by LESSOR due to LESSEE’S failure to redeliver the Aircraft in the condition required by this Lease; and

(g) subject to LESSOR’s duty to mitigate losses, any other loss, damage, expense, cost or liability which LESSOR suffers or incurs as a result of the Event of Default and/or termination of this Lease, including an amount sufficient to fully compensate LESSOR for any loss of or damage to LESSOR’s residual interest in the Aircraft caused by LESSEE’s default.

25.6 Waiver of Default. By written notice to LESSEE, LESSOR may at its election waive any Default or Event of Default and its consequences and rescind and annul any prior notice of termination of this Lease. The respective rights of the parties will then be as they would have been had no Default or Event of Default occurred and no such notice been given.

81 ARTICLE 25 DEFAULT OF LESSEE

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25.7 Present Value of Payments. In calculating LESSOR’s damages hereunder, upon an Event of Default all Rent and other amounts which would have been due hereunder during the Lease Term if an Event of Default had not occurred will be calculated on a present value basis using a discounting rate of * percent *%) per annum discounted to the earlier of the date on which LESSOR obtains possession of the Aircraft or LESSEE makes an effective tender thereof.

25.8 Use of “Termination Date”. For avoidance of doubt, it is agreed that if this Lease terminates and the Aircraft is repossessed by LESSOR due to an Event of Default, then, notwithstanding the use of the term “Termination Date” in this Lease, the period of the Lease Term and the “Expiration Date” will be utilized in calculating the damages to which LESSOR is entitled pursuant to Article 25.5. For example, it is agreed and understood that LESSOR is entitled to receive from LESSEE the Rent and the benefit of LESSEE’s insurance and maintenance of the Aircraft until expiration of the Lease Term.

82 ARTICLE 25 DEFAULT OF LESSEE

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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ARTICLE 26 NOTICES

26.1 Manner of Sending Notices. Any notice, request or information required or permissible under this Lease will be in writing and in English. Notices will be delivered in person or sent by telex, fax, letter (mailed airmail, certified and return receipt requested), or by expedited delivery addressed to the parties as set forth in Article 26.2. In the case of a telex or fax, notice will be deemed received upon actual receipt (in the case of a fax notice, the date of actual receipt will be deemed to be the date set forth on the confirmation of receipt produced by the sender’s fax machine immediately after the fax is sent). In the case of a mailed letter, notice will be deemed received on the tenth (10th) day after mailing. In the case of a notice sent by expedited delivery, notice will be deemed received on the date of delivery set forth in the records of the Person which accomplished the delivery. If any notice is sent by more than one of the above listed methods, notice will be deemed received on the earliest possible date in accordance with the above provisions.

26.2 Notice Information. Notices will be sent:

If to LESSOR:	*
	*
	*
	United States of America
	Attention:         Legal Department
	Fax:             *
	Telephone:    *
If to LESSEE:	*
	*
	*
	*
	*
	Attention:        *
	Fax:            *
	Telephone:        *

or to such other places and numbers as either party directs in writing to the other party.

83 ARTICLE 26 NOTICES

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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ARTICLE 27 GOVERNING LAW AND JURISDICTION

27.1 California Law. This Lease is being delivered in the State of California and will in all respects be governed by and construed in accordance with the Laws of the State of California (notwithstanding the conflict Laws of the State of California).

27.2 Non-Exclusive Jurisdiction in California. As permitted by Section 410.40 of the California Code of Civil Procedure, the parties hereby irrevocably submit to the non-exclusive jurisdiction of the Federal District Court for the Central District of California and the State of California Superior or Municipal Court in Los Angeles, California. Nothing herein will prevent either party from bringing suit in any other appropriate jurisdiction.

27.3 Service of Process. The parties hereby consent to the service of process (a) out of any of the courts referred to above, (b) in accordance with Section 415.40 of the California Code of Civil Procedure by mailing copies of the summons and complaint to the person to be served by air mail, certified or registered mail to the address set forth in Article 26.2, postage prepaid, return receipt requested or (c) in accordance with the Hague Convention, if applicable.

27.4 Prevailing Party in Dispute. If any legal action or other proceeding is brought in connection with or arises out of any provisions in this Lease, the prevailing party will be entitled to recover reasonable attorneys’ fees and other costs incurred in such action or proceedings. The prevailing party will also, to the extent permissible by Law, be entitled to receive pre- and post-judgment Default Interest.

27.5 Waiver. LESSEE AND LESSOR HEREBY WAIVE THE RIGHT TO A TRIAL BY JURY. LESSEE AND LESSOR HEREBY IRREVOCABLY WAIVE ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATED TO THIS LEASE BROUGHT IN ANY OF THE COURTS REFERRED TO IN ARTICLE 27.2, AND HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

84 ARTICLE 27 GOVERNING LAW AND JURISDICTION

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ARTICLE 28 MISCELLANEOUS

28.1 Transportation of Personnel. LESSEE will provide transportation to LESSOR’s personnel on a gratis basis on aircraft operated by LESSEE five (5) times per calendar year (per aircraft leased from LESSOR).

28.2 Press Releases. The parties will give copies to one another, in advance if possible, of all news, articles and other releases provided to the public media regarding this Lease or the Aircraft.

28.3 Power of Attorney. LESSEE hereby irrevocably appoints LESSOR as its attorney for the purpose of putting into effect the intent of this Lease following an Event of Default, including without limitation, the return, repossession, deregistration and exportation of the Aircraft. To evidence this appointment, LESSEE has executed the Power of Attorney in the form of Exhibit H. LESSEE will take all steps required under the Laws of the State of Registration to provide such power of attorney to LESSOR.

28.4 LESSOR Performance for LESSEE. The exercise by LESSOR of its remedy of performing a LESSEE obligation hereunder is not a waiver of and will not relieve LESSEE from the performance of such obligation at any subsequent time or from the performance of any of its other obligations hereunder.

28.5 LESSOR’s Payment Obligations. Any obligation of LESSOR under this Lease to pay or release any amount to LESSEE is conditioned upon (a) all amounts then due and payable by LESSEE to LESSOR under this Lease or under any other agreement between LESSOR and LESSEE having been paid in full and (b) no Default having occurred and continuing hereunder at the time such payment or release of payment is payable to LESSEE.

28.6 Application of Payments. Any amounts paid or recovered in respect of LESSEE liabilities hereunder may be applied to Rent, Default Interest, fees or any other amount due hereunder in such proportions, order and manner as LESSOR determines.

28.7 Usury Laws. The parties intend to contract in strict compliance with the usury Laws of the State of California and, to the extent applicable, the United States. Notwithstanding anything to the contrary in the Operative Documents, LESSEE will not be obligated to pay Default Interest or other interest in excess of the maximum non-usurious interest rate, as in effect from time to time, which may by applicable Law be charged, contracted for, reserved, received or collected by LESSOR in connection with the Operative Documents. During any period of time in which the then-applicable highest lawful rate is lower than the Default Interest rate, Default Interest will accrue and be payable at such highest lawful rate; however, if at later times such highest lawful rate is greater than the Default Interest rate, then LESSEE will pay Default Interest at the highest lawful rate until the Default Interest which is paid by LESSEE equals the amount of interest that would have been payable in accordance with the interest rate set forth in Article 5.6.

85 ARTICLE 28 MISCELLANEOUS

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28.8 Delegation by LESSOR. LESSOR may delegate to any Person(s) all or any of the rights, powers or discretion vested in it by this Lease and any such delegation may be made upon such terms and conditions as LESSOR in its absolute discretion thinks fit.

28.9 Confidentiality. The Operative Documents and all non-public information obtained by either party about the other are confidential and are between LESSOR and LESSEE only and will not be disclosed by a party to third parties (other than to such party’s auditors or legal advisors or as required in connection with any filings of this Lease in accordance with Article 14) without the prior written consent of the other party. If disclosure is required as a result of applicable Law, LESSEE and LESSOR will cooperate with one another to obtain confidential treatment as to the commercial terms and other material provisions of this Lease.

28.10 Rights of Parties. The rights of the parties hereunder are cumulative, not exclusive, may be exercised as often as each party considers appropriate and are in addition to its rights under general Law. The rights of one party against the other party are not capable of being waived or amended except by an express waiver or amendment in writing. Any failure to exercise or any delay in exercising any of such rights will not operate as a waiver or amendment of that or any other such right any defective or partial exercise of any such rights will not preclude any other or further exercise of that or any other such right and no act or course of conduct or negotiation on a party’s part or on its behalf will in any way preclude such party from exercising any such right or constitute a suspension or any amendment of any such right.

28.11 Further Assurances. Each party agrees from time to time to do and perform such other and further acts and execute and deliver any and all such other instruments as may be required by Law, reasonably requested by the auditors of the other party or requested by the other party to establish, maintain or protect the rights and remedies of the requesting party or to carry out and effect the intent and purpose of this Lease.

28.12 Use of Word “including”. The term “including” is used herein without limitation and by way of example only.

28.13 Headings. All article and paragraph headings and captions are purely for convenience and will not affect the interpretation of this Lease. Any reference to a specific article, paragraph or section will be interpreted as a reference to such article, paragraph or section of this Lease.

86 ARTICLE 28 MISCELLANEOUS

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28.14 Invalidity of any Provision. If any of the provisions of this Lease become invalid, illegal or unenforceable in any respect under any Law, the validity, legality and enforceability of the remaining provisions will not in any way be affected or impaired.

28.15 Negotiation. The terms of this Lease are agreed by LESSOR from its principal place of business in *

28.16 Time is of the Essence. Time is of the essence in the performance of all obligations of the parties under this Lease and, consequently, all time limitations set forth in the provisions of this Lease will be strictly observed.

28.17 Amendments in Writing. The provisions of this Lease may only be amended or modified by a writing executed by LESSOR and LESSEE.

28.18 Counterparts. This Lease may be executed in any number of identical counterparts, each of which will be deemed to be an original, and all of which together will be deemed to be one and the same instrument when each party has signed and delivered one such counterpart to the other party.

28.19 Delivery of Documents by Fax. Delivery of an executed counterpart of this Lease or of any other documents in connection with this Lease by fax will be deemed as effective as delivery of an originally executed counterpart. Any party delivering an executed counterpart of this Lease or other document by fax will also deliver an originally executed counterpart, but the failure of any party to deliver an originally executed counterpart of this Lease or such other document will not affect the validity or effectiveness of this Lease or such other document.

28.20 Entire Agreement. The Operative Documents constitute the entire agreement between the parties in relation to the leasing of the Aircraft by LESSOR to LESSEE and supersede all previous proposals, agreements and other written and oral communications in relation hereto. The parties acknowledge that there have been no representations, warranties, promises, guarantees or agreements, express or implied, except as set forth herein.

28.21 Witness. *has executed and delivered this Lease to LESSOR only for the purpose of recording his status as a witness thereto.

87 ARTICLE 28 MISCELLANEOUS

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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IN WITNESS WHEREOF, LESSEE and LESSOR have caused this Lease to be executed by their respective officers as of October 26, 2001.

*	*
*
By: *	By: *
Its:*	Its: *
	By: *
	Its:

*

*

*

*

*

*

*

SIGNATURE PAGE

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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EXHIBIT A             AIRCRAFT DESCRIPTION

Aircraft Manufacturer and Model:	Airbus A319-100
Engine Manufacturer and Model:	IAE V2524-A5
Engine Serial Numbers:	To be identified in the Acceptance Certificate
Audio and Video Equipment:	Furnished
Configuration:	8C/118Y
Specification:	Similar to current LESSEE’s A321-200 MSN (including cargo loading system) and as further agreed in the specification meeting with Manufacturer in September 2001

*

*

*

*

*

*

*

89 EXHIBIT A AIRCRAFT DESCRIPTION

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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EXHIBIT B PARTICIPATION AGREEMENT

EXHIBIT ?

PARTICIPATION AGREEMENT

90

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EXHIBIT C CERTIFICATE OF INSURANCE

[Refer to Aircraft Lease Agreement dated as of October 26, 2001 between LESSEE and LESSOR (the “Lease”). If applicable, insurance certificates from both the insurers and reinsurers will be provided. If there is a LESSOR’s Lender, include references to it where appropriate after references to LESSOR.]

To: *             (“LESSOR”)

*

*

United States

Re: *

A319-100

Manufacturer’s Serial No.:    TBD

Registration Mark:__ (the “Aircraft”)

The following security has subscribed to the insurance and/or reinsurance policies:

[LIST COMPANIES & PERCENTAGES]

THIS IS TO CERTIFY THAT, as Insurance Brokers, we have effected Fleet Insurance in respect of aircraft owned or operated by LESSEE (including the Aircraft) as specified below.

