AIR T INC (Form: 8-K, Received: 07/19/2016 16:32:42)

Crossing Aging - Companies over 20% over 90 days from Invoice Date

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) July 15, 2016

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.)

3524 Airport Road

Maiden, North Carolina 28650

(Address of Principal Executive Offices)

(Zip Code)

(828) 464-8741

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

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

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

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

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

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

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

Item 1.01

Entry into a Material Definitive Agreement

The information set forth in Item 2.01 and Item 2.03 hereof is incorporated herein by reference.

Item 2.01

Completion of Acquisition or Disposition of Assets

On July 18, 2016, pursuant to an Asset Purchase Agreement (the “Asset Purchase Agreement”) between Contrail Aviation Support, LLC (the “Acquisition Subsidiary”), a North Carolina limited liability company and a subsidiary of Air T, Inc. (the “Company”), and Contrail Aviation Support, Inc. (“Contrail Aviation”) and Joseph Kuhn, the sole shareholder of Contrail Aviation, dated as of July 18, 2016, the Acquisition Company completed the purchase of all of the assets owned, used or usable by Contrail Aviation, other than cash, equity in Contrail Aviation’s IC-DISC subsidiary and certain other specified excluded assets. Prior to the asset sale, Contrail Aviation, based in Verona, Wisconsin, engaged in the business of acquiring surplus commercial jet engines or components and supplying surplus and aftermarket commercial jet engine components.

The consideration paid by the Acquisition Subsidiary for the acquired assets was (i) $4,937,500 in cash, which amount is subject to adjustment based on Contrail Aviation’s Net Working Capital (as defined in the Asset Purchase Agreement) as of date of closing of the acquisition and of which $300,000 is to be held in an escrow account to fund indemnification payments to the Acquisition Subsidiary under the Asset Purchase Agreement and (ii) equity membership units in the Acquisition Subsidiary representing 21% of the total equity membership units in the Acquisition Subsidiary. In addition, pursuant to the Asset Purchase Agreement, the Acquisition Subsidiary has agreed to pay as additional deferred consideration to Contrail Aviation for the purchased assets, up to a maximum of $1.5 million per year and $3.0 million in the aggregate (collectively, the “Earnout Payments” and each, an “Earnout Payment”), calculated as follows:

(i)

If the Acquisition Subsidiary generates EBITDA (as defined in the Asset Purchase Agreement) in any Earnout Period (as defined below) less than $1,500,000, no Earnout Payment shall be payable by the Acquisition Subsidiary with respect to such Earnout Period;

(ii)

If the Acquisition Subsidiary generates EBITDA in any Earnout Period equal to or in excess of $1,500,000, but less than $2,000,000, the Earnout Payment for each such Earnout Period shall be an amount equal to the product of (x) the EBITDA generated with respect to such Earnout Period minus $1,500,000, and (y) two (2);

(iii)

If the Acquisition Subsidiary generates EBITDA in any Earnout Period equal to or in excess of $2,000,000, but less than $4,000,000, the Earnout Payment for each such Earnout Period shall be equal to $1,000,000;

(iv)

If the Acquisition Subsidiary generates EBITDA in any Earnout Period equal to or in excess of $4,000,000, the Earnout Payment for each such Earnout Period shall be equal to $1,500,000; and

(v)

If, following the fifth Earnout Period, the Acquisition Subsidiary has generated EBITDA equal to or in excess of $15,000,000 in the aggregate during all Earnout Periods, but Contrail Aviation has received or is owed less than $3,000,000 in aggregate Earnout Payments pursuant to clauses (i) through (iv), above, the Acquisition Subsidiary shall make an additional Earnout Payment to Contrail Aviation in an amount equal to the difference between $3,000,000 and the aggregate Earnout Payments already received or payable pursuant to clauses (i) through (iv), above.

As used in the Asset Purchase Agreement, “Earnout Period” means each of the first five twelve-full-calendar-month periods following the closing of the acquisition.

The Asset Purchase Agreement includes various representations, warranties and covenants of the parties, including a covenant that the Acquisition Subsidiary will offer employment to all employees of Contrail Aviation and nonsolicitation and noncompetition agreements of Contrail Aviation and Mr. Kuhn.

The Asset Purchase Agreement is filed as Exhibit 2.1 hereto and is incorporated by reference herein. In reviewing the Asset Purchase Agreement, please remember that it is included to provide information regarding its terms and is not intended to provide any other factual or disclosure information about the parties thereto. The Asset Purchase Agreement contains representations and warranties, which have been made solely for the benefit of the parties to the Asset Purchase Agreement and should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate. Moreover, the representations and warranties as stated in the Asset Purchase Agreement do not reflect exceptions thereto as may be set forth in separate disclosure schedules exchanged by the parties in connection with the Asset Purchase Agreement. The representations and warranties were made only as of the date of the Asset Purchase Agreement or such other date or dates as may be specified in the Asset Purchase Agreement. Accordingly, the representations and warranties as set forth in the Asset Purchase Agreement alone may not describe the actual state of affairs as of the date they were made or at any other time.

Upon the consummation of the asset sale and in connection with the transfer of equity membership units of the Acquisition Subsidiary to Contrail Aviation, the Acquisition Subsidiary, the Company and Contrail Aviation entered into an Operating Agreement of Contrail Aviation Support, LLC (the “Operating Agreement”) dated as of July 18, 2016 providing for the governance of and the terms of membership interests in the Acquisition Subsidiary and including put and call options permitting, at any time after the fifth anniversary of the asset sale closing date, the Acquisition Subsidiary at its election to purchase from Contrail Aviation, and permitting Contrail Aviation at its election to require the Acquisition Subsidiary to purchase from Contrail Aviation, all of Contrail Aviation’s equity membership interests the Acquisition Subsidiary at price to be agreed upon, or failing such an agreement to be determined pursuant to third-party appraisals in a process specified in the Operating Agreement. The Operating Agreement is filed as Exhibit 10.1 hereto and is incorporated by reference herein.

Item 2.03

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

In connection with and upon consummation of the asset acquisition from Contrail Aviation, on July 18, 2016, the Acquisition Subsidiary entered into a Credit Agreement (the “Contrail Credit Agreement”) with BMO Harris Bank N.A.

The Contrail Credit Agreement provides for revolving credit borrowings by the Acquisition Subsidiary in an amount up to the lesser of $12,000,000 and a borrowing base. The borrowing base is computed monthly and is equal to the sum of 75% of the value of eligible inventory (up to a maximum of $9,000,000) and 80% of outstanding eligible accounts receivable. Borrowings under the Contrail Credit Agreement will bear interest at a rate equal to one-month LIBOR plus 2.80%, and will mature in January 2018.

The obligations of the Acquisition Subsidiary under the Contrail Credit Agreement are required to be guaranteed by each of its subsidiaries (if any), and are (and the guaranty obligations of any such subsidiary guarantors are required to be) secured by a first-priority security interest in substantially all of the assets of the Acquisition Subsidiary and any such subsidiary guarantors, as applicable (including, without limitation, accounts receivable, equipment, inventory and other goods, intellectual property, contract rights and other general intangibles, cash, deposit accounts, equity interests in subsidiaries and joint ventures, investment property, documents and instruments, real property, and proceeds of the foregoing). The obligations of the Acquisition Subsidiary under the Contrail Credit Agreement are also guaranteed by the Company, with such guaranty limited in amount to a maximum of $1,600,000, plus interest on such amount at the rate of interest in effect under the Contrail Credit Agreement, plus costs of collection (the “BMO Limited Guaranty”).

The Contrail Credit Agreement contains affirmative and negative covenants, including covenants that restrict the ability of the Acquisition Subsidiary and its subsidiaries to, among other things, incur or guarantee indebtedness, incur liens, dispose of assets, engage in mergers and consolidations, make acquisitions or other investments, make changes in the nature of its business, and engage in transactions with affiliates. The Contrail Credit Agreement also contains financial covenants applicable to the Acquisition Subsidiary and its subsidiaries, including a minimum debt service coverage ratio of 1.75 to 1.0, a maximum ratio of total liabilities to tangible net worth of 2.5 to 1.0, and a $10,000 limitation on annual operating lease payments.

The Contrail Credit Agreement contains events of default including, without limitation, nonpayment of principal, interest or other obligations, violation of covenants, misrepresentation, cross-default to other debt, bankruptcy and other insolvency events, judgments, certain ERISA events, actual or asserted invalidity of loan documentation, and the Company’s failure to own, legally and beneficially, at least 51% of the voting equity in the Acquisition Subsidiary.

The Contrail Credit Agreement is filed as Exhibit 10.2 hereto and is incorporated by reference herein.

On July 15, 2016, the Company and its subsidiaries, Mountain Air Cargo, Inc., Global Ground Support, LLC, CSA Air, Inc., Global Aviation Services, LLC and Air T Global Leasing, LLC entered into a First Amendment dated as of July 15, 2016 (the “First Amendment”) with Branch Banking and Trust Company (“BB&T”) to amend the Credit Agreement dated April 1, 2015 between the Company, Mountain Air Cargo, Inc., Global Ground Support, LLC, CSA Air, Inc., Global Aviation Services, LLC and BB&T (the “Credit Agreement”). The First Amendment modified the Credit Agreement to:

•

not require that the Acquisition Subsidiary be joined as a borrower under the Credit Agreement;

•

not require that Delphax Technologies Inc. (“Delphax”) be joined as a borrower under the Credit Agreement;

•

permit the BMO Limited Guaranty;

•

revise certain covenants to address the treatment of the Acquisition Subsidiary and Delphax; and

•

effect conforming and other changes to defined terms.

The First Amendment is filed as Exhibit 10.3 hereto and is incorporated by reference herein.

Item 9.01

Financial Statements and Exhibits


Exhibit		Description
2.1		Asset Purchase Agreement dated as of July 18, 2016 between Contrail Aviation Support, LLC, Contrail Aviation Support, Inc. and Joseph Kuhn

10.1		Operating Agreement of Contrail Aviation Support, LLC dated as of July 18, 2016 between Air T, Inc. and Contrail Aviation Support, Inc.

10.2		Credit Agreement dated as of July 18, 2016 between Contrail Aviation Support, LLC and BMO Harris Bank N.A.

10.3		First Amendment dated as of July 15, 2016 among Air T, Inc., Mountain Air Cargo, Inc., Global Ground Support, LLC, CSA Air, Inc., Global Aviation Services, LLC, Air T Global Leasing, LLC and Branch Banking and Trust Company

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: July 19, 2016


AIR T, INC.

By:		/s/ Candice L. Otey
		Candice L. Otey, Vice President-Finance, Chief Financial Officer, Secretary and Treasurer

Exhibit Index


Exhibit		Description
2.1		Asset Purchase Agreement dated as of July 18, 2016 between Contrail Aviation Support, LLC, Contrail Aviation Support, Inc. and Joseph Kuhn*

10.1		Operating Agreement of Contrail Aviation Support, LLC dated as of July 18, 2016 between Air T, Inc. and Contrail Aviation Support, Inc.

10.2		Credit Agreement dated as of July 18, 2016 between Contrail Aviation Support, LLC and BMO Harris Bank N.A.

10.3		First Amendment dated as of July 15, 2016 among Air T, Inc., Mountain Air Cargo, Inc., Global Ground Support, LLC, CSA Air, Inc., Global Aviation Services, LLC, Air T Global Leasing, LLC and Branch Banking and Trust Company

*	Does not include the disclosure schedules and exhibit documents identified and referenced therein. The Company agrees to furnish supplementally a copy of any such omitted schedule or exhibit to the Securities and Exchange Commission upon request.

Exhibit 2.1

ASSET PURCHASE AGREEMENT

BETWEEN

CONTRAIL AVIATION SUPPORT, LLC

(the “Buyer”)

and

CONTRAIL AVIATION SUPPORT, INC.

(the “Seller”)

and

JOSEPH KUHN,

(the “Shareholder”)

Dated as of July 18, 2016

TABLE OF CONTENTS


ARTICLE I

DEFINITIONS AND CONSTRUCTION
		Page

1.1	Definitions		1
1.2	Construction		1

ARTICLE II PURCHASE, TERMS OF PAYMENT AND CLOSING

2.1	Purchase and Sale of Assets		2
2.2	Purchased Assets		2
2.3	Excluded Assets		3
2.4	Procedures for Non-Transferable Assets		4
2.5	Assumed Liabilities		5
2.6	Excluded Liabilities		5
2.7	Consideration		6
2.8	Cash Consideration		6
2.9	Equity Consideration		7
2.10	Earnout Payments		7
2.11	Closing		9
2.12	Closing Obligations		9
2.13	Closing Balance Sheet		10
2.14	Purchase Price Allocation		11
2.15	Other Expenses; Proration		11

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE SELLER

3.1	Organization; Good Standing		12
3.2	Authority; Enforceability		12
3.3	Consents and Approvals; No Violation		13
3.4	Books and Records		13
3.5	Financial Statements		14
3.6	Undisclosed Liabilities		14
3.7	Absence of Certain Changes or Events		14
3.8	Taxes and Tax Returns		15
3.9	Litigation		16
3.10	Governmental Authorizations and Trade Certifications		17
3.11	Compliance with Laws, Governmental Authorizations and Trade Certifications		17
3.12	Environmental Matters		18
3.13	Employee Benefit Plans; ERISA		19
3.14	Employees; Labor Matters		20
3.15	Contracts		21
3.16	Assets		22


3.17	Real Property	22
3.18	Inventory	23
3.19	Accounts Receivable	23
3.20	Proprietary Rights	24
3.21	Insurance	26
3.22	Warranties and Products	27
3.23	Suppliers	27
3.24	Customers	27
3.25	Certain Payments	27
3.26	Transactions with Affiliates	28
3.27	Bank Accounts; Powers of Attorney	28
3.28	Brokers	28
3.29	Full Disclosure	28

ARTICLE IV REPRESENTATIONS AND WARRANTIES RELATING TO SHAREHOLDER

4.1	Authority; Enforceability	29
4.2	Consents and Approvals; No Violation	29
4.3	Equity Interests	29
4.4	Litigation	29
4.5	Brokers	30
4.6	Full Disclosure	30

ARTICLE V

REPRESENTATIONS AND WARRANTIES RELATING TO THE BUYER

5.1	Organization; No Prior Operations	30
5.2	Authority; Enforceability	30
5.3	Consents and Approvals; No Violation	30
5.4	Litigation	31
5.5	Brokers	31
5.6	Full Disclosure	31

ARTICLE VI

COVENANTS AND AGREEMENTS

6.1	Confidentiality	31
6.2	Employees	31
6.3	Lien Searches	32
6.4	Exclusivity	32
6.5	Seller Name Change; Buyer Qualification	33
6.6	Covenant Not to Compete	33
6.7	Inventory Valuation Methodology	33


6.8	Insurance Coverage	34

ARTICLE VII

CLOSING CONDITIONS

7.1	Mutual Conditions	34
7.2	Buyer’s Conditions	34
7.3	Seller’s Conditions	36

ARTICLE VIII

INDEMNIFICATION

8.1	Survival	37
8.2	Seller’s and Shareholder’s Agreement to Indemnify	37
8.3	Buyer’s Agreement to Indemnify	37
8.4	Limitations on Indemnity	38
8.5	Procedure for Indemnification – Third-Party Claims	39
8.6	.Indemnification Procedure – Direct Claims	40
8.7	Escrow Fund	41
8.8	Right of Set-Off	41
8.9	Exclusive Remedy	41

ARTICLE IX

GENERAL PROVISIONS

9.1	Expenses	41
9.2	Amendment and Modification	41
9.3	Waiver of Compliance; Consents	42
9.4	Notices	42
9.5	Publicity	43
9.6	Assignment; No Third-Party Rights	43
9.7	Governing Law	43
9.8	Jurisdiction; Service of Process	43
9.9	Further Assurances; Records	44
9.10	Severability	44
9.11	Construction	44
9.12	Disclosure Schedule	44
9.13	Time of Essence	44
9.14	Counterparts	45
9.15	Entire Agreement	45
9.16	Limitation On Shareholder Obligations	45

iii

EXHIBITS


A		Form of Escrow Agreement
B		Form of Bill of Sale
C		Form of Assignment & Assumption Agreement
D		Form of Shareholder Employment Agreement

ASSET PURCHASE AGREEMENT

This Asset Purchase Agreement, dated as of July 18, 2016, is between CONTRAIL AVIATION SUPPORT, LLC , a North Carolina limited liability company (the “ Buyer ”), CONTRAIL AVIATION SUPPORT, INC. , a Wisconsin corporation (the “ Seller ”), and JOSEPH KUHN , an individual resident of the State of Wisconsin, the sole shareholder of the Seller (the “ Shareholder ”).

Background Statement

The Seller is engaged in the business of acquiring surplus commercial jet engines or components and supplying surplus and aftermarket commercial jet engine components (the “ Business ”).

The Shareholder and the Seller desire the Seller to sell, and the Buyer desires to purchase, all of the assets of the Seller, for the consideration and on the terms set forth herein.

Statement of Agreement

The parties agree as follows:

ARTICLE I

DEFINITIONS AND CONSTRUCTION

1.1 Definitions . Capitalized terms used in this Agreement have the meanings given to them in Appendix 1 .

1.2 Construction .

(a) The article and section headings contained in this Agreement are solely for the purpose of reference and convenience, are not part of the agreement of the parties, and shall not in any way limit, modify or otherwise affect the meaning or interpretation of this Agreement.

(b) References to “Sections” or “Articles” refer to corresponding Sections or Articles of this Agreement unless otherwise specified.

(c) Unless the context requires otherwise, the words “include,” “including” and variations thereof mean without limitation, the words “hereof,” “hereby,” “herein,” “hereunder” and similar terms refer to this Agreement as a whole and not any particular section or article in which such words appear, and any reference to a statute, regulation or law shall include any amendment thereof or any successor thereto and any rules and regulations promulgated thereunder.

(d) Unless the context requires otherwise, words in the singular include the plural, words in the plural include the singular, and words importing any gender shall be applicable to all genders.

(e) If a term is defined as one part of speech (such as a noun), it shall have a corresponding meaning when used as another part of speech (such as a verb).

(f) Currency amounts referenced herein are in U.S. Dollars.

(g) References to a number of days refer to calendar days unless Business Days are specified. Except as otherwise specified, whenever any action must be taken on or by a day that is not a Business Day, then such action may be validly taken on or by the next day that is a Business Day.

(h) All accounting terms used herein and not expressly defined herein shall have the meanings given to them under GAAP.

ARTICLE II

PURCHASE, TERMS OF PAYMENT AND CLOSING

2.1 Purchase and Sale of Assets . On the terms and subject to the conditions of this Agreement, on the Closing Date, the Seller shall sell, convey, assign, transfer and deliver to the Buyer, and the Buyer shall purchase, acquire and accept from the Seller, all of the Purchased Assets, free and clear of all Liens, except for Permitted Liens, in exchange for payment of the Purchase Price.

2.2 Purchased Assets . For purposes of this Agreement, the term “ Purchased Assets ” means all of the assets, rights and properties owned, used or useable by the Seller, and all of the Seller’s rights therein including, without limitation, the following assets, rights and properties, but excluding the Excluded Assets:

(a) all Fixed Assets of the Seller as set forth on Section 3.16(b) of the Disclosure Schedule (the “ Purchased Fixed Assets ”);

(b) all Accounts Receivable of the Seller (the “ Purchased Accounts Receivable ”);

(d) all Governmental Authorizations held or owned by or issued or made available to the Seller to the extent such Governmental Authorizations are transferrable (the “ Purchased Governmental Authorizations ”) and all pending applications therefor or renewals thereof;

(e) all Trade Certifications held or owned by or issued or made available to the Seller to the extent such Trade Certifications are transferrable (the “ Purchased Trade Certifications ”) and all pending applications therefor or renewals thereof;

(f) all Proprietary Rights of the Seller to the extent such Proprietary Rights are transferrable (the “ Purchased Proprietary Rights ”) and all telephone, telecopy and e-mail and web addresses and listings of the Seller;

(g) all Software of the Seller to the extent such Software is transferrable (the “ Purchased Software ”);

(h) all Contracts of the Seller to the extent such Contracts are transferrable (the “ Seller Contracts ”), except for the Excluded Contracts, (the Seller Contracts, excluding the Excluded Contracts, being referred to as the “ Purchased Contracts ”), and all rights of any nature whatsoever arising out of all Purchased Contracts;

(i) all files, records, documents, data, plans, proposals and all other recorded knowledge of the Seller, including client and customer lists and records, referral sources, research and development reports and records, production reports and records, service and warranty records, equipment logs, operating guides and manuals, financial and accounting records, creative materials, advertising materials, promotional materials, studies, reports, correspondence and other similar documents and records, whether in written, electronic, visual or other form, and, subject to Legal Requirements, copies of all personnel and other records of the Seller that are described in Section 2.3(f) , but subject to the exclusion of email records as provided in Section 2.3(l) ;

(j) all rights of the Seller relating to deposits and prepaid expenses, claims for refunds and rights of offset that are not described in Section 2.3(d) ;

(k) all insurance benefits of the Seller, including rights and proceeds, arising from, in connection with or relating to the Purchased Assets or the Assumed Liabilities but excluding any insurance benefits associated with liability(ies) for which the Seller remains responsible following the Closing Date;

(l) all claims and rights of the Seller in connection with or relating to the Purchased Assets or the Assumed Liabilities, including, without limitation, all claims and rights of the Seller against third parties relating to the Purchased Assets or the Assumed Liabilities, whether choate or inchoate, known or unknown, contingent or non-contingent; and

(m) the business of the Seller as a going concern and all of the goodwill associated with the business of the Seller.

2.3 Excluded Assets . The Purchased Assets shall not include any of the following assets, rights and properties of the Seller (the “ Excluded Assets ”), all of which are excluded from the Purchased Assets and shall be retained by the Seller:

(a) all cash, cash equivalents and short-term investments of the Seller;

(b) the rights arising under those Contracts of the Seller set forth in Section 2.3(b) of the Disclosure Schedule (collectively, the “ Excluded Contracts ”);

(d) all claims and rights of the Seller to federal, state, local and foreign Tax refunds, Tax refund claims, Tax credits and Tax deposits, but in each case only to the extent such refunds, claims, credits or deposits relate directly to a period ending at or prior to Closing;

(e) all corporate seals, corporate minute books, corporate formation, organizational and governance documents, stock records and Tax Returns of the Seller;

(f) all records of the Seller that the Seller, pursuant to applicable Legal Requirements, is required to retain in its possession;

(g) all insurance policies of the Seller and all of the Seller’s rights thereunder (except to the extent specified in Sections 2.2(k) and 2.2(l) );

(h) all Governmental Authorizations and or Trade Certifications of the Seller, to the extent not transferable under applicable Legal Requirements;

(i) all assets and rights of the Seller in and with respect to the Plans and Other Benefit Obligations of the Seller;

(j) the shares of capital stock of the Seller held by the Seller in treasury;

(k) the assets, rights and properties, if any, set forth in Section 2.3(k) of the Disclosure Schedule;

(l) the historical email records of the Seller, provided that the Seller covenants that it shall make email records available to the Buyer, including upon the request of the Buyer, to the extent those records reasonably relate to matters pertaining to the operation of the Business, including those matters set forth in Section 2.2(i) and,

(m) the 2015 Ford Explorer owned by the Company and used by the Shareholder with VIN No. 1FM5K8GTXFGA12862.

2.4 Procedures for Non-Transferable Assets . If any Purchased Contracts material to the operation of the Business or any other material property or rights included in the Purchased Assets are not assignable or transferable either by virtue of the provisions thereof or under applicable Legal Requirements without the consent of some other party or parties, the Seller shall use Commercially Reasonable Efforts to obtain such consents prior to the Closing Date. If any such consents cannot be obtained prior to Closing, the Buyer may in the exercise of its sole discretion waive such requirement as a condition to Closing, and in such event, this Agreement and the related instruments of transfer shall not constitute an assignment or transfer thereof and the Buyer shall not assume the obligations of the Seller with respect thereto. In the event the Buyer elects to proceed pursuant to the preceding sentence, then following the Closing, the Seller shall (a) use Commercially Reasonable Efforts to obtain, as soon as reasonably possible after the Closing Date, any consents requested by the Buyer that were not previously obtained and (b) assign such Purchased Contracts or other property or rights included in the Purchased Assets to the Buyer on the effective date for any such consent obtained.

2.5 Assumed Liabilities . As of the Effective Time, on the Closing Date, the Buyer shall assume, and shall thereafter timely pay and perform, the following obligations and liabilities of the Seller (the “ Assumed Liabilities ”):

(a) the current liabilities, excluding any Indebtedness (whether current or long-term), incurred by the Seller in connection with its operation of the Business in the Ordinary Course, but only to the extent that the current liabilities exist as of Effective Time and are accrued for on the Closing Balance Sheet; and

(b) the obligations of the Seller arising after the Effective Time under the Purchased Contracts, except for (i) liabilities for breaches thereof occurring at or before the Effective Time, and (ii) liabilities under or pursuant to Contracts that are required by the terms of Section 3.15 to be listed on Section 3.15 of the Disclosure Schedule that are not so listed.

2.6 Excluded Liabilities .

(a) Except for the Assumed Liabilities, neither the Buyer nor any of its Affiliates shall assume, take subject to or be liable for any liabilities or obligations of any kind or nature, whether absolute, contingent, accrued, known or unknown, of the Business, the Seller or any Affiliate of the Seller (the “ Excluded Liabilities ”). The Seller shall pay and perform and shall cause its Affiliates to pay and perform, on or before the date due, all Excluded Liabilities.

(b) Without limiting the generality of Section 2.6(a) , the Excluded Liabilities shall include any liabilities or obligations of the Seller or any Affiliate of the Seller incurred, arising from or out of, in connection with or relating to:

(i) any Indebtedness of the Seller;

(ii) any claims made by or against the Seller or any Affiliate of the Seller, whether before or after the Closing Date, that arise out of events prior to the Closing Date, including any and all liabilities or obligations relating to investigations by any Governmental Authority, but excluding any claims that are Assumed Liabilities.

(iii) any Taxes, including any Taxes arising by reason of the transactions contemplated herein;

(iv) products manufactured, sold or distributed prior to the Effective Time, including liabilities or obligations related to product warranties, recalls of such products or defects with respect to such products;

(v) any liabilities or obligations under a Contract that are not assumed by the Buyer pursuant to Section 2.5(b) ;

(vi) any Plans or Other Benefit Obligations;

(vii) any employment, severance, retention or termination agreement with any employee;

(viii) any employee grievance;

(ix) any obligation to indemnify, reimburse or advance amounts to any officer, director, employee or agent;

(x) any obligation to distribute to any shareholder or otherwise to apply all or any part of the consideration received hereunder;

(xi) any Proceeding pending as of the Effective Time or any Proceeding commenced after the Effective Time to the extent that it arises out of or relates to any occurrence or event happening prior to the Effective Time;

(xii) any compliance or noncompliance with any Legal Requirement of any Governmental Authority;

(xiii) any credit facility or any security interest related thereto;

(xiv) any fees and expenses in connection with the transactions contemplated hereby;

(xv) any obligation to any shareholders or former shareholders;

(xvi) any obligation relating to the Excluded Assets; and

(xvii) any obligation of the Seller under this Agreement or any other document executed in connection with the transactions contemplated hereby, including the obligations of the Seller and the Shareholder for their expenses as set forth in Section 9.1 .

2.7 Consideration . The aggregate consideration to be paid by the Buyer to the Seller for the Purchased Assets (the “ Consideration ”) shall consist of (a) the Cash Consideration to be paid by the Buyer to the Seller in accordance with Section 2.8 of this Agreement, (b) the equity consideration delivered by the Buyer to the Seller in accordance with Section 2.9 of this Agreement, and (c) the agreement of the Buyer to pay the Earnout Payments to the Seller in accordance with Section 2.10 of this Agreement.

2.8 Cash Consideration .

(a) The Buyer shall pay to the Seller an aggregate amount of cash consideration (as adjusted, the “ Cash Consideration ”) equal to $4,937,500, adjusted as follows: (i) plus the amount, if any, by which the Net Working Capital is greater than $4,000,000 or (ii) minus the amount, if any, by which the Net Working Capital is less than $4,000,000, as applicable. No later than the third Business Day prior to the Closing Date, the Seller shall deliver to the Buyer a certificate, dated as of the date of delivery and in a form reasonably acceptable to the Buyer, setting forth a reasonable, good faith estimate of the Cash Consideration (the “ Estimated Cash Consideration ”), which shall include a statement in reasonable detail of the estimated amount of the Net Working Capital that will be determined based on the Closing Balance Sheet.

(b) On the Closing Date, the Buyer shall make the following payments (collectively, the “ Closing Payments ”):

(i) as security for any amounts that may become payable by the Seller or the Shareholder pursuant to Sections 2.8(c) and 8.2 , the Buyer shall deposit $300,000 (the “ Escrow Fund ”) with Midwest Title Corporation (the “ Escrow Agent ”) pursuant to an Escrow Agreement substantially in the form of Exhibit A (the “ Escrow Agreement ”); and

(ii) the Buyer shall pay to the Seller, by wire transfer of immediately available funds to an account or accounts that the Seller shall designate in writing to the Buyer at least two Business Days prior to the Closing Date, an aggregate amount equal to (A) the Estimated Cash Consideration less (B) the Escrow Fund.

(c) Post-Closing Payments . Within five Business Days after the Closing Balance Sheet and the Cash Consideration are deemed final and binding as provided in Section 2.13 , (i) if the Cash Consideration exceeds the aggregate amount of the Closing Payments, then the Buyer shall pay to the Seller such excess, by wire transfer of immediately available funds to an account or accounts that the Seller shall designate in writing and (ii) if the aggregate amount of the Closing Payments exceeds the Cash Consideration, the Seller shall pay to the Buyer such excess, by wire transfer of immediately available funds to an account or accounts that the Seller shall designate in writing (any such payment, the “ Post-Closing Payment ”). Seller and Buyer agree that any Post-Closing Payment obligation of Seller shall be a cash payment obligation which shall be separate from and shall not be paid or deducted from the Escrow Fund.

2.9 Equity Consideration . On the Closing Date, the Buyer shall issue to the Seller twenty one percent (21%) of the equity interests of the Buyer, free and clear of all Liens, which the parties agree shall be valued at $1,312,500. Such equity interests shall be subject to the restrictions, terms and conditions contained in the Operating Agreement.

2.10 Earnout Payments .

(a) Upon the terms and conditions of this Agreement, the Company hereby agrees to pay to the Seller, in accordance with this Section 2.10 and as additional deferred consideration to the Seller for the Purchased Assets, up to a maximum of $1,500,000 per year and $3,000,000 in the aggregate (collectively, the “ Earnout Payments ” and each, an “ Earnout Payment ”), calculated as follows:

(i) If the Buyer generates EBITDA in any Earnout Period less than $1,500,000, no Earnout Payment shall be payable by the Buyer with respect to such Earnout Period;

(ii) If the Buyer generates EBITDA in any Earnout Period equal to or in excess of $1,500,000, but less than $2,000,000, the Earnout Payment for each such Earnout Period shall be an amount equal to the product of (x) the EBITDA generated with respect to such Earnout Period minus $1,500,000, and (y) two (2);

(iii) If the Buyer generates EBITDA in any Earnout Period equal to or in excess of $2,000,000, but less than $4,000,000, the Earnout Payment for each such Earnout Period shall be equal to $1,000,000;

(iv) If the Buyer generates EBITDA in any Earnout Period equal to or in excess of $4,000,000, the Earnout Payment for each such Earnout Period shall be equal to $1,500,000; and

(v) If, following the fifth Earnout Period, the Buyer has generated EBITDA equal to or in excess of $15,000,000 in the aggregate during all Earnout Periods, but the Seller has received or is owed less than $3,000,000 in aggregate Earnout Payments pursuant to clauses (i) through (iv) , above, the Buyer shall make an additional Earnout Payment to the Seller in an amount equal to the difference between $3,000,000 and the aggregate Earnout Payments already received or payable pursuant to clauses (i) through (iv) , above.

(b) The Seller shall not be entitled to any interest on any Earnout Payments timely paid in accordance with this Agreement. Earnout Payments not timely paid shall bear interest at 12% per annum. In addition, the Buyer’s obligation to pay Earnout Payments pursuant to this Agreement is not subject to the continued employment of the Shareholder and shall not be affected by the termination of employment of the Shareholder with the Buyer following the Closing for any reason.

(c) Within 45 days after the expiration of each Earnout Period, the Buyer shall prepare (or cause to be prepared) and deliver to the Seller a schedule (the “ Earnout Schedule ”) setting forth the Buyer’s calculation of (A) the amount of EBITDA for such Earnout Period and (B) the amount of the Earnout Payment for such Earnout Period (if any) to be paid by the Buyer to the Seller pursuant to this Section 2.10 . The Seller shall be entitled to request, and the Buyer shall timely provide, all such information as reasonably required by the Seller to confirm the accuracy of the information set forth in the Earnout Schedule. In addition, Seller and Seller’s accountants shall be granted access, upon not less than five (5) days written notice to Buyer, to all records and documents related to the calculation hereunder for the purpose of auditing same.

(d) The Earnout Schedule (including without limitation the Buyer’s calculation of the applicable Earnout Payment) with respect to an Earnout Period shall be deemed to be final and binding on all parties unless the Seller objects thereto by giving written notice (the “ Earnout Objection Notice ”) to the Buyer prior to 5:00 p.m., Charlotte, North Carolina time, on or before the 20 ^th Business Day after the Buyer has delivered such Earnout Schedule to the Seller. The Earnout Objection Notice shall set forth in reasonable detail the basis for the Seller’s objections. If the Buyer and the Seller are unable to resolve their disagreement with regard to such Earnout Schedule within 30 days after delivery of the applicable Earnout Objection Notice, then the parties shall engage the Accounting Firm to resolve the issue(s) in dispute. The Accounting Firm’s review shall be limited in scope to the disputed issue(s) or amount(s), and the Accounting Firm shall not have the power to alter, modify, amend, add to or subtract from any term or provision of this Agreement. The parties shall instruct the Accounting Firm to render its decision within 15 Business Days of its engagement, and the Accounting Firm’s determination of the disputed items (and the applicable Earnout Schedule as modified to reflect such determination) shall be final and binding on the parties. The fees and expenses of the Accounting Firm shall be divided equally between the Buyer and the Seller.

(e) Within ten Business Days after the Earnout Schedule for an Earnout Period is deemed to be final and binding as provided in Section 2.10(c) , if the Buyer is obligated to pay any Earnout Payment pursuant to this Section 2.10 pursuant to such Earnout Schedule, it shall pay the required Earnout Payment to the Seller in cash or by wire transfer of immediately available funds. The Seller shall execute and deliver any instruments and documents and shall take all such other actions as the Buyer may reasonably request in order to evidence the payment of such Earnout Payment pursuant to this Section 2.10 .

(f) The parties hereby agree that subsequent to the Closing, the Buyer shall have full right, power and authority to own, operate, manage and control the Business and the operations of the Business in its discretion but subject to the following provisions. Notwithstanding the foregoing, until the end of Year 5 the Buyer shall: (i) maintain a financial reporting system for the Business sufficient to permit the Buyer and the Seller to determine the amount of the Earnout Payments pursuant to the terms of this Agreement, including but not limited to the preparation of inventory valuation calculations consistent with Seller’s past practice pursuant to Section 6.7 ; (ii) pursue in good faith the goal of growing the Business (provided that the foregoing shall not obligate any member of the Buyer to contribute, loan or otherwise provide additional capital to the Buyer); (iii) ensure that during the Earnout Periods, all functional areas of the present Business, and all commercial engine leasing, is conducted through and by the Buyer (or a wholly-owned subsidiary of the Buyer, provided that Seller approves in writing the accounting procedures for such subsidiary, including but not limited to the effect of the operations of the subsidiary on the Earnout calculations hereinabove) and is not conducted by or through any affiliate, parent, partner or other commonly-owned entity, except as may be agreed in writing by Buyer and Seller or Seller’s designee; and (iv) operate the Business in good faith and not intentionally take any action for the purpose of reducing the amount of any Earnout Payment in any material respect.

2.11 Closing . The closing (the “ Closing ”) of the purchase and sale of the Purchased Assets shall be coordinated by the offices of Robinson, Bradshaw & Hinson, P.A., in Charlotte, North Carolina, beginning at 10:00 a.m., local time, on July 18, 2016, or on such other date or at such other time or place as the parties shall agree. The Closing shall be effective as of 12:01 a.m. on the Closing Date (the “ Effective Time ”) and all actions scheduled in this Agreement for the Closing Date shall be deemed to occur simultaneously at the Effective Time.

2.12 Closing Obligations . At the Closing:

(a) The Seller and/or the Shareholder, as the case may be, shall deliver to the Buyer:

(i) this Agreement executed by the Seller and the Shareholder if not already delivered;

(ii) a bill of sale substantially in the form of Exhibit B attached hereto (the “ Bill of Sale ”) executed by the Seller, conveying the Purchased Assets constituting personal property to the Buyer;

(iii) an assignment and assumption agreement substantially in the form of Exhibit C attached hereto (the “ Assignment & Assumption Agreement ”) executed by the Seller, assigning to the Buyer the rights under the Purchased Contracts;

(iv) a lease in form and substance reasonably satisfactory to the Buyer (the “ Lease ”) conveying to the Buyer leasehold title to the Real Property;

(v) an employment agreement in the form of Exhibit D , executed by the Shareholder (the “ Shareholder Employment Agreement ”);

(vi) the Operating Agreement of Buyer, dated as of the date hereof, executed by the Seller (the “ Operating Agreement ”).

(b) The Buyer shall deliver to the Seller and the Shareholder:

(i) this Agreement executed by the Buyer, if not already delivered;

(ii) the Closing Payment to be paid to the Seller pursuant to Section 2.8(b) ;

(iii) the Assignment & Assumption Agreement executed by the Buyer, pursuant to which the Buyer shall assume the obligations of the Purchased Contracts to the extent such obligations are included in the Assumed Liabilities;

(iv) the Shareholder Employment Agreement, executed by the Buyer; and

(v) the Operating Agreement, executed by the Buyer.

(c) The Buyer and the Seller shall enter into the Escrow Agreement with the Escrow Agent in a form satisfactory to both parties, and the Buyer shall deposit the Escrow Fund with the Escrow Agent in accordance with Section 2.8(b) .

2.13 Closing Balance Sheet .

(a) Within 60 days after the Closing Date, the Buyer shall deliver to the Seller (i) a balance sheet as of the Effective Time presenting the Purchased Assets and the Assumed Liabilities as if the Purchased Assets and the Assumed Liabilities were the only assets and liabilities of a single, stand-alone business entity (the “ Closing Balance Sheet ”), which shall be prepared in accordance with GAAP and, with respect to Purchased Inventory, in accordance with Section 6.7 of this Agreement, and (ii) based on the Closing Balance Sheet, a calculation of the Cash Consideration, showing the amount of the Net Working Capital, which shall be calculated in a manner consistent with the computation of the Net Working Capital as of July 15, 2016, based on the Interim Balance Sheet, which is attached hereto as Section 2.13 of the Disclosure Schedule.

(b) If the Seller does not accept the Closing Balance Sheet prepared by the Buyer or the calculation of the Cash Consideration, the Seller shall give written notice to the Buyer prior to 5:00 p.m. Charlotte, North Carolina time on the 45 ^th day after delivery thereof, and the Seller shall be deemed to have accepted the Closing Balance Sheet and the computation of the Cash Consideration proposed by the Buyer, if the Seller has not by then given the Buyer written notice of objection. Any notice of objection shall set forth in reasonable detail the basis for each objection.

(c) If the Buyer and the Seller are unable to resolve any disagreement within 30 days after delivery of the Seller’s written notice, the parties shall engage the Accounting Firm to resolve the issues in dispute. The accounting firm shall apply accounting principles, in accordance with the provisions of this Section 2.13 , to the issues at hand and shall not have the power to alter, modify, amend, add to or subtract from any term or provision of this Agreement, and the accounting firm’s engagement shall be limited in scope to the disputed issues or amounts identified in the notice of objection. The parties shall instruct the Accounting Firm to render its decision within 60 days of the engagement, and such decision shall be binding on the parties. The Buyer, on the one hand, and the Seller, on the other, shall each pay one-half of the cost of the accounting firm.

2.14 Purchase Price Allocation . An amount equal to the Consideration plus the Assumed Liabilities shall be allocated among the Purchased Assets in accordance with Section 2.14 of the Disclosure Schedule. Following the payment of the Post-Closing Payment and the Earnout Payments, if any, the parties shall revise such allocations in a fashion consistent with the agreed-upon allocation set forth in Section 2.14 of the Disclosure Schedule. The allocation set forth in such schedule is intended to comply with the requirements of Section 1060 of the Code. The Seller and the Buyer agree to file all income Tax Returns or reports, including without limitation IRS Form 8594, for their respective taxable years in which the Closing occurs, to reflect the allocation described in Section 2.14 of the Disclosure Schedule (as such schedule may be revised in accordance with this Section 2.14 ) and agree not to take any position inconsistent therewith before any Governmental Authority charged with the collection of any Tax or in any other Proceeding.

2.15 Other Expenses; Proration .

(a) The Seller shall be responsible for, and as of the Closing shall have paid, all ad valorem Taxes on the Purchased Assets levied in years prior to the year in which the Closing occurs.

(b) All ad valorem Taxes on the Purchased Assets for the year in which the Closing occurs shall be prorated per diem on a calendar-year basis. The Seller shall be responsible for (i) the prorated amount of such Taxes up to the Closing Date, except to the extent that such prorated amount is accrued as a liability on the Closing Balance Sheet, and (ii) the prorated amount of such Taxes from and after the Closing Date to the extent shown as an asset on the Closing Balance Sheet. The Buyer shall be responsible for (i) the prorated amount of such Taxes from and after the Closing Date, except to the extent that such prorated amount is shown as an asset on the Closing Balance Sheet, and (ii) the prorated amount of such Taxes up to the Closing Date to the extent accrued as a liability on the Closing Balance Sheet. If any ad valorem Taxes on the Purchased Assets are not due until after the Closing Date, the Buyer shall assume the responsibility of paying the Taxes when the Tax bills are submitted and, at the Closing, the Seller shall remit to the Buyer the prorated amount of such Taxes up to the Closing Date unless otherwise accounted for in connection with Net Working Capital calculations. If the amount of

any such Taxes is not known as of the Closing Date, the proration of such Taxes shall be based on the Tax bills for the immediately preceding year for which such Tax was paid or payable. If, based on the Closing Balance Sheet or on actual Tax bills for the year in which the Closing occurs, (x) it is determined that the Seller has paid to the Buyer pursuant to this Section 2.15(b) an aggregate amount that is greater than the aggregate amount of the ad valorem Taxes for which the Seller is responsible pursuant to this Section 2.15(b) , the Buyer shall refund to the Seller the amount of such excess within 15 days after the amount of such excess is known, or (y) it is determined that the Seller has paid to the Buyer pursuant to this Section 2.15(b) an aggregate amount that is less than the aggregate amount of the ad valorem Taxes for which the Seller is responsible pursuant to this Section 2.15(b) , the Seller shall remit to the Buyer the amount of such deficiency within 15 days after the amount of such deficiency is known.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE SELLER

The Seller represents and warrants to the Buyer that:

3.1 Organization; Good Standing .

(a) The Seller is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, which jurisdiction is set forth in Section 3.1 of the Disclosure Schedule. The Seller has full corporate power and authority to own or use the Purchased Assets and to conduct its business as presently conducted. The Seller is duly qualified to do business as a foreign corporation and is in good standing in the states, provinces and jurisdictions set forth in Section 3.1 of the Disclosure Schedule. No other jurisdiction has given notice to the Seller indicating that the Seller should be qualified in any other jurisdiction.

(b) The Seller has delivered to the Buyer accurate and complete copies of the articles of incorporation and bylaws of the Seller.

3.2 Authority; Enforceability . The Seller has the absolute and unrestricted right, authority, power and capacity to (i) execute and deliver this Agreement and each certificate, document and agreement to be executed by the Seller in connection herewith (the certificates, documents and agreements to be executed by the Seller in connection with this Agreement, collectively, the “ Seller Documents ”) and (ii) perform its obligations hereunder and thereunder. The execution and delivery of this Agreement and the Seller Documents and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by the Seller, and no other proceedings on the part of the Seller are necessary to authorize this Agreement or any Seller Document or to consummate the transactions contemplated hereby or thereby. This Agreement has been duly and validly executed and delivered by the Seller and constitutes a legal, valid and binding obligation of the Seller, enforceable against it in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, moratorium or similar laws of general application relating to or affecting creditors’ rights generally and except for the limitations imposed by general principles of equity (collectively, the “ Bankruptcy Exceptions ”). Upon execution and delivery by the Seller of each Seller Document, such Seller Document shall constitute a legal, valid and binding obligation of the Seller, in each case enforceable against it in accordance with its terms except for the Bankruptcy Exceptions.

3.3 Consents and Approvals; No Violation .

(a) To Seller’s Knowledge, no Governmental Authorization is required in connection with (i) the execution or delivery by the Seller of this Agreement or the Seller Documents, (ii) the performance of the Seller’s obligations under this Agreement or the Seller Documents or (iii) the consummation of the transactions contemplated hereby.

