Air T (AIRT) 8-KEntry into a Material Definitive Agreement

On May 30, 2024, Contrail Aviation Support, LLC (“CAS”), a majority-owned subsidiary Air T, Inc. (the “Company”), entered into a Membership Interest Redemption and Earnout Agreement (the “Redemption Agreement”) with OCAS, Inc., a corporation owned by the Chief Executive Officer of CAS, Joe Kuhn (the “Seller”). Pursuant to the Redemption Agreement, CAS agreed to purchase and redeem from the Seller, 16% of its 21% interest in CAS, effective as of April 1, 2024. The purchase price for the redeemed interest is $4,570,000, plus an earnout amount. Interest accrues on the principal amount at an annual rate equal to the 10 year Treasury bond yield plus 375 basis points, compounded monthly. The rate adjusts on each anniversary date of the note. The cash purchase price is payable pursuant to a secured, subordinated promissory note, payable beginning on May 1, 2024 and monthly thereafter for a 12 month period of interest payments only with the outstanding balance amortized and paid over the following three (3) years. The payment obligation under the note may be deferred if CAS’ forecast indicates that any payment following the first 12 month period would cause a loan default or a loan default exists. Initially, the payment obligation would revert back to interest only, unless a default exists, in which case no payment would be required. If CAS is unable to make a payment for 12 months, then interest shall cease to accrue. The note is expressly subordinated to the payment in full of all indebtedness of CAS on or prior to the date of the note or thereafter created.

Under the Redemption Agreement, the Seller is also entitled to an annual earnout payment in each fiscal year through March 31, 2029 where CAS’s Adjusted EBITDA exceeds $7,000,000. The annual payment amount equals 9.14% of CAS’ Adjusted EBITDA (as defined in the Redemption Agreement) above $7,000,000 in Adjusted EBITDA. Pursuant to the Redemption Agreement, CAS is required to calculate earnout payments annually within 30 days following completion of the annual audits of the Company and CAS and payment of any amount due is required following satisfaction of a procedure to address any objections to the calculated amount. Similar to payments under the note, earnout payments are subordinated and subject to the payment in full of all then outstanding senior debt and no earnout payment may be made if such payment causes or would cause a loan default or if a loan default exists. In such case, any earnout payments would be deferred until CAS is no longer reasonably at risk of a loan default or has been authorized by the lender to resume payments. Any deferred earnout payment will accrue interest at a rate equal to the note rate.

The parties to the Redemption Agreement also indemnified and released each other for certain matters.

In connection with the Redemption Agreement, the parties agreed to certain technical amendments to the First Amended and Restated Operating Agreement of CAS and entered into a new Put and Call Agreement with respect to the remaining five percent (5%) interest in CAS held by the Seller. Pursuant to the new Put and Call Agreement, commencing April 1, 2026 and at any time thereafter, either CAS or the Seller has the option to elect by written notice to purchase or sell all of the remaining five percent (5%) interest in CAS held by the Seller. The purchase price for the five percent (5%) interest is equal to five percent (5%) of the CAS Equity Value, which is defined as an amount equal to nine times (9x) the average Adjusted EBITDA of CAS’ for the three (3) most recent completed fiscal years at the time an option notice is delivered, plus cash and cash -like items and minus debt and debt-like items. The purchase price for the five percent (5%) interest is to be paid in equal quarterly installments over a three (3) year period, together with interest at the then current ten year (10)-year Treasury bond yield plus 250 basis points, adjusted annually. Payment shall be evidenced by a Secured Subordinated Promissory Note with subordination and payment deferral provisions similar to the note provisions described above.

The foregoing description of the Redemption Agreement, the Secured Subordinated Promissory Note, the Subordinated Security Agreement, the Second Amendment to First Amended and Restated Operating Agreement and the Put and Call Option Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of such documents a copy of which are attached hereto as Exhibit 10.1, 10.2, 10.3, 10.4, and 10.5, which are incorporated herein by reference.