AIRCRAFT HULL ALL RISKS

COVERING:

All risks of physical loss or damage to the Aircraft from any cause (subject only to the exclusions as specified below), for an Agreed Value of Aircraft in the amount of [list amount calculated in accordance with Article 19.1]

DEDUCTIBLES:

US$ [AMOUNT] each and every loss. Not applicable to Total Loss/Constructive Total Loss or Arranged Total Loss

91 EXHIBIT C CERTIFICATE OF INSURANCE

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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GEOGRAPHICAL COVERAGE:

Worldwide

AVIATION AND AIRLINE GENERAL THIRD PARTY LIABILITY

COVERING:

Aircraft Third Party, Passenger, Baggage, Cargo and Mail Liability and Airline General Third Party Liability (including Premises, Hangarkeepers and Products Liability) for combined single limit of not less than US$ * (or such higher amount as LESSEE may carry on any other aircraft in its fleet) any one accident/occurrence (but in the aggregate in relation to Products Liability), extended to cover LESSEE’S liability under the Lease to the extent of the risks covered by the policy including war and allied perils under Extended Coverage Endorsement as per AVN 52 subject only to exclusions as specified below and AVN 52D

GEOGRAPHICAL LIMITS:

Worldwide

HULL WAR AND ALLIED PERILS

COVERING:

Hull War Risks as per LSW555.B, but including (a) confiscation or requisition (including by State of Registration and state where airline is domiciled), (b) hijacking or other unlawful seizure or wrongful exercise of control of the Aircraft or crew in flight (including any attempt at such seizure or control) and including “All Risks” Continuation Clause and Extortion Risks (including expenses) and covering claims excluded from Hull All Risks Policy while Aircraft outside Assured’s control by reason of perils insured under this policy, for an Agreed Value of Aircraft in the amount of [list amount calculated in accordance with Article 19.1]

DEDUCTIBLE:

No deductible

92 EXHIBIT C CERTIFICATE OF INSURANCE

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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GEOGRAPHICAL LIMITS:

Worldwide

AIRCRAFT SPARES ALL RISKS INSURANCE

COVERING:

All risks of physical loss or damage to Aircraft Parts or spares or Engines at all times when removed from the Aircraft from whatever cause, subject only to the exclusions specified below, including the risks set down in AVN 48B other than paragraphs (a) and (b) thereof (but including paragraph (a) in respect of transit risks) for limits of not less than:

US$ * any one location

US$ * any one sending

and covering:

With respect to an Engine, an agreed value of      or, with LESSOR’s written

concurrence, replacement cost

With respect to Parts, replacement cost

DEDUCTIBLE:

US$ * each and every loss

GEOGRAPHICAL COVERAGE:

Worldwide

INSURANCE REQUIRED BY MANUFACTURER

LESSEE will carry the insurance required by Manufacturer in connection with LESSOR’s assignment of Manufacturer’s warranties and product support to LESSEE

CONTRACTUAL INDEMNITY

93 EXHIBIT C CERTIFICATE OF INSURANCE

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the commission.

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LESSEE has insurance coverage for the indemnities agreed to by LESSEE pursuant to Article 17 of the Lease

PERIOD OF COVERAGE (ALL POLICIES)

From Delivery Date of Aircraft to [EXPIRATION DATE]

It is further certified that LESSOR has an interest in respect of the Aircraft under the Lease. Accordingly, with respect to losses occurring during the period from the Effective Date until the expiry of the Insurance or until the expiry or agreed termination of the Lease or until the obligations under the Lease are terminated by any action of the Insured or LESSOR and in consideration of the Additional Premium it is confirmed that the Insurance afforded by the Policy is in full force and effect and it is further agreed that the following provisions are specifically endorsed to the Policy.

2. UNDER THE HULL (ALL RISKS AND HULL WAR AND ALLIED RISKS) AND AIRCRAFT SPARES INSURANCES

(a) *ONLY-NO OTHER CONTRACT PARTIES] In respect of any claim on the Aircraft that becomes payable on the basis of a Total Loss, settlement will be made to, or to the order of LESSOR as sole loss payee, up to the Agreed Value. With respect to repairable damage to an Aircraft or Engine, LESSOR will receive all insurance proceeds in excess of US$ *provided that upon receipt by the insurance broker of written notice of a material default on the part of LESSEE, all insurance proceeds which otherwise would be payable to LESSEE will be made directly to LESSOR. In respect of any other claim, settlement (net of any relevant policy deductible) will be made with such party(ies) as may be necessary to repair the Aircraft unless otherwise agreed after consultation between the Insurers and the insured and, where necessary under the terms of the Lease, LESSOR. Such payments will only be made provided they are in compliance with all applicable laws and regulations.

(b) Insurers agree on a 50/50 settlement in terms of AVS 103.

(c) Insurers have no right to replace the Aircraft on a Total Loss (arranged, constructive or otherwise).

(d) Insurers recognize that LESSEE and LESSOR have agreed that a Total Loss of the Airframe will constitute a Total Loss of the Aircraft.

(e) In the event of Total Loss of the Aircraft, Insurers agree to pay LESSOR all amounts up to the Agreed Value based solely upon LESSOR’s (not LESSEE’s) execution

94 EXHIBIT C CERTIFICATE OF INSURANCE

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the commission.

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of the appropriate form of release/discharge document. LESSOR may sign any required release in lieu of the Insured in the event of a Total Loss, Constructive Total Loss or Arranged Total Loss.

(f) “Cut-through clause”: Insurers confirm that in the event of any claim arising under the hull insurances, the Reinsurers will in lieu of payment of the Insurers, its successors in interest and assigns, pay to the person named as sole loss payee under the original insurances that portion of any loss due for which the Reinsurers would otherwise be liable to pay the Insurers (subject to proof of loss), it being understood and agreed that any such payment by any Reinsurers will fully discharge and release such Reinsurer from any and all further liability in connection therewith and provide for payment to be made notwithstanding (i) any bankruptcy, insolvency, liquidation or dissolution of the Insurers and (ii) that the Insurers have made no payment under the original insurance policies.

(g) Insurers confirm that under the insurance policies, if the Insured installs an engine owned by a third party on the Aircraft, either (i) the hull insurance will automatically increase to such higher amount as is necessary in order to satisfy both LESSOR’S requirement to receive the Agreed Value in the event of a Total Loss, Constructive Total Loss or Arranged Total Loss and the amount required by the third party engine owner, or (ii) separate additional insurance on such engine will attach in order to satisfy separately the requirements of the Insured to such third party engine owner.

3. UNDER THE LEGAL LIABILITY INSURANCE

(a) Subject to the provisions of this Endorsement, the Insurance will operate in all respects as if a separate Policy had been issued covering each party insured hereunder, but this provision will not operate to include any claim arising howsoever in respect of loss or damage to the Aircraft insured under the Hull or Spares Insurance of the Insured. Notwithstanding the foregoing the total liability of Insurers in respect of any and all Insureds will not exceed the limits of liability stated in the Policy.

(b) The Insurance provided hereunder will be primary and without right of contribution from any other insurance which may be available to LESSOR.

4. UNDER ALL INSURANCES

(a) LESSOR, its successors and assigns, and (with respect to Aviation and Airline General Third Party Liability only) its directors, officers and employees for their respective rights and interests, are included as Additional Insured.

95 EXHIBIT C CERTIFICATE OF INSURANCE

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the commission.

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(b) The cover afforded to LESSOR by the Policy in accordance with this Endorsement will not be invalidated by any act or omission (including misrepresentation and non-disclosure) of any other person or party which results in a breach of any term, condition or warranty of the Policy.

(c) LESSOR will have no responsibility for premium and insurers will waive any right of set-off or counterclaim against LESSOR except in respect of outstanding premium in respect of the Aircraft, provided that Insurer may only set-off for premiums against the proceeds of the hull insurance for outstanding premiums in connection with hull all risks and hull war and allied perils insurance.

(d) Upon payment of any loss or claim to or on behalf of LESSOR, Insurers will to the extent and in respect of such payment be thereupon subrogated to all legal and equitable rights of LESSOR indemnified hereby (but not against LESSOR). Insurers will not exercise such rights without the consent of those indemnified, such consent not to be unreasonably withheld. At the expense of Insurers LESSOR will do all things reasonably necessary to assist the Insurers to exercise said rights.

(e) Except in respect of any provision for Cancellation or Automatic Termination specified in the Policy or any endorsement thereof, cover provided by this Endorsement may only be cancelled or materially altered in a manner adverse to LESSOR by the giving of not less than thirty (30) days notice in writing to LESSOR. Notice will be deemed to commence from the date such notice is given by the Insurers. Such notice will NOT, however, be given at normal expiry date of the Policy or any endorsement.

5. EXCEPT AS SPECIFICALLY VARIED OR PROVIDED BY THE TERMS OF THIS CERTIFICATE

(a) IS COVERED BY THE POLICY SUBJECT TO ALL TERMS, CONDITIONS, LIMITATIONS, WARRANTIES, EXCLUSIONS AND CANCELLATION PROVISIONS THEREOF.

(b) THE POLICY WILL NOT BE VARIED BY ANY PROVISIONS CONTAINED IN THE LEASE WHICH PURPORT TO SERVE AS AN ENDORSEMENT OR AMENDMENT TO THE POLICY.

SUBJECT (save as specifically stated in this Certificate) to policy terms, conditions, limitations and exclusions.

Yours faithfully,

[BROKERS]

96 EXHIBIT C CERTIFICATE OF INSURANCE

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the commission.

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EXHIBIT D                        BROKERS’ LETTER OF UNDERTAKING

To:	*
	*
	*
	United States

Date:                                                                                                       Our Ref:

Dear Sirs:

Re:	*
	A319-100
	Manufacturer’s Serial Number.         TBD
	Registration Mark:

We confirm that insurance has been effected for the account of [LESSEE] (the “Operator”) covering all aircraft owned or operated by them, including the above-referenced aircraft (the “Aircraft”). [Also confirm, if applicable, the amount of any hull all risks or hull war and allied perils on the Aircraft which LESSEE is carrying in excess of the Agreed Value (which excess insurance would be payable to LESSEE). Such excess insurance may not exceed Ten percent (10%) of the Agreed Value.]

Pursuant to instructions received from the Operator and in consideration of your approving the arrangement of the Operator’s “Fleet Policy” (under which the above-referenced Aircraft is insured) through the intermediary of ourselves as Brokers in connection with the insurance (the “Insurance”) mentioned in our Certificate of Insurance (Reference No. [    ] dated [    ] and attached hereto), we undertake as follows:

1. In relation to the Hull and War Risks Insurance to hold to your order the insurance Slips or Contracts and any Policies which may be issued or any policies substituted (with your consent) therefor (but only insofar as the same relate to the Aircraft only) and the benefit of the Hull and War Risks Insurance thereunder, but subject to our requirements to operate the Fleet Policy insofar as it relates to any other aircraft insured thereunder.

2. To advise you of any of the following:

(a) If any insurer cancels or gives notice of cancellation of any of the Insurance at least thirty (30) days (or such lesser period as may be available in the case of War and Allied Perils) before such cancellation is to take effect in respect of the Aircraft.

97 EXHIBIT D BROKERS’ LETTER OF UNDERTAKING

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the commission.

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(b) Of any act or omission or of any event (including non-payment of premium) of which we have knowledge or are notified and which might invalidate or render unenforceable in whole or in part any of the Insurance, insofar as the same relate to the Aircraft.

(c) If we do not receive instructions to renew all or any of the Insurance at least thirty (30) days prior to their expiration.

(d) If any of the Insurance are not renewed on the same terms (save as to premium and period of cover and as you might otherwise have notified us to be acceptable to you) seven (7) days prior to expiry thereof.

The above undertakings are given subject to our continuing appointment for the time being as Insurance Brokers to the Operator.

We also undertake to advise you if we cease to be Insurance Brokers to the Operator.

Yours faithfully,

98 EXHIBIT D BROKERS’ LETTER OF UNDERTAKING

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the commission.

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EXHIBIT E                        AVIATION AUTHORITY UNDERTAKING LETTER

The Aviation Authority undertakes that:

1. No cancellation, alteration or change in the registration of the Aircraft or recordation of liens will be made until receipt of written consent to such specified change from LESSOR.

2. On written request of LESSOR (which will include telex) the Aviation Authority will promptly de-register the Aircraft and provide such confirmation as is requested by LESSOR together with any other confirmation or information LESSOR may require to enable the Aircraft to be re-registered in any other country or state.

3. On written request of LESSOR (which will include telex) the Aviation Authority will release, remove or cancel all liens it may have over the Aircraft, and will acknowledge in doing so that all liability for such liens as discharged are for the sole account of LESSEE.

4. The Aviation Authority will not allow the registration, use or operation of the Aircraft for any purpose other than the category of fare paying passenger transportation.

5. The Aviation Authority will consent to the export of the Aircraft on the termination of the Lease Term or at LESSOR’S written request.

99 EXHIBIT E AVIATION AUTHORITY UNDERTAKING LETTER

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the commission.

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EXHIBIT F                        ESTOPPEL AND ACCEPTANCE CERTIFICATE

* (“LESSEE”), a corporation organized under the laws of * does hereby represent, acknowledge, warrant and agree as follows:

1. LESSEE and *, as LESSOR, have entered into an Aircraft Lease Agreement dated as of October 26, 2001 (hereinafter referred to as the “Lease”). Words used herein with capital letters and not otherwise defined will have the meanings set forth in the Lease.

2. LESSEE has this              day of                     ,              (Time:                     ) at                                      received from LESSOR possession of:

(a) One (1) A319-100 Aircraft bearing Manufacturer’s serial number (TBD) and Registration Mark     , together with two (2) IAE V2524-A5 Engines bearing manufacturer’s serial numbers      and      (each of which has 750 or more rated take-off horse power) and an APU bearing manufacturer’s serial number             , all in airworthy condition.

(b) All Aircraft Documentation, including the usual and customary manuals, logbooks, flight records and historical information regarding the Aircraft, Engines and Parts.

3. All of the foregoing has been delivered and accepted on the date set forth above to LESSEE’S full satisfaction and pursuant to the terms and provisions of the Lease.

4. The Agreed Value of the Aircraft is US$                            .

5. The amount of fuel on board at Delivery is                  (circle one) pounds/kilos (             gallons).

6. Pursuant to the terms of the Lease, the first Rent payment was due and payable three (3) Business Days prior to the date set forth above and all subsequent monthly payments are due and payable as provided in Article 5.3.2 of the Lease.