(b) Except as disclosed in Section 3.3 of the Disclosure Schedule, neither the execution and delivery of this Agreement and the Seller Documents by the Seller nor the performance of the Seller’s obligations hereunder or thereunder nor the consummation of the transactions contemplated hereby will, directly or indirectly (with or without notice or lapse of time):

(i) contravene, conflict with or result in any violation of any provision of the articles of incorporation or bylaws of the Seller, any resolution adopted by the board of directors or shareholders of the Seller or any agreement among shareholders of the Seller;

(ii) contravene, conflict with or result in a breach of any of the terms or provisions of, or give any Person a right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate or modify any Seller Contract in a manner which causes a Material Adverse Effect;

(iii) result in the creation of any Lien upon any of the Purchased Assets;

(iv) contravene, conflict with, violate, or give any Governmental Authority or other Person the right to challenge any of the transactions contemplated hereby or exercise any remedy (including revocation, withdrawal, suspension or modification of any Governmental Authorization) or obtain any relief under, any Legal Requirement applicable to the Seller;

(v) cause the Buyer to become subject to, or to become liable for the payment of, any Tax;

(vi) contravene, conflict with or violate the terms or requirements of, or result in any loss, or right of revocation, withdrawal, suspension, termination or modification of, any Purchased Governmental Authorization or Purchased Trade Certification; or

(vii) otherwise require the Seller to give any notice to, or obtain any consent from, any Person.

3.4 Books and Records . The books of account and other records of the Seller, all of which have been made available to the Buyer, are complete and correct and have been maintained in accordance with reasonable business practices and Legal Requirements.

3.5 Financial Statements . The Seller has delivered to the Buyer (a) reviewed balance sheets of the Seller as of December 31, 2015, and reviewed statements of income and cash flows of the Seller for the fiscal year ending on such date and (b) reviewed balance sheets of the Seller as of December 31, 2013 and 2014, and reviewed statements of income and cash flows of the Seller for each of the fiscal years ending on such dates, in each case together with any notes thereto (collectively, the “ Annual Financial Statements ”). Section 3.5 of the Disclosure Schedule contains an unaudited balance sheet of the Seller (the “ Interim Balance Sheet ”) as of June 30, 2016 (the “ Balance Sheet Date ”) and unaudited statements of income and cash flows of the Seller for the six (6)-month period ending on such date (collectively, the “ Unaudited Financial Statements ” and together with the Annual Financial Statements, the “ Financial Statements ”). The Financial Statements (i) are true, complete and correct and fairly present the results of operations, cash flows and financial position of the Seller for the periods and as of the dates referred to in the Financial Statements, all in accordance with GAAP consistently applied throughout the periods referred to in the Financial Statements (or, if prior practice deviates from GAAP, in accordance with prior practice as set forth on Section 3.5 of the Disclosure Schedule) subject, in the case of the Unaudited Financial Statements, to normal recurring year-end adjustments (the effect of which would not, individually or in the aggregate, have a Material Adverse Effect) and to the absence of notes (that, if presented, would not differ materially from those included in the Annual Financial Statements) and (ii) are consistent with the books and records of the Seller.

3.6 Undisclosed Liabilities . The Seller has no obligation or liability (whether known or unknown and whether absolute, contingent or otherwise), except liabilities and obligations that (i) are fully accrued or reserved against in the Interim Balance Sheet; (ii) were incurred since the Balance Sheet Date in the Ordinary Course and consistent with past practices and are of the same type and category as shown on the Interim Balance Sheet; or (iii) are the Seller’s obligations under the Seller Contracts, excluding liability for breaches thereof.

3.7 Absence of Certain Changes or Events . Since December 31, 2015, the Seller has conducted its business only in the Ordinary Course and there has not been any:

(i) event or condition that has had, or could reasonably be expected to have, a Material Adverse Effect;

(ii) change in the Seller’s authorized or issued capital stock or any declaration or payment of any dividend or other distribution in respect of shares of the Seller’s capital stock except for Ordinary Course distributions in connection with income taxes;

(iii) amendment or modification to the Seller’s articles of incorporation or bylaws;

(iv) loss or damage (whether or not covered by insurance) affecting any of the Purchased Assets in excess of $10,000.00;

(v) payment or increase by the Seller of any bonuses, salaries or other compensation to any shareholder, director, officer or employee (except, in the case of employees, payments of salaries or other compensation in the Ordinary Course) or entry by the Seller into any employment, severance or similar contract with any director, officer or employee;

(vi) adoption of, or increase in the payments to or benefits under, any profit sharing, bonus, deferred compensation, savings, insurance, pension, retirement, or other employee benefit plan for or with any employees of the Seller;

(vii) entry into, breach or default under, termination of, receipt of a notice of termination of or cancellation or waiver of any (A) Purchased Governmental Authorization, (B) Purchased Trade Certification, (C) Purchased Contract or transaction involving a total commitment by or to the Seller with an aggregate financial value in excess of $10,000.00 or (D) claims or rights of the Seller;

(viii) sale (other than sales of Inventories in the Ordinary Course), lease or other disposition of any Purchased Asset or other property of the Seller or mortgage, pledge or imposition of any Lien on any Purchased Asset or other property of the Seller except for the Permitted Liens;

(ix) change in the accounting methods used by the Seller;

(x) acquisition of assets by the Seller other than in the Ordinary Course;

(xi) change in the terms of any Contracts or other documents identified in the Disclosure Schedule other than in the Ordinary Course;

(xii) indication by any customer or supplier of the Seller of any intention to discontinue or change the terms of its relationship with the Seller other than in the Ordinary Course; or

(xiii) the loss of any Proprietary Right as a result of the failure to make any filing with or pay any fee to any Governmental Authority; or

(xiv) agreement, whether oral or written, by the Seller to do any of the foregoing.

3.8 Taxes and Tax Returns .

(a) The Seller has duly and timely filed all Tax Returns required to be filed by it on or before the date hereof, and all such Tax Returns are true, correct and complete in all material respects. The Seller has duly paid or made provision on the Financial Statements, in accordance with GAAP, for the payment of all Taxes that have been incurred or are due to any taxing authorities by the Seller. The Seller has established reserves on the Financial Statements that are adequate for the payment of all Taxes of the Seller not yet due and payable. All amounts required to be paid by the Seller as estimated income taxes under Code § 6655, and all comparable provisions of state or local statutes, have been duly paid. Since December 31, 2015, the Seller has not incurred any liability for Taxes, other than in the Ordinary Course; provided, however, that Seller has filed for extensions in connection with its 2015 tax returns.

(b) There are no disputes pending in respect of, or claims asserted for, Taxes upon the Seller, nor are there any pending or, to the Seller’s Knowledge, threatened audits or investigations or outstanding matters under discussion with any taxing authorities with respect to the payment of Taxes of the Seller, nor has the Seller given or been requested to give any currently effective waivers extending the statutory period of limitation applicable to any Taxes for any period. No issues that have been raised by any taxing authority in connection with any Taxes or Tax Returns of the Seller are of a recurring nature that would apply to the Taxes or the Tax Returns of the Buyer after the Closing Date. To the Seller’s Knowledge, there are no threatened claims or disputes, nor is there any basis for any claims or disputes, for past due Taxes of the Seller. No claim against the Seller has ever been made by an authority in a jurisdiction where the Seller does not file Tax Returns.

(c) There are no Liens with respect to Taxes (except for Liens for Taxes, assessments or other governmental charges not yet due) upon any of the Purchased Assets.

(d) There has been withheld or collected from each payment made to each employee of the Seller the amount of all Taxes, including, to the extent applicable, federal income Taxes, Federal Insurance Contributions Act Taxes, and state and local income, payroll and wage Taxes, required to be withheld or collected therefrom through the date hereof, and there has been withheld from each payment made by the Seller to each other Person the amount of all Taxes, including without limitation, to the extent applicable, sales Taxes, required to be withheld or collected therefrom through the date hereof, and the same have been paid to the proper Tax depositories or collecting authorities by the date hereof or shall be timely paid to the proper Tax authorities thereafter.

3.9 Litigation .

(a) There are no Proceedings that have been commenced by or against the Seller or, to the Seller’s Knowledge, that have been threatened against or may affect the Seller (including its officers, directors or employees in their capacity as such) or any of its properties, assets or operations, or that challenge, or that may have the effect of preventing, delaying, making illegal, or otherwise interfering with, the transactions contemplated by this Agreement. To Seller’s Knowledge, no event has occurred or circumstance exists that may give rise to or serve as a basis for the commencement of any such Proceeding.

(b) There are, to Seller’s Knowledge, no Orders to which the Seller or to which any of the assets owned or used by the Seller are subject or that may adversely affect the Seller (including its officers, directors or employees in their capacity as such) or that challenge, or that may have the effect of preventing, delaying, making illegal, or otherwise interfering with, the transactions contemplated by this Agreement, or that could affect the enforceability of this Agreement against the Seller or impair the Seller’s ability to consummate the transactions contemplated by this Agreement. To the Seller’s Knowledge, no officer, director, agent, or employee of the Seller is subject to any Order that prohibits such officer, director, agent, or employee from engaging in or continuing any conduct, activity, or practice relating to the business of the Seller.

3.10 Governmental Authorizations and Trade Certifications.

(a) Section 3.10(a) of the Disclosure Schedule contains a complete and accurate list of each Purchased Governmental Authorization and Purchased Trade Certification. The Seller has delivered to the Buyer complete copies of each Purchased Governmental Authorization and Purchased Trade Certification.

(b) Except for those Governmental Authorizations and Trade Certifications set forth in Section 3.10(b) of the Disclosure Schedule, no Governmental Authorizations or Trade Certifications other than those set forth in Section 3.10(a) of the Disclosure Schedule are necessary or required for the Seller to lawfully conduct its business as currently conducted, or for the Seller to own, lease or use its assets.

(c) Each of the Purchased Governmental Authorizations and Purchased Trade Certifications is valid and in full force and effect, and all applications required to have been filed for renewal of the Purchased Governmental Authorizations and Purchased Trade Certifications have been duly filed on a timely basis with the appropriate Governmental Authorities or other entities or organizations, and all other filings required to have been made with respect to the Purchased Governmental Authorizations and Purchased Trade Certifications have been duly made on a timely basis with the appropriate Governmental Authorities or other entities or organizations. Except as described in Section 3.10 of the Disclosure Schedule, the Purchased Governmental Authorizations and Purchased Trade Certifications (i) are not subject any restrictions or conditions that would restrict the Seller’s business as presently conducted or as presently planned to be conducted; and (ii) are transferable to the Buyer and shall remain in full force and effect immediately subsequent to the Closing without any cost to the Buyer and without any additional restriction or condition, or adverse change, as a result of the transactions contemplated hereby.

3.11 Compliance with Laws, Governmental Authorizations and Trade Certifications .

(a) Except as described in Section 3.11 of the Disclosure Schedule, the Seller is, and at all times since January 1, 2013, has been, in compliance in all material respects with (i) to Seller’s Knowledge, all Legal Requirements applicable to the Seller and (ii) all Governmental Authorizations and Trade Certifications of the Seller. Since January 1, 2013, the Seller has not paid any compensation, damages, Taxes, fines, penalties, or other amounts, however designated, for a failure to fully comply with any such Legal Requirements or Governmental Authorizations.

(b) Except as described in Section 3.11 of the Disclosure Schedule, to Seller’s Knowledge, no event has occurred or circumstance exists that may (with or without notice or lapse of time) (i) constitute or result in a violation by the Seller, or failure on the part of the Seller to comply with, any Legal Requirement or any Governmental Authorization or Trade Certification of the Seller, (ii) give rise to any obligation on the part of the Seller to undertake, or to bear all or any portion of the cost of, any remedial action of any nature, or (iii) result in the revocation, withdrawal, suspension, cancellation, termination of or any modification to any Purchased Governmental Authorization or Purchased Trade Certification.

(c) Except as described in Section 3.11 of the Disclosure Schedule, the Seller has not received, at any time since January 1, 2013, any notice or other communication (whether oral or written) from any Governmental Authority or any other Person regarding (i) any actual, alleged, possible or potential violation of, or failure to comply with, any Legal Requirement or any Governmental Authorization or Trade Certification of the Seller, (ii) any actual, alleged, possible or potential obligation on the part of the Seller to undertake, or to bear all or any portion of, any remedial action of any nature, or (iii) any actual, proposed, possible or potential revocation, withdrawal, suspension, cancellation, termination of or modification to any Purchased Governmental Authorization or Purchased Trade Certification.

3.12 Environmental Matters .

(a) The Seller (i) is, and at all times has been, to Seller’s Knowledge, in compliance with all Environmental Laws, (ii) is not liable under any Environmental Laws for remediation or other costs, (iii) has not received any communication (written or oral) that alleges that it is not, or at any time has not been, in such compliance, or has caused exposure of any Person or the environment to any Hazardous Substance, (iv) has all the Governmental Authorizations required by the Environmental Laws for the conduct of its business and (v) knows of no facts or circumstances that may prevent or substantially increase the cost of compliance by the Seller with the Environmental Laws.

(b) Section 3.12(b) of the Disclosure Schedule identifies, to the Seller’s Knowledge, all environmental reports, audits or assessments, all occupational health studies, all regulatory inspections reports and correspondence with regulatory authorities in connection with environmental matters, and all documents pertaining to underground and above-ground storage tanks, polychlorinated biphenyls (“ PCBs ”), asbestos in buildings or products, off-site disposal or wastes, and environmental consent orders, fines and penalties, in each case, that relate to property or facilities now or formerly owned, leased or operated by the Seller, including the Real Property and the Improvements (such properties and facilities, the “ Facilities ”), and all such items have been delivered to the Buyer.

(c) To Seller’s Knowledge, there does not exist, is not occurring and has not occurred during Seller’s occupation of the Real Property and the Improvements any presence, generation, storage, treatment, transport, release or disposal of any Hazardous Substance on, in, under, to or from any Facility in violation of any Environmental Law or that may result in any liability or obligation of the Seller or the Buyer. The Seller has not, to Seller’s Knowledge, caused to occur any presence, generation, storage, treatment, transport, release or disposal of any Hazardous Substance in violation of any Environmental Law or that may result in any liability or obligation of the Seller or the Buyer.

(d) The Seller does not own or operate nor, to the Seller’s Knowledge, has it formerly owned or operated, any site that, nor, to the Seller’s Knowledge, has the Seller sent wastes to a site that, pursuant to CERCLA or any other state or federal law, (i) has been placed on the “National Priorities List,” the “CERCLIS” list or any other state or federal list of sites with suspected or confirmed environmental problems, (ii) is subject to or the source of a claim, administrative order or other request to take removal or remedial action, or other response or corrective action, or to pay money under any Environmental Law or (iii) is otherwise the subject of any federal or state investigation relating to any Environmental Law.

(e) Section 3.12(e) of the Disclosure Schedule identifies (i) all on-site and off-site locations where the Seller has stored, disposed or arranged for the disposal of Hazardous Substances, and (ii) all on-site and off-site locations where the Seller has stored or disposed of Hazardous Substances, except for storage of cleaning, pest control and office supplies held for use by the Seller in the Ordinary Course.

(f) No products made, manufactured, constructed, distributed, sold, leased, supported or installed by the Seller contain asbestos, asbestos-containing material, mercury, mercury-containing material, PCBs or PCB-containing material.

3.13 Employee Benefit Plans; ERISA .

(a) Section 3.13 of the Disclosure Schedule lists each employee pension, retirement, profit sharing, bonus, incentive, deferred compensation, hospitalization, medical, dental, vacation, insurance, sick pay, disability, severance and other plan, trust, fund, program, policy, contract, arrangement or the like that is a Plan maintained, participated in or contributed to by the Seller or any ERISA Affiliate (each, a “ Seller Plan ”). In addition, Section 3.13 of the Disclosure Schedule lists each obligation, arrangement, plan or customary practice that is an Other Benefit Obligation maintained, participated in or contributed to by the Seller (“ Seller Benefit Obligation ”). Section 3.13 of the Disclosure Schedule also lists each ERISA Affiliate. The terms “Seller Plan” and “Seller Benefit Obligation” also include any Plan or Other Benefit Obligation formerly maintained, participated in or contributed to by the Seller, a predecessor of the Seller, or any ERISA Affiliate (including with respect to such a predecessor) or former ERISA Affiliate (including with respect to such a predecessor) if the Seller has any liability with respect thereto.

(b) Neither the Seller nor, to Seller’s Knowledge, any ERISA Affiliate has ever participated in any “multiemployer plan” (as defined in Section 4001(a)(3) of ERISA). Neither the Seller nor, to Seller’s Knowledge, any ERISA Affiliate is subject to any liability with respect to current or prior participation in, current or prior contributions to or current or prior obligations to contribute to any such multiemployer plan. Neither the Seller nor, to Seller’s Knowledge, any ERISA Affiliate has any intent or commitment, whether legally binding or not, to establish, maintain or participate in any plan, fund, program, policy, contract, arrangement, obligation, practice or the like that would, if such intent or commitment had already been carried out, be a Seller Plan or a Seller Benefit Obligation, or to modify or change any Seller Plan or Seller Benefit Obligation that would affect any participant in such Plan or Other Benefit Obligation or any employee or terminated employee of the Seller or, to Seller’s Knowledge, any ERISA Affiliate.

(c) With respect to each of the Seller Plans that is intended to be tax-qualified under Section 401 of the Code, if any, a current, effective favorable individual determination letter has been received by the Seller or the ERISA Affiliate with respect to all of the terms of the Plan relevant to the Plan’s qualification. With respect to each of the Seller Plans or Seller Benefit Obligations (or any fund, trust or other funding medium thereunder) for which a ruling, determination letter, or the like is required to obtain the intended tax benefits thereof, such ruling, determination letter or the like has been received and is in effect.

3.14 Employees; Labor Matters .

(a) Section 3.14(a) of the Disclosure Schedule sets forth all current employees of the Seller, identifies which of such employees are on leave of absence, layoff, short-term disability or other similar status, and indicates for each such employee such employee’s job title, current hourly rate of compensation or base salary (as applicable) and bonus structure, accrued vacation and severance pay, as well as such employee’s date of birth and date of hire. There is no Seller Contract (i) for the employment of any individual or (ii) relating to the payment of any severance or termination payment or bonus to any employee or former employee of the Seller.

(b) The Seller is not delinquent in payments to any employee of the Seller for any wages, salaries, commissions, bonuses or other compensation for any services performed by them to date or amounts required to be reimbursed to such employees.

(c) To the Seller’s Knowledge, no employee of the Seller is a party to, or otherwise bound by, any agreement or arrangement, including any confidentiality, noncompetition, or proprietary rights agreement, between such employee and any other Person that in any way adversely affects or shall affect (i) the performance of his or her duties as an employee of the Seller, (ii) the ability of the Seller to conduct its business or (iii) the ability of such individual to assign to the Seller any rights under any invention, improvement or discovery.

(d) Section 3.14(c) of the Disclosure Schedule specifies the number of employees terminated by the Seller during the 90-day period prior to the date hereof. To the Seller’s Knowledge, no employee of the Seller intends to terminate his or her employment with the Seller.

(e) The Seller is not, and since January 1, 2013, has not been, a party to any collective bargaining agreement or other labor Contract. There is not presently, and since January 1, 2013, there has not been, any pending or existing or, to the Seller’s Knowledge, threatened (i) strike, slowdown, picketing, work stoppage, or employee grievance process, or (ii) application for certification of a collective bargaining agent for any of the employees of the Seller. No event has occurred or circumstance exists that could provide the basis for any work stoppage or other labor dispute with respect to employees of the Seller. There is no lockout of any employees of the Seller, and no such action is contemplated by the Seller.

(f) The Seller has delivered to the Buyer true and complete copies of all personnel, payroll, and employment manuals and policies of the Seller.

(g) There are no loans or other obligations payable or owing by the Seller to any officer, director or employee of the Seller, except salaries, wages, bonuses and salary advances and reimbursement of expenses incurred and accrued in the Ordinary Course. There are no loans or debts payable or owing by any such Persons or their Affiliates to the Seller, nor has the Seller guaranteed any of their respective loans or obligations.

3.15 Contracts .

(a) Set forth in Section 3.15 of the Disclosure Schedule is a complete and accurate list of all of the Seller Contracts, other than the following: (i) Contracts cancelable by the Seller on 60 days or less notice without penalty or other financial obligation and that involves payments to or from the Seller of less than $10,000.00 during such 60-day period or (ii) any Contracts involving the performance of services or the purchase or sale of goods or materials of an amount or value not in excess of $10,000.00 per year and whose term do not continue for longer than one year after the date hereof. In addition, notwithstanding the applicability of any of the foregoing exclusions, Section 3.15 of the Disclosure Schedule sets forth each Seller Contract involving a sharing of profits, losses, costs or liabilities by the Seller with any other Person, and each Seller Contract containing covenants that in any way purport to restrict the business activity of the Seller or limit the freedom of the Seller to engage in any line of business or to compete with any Person, and specifically identifies which Seller Contracts are those of the foregoing types. The contracts or instruments required to be set forth in Section 3.15 of the Disclosure Schedule are referred to herein as the “ Material Contracts .”

(b) The Seller has heretofore delivered to the Buyer true and complete (i) copies of all written Material Contracts and (ii) descriptions of all material terms of all oral Material Contracts.

(c) Each of the Material Contracts is in full force and effect, and constitutes a valid and binding obligation of the Seller and, to the Seller’s Knowledge, the other parties thereto, and is legally enforceable in accordance with its terms, except as enforcement may be limited by the Bankruptcy Exceptions.

(d) To Seller’s Knowledge, no event has occurred or circumstance exists that (with or without notice or lapse of time) may contravene, conflict with, or result in a violation or breach of, or give the Seller or the other Person party thereto the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate, or modify, any Seller Contract, in each case other than an event that would not reasonably be expected to have a Material Adverse Effect. The Seller has not given to or received from any other Person, at any time since January 1, 2013, any notice or other communication (whether oral or written) regarding any actual, alleged, possible, or potential violation or breach of, or default under, any Seller Contract.

(e) There are no renegotiations of, attempts to renegotiate or outstanding rights to renegotiate any amount paid or payable to the Seller under any Material Contracts with any Person, and to the Seller’s Knowledge, no Person has made written demand for any such renegotiation.

(f) The Seller Contracts have been entered into in the Ordinary Course by the Seller and have been entered into without the commission of any act alone or in concert with any other Person, and without any consideration having been paid or promised, that is in violation of any Legal Requirement applicable to the Seller.

(g) To Seller’s Knowledge, no Purchased Contract will upon completion or performance thereof have a Material Adverse Effect on the Purchased Assets or the business to be conducted by the Buyer with the Purchased Assets.

(h) Provided that any applicable consent listed on Section 3.3 of the Disclosure Schedule has been obtained, upon the assignment at Closing of each Purchased Contract as contemplated by this Agreement, such Purchased Contract shall, to Seller’s Knowledge, remain in full force and effect and shall be enforceable by the Buyer immediately after the Closing.

3.16 Assets .

(a) The Seller owns good and valid title to all of the Purchased Assets, whether tangible or intangible, that it purports to own, including all of the assets reflected on the Interim Balance Sheet (except for assets held under capitalized leases and assets sold since the Balance Sheet Date in the Ordinary Course), but excluding the Proprietary Rights (which are addressed in Section 3.20 ), free and clear of all the Liens except for the Permitted Liens.

(b) Section 3.16(b) of the Disclosure Schedule lists all of the Purchased Fixed Assets owned by the Seller and the location thereof.

(c) Section 3.16(c) of the Disclosure Schedule lists all of the Purchased Assets (other than Proprietary Rights) that are leased (rather than owned) by the Seller. For each such leased asset, the Seller has delivered to the Buyer true and complete copies of all leases and other agreements affecting such asset, which it has in its possession.

(d) Each item of tangible personal property included in the Purchased Fixed Assets is in a good state of repair, reasonable wear and tear excepted, does not require any maintenance and repairs except for routine maintenance and repairs not material in nature or cost and is adequate for use by the Seller for its intended purposes, except as listed in Section 3.16(d) of the Disclosure Schedule.

(e) The Purchased Assets (i) constitute all of the assets used by the Seller in connection with the operation of its business and (ii) are sufficient for the continued conduct of the Seller’s business by the Buyer after the Closing in substantially the same manner as conducted prior to the Closing.

3.17 Real Property .

(a) Other than the Real Property leased by the Seller, the Seller does not own or lease any other premises or parcel of real estate.

(b) The Real Property, and the improvements, buildings and structures thereon (the “ Improvements ”), (i) constitute all of the Real Property used by the Seller in the conduct of its business, and (ii) may continue to be used after the Closing for the operation of the Seller’s business as currently operated by the Seller upon agreement with the landlord. No notice of the violation of any Legal Requirement or private restriction has been received by the Seller concerning the Real Property.

(c) The Seller does not own or hold, and is not obligated under or a party to, any option, right of first refusal or other contractual right to purchase, acquire, sell or dispose of the Real Property, or any portion thereof or interest therein.

(d) To Seller’s Knowledge, all of the Real Property and all of the Improvements are serviced by all necessary and adequate utilities, including water, sewage, gas, electricity and telephone. To Seller’s Knowledge, all water, rail, gas, electrical, steam, compressed air, telecommunication, sanitary and storm sewage lines and systems and other similar systems serving the Real Property or the Improvements are installed and operating and are sufficient to enable the Real Property and all of the Improvements to continue to be used and operated in the manner currently being used and operated.

(e) The Seller does not owe any money to any architect, contractor, subcontractor or materialmen for labor or materials performed, rendered or supplied to or in connection with the Real Property, and there is no construction or other improvement work being done at, nor are there any construction or other improvement materials being supplied to, the Real Property.

3.18 Inventory .

(a) All of the Purchased Inventories are in the quantities reflected in the Interim Balance Sheet, subject to sales and additions to the Purchased Inventories in the Ordinary Course of the Seller’s business following such date. The quantities of each item included in the Purchased Inventories are reasonable in the present circumstances of the Seller’s business. All of the Purchased Inventories are located on the Real Property or at the disassembly and reconditioning facilities set forth in Section 3.18 of the Disclosure Schedule. The Seller is not in possession of any Inventories not owned by the Seller, including goods already sold except as disclosed in Section 3.18 of the Disclosure Schedule. No customer of the Seller has the right to return for credit or refund items that, if returned, would be included in the Purchased Inventories pursuant to any agreement, understanding or practice of the Seller with respect to taking back any product (other than with respect to defective products). Without limiting the generality of the foregoing, there is no product of the Seller in the possession of customers of the Seller on consignment or on a similar basis.

(b) Notwithstanding any other term of this Agreement, the parties agree that with respect to its condition the Purchased Inventory is being sold and transferred on an AS-IS, WHERE-IS basis. Accordingly, Seller makes no representations and warranties in connection with the condition of the Purchased Inventories AND ANY AND ALL IMPLIED WARRANTIES WITH RESPECT TO THE CONDITION OF THE PURCHASED INVENTORIES ARE HEREBY DISCLAIMED BY SELLER.

3.19 Accounts Receivable . All Purchased Accounts Receivable (i) represent valid and bona fide claims, (ii) were acquired or arose in the Ordinary Course of the Seller’s business and (iii) are and will be fully collectible by the Buyer in the aggregate face value thereof in the Ordinary Course, net of any respective reserves shown on the Financial Statements or on the accounting records of the Seller as of the Closing Date, within 11 months after the Closing Date. There is no contest, claim, or right of set-off, other than returns in the Ordinary Course of the Seller’s business, under any Seller Contract with any obligor of a Purchased Account Receivable relating to the amount or validity of such Account Receivable.

3.20 Proprietary Rights .

(a) Ownership and Right to Use . The Seller owns, has been granted a license to use or otherwise has, to Seller’s Knowledge, the right to use all of the Purchased Proprietary Rights. The Purchased Proprietary Rights constitute all of the Proprietary Rights used by the Seller in the Business. Except as set forth in Section 3.20(a) of the Disclosure Schedule, the Seller does not have, and the Buyer will not have upon the Closing, (i) any contractual limitation or restriction on its right to use any Purchased Proprietary Right, (ii) any obligation to pay any royalty or other fee to any Person relating to any Purchased Proprietary Right or (iii) any obligation to any other Person to register, protect or, to Seller’s Knowledge, to otherwise take any action with respect to any Purchased Proprietary Right. There is no Seller Contract, other than those Contracts listed in Section 3.20(a) of the Disclosure Schedule, which grants any Person a license in any Purchased Proprietary Right.

(b) Acquired Proprietary Rights . Section 3.20(b) of the Disclosure Schedule identifies each Purchased Proprietary Right that was created for the Seller by any Person other than an employee acting within the scope of the employee’s duties for the Seller. Except as set forth in Section 3.20(b) of the Disclosure Schedule, each such Person has entered into a Contract with the Seller pursuant to which it has assigned to the Seller all of such Person’s rights in such Purchased Proprietary Rights, free of any restrictions, and agreed not to use or disclose any Trade Secrets included in such Purchased Proprietary Rights. Section 3.20(b) of the Disclosure Schedule identifies each Purchased Proprietary Right that is owned by any other Person and licensed to the Seller and identifies the Seller Contract pursuant to which the Seller has licensed such Purchased Proprietary Right, together with any additional Contracts that modify the Seller’s rights or obligations with respect to such Purchased Proprietary Right.

(c) Marks, Trade Names and Domain Names . Section 3.20(c) of the Disclosure Schedule lists each Mark and Trade Name that has been used by the Seller during the last year, and lists each application for registration that has been filed and each registration that has been obtained by the Seller with respect to any such Marks. Section 3.20(c) of the Disclosure Schedule lists each domain name used by the Seller during the last year. All such Marks, Trade Names and domain names are included in the Purchased Proprietary Rights. To Seller’s Knowledge, the Seller has the right to use each such Mark and Trade Name within the scope, and in the geographic area, of its present use and has the right to continue to use each such domain name. To the Seller’s Knowledge: (i) no other Person is using a similar Trade Name to describe a business that is similar to the Business; (ii) no other Person is using a similar Mark to describe products or services that are similar to the products and services of the Business; and (iii) no other Person has registered or is currently using any Mark or Trade Name in a manner that would preclude the Seller from using the Marks and Trade Names included in the Purchased Proprietary Rights throughout the United States.

(d) Patents . The Seller does not own or license any Patent.

(e) Copyrights . Section 3.20(e) of the Disclosure Schedule lists each Copyright registration owned by the Seller and included in the Purchased Proprietary Rights.

(f) Trade Secrets . The Seller has taken efforts that are reasonable under the circumstances to prevent unauthorized disclosure to any other Person of such portions of the Seller’s Trade Secrets included in the Purchased Proprietary Rights that would enable such Person to compete with the Seller within the scope of the Seller’s business as now conducted and as presently proposed to be conducted.

(g) Agreements with Employees . Except as set forth in Section 3.20(g) of the Disclosure Schedule, each current or former employee of the Seller has executed an agreement (i) obligating that Person not to use any Trade Secrets included in the Purchased Proprietary Rights, except in performing duties for the Seller, and not to disclose any such Trade Secrets to any other Person and (ii) assigning to the Seller any Proprietary Rights of such employee that relate to the Business.

(h) Software .

(i) Section 3.20(h) of the Disclosure Schedule lists all of the Purchased Software. Except as set forth in Section 3.20(h) of the Disclosure Schedule, the Purchased Software constitutes all of the Software used by the Seller.

(ii) Section 3.20(h) of the Disclosure Schedule indicates whether each Purchased Software program is owned by the Seller or licensed by the Seller from another Person. Each Person who has participated in the development of Purchased Software that is owned by the Seller is a party to a Seller Contract pursuant to which such Person has assigned the Proprietary Rights in such Software (including the related documentation) to the Seller. With respect to each Purchased Software program that is licensed by the Seller from another Person, except as set forth in Section 3.20(h) of the Disclosure Schedule and except for unmodified versions of publicly available software (A) Seller has, and Buyer will have upon assignment at Closing, all rights as licensee under such Software. Section 3.20(h) of the Disclosure Schedule lists any fee or other amount that, to Seller’s Knowledge, Buyer will be required to pay in connection with, or as a result of, the assignment of such Purchased Software.

(iii) The Seller does not sell, license, sublicense, market or otherwise provide Software, or access to Software, to other Persons in connection with the Business and no Seller Contract grants any Person a license or sublicense in any Software or any right to access or use any Software. The Seller has not entered into any Contract, other than those Seller Contracts listed in Section 3.20(h) of the Disclosure Schedule, that restricts the Seller’s use of any Purchased Software or that obligates the Seller to maintain, enhance, protect or otherwise take any action with respect to any Purchased Software.

(i) No Infringement . To Seller’s Knowledge, the Seller has not interfered with, infringed upon or misappropriated any Proprietary Right of any other Person and the continued operation of the Seller’s business by the Buyer, in the manner that such business is currently conducted or proposed to be conducted, will not, to Seller’s Knowledge, interfere with, infringe

upon or misappropriate any Proprietary Right of any other Person. To the Seller’s Knowledge, no Person is interfering with, infringing upon or misappropriating any Purchased Proprietary Right. No claim has been asserted against the Seller by any Person: (i) that such Person has any right, title or interest in or to any of the Copyrights, Patents, Trade Secrets or Know-How included in the Purchased Proprietary Rights; (ii) that such Person has the right to use any of the Marks, Trade Names or domain names included in the Purchased Proprietary Rights; (iii) to the effect that any past, present or projected act or omission by the Seller infringes any Proprietary Right of such Person; or (iv) that challenges the Seller’s right to use any of the Purchased Proprietary Rights. No facts or circumstances exist that, with or without the passing of time or the giving of notice or both, might reasonably serve as the basis for any such claim.

3.21 Insurance .

(a) Section 3.21(a) of the Disclosure Schedule lists all of the insurance policies maintained by the Seller and for each policy indicates the insurer’s name, policy number, expiration date and amount and type of coverage. The Seller has delivered to the Buyer true and complete copies of all such policies. Section 3.21(a) of the Disclosure Schedule also describes: (i) any self-insurance arrangement by the Seller including any reserves established thereunder; (ii) any Contract or arrangement, other than a policy of insurance, for the transfer or sharing of any risk by the Seller; and (iii) all obligations of the Seller with respect to insurance (including such obligations under leases and service agreements) and identifies the policy under which such coverage is provided.

(b) All insurance policies set forth or required to be set forth in Section 3.21(a) of the Disclosure Schedule are currently in effect and shall continue in full force and effect through the date of Closing. All premiums due and payable on such policies have been paid. Neither the Seller, nor, to the Seller’s Knowledge, any other Person is in breach of its obligations with respect to any such policy. The Seller has not received (i) any refusal of coverage or any notice that a defense shall be afforded with reservation of rights or (ii) any notice of cancellation or any other indication that any insurance policy is no longer in full force or effect or shall not be renewed or that the issuer of any such policy is not willing or able to perform its obligations thereunder.

(c) The Seller has given notice of all existing claims to the insurer providing coverage. No insurance policy of the Seller provides for any retrospective premium adjustment or other experienced-based liability on the part of the Seller.

(d) Section 3.21(d) of the Disclosure Schedule sets forth, by year, for the current policy year and each of the three preceding policy years:

(i) a summary of the loss experience under each policy listed on Section 3.21(a) of the Disclosure Schedule;

(ii) a statement describing each claim under each such insurance policy for an amount in excess of $10,000, which sets forth (A) the name of the claimant and (B) the amount and a brief description of the claim; and

(iii) a statement describing the loss experience for all claims of the Seller that were self-insured, including the number and aggregate costs of such claims.

(e) All insurance policies set forth in Section 3.21(a) of the Disclosure Schedule, taken together, are, to Seller’s Knowledge, sufficient for compliance with all Legal Requirements and all Seller Contracts and provide commercially-reasonable insurance coverage for the Purchased Assets and the operations of the Seller’s business.

3.22 Warranties and Products .

(a) Except as set forth in Section 3.22 of the Disclosure Schedule, during the last three years, the Seller has not recalled any products repaired, refurbished, distributed, sold, leased, supported or installed by the Seller (collectively, the “ Products ”) or received notice of any defect in any Product, any claim of personal injury, death, or property or economic damages in connection with any Product, or any claim for injunctive relief in connection with any Product. To Seller’s Knowledge, there are no facts that are reasonably likely to give rise to a recall of any Product or to give rise to a successful future claim of personal injury, death, or property or economic damages, or a claim for injunctive relief in connection with any Product.

(b) Section 3.22 of the Disclosure Schedule sets forth (i) a description of the standard warranty of the Seller to third Persons with respect to all Products since January 1, 2013, except warranties imposed by law; and (ii) the warranty experience of the Seller since January 1, 2013. The Seller has not given any Product warranties prior to January 1, 2013 that has not expired. There exists no circumstance within Seller’s Knowledge that, after notice or the passage of time or both, create or result in liabilities under existing Product warranties given by the Seller in excess of the reserve therefore on the Interim Balance Sheet.

3.23 Suppliers . To the Seller’s Knowledge, the relationships of the Seller with each of its suppliers are good working relationships, and no supplier of the Seller has cancelled or otherwise terminated, or threatened in writing to cancel or otherwise terminate, its relationship with the Seller, or has since January 1, 2015 (at the volition of the supplier) threatened to decrease or limit materially, its services, supplies or materials to the Seller.

3.24 Customers . Section 3.24 of the Disclosure Schedule lists each customer or account representing sales by the Seller in excess of $100,000.00 during 2015 and in excess of $10,000.00 in the four (4) months ended April 30, 2016. Except as set forth in Section 3.24 of the Disclosure Schedule, to the Seller’s Knowledge, (i) no Purchased Contract or account or relationship with any such customer is being terminated or is being considered for termination or nonrenewal; and (ii) no such customer is considering any material reduction in its commercial relationship with the Seller for reasons related to Seller’s performance. To the Seller’s Knowledge, no such customer is likely to, as a result of the consummation of the transactions contemplated by this Agreement, terminate or materially reduce its relationship with the Seller’s business.

3.25 Certain Payments . Since January 1, 2013, the Seller, has not, and no director, officer, agent or employee of the Seller, nor any other Person associated with or acting for or on behalf of the Seller has, directly or indirectly, made any contribution, gift, bribe, rebate, payoff,

influence payment, kickback, or other payment to any Person, private or public, regardless of form, whether in money, property or services for or in respect of the Seller or any Affiliate of the Seller that is in violation of any Legal Requirement, could subject the Seller to any damage or penalty in any Proceeding or could have a Material Adverse Effect.

3.26 Transactions with Affiliates . No Shareholder, nor any officer or director of the Seller, nor any Affiliate of such Person, has, or since January 1, 2013, has had (i) any interest in any property, real, personal or mixed, tangible or intangible, used in or pertaining to the business of the Seller except with respect to the Real Property; (ii) any agreement, arrangement or understanding with the Seller, other than compensation and benefits as an employee payable in the Ordinary Course; (iii) any claim or other right against the Seller; or (iv) any equity interest or any other financial or profit interest in a Person that has (A) had business dealings or a material financial interest in any transaction with the Seller except with respect to the IC-DISC subsidiary of the Seller, or (B) engaged in competition with the Seller with respect to any line of the products or services of the Seller, except for a less than 1% interest in the outstanding capital stock of any Person that is publicly traded on any recognized exchange or in the over-the-counter market.

3.27 Bank Accounts; Powers of Attorney . Section 3.27 of the Disclosure Schedule sets forth (i) the name of each bank in which the Seller maintains any account or safe deposit box, along with the account or safe deposit box number and the names of all Persons authorized to draw thereon or to have access thereto; and (ii) the names of all Persons, if any, holding powers of attorney from the Seller and a summary statement of the terms thereof.

3.28 Brokers . No broker, finder or other Person is or shall be entitled to any brokerage fees, commissions or finder’s fees in connection with the transactions contemplated hereby from the Seller or any Shareholder by reason of any action taken by the Seller or any Shareholder except Cornerstone Business Services, Inc.

3.29 Full Disclosure .

(a) No statement that relates to the Seller contained in this Agreement, the Disclosure Schedule or any Seller Document (including each representation and warranty in this Article III contains or shall contain any untrue statement of a material fact or omits or shall omit to state any material fact that was necessary to make such statements, in light of the circumstances in which they were made, not misleading.

(b) To the Seller’s Knowledge, there are no facts that have specific application to the Seller (other than general economic or industry conditions) that materially adversely affect or, as far as the Seller can reasonably foresee, materially threaten, the assets or the business, prospects, financial condition, or results of operations of the Seller that has not been set forth in this Agreement or the Disclosure Schedule.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES RELATING TO SHAREHOLDER

The Shareholder represents and warrants to the Buyer that:

4.1 Authority; Enforceability . The Shareholder is a natural person who has the absolute and unrestricted legal right, authority, power and capacity to (i) execute and deliver this Agreement and each certificate, document and agreement to be executed by the Shareholder in connection herewith (collectively, the “ Shareholder Documents ”) and (ii) perform his obligations hereunder and thereunder. The execution and delivery of this Agreement and the Shareholder Documents and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by the Shareholder, and no other proceedings on the part of the Seller are necessary to authorize this Agreement or the Shareholder Documents or to consummate the transactions contemplated hereby or thereby. This Agreement has been duly and validly executed and delivered by the Shareholder and constitutes a legal, valid and binding obligation of the Shareholder, enforceable against it in accordance with its terms except for the Bankruptcy Exceptions. Upon execution and delivery by the Shareholder of each Shareholder Document, such Shareholder Document shall constitute a legal, valid and binding obligation of the Shareholder, in each case enforceable against him in accordance with its terms except for the Bankruptcy Exceptions.

4.2 Consents and Approvals; No Violation .

(a) No Governmental Authorization is required in connection with (i) the execution or delivery by the Shareholder of this Agreement or the Shareholder Documents, or (ii) the performance by the Shareholder of the Shareholder’s obligations under this Agreement or the Shareholder Documents.

(b) Except as disclosed in Section 4.2 of the Disclosure Schedule, neither the execution and delivery of this Agreement and the Shareholder Documents by the Shareholder nor the performance of the Shareholder’s obligations hereunder or thereunder shall (with or without notice or lapse of time) cause a Material Adverse Effect and: (i) contravene, conflict with or result in a breach of any of the terms or provisions of, constitute a default or give any Person a right to declare a default under, give rise to any right of termination, cancellation or acceleration under or give any Person the right to exercise any remedy under, any Contract to which the Shareholder is a party or pursuant to which the Shareholder has any obligation or liability, (ii) contravene, conflict with, result in any violation of, or give any Governmental Authority the right to exercise any remedy (including revocation, withdrawal, suspension or modification) or obtain any relief under, any Legal Requirement applicable to the Shareholder, or (iii) otherwise require the Shareholder to give any notice to, or obtain any consent from, any Person.

4.3 Equity Interests . The authorized equity securities of the Seller consist of 9,000 shares of common stock, par value $.01 per share, of which all outstanding shares are issued and outstanding and owned by the Shareholder. The Shareholder is, and will be on the Closing Date, the record and beneficial owner and holder of the shares owned by it. None of the shares of the Shareholder were issued in violation of the Securities Act of 1933, as amended, or any other Legal Requirement.

4.4 Litigation . There are no Proceedings commenced against or, to the Shareholder’s knowledge, threatened against the Shareholder that could affect its ability to consummate the transactions contemplated by this Agreement. The Shareholder is not subject to any Order that could affect the enforceability of this Agreement against the Shareholder or impair its ability to consummate the transactions contemplated by this Agreement.

4.5 Brokers . No broker, finder or other Person is or shall be entitled to any brokerage fees, commissions or finder’s fees in connection with the transactions contemplated hereby from the Buyer by reason of any action taken by the Shareholder.

4.6 Full Disclosure . No representation made by the Shareholder that is contained in this Agreement, the Disclosure Schedule or any Shareholder Document contains or shall contain any untrue statement of a material fact or omits or shall omit to state any material fact that was necessary, in light of the circumstances under which it was made, in order to avoid statements herein or therein being misleading.

ARTICLE V

REPRESENTATIONS AND WARRANTIES RELATING TO THE BUYER

The Buyer represents and warrants to the Seller as follows:

5.1 Organization; No Prior Operations . The Buyer is a limited liability company duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization. In addition, the Buyer is duly qualified to do business as a foreign limited liability company, and is in good standing, in the State of Wisconsin. From the date of its organization, the Buyer has not engaged in any active business operations or incurred any liabilities other than matters directly related to the transactions described in this Agreement.

5.2 Authority; Enforceability . The Buyer has the absolute and unrestricted legal right, authority, power and capacity to (i) execute and deliver this Agreement and each certificate, document and agreement to be executed by the Buyer in connection herewith (collectively, the “ Buyer Documents ”) and (ii) perform its obligations hereunder and thereunder. The execution and delivery of this Agreement and the Buyer Documents and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by the Buyer, and no other proceedings on the part of the Buyer are necessary to authorize this Agreement or any of the Buyer Documents or to consummate the transactions contemplated hereby or thereby. This Agreement has been duly and validly executed and delivered by the Buyer and constitutes a legal, valid and binding obligation of the Buyer, enforceable against it in accordance with its terms except for the Bankruptcy Exceptions. Upon execution and delivery by the Buyer of each Buyer Document, such Buyer Document shall constitute a legal, valid and binding obligation of the Buyer, in each case enforceable against it in accordance with its terms except for the Bankruptcy Exceptions.

5.3 Consents and Approvals; No Violation .

(a) The Buyer has obtained the Governmental Authorization required in connection with (i) the execution or delivery by the Buyer of this Agreement or the Buyer Documents, or (ii) the performance of the Buyer’s obligations under this Agreement or the Buyer Documents.