7. The Aircraft, Engines, Parts and Aircraft Documentation as described in the Lease have been fully examined by LESSEE and have been received in a condition fully satisfactory to LESSEE and in full conformity with the Lease in every respect

8. The Lease is in full force and effect, LESSOR has fully, duly and timely performed all of its obligations of every kind or nature thereunder and LESSEE has no claims, offsets, deductions, set-off or defenses of any kind or nature in connection with the Lease.

100 EXHIBIT F ESTOPPEL AND ACCEPTANCE CERTIFICATE

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the commission.

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9. LESSOR’S Lender may rely upon all of the foregoing in granting substantial financial accommodations to LESSOR and LESSEE understands and agrees that any funds being advanced by LESSOR’s Lender will be made in reliance upon the foregoing.

10. Prior to the Delivery Date, LESSEE has obtained all required permits, authorizations, licenses and fees of the State of Registration or any Government Entity thereof necessary in order for LESSEE to operate the Aircraft as permitted by the terms of the Lease.

Dated on the date set forth above

*

*

        By:

        Title:

Attachments: 1. List of Aircraft Documentation

2. List of Loose Equipment

101 EXHIBIT F ESTOPPEL AND ACCEPTANCE CERTIFICATE

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the commission.

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EXHIBIT G                      OPINION OF COUNSEL

TO BE GIVEN BY INDEPENDENT OUTSIDE COUNSEL OF LESSEE OR OTHER LAWYERS ACCEPTABLE TO LESSOR

TO:	*
	*
	*
	United States

Gentlemen:

This opinion is furnished to you pursuant to Article 7 of the Aircraft Lease Agreement dated as of October 26, 2001 (the “Lease”) between * (“LESSEE”) * and (“LESSOR”). Defined terms in this opinion are used herein as defined in the Lease.

I have acted as counsel for LESSEE in connection with the preparation, execution and delivery of the Lease.

In that connection I have examined:

(a) The Lease and Estoppel and Acceptance Certificate;

(b) The charter of LESSEE and all amendments thereto (the “Charter”); and

(c) Such other documents, agreements and instruments, and such treaties, laws, rules, regulations, decrees and the like, as I have deemed necessary as a basis for the opinions hereinafter expressed.

[                  (d) All of the agreements and any amendments thereto between LESSEE and all other lessors and lenders of LESSEE covering other aircraft operated by LESSEE on which the Engines can be installed.]

Based upon the foregoing and having regard for legal considerations which I deem relevant, I am of the opinion that:

2. LESSEE is a corporation duly incorporated, validly existing and in good standing under the Laws of *. It has the corporate power and authority to carry on its business as presently conducted and to perform its obligations under the Lease.

102 EXHIBIT G OPINION OF COUNSEL

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the commission.

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3. No authorization, approval, consent, license or order of, or registration with, or the giving of notice to the Aviation Authority or any other regulatory body or authority is required for the valid authorization, execution, delivery and performance by LESSEE of the Lease.

4. The Lease and the Estoppel and Acceptance Certificate have each been duly authorized, executed and delivered by LESSEE. Each such instrument is a valid, enforceable and binding obligation of LESSEE except as enforceability may be limited by bankruptcy, insolvency, reorganization or other Laws of general application affecting the enforcement of creditors’ rights.

5. The execution and delivery of the Lease and the Estoppel and Acceptance Certificate, the consummation by LESSEE of the transactions contemplated therein and compliance by LESSEE with the terms and provisions thereof do not and will not contravene any Law applicable to LESSEE, or result in any breach of or constitute any default under or result in the creation of any lien, charge or encumbrance upon any property of LESSEE, under any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, bank loan or credit agreement, corporate charter, by-law or other agreement or instrument to which LESSEE is a party or by which LESSEE or its properties or assets may be bound or affected.

6. [Describe the process in * with respect to registration of the Aircraft in the name of LESSOR and any other steps required or recommended in * in order to protect the interests of LESSOR in the Aircraft]. Such registration of the Aircraft is not inconsistent with, and would not result in the loss of, LESSOR’s title to and ownership of the Aircraft. Except for the foregoing, no other filing or recording of any instrument or document or any other acts are necessary or advisable under the laws of * to protect LESSOR’s title to and ownership of the Aircraft. [In the opinion given at Delivery, also confirm that the Aircraft is registered in the name of LESSOR.]

7. Except for any filing or recording that may be required with the [NAME OF AIRCRAFT REGISTER] and except for [DESCRIBE SUCH OTHER FILINGS OR RECORDINGS], no filing or recording of any instrument or document (including the filing of any financial statement) is necessary under the laws of * in order for the Lease to constitute a valid and perfected lease of record relating to the Aircraft, it being understood that such counsel expresses no opinion as to the nature of LESSOR’s title to the Aircraft on the Delivery Date. [In opinion given at Delivery, also confirm that the filings and other steps described have been accomplished.]

8. LESSEE holds all licenses, certificates and permits from applicable governmental authorities in * necessary for the conduct of its business as a certificated air carrier and performance of its obligations under the Lease.

9. To my knowledge, there are no suits or proceedings pending or threatened against LESSEE before any Government Entity against or affecting LESSEE which, if adversely

103 EXHIBIT G OPINION OF COUNSEL

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the commission.

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determined, would have a material adverse effect on the financial condition or business of LESSEE or its ability to perform under the Lease, except as described in the filings provided to LESSOR pursuant to Article 22.

10. Under the laws of *, LESSEE will not be required to make or deduct any withholding or other Tax from any payment it may make under the Lease.

11. The obligations of LESSEE under the Lease are direct, general and unconditional obligations of LESSEE and rank or will rank at least pari passu with all other present and future unsecured and unsubordinated obligations (including contingent obligations) of LESSEE, with the exception of such obligations as are mandatorily preferred by law and not by reason of any encumbrance.

12. LESSEE, under the laws of * or any other jurisdiction affecting LESSEE, is subject to private commercial law and suit. Neither LESSEE nor its properties or assets have the right of immunity from suit or execution on the grounds of sovereignty in such jurisdictions and the performance by LESSEE of its obligations under the Lease constitute commercial acts done for commercial purposes.

13. On termination of the Lease, LESSOR would be entitled to repossess the Aircraft and export it from *

14. There is no applicable usury or interest limitation Law in * which may restrict the recovery of payments in accordance with the Lease.

15. LESSOR will not violate any Law or become liable to any tax in * by reason of entering into or performing its obligations under the Lease and it is not necessary to establish a place of business in * in order to enforce any provisions of the Lease.

16. The choice of California Law to govern the Lease will be upheld in any action in the courts of * Any judgment given by United States or California courts would be recognized and accepted by the courts in *

[        17. None of the agreements and any amendments thereto between LESSEE and all other lessors and lenders to LESSEE covering other aircraft operated by LESSEE on which the Engines can be installed contain terms which provide or contemplate that such other lessors or lenders will obtain any right, title or interest in an Engine which is installed on such other aircraft.]

Very truly yours,

104 EXHIBIT G OPINION OF COUNSEL

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the commission.

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EXHIBIT H                         FORM OF POWER OF ATTORNEY

* (“*”) hereby irrevocably appoints * (“*”) of * , U.S.A. as AM’s true and lawful attorney so that * may take any of the following actions in the name of and for * with respect to the A319-100 aircraft bearing manufacturer’s serial number (TBD) (the “Aircraft”) leased by * to * pursuant to an Aircraft Lease Agreement dated as of October 26, 2001 (the “Lease”):

1. Pursuant to the Lease, * has procured and is maintaining insurances for the Aircraft. * has been named sole loss payee on the all risk hull and war risk insurances for the Aircraft. In the event of a total loss or constructive total loss of the Aircraft, * is entitled to receive insurance proceeds in an amount equal to the Agreed Value. * may take all action and sign all documents otherwise required to be performed by * including execution on behalf of * of an appropriate form of discharge/release document, in order for * to collect such insurance proceeds.

2. In the exercise of the rights of * under the Lease to recover the Aircraft from * and * after termination of the Lease due to an Event of Default under the Lease or for termination of the Lease due to any other reason, * may take all action otherwise required to be performed by * before the authorities and courts in * in order to cause the Aircraft to be repossessed by *, deregistered from the [NAME OF REGISTRY] and exported from*.

3. In the exercise of the rights mentioned in paragraphs 1 and 2, * may make any declarations or statements and sign any public or private documents which may be considered necessary or appropriate.

4. * may delegate the powers conferred hereby, in whole or in part, to any individual(s), including but not limited to employees of * or legal counsel in *.

* is empowered to determine in its sole discretion when to exercise the powers conferred upon * pursuant to this Power of Attorney. Any person, agency or company relying upon this Power of Attorney need not and will not make any determination or require any court judgment as to whether an Event of Default has occurred under the Lease or whether the Lease has been terminated. * hereby waives any claims against (a) any person acting on the instructions given by * or its designee pursuant to this Power of Attorney and (b) any person designated by * or an officer of * to give instructions pursuant to this Power of Attorney. * also agrees to indemnify and hold harmless any person, agency or company which may

105 EXHIBIT H FORM OF POWER OF ATTORNEY

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the commission.

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act in reliance upon this Power of Attorney and pursuant to instructions given by * or its designee.

This Power of Attorney is irrevocable until the Aircraft has been returned to the possession of *, deregistered and exported from *.

* has made and delivered this Power of Attorney on                in Hamburg, Germany.

*

*

By:        

Title:

106 EXHIBIT H FORM OF POWER OF ATTORNEY

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the commission.

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EXHIBIT I         ASSIGNMENT OF RIGHTS (AIRFRAME)

[INSERT PROPER FORM BASED ON MANUFACTURER]

107 EXHIBIT I ASSIGNMENT OF RIGHTS (AIRFRAME)

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EXHIBIT J         ASSIGNMENT OF RIGHTS (ENGINES)

[INSERT PROPER FORM BASED ON MANUFACTURER]

108 EXHIBIT J ASSIGNMENT OF RIGHTS (ENGINE)

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EXHIBIT K         RETURN ACCEPTANCE RECEIPT

Date:                     ,                     

1. *, as LESSEE, and *, as LESSOR, have entered into an Aircraft Lease Agreement dated as of October 26, 2001 (the “Lease”). Words used herein with capital letters and not otherwise defined will have the meanings set forth in the Lease.

2. LESSOR has this              day of                     ,              (Time:            ) at                              received from LESSEE possession of:

(a) One (1) A319-100 Aircraft bearing Manufacturer’s serial number (TBD), together with two (2) IAE V2524-A5 Engines bearing manufacturer’s serial numbers      and     , all Parts attached thereto and thereon in an airworthy condition and

(b) All Aircraft Documentation, including the usual and customary manuals, logbooks, flight records and historical information regarding the Aircraft, Engines and Parts, as listed in the Document Receipt attached hereto.

3. The Airframe, Engines and Parts had the following hours/cycles at return:

(a) Airframe:

Total hours:                      Total Landings:                    

                 hours/                  cycles since last “C” check

                 hours/                  cycles since last “A” check

(b) Engines:

				Hrs/Cycles since
Position	Serial No.	Total Hours	Total Cycles	last shop visit

	Time Remaining to Next Life Limited Part Removal
	Hours	Cycles
MSN
MSN

109 EXHIBIT K RETURN ACCEPTANCE RECEIPT

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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(c) APU:     MSN                     

Total hours:                     

                 hours/                  cycles remaining until next HSI inspection

                 hours/                  cycles remaining on turbine and compressor life limited parts

(d) Landing Gears:

Position	Serial No.	Total Hrs/Cycles	Hrs/Cycles since last Overhaul	Hrs/Cycles to next Sched. Removal
Nose
Right Main
Left Main

(e) Status of components or Parts with time/cycle and calendar limits (see attached sheet)

(f) Fuel on board at return:                  (circle one) pounds/kilos (                 gallons)

4. Other technical information regarding the Aircraft and its components are correctly set forth on the Technical Evaluation Report (in the form of Exhibit M) attached hereto.

5. The above specified aircraft, engines and documentation are hereby accepted by LESSOR subject to (a) the provisions of the Lease and (b) correction by LESSEE (or procurement by LESSEE at LESSEE’s cost) as soon as reasonably possible of the discrepancies specified in Attachment 2 hereto.

6. Subject to the following paragraph, the leasing of the Aircraft by LESSOR to LESSEE pursuant to the Lease is hereby terminated without prejudice to LESSEE’s continuing obligations under the Lease including, without limitation, paragraph 5(b) above and Articles 10.5, 16 and 17.

7. LESSEE represents and warrants that during the term of the Lease all maintenance and repairs to the Airframe and Engines were performed in accordance with the requirements

110 EXHIBIT K RETURN ACCEPTANCE RECEIPT

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contained in the Lease. LESSEE further confirms that all of its obligations under the Lease whether accruing prior to the date hereof or which survive the termination of the Lease by their terms and accrue after the date hereof, will remain in full force and effect until all such obligations have been satisfactorily completed.

8. This Return Acceptance Supplement is executed and delivered by the parties in [place].

IN WITNESS WHEREOF, the parties hereto have caused this Return Acceptance Receipt to be executed in their respective corporate names by their duly authorized representatives as of the day and year first above written.

*	*
*	*

By:	By:
Its:	Its:

Attachments:	1.	Aircraft Documentation
	2.	List of Discrepancies
	3.	Technical Evaluation Report (in the form of Exhibit M)

111 EXHIBIT K RETURN ACCEPTANCE RECEIPT

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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ATTACHMENT 1

TO RETURN ACCEPTANCE SUPPLEMENT

AIRCRAFT DOCUMENTATION

[The (a) manuals and (b) Aircraft records and historical documents set forth below are to be returned with the Aircraft in a current, up-to-date and correct status]

MANUALS

1. FAA approved Airplane Flight Manual

2. Manufacturer’s Operations Manual—Volume No.                     

3. Quick Reference Handbook

4. Maintenance Manuals

5. Wiring Diagram Manuals

6. Structural Repair Manual

7. Illustrated Parts Catalog

8. Vendor Illustrated Parts Catalog

9. Overhaul Manuals

10. Vendor Overhaul Manuals

11. Drawings (Major Assembly and Installation)

12. Weight and Balance Control and Loading Manual

13. Weight and Balance Manual Supplement

14. Actual Weight and Balance Compliance

112 EXHIBIT K RETURN ACCEPTANCE RECEIPT

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AIRCRAFT RECORDS AND HISTORICAL DOCUMENTS

1. Aircraft log book (current and file copies)

2. Aircraft Readiness Log (revised to time of return)

3. Maintenance Time Control Report (components, maintenance visit, special items next due Airframe hours and cycles)

4. Aircraft previous maintenance visit record including the last inspection performed

5. Airworthiness Directive Compliance Summary

6. Rigging Document

7. Serviceable Tags for all rotable components installed (Airframe & Engines)

8. ADs requiring continuous surveillance

9. Service bulletin terminated accomplishment status

10. Service bulletin requiring continuous surveillance summary and maintenance control action

11. Airframe and component history records

12. FAA Form 337 (or equivalent) for Airframe, repair/overhaul certification of last major visit

13. FAA Form 337 (or equivalent) for each Engine, repair/overhaul certification of last shop visit

14. Engine Readiness Log for each Engine (components installed)

15. Summary of Service Bulletins accomplished for each Engine

16. Summary of ADs accomplished for each Engine

17. SB and AD status requiring continuous surveillance with maintenance, control action for each Engine

18. Engine time summary sheet including life limited items (for each Engine)

19. Engine log books for each Engine (current and file copies)

113 EXHIBIT K RETURN ACCEPTANCE RECEIPT

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ATTACHMENT 2

TO RETURN ACCEPTANCE SUPPLEMENT

DISCREPANCIES

114 EXHIBIT K RETURN ACCEPTANCE RECEIPT

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EXHIBIT L        MONTHLY REPORT

(SEE FOLLOWING SHEET)

115 EXHIBIT L MONTHLY REPORT

MONTHLY AIRCRAFT UTILIZATION AND STATUS REPORT

Report Due Date:                                            Page 1 of 2

To:	*	Fax: *
	*
	*, United States
	Attn: Finance Department

From:          *

Contact:                                                                      

AIRCRAFT TYPE:	REGISTRATION:
ENGINE TYPE:
SERIAL NUMBER:	MONTH OF                                               ,

NOTE:         PLEASE RECORD TIME IN HOURS AND MINUTES NOT DECIMALS.

Aircraft Total Time Since New As Of Last Month:	Hours:	Min:
Aircraft Total Time Since New:	Hours:	Min:
Aircraft Total Cycles Since New:	Cycles:
Airframe Hours Flown During Month:	Hours:	Min:
Airframe Cycles/Landings During Month:	Cycles:
Time Remaining to “D” or Heavy Maintenance Check:

	HOURS FLOWN DURING MONTH		X		US$ PER FLIGHT HOUR	=		OVERHAUL RESERVES
TOTAL AIRFRAME:		Hrs:		X			=
Original Engine Serial Number:		Hrs:        Min:		X			=
Original Engine Serial Number:		Hrs:        Min:		X			=
TOTAL AMOUNT OF OVERHAUL RESERVES (US$) PAID THIS MONTH FOR AIRFRAME AND ENGINES:

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

Monthly Aircraft Utilization and Status Report
From:  *	Page 2 of 2

ENGINE SERIAL NUMBER:		ENGINE SERIAL NUMBER:
ORIGINAL POSITION:		ORIGINAL POSITION:
ACTUAL LOCATION:		ACTUAL LOCATION:
CURRENT THRUST RATING:		CURRENT THRUST RATING:
	HOURS:/MIN:		HOURS:/MIN:
Total Time Since New As Of Last Month:		Total Time Since New As Of Last Month:
Total Time Since New:		Total Time Since New:
Total Cycles Since New:		Total Cycles Since New:	.
Hours Flown During Month:		Hours Flown During Month:
Cycles During Month:		Cycles During Month:

IMPORTANT:     IF * OWNED ENGINE IS REMOVED OR INSTALLED ON ANOTHER AIRCRAFT IT MUST BE REPORTED MONTHLY ON THIS FORM.

* The confidential portion has been omitted pursuant to a request for confidential treatment filed by Air T, Inc. with the Securities Exchange Commission and filed separately with the Commission.

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EXHIBIT M         TECHNICAL EVALUATION REPORT

(SEE FOLLOWING SHEETS)

118 EXHIBIT M TECHNICAL EVALUATION REPORT

EX-10.13

Exhibit 10.13

PROMISSORY NOTE

Principal $18,000,000.00	Loan Date 09-14-2018	Maturity 09-14-2021	Loan No 20007675682	Call / Coll 220 / 61	Account 0003626486	Officer ***	Initials
References in the boxes above are for Lender’s use only and do not limit the applicability of this document to any particular loan or item. Any item above containing “***” has been omitted due to text length limitations.

Borrower:	CONTRAIL AVIATION SUPPORT, LLC	Lender:	OLD NATIONAL BANK
	CONTRAIL AVIATION LEASING, LLC		619 Madison/Southern Wl Coml LPO
	435 INVESTMENT CT		23 W Main St
	VERONA, Wl 53593-8788		Madison, Wl 53703

Principal Amount: $18,000,000.00 Date of Note: September 14, 2018

PROMISE TO PAY. CONTRAIL AVIATION SUPPORT, LLC; and CONTRAIL AVIATION LEASING, LLC (‘‘Borrower’’) jointly and severally promise to pay to OLD NATIONAL BANK (“Lender”), or order, in lawful money of the United States of America, the principal amount of Eighteen Million & 00/100 Dollars ($18,000,000.00), together with interest on the unpaid principal balance from September 14, 2018, until paid in full.

PAYMENT. Subject to any payment changes resulting from changes in the Index, Borrower will pay this loan in accordance with the following payment schedule, which calculates interest on the unpaid principal balances as described in the “INTEREST CALCULATION METHOD” paragraph using the interest rates described in this paragraph: 35 monthly consecutive interest payments, beginning October 14, 2018, with interest calculated on the unpaid principal balances using an interest rate based on the Index described below, plus a margin of 3.750 percentage points; 35 monthly consecutive principal payments of $500,000.00 each, beginning October 14, 2018, during which interest continues to accrue on the unpaid principal balances using an interest rate based on the Index described below, plus a margin of 3.750 percentage points; and one principal and interest payment on September 14, 2021, with interest calculated on the unpaid principal balances using an interest rate based on the Index described below, plus a margin of 3.750 percentage points. The final payment will be for all principal and accrued interest not yet paid, together with any other unpaid amounts under this Note. Notwithstanding the foregoing, the rate of interest accrual described for the principal only payment stream applies only to the extent that no other interest rate for any other payment stream applies. Unless otherwise agreed or required by applicable law, payments will be applied first to any accrued unpaid interest; then to principal; then to any escrow or reserve account payments as required under any mortgage, deed of trust, or other security instrument or security agreement securing this Note; then to any late charges; and then to any unpaid collection costs. Borrower will pay Lender at Lender’s address shown above or at such other place as Lender may designate in writing.

PAYMENT ADJUSTMENT REQUEST. Borrower anticipates making significant principal payments on the Note between July 2019 and November 2019 (the “Anticipated Principal Reduction”). Upon receipt of the Anticipated Principal Reduction, Borrower may request that Lender recalculate the remaining monthly payment amounts based on the outstanding principal balance of the Note after applying the Anticipated Principal Reduction, the current interest rate based on the Index plus a margin of 3.750, and the remaining amortization. Notwithstanding anything to the contrary contained herein, Borrower may only request one payment re-calculation adjustment and such request may only be made after Lender has received and applied the required Anticipated Principal Reduction to the Note.

VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from time to time based on changes in an independent index which is the one month London Interbank Offered Rate (LIBOR) as published in the Wall Street Journal (the “Index”). The Index is not necessarily the lowest rate charged by Lender on its loans. If the Index becomes unavailable during the term of this loan. Lender may designate a substitute index after notifying Borrower. Lender will tell Borrower the current Index rate upon Borrower’s request. The interest rate change will not occur more often than each month. Borrower understands that Lender may make Ioans based on other rates as well. The interest rate or rates to be applied to the unpaid principal balance during this Note will be the rate or rates set forth herein in the “Payment” section. Notwithstanding any other provision of this Note, after the first payment stream, the interest rate for each subsequent payment stream will be effective as of the due date of the last payment in the just-ending payment stream. NOTICE: Under no circumstances will the interest rate on this Note be more than the maximum rate allowed by applicable law. Whenever increases occur in the interest rate, Lender, at its option, may do one or more of the following: (A) increase Borrower’s payments to ensure Borrower’s loan will pay off by its original final maturity date, (B) increase Borrower’s payments to cover accruing interest, (C) increase the number of Borrower’s payments, and (D) continue Borrower’s payments at the same amount and increase Borrower’s final payment.

INTEREST CALCULATION METHOD. Interest on this Note is computed on a 365/360 basis; that is, by applying the ratio of the interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding. All interest payable under this Note is computed using this method. This calculation method results in a higher effective interest rate than the numeric interest rates stated in this Note.

PREPAYMENT; MINIMUM FINANCE CHARGE. Borrower agrees that all loan fees and other prepaid finance charges are earned fully as of the date of the loan and will not be subject to refund upon early payment (whether voluntary or as a result of default), except as otherwise required by law. In any event, even upon full prepayment of this Note. Borrower understands that Lender is entitled to a minimum finance charge of $95.00. Other than Borrower’s obligation to pay any minimum finance charge. Borrower may pay without penalty all or a portion of the amount owed earlier than it is due. Early payments will not, unless agreed to by Lender in writing, relieve Borrower of Borrower’s obligation to continue to make payments under the payment schedule. Rather, early payments will reduce the principal balance due and may result in Borrower’s making fewer payments. Borrower agrees not to send Lender payments marked “paid in full”, “without recourse”, or similar language. If Borrower sends such a payment. Lender may accept it without losing any of Lender’s rights under this Note, and Borrower will remain obligated to pay any further amount owed to Lender. All written communications concerning disputed amounts, including any check or other payment instrument that indicates that the payment constitutes “payment in full” of the amount owed or that is tendered with other conditions or limitations or as full satisfaction of a disputed amount must be mailed or delivered to: Old National Bank, PO Box 3728 Evansville, IN 47736-3728.

LATE CHARGE. If a payment is not made on or before the 10th day after its due date. Borrower will be charged 5.000% of the regularly scheduled payment.

INTEREST AFTER DEFAULT. Upon default, including failure to pay upon final maturity, the interest rate on this Note shall be increased by adding an additional 3.000 percentage point margin (“Default Rate Margin”). The Default Rate Margin shall also apply to each succeeding interest rate change that would have applied had there been no default. After maturity, or after this Note would have matured had there been no default, the Default Rate Margin will continue to apply to the final interest rate described in this Note. However, in no event will the interest rate exceed the maximum interest rate limitations under applicable law.

DEFAULT. Each of the following shall constitute an event of default (“Event of Default”) under this Note:

Payment Default. Borrower fails to make any payment when due under this Note.

Other Defaults. Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Note or in any of the related documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender and Borrower.

Default in Favor of Third Parties. Borrower or any Grantor defaults under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Borrower’s property or Borrower’s ability to repay this Note or perform Borrower’s obligations under this Note or any of the related documents.

False Statements. Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrower’s behalf under this Note or the related documents is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at any time thereafter.

Death or insolvency. The dissolution of Borrower (regardless of whether election to continue is made), any member withdraws from Borrower, or any other termination of Borrower’s existence as a going business or the death of any member, the insolvency of Borrower, the appointment of a receiver for any part of Borrower’s property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower.

        Loan No: 20007675682 PROMISSORY NOTE (Continued) Page 2    

Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Borrower or by any governmental agency against any collateral securing the loan. This includes a garnishment of any of Borrower’s accounts, including deposit accounts, with Lender. However, this Event of Default shall not apply if there is a good faith dispute by Borrower as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Borrower gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute.

Events Affecting Guarantor. Any of the preceding events occurs with respect to any Guarantor of any of the indebtedness or any Guarantor dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any guaranty of the indebtedness evidenced by this Note.

Adverse Change. A material adverse change occurs in Borrower’s financial condition, or Lender believes the prospect of payment or performance of this Note is impaired.

Cure Provisions. If any default, other than a default in payment, is curable and if Borrower has not been given a notice of a breach of the same provision of this Note within the preceding twelve (12) months, it may be cured if Borrower, after Lender sends written notice to Borrower demanding cure of such default: (1) cures the default within fifteen (15) days; or (2) if the cure requires more than fifteen (15) days, immediately initiates steps which Lender deems in Lender’s sole discretion to be sufficient to cure the default and thereafter continues and completes all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical.

LENDER’S RIGHTS. Upon default, Lender may declare the entire unpaid principal balance under this Note and all accrued unpaid interest immediately due, and then Borrower will pay that amount.