(b) Neither the execution and delivery of this Agreement and the Buyer Documents by the Buyer nor the performance of the Buyer’s obligations hereunder or thereunder shall (with or without notice or lapse of time): (i) contravene, conflict with or result in any violation of any provision of the articles of organization or operating agreement of the Buyer or any resolution adopted by the managers or members of the Buyer, or (ii) contravene, conflict with, result in any violation of, or give any Governmental Authority the right challenge any of the transaction contemplated hereby or to exercise any remedy (including revocation, withdrawal, suspension or modification) or obtain any relief under, any Legal Requirement applicable to the Buyer.

5.4 Litigation . There are no Proceedings commenced against, or, to the Buyer’s knowledge, threatened against the Buyer that could affect its ability to consummate the transactions contemplated by this Agreement. The Buyer is not subject to any Order that could affect the enforceability of this Agreement against the Buyer or impair its ability to consummate the transactions contemplated by this Agreement.

5.5 Brokers . No broker, finder or other Person is or shall be entitled to any brokerage fees, commissions or finder’s fees in connection with the transactions contemplated hereby from the Seller by reason of any action taken by the Buyer.

5.6 Full Disclosure . No representation made by the Buyer that is contained in this Agreement, the Disclosure Schedule or any Buyer Document contains or shall contain any untrue statement of a material fact or omits or shall omit to state any material fact that was necessary, in light of the circumstances under which it was made, in order to avoid statements herein or therein being misleading.

ARTICLE VI

COVENANTS AND AGREEMENTS

6.1 Confidentiality . From and after the date hereof, neither the Seller nor any Shareholder shall disclose or use, and each of the Seller and the Shareholder shall use Commercially Reasonable Efforts to cause its officers, directors, employees, lenders, accountants, representatives, agents and advisors not to disclose or use, any of the Seller’s proprietary and confidential information to any other Persons except to the extent (i) such information is or becomes publicly available or obtainable from independent sources and not in breach of the obligations of the Seller or such Shareholder hereunder, (ii) such information is required to be disclosed by law or by Governmental Authorities having jurisdiction over the Seller or such Shareholder (including applicable securities laws and the rules and regulations of any stock exchange or inter-dealer automated quotation system on which the securities of the Buyer are traded), or (iii) disclosure is necessary for the Seller or such Shareholder to enforce any or all of its rights under this Agreement.

6.2 Employees .

(a) The Seller shall use Commercially Reasonable Efforts to assist the Buyer in obtaining the employment of all employees of the Seller (the “ Seller Employees ”) and the Seller shall cooperate with and shall make available to the Buyer, to the extent permitted by applicable Legal Requirements, all information and documents as may be necessary to assist and coordinate the employment by the Buyer of all of Seller Employees.

(b) Subject to the provisions of Section 6.2(e) below, Buyer shall hire, effective as of the Closing Date, all of Seller’s existing employees in their existing positions and at their existing levels of monetary compensation, and provide employment benefits substantially similar to their existing employment benefits.

(c) Effective as of the Closing, the Seller shall terminate the employment of all of the Seller Employees. The Buyer shall not be liable to any Seller Employees or other Persons for any severance obligations, benefit obligations or any other similar obligations owed by the Seller in connection with the termination of any Seller Employee’s or other Person’s employment with the Seller.

(d) Throughout the five-year period immediately after the Closing, neither the Seller nor the Shareholder shall at any time, directly or indirectly, solicit, encourage, entice or induce for employment any employees of the Buyer in connection with the Business, nor shall the Seller or Shareholder employ any such employees of the Buyer in connection with the Business at any time during the one-year period following the Closing Date, in either case without the prior written consent of the Buyer (which written consent shall be effective only as to the employees specified therein and to no other Person, and such written consent shall not be unreasonably withheld for those employees that are terminated by the Buyer without cause). Notwithstanding the foregoing, Seller and Shareholder may: (i) employ Seller’s former employees on a limited, part-time basis for the purpose of winding up the affairs of the Seller with respect to tax filings and similar activities; and (ii) engage in general advertising and solicitation for employees which is not specifically directed to employees of the Buyer (provided that this clause (ii) shall not diminish the foregoing covenant not to employ employees of the Buyer). The Seller and the Shareholder agree that monetary damages may be inadequate to remedy any breach or threatened breach of the obligations set forth in this Section 6.2(d) and that the Buyer shall be entitled to equitable relief for any breach of this Section, including without limitation the granting of injunctive relief, in addition to any other remedies available at law.

(e) The parties expressly agree that nothing in this Agreement shall be construed as requiring the Buyer to assume any collective bargaining agreement with respect to any Seller Employees. In addition, nothing in this Agreement, expressed or implied, shall (i) obligate the Buyer or any Affiliate of the Buyer to engage any independent contractor currently engaged by the Seller, independent contractor or otherwise; or (ii) confer upon any employee or independent contractor of the Seller any right to continued employment for any specified period, as an employee, independent contractor or otherwise.

6.3 Lien Searches . The Seller and the Shareholder shall promptly, but in any event within ten days before the Closing Date, obtain and deliver to the Buyer Uniform Commercial Code, tax and judgment lien search results prepared by a nationally recognized search service, from the Seller’s jurisdiction of incorporation.

6.4 Exclusivity . In recognition of the time that shall be expended and the expense that shall be incurred by the parties in connection with the transactions contemplated hereby, in the event that the execution of this Agreement occurs on a date other than the Closing Date, each of the Seller and the Shareholder shall not, and shall cause its officers, agents, employees and representatives not to, directly or indirectly, (a) encourage, solicit, engage in negotiations or discussions with, or provide information with respect to any inquiry or proposal (an “ Acquisition Proposal ”) relating to (i) the possible direct or indirect acquisition of all or any portion of the business of the Seller, whether through the acquisition of the capital stock or other equity interest of the Seller or all or substantially all of the Purchased Assets, or (ii) any business combination with the Seller or (b) discuss or disclose either this Agreement (except as may be required by law, or is necessary in connection with the transactions contemplated hereby, and except to the extent that such information becomes public other than as result of a violation hereof), with any Person other than the Buyer without the prior written approval of the Buyer. Similarly, the Buyer shall not discuss or disclose this Agreement (except as may be required by law, or is necessary in connection with the transactions contemplated hereby, and except to the extent that such information becomes public other than as result of a violation hereof), with any Person other than the Seller without the prior written approval of the Seller.

6.5 Seller Name Change; Buyer Qualification . Seller and Shareholder agree that on the Closing Date or as promptly thereafter as reasonably possible, they shall amend the organizational documents of Seller to change the name of the company to a name that is not similar to and is not likely to be confused with the company name of the Buyer.

6.6 Covenant Not to Compete .

(a) The Seller and Shareholder agree that, after the Closing, the Buyer shall be entitled to the goodwill and going concern value of the Business and the Purchased Assets, and to refrain from actions during the Restricted Period referenced below that would materially impair the value of same. For this and other reasons and as an inducement to the Buyer to enter into this Agreement, for a period of five years after the Closing Date (the “ Restricted Period ”), neither the Seller nor the Shareholder shall engage or otherwise participate in, directly or indirectly, either as principal, officer, director, agent, proprietor, shareholder, owner, partner, consultant, manager or employee, the ownership, management, operation or control of, any Person or business that competes with the Buyer with respect to the Business anywhere within the world. The Seller and the Shareholder agree that monetary damages may be inadequate to remedy any breach of the obligations set forth in this Section 6.6 and that the Buyer shall be entitled to equitable relief for any breach of this Section, including without limitation the granting of injunctive relief, in addition to any other remedies available at law.

(b) Notwithstanding anything to the contrary in this Section 6.6 , the parties acknowledge and agree that this Section 6.6 shall not restrict the Shareholder or his Affiliates from owning up to (but not more than) 2% of any class of securities of any enterprise (but without otherwise participating in the activities of such enterprise) if such securities are listed on any national or regional securities exchange or have been registered under Section 12(g) of the Securities Exchange Act of 1934, as amended.

6.7 Inventory Valuation Methodology . The parties agree that, for all purposes under this Agreement, and notwithstanding any other term of this Agreement, the methodology for valuing and expensing Purchased Inventories as well as future Inventories of Buyer shall be

consistent with Seller’s past practice as shown on Section 6.7 of the Disclosure Schedule. Accordingly, Buyer hereby waives any and all claims against Seller and Shareholder arising from or related to Seller’s use of such methodology, including but not limited to claims regarding whether such methodology complies with the requirements of GAAP.

6.8 Insurance Coverage . The Buyer agrees that for a period of five years following the Closing Date it will include the Seller as a named insured on insurance policies that include substantially the same coverages as the Seller’s existing coverage immediately prior to the Closing Date, except that workers’ compensation coverage will not be maintained for the Seller. The foregoing insurance shall, at a minimum, apply with respect to the Seller’s pre-closing business activities and the Seller’s indemnity and insurance obligations under existing aircraft and engine purchase agreements, including but not limited to those listed as Excluded Contracts, and the consignment agreement that is listed as an Excluded Contract; such obligation shall not apply with respect to any additional, new post-Closing business activities of the Seller.

ARTICLE VII

CLOSING CONDITIONS

7.1 Mutual Conditions . The respective obligations of each party to consummate the transactions required to be taken by it at the Closing shall be subject to the fulfillment of the following conditions:

(a) No party to this Agreement shall be subject on the Closing Date to any Order of a court of competent jurisdiction that enjoins or prohibits the consummation of the transactions contemplated by this Agreement, nor shall there be any Proceeding pending or threatened by any Person other than a party to this Agreement that involves any challenge to, or seeks damages or other relief in connection with, any of the transactions contemplated hereby, or that may have the effect of preventing, delaying, making illegal, or otherwise interfering with any of the transactions contemplated hereby.

(b) No Legal Requirement shall have been adopted or promulgated as of the Closing Date having the effect of making the transactions contemplated herein illegal or otherwise prohibiting consummation of, or making void or voidable, the transactions contemplated herein.

7.2 Buyer’s Conditions . The obligation of the Buyer to consummate the transactions required to be taken by it at the Closing shall be further subject to the fulfillment of the following conditions, any one or more of which may be waived by the Buyer (in whole or in part):

(a) All representations and warranties (individually and collectively) of the Seller and the Shareholder respectively, in this Agreement and all other documents and certificates required to be delivered hereby shall be, if specifically qualified by materiality, true and correct in all respects and, if not so qualified, shall be true and correct in all material respects, in each case on the date hereof and as of the Closing Date as if made on the Closing Date, but without giving effect to any supplement to the Disclosure Schedule. Each of the Seller and the Shareholder shall have performed and complied in all material respects with their respective covenants, agreements and conditions (individually and collectively) contained in this Agreement required to be performed and complied with by each of them, respectively, at or prior to the Closing Date.

(b) Each of the Seller and the Shareholder shall have delivered to the Buyer a certificate certifying the matters set forth in Section 7.2(a) with respect to itself. In the case of the Seller, the certificate shall be executed by its chief executive officer or president.

(c) The Seller shall have delivered to the Buyer the Seller Consents, and each such Seller Consent shall be in full force and effect.

(d) The Buyer shall have obtained the Buyer Consents, and each such Buyer Consent shall be in full force and effect.

(e) The Seller and/or the Shareholder, as their obligations appear, shall have delivered each document required to be delivered pursuant to Sections 2.12(a) and 2.12(c) .

(f) All of Buyer’s employees shall have been hired by Buyer as required under this Agreement effective as of the time of Closing.

(g) The Buyer shall have received a certificate from the secretary of the Seller certifying (i) that attached thereto is a true and complete copy of the Seller’s articles of incorporation and all amendments thereto, (ii) that attached thereto is a true and complete copy of the bylaws of the Seller as then in effect, (iii) that attached thereto is a true and complete copy of the resolutions adopted by the board of directors of the Seller authorizing the execution, delivery and performance of this Agreement and the transactions contemplated hereby, and (iv) as to the incumbency and signatures of any of the Seller’s officers who shall execute documents at the Closing or who have executed this Agreement.

(h) The Seller shall have delivered to the Buyer a certificate of good standing of the Seller, dated as of a date not more than 10 Business Days prior to the Closing Date, from the jurisdiction of its organization.

(i) The Seller shall have delivered to the Buyer updates, to the extent needed, to the Uniform Commercial Code, tax and judgment lien search results previously delivered under Section 6.3 , prepared by a nationally recognized search provider, dated as of a date not more than 10 Business Days prior to the Closing Date.

(j) The Buyer shall have received evidence satisfactory to it that prior to or substantially concurrent with the consummation of the transactions contemplated by this Agreement all of the Liens (other than the Permitted Liens) to which any of the Purchased Assets may be subject shall be released and any related filings terminated of record.

(k) The board of directors of Buyer and of Air T, Inc., the Buyer’s parent company, shall have approved this Agreement, the Buyer Documents and the transactions contemplated hereby.

(l) Since the date of this Agreement, there must not have been commenced or threatened against the Buyer, or against any Person affiliated with the Buyer, any Proceeding (a) involving any challenge to, or seeking damages or other relief in connection with, any of the transactions contemplated hereby or (b) that may have the effect of preventing, delaying, making illegal, or otherwise interfering with any of the transactions contemplated hereby.

(m) Simultaneously with the Closing, the Buyer shall enter into a revolving working capital line of credit with Bank of Montreal in an amount up to $12,000,000 and on terms reasonably satisfactory to the Buyer and substantially as negotiated between the Seller and Bank of Montreal prior to the Closing.

7.3 Seller’s Conditions . The obligations of the Seller and the Shareholder to consummate the transactions required to be taken by them at the Closing shall be further subject to the fulfillment of the following conditions, any one or more of which may be waived by the Seller:

(a) All representations and warranties (individually and collectively) of the Buyer in this Agreement and all other documents and certificates required to be delivered hereby shall be, if specifically qualified by materiality, true and correct in all respects and, if not so qualified, shall be true and correct in all material respects, in each case on the date hereof and as of the Closing Date as if made on the Closing Date, but without giving effect to any supplement to the Disclosure Schedule. The Buyer shall have performed and complied in all material respects with all covenants, agreements and conditions (individually and collectively) contained in this Agreement required to be performed and complied with by it at or prior to the Closing Date.

(b) The Buyer shall have delivered to the Seller a certificate certifying as to the matters set forth in Section 7.3(a) executed by its chief executive officer or president.

(c) The Buyer shall have delivered each document required to be delivered and shall have made such payments required pursuant to Sections 2.12(b) and 2.12(c) .

(d) The Seller shall have received from the Buyer a certificate from the secretary of the Buyer certifying (i) that attached thereto is a true and complete copy of the Buyer’s articles of organization and all amendments thereto; (ii) that attached thereto is a true and complete copy of the resolutions adopted by the managers of the Buyer authorizing the execution, delivery and performance of this Agreement and the transactions contemplated hereby; (iii) that attached thereto is a true and complete copy of the operating Agreement the Buyer as then in effect; and (iv) as to the incumbency and signatures of any of the Buyer’s officers who shall execute documents at the Closing or who have executed the Agreement.

(e) The Buyer shall have obtained and delivered to the Seller a certificate of existence and good standing of the Buyer from the jurisdiction of its incorporation.

(f) Since the date of this Agreement, there must not have been commenced or reasonably threatened against the Seller or the Shareholder, any Proceeding (a) involving any challenge to, or seeking damages or other relief in connection with, any of the transactions contemplated hereby or (b) that may have the effect of preventing or making illegal the transactions contemplated hereby.

ARTICLE VIII

INDEMNIFICATION

8.1 Survival . All representations, warranties, and agreements made by the Seller, the Buyer and the Shareholder in this Agreement, the Disclosure Schedule and the documents to be executed in connection with this Agreement shall survive for one (1) year following the Closing, except that the representations and warranties pursuant to Sections 3.1 (Organization; Good Standing), 3.2 (Authority; Enforceability), 3.8 (Taxes and Tax Returns), 3.12 (Environmental Matters), 3.13 (Employee Benefit Plans; ERISA), 3.16(a) (Assets), 4.1 (Authority; Enforceability), 5.1 (Organization) and 5.2 (Authority; Enforceability) shall survive Closing until the expiration of the applicable statute of limitations. All covenants to be performed by the Seller, the Buyer and the Shareholder in this Agreement and the documents to be executed in connection with this Agreement shall survive in accordance with their respective terms.

8.2 Seller’s and Shareholder’s Agreement to Indemnify . Subject to the limitations set forth in this Article VIII and Section 9.16 , the Seller and the Shareholder, jointly and severally, shall indemnify and hold harmless the Buyer and its Affiliates (and the officers, directors, managers, equity holders, employees and agents of each of them) for, and shall pay to such Persons and reimburse such Persons for, any and all Damages arising, directly or indirectly, from or in connection with:

(i) any breach or inaccuracy of any representation or warranty of the Seller or the Shareholder contained in this Agreement, the Disclosure Schedule or in any certificate or document delivered pursuant to this Agreement, including the certificate delivered pursuant to Section 7.2(b) ; provided, that for these purposes, each qualification and exception regarding materiality or Material Adverse Effect in Articles III or IV shall be disregarded and given no effect, so that Damages are determined without regard to such qualifications and exceptions;

(ii) any material breach of any covenant or agreement of the Seller or the Shareholder contained in this Agreement or in any agreement or instrument executed and delivered pursuant to this Agreement;

(iii) any Excluded Liability (including without limitation any Excluded Liability that becomes a liability of the Buyer under any applicable bulk sales law, under any doctrine of de facto merger or successor liability, or otherwise by operation of law);

(iv) any violation of any Environmental Law with respect to the Seller or with respect to the Purchased Assets to the extent such violation occurs prior to the Closing Date; and

(v) any generation, treatment, storage, disposal, transport, release, threatened release or suspected release of any Hazardous Substance (i) by the Seller, (ii) arising in connection with the Purchased Assets prior to the Closing Date or (iii) existing or occurring, on, in, under, about, to or from any off-site disposal site to which the Seller sent wastes prior to the Closing Date.

8.3 Buyer’s Agreement to Indemnify . Subject to the limitations set forth in this Article VIII , the Buyer shall indemnify and hold harmless the Seller, the Shareholder and the Affiliates of the Seller and the Shareholder (and the officers, directors, managers, equity holders, employees and agents of each of them) for, and shall pay to such Persons and reimburse such Persons for, any and all Damages arising, directly or indirectly, from or in connection with:

(i) any material breach or inaccuracy of any representation or warranty of the Buyer contained in this Agreement or in any certificate or document delivered pursuant to this Agreement, including the certificate delivered pursuant to Section 7.3(b) ;

(ii) any material breach of any covenant or agreement of the Buyer contained in this Agreement or in any agreement or instrument executed and delivered pursuant to this Agreement;

(iii) any Assumed Liability; and,

(iv) any liability, claims and causes of actions, of any kind or nature, arising from or in connection with the operation of the Business and any other activities of either Buyer or its Affiliates from and after the Closing Date.

8.4 Limitations on Indemnity . Notwithstanding anything set forth in this Article VIII to the contrary:

(a) The Seller and the Shareholder shall have no liability under Section 8.2(i) until the aggregate amount of the Damages under such subsections exceeds $50,000 after which the Indemnifying Party shall have obligation to indemnify for the full amount of the Damages in excess of such limitation; provided that the foregoing limitation shall not apply to any breach or inaccuracy of any of the following representations or warranties: Sections 3.1 (Organization; Good Standing), 3.2 (Authority; Enforceability), 3.16(a) (Assets), and 4.1 (Authority; Enforceability) (collectively, the “ Fundamental Representations ”) and Sections 3.12 (Environmental Matters) and 8.2(iv) (Environmental Law Violations).

(b) The Seller’s and the Shareholder’s liability under Section 8.2 shall be capped at an aggregate amount of Damages of $700,000; provided that the foregoing limitation shall not apply to any breach of any of the following obligations: Sections 2.8(c) (Post-Closing Payments), 6.1 (Confidentiality), 6.6 (Covenant Not to Compete), 8.2(iii) (Excluded Liabilities), 9.1 (Expenses) and Shareholder’s Employment Agreement.

(c) No indemnification shall be required by the Seller or the Shareholder under Section 8.2(i) or by the Buyer under Section 8.3(i) unless the Indemnifying Party shall have received notice of a claim specifying the factual basis of that claim in reasonable detail to the extent then known by the party seeking indemnification on or before the expiration of the applicable survival period for each respective representation and warranty set forth in Section 8.1 .

(d) Notwithstanding any other term of this Agreement, the Seller and the Shareholder shall not be liable for any Damages, or have any obligations of indemnification, based upon or arising out of any inaccuracy in or breach of any of the representations or warranties of the Seller or the Shareholder either (i) if the Buyer had actual knowledge of such inaccuracy or breach, or had actual knowledge of the factual basis for the same, prior to Closing or (ii) if such claim by the Buyer relates to any of the matters set forth in the “Key Findings” section of the Key

Findings Report, dated May 6, 2016, and prepared by Elliott Davis Decosimo with respect to the Seller. The limitations in this Section 8.4(d) shall not include the waiver of any claims based upon fraud or intentional misrepresentation by the Seller or the Shareholder.

8.5 Procedure for Indemnification – Third-Party Claims .

(a) If any Person shall claim indemnification hereunder arising from any claim or demand of a third party, the party seeking indemnification (the “ Indemnified Party ”) shall promptly notify the party from whom indemnification is sought (the “ Indemnifying Party ”) in writing of the basis for such claim or demand setting forth the nature of the claim or demand in reasonable detail. The failure of the Indemnified Party to so notify the Indemnifying Party shall not relieve the Indemnifying Party of any indemnification obligation hereunder except to the extent the Indemnifying Party demonstrates that the defense of such claim or demand is materially prejudiced by the failure to give such notice; provided that the Indemnifying Party shall not be obligated to reimburse or indemnify the Indemnified Party for its costs or expenses (including legal fees) incurred in connection with the third-party claim prior to providing notice hereunder to the Indemnifying Party.

(b) If any Proceeding is brought by a third party against an Indemnified Party and the Indemnified Party gives notice to the Indemnifying Party pursuant to Section 8.5(a) , the Indemnifying Party shall be entitled to participate in such Proceeding and, to the extent that it wishes, to assume the defense of such Proceeding, if (i) the Indemnifying Party provides written notice to the Indemnified Party that the Indemnifying Party intends to undertake such defense, and by such notice it shall be conclusively established that the Indemnifying Party shall indemnify the Indemnified Party against all claims for indemnification resulting from or relating to such third-party claim as provided in this Article VIII , (ii) the Indemnifying Party provides to the Indemnified Party evidence acceptable to the Indemnified Party that the Indemnifying Party shall have the financial resources to defend against the third-party claim and to fulfill its indemnification obligations hereunder, (iii) the Indemnifying Party conducts the defense of the third-party claim actively and diligently with counsel reasonably satisfactory to the Indemnified Party and (iv) if the Indemnifying Party is a party to the Proceeding, the Indemnifying Party has not determined in good faith that joint representation would be inappropriate. The Indemnified Party shall, in its sole discretion, have the right to employ separate counsel (who may be selected by the Indemnified Party in its sole discretion) in any such action and to participate in the defense thereof, and the fees and expenses of such counsel shall be paid by such Indemnified Party. The Indemnified Party shall fully cooperate with the Indemnifying Party and its counsel in the defense or compromise of such claim or demand, provided that all reasonable out-of-pocket expenses incurred by the Indemnified Party shall be paid by the Indemnifying Party (except as set forth in Section 8.5(a) and the preceding sentence). If the Indemnifying Party assumes the defense of a Proceeding, (A) no compromise or settlement of the claims with respect thereto may be effected by the Indemnifying Party without the Indemnified Party’s consent unless (I) there is no finding or admission of any violation of law or any violation of the rights of any Person and no effect on any other claims that may be made against the Indemnified Party and (II) the sole relief provided is monetary damages that are paid in full by the Indemnifying Party and (B) the Indemnified Party shall have no liability with respect to any compromise or settlement of such claims effected without its consent.

(c) If (i) notice is given to the Indemnifying Party of the commencement of any Proceeding and the Indemnifying Party does not, within twenty (20) days after the Indemnified Party’s notice is given, give notice to the Indemnified Party of its election to assume the defense of such Proceeding, (ii) any of the conditions set forth in clauses (i) through (iv) of Section 8.5(b) above become unsatisfied or (iii) an Indemnified Party determines in good faith that there is a reasonable probability that a Proceeding may adversely affect it other than as a result of monetary damages for which it would be entitled to indemnification from the Indemnifying Party under this Agreement, the Indemnified Party shall (upon notice to the Indemnifying Party) have the right to undertake the defense, compromise or settlement of such claim; provided that the Indemnifying Party shall reimburse the Indemnified Party promptly and periodically for the reasonable costs of defending against the third-party claim (including reasonable attorneys’ fees and expenses) and the Indemnifying Party shall remain responsible for any indemnifiable amounts arising from or related to such third-party claim to the fullest extent provided in this Article VIII . The Indemnifying Party may elect to participate in such Proceedings, negotiations or defense at any time at its own expense.

(d) The Buyer, Seller and the Shareholder hereby consent to the non-exclusive jurisdiction of any court in which a Proceeding is brought against any Indemnified Party for purposes of any claim that an Indemnified Party may have under this Agreement with respect to such Proceeding or the matters alleged therein, and agree that process may be served on the Buyer, Seller and the Shareholder with respect to such a claim anywhere in the world.

(e) With respect to any third-party claim subject to indemnification under this Article VIII , (i) both the Indemnified Party and the Indemnifying Party, as the case may be, shall keep the other Person fully informed of the status of such third-party claim and any related Proceedings at all stages thereof if such Person is not represented by its own counsel, and (ii) the parties agree to render (each at its own expense) to each other such assistance as they may reasonably require of each other and to cooperate in good faith with each other in order to ensure the proper and adequate defense of any third-party claim.

(f) With respect to any third-party claim subject to indemnification under this Article VIII , the parties agree to cooperate in such a manner as to preserve in full (to the extent possible) the confidentiality of all confidential information and the attorney-client and work-product privileges. In connection therewith, each party agrees that: (i) it will use Commercially Reasonable Efforts, in respect of any third-party claim in which it has assumed or participated in the defense, to avoid production of confidential information (consistent with applicable Legal Requirements), and (ii) all communications between any party hereto and counsel responsible for or participating in the defense of any third-party claim shall, to the extent possible, be made so as to preserve any applicable attorney-client or work-product privilege.

8.6 Indemnification Procedure – Direct Claims . If an Indemnified Party shall claim indemnification hereunder for any claim other than a third-party claim, the Indemnified Party may pursue all rights available to it in accordance with this Article VIII and Section 9.8 . Any amount owing by any Person as a result of this Section 8.6 shall be paid within thirty (30) days after final determination (including exhaustion of all appeal rights) of such amount.

8.7 Escrow Fund . If the Closing occurs, any amount owed by the Seller or the Shareholder to the Buyer pursuant to this Article VIII shall be released to the Buyer from the Escrow Fund in accordance with the Escrow Agreement. The Seller and the Buyer shall deliver a Joint Written Direction (as defined in the Escrow Agreement) to the Escrow Agent to allow the timely disbursement of funds in the Escrow Fund.

8.8 Right of Set-Off . Upon receipt of a final judgment from a court of competent jurisdiction, the Buyer may set off any amount to which it may be entitled from the Seller or the Shareholder under this Article or otherwise against amounts otherwise payable hereunder to the Seller. Neither the exercise of nor failure to exercise such right of set-off shall constitute an election of remedies or limit the Buyer in any manner in the enforcement of any other remedies that may be available to it. Notwithstanding the foregoing, if the Buyer has provided one or more notices of a claim for indemnification in a timely manner as provided in Section 8.4(c) and, during the initial 12-month term of the Escrow Fund, an amount becomes payable hereunder to the Seller, then the Buyer may deposit in the Escrow Fund (in lieu of paying to the Seller) an amount equal to (i) the reasonably estimated amount of the Buyer’s Damages with respect to all outstanding claims for indemnity, minus (ii) the then-existing balance in the Escrow Fund; provided that the sum of (x) the amount so deposited in the Escrow Fund, plus (y) then-existing balance in the Escrow Fund plus (z) the amounts previously paid by the Seller or Shareholder to the Buyer pursuant to Section 8.2 shall in no event exceed $700,000.

8.9 Exclusive Remedy . Notwithstanding any other term of this Agreement, the parties acknowledge and agree that their sole and exclusive remedy with respect to any and all claims for any breach of any representation, warranty, covenant, agreement or obligation set forth in this Agreement, or for any other claim otherwise relating to the subject matter of this Agreement, shall be pursuant to the indemnification provisions set forth in this Article VIII provided, however, that nothing in this Section 8.9 shall limit any Person’s right to seek and obtain specific performance, injunction or any other equitable relief to which any Person shall be entitled.

ARTICLE IX

GENERAL PROVISIONS

9.1 Expenses . Whether or not the transactions contemplated hereby are consummated, except as otherwise provided herein, the Buyer shall pay all costs and expenses incurred by the Buyer in connection with this Agreement and the transactions contemplated hereby, and the Seller and the Shareholder shall pay all costs and expenses incurred by the Seller and the Shareholder in connection with this Agreement and the transactions contemplated hereby, including in each case all fees and expenses of investment bankers, finders, brokers, agents, representatives, consultants, counsel and accountants. If this Agreement is terminated, the obligation of each party to pay its own expenses will be subject to any right arising from a breach of the Agreement by another party.

9.2 Amendment and Modification . This Agreement may be amended, modified or supplemented only by an agreement in writing signed by the party against whom such amendment, modification or supplement is sought to be enforced, except that the Seller shall be entitled to amend, modify or supplement this Agreement on behalf of itself and all of the Shareholders. Any such writing must refer specifically to this Agreement.

9.3 Waiver of Compliance; Consents . Subject to the provisions of Article VIII, the rights and remedies of the parties are cumulative and not alternative and may be exercised concurrently or separately. No failure or delay by any party in exercising any right, power, or privilege under this Agreement shall operate as a waiver of such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege shall preclude any other or further exercise of such right, power, or privilege or the exercise of any other right, power, or privilege. To the maximum extent permitted by applicable law, (i) no claim or right arising out of this Agreement can be discharged by one party, in whole or in part, by a waiver or renunciation of the claim or right unless in writing signed by the other party (or, if applicable, the Seller on behalf of itself and all of the Shareholders); (ii) no waiver that may be given by a party shall be applicable except in the specific instance for which it is given; and (c) no notice to or demand on one party shall be deemed to be a waiver of any obligation of such party or of the right of the party giving such notice or demand to take further action without notice or demand as provided in this Agreement. Any consent required or permitted by this Agreement is binding only if in writing.

9.4 Notices . All notices, consents, waivers and other communications hereunder shall be in writing and shall be (i) delivered by hand, (ii) sent by facsimile transmission, or (iii) sent certified mail or by a nationally recognized overnight delivery service, charges prepaid, to the address set forth below (or such other address for a party as shall be specified by like notice):

(a) If to the Seller or to the Shareholder, to:

Contrail Aviation Support, Inc.

435 Investment Court

Verona, WI 53593

Attn: Joseph Kuhn

Copies to:

Boardman & Clark, LLP

1 S. Pinckney Street, Suite 410

Madison, WI 53703

Attn: Frank C. Sutherland

Facsimile: (608) 283-1709

(b) If to the Buyer, to:

Air T, Inc.

3524 Airport Rd.

Maiden, NC 28650

Attn: Nick Swenson

Copies to:

Robinson, Bradshaw & Hinson, P.A.

101 North Tryon Street, Suite 1900

Charlotte, North Carolina 28246

Attn: Stephen M. Lynch

Notice sent to the Seller pursuant to this Section shall have the same force as if delivered to the Shareholder. Each such notice or other communication shall be deemed to have been duly given and to be effective (x) if delivered by hand, immediately upon delivery if delivered on a Business Day during normal business hours and, if otherwise, on the next Business Day; or (y) if sent by a nationally recognized overnight delivery service, on the day of delivery by such service or, if not a Business Day, on the first Business Day after delivery.

9.5 Publicity . No party hereto shall make any public announcement or similar publicity of the transactions contemplated by this Agreement prior to the Closing without first obtaining the prior written consent of the Seller and the Buyer; provided that nothing contained herein shall prohibit any party from making any public announcement if such party determines in good faith, on the advice of legal counsel, that such public disclosure is required by a Legal Requirement so long as such party consults with the Seller and the Buyer prior to making such disclosure. From and after the Closing, any public announcement or similar publicity with respect to this Agreement or the transactions contemplated hereby will be issued at such a time and in such a manner as the Buyer determines. The Buyer and the Seller shall consult with each other concerning the means by which the Seller’s employees, customers and suppliers will be informed of the transactions contemplated hereby and the Buyer shall have the right to be present at any such communication.

9.6 Assignment; No Third-Party Rights . This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, but neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any party hereto without the prior written consent of the other party. This Agreement and its provisions are for the sole benefit of the parties to this Agreement and their successors and permitted assigns and shall not give any other Person any legal or equitable right, remedy or claim.

9.7 Governing Law . The execution, interpretation and performance of this Agreement, and any disputes with respect to the transactions contemplated by this Agreement, including any fraud claims, shall be governed by the internal laws and judicial decisions of the State of Wisconsin, without regard to principles of conflicts of laws.

9.8 Jurisdiction; Service of Process . If any party commences a lawsuit or other proceeding relating to or arising from this Agreement, the parties hereto agree that the United States District Court for the Western District of Wisconsin shall have sole and exclusive jurisdiction over any such proceeding. If such court lacks federal subject matter jurisdiction, the parties agree that the courts of the State of Wisconsin in the County of Dane shall have sole and exclusive jurisdiction. Any of these courts shall be proper venue for any such lawsuit or judicial

proceeding and the parties hereto waive any objection to such venue. The parties hereto consent to and agree to submit to the jurisdiction of any of the courts specified herein and agree to accept service of process to vest personal jurisdiction over them in any of these courts. Process in any action or proceeding referred to in the preceding sentence may be served on any party anywhere in the world.

9.9 Further Assurances; Records . Each Party shall cooperate and take such actions, and execute all such further instruments and documents, at or subsequent to the Closing, as another party or other parties may reasonably request in order to convey title to the Purchased Assets to Buyer and otherwise to effect the terms and purposes of this Agreement. Each party shall provide the other party or parties with reasonable access to all relevant documents and other information pertaining to the Purchased Assets that are needed by such other party or parties for the purposes of preparing Tax Returns or responding to an audit by any Governmental Authority or for any other reasonable purpose.

9.10 Severability . If any provision contained in this Agreement shall for any reason be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein, unless the invalidity of any such provision substantially deprives either party of the practical benefits intended to be conferred by this Agreement. Notwithstanding the foregoing, any provision of this Agreement held invalid, illegal or unenforceable only in part or degree shall remain in full force and effect to the extent not held invalid or unenforceable, and the determination that any provision of this Agreement is invalid, illegal or unenforceable as applied to particular circumstances shall not affect the application of such provision to circumstances other than those as to which it is held invalid, illegal or unenforceable.

9.11 Construction . Each party acknowledges that such party and its attorneys have been given an equal opportunity to negotiate the terms and conditions of this Agreement and that any rule of construction to the effect that ambiguities are to be resolved against the drafting party or any similar rule operating against the drafter of an agreement shall not be applicable to the construction or interpretation of this Agreement.

9.12 Disclosure Schedule . Each representation, warranty and covenant set forth herein shall have independent significance. Any disclosures in any part of the Disclosure Schedule apply only to the Section of this Agreement to which they expressly relate and not to any other representation, warranty or covenant unless such Disclosure Schedule specifically cross-references another Disclosure Schedule. In the event of any inconsistency between the statements in the body of this Agreement and those in of the Disclosure Schedule (other than an exception expressly set forth as such in of the Disclosure Schedule with respect to a specifically identified representation or warranty), the statements in the body of this Agreement will control.

9.13 Time of Essence . With regard to all dates and time periods set forth or referred to in this Agreement, time is of the essence.

9.14 Counterparts . This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement may be executed on signature pages exchanged by facsimile or electronic mail in pdf form, in which event each party shall promptly deliver to the others such number of original executed copies as the others may reasonably request.

9.15 Entire Agreement . This Agreement, including the Appendices, the Exhibits and the Disclosure Schedule, constitutes the entire agreement and understanding of the parties hereto in respect of the subject matter hereof. The Appendices, Exhibits and the Disclosure Schedule hereto are an integral part of this Agreement and are incorporated by reference herein. This Agreement supersedes all prior agreements, understandings, promises, representations and statements between the parties and their representatives with respect to the transactions contemplated by this Agreement, including the letter of intent, dated March 28, 2016.

9.16 Limitation On Shareholder Obligations . Notwithstanding any other term of this Agreement other than the exceptions set forth below, in no event shall Shareholder be personally responsible for any obligations under this Agreement, including but not limited to indemnification obligations under Article VIII , from and after the date that occurs one (1) year following the Closing Date. The foregoing shall not negate, alter or diminish Shareholder’s obligations (i) with respect to the confidentiality and noncompetition covenants in Sections 6.1 and 6.6 , (ii) with respect to any indemnification claim for which Shareholder has received timely notice pursuant to Section 8.4(c) or (iii) under the Shareholder Employment Agreement.

[the remainder of this page left blank intentionally]

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


BUYER:

CONTRAIL AVIATION SUPPORT, LLC

By:		/s/ Nicholas J. Swenson
		Name: Nicholas J. Swenson
		Title: President & Chief Executive Officer

SELLER:

CONTRAIL AVIATION SUPPORT, INC.

By:		/s/ Joseph G. Kuhn
		Name: Joseph G. Kuhn
		Title: President

SHAREHOLDER

/s/ Joseph G. Kuhn
Joseph Kuhn

APPENDIX 1

“Accounting Firm” means an independent accounting firm with a national practice mutually agreed upon in writing by the Seller and the Buyer. If the parties have not agreed upon an accounting firm within 10 Business Days of the need for same, either party may petition a court of competent jurisdiction to appoint the same.

“Accounts Receivable” means, with respect to a Person, (i) all trade accounts receivable and other rights to payment from customers of such Person and the full benefit of all security for such accounts or rights to payment, including all trade accounts receivable representing amounts receivable in respect of goods shipped or products sold or services rendered to customers of such Person, (ii) all other accounts or notes receivable of such Person, including accounts receivable from Affiliates, officers, directors, shareholders, partners, members or managers of such Person and the full benefit of all security for such accounts or notes and (iii) any claim, remedy or other right related to any of the foregoing.

“Acquisition Proposal” has the meaning set forth in Section 6.4 .

“Affiliate” means with respect to any Person, each of the Persons that directly or indirectly, through one or more intermediaries, owns or controls, is controlled by or is under common control with, such Person. For the purpose of this Agreement, “control” means the possession, directly or indirectly, of the power to direct or cause the direction of management and policies, whether through the ownership of voting securities, by contract or otherwise.

“Agreement” means this Asset Purchase Agreement, as it may hereafter be amended in accordance with its terms.

“Annual Financial Statements” has the meaning set forth in Section 3.5 .

“Assignment & Assumption Agreement” has the meaning set forth in Section 2.12(a) .

“Assumed Liabilities” has the meaning set forth in Section 2.5 .

“Balance Sheet Date” has the meaning set forth in Section 3.5 .

“Bankruptcy Exceptions” has the meaning set forth in Section 3.2 .

“Bill of Sale” has the meaning set forth in Section 2.12(a) .

“Business” has the meaning set forth in the Background Statement of this Agreement.

“Business Day” means a day other than a Saturday, Sunday or other day on which commercial banks in Charlotte, North Carolina or Madison, Wisconsin are generally closed for business.

“Buyer” has the meaning set forth in the introductory paragraph of this Agreement.

A-1

“Buyer Consent” means (i) any Governmental Authorization to be obtained by the Buyer or (ii) any approval, consent, ratification, waiver or other authorization (including any Governmental Authorization) necessary to cure, remedy or waive any default, violation or conflict, or relinquish any rights.

“Buyer Documents” has the meaning set forth in Section 5.2 .

“Cash Consideration” has the meaning set forth in Section 2.8(a) .

“CERCLA” means the federal statute commonly referred to as the Comprehensive Environmental Response, Compensation and Liability Act, as amended.

“Closing” has the meaning set forth in Section 2.11 .

“Closing Balance Sheet” has the meaning set forth in Section 2.13(a) .

“Closing Date” means the date and time as of which the Closing actually takes place.

“Closing Payments” has the meaning set forth in Section 2.8(b) .

“Code” means the Internal Revenue Code of 1986, as amended.

“Commercially Reasonable Efforts” means the efforts that a prudent business Person would use in similar circumstances to achieve a desired result in a commercially reasonable manner; provided that an obligation to use the Commercially Reasonable Efforts under this Agreement does not require the Person subject to that obligation to take actions that would result in a Material Adverse Effect to such Person.

“Consideration” has the meaning set forth in Section 2.7 .

“Contract” means any agreement, contract, obligation, promise or undertaking (whether oral or written), including but not limited to contracts, agreements, licenses, indentures, deeds of trust, leases and notes.

“Copyright” means the legal right provided by the Copyright Act of 1976, as amended, to the expression contained in any work of authorship fixed in any tangible medium of expression together with any similar rights arising in any other country as a result of statute or treaty, and any right that may exist to obtain a registration with respect thereto from any Governmental Authority and any rights arising under any such application.

“Damages” means damages, loss, liability, claim, damage, expense (including cost of investigation and reasonable attorneys’ fees) and diminution of value, whether or not involving a third-party claim.

“Disclosure Schedule” means the Disclosure Schedule delivered to the Buyer by the Seller and the Shareholder concurrently with the execution of this Agreement.

“Earnout Payment” has the meaning set forth in Section 2.10(a) .

A-2

“Earnout Period” means each of the first five twelve (12) full calendar month periods following the Closing Date.

“Earnout Objection Notice” has the meaning set forth in Section 2.10(d) .

“Earnout Schedule” has the meaning set forth in Section 2.10(c) .

“EBITDA” means, with respect to the Buyer for any Earnout Period, the aggregate of (i) net income for such period, plus (ii) the sum of depreciation, amortization of intangible assets, interest expense, and income tax expense, all to the extent taken into account in the calculation of net income for such period. EBITDA shall be determined pursuant to or in a manner consistent with GAAP and, with respect to Purchased Inventory and the future inventory of Buyer, in accordance with Section 6.7 of this Agreement.

“Effective Time” has the meaning set forth in Section 2.11 .

“Environmental Laws” means any Legal Requirement that relates to the generation, storage, handling, discharge, emission, transportation, treatment or disposal of Hazardous Substances or wastes or to the protection of human health and the environment, including CERCLA, the Superfund Amendments and Reauthorization Act of 1986, the Resource Conservation and Recovery Act, the Clean Water Act, the Federal Water Pollution Control Act, the Safe Drinking Water Act, the Toxic Substances Control Act, the Occupational Safety and Health Act, and the Hazardous Material Transportation Act, in each case as amended, and the regulations implementing such acts and the state and local equivalent of such acts and regulations, and common law.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, including all regulations and other authoritative Governmental Authority guidance issue with respect thereto.

“ERISA Affiliate” means any trade or business, whether or not incorporated, that is a member of a group of corporations or of trades or businesses (whether or not incorporated) that along with the Seller are treated as a single employer under and for any of the purposes specified in Section 414(b), (c), (m) or (o) of the Code or that is a member of a controlled group within the meaning of Section 4001(a)(14) of ERISA that includes the Seller.

“Escrow Agent” has the meaning set forth in Section 2.8(b) .

“Escrow Agreement” has the meaning set forth in Section 2.8(b) .

“Escrow Fund” has the meaning set forth in Section 2.8(b) .

“Estimated Cash Consideration” has the meaning set forth in Section 2.8(a) .

“Excluded Assets” has the meaning set forth in Section 2.3 .

“Excluded Contracts” has the meaning set forth in Section 2.3(b) .

A-3

“Excluded Liabilities” has the meaning set forth in Section 2.6(a) .

“Facilities” has the meaning set forth in Section 3.12(b) .

“Financial Statements” has the meaning set forth in Section 3.5 .

“Fixed Assets” means, with respect to a Person, all equipment, machinery, furniture and furnishings, fixtures, tools, dies, computer hardware, data processing and telecommunications equipment, office equipment, vehicles and other tangible personal property of every type and kind owned, used or useable by such Person, whether owned or leased, all contract rights (including any express or implied warranties) with respect thereto, and all maintenance records and other documents relating thereto.

“GAAP” means accounting principles generally accepted in the United States.

“Governmental Authority” means any nation or government, any state or other political subdivision thereof, any municipal, local, city or county government, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government and any corporation or other entity owned or controlled, through capital stock or otherwise by any of the foregoing.

“Governmental Authorization” means any approval, consent, license, permit, waiver or other authorization issued, granted, given or otherwise made available by or under the authority of any Governmental Authority or pursuant to any Legal Requirement.

“Hazardous Substance” includes each substance identified or designated as such under CERCLA, as well as any other substance or material meeting any one or more of the following criteria: (i) it is or contains a substance designated as a hazardous waste, hazardous substance, hazardous material, pollutant, contaminant or toxic substance under any Environmental Law, (ii) it is toxic, reactive, corrosive, ignitable, infectious, radioactive or otherwise hazardous or (iii) it is or contains, without limiting the foregoing, petroleum hydrocarbons.

“Improvements” has the meaning set forth in Section 3.17(b) .

“Indebtedness” means, with respect to a Person, (i) all obligations for borrowed money, including obligations evidenced by notes or similar instruments or upon which interest payments are customarily made, (ii) all obligations of to pay the deferred purchase price of property or services (excluding trade payables incurred in the ordinary course of business and not more than 60 days past due), (iii) all obligations created or arising under any conditional sale or other title retention agreement with respect to property acquired, (iv) all capital lease obligation and (v) all guaranty or surety obligations with respect to indebtedness of another Person.

“Indemnified Party” has the meaning set forth in Section 8.5(a) .

“Indemnifying Party” has the meaning set forth in Section 8.5(a) .

“Interim Balance Sheet” has the meaning set forth in Section 3.5 .

A-4

“Inventories” means, with respect to a Person, all inventories of such Person of finished goods, work in process, raw materials and spare parts and all other materials and supplies to be used, consumed or sold by such Person.

“Know-How” means ideas, designs, inventions, discoveries, concepts, compilations of information, methods, techniques, procedures and processes, whether confidential or not, whether patentable or not and whether reduced to practice or not.

“Legal Requirement” means any statute, law, treaty, rule, regulation, Order, decree, writ, injunction or determination of any arbitrator or court or Governmental Authority and, with respect to any Person, includes all such Legal Requirements applicable or binding upon such Person, its business or the ownership or use of any of its assets.

“Liens” means any mortgages, claims, liens, security interests, pledges, escrows, charges, options or other restrictions or encumbrances of any kind or character whatsoever.

“Mark” means any word, name, symbol or device used by a Person to identify its goods or services, whether or not registered, all goodwill associated therewith, and any right that may exist to obtain a registration with respect thereto from any Governmental Authority and any rights arising under any such application. As used in this Agreement, the term “Mark” includes trademarks and service marks.

“Material Adverse Effect” means an adverse effect in excess of $20,000 on the condition (financial or otherwise), results of operations, business, properties, liabilities or prospects of the Seller’s business.

“Material Contracts” has the meaning set forth in Section 3.15(a) .

“Net Working Capital” means the current assets shown on the Closing Balance Sheet, minus the current liabilities shown on the Closing Balance Sheet. Net Working Capital shall be calculated in accordance with GAAP, except that in determining Net Working Capital, both pre-Closing and post-Closing, the Purchased Inventories shall be valued on a basis consistent with Seller’s past practice as shown on Section 6.7 of the Disclosure Schedule and in no event shall reflect any step-up or increase in valuation of the Purchased Inventories as may be reflected in any pre-Closing and post-Closing audit of the Seller or the Buyer or step down or decrease in valuation of the Purchased Inventories for an inventory reserve.

“Operating Agreement” has the meaning set forth in Section 2.12(a)(vi) .

“Order” means any award, decision, injunction, judgment, order, ruling, subpoena or verdict entered, issued, made or rendered by any court, administrative agency, other Governmental Authority or by any arbitrator.

“Ordinary Course” means an action taken by a Person only if:

(a) such action is consistent with the past practices of such Person and is taken in the ordinary course of the normal day-to-day operations of such Person; and

A-5

(b) such action is not required to be authorized by the board of directors of such Person (or by any Person or group of Persons exercising similar authority) or by its shareholders or other owner.

“Other Benefit Obligations” means all obligations, arrangements, plans or customary practices, whether or not legally enforceable, to provide benefits, other than salary or wages, as compensation (whether taxable or not) for services rendered, to present or former directors, employees, or agents, other than obligations, arrangements, plans or customary practices that are Plans, including, without limitation, consulting agreements, sabbatical and leave policies, severance policies, stock option and other stock compensation plans, fringe benefits within the meaning of Section 132 of the Code and cafeteria plans under Section 125 of the Code.

“Patent” means any patent granted by the U.S. Patent and Trademark Office or by the comparable agency of any other country, and any renewal thereof, and any rights arising under any patent application filed with the U.S. Patent and Trademark Office or the comparable agency of any other country and any rights that may exist to file any such application.

“Permitted Liens” means (i) the Liens for current Taxes not yet due and payable ( provided that, with respect to Real Property, Taxes shall be deemed to refer to ad valorem property taxes only), (ii) with respect to personal property only, the Liens imposed by law, such as the Liens of carriers, warehousemen, mechanics, materialmen and landlords, and other similar Liens incurred in the Ordinary Course for sums not constituting borrowed money, that are not overdue, (iii) with respect to Real Property only, (A) minor imperfections of title, if any, none of which materially detracts from the value or impairs the present or anticipated use of the Real Property subject thereto, or impairs the present or anticipated operations of the Seller and (ii) zoning laws and other land use restrictions that do not impair the present or anticipated use of the Real Property subject thereto.

“Person” means any corporation, association, joint venture, partnership, limited liability company, organization, business, individual, trust, government or agency or political subdivision thereof or other legal entity.

“Plan” means an employee welfare benefit plan within the meaning of Section 3(1) of ERISA, an employee pension benefit plan with the meaning of Section 3(2) of ERISA or a plan that is both.

“PCBs” has the meaning set forth in Section 3.12(b) .

“Post-Closing Payment” has the meaning set forth in Section 2.8(c) .

“Prime Rate” means the per annum rate of interest from time to time by Bank of America, N.A. (or, if such bank discontinues its practice of announcing its prime rate, such other institution approved by the Buyer and the Seller) as its prime rate of interest, in effect from time to time.

“Proceeding” means any action, arbitration, audit, hearing, investigation, litigation or suit (whether civil, criminal, administrative, investigative or informal) commenced, brought, conducted, or heard by or before, or otherwise involving, any Governmental Authority or arbitrator.

A-6

“Products” has the meaning set forth in Section 3.22(a) .

“Proprietary Rights” means, with respect to a Person, all Copyrights, Marks, Know-how, Trade Names, Trade Secrets, Patents, domain names and other intellectual property rights owned, licensed, used or usable by such Person.

“Purchased Accounts Receivable” has the meaning set forth in Section 2.2(b) .

“Purchased Assets” has the meaning set forth in Section 2.2 .

“Purchased Contracts” has the meaning set forth in Section 2.2(h) .

“Purchased Fixed Assets” has the meaning set forth in Section 2.2(a) .

“Purchased Governmental Authorizations” has the meaning set forth in Section 2.2(d) .

“Purchased Inventories” has the meaning set forth in Section 2.2(c) .

“Purchased Proprietary Rights” has the meaning set forth in Section 2.2(f) .

“Purchased Trade Certifications” has the meaning set forth in Section 2.2(e) .

“Purchased Software” has the meaning set forth in Section 2.2(g) .

“Real Property” means the premises at which the Business maintains its offices and warehouse at 435 Investment Court, Verona, WI.

“Restricted Period” has the meaning set forth in Section 6.6(a) .

“Seller” has the meaning set forth in the introductory paragraph of this Agreement.

“Seller Benefit Obligation” has the meaning set forth in Section 3.13(a) .

“Seller Consent” means (i) any Governmental Authorization or Trade Certification set forth or required to be set forth on Section 3.3 or 4.2 of the Disclosure Schedule or (ii) any approval, consent, ratification, waiver or other authorization (including any Governmental Authorization) necessary to cure, remedy or waive any default, violation or conflict, or relinquish any rights, set forth or required to be set forth on Section 3.3 or 4.2 of the Disclosure Schedule.

“Seller Contracts” has the meaning set forth on Section 2.2(h) .

“Seller Document” has the meaning set forth in Section 3.2 .

“Seller Employees” has the meaning set forth in Section 6.2(a) .

A-7

“Seller’s Knowledge” means the actual knowledge of either of Joseph Kuhn or Miriam Cohen-Kuhn gained in the ordinary course of the Seller’s business.

“Seller Plan” has the meaning set forth in Section 3.13(a) .

“Shareholder” has the meanings set forth in the introductory paragraph of this Agreement.

“Shareholder Documents” has the meaning set forth in Section 4.1 .

“Shareholder Employment Agreement” has the meaning set forth in Section 2.12(a)(v) .

“Software” means, with respect to a Person, all types of computer software programs owned, licensed, used or usable by such Person, including operating systems, application programs, software tools, firmware and software imbedded in equipment, including both object code and source code versions thereof that are material to Seller’s Business. The term “Software” also includes all written or electronic materials that explain the structure or use of the Software or that were used in the development of the Software, including logic diagrams, flow charts, procedural diagrams, error reports, manuals and training materials.

“Tax” or “Taxes” means (i) all taxes, charges, fees, levies or other assessments (whether federal, state, local or foreign), including income, gross receipts, excise, property, sales, use, transfer, license, payroll, franchise, ad valorem, withholding, Social Security and unemployment taxes and (ii) any interest, penalties and additions related to the foregoing.

“Tax Return” means any report, return or other information required to be supplied to a taxing authority in connection with the Taxes.

“Trade Certification” means any certification, approval, license, qualification or other authorization issued, granted, given or otherwise made available by or under the authority of any trade, quality, safety or other self-regulatory authority that is material to the operation of the Business.

“Trade Names” means any words, name or symbol used by a Person to identify its business.

“Trade Secrets” means business or technical information of any Person including, but not limited to, customer lists, marketing data and Know-How, that is not generally known to other Persons who are not subject to an obligation of nondisclosure and that derives actual or potential commercial value from not being generally known to other Persons.

“Unaudited Financial Statements” has the meaning set forth in Section 3.5

A-8

Exhibit 10.1

FIRST AMENDED AND RESTATED

OPERATING AGREEMENT OF

CONTRAIL AVIATION SUPPORT, LLC

(A North Carolina limited liability company)

DATED: Effective as of July 18, 2016

THE LLC MEMBERSHIP INTERESTS REPRESENTED BY THIS OPERATING AGREEMENT HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE NORTH CAROLINA SECURITIES ACT, OR SIMILAR LAWS OR ACTS OF OTHER STATES IN RELIANCE UPON EXEMPTIONS UNDER THOSE ACTS. THE SALE OR OTHER DISPOSITION OF THE MEMBERSHIP INTERESTS IS RESTRICTED AS STATED IN THIS OPERATING AGREEMENT, AND IN ANY EVENT IS PROHIBITED UNLESS THE LLC RECEIVES SATISFACTORY EVIDENCE THAT SUCH SALE OR OTHER DISPOSITION CAN BE MADE WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY APPLICABLE STATE SECURITIES ACTS AND LAWS. BY ACQUIRING THE MEMBERSHIP INTEREST REPRESENTED BY THIS OPERATING AGREEMENT, THE MEMBER REPRESENTS THAT IT WILL NOT SELL OR OTHERWISE DISPOSE OF ITS MEMBERSHIP INTERESTS WITHOUT REGISTRATION OR OTHER COMPLIANCE WITH THIS OPERATING AGREEMENT, THE AFORESAID ACTS AND THE RULES AND REGULATIONS ISSUED THEREUNDER.

TABLE OF CONTENTS


		Page
ARTICLE I
- FORMATION OF THE COMPANY

1.1	Formation		1
1.2	Name		1
1.3	Defined Terms		1
1.4	Registered Office and Registered Agent; Principal Office		1
1.5	Purposes and Scope		1
1.6	Conflict with the Articles of Organization		2
1.7	Nature of Members’ Interests		2

ARTICLE II
- MEMBER INFORMATION; CAPITALIZATION

2.1	Membership Interests as Units; Members		2
2.2	Initial Capital Contributions		2
2.3	Additional Capital Contributions		2
2.4	No Interest on Capital Contributions		2
2.5	Debt Capital		2
2.6	Capital Accounts		3
2.7	Adjustments to Capital Accounts		3
2.8	Issuances of Units to Third Parties		4
2.9	Proposed Regulations Election		4
2.10	Tax and Accounting Matters		4

ARTICLE III
- ALLOCATIONS, ELECTIONS AND REPORTS

3.1	Profits and Losses		4
3.2	Nonrecourse Deductions		4
3.3	Member Nonrecourse Deductions		5
3.4	Allocations Between Transferor and Transferee		5
3.5	Contributed Property		5
3.6	Minimum Gain Chargeback		5
3.7	Member Minimum Gain Chargeback		6
3.8	Qualified Income Offset		6
3.9	Gross Income Allocation		6
3.10	Section 754 Adjustment		6
3.11	Curative Allocations		7
3.12	Compliance with Treasury Regulations		7
3.13	Tax Withholding		7

ARTICLE IV
- DISTRIBUTIONS

4.1	Distributions		7
4.2	Tax Distributions		7
4.3	Limitation Upon Distributions		8


ARTICLE V
- MANAGEMENT OF THE COMPANY

5.1	Role of Managers	8
5.2	Number and Qualification	8
5.3	Appointment and Removal of Managers; Resignation	8
5.4	Action by the Managers	9
5.5	Action Without Meeting	9
5.6	Officers	9
5.7	Operating Plan and Budgets	10
5.8	Indemnification	10
5.9	Limitation of Liability	11

ARTICLE VI
- RIGHTS AND OBLIGATIONS OF MEMBERS

6.1	No Management by Members	11
6.2	Election of Managers	11
6.3	Member Meetings	11
6.4	Action by the Members	11
6.5	Action Without Meeting	11
6.6	Limited Liability	12
6.7	Bankruptcy of a Member	12
6.8	Affiliate Transactions	12
6.9	Existing Agreements among Members and the Company	13
6.10	Noncompetition; Confidentiality	13

ARTICLE VII
- TRANSFER OF INTERESTS AND ADMISSION OF MEMBERS

7.1	Restrictions on Transfer	14
7.2	Conditions Precedent to Transfers	15
7.3	Substituted Members	15
7.4	Rights of Transferee	15
7.5	Tag-Along	15
7.6	Drag-Along	16

ARTICLE VIII
- PUT-CALL OPTIONS; OTHER PURCHASE EVENTS

8.1	Put-Call Options	17
8.2	Purchase Events	19
8.3	Purchase Notice	19
8.4	Members’ Purchase Option	19
8.5	Purchase Price For Withdrawing Member’s Units	19
8.6	Closing	19
8.7	Effect on Withdrawing Member’s Interest	20

ARTICLE IX
- DISSOLUTION AND LIQUIDATION OF THE COMPANY

9.1	Dissolution Events	20
9.2	Liquidation	20

- ii -


ARTICLE X
- MISCELLANEOUS

10.1	Other Activities of Members and Managers	21
10.2	Fiscal Year	21
10.3	Records	21
10.4	Notices	21
10.5	Amendments	21
10.6	Representations of Members	22
10.7	Survival of Rights	22
10.8	Governing Law	22
10.9	Severability	22
10.10	Agreement in Counterparts	22
10.11	Tax Matters Partner	22
10.12	Creditors Not Benefited	22
10.13	Members’ Access to Information	22

ARTICLE XI
- DEFINITIONS

11.1	Definitions	23

- iii -

FIRST AMENDED AND RESTATED

OPERATING AGREEMENT

CONTRAIL AVIATION SUPPORT, LLC

THIS FIRST AMENDED AND RESTATED OPERATING AGREEMENT of CONTRAIL AVIATION SUPPORT, LLC, (the “ Company ”), is executed effective as of July 18, 2016, by and among the Company and the persons executing this Agreement as the Members (as defined below).

ARTICLE I- FORMATION OF THE COMPANY

1.1 Formation. The Company was formed on May 3, 2016 under, and shall be operated in accordance with, the North Carolina Limited Liability Company Act, as amended (the “ Act ”). As the sole initial member of the Company, Air T executed a Limited Liability Company Operating Agreement for the Company effective as of May 3, 2016. In connection with the closing of the transactions under the Asset Purchase Agreement and the Initial Capital contributions of the Members as set forth in Section 2.2 , the Members and the Company are entering into this Agreement, which amends, restates and replaces in its entirety the initial Limited Liability Company Operating Agreement of the Company. In consideration of the mutual promises and covenants contained herein, the parties hereto agree that the rights and obligations of the parties and the administration and termination of the Company shall be governed by this Agreement, the Articles of Organization and the Act.

1.2 Name. The name of the Company is Contrail Aviation Support, LLC, or such other name determined by the Managers.

1.3 Defined Terms. Capitalized terms not otherwise defined in the text hereof shall have the meanings given to them in ARTICLE XI .

1.4 Registered Office and Registered Agent; Principal Office. The Company registered agent and registered office in the State of North Carolina shall be Air T, Inc., 3524 Airport Road, Maiden, NC 28650 or such other registered agent or registered office as the Managers may specify from time to time. The principal office of the Company shall be maintained at such place as the Managers may designate from time to time.

1.5 Purposes and Scope. The purpose of the Company shall be to engage in the business of acquiring surplus commercial jet engines or components and supplying surplus and aftermarket commercial jet engine components, and to engage in any other lawful business as determined by the Managers. The Company shall not engage in any business or perform any services that require regulatory approval or licensing unless and until the Company (or its employees or agents, as applicable) has obtained all necessary approvals or licenses.

1.6 Conflict with the Articles of Organization. If this Agreement conflicts with the Company’s Articles of Organization or the Act, this Agreement shall govern and control to the extent permitted by law.

1.7 Nature of Members’ Interests. The interests of the Members in the Company shall be personal property for all purposes. Legal title to all Company assets shall be held in the name of the Company. Neither any Member nor a successor, representative or assign of such Member, shall have any right, title or interest in or to any Company Property or the right to partition any Property owned by the Company.

ARTICLE II- MEMBER INFORMATION; CAPITALIZATION

2.1 Membership Interests as Units; Members. Each Membership Interest shall be represented by units (“ Units ”). The names, addresses and Units of the Members are as reflected in Schedule I attached hereto and made a part hereof, which Schedule shall be amended by the Managers as of the effectiveness of any transfer or subsequent issuance of any Units in accordance with the terms of this Agreement. Air T, the organizer of the Company as defined in Section 57D-1-03(24) of the Act, hereby identifies the Persons set forth as the “Members” in Schedule I as the initial Members of the Company.

2.2 Initial Capital Contributions. Contemporaneously with the execution of this Agreement, the Members have contributed capital to the Company in the amounts set forth as the Initial Capital Contribution opposite their names on Schedule I attached hereto (the “ Initial Capital Contributions ”) as follows: (i) Air T has made its Initial Capital Contribution to the Company in cash and (ii) CAS has made its Initial Capital Contribution as a part of its transfer and assignment of its assets to the Company, pursuant to the Asset Purchase Agreement.

2.3 Additional Capital Contributions. The Managers may request each Member to make Capital Contributions to the Company from time to time in addition to the Initial Capital Contributions if all Members agree in writing to the need for additional Capital Contributions and the terms thereof. In such event, each Member shall have the right to contribute its pro-rata share (based on their respective Units) of the requested Capital Contribution in cash or other immediately available funds within forty five (45) days of the capital call. No Member or other holder of Units shall be permitted to make additional capital contributions to the Company without the consent of all Members.

2.4 No Interest on Capital Contributions . No interest shall be paid on any contribution to the capital of the Company.

2.5 Debt Capital . In the event that the Managers determine at any time (or from time to time) that additional funds are required by the Company for or in respect of its business over and above what can be secured through commercially reasonable efforts utilizing bank financing and if all Members agree in writing to the need for additional Capital Contributions, then the Company, upon the Managers’ approval, may (i) borrow all or part of such additional funds, with interest payable at then-prevailing rates, from commercial banks or other institutional or commercial lenders, and/or (ii) borrow all or part of such additional funds from the Members or one or more Affiliates of a Member at an interest rate of not less than 12% and otherwise on

- 2 -

terms and conditions as agreed between the lending Member or Members and the Managers and based on commercially reasonable terms under then-prevailing conditions. Each Member shall have the pro rata right (based upon its Units) to make any such loans from the Members to the Company, with any unsubscribed rights being allocated among the Members willing to make such loans pro rata (based on their respective Units). Any loan by a Member to the Company shall not be considered a capital contribution. Joseph G. Kuhn shall have the authority to act in a commercially reasonable manner to direct repayment of any loan authorized hereunder for so long as he remains a Member, it being understood that a loan from any Member or Affiliate of a Member may not include a prepayment penalty.

2.6 Capital Accounts . A capital account shall be established for each Member and shall be credited with each Member’s initial and additional Capital Contributions pursuant to this Article II . All contributions of Property to the Company by a Member shall be valued and credited to the Member’s capital account at such Property’s Gross Asset Value on the date of contribution. All Distributions of Property to the Member by the Company shall be valued and debited against the Member’s capital account at such Property’s Gross Asset Value on the date of Distribution. Each Member’s capital account shall at all times be determined and maintained pursuant to the principles of this Section 2.6 and Treasury Regulations Section 1.704-1(b)(2)(iv). Each Member’s capital account shall be increased in accordance with such Regulations by:

(a) The amount of Profits allocated to the Member pursuant to this Agreement; and

(b) The amount of any Company liabilities assumed by the Member or which are secured by any Company Property distributed to such Member.

Each Member’s capital account shall be decreased in accordance with such Regulations by:

(d) The amount of Distributions made to the Member pursuant to this Agreement; and

(e) The amount of any liabilities of the Member assumed by the Company or which are secured by any Property contributed by such Member to the Company.

In addition, each Member’s capital account shall be (i) increased or decreased by any items which are specially allocated pursuant to Sections 3.2 , 3.3 , 3.6 , 3.7 , 3.8 , 3.9 , 3.10 , or 3.11 hereof and (ii) subject to such other adjustments as may be required in order to comply with the capital account maintenance requirements of Section 704(b) of the Code.

2.7 Adjustments to Capital Accounts . The Managers may, upon the sale or issuance of Units, the vesting of Units, the making of additional capital contributions, or at such other times as are permitted by Treasury Regulations Section 1.704-1(b)(2)(iv), adjust the book value of the Company’s assets pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(f) to reflect their then fair market value, and in such event the Capital Account of each Member shall be adjusted to reflect that Member’s share of unrealized gain or loss, as provided in Section 2.6 , as if such property had been sold for its then fair market value as determined by the Managers.

- 3 -

2.8 Issuances of Units to Third Parties. At any time and from time to time, the Members shall have the power and authority, by unanimous vote, to issue Units to any third-party that is not a Member or an Affiliate of a Member and admit such Person as a Member. The issuance of Units may be made in exchange for such cash, property, or services, and on such other terms and conditions, as the Managers shall determine. A Person to whom Units have been issued shall not become a Member, with the rights and privileges associated therewith, until such Person becomes a party to this Agreement.

2.9 Proposed Regulations Election . The Company and each current and future Member hereby agree, pursuant to proposed Treasury Regulations § 1.83-3(e), Notice 2005-43, and all final or successor regulations, revenue procedures and similar authority, that (i) the Company is authorized and directed to elect the safe harbor under which the fair market value of an interest in the Company that is issued in connection with the performance of services is treated as being equal to the liquidation value of that interest on or after the date such regulations become final, and (ii) the Company and each Member, including any person to whom an interest in the Company is transferred in connection with the performance of services, agree to comply with all requirements of the safe harbor with respect to all interests transferred in connection with the performance of services while the election remains effective. The Company shall prepare and execute such documents and retain such records as are required by the final regulations. In the discretion of the Managers, the Company may at any time revoke such safe harbor election in such manner as the final regulations provide.

2.10 Tax and Accounting Matters . All decisions as to tax and accounting matters, except as this Agreement specifically provides otherwise, shall be made by the Managers, including the election to amortize organizational expenses over 60 months under Code Section 709, the method of accounting (cash or accrual) and whether to make an election under Code Section 754.

ARTICLE III- ALLOCATIONS, ELECTIONS AND REPORTS

3.1 Profits and Losses .

(a) Except as otherwise provided in this Article III , Profits and Losses of the Company shall be allocated among the Members in accordance with their respective Units.

(b) The Losses allocated pursuant to Section 3.1(a) shall not exceed the maximum amount of Losses that can be so allocated without causing any Member to have an Adjusted Capital Account Deficit at the end of any Fiscal Year. In the event some, but not all, of the Members would have Adjusted Capital Account Deficits as a consequence of an allocation of Losses pursuant to Section 3.1(a) , the limitation set forth in this Section 3.1(b) shall be applied on a Member by Member basis so as to allocate the maximum permissible Losses to each Member under Treasury Regulations Section 1.704-1(b)(2)(ii)(d). All Losses allocated pursuant to Section 3.1(a) shall be allocated to those Members who are eligible for such an allocation in proportion to their respective Units.

3.2 Nonrecourse Deductions. Nonrecourse Deductions shall be allocated among the Members in accordance with their respective Units.

- 4 -

3.3 Member Nonrecourse Deductions. Any Member Nonrecourse Deductions shall be specially allocated to the Member who bears the economic risk of loss with respect to the Member Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable in accordance with Treasury Regulations Section 1.704-2(i).

3.4 Allocations Between Transferor and Transferee . In the event of the transfer of all or any part of a Member’s Units (in accordance with the provisions of this Agreement) at any time other than at the end of a Fiscal Year, or the admission of a new Member (in accordance with the terms of this Agreement), the Transferring Member or new Member’s share of the Company’s income, gain, loss, deductions and credits, as computed for Federal income tax purposes, shall be allocated between the transferor Member and the transferee Member, or the new Member and the other Members, as the case may be, as determined by the Managers in any manner that reasonably reflects the purpose and intention of this Agreement.

3.5 Contributed Property . In accordance with Code Section 704(c) and the Treasury Regulations thereunder, income, gain, loss and deduction with respect to any Property contributed to the capital of the Company shall, solely for tax purposes, be allocated among the Members so as to take account of any variation between the adjusted basis of such Property to the Company for Federal income tax purposes and its initial Gross Asset Value at the time of contribution.

In the event the Gross Asset Value of any Company asset is adjusted pursuant to the definition of Gross Asset Value hereof, subsequent allocations of income, gain, loss, and deduction with respect to such asset shall take account of any variation between the adjusted basis of such asset for federal income tax purposes and its Gross Asset Value in the same manner as under Code Section 704(c) and the Regulations thereunder.

Any elections or other decisions relating to such allocations shall be made by the Managers in any manner that reasonably reflects the purpose and intention of this Agreement. Allocations pursuant to this Section 3.5 are solely for purposes of federal, state and local taxes and shall not affect, or in any way be taken into account in computing, any Member’s Capital Account or share of Profits, Losses, other items, or Distributions pursuant to any provision of this Agreement.

3.6 Minimum Gain Chargeback . If there is a net decrease in Company Minimum Gain during any Fiscal Year, each Member shall be specially allocated items of Company income and gain for such year (and, if necessary, subsequent years) in an amount equal to such Member’s share of the net decrease in Company Minimum Gain, determined in accordance with Treasury Regulation Section 1.704-2(g). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Member pursuant thereto. The items to be so allocated shall be determined in accordance with Treasury Regulations Sections 1.704-2(f) and 1.704-2(j)(2). This Section 3.6 is intended to comply with the minimum gain chargeback requirement in Treasury Regulation 1.704-2(f) and shall be interpreted consistently therewith.

- 5 -

3.7 Member Minimum Gain Chargeback . If there is a net decrease in Member Minimum Gain attributable to a Member Nonrecourse Debt, as defined in Treasury Regulation Section 1.704-2(i)(4), during any Fiscal Year, each Member who has a share of the Member Minimum Gain attributable to such Member Nonrecourse Debt, determined in accordance with Treasury Regulation Section 1.704-2(i)(5), shall be specially allocated items of Company income and gain for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount equal to such Member’s share of the net decrease in Member Minimum Gain attributable to such Member Nonrecourse Debt, determined in accordance with Treasury Regulation Section 1.704-2(i)(4) and (5). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Member pursuant thereto. The items to be so allocated shall be determined in accordance with Treasury Regulations Section 1.704-2(i)(4). This Section 3.7 is intended to comply with the Member Minimum Gain chargeback requirement in Treasury Regulation Section 1.704(i)(4) and shall be interpreted consistently therewith.

3.8 Qualified Income Offset . If any Member unexpectedly receives an adjustment, allocation or distribution as described in Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(4) through (6) which causes or increases a deficit capital account balance in such Member’s capital account (as determined in accordance with such Regulation) items of Company income and gain shall be specially allocated to each such Member in an amount and manner sufficient to eliminate, to the extent required by the Regulations, the Adjusted Capital Account Deficit of such Member as quickly as possible, provided that an allocation pursuant to this Section 3.8 shall be made if and only to the extent that such Member would have an Adjusted Capital Account Deficit after all other allocations provided for in this Article III have been tentatively made as if this Section 3.8 were not in the Agreement. This provision is intended to be a “qualified income offset,” as defined in Treasury Regulation Section 1.704-1(b)(2)(ii)(d), such Regulation being specifically incorporated herein by reference.

3.9 Gross Income Allocation . In the event any Member has a deficit Capital Account at the end of any Company Fiscal Year which is in excess of the sum of (i) the amount such Member is obligated to restore, and (ii) the amount such Member is deemed to be obligated to restore pursuant to the penultimate sentences of Treasury Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), each such Member shall be specially allocated items of Company income and gain in the amount of such excess as quickly as possible, provided that an allocation pursuant to this Section 3.9 shall be made if and only to the extent that such Member would have a deficit Capital Account in excess of such sum after all other allocations provided for in this Article III have been tentatively made as if this Section 3.9 and Section 3.8 hereof were not in the Agreement.

3.10 Section 754 Adjustment . To the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Code Section 734(b) or Code Section 743(b) is required, pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(2) or Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital Accounts as the result of a Distribution to a Member in complete liquidation of his interest in the Company, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) and such gain or loss shall be specially allocated to the Members in accordance with their interests in the Company in the event that Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the Members to whom such Distribution was made in the event that Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.

- 6 -

3.11 Curative Allocations . The allocations set forth in Sections 3.1(b) , 3.2 , 3.3 , 3.6 , 3.7 , 3.8 , 3.9 , 3.10 hereof (the “ Regulatory Allocations ”) are intended to comply with certain requirements of the Treasury Regulations. It is the intent of the Members that, to the extent possible, all Regulatory Allocations shall be offset either with other Regulatory Allocations or with special allocations of other items of Company income, gain, loss or deduction pursuant to this Section 3.11 . Therefore, notwithstanding any other provision of this Article III (other than the Regulatory Allocations), the Managers shall make such offsetting special allocations of Company income, gain, loss or deduction in whatever manner they determine appropriate so that, after such offsetting allocations are made, each Member’s Capital Account balance is, to the extent possible, equal to the Capital Account balance such Member would have had if the Regulatory Allocations were not part of the Agreement and all Company items were allocated pursuant to Section 3.1 . In exercising their discretion under this Section 3.11 , the Managers shall take into account future Regulatory Allocations under Sections 3.6 and 3.7 that, although not yet made, are likely to offset other Regulatory Allocations previously made under Sections 3.2 and 3.3 .

3.12 Compliance with Treasury Regulations . The above provisions of this Article III notwithstanding, it is specifically understood that the Managers may make such elections, tax allocations and adjustments, including amendments to this Agreement, as the Managers deem necessary or appropriate to maintain to the greatest extent possible the validity of the tax allocations set forth in this Agreement, particularly with regard to Treasury Regulations under Code § 704(b).

3.13 Tax Withholding . The Company shall be authorized to pay, on behalf of any Member, any amounts to any federal, state or local taxing authority, as may be necessary for the Company to comply with tax withholding provisions of the Code or applicable state statutes or other income tax or revenue laws of any taxing authority. To the extent the Company pays any such amounts that it may be required to pay on behalf of a Member, such amounts shall be treated as a cash Distribution to such Member and shall reduce the amount otherwise distributable to such Member.

ARTICLE IV- DISTRIBUTIONS

4.1 Distributions . Subject to Section 4.2 below, the Company’s cash and other available assets may be distributed, retained or reinvested as determined by the Managers. At such times as are determined by the Managers, Distributions will be made to the Members pro rata in proportion to their respective Units.

4.2 Tax Distributions .

The Managers shall distribute to each Member, with respect to each calendar year, in an amount not less than the product of (i) the Applicable Tax Rate, as hereinafter defined, for such calendar year multiplied by (ii) such Member’s proportionate pass through share of the taxable income of the Company, if any, for such year (for this purpose all items of income, gain, loss or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income). The distributions to be made with respect to a calendar year shall be made in four installments, each payable by the Company on or before the date on which quarterly

- 7 -

estimated tax payments are due for federal and state income tax purposes (provided that with respect to the estimated tax payment due January 15 of each year, a partial distribution shall be made prior to December 31 for Wisconsin income tax purposes) and each distribution to a Member shall be an amount equal to the Applicable Tax Rate multiplied by an amount reasonably estimated by the Company’s accountant as being such Member’s proportionate pass through share of the taxable income of the Company for the period to which such distribution relates. If the sum of the quarterly distributions paid to a Member for a calendar year are less than the Applicable Tax Rate multiplied by such Member’s proportionate pass through share of the taxable income of the Company for such calendar year, the Company shall distribute to such Member an amount equal to such deficit prior to April 1 in the following calendar year. The “ Applicable Tax Rate ” for a calendar year shall be the combined highest marginal federal and the highest state income tax applicable to any Member’s individual income tax rates that apply for such calendar year, treating such Member as if such Member were a resident and taking into account the deductibility of state income tax payments for federal income tax purposes.

4.3 Limitation Upon Distributions . No Distribution shall be declared and paid if payment of such Distribution would cause the Company to violate any limitation on distributions provided in the Act or other applicable law or result in a default or event of default under any agreement or instrument governing the terms of indebtedness for borrowed money to which the Company is a party at the time of the proposed distribution.

ARTICLE V- MANAGEMENT OF THE COMPANY

5.1 Role of Managers . Except to the extent otherwise expressly required by this Agreement or the Act, the Managers shall have full, exclusive and complete authority to manage the affairs of the Company. No Manager, acting in his capacity as a Manager, shall be entitled to sign for or take any action individually on behalf of the Company without being authorized by the Managers.

5.2 Number and Qualification . The number of Managers shall be five unless altered as otherwise provided herein; provided that (x) no such change in the number of Managers shall negate the right of any Member to appoint Managers as provided in Section 5.3 without the consent of such affected Member and (y) if any Member’s right to appoint a Manager pursuant to Section 5.3 is terminated, the number of Managers shall automatically be reduced accordingly. Managers need not be Members and need not be residents of the State of North Carolina.

5.3 Appointment and Removal of Managers; Resignation .

(a) The Company shall have five Managers, four designated by Air T and one designated by CAS. The initial Managers designated by Air T shall be Nick Swenson, Candice Otey, Andrew Osborne, and Seth Barkett. The initial Manager designated by CAS shall be Joseph Kuhn. If any Member ceases to be a Member, the Managers appointed by such Member shall be automatically removed at the time such Member ceases to be a Member and the Managers designated by the remaining Member shall be the sole Managers of the Company.

- 8 -

(b) A Member shall have the power to remove and/or replace (to the extent applicable) at any time any one or more of the Managers designated by such Member.

(c) A Person may resign as a Manager at any time by delivering written notice to all Members. Additionally, a Person shall cease to be a Manager upon his death or incapacity (if an individual), dissolution (if a legal entity), resignation, removal, or the occurrence of any event that terminates the appointment right of the Member who appointed such Manager.

5.4 Action by the Managers . Each Manager shall have one vote. The affirmative vote of a majority of all of the Managers (regardless of the number of Managers in attendance at any meeting of the Managers) shall be the act of the Managers hereunder and for purposes of the Act. As used in this Agreement, the phrases “ the approval of the Managers ,” “ the consent of the Managers ,” “ as determined by the Managers ” and similar phrases mean the approval as set forth in the preceding sentence, except as expressly provided otherwise in this Agreement.

5.5 Action Without Meeting . The Managers may act without a meeting if one or more written consents, describing the action to be taken, is provided to each Manager for consideration at least 24 hours before requesting the Managers to act upon same, and signed by those Managers having the requisite authority to approve such action. The 24-hour notice requirement hereunder may be waived by unanimous written consent of the Managers.

5.6 Officers.

(a) The Managers may from time to time appoint and delegate to one or more individuals (each an “ Officer ”) any portion of authority granted to the Managers hereunder as the Managers deem appropriate. No such delegation shall relieve the Managers of their duties and obligations, or limit the authority of the Managers, set forth herein. Each Officer shall hold office until such Officer’s death, incapacity, resignation or removal or until the appointment of a successor. A Person may be removed as an Officer with the consent of the Managers at any time with or without cause (but subject to the provisions of any applicable employment agreement). A Person may resign as an Officer at any time by delivering written notice to all Managers.

(b) The initial Officers of the Company shall consist of a Chief Executive Officer and a Chief Financial Officer. The Company may also have one or more Vice Presidents, a Treasurer, a Secretary and such other Officers and assistant Officers as the Managers shall determine. Any two or more offices may be held by the same individual, but no Officer may act in more than one capacity where action of two or more Officers is required. The following Officers shall have the authority and responsibilities set forth below:

(i) Chief Executive Officer . The Chief Executive Officer shall be the principal officer of the Company and, subject to the control of the Managers, shall generally supervise and control the business and affairs of the Company. He or she shall sign, with the Secretary, or any other proper Officer of the Company thereunto authorized by the Managers, any deeds, mortgages, bonds, contracts, or other instruments that the Managers have authorized to be executed, except in cases where the signing and execution thereof shall be expressly delegated by the Managers or by this Agreement to some other Officer or agent of the Company, or shall be required by law to be otherwise

- 9 -

signed or executed; and generally he or she shall perform all duties incident to the office of Chief Executive Officer and such other duties as may be prescribed by the Managers from time to time. Joseph Kuhn is hereby appointed as of the date of this Agreement as the Chief Executive Officer of the Company. Mr. Kuhn shall also have the title of President of the Company, which title shall be deemed to have the same meaning as Chief Executive Officer.

(ii) Vice President . In the absence of the Chief Executive Officer or in the event of his or her inability or refusal to act, the Vice President (or in the event there be more than one Vice President, the Vice Presidents in the order designated by the Managers, or in the absence of any designation, then in the order of their election) shall perform the duties of the Chief Executive Officer, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Chief Executive Officer. The Vice Presidents shall perform such other duties as from time to time may be prescribed by the Chief Executive Officer or by the Managers.

(iii) Chief Financial Officer . The Chief Financial Officer shall: (A) have charge and custody of and be responsible for all funds and securities of the Company; receive and give receipts for moneys due and payable to the Company from any source whatsoever, and deposit all such moneys in the name of the Company in such depositories as shall be selected in accordance with this Agreement; (B) maintain appropriate accounting records; and (C) in general perform all of the duties incident to the office of Chief Financial Officer and such other duties as from time to time may be prescribed by the Chief Executive Officer or by the Managers. Miriam Cohen-Kuhn is hereby appointed as of the date of this Agreement as the Chief Financial Officer of the Company.

(iv) Secretary . The Secretary shall: (A) keep the minutes of the meetings of Members and of the Managers (and committees thereof) in one or more books provided for that purpose; (B) see that all notices are duly given in accordance with the provisions of this Agreement or as required by law; (C) maintain and authenticate the records of the Company; (D) attest the signature or certify the incumbency or signature of any Officer; and (E) in general perform all duties incident to the office of secretary and such other duties as from time to time may be prescribed by the Chief Executive Officer or by the Managers.

5.7 Operating Plan and Budgets . The Managers will cause the officers of the Company to prepare a proposed operating plan and budget of the Company for each fiscal year, which plan and budget shall be updated quarterly. The Managers will promptly review, comment on and, if acceptable, approve such budgets. If the Managers do not approve any annual budget before the beginning of a year, the Company shall operate in accordance with actual results for the prior year, plus 5%, unless and until the Managers approve a budget for such year.

5.8 Indemnification . The Company shall indemnify the Managers and Officers to the fullest extent permitted or required by the Act, as amended from time to time except for any liability or loss that arises from the Manager’s or Officer’s fraud, intentional misconduct, bad

- 10 -

faith or gross negligence, and the Company shall advance expenses (including legal fees) incurred by any Manager or Officer upon receipt by the Company of the signed statement of the Manager or Officer agreeing to reimburse the Company for such advance in the event it is ultimately determined that such Manager or Officer is not entitled to be indemnified by the Company against such expenses.

5.9 Limitation of Liability . The Managers of the Company shall not be liable to the Company, to the fullest extent permitted by the Act, for monetary damages for an act or omission in such Person’s capacity as a Manager, except for (i) acts or omissions which the Manager knew at the time of the acts or omissions were in conflict with the interests of the Company unless such acts or omissions were approved by the disinterested Managers or Members or (ii) any transaction from which the Manager derived an improper personal benefit. If the Act is amended to authorize action further eliminating or limiting the liability of a Manager, then the liability of the Managers of the Company shall be eliminated or limited to the fullest extent permitted by the Act as so amended. Any repeal or modification of this Section shall not adversely affect the right or protection of the Managers existing at the time of such repeal or modification.

ARTICLE VI- RIGHTS AND OBLIGATIONS OF MEMBERS

6.1 No Management by Members . Except as provided in this Agreement or required by the Act, the Members in their capacity as Members shall not take part in the management or control of the business. The Members shall not transact any business for the Company, nor shall they have power to sign for or to bind the Company.

6.2 Election of Managers . If the number of Managers as set pursuant to Section 5.2 is greater than the number of Managers appointed pursuant to Section 5.3 , then the Members shall have the right to elect such additional Managers and any replacements thereof.

6.3 Member Meetings . Meetings of Members may be held on such terms (including by telephone conference call), and after such notice as the Managers may reasonably establish. Upon request for a meeting to the Managers by any Member or Members owning more than 10% of the Units, the Managers shall give notice and arrange for the holding of a meeting on the terms reasonably requested by such Member or Members within five business days from receipt of the request. Notice of a meeting of Members must be given to all Members entitled to vote at the meeting at least forty-eight (48) hours before the date of the meeting, unless the Members unanimously agree to waive such prior notice.

6.4 Action by the Members . The affirmative vote of a Majority in Interest of the Members, regardless of the number of Members in attendance at any meeting of the Members, shall be the act of the Members hereunder and for purposes of the Act. As used in this Agreement, the phrases “ the approval of the Members ,” “ the consent of the Members ,” “ as determined by the Members “ and similar phrases mean the approval as set forth in the preceding sentence, except as expressly provided otherwise in this Agreement.

6.5 Action Without Meeting . The Members may act without a meeting if one or more written consents, describing the action to be taken, is provided to each Member for consideration and signed by those Members having the requisite authority to approve such action.

- 11 -

6.6 Limited Liability . The Members shall not be required to make any contribution to the capital of the Company except as set forth in Article II , nor shall the Members in their capacity as such be bound by, or personally liable for, any expense, liability or obligation of the Company except to the extent of their interest in the Company and the obligation to return Distributions made to them under certain circumstances as required by the Act. The Members shall be under no obligation to restore a deficit capital account upon the dissolution of the Company or the liquidation of any of their Membership Interests.

6.7 Bankruptcy of a Member . A Member shall cease to have any power as a Member, any voting rights or rights of approval hereunder upon the bankruptcy or assignment for the benefit of creditors of such Member; and the Member or its bankruptcy estate or trustee or assignee upon the occurrence of any such event shall have only the rights, powers and privileges of a transferee enumerated in Section 7.4 , and shall be liable for all obligations of the Member under this Agreement. A Member shall cease to have any power as a Member, any voting rights or rights of approval hereunder upon the death or legal incapacity of the Member.

6.8 Affiliate Transactions.

(a) The fact that any Person is a Member, Manager or an Affiliate of any Member or Manager shall not prohibit the Company from employing or engaging such Person to render or perform a service or from otherwise transacting business with such Person (collectively, the “ Affiliate Transactions ”) if the Affiliate Transaction is negotiated at arms’ length and is on customary terms that are at least as favorable as a transaction with a third-party. Each Member represents and warrants to the other Members that such Member has disclosed to the other Members the existence and nature of such Member’s interest, and/or the interest of any Affiliate of such Member, in all existing Affiliate Transactions and covenants to make the same disclosures to the other Members (and/or the Managers appointed by each such Member) in advance of the consummation of each proposed new Affiliate Transaction.

(b) If it is proposed that the Company enter into any agreement, or effect any transaction with, a Member or an Affiliate of a Member then: (i) each Member (and the Managers appointed by such Member) may represent such Member’s own interests (or the interests of its Affiliate) with respect to the negotiation of any transaction, contract, agreement, lease, or the like between the Company and the Member or the Member’s Affiliate; and (ii) any such agreement or transaction, or amendment or modification thereof, shall be approved on behalf of the Company by a majority of the Managers, excluding the Managers appointed by the Member who is a party (or whose Affiliate is a party) to such Affiliate Transaction.

(c) If any Manager seeks to enforce the Company’s rights under any Affiliate Transaction (including, without limitation, the Company’s rights under the Asset Purchase Agreement), or under the restrictive covenants and confidentiality provisions in Section 6.10 , then (i) such Manager shall have authority to do so upon approval and in accordance with the directives of a majority of the Managers, excluding the Managers appointed by the Member who is a party (or whose Affiliate is a party) to such Affiliate Transaction, (ii)

- 12 -

the Manager bringing the enforcement action shall be entitled to reimbursement of all reasonable attorneys’ fees and other costs in pursuing such enforcement action if they prevail on the merits of their claims, and otherwise, such Manager shall bear its own costs, and (c) such reimbursement shall be paid by the Member who is a party (or whose Affiliate is a party) to such Affiliate Transaction promptly upon the final non-appealable conclusion of such matter. Any recovery on the Company’s behalf in such matter shall accrue to the Company.

6.9 Existing Agreements among Members and the Company . The following agreements in effect as of the date hereof are Affiliate Transactions that are approved for all purposes of this Agreement:

(a) Asset Purchase Agreement dated as of the date hereof (the “ Asset Purchase Agreement ”), between the Company, as buyer, the CAS Member, as seller, and Joseph Kuhn, as the shareholder of the CAS Member.

(b) Employment Agreement dated as of the date hereof (the “ Employment Agreement ”), under which such the Company will employ Joseph Kuhn and such executive shall agree to be bound by certain noncompetition covenants and related restrictions.