ATTORNEYS’ FEES; EXPENSES. Lender may hire or pay someone else to help collect this Note if Borrower does not pay. Borrower will pay Lender that amount. This includes, subject to any limits under applicable law. Lender’s attorneys’ fees and Lender’s legal expenses, whether or not there is a lawsuit, including attorneys’ fees, expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), and appeals. If not prohibited by applicable law. Borrower also will pay any court costs, in addition to all other sums provided by law.

JURY WAIVER. Lender and Borrower hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by either Lender or Borrower against the other.

GOVERNING LAW. This Note will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of Wisconsin without regard to its conflicts of law provisions. This Note has been accepted by Lender in the State of Wisconsin.

CHOICE OF VENUE. If there is a lawsuit, Borrower agrees upon Lender’s request to submit to the jurisdiction of the courts of Dane County, State of Wisconsin.

DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $20.00 if Borrower makes a payment on Borrower’s loan and the check or preauthorized charge with which Borrower pays is later dishonored.

RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all Borrower’s accounts with Lender (whether checking, savings, or some other account). This includes all accounts Borrower holds jointly with someone else and all accounts Borrower may open in the future. However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the indebtedness against any and all such accounts, and, at Lender’s option, to administratively freeze all such accounts to allow Lender to protect Lender’s charge and setoff rights provided in this paragraph.

COLLATERAL. Borrower acknowledges this Note is secured by the collateral under any and all existing and subsequent security documents, including mortgages, security agreements and collateral assignments by any Borrower or Guarantor.

COLLATERAL INSPECTION/APPRAISAL COST REIMBURSEMENT. Upon such frequency as Lender may determine and whether or not Borrower is in default. Lender shall be entitled to perform and Borrower shall cooperate with examinations, inspections, audits and appraisals as provided herein. Upon advance notice by Lender to Borrower. Borrower shall permit access to its books and records by Lender and by Lender’s designated representatives and agents for purposes of inspection, copying and/or auditing. Lender and Lender’s designated representatives and agents shall also have the right upon advance notice to examine, inspect and/or appraise any collateral for this Note wherever located. Subject to any limitations under applicable law. Borrower shall reimburse Lender for any professional fees or other expenses incurred by Lender in connection with any examinations, inspections or audits of the books and records of Borrower and/or any examinations, inspections and/or appraisals of such collateral.

FINANCIAL RECORDS. In absence of a more specific agreement, requirement or covenant with regard to the preparation and delivery of financial statements and additional information which may be contained in a Business Loan Agreement between Borrower and Lender. Borrower agrees to furnish Lender with, as soon as available, but in no event later than ninety (90) days after the end of each fiscal year of Borrower. Borrower’s balance sheet and income statement for the year ended. Borrower further agrees to furnish Lender with, as soon as available, but in no event later than thirty (30) days after direction to do so from Lender, current interim financial statements, lists of assets and liabilities, agings of receivables and payables, inventory schedules, budgets, forecasts, tax returns, and other reports with respect to Borrower’s financial condition and business operations. All financial reports required to be provided by Borrower shall be prepared in accordance with generally accepted accounting principles, applied on a consistent basis, and certified by an authorized officer of Borrower as being true and correct. Borrower also agrees to cause all guarantors of this Note to furnish financial statements and federal income tax returns within thirty (30) days after direction to do so by the Lender. If the required financial statements or financial information required by this Note or any Business Loan Agreement between Borrower and Lender is not delivered to Lender within fifteen days after the date required to do so, in addition to its other rights and remedies hereunder. Lender shall be entitled to increase Borrower’s interest rate on this Note 3.00 percentage points above the interest rate which would otherwise apply until such time as all of the required financial information is provided to the Lender.

CAPITALIZATION OF LATE CHARGES. Borrower understands and agrees that any late charges imposed under this Note may be added by Lender to the principal amount due under this loan and shall bear interest at the rate then applicable under the terms of this Note.

SUCCESSOR INTERESTS. The terms of this Note shall be binding upon Borrower, and upon Borrower’s heirs, personal representatives, successors and assigns, and shall inure to the benefit of Lender and its successors and assigns.

GENERAL PROVISIONS. This Note benefits Lender and its successors and assigns, and binds Borrower and Borrower’s heirs, successors, assigns, and representatives. If any part of this Note cannot be enforced, this fact will not affect the rest of the Note. Lender may delay or forgo enforcing any of its rights or remedies under this Note without losing them. Each Borrower understands and agrees that, with or without notice to Borrower. Lender may with respect to any other Borrower (a) make one or more additional secured or unsecured loans or otherwise extend additional credit; (b) alter, compromise, renew, extend, accelerate, or otherwise change one or more times the time for payment or other terms of any indebtedness, including increases and decreases of the rate of interest on the indebtedness; (c) exchange, enforce, waive, subordinate, fail or decide not to perfect, and release any security, with or without the substitution of new collateral; (d) apply such security and direct the order or manner of sale thereof, including without limitation, any non-judicial sale permitted by the terms of the controlling security agreements, as Lender in its discretion may determine; (e) release, substitute, agree not to sue, or deal with any one or more of Borrower’s sureties, endorsers, or other guarantors on any terms or in any manner Lender may choose; and (f) determine how, when and what application of payments and credits shall be made on any other indebtedness owing by such other Borrower. Borrower and any other person who signs, guarantees or endorses this Note, to the extent allowed by law, waive presentment, demand for payment, and notice of dishonor. Upon any change in the terms of this Note, and unless otherwise expressly stated in writing, no party who signs this Note, whether as maker, guarantor, accommodation maker or endorser, shall be released from liability. All such parties agree that Lender may renew or extend (repeatedly and for any length of time) this loan or release any party or guarantor or collateral; or impair, fail to realize upon or perfect Lender’s security interest in the collateral; and take any other action deemed necessary by Lender without the consent of or notice to anyone. All such parties also agree that Lender may modify this loan without the consent of or notice to anyone other than the party with whom the modification is made. The obligations under this Note are joint and several.

       Loan No: 20007675682 PROMISSORY NOTE (Continued) Page 3    

PRIOR TO SIGNING THIS NOTE, EACH BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. EACH BORROWER AGREES TO THE TERMS OF THE NOTE.

BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.

BORROWER:

CONTRAIL AVIATION SUPPORT, LLC

By:	/s/ JOSEPH KUHN
	JOSEPH KUHN, CEO of CONTRAIL AVIATION SUPPORT, LLC

CONTRAIL AVIATION LEASING, LLC

CONTRAIL AVIATION SUPPORT, LLC, SOLE MEMBER AND MANAGER of CONTRAIL AVIATION LEASING, LLC

By:	/s/ JOSEPH KUHN
	JOSEPH KUHN, CEO of CONTRAIL AVIATION SUPPORT, LLC

BUSINESS LOAN AGREEMENT

Principal $18,000,000.00	Loan Date 09-14-2018	Maturity 09-14-2021	Loan No 20007675682	Call / Coll 220 / 61	Account 0003626486	Officer ***	Initials
References in the boxes above are for Lender’s use only and do not limit the applicability of this document to any particular loan or item. Any item above containing “ * * * ” has been omitted due to text length limitations.

Borrower:	CONTRAIL AVIATION SUPPORT, LLC	Lender:	OLD NATIONAL BANK
	CONTRAIL AVIATION LEASING, LLC		619 Madison/Southern Wl Coml LPO
	435 INVESTMENT CT		23 W Main St
	VERONA, Wl 53593-8788		Madison, Wl 53703

THIS BUSINESS LOAN AGREEMENT dated September 14, 2018, is made and executed between CONTRAIL AVIATION SUPPORT, LLC; and CONTRAIL AVIATION LEASING, LLC (“Borrower”) and OLD NATIONAL BANK (“Lender”) on the following terms and conditions. Borrower has received prior commercial loans from Lender or has applied to Lender for a commercial loan or loans or other financial accommodations, including those which may be described on any exhibit or schedule attached to this Agreement. Borrower understands and agrees that: (A) in granting, renewing, or extending any Loan, Lender is relying upon Borrower’s representations, warranties, and agreements as set forth in this Agreement; (B) the granting, renewing, or extending of any Loan by Lender at all times shall be subject to Lender’s sole judgment and discretion; and (C) all such Loans shall be and remain subject to the terms and conditions of this Agreement.

TERM. This Agreement shall be effective as of September 14, 2018, and shall continue in full force and effect until such time as all of Borrower’s Loans in favor of Lender have been paid in full, including principal, interest, costs, expenses, attorneys’ fees, and other fees and charges, or until such time as the parties may agree in writing to terminate this Agreement.

CONDITIONS PRECEDENT TO EACH ADVANCE. Lender’s obligation to make the initial Advance and each subsequent Advance under this Agreement shall be subject to the fulfillment to Lender’s satisfaction of all of the conditions set forth in this Agreement and in the Related Documents.

Loan Documents. Borrower shall provide to Lender the following documents for the Loan: (1) the Note; (2) Security Agreements granting to Lender security interests in the Collateral; (3) financing statements and all other documents perfecting Lender’s Security Interests; (4) evidence of insurance as required below; (5) guaranties; (6) together with all such Related Documents as Lender may require for the Loan; all in form and substance satisfactory to Lender and Lender’s counsel.

Borrower’s Authorization. Borrower shall have provided in form and substance satisfactory to Lender properly certified resolutions, duly authorizing the execution and delivery of this Agreement, the Note and the Related Documents. In addition, Borrower shall have provided such other resolutions, authorizations, documents and instruments as Lender or its counsel, may require.

Payment of Fees and Expenses. Borrower shall have paid to Lender all fees, charges, and other expenses which are then due and payable as specified in this Agreement or any Related Document.

Representations and Warranties. The representations and warranties set forth in this Agreement, in the Related Documents, and in any document or certificate delivered to Lender under this Agreement are true and correct.

No Event of Default. There shall not exist at the time of any Advance a condition which would constitute an Event of Default under this Agreement or under any Related Document.

MULTIPLE BORROWERS. This Agreement has been executed by multiple obligors who are referred to in this Agreement individually, collectively and interchangeably as “Borrower.” Unless specifically stated to the contrary, the word “Borrower” as used in this Agreement, including without limitation all representations, warranties and covenants, shall include all Borrowers. Borrower understands and agrees that, with or without notice to any one Borrower, Lender may (A) make one or more additional secured or unsecured loans or otherwise extend additional credit with respect to any other Borrower; (B) with respect to any other Borrower alter, compromise, renew, extend, accelerate, or otherwise change one or more times the time for payment or other terms of any indebtedness, including increases and decreases of the rate of interest on the indebtedness; (C) exchange, enforce, waive, subordinate, fail or decide not to perfect, and release any security, with or without the substitution of new collateral; (D) release, substitute, agree not to sue, or deal with any one or more of Borrower’s or any other Borrower’s sureties, endorsers, or other guarantors on any terms or in any manner Lender may choose; (E) determine how, when and what application of payments and credits shall be made on any indebtedness; (F) apply such security and direct the order or manner of sale of any Collateral, including without limitation, any non-judicial sale permitted by the terms of the controlling security agreement or deed of trust, as Lender in its discretion may determine; (G) sell, transfer, assign or grant participations in all or any part of the Loan; (H) exercise or refrain from exercising any rights against Borrower or others, or otherwise act or refrain from acting; (I) settle or compromise any indebtedness; and (J) subordinate the payment of all or any part of any of Borrower’s indebtedness to Lender to the payment of any liabilities which may be due Lender or others.

REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as of the date of this Agreement, as of the date of each disbursement of loan proceeds, as of the date of any renewal, extension or modification of any Loan, and at all times any Indebtedness exists:

Organization. CONTRAIL AVIATION SUPPORT, LLC is a limited liability company which is, and at all times shall be, duly organized, validly existing, and in good standing under and by virtue of the laws of the State of North Carolina. CONTRAIL AVIATION SUPPORT, LLC is duly authorized to transact business in the State of Wisconsin and all other states in which CONTRAIL AVIATION SUPPORT, LLC is doing business, having obtained all necessary filings, governmental licenses and approvals for each state in which CONTRAIL AVIATION SUPPORT, LLC is doing business. Specifically, CONTRAIL AVIATION SUPPORT, LLC is, and at all times shall be, duly qualified as a foreign limited liability company in all states in which the failure to so qualify would have a material adverse effect on its business or financial condition. CONTRAIL AVIATION SUPPORT, LLC has the full power and authority to own its properties and to transact the business in which it is presently engaged or presently proposes to engage. CONTRAIL AVIATION SUPPORT, LLC maintains an office at 435 INVESTMENT CT, VERONA, WI 53593-8788. Unless CONTRAIL AVIATION SUPPORT, LLC has designated otherwise in writing, the principal office is the office at which CONTRAIL AVIATION SUPPORT, LLC keeps its books and records including its records concerning the Collateral. CONTRAIL AVIATION SUPPORT, LLC will notify Lender prior to any change in the location of CONTRAIL AVIATION SUPPORT, LLC’s state of organization or any change in CONTRAIL AVIATION SUPPORT, LLC’s name. CONTRAIL AVIATION SUPPORT, LLC shall do all things necessary to preserve and to keep in full force and effect its existence, rights and privileges, and shall comply with all regulations, rules, ordinances, statutes, orders and decrees of any governmental or quasi-governmental authority or court applicable to CONTRAIL AVIATION SUPPORT, LLC and CONTRAIL AVIATION SUPPORT, LLC’s business activities.