6.10 Noncompetition; Confidentiality.

(a) In furtherance of the business of the Company and the purposes of this Agreement, each Member hereby agrees that it, and its Affiliates, will not (except via their interest in the Company) engage, directly or indirectly, either as principal, officer, director, agent, proprietor, shareholder, owner, partner, consultant, manager or employee, or participate in the ownership, management, operation or control of any business that in any material respect offers to third parties any of the products or services provided by the Company within the territory served by the Company for so long as such Member owns an interest in the Company; provided , however , that the foregoing shall not restrict any Member and its Affiliates from owning up to (but not more than) two percent of any class of securities of any enterprise (but without otherwise participating in the activities of such enterprise) if such securities are listed on any national or regional securities exchange or have been registered under Section 12(g) of the Securities Exchange Act of 1934, as amended. Each Member further agrees that it, and its Affiliates, will not, for so long as such Member owns an interest in the Company and for a period of five (5) years thereafter, employ any employee of the Company within one year following such employee’s termination of employment with the Company. Notwithstanding any other term of this Agreement, Joseph G. Kuhn shall not be subject to restrictions under this Section 6.10(a) (including as an Affiliate) unless he or CAS (or a Related Party of CAS) is a current Member of the Company at the time of enforcement.

(b) Each Member hereby agrees on behalf of itself and its Affiliates that the confidential and proprietary business information of the Company, including financial information, operating process and technology is the Property of the Company and further agrees that it (i) will protect the confidentiality of such confidential information with the same degree of care that the Member and its Affiliates use for the protection of their own confidential and proprietary information (but not less than commercially reasonable care), and (ii) will not use or derive any benefit from any Confidential Information other than in connection with its

- 13 -

membership in the Company or pursuant to the terms of any approved Affiliate Transactions. A Member or its Affiliates may reveal the Company’s confidential information to its directors, managers, officers, employees, affiliates, advisors, attorneys, accountants and agents (“ Representatives ”) who have a need to know the confidential information in connection with this Agreement or any approved Affiliate Transactions and who are informed by the Member of the confidential nature of the confidential information. A Member will be responsible for any breach of the provisions of this agreement by any of its Representatives. For purposes hereof, confidential information of the Company shall not include information that (i) is or becomes generally and publicly available other than as a result of a breach of this covenant by the applicable Member, (ii) is or becomes known to the Member on a nonconfidential basis from a source which is not prohibited from disclosing such information by any contractual or fiduciary obligation to the Company, or (iii) the Member can prove by competent evidence either is already known by it at the time of disclosure or is independently developed by it without use of Company confidential information.

(c) All remedies available to each party for breach of the provisions of this Section 6.10 are cumulative and may be exercised concurrently or separately, and the exercise of any one remedy shall not be deemed an election of such remedy to the exclusion of the other remedies. Upon any such breach, the Company and the nonbreaching parties shall have, and may pursue, all remedies at law and in equity, and without limiting the generality of the foregoing, may sue for specific performance and damages including disgorgement of profits.

ARTICLE VII- TRANSFER OF INTERESTS AND ADMISSION OF MEMBERS

7.1 Restrictions on Transfer .

(a) Except as provided in this Sections 7.1 , 7.5 , 7.6 , 8.1 and 8.4 , no Member may voluntarily or involuntarily Transfer, or create or suffer to exist any Encumbrance against, all or any part of its record or beneficial interest in the Company without the prior written consent of the Managers. No Member that is an entity may transfer equity or other controlling interests to the extent that such entity would no longer qualify as a Related Party of the controlling equityholder of the Member as of the date it became a Member. Except for withdrawals in connection with a Transfer of Units permitted by this Agreement, no Member may withdraw from the Company without the consent of the Managers.

(b) A Member may voluntarily Transfer all or any part of its Units in the Company to any Related Party of such Member, provided that CAS shall not make any such Transfer prior to the fifth anniversary of the date of the Asset Purchase Agreement without the prior written consent of the Managers. No further Transfer shall be made by any Related Party transferee except back to the Member that originally owned it or to another Related Party of such Member, or except pursuant to the terms of Section 7.1(a) . Any Related Party transfer shall be subject to Section 7.2 but shall not otherwise require the consent of the Managers. A Related Party transferee shall become a Member upon compliance with Sections 7.3(a) and 7.3(c) . At all times after a transfer by a Member to a Related Party transferee, the Option rights described in Section 8.1 and the Purchase Events described in Section 8.2 shall apply upon the occurrence of any such event to either of the transferring Member or the Related Party transferee.

- 14 -

(c) If, at any time prior to the Transfer of any Units pursuant to this Section 7.1 , such Units are required to be sold pursuant to Sections 7.6 , 8.1 or 8.4 , the provisions of Sections 7.6 , 8.1 or 8.4 , as applicable, shall govern the Transfer of such Units and this Section 7.1 shall cease to apply to the Transfer of such Units.

7.2 Conditions Precedent to Transfers . Any purported Transfer or Encumbrance otherwise complying with Section 7.1 will be ineffective until the transferor and his transferee furnish to the Company the instruments and assurances the Managers may request, including without limitation, if requested, an opinion of counsel satisfactory to the Company that the interest in the Company being Transferred or Encumbered has been registered or is exempt from registration under the Securities Act and applicable state securities laws.

7.3 Substituted Members . No assignee or transferee of Units shall be admitted as a substituted Member of the Company unless, in addition to compliance with the conditions set forth in Section 7.2 , all of the following conditions are satisfied:

(a) The assignee has executed and delivered all documents deemed appropriate by the Company to reflect his admission to the Company and his agreement to be bound by this Agreement;

(b) The Managers shall have consented in writing to such substitution, provided that no such consent shall be required in respect of any assignment or transfer expressly permitted pursuant to Section 7.1; and

(c) Payment has been made to the Company of all costs and expenses of admitting any such assignee as a substituted Member.

7.4 Rights of Transferee . Unless admitted to the Company in accordance with Section 7.3 , the transferee of Units shall not be entitled to any of the rights, powers or privileges of its predecessor in interest, except that it shall be entitled to receive any Distributions and be credited or debited with its proportionate share of Profits and Losses. If the Company is required by a court of competent jurisdiction or applicable law to recognize an unauthorized Transfer all or any part of any Member’s record or beneficial interest in the Company, then such Transfer shall be deemed a breach hereunder and the Transferee shall have only the rights of a Transferee under this Section 7.4 with respect to the transferred interest, and any Distributions with respect to such transferred interest may be applied (without limiting any other legal or equitable rights of the Company) towards the satisfaction of any debts, obligations, or liabilities for damages that the transferor or transferee of such interest may have to the Company.

7.5 Tag-Along .

(a) In the event that a Member or Members (collectively, the “ Majority Member ”) is permitted (pursuant to Section 7.1(a) ) and proposes to Transfer Units constituting more than 50% of the total Units to a third party (the “ Tag-Along Transferee ”), then the Majority Member shall, at least 45 days prior to the proposed Transfer, give written notice to the other Members (a “ Tag-Along Notice ”) describing the terms of the proposed Transfer in reasonable detail, including the identity of the Tag-Along Transferee, the number of Units to be sold and the proposed closing date, and stating that each of the other Members (each, a “ Tag-Along

- 15 -

Member ”) has the right (the “ Tag-Along Right ”) to sell to the Tag-Along Transferee the same pro rata portion of its Units as the Majority Member (determined by reference to the relative Units of each such Member and with pro rata cutbacks for all selling Members to the extent that the Tag-Along Transferee is unwilling to acquire all Units sought to be Transferred), simultaneously with and conditional upon the closing of such Transfer, on the same pro rata terms and conditions as the Majority Member.

(b) Each Tag-Along Member may elect to exercise its Tag-Along Right by delivering written notice to the Majority Member and the other Members no later than 30 days after receipt of the Tag-Along Notice (the “ Tag-Along Period ”). In the event a Tag-Along Member delivers such a notice to the Majority Member prior to the expiration of the Tag-Along Period, such notice shall constitute an irrevocable obligation of such Tag-Along Member to sell its Units to the Tag-Along Transferee in accordance with the Tag-Along Notice. The Majority Member shall give the Tag-Along Members at least ten business days’ notice of the time and place of the closing.

(c) Each Member as part of its participation in the Transfer pursuant to the Tag-Along Right shall convey its Units to the Tag-Along Transferee at the closing, free and clear of all liens, claims and encumbrances and pursuant to such instruments of conveyance and warranties (including warranty of title and absence of encumbrances) as the Tag-Along Transferee shall reasonably request, in exchange for payment in full of the purchase price set forth in the Tag-Along Notice, and each Tag-Along Member shall enter into agreements with the Tag-Along Transferee containing the same terms and conditions as those applicable to the Majority Member; provided , however , that except with respect to indemnities for breaches of representations related to title to the Tag-Along Member’s Units, each Tag-Along Member shall only be required to participate pro rata in any indemnity given to the Tag-Along Transferee on the same terms as the Majority Member, subject to a maximum indemnity exposure not to exceed the proceeds of the sale received by such Tag-Along Member. All Members participating in any such transaction shall bear their pro rata share of the reasonable costs of such transaction. Costs incurred by a Member on its own behalf shall not be considered costs of such a transaction and shall be paid solely by such Member.

7.6 Drag-Along .

(a) In the event that a Majority Member has received a bona fide written offer (the “ Drag-Along Offer ”) from an unaffiliated third party (the “ Drag-Along Transferee ”) to purchase Units constituting more than 50% of the total Units, then the Majority Member shall have the right (“ Drag-Along Right ”) to require all, but not less than all, of the other Persons holding Units (the “ Drag-Along Persons ”) to sell the same pro rata portion of their Units as the Majority Member (determined by reference to the relative Units of each such Member) to the Drag-Along Transferee in accordance with the terms of the Drag-Along Offer.

(b) The Majority Member may elect to exercise its Drag-Along Right by delivering written notice (the “ Drag-Along Notice ”) to the Drag-Along Persons. The Drag-Along Notice must describe the terms of the proposed Transfer in reasonable detail, including the identity of the Drag-Along Transferee and the proposed closing date. In the event the Majority Member delivers a Drag-Along Notice to the Drag-Along Persons, such notice shall

- 16 -

constitute an irrevocable obligation of such Persons to sell their applicable Units to the Drag-Along Transferee in accordance with the Drag-Along Offer, so long as the purchase and sale transaction occurs within 90 days after the date of the Drag-Along Notice. In the event that the Drag-Along Transferee desires to effect such Transfer pursuant to a merger, consolidation or other business combination of the Company, the Majority Member shall have the right to cause the Managers and the other Members and Drag-Along Persons to effect such form of Transfer, and take all actions necessary to approve such form of Transfer pursuant to this Section 7.6 . The Majority Member shall give the Drag-Along Persons at least ten business days’ notice of the time and place of the closing.

(c) Each Drag-Along Person as part of its participation in the Transfer pursuant to the Drag-Along Right shall convey its Units, if required by the form of the transaction, to the Drag-Along Transferee at the closing, free and clear of all liens, claims and encumbrances and pursuant to such instruments of conveyance and warranties (including warranty of title and absence of encumbrances) as the Drag-Along Transferee shall reasonably request, in exchange for payment in full of the purchase price set forth in the Drag-Along Offer, and each Drag-Along Person shall enter into agreements with the Drag-Along Transferee containing the same terms and conditions as those applicable to the Majority Member; provided , however , that except with respect to indemnities for breaches of representations related to title to such Drag-Along Person’s Units, each Drag-Along Person shall only be required to participate pro rata in any indemnity given to the Drag-Along Transferee on the same terms as the Majority Member, subject to a maximum indemnity exposure not to exceed the proceeds of the sale received by such Drag-Along Person. All Members participating in any such transaction shall bear their pro rata share of the reasonable costs of such transaction. Costs incurred by a Member on its own behalf shall not be considered costs of such a transaction and shall be paid solely by such Member.

ARTICLE VIII- PUT-CALL OPTIONS; OTHER PURCHASE EVENTS

8.1 Put-Call Options.

(a) Commencing on the fifth anniversary of the date of this Agreement and at any time thereafter (the “ Option Period ”), (i) the Company (or Air T if the Managers so elect, in either case, the “ Buyer ”) shall have the option to purchase all of the Units of CAS and (ii) CAS shall have the option to sell all of its Units to the Buyer (either of such options, the “ Option ”). Either of the Buyer or CAS may elect to exercise its Option by delivering written notice to the Company and the other Members prior to or during the Option Period. In the event the Buyer or CAS delivers such a notice, such notice shall constitute an irrevocable obligation of the Company (or Air T if so designated by the Managers) to purchase and CAS to sell its Units in accordance with this Section 8.1 .

(b) The purchase price to be paid for CAS’s Units upon exercise of the Option will be the Strike Price. The closing (the “ Option Closing ”) of the purchase following the exercise of the Option shall take place on the date agreed upon by the Buyer and CAS, but not later than thirty (30) days following a final determination of the Strike Price under Section 8.1(c) below; provided, however, that the Option Closing may not take place prior to the commencement of the Option Period. The Strike Price shall be paid on the Option Closing by

- 17 -

the Buyer, in the Buyer’s discretion, in any combination of the following: (i) cash and/or (ii) delivery of a three-year amortizing promissory note of the Buyer for the balance of the Strike Price, which note shall require monthly principal and interest payments on a three-year fully amortized schedule (with the first such principal payment due at the Option Closing), bearing interest at an annual rate equal to the 10-Year Treasury Bond Yield plus 375 basis points. Such Note shall be secured by the Units which are the subject of such transfer. Upon delivery of full payment of the Strike Price, CAS shall execute and deliver such assignments and other instruments as may be reasonably necessary to evidence and fully affect the transfer of its Units to the Buyer free and clear of all liens, claims and encumbrances.

(c) Upon the delivery by either party of a notice of exercise of the Option, the Buyer and CAS shall work together in good faith to mutually agree in writing on the Strike Price within the period of 90 days following the date of such notice. If the parties cannot agree on the Strike Price within such period, then each of the Buyer and CAS shall engage a qualified reputable investment banking firm or qualified reputable business appraisal firm, either of which shall have no prior business relationship with either party, and whose representative signing any valuation shall be an individual accredited as a chartered financial analyst (CFA) by the CFA Institute, an individual accredited in business valuation (ABV) through the American Institute of CPAs (AICPA), an individual accredited as a certified valuation analyst (CVA) by the National Association of Certified Valuators and Analysts (NACVA), or an individual accredited in business valuation through the American Society of Appraisers (ASA) to provide a written determination of the Strike Price. Each party shall deliver the written determination of its appraiser to the other party on the 150 ^th day following the date of the Option exercise notice. If the two appraisals are within an amount that is 20% or less of the lower appraisal, then the Strike Price shall be the average of the two appraisals. If the appraisals differ by greater than such 20% threshold, then the parties shall instruct the two appraisers to select a third, neutral qualified reputable investment banking firm or qualified reputable business appraisal firm that has no prior business relationship with either party and that has relevant experience in the aerospace industry. Such third appraiser, within 45 days of its appointment, after reviewing the appraisals by the first two appraisers and undertaking an independent analysis, shall issue its determination in writing of the Strike Price. Upon such determination, the final Strike Price shall be calculated by averaging the determination of the third appraiser with the one determination of the first two appraisers that is closest (either above or below) to the determination of the third appraiser, which calculation shall be final and conclusive as to the Strike Price. The costs of the appraiser selected by a party shall be the expense of such party and the cost of a third appraiser, if required, shall be borne equally by the Buyer and CAS.

(d) In connection with the appraisals made pursuant to Section 8.1(c) , if there has been one or more changes in the accounting practices of the Company during any relevant valuation period (including without limitation the accounting practices governing the expensing of inventory that may impact any cash flow determination or EBITDA calculation for such period), the appraisers are directed to review and account for such changes in a manner that ensures the Strike Price determined hereunder is not unduly increased or decreased as a result of such changes.

- 18 -

8.2 Purchase Events. Each of the following events shall constitute a “ Purchase Event ” under this Agreement:

(a) The death of Joseph G. Kuhn, permanent disability of Joseph G. Kuhn with respect to CAS, or the dissolution and winding up of a Member;

(b) Any filing by a Member of a voluntary petition for reorganization or liquidation under any federal or state law for the relief of debtors or any filing against a Member of any involuntary petition for liquidation or reorganization under any federal or state law for the relief of debtors that is not dismissed or stayed within 60 days of filing;

(c) Any purported voluntary or involuntary Transfer or Encumbrance of all or any part of a Member’s Membership Interest in a manner not expressly permitted by this Agreement;

(d) Any material breach of this Agreement by a Member which is not cured within sixty (60) days after written notice of such breach is given to the Member by the Company; or

(e) Any purported withdrawal or attempt to withdraw by a Member from the Company other than as may be expressly permitted by this Agreement.

8.3 Purchase Notice. Upon the occurrence of a Purchase Event, the Member to whom such event has occurred (the “ Withdrawing Member ”), or his executor, administrator or other legal representative in the event of death or declaration of legal incompetency, shall give notice of the Purchase Event (the “ Purchase Notice ”) to the Managers and the Company within thirty (30) days after its occurrence. If the Withdrawing Member fails to give the Purchase Notice, the Managers or a Majority in Interest of the Members (other than a Withdrawing Member) may give the notice at any time thereafter and by so doing commence the Purchase procedure provided for in this Article VIII .

8.4 Members’ Purchase Option. Upon the occurrence of a Purchase Event, each of the Members, except the Withdrawing Member and any other Withdrawing Member, shall have an option to purchase (the “ Purchase Option ”) the Withdrawing Member’s Units at Closing on the terms and conditions set forth in this Article VIII . This right will be allocated among the Members who elect to purchase (the “ Purchasing Members ”) in the proportion they mutually agree upon, or, in the absence of agreement, in the ratio that each of the Purchasing Member’s Units bears to the aggregate Units of all Purchasing Members. The Purchasing Members must give notice of their election to exercise their Purchase Option to the Withdrawing Member and all other Members within thirty (30) days following delivery of the Purchase Notice.

8.5 Purchase Price For Withdrawing Member’s Units. The purchase price to be paid for the Withdrawing Member’s Units Interest will be the price agreed upon by the Purchasing Members and the Withdrawing Member within thirty (30) days after the Purchase Notice is given, or, if no agreement is reached, the Strike Price.

8.6 Closing. The closing (the “ Closing ”) of the purchase of any Units required to be purchased and sold following the exercise of a purchase option pursuant to this Article VIII shall take place on the date agreed upon by the Purchasing Members and the Withdrawing Member or, if no date is agreed upon, on a date set by the Purchasing Members but not later than ninety (90) days after the delivery of the Purchase Notice. The purchase price for each Unit

- 19 -

being purchased will be payable by each Purchasing Member for its allocated share, at the election of each Purchasing Member, either (i) in full in cash at Closing or (ii) by a note payable in three equal principal installments on the Closing date and on the first and second anniversaries thereof, with payment of such note secured by the Units subject to transfer. The purchase price will bear interest from the date of the Purchase Event which began the Purchase procedure through the date of payment (including any future payments under a note as provided above) at an interest rate equal to the Prime Rate on the date of the Purchase Event, or if not a business day, the next business day thereafter. Upon full payment of the purchase price, any Withdrawing Member shall execute and deliver such assignments and other instruments as may be reasonably necessary to evidence and fully affect the transfer of their Membership Interests to any purchaser.

8.7 Effect on Withdrawing Member’s Interest. From the date of the occurrence of the Purchase Event to the date of the Transfer of the Withdrawing Member’s Units under this Article VIII , the Units of the Withdrawing Member will be excluded from any calculation of aggregate Units for purposes of any approval required of Members under this Agreement. Without limiting the generality of any other provision of this Agreement, upon the exercise of the Purchase Option, the Withdrawing Member, without further action, will have no rights in the Company or against the Company or any Member other than the right to receive payment for his Units in accordance with this Article VIII .

ARTICLE IX- DISSOLUTION AND LIQUIDATION OF THE COMPANY

9.1 Dissolution Events . The Company will be dissolved upon the happening of any of the following events:

(a) All or substantially all of the Property of the Company is sold, exchanged or otherwise transferred (unless the Managers elect to continue the business of the Company);

(b) A document is signed by a Majority in Interest of the Members which states their election to dissolve the Company;

(c) The entry of a final judgment, order or decree of a court of competent jurisdiction adjudicating the Company to be bankrupt and the expiration without appeal of the period, if any, allowed by applicable law in which to appeal; or

(d) The entry of a decree of judicial dissolution or the issuance of a certificate for administrative dissolution under the Act.

9.2 Liquidation . Upon the happening of any of the events specified in Section 9.1 , the Managers will commence as promptly as practicable to wind up the Company’s affairs unless the Managers determine that an immediate liquidation of Company assets would cause undue loss to the Company, in which event the liquidation may be deferred for a time determined by the Managers to be appropriate. Assets of the Company may be liquidated or distributed in kind, as the Managers determine to be appropriate. The Members will continue to share Company Profits and Losses during the period of liquidation in the manner set forth in Articles III and IV . The proceeds from liquidation of the Company, including repayment of any debts of Members to the Company, and any Company assets that are not sold in connection with the liquidation will be applied in the following order of priority:

- 20 -

(a) To payment of the debts and satisfaction of the other obligations of the Company, including without limitation debts and obligations to Members;

(b) To the establishment of any reserves deemed appropriate by the Managers for any liabilities or obligations of the Company, which reserves will be held for the purpose of paying liabilities or obligations and, at the expiration of a period the Managers deem appropriate, will be distributed in the manner provided in Section 9.2(c) ;

ARTICLE X- MISCELLANEOUS

10.1 Other Activities of Members and Managers. Subject to the restrictive covenants in Section 6.10, any Member and its Affiliates and any Manager and its Affiliates may engage in or possess an interest in other business ventures of any nature or description, independently or with others, without having or incurring any obligation to offer any interest in such activities to the Company or any Member and neither the Company nor any Member or Manager shall have any rights in or to such independent ventures or the income or profits derived therefrom by virtue of this Agreement.

10.2 Fiscal Year . The Fiscal Year will end on March 31, unless another fiscal year-end is selected by the Managers.

10.3 Records . The records of the Company will be maintained at the principal place of business of the Company, or at any other location the Managers select provided that the Company keep at its principal place of business the records required by the Act to be maintained there. Appropriate records in reasonable detail will be maintained to reflect income tax information for the Members.

10.4 Notices . Any notice or other communication required by this Agreement must be in writing. Notices and other communications will be deemed to have been given when delivered by hand (including by recognized overnight delivery service) or three business days after being deposited in the United States mail, postage prepaid, addressed to the Member to whom the notice is intended to be given (or to any Manager appointed by such Member) at its address set forth on the signature pages of this Agreement or, in the case of the Company, to its principal place of business. A Person may change his notice address by notice in writing to the Company and to each other Member given under this Section 10.4 .

10.5 Amendments . Except as otherwise expressly provided in this Section 10.5 or as permitted by Section 3.12 , no amendment of this Agreement will be valid or binding upon the Members, nor will any waiver of any term of this Agreement be effective, unless in writing and signed by all Members.

- 21 -

10.6 Representations of Members . Each Member represents and warrants to the Company and every other Member that it (a) is fully aware of, and is capable of bearing, the risks relating to an investment in the Company, (b) understands that its interest in the Company has not been registered under the Securities Act or the securities law of any jurisdiction in reliance upon exemptions contained in those laws, and (c) has acquired its interest in the Company for its own account, with the intention of holding the interest for investment and without any intention of participating directly or indirectly in any redistribution or resale of any portion of the interest in violation of the Securities Act or any applicable law.

10.7 Survival of Rights . Except as herein otherwise provided to the contrary, this Agreement shall be binding upon and inure to the benefit of the parties, their successors and assigns.

10.8 Governing Law . This Agreement shall be governed and construed in accordance with the laws of the State of North Carolina without giving effect to the conflicts of laws provisions thereof.

10.9 Severability . If any provision, sentence, phrase or word of this Agreement or the application thereof to any person or circumstance shall be held invalid, the remainder of this Agreement, or the application of such provision, sentence, phrase, or word to persons or circumstances, other than those as to which it is held invalid, shall not be affected thereby.

10.10 Agreement in Counterparts . This Agreement may be executed in several counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. In addition, this Agreement may contain more than one counterpart of the signature pages and this Agreement may be executed by the affixing of the signatures of each of the Members to one of such counterpart signature pages; all of such signature pages shall be read as though one, and they shall have the same force and effect as though all of the signers had signed a single signature page.

10.11 Tax Matters Partner . For purposes of this Agreement, the Managers may designate one Member as the Tax Matters Partner. Air T is hereby designated as the initial Tax Matters Partner.

10.12 Creditors Not Benefited . Nothing in this Agreement is intended to benefit any creditor of the Company or of any Member. No creditor of the Company or any Member will be entitled to require the Managers to solicit or accept any loan or additional capital contribution for the Company or to enforce any right which the Company or any Member may have against a Member, whether arising under this Agreement or otherwise.

10.13 Members’ Access to Information . Each Member shall have the right to obtain from the Company, or be granted access for the purpose of reviewing and copying, from time to time, upon reasonable notice, such information regarding the affairs of the Company as may be reasonably related to the business, operational and financial affairs of the Company (including without limitation quarterly and annual financial statements for the Company consisting of a balance sheet and income statement for such periods prepared in accordance with sound accounting principles). Any demand for information under this Section 10.13 shall (i) be in writing, (ii) be made in good faith and for a proper purpose, and (iii) describe with reasonable particularity the purpose and the records or information demanded.

- 22 -

ARTICLE XI- DEFINITIONS

11.1 Definitions. The following terms used in this Agreement shall have the following meanings (unless otherwise expressly provided herein):

“ Act ” has the meaning assigned to it in Section 1.1 .

“ Adjusted Capital Account Deficit ” means, with respect to any Member, the deficit balance, if any, in such Member’s Capital Account as of the end of the relevant fiscal year, after giving effect to the following adjustments:

(a) Credit to such Capital Account any amounts to which such Member is obligated to restore or is deemed to be obligated to restore pursuant to the penultimate sentences of Treasury Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and

(b) Debit to such Capital Account the items described in Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6) of the Treasury Regulations.

The foregoing definition of Adjusted Capital Account Deficit is intended to comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Treasury Regulations and shall be interpreted consistently therewith.

“ Adjusted Capital Contributions ” means, as of any day, a Member’s Capital Contributions adjusted as follows:

(a) Increased by the amount of any Company liabilities which, in connection with Distributions, are assumed by such Member or are secured by any Company Property distributed to such Member, and

(b) Reduced by the amount of cash and the Gross Asset Value of any Company Property distributed to such Member and the amount of any liabilities of such Member assumed by the Company or which are secured by any property contributed by such Member to the Partnership.

In the event any Member transfers all or any portion of his Units in accordance with the terms of this Agreement, his transferee shall succeed to the Adjusted Capital Contribution of the transferor to the extent it relates to the transferred Units.

“ Affiliate ” means (a) with regard to any Member who is an individual, such Member’s Family Members, a trust for the benefit of such Member or his/her Family Members, or a corporation, partnership, limited liability company or other entity in which such Member holds the controlling governing interest and (b) with regard to any Member that is not an individual, (i) any Person directly or indirectly controlling, controlled by or under common control with such Person through contract or through the ownership of the controlling governing interest of a Person, (ii) any and all directors, managers, officers, partners, shareholders and members of such Person and all settlors and trustees of any trust and (iii) any Family Member of any Person described in the foregoing clauses (i) and (ii).

- 23 -

“ Affiliate Transactions ” has the meaning assigned to it in Section 6.8(a) .

“ Agreement ” means this First Amended and Restated Operating Agreement, as amended from time to time.

“ Air T ” means Air T, Inc.

“ Articles of Organization ” means the Articles of Organization of the Company filed with the Secretary of State, as amended or restated from time to time.

“ Asset Purchase Agreement ” has the meaning assigned to it in Section 6.9(a) .

“ Buyer ” has the meaning assigned to it in Section 8.1(a) .

“ Capital Account ” means, with respect to any Member, the capital account maintained for such Member in accordance with Section 2.5 .

“ Capital Contribution ” means all contributions of cash or property (valued for this purpose at initial Gross Asset Value) made by a Member or his predecessor in interest which shall include, without limitation, those contributions made pursuant to Article II of this Agreement.

“ CAS ” means Contrail Aviation Support, Inc., which will change its name to OCAS, Inc. promptly following the date hereof.

“ Code ” means the Internal Revenue Code of 1986, as amended from time to time (and any corresponding provisions of succeeding law).

“ Company Minimum Gain ” means gain as defined in Treasury Regulations Section 1.704-2(d).

“ Depreciation ” means, for each Fiscal Year, an amount equal to the depreciation, amortization, or other cost recovery deduction allowable with respect to an asset for such Fiscal Year, except that if the Gross Asset Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such Fiscal Year, Depreciation shall be an amount which bears the same ratio to such beginning Gross Asset Value as the federal income tax depreciation, amortization, or other cost recovery deduction for such Fiscal Year bears to such beginning adjusted tax basis; provided , however , that if the adjusted basis for federal income tax purposes of an asset at the beginning of such Fiscal Year is zero, Depreciation shall be determined with reference to such beginning Gross Asset Value using any reasonable method selected by the Managers.

“ Distribution ” means any money or other property distributed to a Member with respect to the Member’s Units, but shall not include any payment to a Member for materials or services rendered nor any reimbursement to a Member for expenses permitted in accordance with this Agreement.

- 24 -

“ EBITDA ” has the meaning assigned to it in the Asset Purchase Agreement and shall be calculated for all purposes under this Agreement in a manner consistent with the manner in which it is calculated pursuant to the Asset Purchase Agreement.

“ Employment Agreement ” has the meaning assigned to it in Section 6.9(b) .

“ Encumbrance ” means any lien, pledge, encumbrance, collateral assignment or hypothecation.

“ Family Member ” of any Person means such Person’s spouse, any issue, spouse of issue and any Affiliate of any such Person; provided , however , that any spouse living separate and apart from a Member with the intention by either spouse to cease their matrimonial cohabitation shall not be deemed a Family Member.

“ Fiscal Year ” means an annual accounting period ending December 31 of each year during the term of the Company.

“ Gross Asset Value ” means, with respect to any asset, the asset’s adjusted basis for federal income tax purposes, except as follows:

(a) The initial Gross Asset Value of any asset contributed by a Member to the Company shall be the gross fair market value of such asset, as determined by the contributing Member and the Managers;

(b) The Gross Asset Values of all Company assets shall be adjusted to equal their respective gross fair market values, as determined by the Managers, as of the following times: (i) the acquisition of an additional interest in the Company (other than upon the initial formation of the Company) by any new or existing Member in exchange for more than a de minimis Capital Contribution; (ii) the distribution by the Company to a Member of more than a de minimis amount of Company Property as consideration for an interest in the Company; and (iii) the liquidation of the Company within the meaning of Treasury Regulations Section 1.704-1(b)(2)(ii)(g); provided , however , that the adjustments pursuant to clauses (i) and (ii) above shall be made only if the Managers reasonably determine that such adjustments are necessary or appropriate to reflect the relative economic interests of the Members in the Company;

(c) The Gross Asset Value of any Company asset distributed to any Member shall be adjusted to equal the gross fair market value of such asset on the date of distribution as determined by the distributee and the Managers; and

(d) The Gross Asset Values of Company assets shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m) and subsection (f) in the definition of Profits and Losses herein, and 6.10 hereof; provided , however , that Gross Asset Values shall not be adjusted pursuant to this subsection (d) hereof to the extent the Managers determine that an adjustment pursuant to subsection (b) hereof is necessary or appropriate in connection with a transaction that would otherwise result in an adjustment pursuant to this subsection (d).

- 25 -

If the Gross Asset Value of an asset has been determined or adjusted pursuant to subsection (a) or (b), or subsection (d) hereof, such Gross Asset Value shall thereafter be adjusted by the Depreciation taken into account with respect to such asset for purposes of computing Profits or Losses.

“ Initial Capital Contribution ” has the meaning assigned to it in Section 2.2 .

“ Losses ” has the meaning set forth in the definition of “Profits and Losses.”

“ Majority in Interest ” means, with respect to any referenced group of Members, a combination of any of such Members who, in the aggregate, own more than fifty percent (50%) of the Units owned by all of such referenced group of Members.

“ Managers ” means the Person or Persons serving as Managers of the Company as set forth in Article V .

“ Member ” means each Person designated as a member of the Company on Schedule I hereto, or any additional member admitted as a Member of the Company in accordance with Article VII . “ Members ” refers to such Persons as a group.

“ Member Minimum Gain ” means an amount, with respect to each Member Nonrecourse Debt, equal to the Company Minimum Gain that would result if such Member Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with Treasury Regulations Section 1.704-2(i).

“ Member Nonrecourse Debt ” means any nonrecourse debt (for the purposes of Treasury Regulations Section 1.1001-2) of the Company for which any Member bears the “economic risk of loss,” within the meaning of Treasury Regulations Section 1.752-2.

“ Member Nonrecourse Deductions ” means deductions as described in Treasury Regulations Section 1.704-2(i). The amount of Member Nonrecourse Deductions with respect to a Member Nonrecourse Debt for any Fiscal Year equals the excess, if any, of (A) the net increase, if any, in the amount of Member Minimum Gain attributable to such Member Nonrecourse Debt during such Fiscal Year, over (B) the aggregate amount of any Distributions during that Fiscal Year to the Member that bears the economic risk of loss for such Member Nonrecourse Debt to the extent such Distributions are from the proceeds of such Member Nonrecourse Debt and are allocable to an increase in Member Minimum Gain attributable to such Member Nonrecourse Debt, determined in accordance with Treasury Regulations Section 1.704-2(i).

“ Membership Interest ” means all of a Member’s rights in the Company, including without limitation, the Member’s share of the Profits and Losses of the Company, the right to receive Distributions of the Company’s assets, any right to vote and any right to participate in the management of the Company as provided in the Act and this Agreement.

“ Nonrecourse Deductions ” means deductions as set forth in Treasury Regulations Section 1.704-2(b)(1). The amount of Nonrecourse Deductions for a given Fiscal Year equals the excess, if any, of (A) the net increase, if any, in the amount of Company Minimum Gain

- 26 -

during such Fiscal Year, over (B) the aggregate amount of any Distributions during such Fiscal Year of proceeds of a Nonrecourse Liability that are allocable to an increase in Company Minimum Gain, determined according to the provisions of Treasury Regulations Section 1.704-2(h).

“ Nonrecourse Liability ” means any Company liability (or portion thereof) for which no Member bears the “economic risk of loss,” within the meaning of Treasury Regulations Section 1.752-2.

“ Option ” has the meaning assigned to it in Section 8.1(a) .

“ Option Closing ” has the meaning assigned to it in Section 8.1(b) .

“ Option Period ” has the meaning assigned to it in Section 8.1(a) .

“ Person ” means an individual, a trust, an estate, or a domestic corporation, a foreign corporation, a professional corporation, a partnership, a limited partnership, a limited liability company, a foreign limited liability company, an unincorporated association, or another entity.

“ Prime Rate ” means as of a particular date the prime rate of interest as published on that date in the WALL STREET JOURNAL. If the WALL STREET JOURNAL is not published on a date for which the Prime Rate must be determined, the Prime Rate shall be the prime rate published in the WALL STREET JOURNAL on the nearest preceding date on which the WALL STREET JOURNAL was published.

“ Profits and Losses ” means, for each Fiscal Year, an amount equal to the Company’s taxable income or loss for such year or period, determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss, or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss), with the following adjustments:

(a) Any income of the Company that is exempt from federal income tax and not otherwise taken into account in computing Profits and Losses pursuant to this definition of “Profits” and “Losses” shall be added to such taxable income or loss;

(b) Any expenditures of the Company described in Code Section 05(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Profits or Losses shall be subtracted from such taxable income or loss;

(c) In the event the Gross Asset Value of any Company asset is adjusted pursuant to the definition of Gross Asset Value, the amount of such adjustment shall be taken into account as gain or loss from the disposition of such asset for purposes of computing Profits or Losses;

- 27 -

(d) Gain or loss resulting from any disposition of Company Property with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Gross Asset Value of the property disposed of, notwithstanding that the adjusted tax basis of such property differs from its Gross Asset Value;

(e) In lieu of the depreciation, amortization, and other cost recovery deductions taken into account in computing such taxable income or loss, there shall be taken into account Depreciation for such fiscal year or other period, computed in accordance with the definition of Depreciation hereof;

(f) To the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Code Section 734(b) or Code Section 743(b) is required pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be taken into account in determining Capital Accounts as a result of a Distribution other than in liquidation of a Member’s interest in the Company, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases the basis of the asset) from the disposition of the asset and shall be taken into account for purposes of computing Profits or Losses;

(g) Notwithstanding any other provision of this definition of Profits and Losses, any items which are specially allocated pursuant to Sections 3.1(b) , 3.2 , 3.3 , 3.6 , 3.7 , 3.8 , 3.9 , 3.10 or 3.11 hereof shall not be taken into account in computing Profits or Losses.

The amounts of the items of Company income, gain, loss, or deduction available to be specially allocated pursuant to Sections 3.1(b) , 3.2 , 3.3 , 3.6 , 3.7 , 3.8 , 3.9 , 3.10 or 3.11 hereof shall be determined by applying rules analogous to those set forth in subsections (a) through (f) above.

“ Property ” means (i) any and all real property acquired or owned by the Company, (ii) any and all of the improvements constructed on such real property; and (iii) any personal property acquired or owned by the Company (including, without limitation, intangible property).

“ Purchase Event ” has the meaning assigned to it in Section 8.2 .

“ Purchase Notice ” has the meaning assigned to it in Section 8.3 .

“ Purchase Option ” has the meaning assigned to it in Section 8.4 .

“ Purchasing Members ” has the meaning assigned to it in Section 8.4 .

“ Related Party ” means, (a) with respect to a Member who is an individual, (i) a trust solely for the benefit of the Member and/or any Family Member or (ii) a corporation, partnership, limited liability company or other entity in which the Member and/or any Family Member, or a trust for any of their benefit own all of the equity interests; provided that in any case the Member possesses the power to direct or cause the direction of the management and policies of such Person, whether as trustee or through the ownership of voting securities, by contract or otherwise; provided , however , that any spouse living separate and apart from a

- 28 -

Member or issue of a Member with the intention by either spouse to cease their matrimonial cohabitation shall not be deemed a Related Party and (b) with respect to a Member that is an entity, (i) the controlling individual equityholder of such Member as of the date of this Agreement, (ii) any trust or entity that would qualify as a Related Party of such controlling individual equityholder and (iii) any Person directly or indirectly controlling, controlled by or under common control with such Person through contract or through the ownership of the controlling governing interest of a Person.

“ Representative ” has the meaning assigned to it in Section 6.10(b) .

“ Secretary of State ” means the Secretary of State of North Carolina.

“ Strike Price ” means an amount equal to the total distributions CAS would receive pursuant to Article IV if the Company (i) sold all of its assets (inclusive of its intangible assets) at fair market value and on a going-concern basis in an arms-length transaction to an independent third-party purchaser, (ii) paid its debts and liabilities (inclusive of contingent liabilities, the value of which shall be estimated or otherwise provided for in the determination of the Strike Price), and (iii) distributed all remaining assets (inclusive of all cash and cash equivalents of the Company) after all gain or loss from such deemed sale is allocated pursuant to Article III . The Strike Price shall be determined as of the end of the month ending immediately prior to delivery of notice of exercise of the Option and shall be the amount agreed by the parties or determined pursuant to the appraisal process set forth in Section 8.1(c) . The foregoing definition and appraisal process as set forth in Section 8.1(c) shall exclude the application of any discount for lack of control , discount for lack of marketability, or any other similar discounts or adjustments in the determination of the Strike Price.

“ Tax Matters Partner ” means the Member designated by the Managers as the “tax matters partner,” as that term is defined in the Code or as the partnership representative within the meaning of that term in Code § 6223(a) when such provision becomes applicable to the Company.

“ Transfer ” means sell, assign, transfer, lease or otherwise dispose of property, including without limitation an interest in the Company.

“ Treasury Regulations ” means the Income Tax Regulations and Temporary Regulations promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).

“ Units ” has the meaning assigned to it in Section 2.1 .

“ Withdrawing Member ” has the meaning assigned to it in Section 8.3 .

[Signatures appear on following page.]

- 29 -

IN WITNESS WHEREOF, the undersigned, being all of the Members of the Company, have caused this Agreement to be duly adopted by the Company effective as of the date set forth on the cover page of the Agreement, and do hereby assume and agree to be bound by and to perform all of the terms and provisions set forth in this Agreement.


MEMBERS:

AIR T, INC.

By:		/s/ Nicholas J. Swenson
		Name: Nicholas J. Swenson
		Title: President & Chief Executive Officer

CONTRAIL AVIATION SUPPORT, INC.

By:		/s/ Joseph G. Kuhn
		Name: Joseph G. Kuhn
		Title: President

Operating Agreement of

Contrail Aviation Support, LLC

SCHEDULE I


Names and Address of Members	Initial Capital Contribution		Units
Air T, Inc. 3524 Airport Road Maiden, NC 28650	$	4,937,500		4,937.5
Contrail Aviation Support, Inc. 435 Investment Court Verona, WI 53593	$	1,312,500		1,312.5
TOTALS	$	6,250,000		6,250

Exhibit 10.2

LOGO

Credit Agreement

dated as of July 18, 2016

between

C ONTRAIL A VIATION S UPPORT , LLC

and

BMO H ARRIS B ANK N.A.

Table of Contents


SECTION 1.	DEFINITIONS; INTERPRETATION	1

Section 1.1	Definitions	1
Section 1.2	Interpretation	14
Section 1.3	Change in Accounting Principles	14

SECTION 2.	THE CREDIT FACILITIES	15

Section 2.1	Operating Line Revolving Credit Commitment	15
Section 2.2	[Intentionally Deleted.]	15
Section 2.3	Applicable Interest Rate	15
Section 2.4	Rate Determinations	15
Section 2.5	Minimum Borrowing Amounts	15
Section 2.6	Manner of Borrowing Loans; Notice to Bank	16
Section 2.7	Maturity of Loans	16
Section 2.8	Prepayments	16
Section 2.9	Default Rate	16
Section 2.10	Evidence of Indebtedness	16
Section 2.11	Fees	17
Section 2.12	Place and Application of Payments	17

SECTION 3.	CHANGE IN CIRCUMSTANCES	18

Section 3.1	Withholding Taxes	18
Section 3.2	Documentary Taxes	18
Section 3.4	Change of Law	18
Section 3.5	Unavailability of Deposits or Inability to Ascertain, or Inadequacy of, LIBOR	18
Section 3.6	Increased Cost and Reduced Return	19
Section 3.7	Lending Offices	20
Section 3.8	Discretion of Bank as to Manner of Funding	20

SECTION 4.	CONDITIONS PRECEDENT	20

Section 4.1	Initial Credit Event	20
Section 4.2	All Credit Events	22

SECTION 5.	REPRESENTATIONS AND WARRANTIES	23

Section 5.1	Organization and Qualification	23
Section 5.2	Subsidiaries	23
Section 5.3	Authority and Validity of Obligations	24
Section 5.4	Use of Proceeds; Margin Stock	24
Section 5.5	Financial Reports	24
Section 5.6	No Material Adverse Change	25


Section 5.7	Full Disclosure	25
Section 5.8	Trademarks, Franchises, and Licenses	25
Section 5.9	Governmental Authority and Licensing	25
Section 5.10	Good Title	25
Section 5.11	Litigation and Other Controversies	26
Section 5.12	Taxes	26
Section 5.13	Approvals	26
Section 5.14	Affiliate Transactions	26
Section 5.15	Investment Company	26
Section 5.16	ERISA	26
Section 5.17	Compliance with Laws	26
Section 5.18	OFAC	27
Section 5.19	Other Agreements	27
Section 5.20	Solvency	27
Section 5.21	No Default	27
Section 5.22	No Broker Fees	27

SECTION 6.	AFFIRMATIVE COVENANTS	27

Section 6.1	Maintenance of Business	27
Section 6.2	Maintenance of Properties	28
Section 6.3	Taxes and Assessments	28
Section 6.4	Insurance	28
Section 6.5	Financial Reports	29
Section 6.6	Inspection	30
Section 6.7	ERISA	30
Section 6.8	Compliance with Laws	30
Section 6.9	Compliance with OFAC Sanctions Programs	31
Section 6.10	Formation of Subsidiaries	32
Section 6.13	Banking Relationship	33

SECTION 7.	NEGATIVE COVENANTS	34

Section 7.1	Borrowings and Guaranties	34
Section 7.2	Liens	35
Section 7.3	Investments, Acquisitions, Loans and Advances	36
Section 7.4	Mergers, Consolidations and Sales	37
Section 7.5	Maintenance of Subsidiaries	37
Section 7.6	[Intentionally Deleted]	37
Section 7.7	Burdensome Contracts With Affiliates	38
Section 7.8	No Changes in Fiscal Year	38
Section 7.9	Change in the Nature of Business	38
Section 7.10	No Restrictions	38
Section 7.11	Subordinated Debt	38
Section 7.12	Financial Covenants	38
Section 7.13	ASA Certification	39
Section 7.14	Net Orderly Liquidation Value of Eligible Inventory	39

-ii-


SECTION 8.	EVENTS OF DEFAULT AND REMEDIES	39

Section 8.1	Events of Default	39
Section 8.2	Non Bankruptcy Defaults	41
Section 8.3	Bankruptcy Defaults	42

SECTION 9.	MISCELLANEOUS	42

Section 9.1	Non-Enforcement of Foreign Security Agreement	42
Section 9.2	No Waiver, Cumulative Remedies	42
Section 9.3	Non-Business Days	42
Section 9.4	Survival of Representations	42
Section 9.5	Survival of Indemnity and Certain Other Provisions	43
Section 9.6	Notices	43
Section 9.7	Counterparts	43
Section 9.8	Successors and Assigns	43
Section 9.9	Amendments, etc.	43
Section 9.10	Headings	44
Section 9.11	Costs and Expenses; Indemnification	44
Section 9.12	Set off	45
Section 9.13	Entire Agreement	46
Section 9.14	Governing Law	46
Section 9.15	Severability of Provisions	46
Section 9.16	Construction	46
Section 9.17	Submission to Jurisdiction; Waiver of Venue; Service of Process	46
Section 9.18	Waiver of Jury Trial	47
Section 9.19	USA Patriot Act	47
Section 9.20	Time is of the Essence	48

-iii-

CREDIT AGREEMENT

This Credit Agreement is entered into as of July 18, 2016, by and between Contrail Aviation Support, LLC, a North Carolina limited liability company ( “Borrower” ), and BMO Harris Bank N.A., a national banking association (“ Bank” ). All capitalized terms used herein without definition shall have the meanings ascribed thereto in Section 1.1 .