CONTRAIL AVIATION LEASING, LLC is a limited liability company which is, and at all times shall be, duly organized, validly existing, and in good standing under and by virtue of the laws of the State of Wisconsin. CONTRAIL AVIATION LEASING, LLC is duly authorized to transact business in all other states in which CONTRAIL AVIATION LEASING, LLC is doing business, having obtained all necessary filings, governmental licenses and approvals for each state in which CONTRAIL AVIATION LEASING, LLC is doing business. Specifically, CONTRAIL AVIATION LEASING, LLC is, and at all times shall be, duly qualified as a foreign limited liability company in all states in which the failure to so qualify would have a material adverse effect on its business or financial condition. CONTRAIL AVIATION LEASING, LLC has the full power and authority to own its properties and to transact the business in which it is presently engaged or presently proposes to engage. CONTRAIL AVIATION LEASING, LLC maintains an office at 435 INVESTMENT CT, VERONA, WI 53593-8788. Unless CONTRAIL AVIATION LEASING, LLC has designated otherwise in writing, the principal office is the office at which CONTRAIL AVIATION LEASING, LLC keeps its books and records including its records concerning the Collateral. CONTRAIL AVIATION LEASING, LLC will notify Lender prior to any change in the location of CONTRAIL AVIATION LEASING, LLC’s state of organization or any change in CONTRAIL AVIATION LEASING, LLC’s name. CONTRAIL AVIATION LEASING, LLC shall do all things necessary to preserve and to keep in full force and effect its existence, rights and privileges, and shall comply with all regulations, rules, ordinances, statutes, orders and decrees of any governmental or quasi-governmental authority or court applicable to CONTRAIL AVIATION LEASING, LLC and CONTRAIL AVIATION LEASING, LLC’s business activities.

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Assumed Business Names. Borrower has filed or recorded all documents or filings required by law relating to all assumed business names used by Borrower. Excluding the name of Borrower, the following is a complete list of all assumed business names under which Borrower does business: None.

Authorization. Borrower’s execution, delivery, and performance of this Agreement and all the Related Documents have been duly authorized by all necessary action by Borrower and do not conflict with, result in a violation of, or constitute a default under (1) any provision of (a) Borrower’s articles of organization or membership agreements, or (b) any agreement or other instrument binding upon Borrower or (2) any law, governmental regulation, court decree, or order applicable to Borrower or to Borrower’s properties.

Financial Information. Each of Borrower’s financial statements supplied to Lender truly and completely disclosed Borrower’s financial condition as of the date of the statement, and there has been no material adverse change in Borrower’s financial condition subsequent to the date of the most recent financial statement supplied to Lender. Borrower has no material contingent obligations except as disclosed in such financial statements.

Legal Effect. This Agreement constitutes, and any instrument or agreement Borrower is required to give under this Agreement when delivered will constitute legal, valid, and binding obligations of Borrower enforceable against Borrower in accordance with their respective terms.

Properties. Except as contemplated by this Agreement or as previously disclosed in Borrower’s financial statements or in writing to Lender and as accepted by Lender, and except for property tax liens for taxes not presently due and payable, Borrower owns and has good title to all of Borrower’s properties free and clear of all Security Interests, and has not executed any security documents or financing statements relating to such properties. All of Borrower’s properties are titled in Borrower’s legal name, and Borrower has not used or filed a financing statement under any other name for at least the last five (5) years.

Hazardous Substances. Except as disclosed to and acknowledged by Lender in writing, Borrower represents and warrants that: (1) During the period of Borrower’s ownership of the Collateral, there has been no use, generation, manufacture, storage, treatment, disposal, release or threatened release of any Hazardous Substance by any person on, under, about or from any of the Collateral. (2) Borrower has no knowledge of, or reason to believe that there has been (a) any breach or violation of any Environmental Laws; (b) any use, generation, manufacture, storage, treatment, disposal, release or threatened release of any Hazardous Substance on, under, about or from the Collateral by any prior owners or occupants of any of the Collateral; or (c) any actual or threatened litigation or claims of any kind by any person relating to such matters. (3) Neither Borrower nor any tenant, contractor, agent or other authorized user of any of the Collateral shall use, generate, manufacture, store, treat, dispose of or release any Hazardous Substance on, under, about or from any of the Collateral; and any such activity shall be conducted in compliance with all applicable federal, state, and local laws, regulations, and ordinances, including without limitation all Environmental Laws. Borrower authorizes Lender and its agents to enter upon the Collateral to make such inspections and tests as Lender may deem appropriate to determine compliance of the Collateral with this section of the Agreement. Any inspections or tests made by Lender shall be at Borrower’s expense and for Lender’s purposes only and shall not be construed to create any responsibility or liability on the part of Lender to Borrower or to any other person. The representations and warranties contained herein are based on Borrower’s due diligence in investigating the Collateral for hazardous waste and Hazardous Substances. Borrower hereby (1) releases and waives any future claims against Lender for indemnity or contribution in the event Borrower becomes liable for cleanup or other costs under any such laws, and (2) agrees to indemnify, defend, and hold harmless Lender against any and all claims, losses, liabilities, damages, penalties, and expenses which Lender may directly or indirectly sustain or suffer resulting from a breach of this section of the Agreement or as a consequence of any use, generation, manufacture, storage, disposal, release or threatened release of a hazardous waste or substance on the Collateral. The provisions of this section of the Agreement, including the obligation to indemnify and defend, shall survive the payment of the Indebtedness and the termination, expiration or satisfaction of this Agreement and shall not be affected by Lender’s acquisition of any interest in any of the Collateral, whether by foreclosure or otherwise.

Litigation and Claims. No litigation, claim, investigation, administrative proceeding or similar action (including those for unpaid taxes) against Borrower is pending or threatened, and no other event has occurred which may materially adversely affect Borrower’s financial condition or properties, other than litigation, claims, or other events, if any, that have been disclosed to and acknowledged by Lender in writing.

Taxes. To the best of Borrower’s knowledge, all of Borrower’s tax returns and reports that are or were required to be filed, have been filed, and all taxes, assessments and other governmental charges have been paid in full, except those presently being or to be contested by Borrower in good faith in the ordinary course of business and for which adequate reserves have been provided.

Lien Priority. Unless otherwise previously disclosed to Lender in writing. Borrower has not entered into or granted any Security Agreements, or permitted the filing or attachment of any Security Interests on or affecting any of the Collateral directly or indirectly securing repayment of Borrower’s Loan and Note, that would be prior or that may in any way be superior to Lender’s Security Interests and rights in and to such Collateral.

Binding Effect. This Agreement, the Note, all Security Agreements (if any), and all Related Documents are binding upon the signers thereof, as well as upon their successors, representatives and assigns, and are legally enforceable in accordance with their respective terms.

AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, so long as this Agreement remains in effect, Borrower will:

Notices of Claims and Litigation. Promptly inform Lender in writing of (1) all material adverse changes in Borrower’s financial condition, and (2) all existing and all threatened litigation, claims, investigations, administrative proceedings or similar actions affecting Borrower or any Guarantor which could materially affect the financial condition of Borrower or the financial condition of any Guarantor.

Financial Records. Maintain its books and records in accordance with GAAP, applied on a consistent basis, and permit Lender to examine and audit Borrower’s books and records at all reasonable times.

Financial Statements. Furnish Lender with the following:

Additional Requirements. Applies to CONTRAIL AVIATION SUPPORT LLC and CONTRAIL AVIATION LEASING LLC: As soon as available, but in any event not later than 120 days after the end of each fiscal year of the Borrower, Borrower’s audited balance sheet and audited statements of income, accumulated earnings, and cash flows for such year, setting forth in each case in comparative form the figures for the previous year, prepared by an independent certified public accountant satisfactory to Lender. In addition, as soon as available, but in any event not later than 45 days after the end of each fiscal quarter, Borrower’s balance sheet and statements of income, accumulated earnings, and cash flows for the respective fiscal quarter and year-to-date periods, all prepared in accordance with GAAP, setting forth in each case in comparative form the figures for the previous year’s respective fiscal quarter and year-to-date periods and certified by an officer of Borrower as being true and correct. Lender, in its sole discretion, reserves the ability to change the required times and frequencies of submissions of financial statements by Borrower. In addition to any other financial reporting requirements of Borrower to Lender, Borrower agrees to furnish to Lender, at times and frequencies determined appropriate by Lender in its sole discretion from time to time, Federal and State income tax returns, borrowing base certificates, agings of receivables and payables, inventory schedules, budgets, forecasts, and other reports with respect to Borrower’s financial condition and business operations.

All financial reports required to be provided under this Agreement shall be prepared in accordance with GAAP, applied on a consistent basis, and certified by Borrower as being true and correct.

Additional Information. Furnish such additional information and statements, as Lender may request from time to time.

Financial Covenants and Ratios. Comply with the following covenants and ratios:

Additional Requirements. Applies to CONTRAIL AVIATION SUPPORT LLC and CONTRAIL AVIATION LEASING LLC: Maintain with Lender all of Borrower’s depository accounts.

Applies to CONTRAIL AVIATION SUPPORT LLC and CONTRAIL AVIATION LEASING LLC: Distributions and/or dividends of any kind are not permitted without prior Lender review and approval, with the exception of distributions for tax liability will be permitted.

Applies to CONTRAIL AVIATION SUPPORT LLC and CONTRAIL AVIATION LEASING LLC: Maintain a Quarterly Rolling Cash Flow Coverage Ratio of not less than 1.25 to 1.0. The term Quarterly Rolling Cash Flow Coverage Ratio means a ratio, the numerator of which is the Borrower Net Income After Tax in accordance with GAAP, but excluding extraordinary gains and losses and nonrecurring income as determined by the Lender in its sole discretion, less dividends or withdrawals from capital to members, plus the aggregate amounts deducted in determining Net Income After Tax in respect of interest, depreciation, depletion, and amortization expense, in each case determined in accordance with GAAP, plus Capital Contributions and any increase in Subordinated Debt, all for the then most recently ended period of four (4) consecutive fiscal quarters, and the denominator of which is Borrower Debt Service for the corresponding period. Capital Contribution means cash acquired from an owner, partner, member or shareholder, the GAAP

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accounting effect of which is to increase the equity capital. Subordinated Debt means any liabilities for borrowed money which have been subordinated in right of payment and priority to the Loan, all on terms and conditions satisfactory to Lender. Debt Service means with respect to any period, the sum of all due and owing payments of principal on liabilities for borrowed money and interest expense determined in accordance with GAAP for such period. This ratio should be maintained at all times and may be evaluated at any time.

Applies to CONTRAIL AVIATION SUPPORT LLC and CONTRAIL AVIATION LEASING LLC: It is an event of default if Joe Kuhn and Miriam Cohen-Kuhn cease to oversee the day to day operations of the business. Annual inventory and fixed asset appraisal required to be completed by a third- party acceptable to Lender.

Applies to CONTRAIL AVIATION SUPPORT LLC and CONTRAIL AVIATION LEASING LLC: Maintain a Tangible Net Worth of at least $8,500,000.00. The term Tangible Net Worth means Borrower total assets excluding all intangible assets (i.e. goodwill, trademarks, patents, copyrights, organizational expenses, investments in subsidiaries, investments in affiliates, Obligations Due from Related Parties and similar intangible items as classified by Lender in its sole discretion) less total liabilities excluding any amounts owing to Joe Kuhn pursuant to the GAAP treatment of the earn out provision in the asset purchase agreement of Control Aviation Support, Inc. This minimum level of Tangible Net Worth should be maintained at all times and may be evaluated at any time. Obligations Due from Related Parties means any and all debts, liabilities and obligations of every nature or form owing from Related Parties, elated Parties means a parent company or any shareholder or shareholder spouse, owner or owner spouse, member or member spouse, manager or manager spouse, officer or officer spouse, employee or employee spouse, agent, or a business entity more than five percent (5%) of the ownership interests of which is owned directly or by any of such persons.

Applies to CONTRAIL AVIATION SUPPORT LLC and CONTRAIL AVIATION LEASING LLC: Line of Credit Required Cleanup Period. Borrower shall cause the outstanding principal balance of this Note to be zero (0) for at least thirty (30) consecutive days during the term of the Note, or if the term of the Note exceeds one (1) year, during each annual period ending on the anniversary of the date of the Note (the testing Period. Notwithstanding the foregoing, it shall not be considered an event of default under this provision if the Borrower achieves a Debt Service Coverage Ratio of 1.10:1. For purposes of this section only. Debt Service Coverage Ratio shall mean a ratio, the numerator of which shall be EBITDA for the 12-month period then ended and the denominator being Debt Service; EBITDA shall mean, with respect to any period. Net Income of the Borrower for such period plus all amounts deducted in arriving at such Net Income amount in respect of (i) interest expense of Borrower for such period, (ii) federal, state and local income taxes for such period, and (iii) depreciation and amortization expense for such period; Net Income shall mean, with reference to any period, the net income (or net loss) of the Borrower for such period, but excluding any nonrecurring income and extraordinary profits during such period and any taxes on such nonrecurring income and extraordinary profits; and Debt Service shall mean, with reference to any period, the sum of (i) the aggregate amount of payments required to be paid by Borrower by amortizing the lowest principal balance outstanding on the Note at any time during the applicable Testing Period over a hypothetical five-year period at the then outstanding interest rate in effect at the time of the testing, plus (ii) interest expenses of the Borrower for such period.

Applies to CONTRAIL AVIATION SUPPORT LLC and CONTRAIL AVIATION LEASING LLC: Field audits and borrowing base certificates required to be completed at Lender’s request.

Applies to CONTRAIL AVIATION SUPPORT LLC and CONTRAIL AVIATION LEASING LLC: Borrower to maintain ASA certification at all times.

Except as provided above, all computations made to determine compliance with the requirements contained in this paragraph shall be made in accordance with generally accepted accounting principles, applied on a consistent basis, and certified by Borrower as being true and correct.

Insurance. Maintain fire and other risk insurance, public liability insurance, and such other insurance as Lender may require with respect to Borrower’s properties and operations, in form, amounts, coverages and with insurance companies acceptable to Lender. Borrower, upon request of Lender, will deliver to Lender from time to time the policies or certificates of insurance in form satisfactory to Lender, including stipulations that coverages will not be cancelled or diminished without at least ten (10) days prior written notice to Lender. Each insurance policy also shall include an endorsement providing that coverage in favor of Lender will not be impaired in any way by any act, omission or default of Borrower or any other person. In connection with all policies covering assets in which Lender holds or is offered a security interest for the Loans. Borrower will provide Lender with such lender’s loss payable or other endorsements as Lender may require.

Insurance Reports. Furnish to Lender, upon request of Lender, reports on each existing insurance policy showing such information as Lender may reasonably request, including without limitation the following: (1) the name of the insurer; (2) the risks insured; (3) the amount of the policy; (4) the properties insured; (5) the then current property values on the basis of which insurance has been obtained, and the manner of determining those values; and (6) the expiration date of the policy. In addition, upon request of Lender (however not more often than annually). Borrower will have an independent appraiser satisfactory to Lender determine, as applicable, the actual cash value or replacement cost of any Collateral. The cost of such appraisal shall be paid by Borrower.

Guaranties. Prior to disbursement of any Loan proceeds, furnish executed guaranties of the Loans in favor of Lender, executed by the guarantors named below, on Lender’s forms, and in the amounts and under the conditions set forth in those guaranties.

Names of Guarantors	Amounts
JOSEPH G. KUHN	$	400,000.00
AIR T, INC.	$	1,600,000.00

Other Agreements. Comply with all terms and conditions of all other agreements, whether now or hereafter existing, between Borrower and any other party and notify Lender immediately in writing of any default in connection with any other such agreements.

Loan Proceeds. Use all Loan proceeds solely for Borrower’s business operations, unless specifically consented to the contrary by Lender in writing.

Taxes, Charges and Liens. Pay and discharge when due all of its indebtedness and obligations, including without limitation all assessments, taxes, governmental charges, levies and liens, of every kind and nature, imposed upon Borrower or its properties, income, or profits, prior to the date on which penalties would attach, and all lawful claims that, if unpaid, might become a lien or charge upon any of Borrower’s properties, income, or profits. Provided however, Borrower will not be required to pay and discharge any such assessment, tax, charge, levy, lien or claim so long as (1) the legality of the same shall be contested in good faith by appropriate proceedings, and (2) Borrower shall have established on Borrower’s books adequate reserves with respect to such contested assessment, tax, charge, levy, lien, or claim in accordance with GAAP.

Performance. Perform and comply, in a timely manner, with all terms, conditions, and provisions set forth in this Agreement, in the Related Documents, and in all other instruments and agreements between Borrower and Lender. Borrower shall notify Lender immediately in writing of any default in connection with any agreement.

Operations. Maintain executive and management personnel with substantially the same qualifications and experience as the present executive and management personnel; provide written notice to Lender of any change in executive and management personnel; conduct its business affairs in a reasonable and prudent manner.

Environmental Studies. Promptly conduct and complete, at Borrower’s expense, all such investigations, studies, samplings and testings as may be requested by Lender or any governmental authority relative to any substance, or any waste or by-product of any substance defined as toxic or a hazardous substance under applicable federal, state, or local law, rule, regulation, order or directive, at or affecting any property or any facility owned, leased or used by Borrower.

Compliance with Governmental Requirements. Comply with all laws, ordinances, and regulations, now or hereafter in effect, of all governmental authorities applicable to the conduct of Borrower’s properties, businesses and operations, and to the use or occupancy of the Collateral, including without limitation, the Americans With Disabilities Act. Borrower may contest in good faith any such law, ordinance, or regulation and withhold compliance during any proceeding, including appropriate appeals, so long as Borrower has notified Lender in writing prior to doing so and so long as, in Lender’s sole opinion, Lender’s interests in the Collateral are not jeopardized. Lender may require Borrower to post adequate security or a surety bond, reasonably satisfactory to Lender, to protect Lender’s interest.

Inspection. Permit employees or agents of Lender at any reasonable time to inspect any and all Collateral for the Loan or Loans and Borrower’s other properties and to examine or audit Borrower’s books, accounts, and records and to make copies and memoranda of Borrower’s books, accounts, and records. If Borrower now or at any time hereafter maintains any records (including without limitation computer generated records and computer software programs for the generation of such records) in the possession of a third party, Borrower, upon request of Lender, shall notify such party to permit Lender free access to such records at all reasonable times and to provide Lender with copies of any records it may request, all at Borrower’s expense.

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Environmental Compliance and Reports. Borrower shall comply in all respects with any and all Environmental Laws; not cause or permit to exist, as a result of an intentional or unintentional action or omission on Borrower’s part or on the part of any third party, on property owned and/or occupied by Borrower, any environmental activity where damage may result to the environment, unless such environmental activity is pursuant to and in compliance with the conditions of a permit issued by the appropriate federal, state or local governmental authorities; shall furnish to Lender promptly and in any event within thirty (30) days after receipt thereof a copy of any notice, summons, lien, citation, directive, letter or other communication from any governmental agency or instrumentality concerning any intentional or unintentional action or omission on Borrower’s part in connection with any environmental activity whether or not there is damage to the environment and/or other natural resources.

Additional Assurances. Make, execute and deliver to Lender such promissory notes, mortgages, deeds of trust, security agreements, assignments, financing statements, instruments, documents and other agreements as Lender or its attorneys may reasonably request to evidence and secure the Loans and to perfect all Security Interests.

RECOVERY OF ADDITIONAL COSTS. If the imposition of or any change in any law, rule, regulation, guideline, or generally accepted accounting principle, or the interpretation or application of any thereof by any court, administrative or governmental authority, or standard-setting organization (including any request or policy not having the force of law) shall impose, modify or make applicable any taxes (except federal, state or local income or franchise taxes imposed on Lender), reserve requirements, capital adequacy requirements or other obligations which would (A) increase the cost to Lender for extending or maintaining the credit facilities to which this Agreement relates, (B) reduce the amounts payable to Lender under this Agreement or the Related Documents, or (C) reduce the rate of return on Lenders capital as a consequence of Lender’s obligations with respect to the credit facilities to which this Agreement relates, then Borrower agrees to pay Lender such additional amounts as will compensate Lender therefor, within five (5) days after Lender’s written demand for such payment, which demand shall be accompanied by an explanation of such imposition or charge and a calculation in reasonable detail of the additional amounts payable by Borrower, which explanation and calculations shall be conclusive in the absence of manifest error.

LENDER’S EXPENDITURES. If any action or proceeding is commenced that would materially affect Lender’s interest in the Collateral or if Borrower fails to comply with any provision of this Agreement or any Related Documents, including but not limited to Borrower’s failure to discharge or pay when due any amounts Borrower is required to discharge or pay under this Agreement or any Related Documents, Lender on Borrower’s behalf may (but shall not be obligated to) take any action that Lender deems appropriate, including but not limited to discharging or paying all taxes, liens, security interests, encumbrances and other claims, at any time levied or placed on any Collateral and paying all costs for insuring, maintaining and preserving any Collateral. All such expenditures incurred or paid by Lender for such purposes will then bear interest at the rate charged under the Note from the date incurred or paid by Lender to the date of repayment by Borrower. All such expenses will become a part of the Indebtedness and, at Lender’s option, will (A) be payable on demand; (B) be added to the balance of the Note and be apportioned among and be payable with any installment payments to become due during either (1) the term of any applicable insurance policy; or (2) the remaining term of the Note; or (C) be treated as a balloon payment which will be due and payable at the Note’s maturity.

NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this Agreement is in effect, Borrower shall not, without the prior written consent of Lender:

Additional Financial Restrictions. Applies to CONTRAIL AVIATION SUPPORT LLC and CONTRAIL AVIATION LEASING LLC: (1) Engage in any business activities substantially different than those in which Borrower is presently engaged, (2) cease operations, liquidate, merge, transfer, acquire or consolidate with any other entity, change its name, dissolve or transfer or sell Collateral out of the ordinary course of business, or (3) purchase or retire any of Borrower’s outstanding shares or alter or amend Borrower’s capital structure.

Agreements. Enter into any agreement containing any provisions which would be violated or breached by the performance of Borrower’s obligations under this Agreement or in connection herewith.

CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to Borrower, whether under this Agreement or under any other agreement, Lender shall have no obligation to make Loan Advances or to disburse Loan proceeds if: (A) Borrower or any Guarantor is in default under the terms of this Agreement or any of the Related Documents or any other agreement that Borrower or any Guarantor has with Lender; (B) Borrower or any Guarantor dies, becomes incompetent or becomes insolvent, files a petition in bankruptcy or similar proceedings, or is adjudged a bankrupt; (C) there occurs a material adverse change in Borrower’s financial condition, in the financial condition of any Guarantor, or in the value of any Collateral securing any Loan; or (D) any Guarantor seeks, claims or otherwise attempts to limit, modify or revoke such Guarantor’s guaranty of the Loan or any other loan with Lender.

RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all Borrower’s accounts with Lender (whether checking, savings, or some other account). This includes all accounts Borrower holds jointly with someone else and all accounts Borrower may open in the future. However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the Indebtedness against any and all such accounts, and, at Lender’s option, to administratively freeze all such accounts to allow Lender to protect Lender’s charge and setoff rights provided in this paragraph.

DEFAULT. Each of the following shall constitute an Event of Default under this Agreement:

Payment Default. Borrower fails to make any payment when due under the Loan.

Other Defaults. Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Agreement or in any of the Related Documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender and Borrower.

Default in Favor of Third Parties. Borrower or any Grantor defaults under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Borrower’s or any Grantor’s property or Borrower’s or any Grantor’s ability to repay the Loans or perform their respective obligations under this Agreement or any of the Related Documents.

False Statements. Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrower’s behalf under this Agreement or the Related Documents is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at any time thereafter.

Death or Insolvency. The dissolution of Borrower (regardless of whether election to continue is made), any member withdraws from Borrower, or any other termination of Borrower’s existence as a going business or the death of any member, the insolvency of Borrower, the appointment of a receiver for any part of Borrower’s property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower.

Defective Collateralization. This Agreement or any of the Related Documents ceases to be in full force and effect (including failure of any collateral document to create a valid and perfected security interest or lien) at any time and for any reason.

Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Borrower or by any governmental agency against any collateral securing the Loan. This includes a garnishment of any of Borrower’s accounts, including deposit accounts, with Lender. However, this Event of Default shall not apply if there is a good faith dispute by Borrower as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Borrower gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute.

Events Affecting Guarantor. Any of the preceding events occurs with respect to any Guarantor of any of the Indebtedness or any Guarantor dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any Guaranty of the indebtedness.

Adverse Change. A material adverse change occurs in Borrower’s financial condition, or Lender believes the prospect of payment or performance of the Loan is impaired.

Right to Cure. If any default, other than a default on Indebtedness, is curable and if Borrower or Grantor, as the case may be, has not been given a notice of a similar default within the preceding twelve (12) months, it may be cured if Borrower or Grantor, as the case may be, after Lender sends written notice to Borrower or Grantor, as the case may be, demanding cure of such default; (1) cure the default within fifteen (15) days; or (2) if the cure requires more than fifteen (15) days, immediately initiate steps which Lender deems in Lender’s sole discretion to be sufficient to cure the default and thereafter continue and complete all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical.

Death of a Guarantor. Notwithstanding anything to the contrary herein, or in any of the Related Documents, the death of a Guarantor shall not be an Event of Default if, within one hundred twenty (120) days following such death, the Borrower provides a substitute guarantor reasonably acceptable to Lender.

Permitted Liens. Notwithstanding anything to the contrary herein, or in any of the Related Documents, it shall not be an Event of Default if any Collateral owned by Borrower is or becomes subject to any of the following liens; (a) liens for taxes not yet due and payable or which are being contested in good faith by appropriate proceedings diligently pursued and for which adequate reserves have been established on the Borrower’s books in accordance to GAAP to fully satisfy the contested lien; (b) mechanics’, materialmen’s, bankers’, carriers’.

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warehousemen’s and similar liens and encumbrances arising in the ordinary course of Borrower’s business and securing obligations of Borrower that are not overdue or are being contested in good faith by appropriate proceedings diligently pursued, provided that in the case of any such contest any proceedings commenced for the enforcement of such liens and encumbrances shall have been duly suspended and for which adequate reserves have been established on the Borrower’s books in accordance to GAAP to fully satisfy the contested lien; (c) liens arising in connection with worker’s compensation, unemployment insurance, old age pensions and social security benefits and similar statutory obligations which are not overdue or are being contested in good faith by appropriate proceedings diligently pursued, provided that in the case of any such contest any proceedings commenced for the enforcement of such liens shall have been duly suspended and for which adequate reserves have been established on the Borrower’s books in accordance to GAAP to fully satisfy the contested lien; (d) liens in favor of Lender; (e) minor survey exceptions or minor encumbrances, easements or reservations, or rights of others for rights-of-way, utilities and other similar purposes, or zoning or other restrictions as to the use of real properties, which do not materially interfere with the business of Borrower; and (f) any interest or title of a lessor under any operating lease.

EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where otherwise provided in this Agreement or the Related Documents, all commitments and obligations of Lender under this Agreement or the Related Documents or any other agreement immediately will terminate (including any obligation to make further Loan Advances or disbursements), and, at Lender’s option, all Indebtedness immediately will become due and payable, all without notice of any kind to Borrower, except that in the case of an Event of Default of the type described in the “Insolvency” subsection above, such acceleration shall be automatic and not optional. In addition, Lender shall have all the rights and remedies provided in the Related Documents or available at law, in equity, or otherwise. Except as may be prohibited by applicable law, all of Lender’s rights and remedies shall be cumulative and may be exercised singularly or concurrently. Election by Lender to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform an obligation of Borrower or of any Grantor shall not affect Lender’s right to declare a default and to exercise its rights and remedies.

PRIOR AGREEMENTS AND GUARANTIES. Even though the definition of Related Documents includes loan agreements and credit agreements, this Agreement supersedes any and all prior loan agreements or credit agreements between the Borrower and the Lender except for any existing cash allocation management agreement, floorplan agreement, letter of credit reimbursement agreement, loan or credit agreement for any bond transaction, attorney prepared loan or credit agreement for a specific transaction, SWAP agreement, SBA loan agreement, agricultural loan agreement or a construction loan agreement for a project not yet completed. Any and all forms of guaranty executed prior to this Agreement shall remain in full force and effect even if not listed in this Agreement.

RESTRICTED DEPOSIT ACCOUNT. Contemporaneous with closing of the Loan, Lender shall deposit one-hundred percent (100%) of the Loan proceeds (the “Loan Proceeds”) into Borrower’s deposit account number 133788963. The Loan Proceeds will be unavailable to Borrower until such time as Borrower receives Lender’s consent to initiate a wire to purchase the Collateral that wilt secure the Loan.

MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Agreement:

Amendments. This Agreement, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Agreement. No alteration of or amendment to this Agreement shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment.

Attorneys’ Fees; Expenses. Borrower agrees to pay upon demand all of Lender’s costs and expenses, including Lender’s attorneys’ fees and Lender’s legal expenses, incurred in connection with the enforcement of this Agreement. Lender may hire or pay someone else to help enforce this Agreement, and Borrower shall pay the costs and expenses of such enforcement. Costs and expenses include Lender’s attorneys’ fees and legal expenses whether or not there is a lawsuit, including attorneys’ fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. Borrower also shall pay all court costs and such additional fees as may be directed by the court.

Caption Headings. Caption headings in this Agreement are for convenience purposes only and are not to be used to interpret or define the provisions of this Agreement.

Consent to Loan Participation. Borrower agrees and consents to Lender’s sale or transfer, whether now or later, of one or more participation interests in the Loan to one or more purchasers, whether related or unrelated to Lender. Lender may provide, without any limitation whatsoever, to any one or more purchasers, or potential purchasers, any information or knowledge Lender may have about Borrower or about any other matter relating to the Loan, and Borrower hereby waives any rights to privacy Borrower may have with respect to such matters. Borrower additionally waives any and all notices of sale of participation interests, as well as all notices of any repurchase of such participation interests. Borrower also agrees that the purchasers of any such participation interests will be considered as the absolute owners of such interests in the Loan and will have all the rights granted under the participation agreement or agreements governing the sale of such participation interests. Borrower further waives all rights of offset or counterclaim that it may have now or later against Lender or against any purchaser of such a participation interest and unconditionally agrees that either Lender or such purchaser may enforce Borrower’s obligation under the Loan irrespective of the failure or insolvency of any holder of any interest in the Loan. Borrower further agrees that the purchaser of any such participation interests may enforce its interests irrespective of any personal claims or defenses that Borrower may have against Lender.

Governing Law. This Agreement will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of Wisconsin without regard to its conflicts of law provisions. This Agreement has been accepted by Lender in the State of Wisconsin.

Choice of Venue. If there is a lawsuit, Borrower agrees upon Lender’s request to submit to the jurisdiction of the courts of Dane County, State of wisconsin.

Joint and Several Liability. All obligations of Borrower under this Agreement shall be joint and several, and all references to Borrower shall mean each and every Borrower. This means that each Borrower signing below is responsible for all obligations in this Agreement. Where any one or more of the parties is a corporation, partnership, limited liability company or similar entity, it is not necessary for Lender to inquire into the powers of any of the officers, directors, partners, members, or other agents acting or purporting to act on the entity’s behalf, and any obligations made or created in reliance upon the professed exercise of such powers shall be guaranteed under this Agreement.

No Waiver by Lender. Lender shall not be deemed to have waived any rights under this Agreement unless such waiver is given in writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender of a provision of this Agreement shall not prejudice or constitute a waiver of Lender’s right otherwise to demand strict compliance with that provision or any other provision of this Agreement. No prior waiver by Lender, nor any course of dealing between Lender and Borrower, or between Lender and any Grantor, shall constitute a waiver of any of Lender’s rights or of any of Borrower’s or any Grantor’s obligations as to any future transactions. Whenever the consent of Lender is required under this Agreement, the granting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld in the sole discretion of Lender.

Notices. Any notice required to be given under this Agreement shall be given in writing, and shall be effective when actually delivered, when actually received by telefacsimile (unless otherwise required by law), when deposited with a nationally recognized overnight courier, or, if mailed, when deposited in the United States mail, as first class, certified or registered mail postage prepaid, directed to the addresses shown near the beginning of this Agreement. Any party may change its address for notices under this Agreement by giving formal written notice to the other parties, specifying that the purpose of the notice is to change the party’s address. For notice purposes, Borrower agrees to keep Lender informed at all times of Borrower’s current address. Unless otherwise provided or required by law, if there is more than one Borrower, any notice given by Lender to any Borrower is deemed to be notice given to all Borrowers.

Severability. If a court of competent jurisdiction finds any provision of this Agreement to be illegal, invalid, or unenforceable as to any person or circumstance, that finding shall not make the offending provision illegal, invalid, or unenforceable as to any other person or circumstance. If feasible, the offending provision shall be considered modified so that it becomes legal, valid and enforceable. If the offending provision cannot be so modified, it shall be considered deleted from this Agreement. Unless otherwise required by law, the illegality, invalidity, or unenforceability of any provision of this Agreement shall not affect the legality, validity or enforceability of any other provision of this Agreement.

Subsidiaries and Affiliates of Borrower. To the extent the context of any provisions of this Agreement makes it appropriate, including without limitation any representation, warranty or covenant, the word “Borrower” as used in this Agreement shall include all of Borrower’s subsidiaries and affiliates. Notwithstanding the foregoing however, under no circumstances shall this Agreement be construed to require Lender to make any Loan or other financial accommodation to any of Borrower’s subsidiaries or affiliates.

Successors and Assigns. All covenants and agreements by or on behalf of Borrower contained in this Agreement or any Related Documents shall bind Borrower’s successors and assigns and shall inure to the benefit of Lender and its successors and assigns. Borrower shall not, however, have the right to assign Borrower’s rights under this Agreement or any interest therein, without the prior written consent of Lender.

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Survival of Representations and Warranties. Borrower understands and agrees that in making the Loan, Lender is relying on all representations, warranties, and covenants made by Borrower in this Agreement or in any certificate or other instrument delivered by Borrower to Lender under this Agreement or the Related Documents. Borrower further agrees that regardless of any investigation made by Lender, all such representations, warranties and covenants will survive the making of the Loan and delivery to Lender of the Related Documents, shall be continuing in nature, and shall remain in full force and effect until such time as Borrower’s Indebtedness shall be paid in full, or until this Agreement shall be terminated in the manner provided above, whichever is the last to occur.

Time is of the Essence. Time is of the essence in the performance of this Agreement.

Waive Jury. All parties to this Agreement hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by any party against any other party.

Subsidiaries and Affiliates of Borrower – Air T, Inc. Notwithstanding anything to the contrary herein, or in any of the Related Documents, Air T, Inc., a Delaware corporation shall not be construed or interpreted as either an affiliate or subsidiary of the Borrower.

DEFINITIONS. The following capitalized words and terms shall have the following meanings when used in this Agreement, Unless specifically stated to the contrary, all references to dollar amounts shall mean amounts in lawful money of the United States of America. Words and terms used in the singular shall include the plural, and the plural shall include the singular, as the context may require. Words and terms not otherwise defined in this Agreement shall have the meanings attributed to such terms in the Uniform Commercial Code. Accounting words and terms not otherwise defined in this Agreement shall have the meanings assigned to them in accordance with generally accepted accounting principles as in effect on the date of this Agreement:

Advance. The word “Advance” means a disbursement of Loan funds made, or to be made, to Borrower or on Borrower’s behalf on a line of credit or multiple advance basis under the terms and conditions of this Agreement.

Agreement. The word “Agreement” means this Business Loan Agreement, as this Business Loan Agreement may be amended or modified from time to time, together with all exhibits and schedules attached to this Business Loan Agreement from time to time.

Borrower. The word “Borrower” means CONTRAIL AVIATION SUPPORT, LLC; and CONTRAIL AVIATION LEASING, LLC and includes all co-signers and co-makers signing the Note and all their successors and assigns.

Collateral. The word “Collateral” means all property and assets granted as collateral security for a Loan, whether real or personal property, whether granted directly or indirectly, whether granted now or in the future, and whether granted in the form of a security interest, mortgage, collateral mortgage, deed of trust, assignment, pledge, crop pledge, chattel mortgage, collateral chattel mortgage, chattel trust, factor’s lien, equipment trust, conditional sale, trust receipt, lien, charge, lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever, whether created by law, contract, or otherwise.

Environmental Laws. The words “Environmental Laws” mean any and all state, federal and local statutes, regulations and ordinances relating to the protection of human health or the environment, including without limitation the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq. (“CERCLA”), the Superfund Amendments and Reauthorization Act of 1986, Pub. L. No, 99-499 (“SARA”), the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or other applicable state or federal laws, rules, or regulations adopted pursuant thereto.

Event of Default. The words “Event of Default” mean any of the events of default set forth in this Agreement in the default section of this Agreement.

GAAP. The word “GAAP” means generally accepted accounting principles.

Grantor. The word “Grantor” means each and all of the persons or entities granting a Security Interest in any Collateral for the Loan, including without limitation all Borrowers granting such a Security Interest.

Guarantor. The word “Guarantor” means any guarantor, surety, or accommodation party of any or all of the Loan.

Guaranty. The word “Guaranty” means the guaranty from Guarantor to Lender, including without limitation a guaranty of all or part of the Note.

Hazardous Substances. The words “Hazardous Substances” mean materials that, because of their quantity, concentration or physical, chemical or infectious characteristics, may cause or pose a present or potential hazard to human health or the environment when improperly used, treated, stored, disposed of, generated, manufactured, transported or otherwise handled. The words “Hazardous Substances” are used in their very broadest sense and include without limitation any and all hazardous or toxic substances, materials or waste as defined by or listed under the Environmental Laws. The term “Hazardous Substances” also includes, without limitation, petroleum and petroleum by-products or any fraction thereof and asbestos.

Indebtedness. The word “Indebtedness” means the indebtedness evidenced by the Note or Related Documents, including all principal and interest together with all other indebtedness and costs and expenses for which Borrower is responsible under this Agreement or under any of the Related Documents.

Lender. The word “Lender” means OLD NATIONAL BANK, its successors and assigns.

Loan. The word “Loan” means any and all loans and financial accommodations from Lender to Borrower whether now or hereafter existing, and however evidenced, including without limitation those loans and financial accommodations described herein or described on any exhibit or schedule attached to this Agreement from time to time.

Note. The word “Note” means the Note dated September 14, 2018 and executed by CONTRAIL AVIATION SUPPORT, LLC; and CONTRAIL AVIATION LEASING, LLC in the principal amount of $18,000,000.00, together with all renewals of, extensions of, modifications of, refinancings of, consolidations of, and substitutions for the note or credit agreement.

Related Documents. The words “Related Documents” mean all promissory notes, credit agreements, loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust, security deeds, collateral mortgages, and all other instruments, agreements and documents, whether now or hereafter existing, executed in connection with the Loan.

Security Agreement. The words “Security Agreement” mean and include without limitation any agreements, promises, covenants, arrangements, understandings or other agreements, whether created by law, contract, or otherwise, evidencing, governing, representing, or creating a Security Interest.

Security Interest. The words “Security Interest” mean, without limitation, any and all types of collateral security, present and future, whether in the form of a lien, charge, encumbrance, mortgage, deed of trust, security deed, assignment, pledge, crop pledge, chattel mortgage, collateral chattel mortgage, chattel trust, factor’s lien, equipment trust, conditional sale, trust receipt, lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever whether created by law, contract, or otherwise.

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BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN AGREEMENT AND BORROWER AGREES TO ITS TERMS. THIS BUSINESS LOAN AGREEMENT IS DATED SEPTEMBER 14, 2018.

BORROWER:

CONTRAIL AVIATION SUPPORT, LLC

By:	/s/ JOSEPH KUHN
	JOSEPH KUHN, CEO of CONTRAIL AVIATION SUPPORT, LLC

CONTRAIL AVIATION LEASING, LLC

CONTRAIL AVIATION SUPPORT, LLC, SOLE MEMBER AND MANAGER of CONTRAIL AVIATION LEASING, LLC

By:	/s/ JOSEPH KUHN
	JOSEPH KUHN, CEO of CONTRAIL AVIATION SUPPORT, LLC

LENDER:

OLD NATIONAL BANK

By:	Not Eligible
	Authorized Signer