PRELIMINARY STATEMENT

Borrower has requested, and Bank has agreed to extend, certain credit facilities on the terms and conditions of this Agreement.

NOW, THEREFORE, in consideration of the mutual agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

SECTION 1. DEFINITIONS; INTERPRETATION.

Section 1.1 Definitions. The following terms when used herein shall have the following meanings:

“Account Debtor” means any Person obligated to make payment on any Receivable.

“Adjusted One Month LIBOR” means, for any Borrowing of Eurodollar Loans, a rate per annum determined in accordance with the following formula:


Adjusted One Month LIBOR =		LIBOR
		1 - Eurodollar Reserve Percentage

“Affiliate” means any Person directly or indirectly controlling or controlled by, or under direct or indirect common control with, another Person. A Person shall be deemed to control another Person for purposes of this definition if such 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, common directors, trustees or officers, by contract or otherwise.

“Agreement” means this Credit Agreement, as the same may be amended, restated, supplemented, or otherwise modified from time to time pursuant to the terms hereof.

“Applicable Margin” means, with respect to Loans, 2.80% per annum

“Approved Country” means (i) the United States, Singapore, Germany, and/or United Kingdom; (ii) China, France, Malaysia, Ireland and/or the Netherlands upon prior written notification from the Borrower to the Bank and the parties hereto entering into a Foreign Security Agreement (defined below in the definition of “Eligible Inventory”), at Borrower’s cost and (iii) additional countries with the prior written approval of the Bank, which approval shall be subject to perfection of the Bank’s security interests in the Borrower’s Inventory in such country at Borrower’s cost, and which approval shall not be otherwise unreasonably withheld. With

S-1

respect to (ii) above, upon receiving the written notification from the Borrower, the Bank shall promptly undertake all appropriate actions, at Borrower’s cost, to have prepared and present for execution to Borrower the Foreign Security Agreement(s) the Bank requires the Borrower to execute in connection with the Borrower’s Inventory in the country which is the subject of the written notification.

“Assignment of Life Insurance Policy” means the Assignment of Life Insurance Policy on even date herewith executed by the Borrower in favor of the Bank pursuant to which a $2,000,000.00 life insurance policy on the life of Joseph G. Kuhn is collaterally assigned to the Bank in order to secure the Note given by the Bank to the Borrower.

“Authorized Representative” means those persons shown on the list of officers provided by Borrower pursuant to Section 4.1 or on any update of any such list provided by Borrower to Bank, or any further or different officers of Borrower so named by any Authorized Representative of Borrower in a written notice to Bank.

“Bank” is defined in the introductory paragraph of this Agreement.

“Bankruptcy Proceeding ” means, with respect to any Person, (i) consenting in writing to the appointment of a conservator, receiver, trustee, custodian or liquidator in any insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings of or relating to it or of or relating to all, or substantially all, of its property, or for the winding-up or liquidation of its affairs, (ii) admitting in writing its inability to pay its debts generally as they become due or (iii) filing a petition, or otherwise instituting, or consenting in writing to the institution against it or, proceedings to take advantage of any law relating to bankruptcy, insolvency or reorganization or the relief of debtors under any federal, state or foreign bankruptcy, insolvency, receivership or similar law.

“Base Rate” means, for any day, the rate per annum equal to the rate of interest announced or otherwise established by Bank from time to time as its prime commercial rate as in effect on such day, with any change in the Base Rate resulting from a change in said prime commercial rate to be effective as of the date of the relevant change in said prime commercial rate (it being acknowledged and agreed that such rate may not be Bank’s best or lowest rate).

“Borrower” is defined in the introductory paragraph of this Agreement.

“Borrowing” means the total of Loans advanced on a single date. A Borrowing is “advanced” on the day Bank advances funds comprising such Borrowing to, or for the credit of the Borrower.

“Business Day” means any day (other than a Saturday or Sunday) on which banks are not authorized or required to close in Madison, Wisconsin. If the applicable Business Day relates to the determination of the LIBOR Index Rate, then Business Day means any day on which banks on which commercial banks are open for general business (including dealings in foreign exchange and foreign currency deposits) in London, England.

S-2

“Capital Expenditures” means, with respect to any Person for any period, the aggregate amount of all expenditures (whether paid in cash or accrued as a liability) by such Person during that period for the acquisition or leasing (pursuant to a Capital Lease) of fixed or capital assets or additions to property, plant, or equipment (including replacements, capitalized repairs, and improvements) which should be capitalized on the balance sheet of such Person in accordance with GAAP.

“ Capital Lease ” means any lease of Property which in accordance with GAAP is required to be capitalized on the balance sheet of the lessee.

“ Capitalized Lease Obligation ” means, for any Person, the amount of the liability shown on the balance sheet of such Person in respect of a Capital Lease determined in accordance with GAAP.

“CERCLA” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. §§9601 et seq., and any future amendments.

“Change in Law” means the occurrence, after the date of this Agreement, of any of the following: (i) the adoption or taking effect of any law, rule, regulation or treaty, (ii) any change in any law, rule, regulation or treaty or in the administration, interpretation or application thereof by any Governmental Authority or (iii) the making or issuance of any request, guideline or directive (whether or not having the force of law) by any Governmental Authority; provided that notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.

“Change of Control” means Air T, Inc. ceases to own, legally and beneficially, at least fifty-one percent (51%) of the Voting Stock of Borrower.

“Closing Date” means the date of this Agreement or such later Business Day upon which each condition described in Section 4.1 shall be satisfied or waived in a manner acceptable to Bank in its discretion.

“Code” means the Internal Revenue Code of 1986, as amended, and any successor statute thereto.

“Collateral” means all properties, rights, interests, and privileges from time to time subject to the Liens granted to Bank, or any security trustee therefor, by the Collateral Documents.

“Collateral Documents” means the Security Agreement and all other mortgages, deeds of trust, security agreements, pledge agreements, assignments, financing statements and other documents as shall from time to time secure or relate to the Obligations or any part thereof.

“Commitment” means the Operating Line Revolving Credit Commitment.

S-3

“Controlled Group” means all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with Borrower, are treated as a single employer under Section 414 of the Code.

“Credit Event” means the advancing of any Loan.

“ Debt Service ” means, with reference to any period, the sum of (i) the aggregate amount of payments required to be made by the Borrower and any of its Subsidiaries during such period in respect of principal on all Indebtedness plus (ii) Interest Expense of Borrower and any of its Subsidiaries for such period.

“Debt Service Coverage Ratio” means, as of the last day of each fiscal quarter, the Borrower and its Subsidiaries shall maintain a ratio of (i) EBITDA for the 12-month period then ended minus the sum of (x) federal, state and local income taxes (and franchise taxes in lieu of income taxes) paid or required to be paid in cash by Borrower and its Subsidiaries during the 12-month period the ended and (y) dividends, distributions, redemptions and repurchases paid to shareholders or other equity interest holders of Borrower and/or any of its Subsidiaries during the 12-month period then ended to (ii) Debt Service for the 12-month period then ended, each computed in accordance with GAAP, of not less than 1.75 to 1.00.

“Default” means any event or condition the occurrence of which would, with the passage of time or the giving of notice, or both, constitute an Event of Default.

“Disposition” means the sale, lease, conveyance or other disposition of Property, other than sales or other dispositions expressly permitted under Sections 7.4(a) , 7.4(b), and 7.4(d) .

“Domestic Subsidiary” means a Subsidiary that is not a Foreign Subsidiary.

“EBITDA ” means, with respect to any period, Net Income of the Borrower and its Subsidiaries for such period plus all amounts deducted in arriving at such Net Income amount in respect of (i) Interest Expense of Borrower and its Subsidiaries for such period, (ii) federal, state and local income taxes for such period, and (iii) depreciation and amortization expense for such period.

“Eligible Inventory” means Inventory of Borrower and its Subsidiaries (other than packaging, crating and supplies inventory) which:

(a) is an asset of such Person to which it has good and marketable title, is freely assignable, and is subject to (i) in the case of Inventory located in the United States, a perfected, first priority Lien in favor of Bank free and clear of any other Liens and (ii) in the case of Inventory located in another Approved Country, a Foreign Security Agreement;

(b) is located in the United States of America or other Approved Country at a Permitted Collateral Location as set forth in (and as defined in) a Security Agreement and, in the case of any location not owned by such Person, which is at all times subject to a lien waiver agreement from such landlord or other third party to the extent required by, and in form and substance satisfactory to, Bank. It is expressly acknowledged and agreed that foreign Inventory may be torn down and overhauled internationally so long as parts which are outside the United States for a period longer than one hundred twenty (120) days shall be excluded from Eligible Inventory in accordance with paragraph (h) below.

S-4

(d) is not obsolete, and is of good and merchantable quality free from any defects which might materially adversely affect the market value thereof;

(e) is not covered by a warehouse receipt or similar document;

(f) in the case of finished goods inventory, was produced pursuant to binding and existing purchase orders therefor to which such Person has title;

(g) has not been owned by the Borrower or any Subsidiary for more than twenty four (24) months;

(h) does not consist of parts stored in warehouses outside the United States for a period longer than 120 days (and if the storage of a part exceeds this 120 day limitation, the part will be excluded from Eligible Inventory, and the value of such excluded part shall be calculated as described in (b) of the definition of Operating Line Borrowing Base); and

(i) is not on consignment.

“Eligible Receivables” means any Receivable of Borrower or any Subsidiary which:

(a) arises out of the sale of finished goods inventory or/and aircraft engines, engine parts, airframes or airframe parts delivered to and accepted by, or out of the rendition of services fully performed and accepted by, the Account Debtor on such Receivable, does not represent a pre-billed Receivable or a progress billing, and is net of any deposits made by or for the account of the relevant Account Debtor;

(b) is payable in U.S. Dollars

(c) if such right has arisen out of the sale of such goods shipped to, or out of the rendition of services to an Account Debtor located outside the United States of America, such right is secured by an insurance policy on terms, and issued by Foreign Credit Insurance Association, Ex-Im Bank or another insurer, satisfactory to Bank (which in any event shall insure not less than one hundred percent (100%) of the face amount of such Receivable and shall be subject to such deductions as are acceptable to Bank), and in each case which has been assigned or transferred to Bank in a manner acceptable to Bank;

(d) is the valid, binding and legally enforceable obligation of the Account Debtor obligated thereon and such Account Debtor is not (i) a Subsidiary or an Affiliate of Borrower, (ii) a shareholder, director, officer or employee of Borrower or any Subsidiary, (iii) the United States of America or other Approved Country, or any state, province, or political subdivision thereof, or any department, agency or instrumentality of any of the foregoing, unless the Assignment of Claims Act or any similar national, state, provincial, or local statute, as the case may be, is complied with to the satisfaction of Bank, (iv) a debtor under any proceeding under the United States Bankruptcy Code, as amended, or any other comparable bankruptcy or insolvency law, or (v) an assignor for the benefit of creditors;

S-5

(e) is not evidenced by an instrument or chattel paper unless the same has been endorsed and delivered to Bank;

(f) is an asset of such Person to which it has good and marketable title, is freely assignable, and is subject to a perfected, first priority Lien in favor of Bank free and clear of any other Liens;

(g) is not subject to any counterclaim or defense asserted by the Account Debtor or subject to any offset or contra account payable to the Account Debtor (unless the amount of such Receivable is net of such contra account established to the reasonable satisfaction of Bank);

(h) no surety bond was required or given in connection with said Receivable or the contract or purchase order out of which the same arose;

(i) is evidenced by an invoice to the Account Debtor dated not more than five (5) Business Days subsequent to the shipment date of the relevant inventory or completion of performance of the relevant services and is issued on ordinary trade terms requiring payment within ninety (90) days of invoice date;

(j) is not unpaid more than 90 days after the original invoice date; provided that Receivables that are insured as described in subsection (b) above may be unpaid for up to 120 days and still be eligible for inclusion in the Operating Line Borrowing Base;

(k) is not owed by an Account Debtor who is obligated on Receivables more than 20% of the aggregate unpaid balance of which have been past due for longer than the relevant period specified in subsection (i) above unless Bank has approved the continued eligibility thereof;

(l) would not cause the total Eligible Receivables owing from the Account Debtor and its Affiliates to exceed 35% of all Eligible Receivables unless (a) one hundred percent (100%) of the Receivable from the Account Debtor and its Affiliates is secured by an insurance policy on terms, and issued by Foreign Credit Insurance Association, Ex-Im Bank or another insurer, satisfactory to Bank (which in any event shall insure not less than one hundred percent (100%) of the face amount of such Receivable and shall be subject to such deductions as are acceptable to Bank), and in each case which has been assigned or transferred to Bank in a manner acceptable to Bank, or (b) the Account Debtor’s long term debt or short term debt, as applicable, qualifies as Investment Grade;

(m) does not arise from a sale on a bill and hold, guaranteed sale, sale or return, sale on approval, consignment or any other repurchase or return basis ; and

(n) is not otherwise deemed to be ineligible in the reasonable judgment of Bank (it being acknowledged and agreed that with five (5) Business Days prior written notice any Receivable of Borrower or any Subsidiary may be deemed ineligible by Bank acting in its reasonable judgment).

S-6

“Environmental Claim” means any investigation, notice, violation, demand, allegation, action, suit, injunction, judgment, order, consent decree, penalty, fine, lien, proceeding or claim (whether administrative, judicial or private in nature) arising (a) pursuant to, or in connection with an actual or alleged violation of, any Environmental Law, (b) in connection with any Hazardous Material, (c) from any abatement, removal, remedial, corrective or response action in connection with a Hazardous Material, Environmental Law or order of a Governmental Authority or (d) from any actual or alleged damage, injury, threat or harm to health, safety, natural resources or the environment.

“Environmental Law” means any current or future Legal Requirement pertaining to (a) the protection of health, safety and the indoor or outdoor environment, (b) the conservation, management or use of natural resources and wildlife, (c) the protection or use of surface water or groundwater, (d) the management, manufacture, possession, presence, use, generation, transportation, treatment, storage, disposal, Release, threatened Release, abatement, removal, remediation or handling of, or exposure to, any Hazardous Material or (e) pollution (including any Release to air, land, surface water or groundwater), and any amendment, rule, regulation, order or directive issued thereunder.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, or any successor statute thereto.

“Eurodollar Loan” means a Loan bearing interest by reference to Adjusted One Month LIBOR.

“ Eurodollar Reserve Percentage ” means the maximum reserve percentage, expressed as a decimal, at which reserves (including any emergency, marginal, special, and supplemental reserves) are imposed by the Board of Governors of the Federal Reserve System (or any successor) on “eurocurrency liabilities”, as defined in such Board’s Regulation D (or any successor thereto), subject to any amendments of such reserve requirement by such Board or its successor, taking into account any transitional adjustments thereto. For purposes of this definition, the relevant Loans shall be deemed to be “eurocurrency liabilities” as defined in Regulation D without benefit or credit for any prorations, exemptions or offsets under Regulation D. The Eurodollar Reserve Percentage shall be adjusted automatically on and as of the effective date of any change in any such reserve percentage.

“Event of Default” means any event or condition identified as such in Section 8.1 .

“Event of Loss” means, with respect to any Property, any of the following: (a) any loss, destruction or damage of such Property or (b) any condemnation, seizure, or taking, by exercise of the power of eminent domain or otherwise, of such Property, or confiscation of such Property or the requisition of the use of such Property.

“ Foreign Security Agreement ” means an agreement entered into by the parties hereto which purports to give the Bank a security interest or its equivalent on Inventory located within a country other than the United States in form and substance reasonably satisfactory to the Bank, governed by the law of such country, such as the Debenture dated of even date herewith (governed by the law of England and Wales) and the Transfer by Way of Security dated of even date herewith (governed by the law of the Federal Republic of Germany.

S-7

“Foreign Subsidiary” means each Subsidiary which (a) is organized under the laws of a jurisdiction other than the United States of America or any state thereof or the District of Columbia, (b) conducts substantially all of its business outside of the United States of America, and (c) has substantially all of its assets outside of the United States of America.

“GAAP” means generally accepted accounting principles set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the U.S. accounting profession), which are applicable to the circumstances as of the date of determination.

“Governmental Authority” means the government of the United States of America or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).

“Guarantor” and “Guarantors” are each defined in Section 6.12(a) .

“Guaranty” and “Guaranties” are each defined in Section 6.12(a) .

“Hazardous Material” means any substance, chemical, compound, product, solid, gas, liquid, waste, byproduct, pollutant, contaminant or material which is hazardous or toxic, and includes (a) asbestos, polychlorinated biphenyls and petroleum (including crude oil or any fraction thereof) and (b) any material classified or regulated as “hazardous” or “toxic” or words of like import pursuant to an Environmental Law.

“Hazardous Material Activity” means any activity, event or occurrence involving a Hazardous Material, including the manufacture, possession, presence, use, generation, transportation, treatment, storage, disposal, Release, threatened Release, abatement, removal, remediation, handling of or corrective or response action to any Hazardous Material.

“ Indebtedness ” means with reference to the Borrower and its Subsidiaries (a) all indebtedness created, assume or incurred in any manner by the Borrower and its Subsidiaries representing money borrowed (including by the issuance of debt securities), (b) all indebtedness of the Borrower and its Subsidiaries for the deferred purchase price of property or services (other than trade accounts payable arising in the ordinary course of business), (c) all indebtedness secured by any lien upon any property of Borrower and its Subsidiaries, whether or not the Borrower or any of its Subsidiaries has assumed or becomes liable for the payment of such indebtedness, (d) all Capitalized Lease Obligations, and (e) all obligations of the Borrower and its Subsidiaries on or with respect to letters of credit, bankers’ acceptances and other extensions of credit whether or not representing obligations for borrowed money.

S-8

“ Interest Expense ” means, with reference to any period, the sum of all interest charges (including imputed interest charges with respect to Capitalized Lease Obligations and all amortization of debt discount and expense) of the Borrower and its Subsidiaries for such period.

“Interest Payment Date” means with respect to any Loan, the last day of each Interest Period with respect to such Loan and on the maturity date.

“Interest Period” means, with respect to any Borrowing of Eurodollar Loans, the period commencing on the date such Borrowing of Eurodollar Loans is advanced, continued, or created by conversion and ending 1 month thereafter; provided that:

i. no Interest Period shall extend beyond the final maturity date of the relevant Loans;

ii. whenever the last day of any Interest Period would otherwise be a day that is not a Business Day, the last day of such Interest Period shall be extended to the next succeeding Business Day, provided that, if such extension would cause the last day of an Interest Period for a Borrowing of Eurodollar Loans to occur in the following calendar month, the last day of such Interest Period shall be the immediately preceding Business Day; and

iii. for purposes of determining an Interest Period for a Borrowing of Eurodollar Loans, a month means a period starting on one day in a calendar month and ending on the numerically corresponding day in the next calendar month; provided that if there is no numerically corresponding day in the month in which such an Interest Period is to end or if such an Interest Period begins on the last Business Day of a calendar month, then such Interest Period shall end on the last Business Day of the calendar month in which such Interest Period is to end.

“Inventory” means any raw materials, finished goods inventory and aircraft engines, engine parts, airframes and airframe parts of Borrower and its Subsidiaries (other than packaging, crating and supplies inventory).

“ Investment Grade ” means a rating from S&P of an Account Debtor’s long term debt of BBB- or better; provided that, if S&P does not rate the Account Debtor’s long term debt and another rating agency does, then the Borrower may, with the written consent of the Bank, which shall not be unreasonably withheld, rely on another rating agency’s rating for the purpose of determining whether the Account Debtor has an investment grade rating and further provided that, if the long term debt is not rated by S&P or another rating agency, the Borrower may, with the written consent of the Bank, which shall not be unreasonably withheld, rely on a rating from S&P or another rating agency of the Account Debtor’s short term debt of BBB- or better.

“Legal Requirement” means any treaty, convention, statute, law, regulation, ordinance, license, permit, governmental approval, injunction, judgment, order, consent decree or other requirement of any Governmental Authority, whether federal, state, or local.

“ LIBOR ” means, for an Interest Period for a Borrowing of Eurodollar Loans, (a) the LIBOR Index Rate for such Interest Period, if such rate is available, and (b) if the LIBOR Index Rate cannot be determined, the arithmetic average of the rates of interest per annum (rounded

S-9

upwards, if necessary, to the nearest 1/100 of 1%) at which deposits in U.S. Dollars in immediately available funds are offered to Bank at 11:00 a.m. (London, England time) two (2) Business Days before the beginning of such Interest Period by three (3) or more major banks in the interbank eurodollar market selected by Bank for delivery on the first day of and for a period equal to such Interest Period and in an amount equal or comparable to the principal amount of the Eurodollar Loan scheduled to be made as part of such Borrowing, provided that in no event shall “LIBOR” be less than 0.00%.

“ LIBOR Index Rate ” means, for any Interest Period, the rate per annum (rounded upwards, if necessary, to the next higher one hundred thousandth of a percentage point) for deposits in U.S. Dollars for a period equal to such Interest Period, which appears on the LIBOR Index as of 11:00 a.m. (London, England time) on the day two (2) Business Days before the commencement of such Interest Period.

“ LIBOR Index ” means the independent index which is the one month ICE Benchmark Administration (ICE) LIBOR and reported on Bloomberg’s Financial Market’s terminal screen entitled “Official ICE LIBOR Fixings” (or on any successor or substitute page of such service, or any successor to or substitute for such service, providing rate quotations comparable to those currently provided on such page of such service, as determined by Bank from time to time for purposes of providing quotations of interest rates applicable to Dollar deposits in the London interbank market).

“Lien” means any mortgage, lien, security interest, pledge, charge or encumbrance of any kind in respect of any Property, including the interests of a vendor or lessor under any conditional sale, Capital Lease or other title retention arrangement.

“Loan” means any Operating Line Revolving Loan.

“Loan Documents” means this Agreement, the Note, the Collateral Documents, the Guaranties, and each other instrument or document to be delivered hereunder or thereunder or otherwise in connection therewith.

“Material Adverse Effect” means (a) a material adverse change in, or material adverse effect upon, the operations, business, Property, condition (financial or otherwise) or prospects of Borrower or of Borrower and its Subsidiaries taken as a whole, (b) a material impairment of the ability of Borrower or any Subsidiary to perform its material obligations under any Loan Document or (c) a material adverse effect upon (i) the legality, validity, binding effect or enforceability against Borrower or any Subsidiary of any Loan Document or the rights and remedies of Bank thereunder or (ii) the perfection or priority of any Lien granted under any Collateral Document.

“Maximum Leverage Ratio” means the ratio of Total Liabilities to Tangible Net Worth.

“Moody’s” means Moody’s Investor Service Inc.

“ Net Income ” means, with reference to any period, the net income (or net loss) of the Borrower and its Subsidiaries for such period, but excluding any nonrecurring income and any extraordinary profits during such period and any taxes on such nonrecurring income and extraordinary profits.

S-10

“Note” is defined in Section 2.10(b) .

“Obligations” means all obligations of Borrower to pay principal and interest on the Loans, all fees and charges payable hereunder, and all other payment obligations of Borrower or any of its Subsidiaries arising under or in relation to any Loan Document, in each case whether now existing or hereafter arising, due or to become due, direct or indirect, absolute or contingent, and howsoever evidenced, held or acquired.

“OFAC” means the United States Department of Treasury Office of Foreign Assets Control.

“OFAC Event” means the event specified in Section 6.9 .

“OFAC Sanctions Programs” means all laws, regulations, and Executive Orders administered by OFAC, including the Bank Secrecy Act, anti-money laundering laws (including the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L. 107-56 (a/k/a the USA Patriot Act)), and all economic and trade sanction programs administered by OFAC, any and all similar United States federal laws, regulations or Executive Orders, and any similar laws, regulators or orders adopted by any State within the United States.

“OFAC SDN List” means the list of the Specially Designated Nationals and Blocked Persons maintained by OFAC.

“Operating Line Borrowing Base” means, as of any time it is to be determined, the sum of:

(a) 80% of the then outstanding unpaid amount of Eligible Receivables; plus

(b) 75% of the value (computed as follows: the lower of cost (first-in, first-out) or market value; when inventory items are sold they are costed out under the gross profit method, the parts are assigned costs based on a percentage of the future sales price (based on prior history and industry standards), plus any additional repair costs, and sales price is established using Pratt and Whitney pricing guidelines; and when parts are purchased , they are stated at the lower of cost or market; and this method shall not be amended, modified or revised without the Bank’s prior written consent, which consent may be withheld by Bank, in Bank’s sole discretion) of Eligible Inventory (it being acknowledged and agreed that 75% of the cost of acquiring engines by the Borrower and its Subsidiaries with proceeds of Operating Line Revolving Loan(s) shall be included in the Operating Line Borrower Base so long as such engines meet the requirements needed to qualify as Eligible Inventory); provided that the maximum amount of advances against all Eligible Inventory that may be included in the Operating Line Borrowing Base shall not exceed $9,000,000 and that the maximum amount of advances against Eligible Inventory that has been owned by the Borrower or any Subsidiary for at least eighteen (18) months that may be included in the Operating Line Borrowing Base shall not exceed $1,500,000;

S-11

provided that the Operating Line Borrowing Base shall be computed only as against and on so much of such Collateral as is included on the Operating Line Borrowing Base Certificates furnished from time to time by Borrower pursuant to this Agreement and, if required by Bank pursuant to any of the terms hereof or any Collateral Document, as verified by such other evidence reasonably required to be furnished to Bank pursuant hereto or pursuant to any such Collateral Document.

“Operating Line Borrowing Base Certificate” means the certificate in the form of Exhibit A hereto, or in such other form acceptable to Bank, to be delivered to Bank pursuant to Sections 4.2 and 6.5 .

“Operating Line Revolving Credit Commitment” means the obligation of Bank to make Revolving Loans hereunder in an aggregate principal or face amount at any one time outstanding not to exceed $12,000,000.

“Operating Line Revolving Loan” is defined in Section 2.1 .

“Operating Line Revolving Note” is defined in Section 2.10(b) .

“PBGC” means the Pension Benefit Guaranty Corporation or any Person succeeding to any or all of its functions under ERISA.

“Person” means an individual, partnership, corporation, limited liability company, association, trust, unincorporated organization or any other entity or organization, including a government or agency or political subdivision thereof.

“Plan” means any employee pension benefit plan covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code that either (a) is maintained by a member of the Controlled Group for employees of a member of the Controlled Group or (b) is maintained pursuant to a collective bargaining agreement or any other arrangement under which more than one employer makes contributions and to which a member of the Controlled Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions.

“ Property” means, as to any Person, all types of real, personal, tangible, intangible or mixed property owned by such Person whether or not included in the most recent balance sheet of such Person and its Subsidiaries under GAAP.

“RCRA” means the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976 and Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. §§ 6901 et seq ., and any future amendments.

“Receivables” means all rights to the payment of a monetary obligation, now or hereafter owing to Borrower or any Subsidiary, evidenced by accounts, instruments, chattel paper, or general intangibles.

S-12

“Release” means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, migration, dumping, or disposing into the indoor or outdoor environment, including the abandonment or discarding of barrels, drums, containers, tanks or other receptacles containing or previously containing any Hazardous Material.

“Revolving Credit Termination Date” means January 13, 2018, or such earlier date on which the Revolving Credit Commitment is terminated in whole pursuant to Section 2.13 , 8.2 or 8.3 .

“S&P” means Standard & Poor’s Ratings Services Group, a division of The McGraw Hill Companies, Inc.

“Security Agreement” means that certain General Security Agreement dated the date of this Agreement between Borrower and its Subsidiaries and Bank and any other security or collateral agreement executed by the Borrower or any of its Subsidiaries in favor of the Bank, as any of the same may be amended, restated, supplemented, or otherwise modified from time to time.

“Subordinated Debt” means Indebtedness for Borrowed Money which is subordinated in right of payment to the prior payment of the Obligations pursuant to subordination provisions approved in writing by Bank and is otherwise pursuant to documentation that is, which is in an amount that is, and which contains interest rates, payment terms, maturities, amortization schedules, covenants, defaults, remedies and other material terms that are, in each case, in form and substance satisfactory to Bank.

“Subsidiary” means, as to any particular parent corporation or organization, any other corporation or organization more than fifty percent (50%) of the outstanding Voting Stock of which is at the time directly or indirectly owned by such parent corporation or organization or by any one or more other entities which are themselves subsidiaries of such parent corporation or organization. Unless otherwise expressly noted herein, the term “Subsidiary” means a Subsidiary of Borrower or of any of its direct or indirect Subsidiaries.

“Tangible Net Worth” means, at any time, (i) total assets of the Borrower and its Subsidiaries at such time, minus all intangible assets (i.e. goodwill, trademarks, patents, copyrights, organizational expenses, and similar intangible items) of the Borrower and its Subsidiaries minus (ii) Total Liabilities of Borrower and its Subsidiaries.

“Total Liabilities” means, for any Person and at any time the same is to be determined, such Person’s total liabilities, as determined in accordance with GAAP.

“Unfunded Vested Liabilities” means, for any Plan at any time, the amount (if any) by which the present value of all vested non-forfeitable accrued benefits under such Plan exceeds the fair market value of all Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the Controlled Group to the PBGC or the Plan under Title IV of ERISA.

“U.S. Dollars” and “$” each means the lawful currency of the United States of America.

S-13

“Voting Stock” of any Person means capital stock or other equity interests of any class or classes (however designated) having ordinary power for the election of directors or other similar governing body of such Person, other than stock or other equity interests having such power only by reason of the happening of a contingency.

“Welfare Plan” means a “welfare plan” as defined in Section 3(1) of ERISA.

“Wholly-owned Subsidiary” means a Subsidiary of which all of the issued and outstanding shares of capital stock (other than directors’ qualifying shares as required by law) or other equity interests are owned by Borrower and/or one or more Wholly-owned Subsidiaries within the meaning of this definition.

Section 1.2 Interpretation . The foregoing definitions are equally applicable to both the singular and plural forms of the terms defined. The words “hereof”, “herein”, and “hereunder” and words of like import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” All references to time of day herein are references to Madison, Wisconsin, time unless otherwise specifically provided. Where the character or amount of any asset or liability or item of income or expense is required to be determined or any consolidation or other accounting computation is required to be made for the purposes of this Agreement, it shall be done in accordance with GAAP except where such principles are inconsistent with the specific provisions of this Agreement.

Section 1.3 Change in Accounting Principles . If, after the date of this Agreement, there shall occur any change in GAAP from those used in the preparation of the financial statements referred to in Section 5.5 and such change shall result in a change in the method of calculation of any financial covenant, standard or term found in this Agreement, either the Borrower or the Bank may by notice to the other require that the Borrower and the Bank negotiate in good faith to amend such covenants, standards, and terms so as equitably to reflect such change in accounting principles, with the desired result being that the criteria for evaluating the financial condition of the Borrower and its Subsidiaries shall be the same as if such change had not been made. No delay by the Borrower or the Bank in requiring such negotiation shall limit their right to so require such a negotiation at any time after such a change in accounting principles. Until any such covenant, standard, or term is amended in accordance with this Section 1.3 , financial covenants shall be computed and determined in accordance with GAAP in effect prior to such change in accounting principles. Without limiting the generality of the foregoing, the Borrower shall neither be deemed to be in compliance with any financial covenant hereunder nor out of compliance with any financial covenant hereunder if such state of compliance or noncompliance, as the case may be, would not exist but for the occurrence of a change in accounting principles after the date hereof.

S-14

SECTION 2. THE CREDIT FACILITIES.

Section 2.1 Operating Line Revolving Credit Commitment . Subject to the terms and conditions hereof, Bank agrees to make a loan or loans (individually a “Operating Line Revolving Loan” and collectively the “Operating Line Revolving Loans” ) in U.S. Dollars to Borrower from time to time on a revolving basis up to the amount of the Operating Line Revolving Credit Commitment, subject to any reductions thereof pursuant to the terms hereof, before the Revolving Credit Termination Date. The sum of the aggregate principal amount of Operating Line Revolving Loans at any time outstanding shall not exceed the lesser of (i) the Operating Line Revolving Credit Commitment in effect at such time and (ii) the Operating Line Borrowing Base as determined based on the most recent Operating Line Borrowing Base Certificate. Operating Line Revolving Loans may be repaid and the principal amount thereof re-borrowed before the Revolving Operating Line Credit Termination Date, subject to the terms and conditions hereof.

Borrower shall use the proceeds of Operating Line Revolving Loans for its general working capital purposes (including, without limitation, the acquisition of engines and parts, and taking possession of assets of third parties under a consignment agreement, which may or may not be covered by Borrower’s or such Subsidiary’s insurance) and for such other general corporate purposes as are consistent with all applicable laws, which may include a contribution of capital to one or more of its Subsidiaries for general working capital purposes. Such working capital purposes may include the assumption of leases by the Borrower or a Subsidiary for aircraft and/or aircraft airframes, engines, airframe parts and/or engine parts for the purpose of helping the Borrower or any of its Subsidiaries gain access to aircraft engines or engine parts for its general business, and may also include, subject to the Bank’s prior written approval (which approval shall not be unreasonably withheld) and satisfaction by Borrower or Subsidiary of Borrower of terms and conditions determined necessary by the Bank, in the Bank’s reasonable discretion, including, but not limited to being subject to all of the terms and conditions of this Agreement, the formation of one or more new Subsidiaries, or Borrower or a Subsidiary of Borrower entering into joint ventures to facilitate the assumption of such leases, and any other general corporate purposes approved in writing by Bank.

Section 2.2 [Intentionally Deleted.]

Section 2.3 Applicable Interest Rate . Each Loan shall bear interest (computed on the basis of a year of 360 days and the actual days elapsed) on the unpaid principal amount thereof from the date such Loan is advanced, until maturity (whether by acceleration or otherwise) at a rate per annum equal to the sum of the Applicable Margin plus the Adjusted One Month LIBOR applicable for such Interest Period, payable by Borrower on each Interest Payment Date and at maturity (whether by acceleration or otherwise).

Section 2.4 Rate Determinations . Bank shall determine the interest rate applicable to the Loans, and its determination thereof shall be conclusive and binding except in the case of manifest error.

Section 2.5 Minimum Borrowing Amounts. Each Borrowing of Loans shall be in an amount not less than $10,000.

S-15

Section 2.6 Manner of Borrowing Loans; Notice to Bank . Borrower shall give notice to Bank by no later than 10:00 a.m. at least one (1) Business Day before the date on which Borrower requests Bank to advance a Borrowing of a Loan. All such notices concerning the advance shall specify the date of the requested advance (which shall be a Business Day) and the amount of the requested Borrowing to be advanced. No Borrowing shall be advanced if any Default or Event of Default then exists. Borrower agrees that Bank may rely on any such telephonic, telecopy or other telecommunication notice given by any person Bank in good faith believes is an Authorized Representative without the necessity of independent investigation, and in the event any such notice by telephone conflicts with any written confirmation such telephonic notice shall govern if Bank has acted in reliance thereon.

Section 2.7 Maturity of Loans. All Loans, both for principal and interest then outstanding, shall mature and be due and payable by Borrower on the Revolving Credit Termination Date.

Section 2.8 Prepayments. Borrower may prepay in whole or in part (but, if in part, then in an amount not less than $10,000) upon one (1) Business Days prior notice by Borrower to Bank. In addition, if at any time the sum of the unpaid principal balance of the Operating Line Revolving Loans then outstanding shall be in excess of the Operating Line Borrowing Base as determined on the basis of the most recent Operating Line Borrowing Base Certificate, Borrower shall immediately upon written notice from the Bank pay over the amount of the excess to Bank as and for a mandatory prepayment on such Obligations. Any amount of Operating Line Revolving Loans paid or prepaid before the Revolving Credit Termination Date may, subject to the terms and conditions of this Agreement, be borrowed, repaid and borrowed again.

Section 2.9 Default Rate . Notwithstanding anything to the contrary contained herein, if any Loan or any part thereof is not paid when due (whether by lapse of time, acceleration, or otherwise), or at the election of Bank upon notice to Borrower during the existence of any other Event of Default, Borrower shall pay interest (after as well as before entry of judgment thereon to the extent permitted by law) on the principal amount of all Loans equal to the sum of 4.0% per annum plus the Applicable Margin plus the Base Rate from time to time in effect.

Section 2.10 Evidence of Indebtedness .

(a) Bank shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of Borrower hereunder, including the amounts of principal and interest payable and paid to Bank from time to time hereunder. The entries maintained in the account(s) maintained by the Bank shall be prima facie evidence of the existence and amounts of the Obligations therein recorded; provided , that the failure of Bank to maintain such account(s) or any error therein shall not in any manner affect the obligation of Borrower to repay the Obligations in accordance with their terms.

(b) The Operating Line Revolving Loans shall be evidenced by a promissory note payable by the Borrower to the order of the Bank in the amount of the Operating Line Revolving Credit Commitment (the “Operating Line Revolving Note” or “Note” ).

S-16

Section 2.11 Fees.

(a) Closing Fee. Borrower shall pay to Bank on the date hereof a non-refundable closing fee in the amount of $0.00.

(b) Audit Fees. Borrower shall pay to Bank charges for audits of the Collateral performed by Bank or its agents or representatives in such amounts as Bank may from time to time request (Bank acknowledging and agreeing that such charges shall be computed in the same manner as it at the time customarily uses for the assessment of charges for similar collateral audits); provided that in the absence of any Default and Event of Default, Borrower shall not be required to pay Bank for more than one (1) such audit per calendar year.

(c) Deposit Account Fees . Bank shall waive for four months from the date of this Agreement all fees that otherwise would be charged to Borrower in connection with any deposit accounts Borrower maintains with Bank.

(d) Renewal Fees . In the event the parties extend, renew or refinance this Agreement or any Loan or the Operating Line Revolving Loan Commitment, or enter into a similar credit arrangement after the final maturity date of the Loans (any of the foregoing, a “ Loan Renewal ”), the Bank shall waive up to $1,500 of the renewal or other loan fees and $250 of any additional fees or costs that would otherwise be charged to the Borrower in connection with such Loan Renewal. In the event the parties then enter into a second Loan Renewal thereafter, the Bank shall waive up to $1,500 of the renewal or other loan fees and $250 of any additional fees or costs that would otherwise be charged to the Borrower in connection with the second Loan Renewal. The amount of fees and charges waived by the Bank pursuant to this section shall not exceed $3,500.

Section 2.12 Place and Application of Payments . All payments of principal, interest, fees, and all other Obligations payable under the Loan Documents shall be made to Bank at its office at One West Main Street, Madison, Wisconsin (or at such other place as Bank may specify) no later than 1:00 p.m. on the date any such payment is due and payable. Payments received by Bank after 1:00 p.m. shall be deemed received as of the opening of business on the next Business Day. All such payments shall be made in lawful money of the United States of America, in immediately available funds at the place of payment, without set-off or counterclaim and without reduction for, and free from, any and all present or future taxes, levies, imposts, duties, fees, charges, deductions, withholdings, restrictions, and conditions of any nature imposed by any government or any political subdivision or taxing authority thereof (but excluding any taxes imposed on or measured by the net income of Bank). All payments shall be applied (i) first , towards payment of interest and fees then due hereunder and under the other Loan Documents, and (ii) second , towards payment of principal. Borrower hereby irrevocably authorizes Bank to (a) charge from time to time any of Borrower’s deposit accounts with Bank and/or (b) make Loans from time to time hereunder (and any such Loan may be made by Bank hereunder without regard to the provisions of Section 4 hereof), in each case for payment of any Obligation then due and payable (whether such Obligation is for interest then due on a Loan or otherwise); provided that Bank shall not be under any obligation to charge any such deposit account or make any such Loan under this Section, and Bank shall incur no liability to Borrower or any other Person for its failure to do so.

S-17

(a) Commitment Terminations. Optional Commitment Terminations. Borrower shall have the right at any time and from time to time, upon five (5) Business Days prior written notice to Bank (or such shorter period of time agreed to by Bank), to terminate all (but not less than all) of the Operating Line Revolving Credit Commitment without premium or penalty; provided that the Operating Line Revolving Credit Commitment may not be reduced to an amount less than the sum of the aggregate principal amount of Operating Line Revolving Loans then outstanding. Borrower has no right to partially terminate the Operating Line Revolving Credit Commitment and upon termination of the Operating Line Revolving Credit Commitment pursuant to this Section, this Agreement shall otherwise remain in full force and effect until the unpaid aggregate principal amount of the Operating Line Revolving Loans then outstanding is zero ($0).

(b) No Reinstatement . Any termination of the Commitment pursuant to this Section 2.13 may not be reinstated.

SECTION 3. CHANGE IN CIRCUMSTANCES.

Section 3.1 Withholding Taxes. Except as otherwise required by law, each payment by Borrower under this Agreement or the other Loan Documents shall be made without withholding for or on account of any present or future taxes (other than overall net income taxes on the recipient) imposed by or within the jurisdiction in which Borrower is domiciled, any jurisdiction from which Borrower makes any payment, or (in each case) any political subdivision or taxing authority thereof or therein. If any such withholding is so required, Borrower shall make the withholding, pay the amount withheld to the appropriate Governmental Authority before penalties attach thereto or interest accrues thereon, and forthwith pay such additional amount as may be necessary to ensure that the net amount actually received by Bank free and clear of such taxes (including such taxes on such additional amount) is equal to the amount that Bank would have received had such withholding not been made. If Bank pays any amount in respect of any such taxes, penalties or interest, Borrower shall reimburse Bank for that payment on demand in the currency in which such payment was made. If Borrower pays any such taxes, penalties or interest, it shall deliver official tax receipts evidencing that payment or certified copies thereof to Bank on or before the thirtieth day after payment.

Section 3.2 Documentary Taxes. Borrower agrees to pay on demand any documentary, stamp or similar taxes payable in respect of this Agreement or any other Loan Document, including interest and penalties, in the event any such taxes are assessed, irrespective of when such assessment is made and whether or not any credit is then in use or available hereunder.

Section 3.3 [Intentionally Deleted]

Section 3.4 Change of Law. Notwithstanding any other provisions of this Agreement or any other Loan Document, if at any time any Change in Law or regulation or in the interpretation thereof makes it unlawful for Bank to make or continue to maintain any Loans or to perform its obligations as contemplated hereby, Bank shall promptly give notice thereof to Borrower and Bank’s obligations to make or maintain such Loans under this Agreement shall be suspended until it is no longer unlawful for Bank to make or maintain such Loans. Borrower

S-18

shall prepay on demand the outstanding principal amount of any such affected Loans, together with all interest accrued thereon and all other amounts then due and payable to Bank under this Agreement; provided , subject to all of the terms and conditions of this Agreement, Borrower may then elect to borrow from Bank and Bank, if able, shall lend to Borrower the principal amount of the affected Loans by means of Loans bearing interest at the Base Rate.

Section 3.5 Unavailability of Deposits or Inability to Ascertain, or Inadequacy of, LIBOR. If on or prior to the first day of any Interest Period for any Borrowing of Eurodollar Loans:

(a) Bank determines that deposits in U.S. Dollars (in the applicable amounts) are not being offered to it in the interbank eurodollar market for such Interest Period, or that by reason of circumstances affecting the interbank eurodollar market adequate and reasonable means do not exist for ascertaining the applicable LIBOR, or

(b) Bank determines that (i) LIBOR as determined hereby will not adequately and fairly reflect the cost to Bank of funding their Eurodollar Loans for such Interest Period or (ii) that the making or funding of Eurodollar Loans become impracticable,

then Bank shall forthwith give notice thereof to Borrower, whereupon until Bank notifies Borrower that the circumstances giving rise to such suspension no longer exist, the obligations of Bank to create, continue, or effect by conversion Eurodollar Loans shall be suspended.

Section 3.6 Increased Cost and Reduced Return . If, on or after the date hereof, any Change in Law:

(i) shall subject Bank (or its lending branch) to any tax, duty or other charge with respect to its Loans, its Note, or its obligation to make Loans, or shall change the basis of taxation of payments to Bank (or its lending branch) of the principal of or interest on its Loans or Letter(s) of Credit, or any other amounts due under this Agreement or any other Loan Document in respect of its Loans (except for changes in the rate of tax on the overall net income of Bank (or its lending branch) imposed by the jurisdiction in which Bank’s principal executive office or lending branch is located); or

(ii) shall impose, modify or deem applicable any reserve, special deposit or similar requirement (including any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding with respect to any Loans any such requirement included in an applicable Eurodollar Reserve Percentage) against assets of, deposits with or for the account of, or credit extended by, Bank (or its lending branch) or shall impose on Bank (or its lending branch) or on the interbank market any other condition affecting its Loans, its Note, or its obligation to make Loans;

and the result of any of the foregoing is to increase the cost to Bank (or its lending branch) of making or maintaining any Loan, or to reduce the amount of any sum received or receivable by Bank (or its lending branch) under this Agreement or under any other Loan Document with respect thereto, by an amount deemed by Bank to be material, then, within fifteen (15) days after demand by Bank, Borrower shall be obligated to pay to Bank such additional amount or amounts as will compensate Bank for such increased cost or reduction.

S-19

(b) If, after the date hereof, Bank shall have determined that any Change in Law has had the effect of reducing the rate of return on Bank’s capital as a consequence of its obligations hereunder to a level below that which Bank could have achieved but for such Change in Law (taking into consideration Bank’s policies with respect to capital adequacy) by an amount deemed by Bank to be material, then from time to time, within fifteen (15) days after demand by Bank, Borrower shall pay to Bank such additional amount or amounts as will compensate Bank for such reduction.

(c) A certificate of Bank claiming compensation under this Section 3.6 and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive absent manifest error. In determining such amount, Bank may use any reasonable averaging and attribution methods.

Section 3.7 Lending Offices. Bank may, at its option, elect to make its Loans hereunder at the branch, office or affiliate specified on the appropriate signature page hereof or at such other of its branches, offices or affiliates as it may from time to time elect. To the extent reasonably possible, Bank shall designate an alternative branch or funding office with respect to its Loans to reduce any liability of Borrower to Bank under Section 3.6 or to avoid the unavailability of Loans under Section 3.5 , so long as such designation is not otherwise disadvantageous to Bank.

Section 3.8 Discretion of Bank as to Manner of Funding . Notwithstanding any other provision of this Agreement, Bank shall be entitled to fund and maintain its funding of all or any part of its Loans in any manner it sees fit, it being understood, however, that for the purposes of this Agreement all determinations hereunder with respect to Loans shall be made as if Bank had actually funded and maintained each Loan through the purchase of deposits in the interbank euro-dollar market having a maturity corresponding to such Loan’s Interest Period, and, in the case of any Eurodollar Loan, bearing an interest rate equal to LIBOR for such Interest Period.

SECTION 4. CONDITIONS PRECEDENT.

Section 4.1 Initial Credit Event . The obligation of Bank to participate in any initial Credit Event hereunder is subject to satisfaction or waiver by Bank of the following conditions precedent:

(a) Bank shall have received each of the following, in each case (i) duly executed by all applicable parties, (ii) dated a date satisfactory to Bank and (iii) in form and substance satisfactory to Bank:

(i) this Agreement duly executed by Borrower and Bank;

(ii) duly executed Note of Borrower dated the date hereof;

S-20

(iii) the Guaranties, the Security Agreement and each of the other Collateral Documents required by Bank, together with (i) original stock certificates or other similar instruments or securities representing all of the issued and outstanding shares of capital stock or other equity interests in each of the entities being pledged as of the Closing Date, (ii) stock powers for the Collateral consisting of the stock or other equity interest in each entity being pledged, executed in blank and undated, (iii) UCC financing statements to be filed against Borrower and each Subsidiary, as debtor, in favor of Bank, as secured party, (iv) patent, trademark, and copyright collateral agreements to the extent requested by Bank, and (v) deposit account, securities account, and commodity account control agreements to the extent requested by Bank;

(iv) evidence of all insurance required to be maintained under the Loan Documents;

(v) copies of Borrower’s and each Subsidiary’s articles of organization and Operating Agreement (or comparable organizational documents) and any amendments thereto, certified in each instance by its Secretary or Assistant Secretary;

(vi) copies of resolutions of Borrower’s, each Guarantor which is a corporation, limited liability company (or other type of legal business entity), and each Subsidiary’s Board of Directors (or similar governing body) authorizing the execution, delivery and performance of this Agreement and the other Loan Documents to which it is a party and the consummation of the transactions contemplated hereby and thereby, together with specimen signatures of the persons authorized to execute such documents on Borrower’s and each Subsidiary’s behalf, all certified in each instance by its Secretary or Assistant Secretary;

(vii) such documents and certifications as Bank may reasonably require to evidence that Borrower, each Guarantor which is a corporation, limited liability company (or other type of legal business entity), and each Subsidiary is validly existing, in good standing, and qualified to engage in business in its jurisdiction of organization and in any other jurisdiction in which the nature of Borrower’s or such Subsidiary’s business requires such qualification;

(viii) a list of Borrower’s Authorized Representatives;

(ix) such evaluations and certifications as it may reasonably require in order to satisfy itself as to the value of the Collateral, the financial condition of Borrower and its Subsidiaries, and the lack of material contingent liabilities of Borrower and its Subsidiaries;

(x) an Operating Line Borrowing Base Certificate in the form attached hereto as Exhibit A showing the computation of the Operating Line Borrowing Base, in reasonable detail as of the close of business not earlier than thirty one (31) days prior to the making of the initial extension of credit hereunder;

S-21

(xi) financing statement, tax, and judgment lien search results against the Property of Borrower and each Subsidiary evidencing the absence of Liens on its Property except as permitted by Section 7.2 ;

(xii) pay off and lien release letters from secured creditors of Borrower and each Subsidiary setting forth, among other things, the total amount of indebtedness outstanding and owing to them (or outstanding letters of credit issued for the account of Borrower or any Subsidiary) and containing an undertaking to cause to be delivered to Bank UCC termination statements and any other lien release instruments necessary to release their Liens on the assets of Borrower and each Subsidiary;

(xiii) evidence reasonably satisfactory to Bank that all indebtedness to creditors referenced in the preceding paragraph has been (or concurrently with the initial Borrowing will be) paid in full, and that all agreements and instruments governing indebtedness and that all Liens securing such indebtedness have been (or concurrently with the initial Borrowing will be) terminated.

(xiv) a fully executed Internal Revenue Service Form W-9 for Borrower; and

(xv) such other agreements, instruments, documents, certificates, and opinions as Bank may reasonably request.

(b) Bank shall have received the initial fees called for by Section 2.11 , together with all other fees, costs and expenses required to be paid by Borrower at or before closing; and

Section 4.2 All Credit Events.

The obligation of Bank to participate in any Credit Event (including any initial Credit Event) hereunder is subject to the following conditions precedent:

(a) each of the representations and warranties set forth herein and in the other Loan Documents shall be and remain true and correct in all respect (or in all material respect if such representation or warranty is not by its terms already qualified as to materiality) as of said time, except to the extent the same expressly relate to an earlier date, in which case such representations and warranties shall be and remain true and correct in all respect (or in all material respect if such representation or warranty is not by its terms already qualified as to materiality) as of such earlier date;

(b) no Default or Event of Default shall have occurred and be continuing or would occur as a result of such Credit Event;

S-22

(d) after giving effect to such Credit Event, the sum of the aggregate principal amount of Operating Line Revolving Loans at any time outstanding shall not exceed the lesser of (i) the Operating Line Revolving Credit Commitment in effect at such time and (ii) the Operating Line Borrowing Base; and

(e) such Credit Event shall not violate any order, judgment or decree of any court or other authority or any provision of law or regulation applicable to Bank (including Regulation U of the Board of Governors of the Federal Reserve System) as then in effect.

Each request for a Borrowing hereunder shall be deemed to be a representation and warranty by Borrower on the date on such Credit Event as to the facts specified in subsections (a) through (e) of this Section; provided that Bank may continue to make advances under the Operating Line Revolving Credit Commitment, in the sole discretion of Bank, notwithstanding the failure of Borrower to satisfy one or more of the conditions set forth above and any such advances so made shall not be deemed a waiver of any Default or Event of Default or other condition set forth above that may then exist.

SECTION 5. REPRESENTATIONS AND WARRANTIES.

Borrower represents and warrants to Bank as follows:

Section 5.1 Organization and Qualification . Borrower is (a) duly organized, validly existing, and in good standing as a corporation under the laws of the State of Wisconsin, (b) has full and adequate power to own its Property and conduct its business as now conducted, and (c) is duly licensed or qualified and in good standing in each jurisdiction in which the nature of the business conducted by it or the nature of the Property owned or leased by it requires such licensing or qualifying, except, with respect to this clause (c), where the failure to do so could not reasonably be expected to have a Material Adverse Effect.

Section 5.2 Subsidiaries . Each Subsidiary (a) is duly organized, validly existing, and in good standing under the laws of the jurisdiction in which it is organized, (b) has full and adequate power to own its Property and conduct its business as now conducted, and (c) is duly licensed or qualified and in good standing in each jurisdiction in which the nature of the business conducted by it or the nature of the Property owned or leased by it requires such licensing or qualifying, except, with respect to this clause (c), where the failure to do so could not reasonably be expected to have a Material Adverse Effect. Schedule 5.2 hereto identifies each Subsidiary, the jurisdiction of its organization, the percentage of issued and outstanding shares of each class of its capital stock or other equity interests owned by Borrower and the other Subsidiaries and, if such percentage is not 100% (excluding directors’ qualifying shares as required by law), a description of each class of its authorized capital stock and other equity interests and the number of shares of each class issued and outstanding. All of the outstanding shares of capital stock and other equity interests of each Subsidiary are validly issued and outstanding and fully paid and non-assessable and all such shares and other equity interests indicated on Schedule 5.2 as owned by Borrower or another Subsidiary are owned, beneficially and of record, by Borrower or such Subsidiary free and clear of all Liens other than the Liens granted in favor of Bank pursuant to the Collateral Documents. There are no outstanding commitments or other obligations of any Subsidiary to issue, and no options, warrants or other rights of any Person to acquire, any shares of any class of capital stock or other equity interests of any Subsidiary.

S-23

Section 5.3 Authority and Validity of Obligations. Borrower has full right and authority to enter into this Agreement and the other Loan Documents executed by it, to make the borrowings herein provided for, to grant to Bank the Liens described in the Collateral Documents executed by Borrower, and to perform all of its obligations hereunder and under the other Loan Documents executed by it. Each Subsidiary has full right and authority to enter into the Loan Documents executed by it, to guarantee the Obligations, to grant to Bank the Liens described in the Collateral Documents executed by such Person, and to perform all of its obligations under the Loan Documents executed by it. The Loan Documents delivered by Borrower and its Subsidiaries have been duly authorized, executed, and delivered by such Persons and constitute valid and binding obligations of Borrower and its Subsidiaries enforceable against them in accordance with their terms, except as enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance or similar laws affecting creditors’ rights generally and general principles of equity (regardless of whether the application of such principles is considered in a proceeding in equity or at law); and this Agreement and the other Loan Documents do not, nor does the performance or observance by Borrower or any Subsidiary of any of the matters and things herein or therein provided for, (a) contravene or constitute a default under any provision of law or any judgment, injunction, order or decree binding upon Borrower or any Subsidiary or any provision of the organizational documents (e.g., charter, certificate or articles of incorporation and bylaws, certificate or articles of association and operating agreement, partnership agreement, or other similar organizational documents) of Borrower or any Subsidiary, (b) to the best of Borrower’s knowledge, conflict with, contravene or constitute a default under any material indenture or agreement of or affecting Borrower or any Subsidiary or any of their Property, or (c) result in the creation or imposition of any Lien on any Property of Borrower or any Subsidiary other than the Liens granted in favor of Bank pursuant to the Collateral Documents.

Section 5.4 Use of Proceeds; Margin Stock. Borrower shall use the proceeds of Operating Line Revolving Loans for the purposes described in Section 2.1 above. Neither Borrower nor any Subsidiary is engaged, principally or as one of its important activities, in the business of purchasing or carrying margin stock or in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U of the Board of Governors of the Federal Reserve System), and no part of the proceeds of any Loan or any other extension of credit made hereunder will be used to purchase or carry any such margin stock or to extend credit to others for the purpose of purchasing or carrying any such margin stock. Margin stock (as hereinabove defined) constitutes less than 25% of the assets of Borrower and its Subsidiaries which are subject to any limitation on sale, pledge or other restriction hereunder.

Section 5.5 Financial Reports . The consolidated balance sheet of Borrower and its Subsidiaries as of December 31, 2015, and the related consolidated statements of income, retained earnings and cash flows of Borrower and its Subsidiaries for the fiscal year then ended, and accompanying notes thereto, which financial statements are accompanied by the review report of Dixon Hughes Goodman LLP, independent public accountants, and the unaudited

S-24

interim consolidated balance sheet of Borrower and its Subsidiaries as February 29, 2016, and the related consolidated statements of income of Borrower and its Subsidiaries for the two (2) months then ended, heretofore furnished to Bank, fairly present the consolidated financial condition of Borrower and its Subsidiaries as at said dates and the consolidated results of their operations and cash flows for the periods then ended in conformity with GAAP applied on a consistent basis. Neither Borrower nor any Subsidiary has contingent liabilities which are material to it other than as indicated on such financial statements or, with respect to future periods, on the financial statements furnished pursuant to Section 6.5 .

Section 5.6 No Material Adverse Change. To the best of Borrower’s knowledge, since February 29, 2016, there has been no change in the condition (financial or otherwise) or business prospects of Borrower or any Subsidiary except those occurring in the ordinary course of business, none of which individually or in the aggregate could reasonably be expected to have a Material Adverse Effect.

Section 5.7 Full Disclosure. The statements and information furnished to Bank in connection with the negotiation of this Agreement and the other Loan Documents and the commitments by Bank to provide all or part of the financing contemplated hereby do not contain any untrue statements of a material fact or omit a material fact necessary to make the statements contained herein or therein not misleading.

Section 5.8 Trademarks, Franchises, and Licenses . Borrower and its Subsidiaries own, possess, or have the right to use all necessary patents, licenses, franchises, trademarks, trade names, trade styles, copyrights, trade secrets, know how, and confidential commercial and proprietary information to conduct their businesses as now conducted, without known conflict with any patent, license, franchise, trademark, trade name, trade style, copyright or other proprietary right of any other Person.

Section 5.9 Governmental Authority and Licensing. Borrower and its Subsidiaries have received all licenses, permits, and approvals of all Governmental Authorities, if any, necessary to conduct their businesses, in each case except where the failure to obtain or maintain the same could not reasonably be expected to have a Material Adverse Effect. No investigation or proceeding is pending or, to the knowledge of Borrower, threatened, before or by any Governmental Authority that could reasonably be expected to have a Material Adverse Effect.

Section 5.10 Good Title. Borrower and its Subsidiaries have good and defensible title (or valid leasehold interests) to their assets as reflected on the most recent consolidated balance sheet of Borrower and its Subsidiaries furnished to Bank (except for sales of assets in the ordinary course of business), subject to no Liens other than such thereof as are permitted by Section 7.2 . It is acknowledged and agreed by Bank that Borrower and/or a Subsidiary of Borrower may from time to time have possession of assets of third parties under a consignment agreement, which may or may not be covered by Borrower’s or such Subsidiary’s insurance, as applicable, and the interest of Borrower or Subsidiary, as applicable, shall not be one of ownership or leasehold.

S-25

Section 5.11 Litigation and Other Controversies. There is no litigation or governmental or arbitration proceeding or labor controversy pending, nor to the knowledge of Borrower threatened, against Borrower or any Subsidiary or any of their Property which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

Section 5.12 Taxes. All tax returns required to be filed by Borrower or any Subsidiary in any jurisdiction have, in fact, been filed, and all taxes, assessments, fees, and other governmental charges upon Borrower or any Subsidiary or upon any of its Property, income or franchises, which are shown to be due and payable in such returns, have been paid, except such taxes, assessments, fees and governmental charges, if any, as are being contested in good faith and by appropriate proceedings which prevent enforcement of the matter under contest and as to which adequate reserves established in accordance with GAAP have been provided. Borrower does not know of any proposed additional tax assessment against it or its Subsidiaries for which adequate provisions in accordance with GAAP have not been made on their accounts. Adequate provisions in accordance with GAAP for taxes on the books of Borrower and each Subsidiary have been made for all open years, and for its current fiscal period.

Section 5.13 Approvals. No authorization, consent, license or exemption from, or filing or registration with, any court or Governmental Authority, nor any approval or consent of any other Person, is or will be necessary to the valid execution, delivery or performance by Borrower or any Subsidiary of any Loan Document, except for such approvals which have been obtained prior to the date of this Agreement and remain in full force and effect.

Section 5.14 Affiliate Transactions. Neither Borrower nor any Subsidiary is a party to any contracts or agreements with any of its Affiliates on terms and conditions which are less favorable to Borrower or such Subsidiary than would be usual and customary in similar contracts or agreements between Persons not affiliated with each other.

Section 5.15 Investment Company. Neither Borrower nor any Subsidiary is an “investment company” or a company “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

Section 5.16 ERISA. Borrower and each other member of its Controlled Group has fulfilled its obligations under the minimum funding standards of and is in compliance in all material respects with ERISA and the Code to the extent applicable to it and has not incurred any liability to the PBGC or a Plan under Title IV of ERISA other than a liability to the PBGC for premiums under Section 4007 of ERISA. Neither Borrower nor any Subsidiary has any contingent liabilities with respect to any post-retirement benefits under a Welfare Plan, other than liability for continuation coverage described in article 6 of Title I of ERISA.

Section 5.17 Compliance with Laws. To the best of Borrower’s knowledge, Borrower and its Subsidiaries are in compliance with the requirements of all federal, state and local laws, rules and regulations applicable to or pertaining to their Property or business operations (including the Occupational Safety and Health Act of 1970, the Americans with Disabilities Act of 1990, and laws and regulations establishing quality criteria and standards for air, water, land and toxic or hazardous wastes and substances), except for any such noncompliance that, individually or in the aggregate, could not reasonably be expected to have a Material Adverse

S-26

Effect. Neither Borrower nor any Subsidiary has received notice to the effect that its operations are not in compliance with any of the requirements of applicable federal, state or local environmental, health, and safety statutes and regulations or is the subject of any governmental investigation evaluating whether any remedial action is needed to respond to a release of any toxic or hazardous waste or substance into the environment, except where any such noncompliance or remedial action, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

Section 5.18 OFAC. To the best of Borrower’s knowledge, (a) Borrower is in compliance with the requirements of all OFAC Sanctions Programs applicable to it, (b) each Subsidiary of Borrower is in compliance with the requirements of all OFAC Sanctions Programs applicable to such Subsidiary, (c) Borrower has provided to Bank all information regarding Borrower and its Affiliates and Subsidiaries necessary for Bank to comply with all applicable OFAC Sanctions Programs, and (d) neither Borrower nor any of its Affiliates or Subsidiaries is, as of the date hereof, named on the current OFAC SDN List.

Section 5.19 Other Agreements . Neither Borrower nor any Subsidiary is in default under the terms of any covenant, indenture or agreement of or affecting such Person or any of its Property, except for any such default that could not reasonably be expected to have a Material Adverse Effect.

Section 5.20 Solvency. Borrower and its Subsidiaries are solvent, able to pay their debts as they become due, and have sufficient capital to carry on their business and all businesses in which they are about to engage.

Section 5.21 No Default. No Default or Event of Default has occurred and is continuing.

Section 5.22 No Broker Fees. No broker’s or finder’s fee or commission will be payable with respect hereto or any of the transactions contemplated hereby; and Borrower hereby agrees to indemnify Bank against, and agree that they will hold Bank harmless from, any claim, demand, or liability for any such broker’s or finder’s fees alleged to have been incurred in connection herewith or therewith and any expenses (including reasonable attorneys’ fees) arising in connection with any such claim, demand, or liability.

SECTION 6. AFFIRMATIVE COVENANTS.

So long as all or any portion of the Commitment remains outstanding or any Obligations hereunder remain outstanding, Borrower agrees that:

Section 6.1 Maintenance of Business. Borrower shall, and shall cause each Subsidiary to, preserve and maintain its existence, except as otherwise provided in Section 7.4(c) . Borrower shall, and shall cause each Subsidiary to, preserve and keep in force and effect all licenses, permits, franchises, approvals, patents, trademarks, trade names, trade styles, copyrights, and other proprietary rights necessary to the proper conduct of its business, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect.

S-27

Section 6.2 Maintenance of Properties. Borrower shall, and shall cause each Subsidiary to, maintain, preserve, and keep its property, plant, and equipment in good repair, working order and condition (ordinary wear and tear excepted), and shall from time to time make all needful and proper repairs, renewals, replacements, additions, and betterments thereto so that at all times the efficiency thereof shall be fully preserved and maintained, in each case except where the failure to do so could not reasonably be expected to have a Material Adverse Effect.

Section 6.3 Taxes and Assessments . Borrower shall duly pay and discharge, and shall cause each Subsidiary to duly pay and discharge, all taxes, rates, assessments, fees, and governmental charges upon or against it or its Property, in each case before the same become delinquent and before penalties accrue thereon, unless and to the extent that the same are being contested in good faith and by appropriate proceedings which prevent enforcement of the matter under contest and adequate reserves are provided therefor.

Section 6.4 Insurance. Borrower shall insure and keep insured, and shall cause each Subsidiary to insure and keep insured, with good and responsible insurance companies, all insurable Property owned by it which is of a character usually insured by Persons similarly situated and operating like Properties against loss or damage from such hazards and risks (including flood insurance with respect to any improvements on real Property consisting of building or parking facilities in an area designated by a governmental body as having special flood hazards), and in such amounts, as are insured by Persons similarly situated and operating like Properties, but in no event at any time in an amount less than the replacement value of the Collateral. Borrower shall also maintain, and shall cause each Subsidiary to maintain, insurance with respect to the business of Borrower and its Subsidiaries, covering commercial general liability, statutory worker’s compensation and occupational disease, statutory structural work act liability, and business interruption and such other risks with good and responsible insurance companies, in such amounts and on such terms as Bank shall reasonably request, but in any event as and to the extent usually insured by Persons similarly situated and conducting similar businesses. Borrower shall in any event maintain insurance on the Collateral to the extent required by the Collateral Documents. All such policies of insurance shall contain satisfactory lender’s loss payable endorsements, naming Bank as a loss payee, assignee or additional insured, as appropriate, as its interest may appear, and showing only such other loss payees, assignees and additional insureds as are satisfactory to Bank. Each policy of insurance or endorsement shall contain a clause requiring the insurer to give not less than 30 days’ prior written notice to Bank in the event of cancellation of the policy for any reason whatsoever and a clause specifying that the interest of Bank shall not be impaired or invalidated by any act or neglect of Borrower, any of its Subsidiaries, or the owner of the premises or Property or by the occupation of the premises for purposes more hazardous than are permitted by said policy. Borrower shall deliver to Bank (a) on the date of this Agreement, and at such other times as Bank shall reasonably request, certificates evidencing the maintenance of insurance required hereunder, (b) prior to the termination of any such policies, certificates evidencing the renewal thereof, and (c) promptly following request by Bank, copies of all insurance policies of Borrower and its Subsidiaries. Borrower also agrees to deliver to Bank, promptly as rendered, true copies of all reports made in any reporting forms to insurance companies.

S-28

Section 6.5 Financial Reports. Except for purposes of calculating the Operating Line Borrowing Base, Borrower shall, and shall cause each Subsidiary to, maintain a standard system of accounting in accordance with GAAP and shall furnish to Bank and its duly authorized representatives such information respecting the business and financial condition of Borrower and each Subsidiary as Bank may reasonably request; and without any request, shall furnish to Bank:

(a) as soon as available, and in any event no later than twenty (20) days after the last day of each calendar month, an Operating Line Borrowing Base Certificate showing the computation of the Operating Line Borrowing Base in reasonable detail as of the close of business on the last day of such month, prepared by Borrower and certified to by its chief financial officer or another officer of Borrower acceptable to Bank, which shall be accompanied by supporting accounts receivable and accounts payable aging documentation from Borrower in form and substance reasonably acceptable to Bank, dated as of the same date as the Operating Line Borrowing Base Certificate.

(b) [Intentionally Deleted];

(c) as soon as available, and in any event no later than twenty (20) days after the last day of each calendar month, including the calendar month ending on the last day of the fiscal year of Borrower, a copy of balance sheet of Borrower as of the last day of such period and statements of income of Borrower for such period and the fiscal year-to-date period then ended, each in reasonable detail, prepared by Borrower in accordance with GAAP and certified to by its chief financial officer or such other officer acceptable to Bank;

(d) as soon as available, and in any event no later than one hundred twenty (120) days after the last day of each fiscal year of Borrower, a copy of the balance sheet of Borrower as of the close of such period and statements of income, retained earnings, and cash flows of Borrower for such period, and accompanying notes thereto, each in reasonable detail showing in comparative form the figures for the previous fiscal year, audited by Dixon Hughes Goodman LLP or another firm of independent public accountants of recognized standing, selected by Borrower and satisfactory to Bank except that for fiscal year ending December 31, 2015,the balance sheet of Borrower and statements of income, retained earnings, and cash flows of Borrower only need to be reviewed by Henkamp Krueger & Co., or another firm of independent public accountants of recognized standing, selected by Borrower and satisfactory to Bank;

(e) [Intentionally Deleted]

(f) prior to the advance of any Loan totaling individually $1,000,000 or more, a written copy of an engine or bulk wholesale purchase invoice to be financed with such Loan;

(g) as soon as available, and in any event no later than one hundred twenty (120) days after the last day of each fiscal year of Borrower, a copy of an appraisal of the raw materials or finished goods of Borrower or its Subsidiaries as of the close of such fiscal year in reasonable detail prepared by a qualified appraiser and in form satisfactory to Bank;

S-29

(h) as soon as available, and in any event no later than ninety (90) days after the last day of each fiscal year of Borrower beginning with fiscal year ending December 31, 2017, the Bank shall have performed, at Borrower’s cost, a field exam report as of the close of such fiscal year in reasonable detail and in form satisfactory to Bank;

(i) promptly after receipt thereof, any additional written reports and management letters concerning significant aspects of Borrower’s or any Subsidiary’s operations and financial affairs given to it by its independent public accountants;

(j) promptly after receipt thereof, a copy of each audit made by any regulatory agency of the books and records of Borrower or any Subsidiary or of notice of any material noncompliance with any applicable law, regulation or guideline relating to Borrower or any Subsidiary, or its business;

(k) as soon as available, and in any event no later than thirty (30) days after the filing, a copy of the Federal and State tax returns filed by Joseph G. Kuhn;

(l) as soon as available, and in any event no later than one hundred twenty (120) days of each year, a copy of the personal financial statement for Joseph G. Kuhn in reasonable detail and in form satisfactory to Bank; and

(m) promptly after knowledge thereof shall have come to the attention of any responsible officer of Borrower, written notice of (i) any threatened or pending litigation or governmental or arbitration proceeding or labor controversy against Borrower or any Subsidiary or any of their Property which, if adversely determined, could reasonably be expected to have a Material Adverse Effect or (ii) the occurrence of any Default or Event of Default hereunder.

Section 6.6 Inspection. Upon prior written notice from the Bank, Borrower shall, and shall cause each Subsidiary to, permit Bank and its duly authorized representatives and agents to visit and inspect any of its Property, corporate books, and financial records, to examine and make copies of its books of accounts and other financial records, and to discuss its affairs, finances, and accounts with, and to be advised as to the same by, its officers, employees and independent public accountants (and by this provision Borrower hereby authorizes such accountants to discuss with Bank the finances and affairs of Borrower and its Subsidiaries) during business hours at such reasonable times and intervals as Bank may designate.

Section 6.7 ERISA. Borrower shall, and shall cause each Subsidiary to, promptly notify Bank of: (a) receipt of any notice from the PBGC of its intention to seek termination of any Plan or appointment of a trustee therefor, and (c) its intention to terminate or withdraw from any Plan.

Section 6.8 Compliance with Laws .

(a) Borrower shall, and shall cause each Subsidiary to, comply in all respects with the requirements of all federal, state, and local laws, rules, regulations, ordinances and orders applicable to or pertaining to its Property or business operations, except where any such non- compliance, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect or result in a Lien upon any of its Property.

S-30

(b) Without limiting the agreements set forth in Section 6.8(a) above, Borrower shall, and shall cause each Subsidiary to, at all times, do the following to the extent the failure to do so, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect: (i) comply in all material respects with, and maintain each of the Premises in compliance in all material respects with, all applicable Environmental Laws; (ii) require that each tenant and subtenant, if any, of any of the Premises or any part thereof comply in all material respects with all applicable Environmental Laws; (iii) obtain and maintain in full force and effect all material governmental approvals required by any applicable Environmental Law for operations at each of the Premises; (iv) cure any material violation by it or at any of the Premises of applicable Environmental Laws; (v) not allow the presence or operation at any of the Premises of any (1) landfill or dump or (2) hazardous waste management facility or solid waste disposal facility as defined pursuant to RCRA or any comparable state law; (vi) not manufacture, use, generate, transport, treat, store, release, dispose or handle any Hazardous Material at any of the Premises except in the ordinary course of its business and in de minimis amounts; (vii) within ten (10) Business Days notify Bank in writing of and provide any reasonably requested documents upon learning of any of the following in connection with Borrower or any Subsidiary or any of the Premises: (1) any material liability for response or corrective action, natural resource damage or other harm pursuant to CERCLA, RCRA or any comparable state law; (2) any material Environmental Claim; (3) any material violation of an Environmental Law or material Release, threatened Release or disposal of a Hazardous Material; (4) any restriction on the ownership, occupancy, use or transferability arising pursuant to any (x) Release, threatened Release or disposal of a Hazardous Material or (y) Environmental Law; or (5) any environmental, natural resource, health or safety condition, which could reasonably be expected to have a Material Adverse Effect; (viii) conduct at its expense any investigation, study, sampling, testing, abatement, cleanup, removal, remediation or other response action necessary to remove, remediate, clean up or abate any material Release, threatened Release or disposal of a Hazardous Material as required by any applicable Environmental Law, (ix) abide by and observe any restrictions on the use of the Premises imposed by any Governmental Authority as set forth in a deed or other instrument affecting Borrower’s or any Subsidiary’s interest therein; (x) promptly provide or otherwise make available to Bank any reasonably requested environmental record concerning the Premises which Borrower or any Subsidiary possesses or can reasonably obtain; and (xi) perform, satisfy, and implement any operation or maintenance actions required by any Governmental Authority or Environmental Law, or included in any no further action letter or covenant not to sue issued by any Governmental Authority under any Environmental Law.

Section 6.9 Compliance with OFAC Sanctions Programs .

(a) Borrower shall at all times comply with the requirements of all OFAC Sanctions Programs applicable to Borrower and shall cause each of its Subsidiaries to comply with the requirements of all OFAC Sanctions Programs applicable to such Subsidiary.

(b) Borrower shall provide Bank any information regarding Borrower, its Affiliates, and its Subsidiaries necessary for Bank to comply with all applicable OFAC Sanctions Programs; subject however, in the case of Affiliates, to Borrower’s ability to provide information applicable to them.

S-31

(c) If Borrower obtains actual knowledge or receives any written notice that Borrower, any Affiliate or any Subsidiary is named on the then current OFAC SDN List (such occurrence, an “OFAC Event” ), Borrower shall promptly (i) give written notice to Bank of such OFAC Event, and (ii) comply with all applicable laws with respect to such OFAC Event (regardless of whether the party included on the OFAC SDN List is located within the jurisdiction of the United States of America), including the OFAC Sanctions Programs, and Borrower hereby authorizes and consents to Bank taking any and all steps Bank deems necessary, in its sole discretion, to avoid violation of all applicable laws with respect to any such OFAC Event, including the requirements of the OFAC Sanctions Programs (including the freezing and/or blocking of assets and reporting such action to OFAC).

Section 6.10 Formation of Subsidiaries . Promptly upon the formation or acquisition of any Subsidiary which is not a Foreign Subsidiary, Borrower shall provide Bank notice thereof and timely comply with the requirements of Section 6.12 (at which time Schedule 5.2 shall be deemed amended to include reference to such Subsidiary). Except for Foreign Subsidiaries existing on the Closing Date and identified on Schedule 5.2, Borrower shall not, nor shall it permit any Subsidiary to, form or acquire any Foreign Subsidiary without the Bank’s prior written consent, which consent may be withheld by Bank, in Bank’s sole discretion.

Section 6.11 [Intentionally Deleted]

Section 6.12 Guaranties and Collateral.

(a) Guaranties . The payment and performance of the Obligations shall at all times be guaranteed by Joseph G. Kuhn, and Air T, Inc. and by each direct and indirect Subsidiary of Borrower pursuant to one or more guaranty agreements in form and substance acceptable to Bank (as the same may be amended, restated, supplemented, or otherwise modified from time to time) individually a “Guaranty” and collectively the “Guaranties” and Joseph G. Kuhn, Air T, Inc. and each such Subsidiary executing and delivering a Guaranty being referred to herein as a “Guarantor” and collectively the “Guarantors”.

(b) Collateral. (i) The Obligations shall be secured by valid, perfected, and enforceable Liens on all right, title, and interest of Borrower and each Subsidiary in all of their accounts, chattel paper, instruments, documents, general intangibles, letter of credit rights, supporting obligations, deposit accounts, investment property, inventory, equipment, fixtures, commercial tort claims, real estate and certain other Property, whether now owned or hereafter acquired or arising, and all proceeds thereof (collectively, the “Assets”) in the case of Assets located in the United States, and (ii) in the case of Assets located in another Approved Country, the parties hereto shall enter or shall have entered into a Foreign Security Agreement. Without limiting the foregoing, Bank shall receive a collateral assignment of all insurance maintained by the Borrower or any of its Subsidiaries at any time insuring the payment of receivables owed to the Borrower or any of its Subsidiaries. Borrower acknowledges and agrees that (i) the Liens on the Collateral located within the United States shall be valid and perfected first priority Liens, in each case pursuant to one or more Collateral Documents from such Persons, each in form and substance satisfactory to Bank and (ii) in the case of Collateral located in another Approved Country, the parties hereto shall enter into a Foreign Security Agreement; provided, however , that in the case of Assets not located in an Approved Country, the Borrower shall not be required to enter into or provide any Collateral Documents other than the Security Agreement.

S-32

(c) Liens on Real Property . In the event that Borrower or any Subsidiary owns or hereafter acquires any real property, Borrower shall, or shall cause such Subsidiary to, execute and deliver to Bank a mortgage or deed of trust acceptable in form and substance to Bank for the purpose of granting to Bank (or a security trustee therefor) a Lien on such real property to secure the Obligations, shall pay all taxes, costs, and expenses incurred by Bank in recording such mortgage or deed of trust, and shall supply to Bank at Borrower’s cost and expense a survey, environmental report, hazard insurance policy, appraisal report, and a mortgagee’s policy of title insurance from a title insurer acceptable to Bank insuring the validity of such mortgage or deed of trust and its status as a first Lien (subject to Liens expressly permitted by this Agreement) on the real property encumbered thereby and such other instrument, documents, certificates, and opinions reasonably required by Bank in connection therewith.

(d) Further Assurances . Borrower agrees that it shall, and shall cause each Subsidiary to, from time to time at the request of Bank, execute and deliver such documents and do such acts and things as Bank may reasonably request in order to provide for or perfect or protect Bank’s Liens on the Collateral.

Section 6.13 Banking Relationship. Borrower will and will cause each Subsidiary to establish and maintain its primary banking depository and disbursement relationship with the Bank, including establishing and maintaining operating, administrative, cash management, collection activity, payroll and disbursement accounts for the conduct of its business.

Section 6.14 Regular Review. The Borrower agrees to furnish such information respecting the business, assets and financial condition of the Borrower as Lender may reasonably request from time to time. The Borrower shall furnish such information as soon as possible, but in any event within thirty (30) days after the request. Based upon this information, Lender will conduct a regular review of your loan. The Borrower and Guarantor(s) agree that the Lender in its discretion may obtain a credit bureau report on the Borrower and Guarantor(s) in order to evaluate the Borrower and Guarantor’s creditworthiness and ability to meet its obligations under the loan, and subsequently for any future purposes in connection with existing or contemplated extensions of credit to the Borrower, to the Guarantor(s) or to any other entity in which the Guarantor(s) is or is expected to be guarantor, owner, director, manager or officer. The Borrower also agrees that the Lender may exchange information about the Borrower and Guarantor(s) and their obligations under this Note with Borrower’s references, other businesses (including affiliates of the Lender), or any Guarantor(s), and credit reporting agencies and may confirm any information provided by the Borrower.

Section 6.15 Sharing and Use of Information within the BMO Harris Family of Companies. Lender may share within the BMO Harris Family of Companies information about Borrower and Guarantor(s) transactions or experiences with Lender, information Borrower and Guarantor(s) supply on Borrower and Guarantor(s) account applications, and information Lender receives from third parties. If Borrower and/or Guarantor(s) is an individual, Borrower and Guarantor(s) have the right to instruct Lender not to share among Lender banks and affiliated financial service companies certain information (other than information about Lender transactions and experiences with Borrower and Guarantor(s)) from Borrower and Guarantor(s) account applications or information Lender receive from third parties. Borrower and

S-33

Guarantor(s) may limit Lender from using personal information received from Lender’s affiliates within the BMO Harris Family of Companies, such as Lender banks, brokerage, insurance or investment advisory affiliates, to market Lender products or services to Borrower and Guarantor(s). This information includes Borrower and Guarantor(s) income, Borrower and Guarantor(s) account history and Borrower and Guarantor(s) credit score. To inform Lender that Borrower and/or Guarantor(s) do not want Lender to share certain information about Borrower and Guarantor(s) or to limit marketing offers, please contact Lender at 1-888-654-0063, or visit any BMO Harris Bank location. Borrower and Guarantor(s) choices will apply to everyone at the same address in Lender’s records. The BMO Harris Family of Companies means BMO Harris Bank and all other companies affiliated with the Lender by common ownership or control.

SECTION 7. NEGATIVE COVENANTS.

So long as all or any portion of the Commitments remains outstanding or any Obligations hereunder remain outstanding, Borrower agrees that:

Section 7.1 Borrowings and Guaranties . Borrower shall not, nor shall it permit any Subsidiary to, issue, incur, assume, create or have outstanding any Indebtedness for Borrowed Money, or incur liabilities for interest rate, currency, or commodity cap, collar, swap, or similar hedging arrangements, or be or become liable as endorser, guarantor, surety or otherwise for any debt, obligation or undertaking of any other Person, or otherwise agree to provide funds for payment of the obligations of another, or supply funds thereto or invest therein or otherwise assure a creditor of another against loss, or apply for or become liable to the issuer of a letter of credit which supports an obligation of another, or subordinate any claim or demand it may have to the claim or demand of any other Person; provided that the foregoing shall not restrict nor operate to prevent:

(a) the Obligations of Borrower and its Subsidiaries owing to Bank under the Loan Documents and other indebtedness and obligations of such Persons owing to Bank;

(b) [Intentionally Deleted]

(d) subject to Bank’s prior written approval, which shall not be unreasonably withheld, assumption of leases for aircrafts and/or aircraft airframes, engines, airframe parts and/or engine parts, aircraft engine leases by Borrower and/or any Subsidiary in the ordinary course of business;

(e) subject to Bank’s prior written approval, which shall not be unreasonably withheld, Borrower or any Subsidiary of Borrower entering into consignment agreements with third parties which involve possession of assets of third parties, which may or may not be covered by Borrower’s or a Subsidiary’s insurance, as applicable;

S-34

(f) Indebtedness and/or other liabilities of Borrower or any Subsidiary for an automobile to be used by Joseph Kuhn that does not exceed $60,000 in the aggregate in any given calendar year; and

(g) Indebtedness from time to time owing by any Subsidiary to Borrower in the ordinary course of business to finance working capital needs.

Section 7.2 Liens . Borrower shall not, nor shall it permit any Subsidiary to, create, incur or permit to exist any Lien of any kind on any Property owned by any such Person; provided that the foregoing shall not apply to nor operate to prevent:

(a) Liens arising by statute in connection with worker’s compensation, unemployment insurance, old age benefits, social security obligations, taxes, assessments, statutory obligations or other similar charges (other than Liens arising under ERISA), good faith cash deposits in connection with tenders, contracts or leases to which Borrower or any Subsidiary is a party or other cash deposits required to be made in the ordinary course of business; provided in each case that the obligation is not for borrowed money and that the obligation secured is not overdue or, if overdue, is being contested in good faith by appropriate proceedings which prevent enforcement of the matter under contest and adequate reserves have been established therefor;

(b) mechanics’, workmen’s, materialmen’s, landlords’, carriers’ or other similar Liens arising in the ordinary course of business with respect to obligations which are not due or which are being contested in good faith by appropriate proceedings which prevent enforcement of the matter under contest;

(c) judgment liens and judicial attachment liens not constituting an Event of Default under Section 8.1(g) and the pledge of assets for the purpose of securing an appeal, stay or discharge in the course of any legal proceeding;

(d) Liens on equipment of Borrower or any Subsidiary created solely for the purpose of securing indebtedness permitted by Section 7.1(b) , representing or incurred to finance the purchase price of such Property; provided that no such Lien shall extend to or cover other Property of Borrower or such Subsidiary other than the respective Property so acquired, and the principal amount of indebtedness secured by any such Lien shall at no time exceed the purchase price of such Property, as reduced by repayments of principal thereon;

(e) any interest or title of a lessor under any operating lease or lease described under Section 2.1;

(f) easements, rights of way, restrictions, and other similar encumbrances against real property incurred in the ordinary course of business which, in the aggregate, are not substantial in amount and which do not materially detract from the value of the Property subject thereto or materially interfere with the ordinary conduct of the business of Borrower or any Subsidiary; and

(g) Liens granted in favor of Bank pursuant to the Collateral Documents.

S-35

Section 7.3 Investments, Acquisitions, Loans and Advances. Borrower shall not, nor shall it permit any Subsidiary to, directly or indirectly, make, retain or have outstanding any investments (whether through purchase of stock or obligations or otherwise) in, or loans or advances to (other than for travel advances and other similar cash advances made to employees in the ordinary course of business), any other Person, or acquire all or any substantial part of the assets or business of any other Person or division thereof other than the assets or business of a Subsidiary of Borrower subject to the Bank’s prior written approval, which shall not be unreasonably withheld; provided that the foregoing shall not apply to nor operate to prevent:

(a) investments in direct obligations of the United States of America or of any agency or instrumentality thereof whose obligations constitute full faith and credit obligations of the United States of America, provided that any such obligations shall mature within one year of the date of issuance thereof;

(b) investments in commercial paper rated at least P-1 by Moody’s and at least A-1 by S&P maturing within one year of the date of issuance thereof;

(c) investments in certificates of deposit issued by Bank or by any United States commercial bank having capital and surplus of not less than $100,000,000 which have a maturity of one year or less;

(d) investments in repurchase obligations with a term of not more than 7 days for underlying securities of the types described in subsection (a) above entered into with any bank meeting the qualifications specified in subsection (c) above, provided all such agreements require physical delivery of the securities securing such repurchase agreement, except those delivered through the Federal Reserve Book Entry System;

(e) investments in money market funds that invest solely, and which are restricted by their respective charters to invest solely, in investments of the type described in the immediately preceding subsections (a) , (b) , (c) , and (d) above;

(f) Borrower’s investment existing on the date of this Agreement in its Subsidiaries or Borrower’s investments from time to time in its Subsidiaries, and investments made from time to time by a Subsidiary in one or more of its Subsidiaries;

(g) intercompany advances made from time to time from Borrower to any one or more Subsidiaries in the ordinary course of business to finance working capital needs;

(h) subject to the Bank’s prior written approval, which shall not be unreasonably withheld, assumption of leases for aircrafts and/or aircraft airframes, engines, airframe parts and/or engine parts, aircraft engine leases in the ordinary course of business;

(i) subject to the Bank’s prior written approval, which shall not be unreasonably withheld, entering into consignment agreements with third parties which involve possession of assets of third parties, which may or may not be covered by Borrower’s or a Subsidiary’s insurance, as applicable; and

S-36

(j) other investments, loans, and advances in addition to those otherwise permitted by this Section in an amount not to exceed One Hundred Thousand Dollars ($100,000.00) in the aggregate at any one time outstanding.

In determining the amount of investments, acquisitions, loans, and advances permitted under this Section, investments and acquisitions shall always be taken at the original cost thereof (regardless of any subsequent appreciation or depreciation therein), and loans and advances shall be taken at the principal amount thereof then remaining unpaid.

Section 7.4 Mergers, Consolidations and Sales. Borrower shall not, nor shall it permit any Subsidiary to, be a party to any merger or consolidation, or sell, transfer, lease or otherwise dispose of all or any part of its Property, including any disposition of Property as part of a sale and leaseback transaction, or in any event sell or discount (with or without recourse) any of its notes or accounts receivable; provided that this Section shall not apply to nor operate to prevent:

(a) the sale or lease of inventory in the ordinary course of business;

(b) the sale, transfer, lease or other disposition of Property of Borrower and its Subsidiaries to one another in the ordinary course of its business;

(c) the merger of any Subsidiary with and into Borrower or any other Subsidiary; provided that, in the case of any merger involving Borrower, Borrower is the corporation surviving the merger;

(d) the sale, transfer or other disposition of any tangible personal property that, in the reasonable business judgment of Borrower or its Subsidiary, has become obsolete or worn out, and which is disposed of in the ordinary course of business; and

(e) the sale, transfer, lease or other disposition of Property of Borrower or any Subsidiary (including any disposition of Property as part of a sale and leaseback transaction), but not including the sale or lease of Inventory in the ordinary course of Borrower’s business, aggregating for Borrower and its Subsidiaries not more than One Hundred Thousand Dollars ($100,000.00) during any fiscal year of Borrower.

Section 7.5 Maintenance of Subsidiaries Borrower shall not assign, sell or transfer, nor shall it permit any Subsidiary to issue, assign, sell or transfer, any shares of capital stock or other equity interests of a Subsidiary; provided that the foregoing shall not operate to prevent (a) Liens on the capital stock or other equity interests of Subsidiaries granted to Bank pursuant to the Collateral Documents, (b) the issuance, sale, and transfer to any person of any shares of capital stock of a Subsidiary solely for the purpose of qualifying, and to the extent legally necessary to qualify, such person as a director of such Subsidiary, (c) Borrower from assigning, selling or transferring, or any Subsidiary from issuing, assigning, selling or transferring 49% or less of the outstanding shares of capital stock or other equity interests of a Subsidiary conditioned upon prior written approval from the Bank, which approval shall not be unreasonably withheld, and (d) any transaction permitted by Section 7.4(c) above.

Section 7.6 [Intentionally Deleted]

S-37

Section 7.7 Burdensome Contracts With Affiliates . Borrower shall not, nor shall it permit any Subsidiary to, enter into any contract, agreement or business arrangement with any of its Affiliates (other than with Wholly-owned Subsidiaries) on terms and conditions which are less favorable to Borrower or such Subsidiary than would be usual and customary in similar contracts, agreements or business arrangements between Persons not affiliated with each other.

Section 7.8 No Changes in Fiscal Year. The fiscal year of Borrower and its Subsidiaries ends on December 31 of each year; and Borrower shall not, nor shall it permit any Subsidiary to, change its fiscal year from its present basis.

Section 7.9 Change in the Nature of Business . Borrower shall not, nor shall it permit any Subsidiary to, engage in any business or activity if as a result the general nature of the business of Borrower or any Subsidiary would be changed in any material respect from the general nature of the business engaged in by it as of the Closing Date; provided, however, that this Section 7.9 shall not prevent Borrower or any Subsidiary, subject to the Bank’s prior written approval, from assuming leases for aircrafts and/or aircraft airframes, engines, airframe parts and/or engine parts if such assumption is for the purpose of helping the Borrower or its Subsidiary to gain access to aircraft engines or engine parts for its general business, or from forming one or new Subsidiaries or entering into joint ventures to facilitate the assumption of such leases, or any other business or activity identified in Section 2.1 hereof.

Section 7.10 No Restrictions . Except pursuant to this Agreement and the other Loan Documents, Borrower shall not, nor shall it permit any Subsidiary to, directly or indirectly create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of Borrower or any Subsidiary to: (a) pay dividends or make any other distribution on any Subsidiary’s capital stock or other equity interests owned by Borrower or any other Subsidiary, (b) pay any indebtedness owed to Borrower or any other Subsidiary, (c) make loans or advances to Borrower or any other Subsidiary, (d) transfer any of its Property to Borrower or any other Subsidiary, or (e) guarantee the Obligations and/or grant Liens on its assets to Bank as required by the Loan Documents.

Section 7.11 Subordinated Debt. Borrower shall not, nor shall it permit any Subsidiary to, (a) amend or modify any of the terms or conditions relating to Subordinated Debt, (b) make any voluntary prepayment of Subordinated Debt or effect any voluntary redemption thereof, or (c) make any payment on account of Subordinated Debt which is prohibited under the terms of any instrument or agreement subordinating the same to the Obligations. Notwithstanding the foregoing, Borrower may agree to a decrease in the interest rate applicable thereto or to a deferral of repayment of any of the principal of or interest on the Subordinated Debt beyond the current due dates therefor.

Section 7.12 Financial Covenants.

(a) Debt Service Coverage Ratio . As of the last day of each fiscal quarter of Borrower, commencing September 30, 2016 and on last day of each subsequent fiscal quarter of Borrower, Borrower and its Subsidiaries shall have a Debt Service Coverage Ratio for the four (4) fiscal quarters then ended, of not less than 1.75:1.00.

S-38

(b) Maximum Leverage Ratio . As of the last day of each fiscal quarter of Borrower, commencing September 30, 2016 and on last day of each subsequent fiscal quarter of Borrower, Borrower shall not permit the Maximum Leverage Ratio to exceed 2.50:1.00.

For purposes of 7.12(a) and (b), the first four (4) quarters then ended shall include the financial performance of Contrail Aviation, Inc., until such time as Borrower has operated for a full four (4) quarters.

(d) Operating Leases . Other than the lease(s) and other arrangements disclosed in Schedule 7.12(d), and subject to Section 7.1(d), Borrower shall not, nor shall it permit any Subsidiary to, acquire the use or possession of any Property under a lease or similar arrangement, whether or not Borrower or any Subsidiary has the express or implied right to acquire title to or purchase such Property, at any time if, after giving effect thereto, the aggregate amount of fixed rentals and other consideration payable by Borrower and its Subsidiaries under all such leases and similar arrangements would exceed Ten Thousand Dollars ($10,000.00) during any fiscal year of Borrower. Capital Leases shall not be included in computing compliance with this Section to the extent Borrower’s and its Subsidiaries’ liability in respect of the same is permitted by Section 7.1(b) .

Section 7.13 ASA Certification. The Borrower shall at all times remain in material compliance with all of the terms and conditions of its certification from the Aviation Suppliers Association.

Section 7.14 Net Orderly Liquidation Value of Eligible Inventory. The net orderly liquidation value of the Borrower’s Eligible Inventory as shown on the most recent inventory appraisal provided to the Bank shall not be less than 87.5% of such Eligible Inventory’s aggregate book value.

SECTION 8. EVENTS OF DEFAULT AND REMEDIES.

Section 8.1 Events of Default.

Any one or more of the following shall constitute an “ Event of Default ” hereunder:

(a) default in the payment when due of all or any part of any Obligation payable by Borrower hereunder or under any other Loan Document that is not a Foreign Security Agreement (whether at the stated maturity thereof or at any other time provided for in this Agreement), or default shall occur in the payment when due of any other indebtedness or obligation, other than indebtedness or an obligation arising under a Foreign Security Agreement, (whether direct, contingent or otherwise) of Borrower owing to Bank;

S-39

(b) default in the observance or performance of any covenant set forth in Sections 6.1 , 6.4 , 6.5 , 6.6 , 6.11 , or 7 or of any provision in any Loan Document that is not a Foreign Security Agreement dealing with the use, disposition or remittance of the proceeds of Collateral or requiring the maintenance of insurance thereon;

(c) default in the observance or performance of any other provision hereof or of any other Loan Document that is not a Foreign Security Agreement;

(d) any representation or warranty made herein or in any other Loan Document that is not a Foreign Security Agreement or in any certificate furnished to Bank pursuant hereto or thereto or in connection with any transaction contemplated hereby or thereby proves untrue in any respect (or in any material respect if such representation, warranty, certification or statement is not by its terms already qualified as to materiality) as of the date of the issuance or making or deemed making thereof;

(e) any event occurs or condition exists (other than those described in subsections (a) through (d) above) which is specified as an event of default under any of the other Loan Documents (other than any of the Foreign Security Agreements), or any of the Loan Documents (other than a Foreign Security Agreement) shall for any reason not be or shall cease to be in full force and effect or is declared to be null and void, or any of the Collateral Documents relating to Collateral located within the United States shall for any reason fail to create a valid and perfected first priority Lien in favor of Bank, or in the case of the Kuhn Mortgage, a valid and perfected junior Lien in favor of Bank, in any Collateral purported to be covered thereby except as expressly permitted by the terms thereof, or any Subsidiary takes any action for the purpose of terminating, repudiating or rescinding any Loan Document executed by it or any of its obligations thereunder;

(f) default shall occur under any Indebtedness for Borrowed Money issued, assumed or guaranteed by Borrower or any Subsidiary aggregating in excess of One Hundred Thousand Dollars ($100,000.00), or under any indenture, agreement or other instrument under which the same may be issued, and such default shall continue for a period of time sufficient to permit the acceleration of the maturity of any such Indebtedness for Borrowed Money (whether or not such maturity is in fact accelerated), or any such Indebtedness for Borrowed Money shall not be paid when due (whether by demand, lapse of time, acceleration or otherwise), provided that the default has not occurred under a Foreign Security Agreement;

(g) any judgment or judgments, writ or writs or warrant or warrants of attachment, or any similar process or processes, shall be entered or filed against Borrower or any Subsidiary, or against any of its Property, in an aggregate amount in excess of One Hundred Thousand Dollars ($100,000.00) (except to the extent fully covered by insurance as to which the insurer has been notified of such judgment and has not denied coverage), and which remains undischarged, unvacated, unbonded or unstayed for a period of thirty (30) days, provided that the judgment(s), writ(s), warrant(s) of attachment or process(es) do not arise out of and are not related to any Foreign Security Agreement;

(h) Borrower or any Subsidiary, or any member of its Controlled Group, shall fail to pay when due an amount or amounts aggregating in excess of One Hundred Thousand Dollars ($100,000.00) which it shall have become liable to pay to the PBGC or to a Plan under Title IV

S-40

of ERISA; or notice of intent to terminate a Plan or Plans having aggregate Unfunded Vested Liabilities in excess of One Hundred Thousand Dollars ($100,000.00) (collectively, a “Material Plan”) shall be filed under Title IV of ERISA by Borrower or any Subsidiary, or any other member of its Controlled Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate or to cause a trustee to be appointed to administer any Material Plan or a proceeding shall be instituted by a fiduciary of any Material Plan against Borrower or any Subsidiary, or any member of its Controlled Group, to enforce Section 515 or 4219(c)(5) of ERISA and such proceeding shall not have been dismissed within thirty (30) days thereafter; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated;

(i) any Change of Control shall occur;

(j) Borrower or any Subsidiary shall (i) have entered involuntarily against it an order for relief under the United States Bankruptcy Code, as amended, (ii) admit in writing its inability to pay its debts generally as they become due, (iii) make an assignment for the benefit of creditors, (iv) apply for, seek, consent to or acquiesce in, the appointment of a receiver, custodian, trustee, examiner, liquidator or similar official for it or any substantial part of its Property, (v) institute any proceeding seeking to have entered against it an order for relief under the United States Bankruptcy Code, as amended, to adjudicate it insolvent, or seeking dissolution, winding up, liquidation, reorganization, arrangement, adjustment or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors or fail to file an answer or other pleading denying the material allegations of any such proceeding filed against it, (vi) take any corporate action in furtherance of any matter described in parts (i) through (v) above, or (vii) fail to contest in good faith any appointment or proceeding described in Section 8.1(k) ;

(k) a custodian, receiver, trustee, examiner, liquidator or similar official shall be appointed for Borrower or any Subsidiary, or any substantial part of any of its Property, or a proceeding described in Section 8.1(j)(v) shall be instituted against Borrower or any Subsidiary, and such appointment continues undischarged or such proceeding continues undismissed or unstayed for a period of sixty (60) days;

(l) Joseph G. Kuhn no longer being employed by or otherwise serving as President of Borrower for whatever reason.

Section 8.2 Non Bankruptcy Defaults. When any Event of Default (other than those described in Section 8.1(j) or (k) with respect to Borrower) has occurred and is continuing, Bank may, by written notice to Borrower: (a) terminate the remaining Commitment and all other obligations of Bank hereunder on the date stated in such notice (which may be the date thereof); and (b) declare the principal of and the accrued interest on all outstanding Loans to be forthwith due and payable and thereupon all outstanding Loans, including both principal and interest thereon, shall be and become immediately due and payable together with all other amounts payable under the Loan Documents without further demand, presentment, protest or notice of any kind; provided, however, that (x) should Borrower fail to pay any monies when due under the Loan Documents, such failure shall not constitute an “Event of Default” under the Loan

S-41

Documents or permit Lender to exercise remedies under any Loan Document unless Borrower has not fully cured such failure by the fifth (5th) day after delivery of written notice by Lender to Borrower and (y) should an event that relates to a non-monetary default occur, such event shall not constitute an Event of Default or permit Lender to exercise remedies under any Loan Document unless the Borrower has not fully cured such default by the fifteenth (15 ^th ) day after delivery of written notice by Lender to Borrower.

Section 8.3 Bankruptcy Defaults . When any Event of Default described in Section 8.1(j) or (k) with respect to Borrower has occurred and is continuing, then all outstanding Loans together with all other amounts payable under the Loan Documents shall immediately become due and payable without presentment, demand, protest or notice of any kind, the obligation of Bank to extend further credit pursuant to any of the terms hereof shall immediately.

SECTION 9. MISCELLANEOUS.

Section 9.1 Non-Enforcement of Foreign Security Agreement . Notwithstanding anything in any Foreign Security Agreement, this Credit Agreement or any other Loan Document, the Bank shall not enforce any term or condition of any Foreign Security Agreement, including any of its rights or remedies thereunder, unless and until an Event of Default has occurred under this Credit Agreement, and the Bank agrees that a default, an event of default, or non-performance of the Borrower under any Foreign Security Agreement shall not constitute an Event of Default under this Credit Agreement or any other Loan Document.

Section 9.2 No Waiver, Cumulative Remedies. No delay or failure on the part of Bank in the exercise of any power or right under any Loan Document shall operate as a waiver thereof or as an acquiescence in any default, nor shall any single or partial exercise of any power or right preclude any other or further exercise thereof or the exercise of any other power or right. The rights and remedies hereunder of Bank are cumulative to, and not exclusive of, any rights or remedies which Bank would otherwise have.

Section 9.3 Non-Business Days. If any payment hereunder becomes due and payable on a day which is not a Business Day, the due date of such payment shall be extended to the next succeeding Business Day on which date such payment shall be due and payable. In the case of any payment of principal falling due on a day which is not a Business Day, interest on such principal amount shall continue to accrue during such extension at the rate per annum then in effect, which accrued amount shall be due and payable on the next scheduled date for the payment of interest.

Section 9.4 Survival of Representations. All representations and warranties made herein or in any other Loan Document or in certificates given pursuant hereto or thereto shall survive the execution and delivery of this Agreement and the other Loan Documents, and shall continue in full force and effect with respect to the date as of which they were made as long as any credit is in use or available hereunder.

S-42

Section 9.5 Survival of Indemnity and Certain Other Provisions. All indemnity provisions and other provisions relative to reimbursement to Bank of amounts sufficient to protect the yield of Bank with respect to the Loans, including, but not limited to, Sections 3.3 , 3.6 , and 9.10 , shall survive the payment and satisfaction of all Obligations and the termination of this Agreement and the other Loan Documents, and shall remain in force beyond the expiration of any applicable statute of limitations and payment or satisfaction in full of any single claim thereunder. All such indemnity and other provisions shall be binding upon the successors and assigns of Borrower and shall inure to the benefit of each applicable Indemnitee and its successors and assigns.

Section 9.6 Notices. Except as otherwise specified herein, all notices hereunder and under the other Loan Documents shall be in writing (including notice by telecopy) and shall be given to the relevant party at its address set forth below, or such other address as such party may hereafter specify by notice to the other given by courier, by United States certified or registered mail, by telecommunication device capable of creating a written record of such notice and its receipt. Notices under the Loan Documents shall be addressed:

to Borrower:

Contrail Aviation Support, LLC

435 Investment Court

Verona, WI 53593-8788

Attention: Joseph G. Kuhn

Telephone: 608-848-8100

to Bank:

BMO Harris Bank N.A.

One West Main Street

Madison, Wisconsin 53703

Attention: Thomas Olson Jr.

Telephone: : 608-283-5708

Each such notice, request or other communication shall be effective (i) if given by telecopier, when such telecopy is transmitted to the telecopier number specified in this Section and a confirmation of such telecopy has been received by the sender, (ii) if given by mail, 5 days after such communication is deposited in the mail, certified or registered with return receipt requested, addressed as aforesaid or (iii) if given by any other means, when delivered at the addresses specified in this Section; provided that any notice given pursuant to Section 2 shall be effective only upon receipt.

Section 9.7 Counterparts. This Agreement may be executed in any number of counterparts, and by the different parties hereto on separate counterpart signature pages, each of which shall constitute an original, and all such counterparts taken together shall be deemed to constitute one and the same instrument.

Section 9.8 Successors and Assigns. This Agreement shall be binding upon Borrower and its successors and assigns, and shall inure to the benefit of Bank and its successors and assigns, including any subsequent holder of any of the Obligations. Borrower may not assign any of its rights or obligations under any Loan Document without the written consent of Bank.

Section 9.9 Amendments, etc . No amendment, modification, termination or waiver of any provision of this Agreement or of any other Loan Document, nor consent to any departure by Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by Borrower and Bank. No notice to or demand on Borrower in any case shall entitle Borrower to any other or further notice or demand in similar or other circumstances.

S-43

Section 9.10 Headings . Article and Section headings used in this Agreement are for reference only and shall not affect the construction of this Agreement.

Section 9.11 Costs and Expenses; Indemnification.

(a) Borrower agrees to pay all costs and expenses of Bank in connection with the preparation, negotiation, execution, delivery, and administration of the Loan Documents, including the reasonable fees and disbursements of counsel to Bank, in connection with the preparation and execution of the Loan Documents and in connection with the transactions contemplated hereby or thereby, and any amendment, waiver or consent related thereto, whether or not the transactions contemplated herein are consummated, together with any fees and charges suffered or incurred by Bank in connection with periodic environmental audits, fixed asset appraisals, title insurance policies, collateral filing fees and lien searches. Borrower agrees to pay to Bank all costs and expenses incurred or paid by Bank, including reasonable attorneys’ fees and disbursements and court costs, in connection with any Default or Event of Default hereunder or in connection with the enforcement of any of the Loan Documents (including all such costs and expenses incurred in connection with any proceeding under the United States Bankruptcy Code involving Borrower or any Subsidiary as a debtor thereunder). Borrower further agrees to indemnify Bank, and any security trustee therefor, their respective Affiliates, and each of their respective directors, officers, employees, agents, advisors, and consultants (each such Person being called an “Bank Indemnitee” ) against all losses, claims, damages, penalties, judgments, liabilities and expenses (including all reasonable fees and disbursements of counsel for any such Bank Indemnitee and all reasonable expenses of litigation or preparation therefor, whether or not the Bank Indemnitee is a party thereto, or any settlement arrangement arising from or relating to any such litigation) which any of them may pay or incur arising out of or relating to any Loan Document or any of the transactions contemplated thereby or the direct or indirect application or proposed application of the proceeds of any Loan, other than those which arise from the gross negligence or willful misconduct of the party claiming indemnification or arising from Bank taking any action which constitutes a breach of Section 9.1 hereof. Borrower, upon demand by Bank at any time, shall reimburse Bank for any legal or other expenses (including all reasonable fees and disbursements of counsel for any such Bank Indemnitee) incurred in connection with investigating or defending against any of the foregoing (including any settlement costs relating to the foregoing) except if the same is directly due to the gross negligence or willful misconduct of the party to be indemnified. To the extent permitted by applicable law, Borrower shall not assert or cause any Subsidiary to assert, and hereby waives, any claim against any Bank Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or the other Loan Documents or any agreement or instrument contemplated hereby or thereby, the transactions contemplated hereby or thereby, any Loan or the use of the proceeds thereof.

(b) Borrower unconditionally agrees to forever indemnify, defend and hold harmless, and covenants not to sue for any claim for contribution against, each Bank Indemnitee for any damages, costs, loss or expense, including, response, remedial or removal costs and all fees and

S-44

disbursements of counsel for any such Bank Indemnitee, arising out of any of the following: (i) any presence, release, threatened release or disposal of any hazardous or toxic substance or petroleum by Borrower or any Subsidiary or otherwise occurring on or with respect to its Property (whether owned or leased), (ii) the operation or violation of any Environmental Law, whether federal, state, or local, and any regulations promulgated thereunder, by Borrower or any Subsidiary or otherwise occurring on or with respect to its Property (whether owned or leased), (iii) any claim for personal injury or property damage in connection with Borrower or any Subsidiary or otherwise occurring on or with respect to its Property (whether owned or leased), and (iv) the inaccuracy or breach of any environmental representation, warranty or covenant by Borrower or any Subsidiary made herein or in any other Loan Document evidencing or securing any Obligations or setting forth terms and conditions applicable thereto or otherwise relating thereto, except for damages arising from the willful misconduct or gross negligence of the relevant Bank Indemnitee.

Notwithstanding anything else in this Credit Agreement, Bank agrees to indemnify Borrower, and its Affiliates, and each of their respective directors, officers, employees, agents, advisors, and consultants (each such Person being called a “Borrower Indemnitee” ) against all losses, claims, damages, penalties, judgments, liabilities and expenses (including all reasonable fees and disbursements of counsel for any such Borrower Indemnitee and all reasonable expenses of litigation or preparation therefor, whether or not the Borrower Indemnitee is a party thereto, or any settlement arrangement arising from or relating to any such litigation) which any of them may be required to pay or incur arising out of or relating to any Foreign Security Agreement or any of the transactions contemplated thereby unless an Event of Default has occurred and is occurring under this Credit Agreement. In addition, Bank, upon demand by Borrower at any time, shall reimburse Borrower for any legal or other expenses (including all reasonable fees and disbursements of counsel for any such Borrower Indemnitee) incurred in connection with investigating or defending against any of the foregoing (including any settlement costs relating to the foregoing). Bank shall not assert, and hereby waives, any claim against any Borrower Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, any Foreign Security Agreement or any agreement or instrument contemplated thereby or the transactions contemplated thereby.

Section 9.12 Set off. In addition to any rights now or hereafter granted under the Loan Documents or applicable law and not by way of limitation of any such rights, upon the occurrence of any Event of Default, Bank and each of its affiliates is hereby authorized by Borrower at any time or from time to time, without notice to Borrower, or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and to apply any and all deposits (general or special, including, but not limited to, indebtedness evidenced by certificates of deposit, whether matured or unmatured, and in whatever currency denominated, but not including trust accounts) and any other indebtedness at any time held or owing by Bank or that affiliate, to or for the credit or the account of Borrower, whether or not matured, against and on account of the Obligations of Borrower to Bank under the Loan Documents, including,

S-45

but not limited to, all claims of any nature or description arising out of or connected with the Loan Documents, irrespective of whether or not (a) Bank shall have made any demand hereunder or (b) the principal of or the interest on the Loans and other amounts due hereunder shall have become due and payable pursuant to Section 8 and although said obligations and liabilities, or any of them, may be contingent or unmatured.

Section 9.13 Entire Agreement. The Loan Documents constitute the entire understanding of the parties thereto with respect to the subject matter thereof and any prior agreements, whether written or oral, with respect thereto are superseded hereby.

Section 9.14 Governing Law. This Agreement and the other Loan Documents (except as otherwise specified therein), and any claim, controversy, dispute or cause of action (whether in contract, tort or otherwise) based upon, arising out of or relating to this Agreement or any Loan Document, and the rights and duties of the parties hereto, shall be governed by and construed and determined in accordance with the internal laws of the State of Wisconsin.

Section 9.15 Severability of Provisions. Any provision of any Loan Document that is unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such unenforceability without invalidating the remaining provisions hereof or affecting the enforceability of such provision in any other jurisdiction. All rights, remedies and powers provided in this Agreement and the other Loan Documents may be exercised only to the extent that the exercise thereof does not violate any applicable mandatory provisions of law, and all the provisions of this Agreement and other Loan Documents are intended to be subject to all applicable mandatory provisions of law which may be controlling and to be limited to the extent necessary so that they will not render this Agreement or the other Loan Documents invalid or unenforceable.

Section 9.16 Construction. The parties acknowledge and agree that the Loan Documents shall not be construed more favorably in favor of any party hereto based upon which party drafted the same, it being acknowledged that all parties hereto contributed substantially to the negotiation of the Loan Documents. The provisions of this Agreement relating to Subsidiaries shall only apply during such times as Borrower has one or more Subsidiaries. Nothing contained herein shall be deemed or construed to permit any act or omission which is prohibited by the terms of any Collateral Document, the covenants and agreements contained herein being in addition to and not in substitution for the covenants and agreements contained in the Collateral Documents.

Section 9.17 Submission to Jurisdiction; Waiver of Venue; Service of Process.

(a) BORROWER IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF WISCONSIN SITTING IN DANE COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE WESTERN DISTRICT OF WISCONSIN, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND

S-46

EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT BANK MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION.

(b) BORROWER IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (a) OF THIS SECTION. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

(c) EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 9.5 . NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.

Section 9.18 Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

Section 9.19 USA Patriot Act. Bank hereby notifies Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107 56 (signed into law October 26, 2001)) (the “Act” ), it is required to obtain, verify, and record information that identifies Borrower, which information includes the name and address of Borrower and other information that will allow Bank to identify Borrower in accordance with the Act.

S-47

Section 9.20 Time is of the Essence. Time is of the essence of this Agreement and each of the other Loan Documents.

This Credit Agreement is entered into between us for the uses and purposes hereinabove set forth as of the date first above written.

[Signature Pages to Follow]

S-48


“Borrower”

CONTRAIL AVIATION SUPPORT, LLC

By:		/s/ Joseph G. Kuhn
Name:		Joseph G. Kuhn
Title:		President

[Bank’s signature on next page]

S-49


“Bank”

BMO HARRIS BANK N.A.

By:		/s/ Thomas Olson Jr.
Name:		Thomas Olson Jr.
Title:		Vice President

[Bank’s signature page to Credit Agreement of Contrail Aviation Support, LLC]

S-50

Exhibit A

[NEEDS REVISION]

OPERATING LINE BORROWING BASE CERTIFICATE

Contrail Aviation Support, Inc.

$12,000,000 Line of Credit

To: BMO Harris Bank, N.A.

For month ending (Please send to bank within 15 days of the month-end).

Pursuant to the Credit Agreement between BMO Harris Bank, N.A. and the undersigned dated , 2016, which defines the terms used herein, the undersigned certifies that:


1A.	Total Accounts Receivable as of :	$	0.00
2A.	Ineligible Accounts Receivable (attach ineligible listing)	$	0.00
3A.	Net Eligible Accounts Receivable (Line 1A less Line 2A)	$	0.00
4.	Eligible Inventory	$	0.00
5.	Ineligible Inventory	$	0.00
6.	Net Eligible Inventory (Line 4 less Line 5)	$	0.00
7A.	Multiply Line 3A x 80%	$	0.00
7B.	Multiply Line 3B x 75%	$	0.00
7C.	Multiply Line 6 x 75% (Max $5MM or 70% of the Total Borrowing Base Certificate)	$	0.00
8.	Net Collateral Value (Sum of Line 7A, 7B, & 7C)	$	0.00
9.	Amount owed BMO Harris Bank, N.A. under the $12,000,000 line of credit	$	0.00
10.	Availability (Line 8 less Line 9 - not greater than $12,000,000:	$	0.00

The undersigned represents and warrants that the foregoing is true, complete and correct, and that the information reflected in this Collateral Schedule complies with the representations and warranties set forth in the Security Agreement and in the Credit Agreement between the undersigned and BMO Harris Bank N.A. dated , 2016.

The undersigned [ is] [ is not] in compliance under the Credit Agreement


		Contrail Aviation Support, Inc.

		By:

		Date:


Please send this report to:		BMO Harris Bank, N. A.
		Tom Olson
		One West Main St.,
		Madison, WI 53703 thomas.olson@bmo.com/608-283-5799 fax

Please include updated Accounts Receivable and Payable aging as of the same date.


	Ineligible Listing
A:)	Over 90 days from invoice date (60-90 and 90+ columns)	0.00	From A/R schedule end of month

B.)	Cross aging ( current A/R balances from companies having 20% or more over 90 days from invoice date	0.00	Formula

C.)	Concentration accounts-exclude the amount from any one client over 35% of total A/R-exclude only the amount over the 35% threshold	0.00	Enter Number from bottom of AR Aging if over 35%

D.)	U.S. Government A/R	0.00	Enter a number - Usually zero

E.)	Foreign A/R	0.00	Enter a number - Usually zero

F.)	Affiliated A/R (A/R from companies related to borrowing entity)	0.00	Enter a number - Usually zero

G.)	Contra accounts (A/R with corresponding A/P balances - the amount here should be the Lessor of the A/R or A/P balance) Lessor of AR or deposit balance	0.00	Enter a number - Usually zero

H.)	Credits over 90 days old (any negative amounts in the 60-90 and 90+ columns)	0.00	Formula

	Reserve	0.00
	Total - put total on Line 2 of Borrowing Base Certificate	0.00


Contra Accounts

Accounts Payable Contra Accounts
	0.00
Accounts Receivable Deposits - Lesser of Deposit or AR outstanding
	0.00
Credits over 90 Days Old
		0.00

		0.00

Contrail Aviation Support Receivables

AS OF 07/31/2015

Current

1-30

31 - 60

61-90

> 90

TOTAL

Total Past Due

Past Due as a
% of Total

0.00


35% Threshold: Exclude amount over this amount for any client that exceeds this			$
Clients Over this Amount:		Client Total
Client name
Amount Exceeding 35% threshold	$	0.00
Clients with > 20% > 90 days past due	$	0.00

Contrail Aviation PAYABLES

As of 07/31/2015


Vendor	Current	1 – 30		31-60		61-90		> 90		TOTAL
											0.00
											0.00
											0.00
											0.00
											0.00
											0.00
											0.00
											0.00
											0.00
											0.00
											0.00
											0.00
											0.00
											0.00
											0.00
											0.00
											0.00
											0.00
											0.00
											0.00
											0.00
											0.00
											0.00
											0.00
TOTAL			0.00		0.00		0.00		0.00		0.00

Schedule I

to Compliance Certificate

CONTRAIL AVIATION SUPPORT, LLC

Compliance Calculations

for Credit Agreement dated as of July 18, 2016

Calculations as of ,


A. Debt Service Coverage Ratio (Section 7.12(a))
A1. EBITDA – TTM A2. LESS Distributions/Dividends – (y)	$

A3. Total
A4. Debt Service Coverage Ratio – TTM (Interest Expense TTM)
A5. Ratio of Line A3 to A4		:1.0
A6. Line A5 ratio must not exceed		1.75:1.0
A7. Borrower is in compliance (circle yes or no)		yes/no
B. Maximum Leverage Ration (Section 7.12(b))
1. Total Liabilities	$

2. Tangible Net Worth	$

3. Ratio of Line B1 to B2		:1.0
4. Line B3 ratio must not exceed		2.50:1.00
Borrower is in compliance (circle yes or no)		yes/no

Schedule 5.2

Subsidiaries


Name	Jurisdiction Of Organization	Percentage Ownership	Owner
N/A

Exhibit 10.3

FIRST AMENDMENT

This FIRST AMENDMENT (this “ Amendment ”) dated as of July 15, 2016 to the Credit Agreement referenced below is by and among AIR T, INC., a Delaware corporation (“ Air T ”), MOUNTAIN AIR CARGO, INC., a North Carolina corporation (“ Mountain Air ”), GLOBAL GROUND SUPPORT, LLC, a North Carolina limited liability company (“ Global Ground ”), CSA AIR, INC., a North Carolina corporation (“ CSA ”), GLOBAL AVIATION SERVICES, LLC, a North Carolina limited liability company (“ Global Aviation ”), AIR T GLOBAL LEASING, LLC, a North Carolina limited liability company (“ Air T Leasing ” and together with Air T, Mountain Air, Global Ground, CSA and Global Aviation, each a “ Borrower ” and collectively, the “ Borrowers ”), and BRANCH BANKING AND TRUST COMPANY, a North Carolina banking corporation (the “ Bank ”). Capitalized terms used herein but not otherwise defined herein shall have the meanings provided to such terms in the Credit Agreement (as defined below).

W I T N E S S E T H

WHEREAS, a $20,000,000 revolving credit facility has been established in favor of the Borrowers pursuant to the terms of that certain Credit Agreement (as amended, modified, supplemented, increased and extended from time to time, the “ Credit Agreement ”) dated April 1, 2015 between the Borrowers and the Bank;

WHEREAS, Air T has informed the Bank that it intends to make Investments in the form of (a) the formation of Contrail Aviation Support, LLC, a North Carolina limited liability company (“ Contrail ”), and the acquisition by Air T of 79% of the outstanding Equity Interests of Contrail in exchange for cash in the amount of approximately $4,937,500 (the “ Contrail Capital Contribution ”), and (b) the acquisition (the “ Contrail Acquisition ”) by Contrail of substantially all of the assets of Contrail Aviation Support, Inc. (“ Old Contrail ”).

WHEREAS, Air T has delivered to the Bank on or prior to the date hereof a Pro Forma Compliance Certificate certifying that (a) after giving effect to the Contrail Capital Contribution and the Contrail Acquisition on a Pro Forma Basis, the Borrowers are in compliance with the financial covenants set forth in Section 7.11 recomputed as of March 31, 2016 and (b) no Default or Event of Default has occurred or would result from the Contrail Capital Contribution and the Contrail Acquisition.

WHEREAS, following the delivery of the Pro Forma Compliance Certificate referenced above, the Contrail Acquisition qualifies as a Permitted Acquisition and the Contrail Capital Contribution qualifies as a Permitted Investment.

WHEREAS, following the Contrail Contribution, Contrail will constitute a Subsidiary of Air T.

WHEREAS, pursuant to Section 6.14 of the Credit Agreement, Air T is required to cause any new Subsidiary to join as a Borrower under the Credit Agreement and a debtor under the Security Agreement and to deliver certain deliverables as more particularly described in Section 6.14 .

WHEREAS, Air T has informed the Bank that contemporaneously with the Contrail Acquisition, Contrail will be entering into a Credit Agreement dated on or about July 18, 2016 (as amended, modified, or extended, the “ BMO Credit Agreement ”) between Contrail and BMO Harris Bank N.A. (“ BMO ”) pursuant to which BMO will make a $12,000,000 revolving credit facility available to Contrail.

WHEREAS, Air T has informed the Bank that it has agreed to guaranty $1,600,000 of the obligations of Contrail to BMO under the BMO Credit Agreement pursuant to a Limited Guaranty dated on or about July 18, 2016 (the “ BMO Guaranty ”).

WHEREAS, Air T is prohibited from making the BMO Guaranty pursuant to Section 7.7 of the Credit Agreement without the Bank’s prior written consent.

WHEREAS, Air T previously made Investments in the form of the acquisition by Air T of 43,000 shares of Series B Preferred Stock of Delphax Technologies Inc. (“ Delphax ”) and stock warrants for 95,600 shares of Series B Preferred Stock of Delphax for an aggregate purchase price of $1,050,000 (collectively, the “ Delphax Equity Investment ”).

WHEREAS, Air T previously delivered a Pro Forma Compliance Certificate demonstrating that the Delphax Equity Investment constitutes a Permitted Investment.

WHEREAS, Air T has informed the Bank that on or about June 1, 2016, certain events took place that caused Delphax to become a Subsidiary of Air T.

WHEREAS, Air T has requested that the Bank (i) waive the requirement for Air T to cause Contrail to join as a Borrower under the Credit Agreement and a debtor under the Security Agreement and to deliver certain deliverables as more particularly described in Section 6.14 (collectively, the “ Contrail Joinder Waiver ”), (ii) waive the requirement for Air T to cause Delphax to join as a Borrower under the Credit Agreement and a debtor under the Security Agreement and to deliver certain deliverables as more particularly described in Section 6.14 and waive any Default that has occurred due to the Borrowers failure to comply with the requirements of Section 6.14 within 30 days of Delphax becoming a Subsidiary of Air T (collectively, the “ Delphax Joinder Waiver ”), (iii) consent to the BMO Guaranty (the “ BMO Guaranty Consent ”) and (iv) make certain other changes to the terms of the Credit Agreement as more particularly described herein.

NOW, THEREFORE, IN CONSIDERATION of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. Amendments to the Credit Agreement .

(a) The following definition is hereby added to Section 1.01 in the appropriate alphabetical order:

“ Cash Equivalents ” means, as at any date, (a) securities issued or directly and fully guaranteed or insured by the United States or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than twelve months from the date of acquisition, (b) Dollar denominated time deposits and certificates of deposit of (i) the Bank, (ii) any domestic commercial bank of recognized standing having capital and surplus in excess of $500,000,000 or (iii) any bank whose short term commercial paper rating from S&P is at

least A-1 or the equivalent thereof or from Moody’s is at least P-1 or the equivalent thereof (any such bank being an “ Approved Bank ”), in each case with maturities of not more than 270 days from the date of acquisition, (c) commercial paper and variable or fixed rate notes issued by any Approved Bank (or by the parent company thereof) or any variable rate notes issued by, or guaranteed by, any domestic corporation rated A-1 (or the equivalent thereof) or better by S&P or P-1 (or the equivalent thereof) or better by Moody’s and maturing within six months of the date of acquisition, (d) repurchase agreements entered into by any Person with a bank or trust company (including the Bank) or recognized securities dealer having capital and surplus in excess of $500,000,000 for direct obligations issued by or fully guaranteed by the United States in which such Person shall have a perfected first priority security interest (subject to no other liens) and having, on the date of purchase thereof, a fair market value of at least 100% of the amount of the repurchase obligations and (e) investments, classified in accordance with GAAP as current assets, in money market investment programs registered under the Investment Company Act of 1940 which are administered by reputable financial institutions having capital of at least $500,000,000 and the portfolios of which are limited to Investments of the character described in the foregoing subdivisions (a) through (d).

(b) The following definitions set forth in Section 1.01 are hereby amended and restated to read as follows:

“ Consolidated EBITDA ” means, for any period, for the Borrowers and their Subsidiaries on a consolidated basis, an amount equal to Consolidated Net Income for such period plus the following to the extent deducted in calculating such Consolidated Net Income: (a) Consolidated Interest Charges for such period, (b) the provision for federal, state, local and foreign income taxes payable by the Borrowers for such period, and (c) depreciation and amortization expense for such period, all as determined in accordance with GAAP.

“ Consolidated Fixed Charges ” means, for any period, for the Borrowers and their Subsidiaries on a consolidated basis, an amount equal to the sum of (a) the cash portion of Consolidated Interest Charges for such period plus (b) Consolidated Scheduled Funded Debt Payments for such period plus (c) rent and lease expense for such period.

“ Consolidated Interest Charges ” means, for any period, for the Borrowers and their Subsidiaries on a consolidated basis, the sum of the following (without duplication) interest expense (including, without limitation, interest expense attributable to Capital Leases and all net payment obligations pursuant to Rate Hedging Obligations) for such period.

“ Consolidated Leverage Ratio ” means, as of any date of determination, the ratio of (a) Funded Indebtedness of for the Borrowers and their Subsidiaries on a consolidated basis as of such date to (b) Consolidated EBITDA for the period of the four fiscal quarters most recently ended.

“ Consolidated Net Income ” means, for any period, the net income of the Borrowers and their Subsidiaries on a consolidated basis (excluding extraordinary gains) for that period, as determined in accordance with GAAP.

“ Consolidated Scheduled Funded Debt Payments ” means for any period for the Borrowers and their Subsidiaries on a consolidated basis, the sum of all scheduled payments of principal on Funded Indebtedness, as determined in accordance with GAAP.

For purposes of this definition, “scheduled payments of principal” shall be determined without giving effect to any reduction of such scheduled payments resulting from the application of any voluntary or mandatory prepayments made during the applicable period.

“ Consolidated Total Liabilities ” means the aggregate amount of all liabilities (i.e., claims of creditors of any of the Borrowers that are to be satisfied by the disbursement or utilization of corporate resources) of the Borrowers and their Subsidiaries on a consolidated basis, including without limitation all Indebtedness of the Borrowers and their Subsidiaries, all determined in accordance with Generally Accepted Accounting Principles applied on a Consistent Basis.

“ Funded Indebtedness ” means, for any Person, the sum of (a) all indebtedness of such Person in respect of money borrowed, including, without limitation, the deferred purchase price of any property or asset or indebtedness evidenced by a promissory note, bond or similar written obligation for the payment of money (including, but not limited to, conditional sales or similar title retention agreements) and the capitalized amount of all Capital Leases that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP and (b) 100% of the amount of the guaranty provided by Air T to BMO Harris Bank N.A. (which was $1,600,000 on the date of the First Amendment dated as of July 15, 2016 among the Borrowers and the Bank (the “ First Amendment ”)) pursuant to a Limited Guaranty dated on or about July 18, 2016 given by Air T in favor of BMO Harris Bank N.A. Notwithstanding the foregoing, any “earnout” obligation of any of the Borrowers or their respective Subsidiaries in connection with the Contrail Acquisition (as defined in the First Amendment) shall not constitute Funded Indebtedness.

(c) For the avoidance of doubt, (i) the balance sheet and financial performance of Contrail Aviation Support, LLC and Delphax Technologies Inc. will be taken into account in computing the financial covenants set forth in Section 7.11(a) , (b) and (c) , (ii) the balance sheet and financial performance of Contrail Aviation Support, LLC and Delphax Technologies Inc. will not be taken into account in computing the financial covenant set forth in Section 7.11(d) and (iii) any Revolving Loans used to finance the Acquisition of, and subsequent Investments in, Old Contrail and Delphax will be taken into account in computing clause (b) of the definition of “Consolidated Asset Coverage Ratio”.

(d) Section 7.7 is hereby amended by (i) deleting the “and” at the end of Section 7.4(b) , (ii) deleting the “.” at the end of Section 7.7(c) and substituting the following in lieu thereof “; and” and (ii) added a new Section 7.7(d) to read as follows:

“(d) the guaranty by Air T of Funded Indebtedness owed by Contrail Aviation Support, LLC to BMO Harris Bank N.A. with respect to a $12 million revolving line of credit extended pursuant to a Credit Agreement dated on or about July 18, 2016 between Contrail Aviation Support, LLC and BMO Harris Bank N.A.”

(e) Section 7.8 is hereby amended and restated to read as follows:

“ Section 7.8 Investments . Make any Investments except (a) Permitted Investments, (b) Permitted Acquisitions, (c) Investments held by a Borrower in the form of cash or Cash Equivalents and (d) the formation of and Investments in a Subsidiary that becomes a Borrower in compliance with Section 6.14 .”

2. Waivers and Consents . Air T hereby requests, and the Bank hereby agrees to (a) the Contrail Joinder Waiver, (b) the Delphax Joinder Waiver and (c) the BMO Guaranty Consent. These waivers are limited solely to the matter described in the preceding sentence, and nothing contained in this Amendment shall be deemed to constitute a waiver of Section 6.14 of the Credit Agreement in the future or any other rights or remedies the Bank may have under any of the Loan Documents or under applicable law, including, without limitation, any rights and remedies the Bank may have in the future related to any financial covenant default triggered in part by the Contrail Capital Contribution, the Contrail Acquisition or the Delphax Equity Investment.

3. Conditions Precedent . This Amendment shall become effective as of the date hereof upon receipt by the Bank of:

(a) duly executed counterparts of this Amendment from the Borrowers;

(b) a Pro Forma Compliance Certificate demonstrating that after giving effect to the Contrail Acquisition and the Contrail Capital Contribution on a Pro Forma Basis, the Borrowers would be in compliance with the Financial Covenant Test and the Leverage Test;

(d) such other documents, instruments and approvals as the Bank may reasonably request.

4. Amendment is a “Loan Document” . This Amendment is a Loan Document and all references to a “Loan Document” in the Credit Agreement and the other Loan Documents (including, without limitation, all such references in the representations and warranties in the Credit Agreement and the other Loan Documents) shall be deemed to include this Amendment.

5. Reaffirmation of Representations and Warranties . Each Borrower represents and warrants that (a) each of the representations and warranties set forth in the Loan Documents is true and correct in all material respects as of the date hereof (except those that expressly relate to an earlier period) and (b) no Default has occurred and is continuing. Air T further represents that the BMO Guaranty is unsecured.

6. Reaffirmation of Obligations . Each Borrower (a) acknowledges and consents to all of the terms and conditions of this Amendment, (b) affirms all of its obligations under the Loan Documents and (c) agrees that this Amendment and all documents executed in connection herewith do not operate to reduce or discharge such Borrower’s obligations under the Loan Documents.

7. No Other Changes . Except as modified hereby, all of the terms and provisions of the Loan Documents shall remain in full force and effect.

8. Counterparts; Delivery . This Amendment may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original and it shall not be necessary in making proof of this Amendment to produce or account for more than one such counterpart. Delivery of an executed counterpart of this Amendment by facsimile or other electronic imaging means shall be effective as an original.

9. Costs and Expenses . The Borrowers agree that they shall pay, upon demand by the Bank, the costs and expenses of the Bank in connection with the execution and delivery of this Amendment, including without limitation the reasonable fees and expenses of counsel to the Bank.

10. Governing Law . This Amendment shall be deemed to be a contract made under, and for all purposes shall be construed in accordance with, the laws of the State of North Carolina.

[Signature Pages Follow]

IN WITNESS WHEREOF, the Borrowers have caused a counterpart of this First Amendment to be duly executed and delivered as of the date first above written.


AIR T, INC.

By:	/s/ Candice Otey	(SEAL)
Name:	Candice Otey
Title:	Chief Financial Officer

MOUNTAIN AIR CARGO, INC.

By:	/s/ Candice Otey	(SEAL)
Name:	Candice Otey
Title:	Chief Financial Officer

GLOBAL GROUND SUPPORT, LLC

By:	/s/ Candice Otey	(SEAL)
Name:	Candice Otey
Title:	Chief Financial Officer

CSA AIR, INC.

By:	/s/ Candice Otey	(SEAL)
Name:	Candice Otey
Title:	Chief Financial Officer

GLOBAL AVIATION SERVICES, LLC

By:	/s/ Candice Otey	(SEAL)
Name:	Candice Otey
Title:	Chief Financial Officer

AIR T GLOBAL LEASING, LLC

By:	/s/ Candice Otey	(SEAL)
Name:	Candice Otey
Title:	Chief Financial Officer

IN WITNESS WHEREOF, the Bank caused a counterpart of this First Amendment to be duly executed and delivered as of the date first above written.


BRANCH BANKING AND TRUST COMPANY

By:		/s/ G. Christopher Hill
		G. Christopher Hill
		Senior Vice President